MFS SERIES TRUST II, 485BPOS, 1997-08-28

MFS SERIES TRUST II
485BPOS, 1997-08-28

Previous: QUEST HEALTH CARE FUND VII LP, 10-Q, 1997-08-28

Next: FRANKLIN NEW YORK TAX FREE TRUST, NSAR-A, 1997-08-28

<PAGE>

As filed with the Securities and Exchange Commission on August 28, 1997
1933 Act File No. 33-7637
1940 Act File No. 811-4775

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

POST-EFFECTIVE AMENDMENT NO. 23

AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 25

MFS SERIES TRUST II
(Exact Name of Registrant as Specified in Charter)

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

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

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

|_| immediately upon filing pursuant to paragraph (b)
|X| on August 30, 1997 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

Pursuant to Rule 24f-2, the Registrant has registered an indefinite number of
its shares of Beneficial Interest (without par value), under the Securities Act
of 1933. The Registrant filed a Rule 24f-2 Notice on behalf of all of its series
for its fiscal year ended November 30, 1996 on January 28, 1997.
<PAGE>
MFS SERIES TRUST II

MFS(R) LARGE CAP GROWTH FUND
(FORMERLY KNOWN AS MFS CAPITAL GROWTH FUND)

CROSS REFERENCE SHEET

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

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

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

2 (a) Expense Summary *

(b), (c) * *

3 (a) Condensed Financial Information *

(b) * *

(d) Condensed Financial Information *

4 (a) Front Cover Page; the Fund; *
Investment Objective and Policies

(b), (c) Investment Objective and Policies *

5 (a) The Fund; Management of the *
Fund - Investment Adviser

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

(d) Management of the Fund - *
Investment Adviser;
Administrator - Back Cover Page

(e) Management of the Fund - Back *
Cover Page

(f) Expense Summary *

(g) Information Concerning Shares *
of the Fund - Purchases

(h) * *

5A (a), (b), (c) ** **

6 (a) Information Concerning Shares *
of the Fund - Description of
Shares, Voting Rights and
Liabilities; Information
Concerning Shares of the
Fund - Redemptions and
Repurchases; Information
Concerning Shares of the Fund -
Purchases; Information
Concerning Shares of the Fund -
Exchanges

(b), (c), (d) * *

(e) Shareholder Services *

(f) Information Concerning Shares *
of the Fund - Distributions;

Shareholder Services -
Distribution Options

(g) Information Concerning Shares *
of the Fund - Tax Status;
Information Concerning Shares
of the Fund - Distributions

(h) * *

7 (a) Front Cover Page; Management *
of the Fund - Distributor; Back
Cover Page

(b) Information Concerning Shares *
of the Fund - Purchases; Net
Asset Value

(c) Information Concerning Shares *
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Exchanges;
Shareholder Services

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

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

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

(g) Expense Summary; Information *
Concerning Shares of the Fund -
Purchases; 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 * *

10 (a), (b) * Front Cover Page

11 * Front Cover Page

12 * Definitions

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

(d) * *

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

15 (a) * *

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

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

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

(d) * Management of the Fund -
Investment Adviser;
Administrator

(e) * Portfolio Transactions and
Brokerage Commissions

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

(g) * *

(h) * Management of the Fund -
Custodian; Independent
Auditors and Financial
Statements; Back Cover
Page

(i) * Management of the Fund -
Shareholder Servicing Agent

17 (a), (b), (c) * Portfolio Transactions and
(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

(b) Information Concerning Shares Determination of Net Asset
of the Fund - Net Asset Value; Value and Performance -
Information Concerning Shares Net Asset Value
of the Fund - Purchases

20 * Tax Status

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

22 (a) * *

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

23 * Independent Auditors and
Financial Statements

- --------------------------
* Not Applicable
** Contained in Annual Report
</TABLE>

<PAGE>
MFS LARGE CAP GROWTH FUND

(FORMERLY KNOWN AS MFS CAPITAL GROWTH FUND)

SUPPLEMENT TO THE SEPTEMBER 1, 1997 PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION

THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUND'S
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION ("SAI"), DATED SEPTEMBER 1,
1997, 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

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS I
-------
<S> <C>
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........................................................................ 0.75%
Rule 12b-1 Fees........................................................................ None
Other Expenses(1)(2)................................................................... 0.30%
-----
Total Operating Expenses............................................................... 1.05%
</TABLE>

- ----------
(1) "Other Expenses" is based on Class A expenses incurred during the six months
ended May 31, 1997.
(2) 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........................................ $11
3 years....................................... 33

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.

CONDENSED FINANCIAL INFORMATION

The following information has not been audited and should be read in
conjunction with the financial statements included in the Fund's Semiannual
Report to Shareholders which are incorporated by reference into the SAI.

<PAGE>
Financial Highlights - Class I Shares
PERIOD ENDED
MAY 31, 1997
(UNAUDITED)*
------------
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 13.99
-------
Income from investment operations # -
Net investment income $ 0.06
Net realized and unrealized gain on investments
and foreign currency transactions 1.31
-------
Total from investment operations $ 1.37
-------
Net asset value - end of period $ 15.36
=======
Total return 9.79%++
Ratios (to average net assets)/Supplemental data:
Expenses ## 1.08%+
Net investment income 0.91%+
Portfolio turnover 63%
Average Commission Rate $0.0255
Net assets at end of period (000 omitted) $ 1
- --------------------------
*For the period from the commencement of offering of Class I shares,
January 2, 1997 through May 31, 1997.
+Annualized
++Not annualized
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.

ELIGIBLE PURCHASERS

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

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

(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.

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

Three classes of shares of the Fund currently are offered for sale, Class A
shares, Class B 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 and Class B 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 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 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 because expenses
attributable to Class A shares and Class B shares generally will be higher.

THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1997

<PAGE>
PROSPECTUS
MFS(R) LARGE CAP September 1, 1997
GROWTH FUND Class A Shares of Beneficial Interest
(A member of the MFS Family of Funds(R)) Class B Shares of Beneficial Interest
- --------------------------------------------------------------------------------

Page
----
1. Expense Summary ........................................ 2
2. Condensed Financial Information ........................ 3
3. The Fund ............................................... 5
4. Investment Objective and Policies ...................... 6
5. Investment Techniques .................................. 6
6. Additional Risk Factors ................................ 11
7. Management of the Fund ................................. 14
8. Information Concerning Shares of the Fund .............. 15
Purchases ........................................... 15
Exchanges ........................................... 20
Redemptions and Repurchases ......................... 21
Distribution Plan ................................... 23
Distributions ....................................... 24
Tax Status .......................................... 25
Net Asset Value ..................................... 25
Description of Shares, Voting Rights and Liabilities 25
Performance Information ............................. 26
9. Shareholder Services ................................... 26
Appendix A ............................................. A-1
Appendix B ............................................. B-1
Appendix C ............................................. C-1

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

MFS LARGE CAP GROWTH FUND
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000

This Prospectus pertains to MFS Large Cap Growth Fund (the "Fund"), a
diversified series of MFS Series Trust II (the "Trust"), an open-end management
investment company consisting of three series. The Fund's investment objective
is to provide growth of capital. THE FUND IS INTENDED FOR INVESTORS WHO
UNDERSTAND AND ARE WILLING TO ACCEPT THE RISKS ENTAILED IN SEEKING LONG-TERM
GROWTH OF CAPITAL (see "Investment Objective and Policies"). The minimum initial
investment generally is $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.

This Prospectus sets forth concisely the information concerning the Trust and
Fund that a prospective investor ought to know before investing. The Trust, on
behalf of the Fund, has filed with the Securities and Exchange Commission (the
"SEC") a Statement of Additional Information dated September 1, 1997, as amended
or supplemented from time to time (the "SAI"), which contains more detailed
information about the Trust and the Fund and is incorporated into this
Prospectus by reference. See page 28 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.

INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
1. EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases of Fund Shares (as a
percentage of offering price) ........................................ 5.75% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) ................ See Below(1) 4.00%

ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ........................................................ 0.75% 0.75%
Rule 12b-1 Fees ........................................................ 0.25%(2) 1.00%(3)
Other Expenses(4) ...................................................... 0.30% 0.30%
----- -----
Total Operating Expenses ............................................... 1.30% 2.05%
</TABLE>

- ------------
(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. Payment of the 0.10% per annum Class A distribution fee will
commence on such date as the Trustees of the Trust may determine.
Distribution expenses paid under the 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 shares. Distribution expenses paid under the
Distribution Plan with respect to Class B shares, together with any CDSC
payable upon redemption of Class B shares, may cause long-term shareholders
to pay more than the maximum sales charge that would have been permissible
if imposed entirely as an initial sales charge. See "Information Concerning
Shares of the Fund -- Distribution Plan" below.

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

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

<TABLE>
<CAPTION>
PERIOD CLASS A CLASS B
- ------ -------- ----------------------
(1)
<S> <C> <C> <C>
1 year ..................................................... $ 70 $ 61 $ 21
3 years .................................................... 96 94 64
5 years .................................................... 125 130 110
10 years .................................................... 205 218(2) 218(2)
</TABLE>

- ------------
(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 Fund expenses are set
forth in the following sections: (i) varying sales charges on share purchases --
"Purchases"; (ii) varying CDSCs -- "Purchases"; (iii) management fees --
"Investment Adviser"; and (iv) Rule 12b-1 (i.e., distribution plan) fees --
"Distribution 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 (except for the information with
respect to the six-month period ended May 31, 1997) for at least the latest five
fiscal years of the Fund and should be read in conjunction with the financial
statements included in the Fund's Annual Report and subsequent Semiannual Report
to shareholders which are incorporated by reference into the SAI. This
information (except for the information with respect to the six-month period
ended May 31, 1997) is included in reliance upon the report of the Fund's
independent auditors given upon their authority, as experts in accounting and
auditing. The Fund's current independent auditors are Deloitte & Touche LLP.

FINANCIAL HIGHLIGHTS
CLASS A SHARES

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1997 -----------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993*
-------------------- ----- ----- ----- -----
CLASS A
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of
period ................................... $18.02 $17.67 $13.49 $14.75 $14.58
------ ------ ------ ------ ------
Income from investment operations# --
Net investment income .................... $ 0.04 $ 0.08 $ 0.11 $ 0.21 $ 0.03
Net realized and unrealized gain
(loss) on investments ................... 1.39 2.96 4.91 (0.25) 0.14
------ ------ ------ ------ ------
Total from investment operations ....... $ 1.43 $ 3.04 $ 5.02 $(0.04) $ 0.17
------ ------ ------ ------ ------

Less distributions declared to shareholders --
From net investment income ............... $ -- $(0.16) $(0.22) $(0.06) $ --
From net realized gain on
investments ............................. (4.10) (2.53) (0.62) (1.16) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders ......................... $(4.10) $(2.69) $(0.84) $(1.22) $ --
------ ------ ------ ------ ------
Net asset value -- end of period .......... $15.35 $18.02 $17.67 $13.49 $14.75
====== ====== ====== ====== ======
Total return(+) ........................... 10.31%++ 19.76% 39.51% (0.47)% 5.01%+

RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ............................... 1.30%+ 1.31% 1.27% 1.12% 0.91%+
Net investment income .................... 0.50%+ 0.47% 0.67% 1.59% 1.67%+

PORTFOLIO TURNOVER ........................ 63% 112% 91% 50% 70%
AVERAGE COMMISSION RATE### ................ $0.0255 $0.0387 -- -- --
NET ASSETS AT END OF PERIOD
(000 OMITTED) ............................. $184,232 $150,261 $88,119 $2,608 $ 196

- ----------
*For the period from the commencement of offering of Class A shares, September 7, 1993 through November 30, 1993.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to November 30, 1992 are based on average shares outstanding.

##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction
for fees paid indirectly.
###Average commission rate is calculated for funds with 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.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS -- CONTINUED
CLASS B SHARES

SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1997 ----------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
----------------- ------ ------ ------ ------
CLASS B
----------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C>
Net asset value -- beginning
of period ......................... $ 17.96 $ 17.56 $ 13.37 $ 14.72 $ 14.83
-------- -------- -------- -------- --------
Income from investment operations# --
Net investment income (loss) ...... $ (0.02) $ (0.06) $ 0.01 $ 0.04 $ 0.03
Net realized and unrealized
gain (loss) on investments ....... 1.40 2.97 4.85 (0.23) 0.50
-------- -------- -------- -------- --------
Total from investment
operations .................... $ 1.38 $ 2.91 $ 4.86 $ (0.19) $ 0.53
-------- -------- -------- -------- --------
Less distributions declared to shareholders --
From net investment income ........ $ -- -- $ (0.05) $ -- ** $ (0.02)
From net realized gain on
investments ...................... (3.94) (2.51) (0.62) (1.16) (0.62)
-------- -------- -------- -------- --------
Total distributions
declared to shareholders ...... $ (3.94) $ (2.51) $ (0.67) $ (1.16) $ (0.64)
-------- -------- -------- -------- --------
Net asset value -- end of
period ........................... $ 15.40 $ 17.96 $ 17.56 $ 13.37 $ 14.72
======== ======== ======== ======== ========
Total return ....................... 9.83%++ 18.84% 38.16% (1.52)% 3.70%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ........................ 2.04%+ 2.13% 2.14% 2.18% 2.15%
Net investment income (loss) ...... (0.25)%+ (0.38)% 0.08% 0.32% 0.10%
PORTFOLIO TURNOVER ................. 63% 112% 91% 50% 70%
AVERAGE COMMISSION RATE### ......... $ 0.0255 $ 0.0387 -- -- --
NET ASSETS AT END OF PERIOD
(000 OMITTED) ..................... $419,328 $430,936 $428,445 $384,504 $454,089
</TABLE>

- ----------
**The per share distribution from net investment income on Class B shares was
$0.00312.

+Annualized.
++Not annualized.
#Per share data for the periods subsequent to November 30, 1992 are based on
average shares outstanding.

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------------------------------------

1992 1991 1990 1989 1988 1987**
----- ----- ----- ------ ----- -----
CLASS B
----------------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C>

Net asset value -- beginning
of period .................. $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59 $ 7.50
-------- -------- -------- -------- -------- -------
Income from investment operations --
Net investment income ...... $ 0.02 $ 0.10 $ 0.18 $ 0.17 $ 0.12 $ 0.04
Net realized and unrealized
gain (loss) on investments 2.61 2.15 (0.75) 2.63 1.76 0.06
-------- -------- -------- -------- -------- -------
Total from investment
operations ............. $ 2.63 $ 2.25 $ (0.57) $ 2.80 $ 1.88 $ 0.10
-------- -------- -------- -------- -------- -------
Less distributions declared
to shareholders --
From net investment income . $ -- $ (0.14) $ (0.19) $ (0.13) $ (0.09) $ (0.01)
From net realized gain on
investments ............... (1.07) (0.13) -- -- -- --
-------- -------- -------- -------- -------- -------
Total distributions
declared to shareholders $ (1.07) $ (0.27) $ (0.19) $ (0.13) $ (0.09) $ (0.01)
-------- -------- -------- -------- -------- -------
Net asset value -- end of
period .................... $ 14.83 $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59
======== ======== ======== ======== ======== =======
Total return ................ 20.61% 20.22% (4.80)% 30.11% 24.79% 1.41%+
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ................... 2.24% 2.28% 2.38% 2.46% 2.17% 2.26%+
Net investment income ...... 0.18% 0.75% 1.56% 1.56% 1.34% 0.36%+
PORTFOLIO TURNOVER .......... 65% 86% 68% 58% 93% 139%
NET ASSETS AT END OF PERIOD
(000 OMITTED) .............. $436,561 $317,375 $226,245 $202,861 $130,961 $88,471

- ----------

**For the period from the commencement of investment operations, December 29, 1986 through November 30, 1987.

+Annualized.
</TABLE>

3. THE FUND
The Fund is a diversified series of the Trust, an open-end management investment
company which was organized as a business trust under the laws of The
Commonwealth of Massachusetts on July 30, 1986. The Trust presently consists of
three series of shares, each of which represents a portfolio with separate
investment objectives and policies. Shares of the Fund are continuously sold to
the public and the Fund then uses the proceeds to buy securities for its
portfolio. Two 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
upon redemption of 1.00% during the first year in the case of certain purchases
of $1 million or more and certain purchases by retirement plans) and are subject
to an annual distribution fee and a 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 a 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. In addition, the Fund offers an
additional class of shares, Class I shares, exclusively to certain institutional
investors. Class I shares are made available by means of a separate Prospectus
Supplement provided to institutional investors eligible to purchase Class I
shares and are offered at net asset value without an initial sales charge or
CDSC upon redemption and without an annual distribution and service fee.

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

4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund seeks to provide growth of capital. Dividend
income, if any, is a consideration incidental to the Fund's objective of growth
of capital.

INVESTMENT POLICIES -- The Fund seeks to achieve its objective by investing,
under normal market conditions, at least 65% of its total assets in equity
securities of companies with large market capitalization. These companies have a
market capitalization of at least $5 billion. Companies whose capitalization
falls below $5 billion after purchase continue to be considered large-
capitalization companies for purposes of this 65% investment policy. Generally,
emphasis is placed upon companies believed to possess above-average growth
opportunities rather than on companies with more mature growth trends.

While the policy of the Fund is to invest at least 65% of its total assets in
equity securities (see "Investment Techniques -- Equity Securities"), it may
invest up to 35% of its total assets in other types of securities such as fixed
income securities, although 10% of the Fund's net assets may be invested in
lower-rated or unrated fixed-income securities. It is contemplated that the
Fund's non-convertible long-term debt investments will consist primarily of
"investment grade" securities (rated at least Baa by Moody's Investors Service
Inc. ("Moody's") or BBB by Standard & Poor's Ratings Services ("S&P"), Duff &
Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors Service, Inc.
("Fitch")). Securities rated BBB by S&P, Duff & Phelps or Fitch or Baa by
Moody's are considered to have speculative characteristics. Securities rated BB
by S&P, Duff & Phelps or Fitch or Ba by Moody's are considered speculative and
are commonly known as "junk bonds." (See "Additional Risk Factors -- Lower-Rated
Fixed Income Securities" below for a further description of the risks associated
with investing in these securities.) For a description of these ratings, see
Appendix B to this Prospectus.

The Fund may also invest up to 25% (and expects generally to invest between 0%
to 20%) of its total assets in foreign securities (not including American
Depositary Receipts ("ADRs")), which are not traded on U.S. exchanges. See
"Additional Risk Factors -- Foreign Securities" below.

Cash, short-term obligations, repurchase agreements or other forms of debt
securities may be held by the Fund to provide a reserve for future purchases of
common stock or other securities. Subject to tax requirements, portfolio changes
are made without regard to the length of time a security has been held, or
whether a sale would result in a profit or loss.

5. INVESTMENT TECHNIQUES
Consistent with the Fund's investment objective and policies, the Fund may
engage in the following investment techniques, many of which are described more
fully in the SAI. See "Investment Techniques" in the SAI.

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.

LENDING OF SECURITIES -- The Fund may make loans of its portfolio securities.
Such loans will usually be made only to member banks of the Federal Reserve
System and member firms (and subsidiaries thereof) of the New York Stock
Exchange (the "Exchange") and would be required to be secured continuously by
collateral in cash, U.S. Government securities or an irrevocable letter of
credit maintained on a current basis at an amount at least equal to the market
value of the securities loaned. The Fund would continue to collect the
equivalent of the interest on the securities loaned and would also receive
either interest (through investment of cash collateral) or a fee (if the
collateral is U.S. Government securities or a letter of credit).

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 which are intended
to minimize risk.

RESTRICTED SECURITIES -- The Fund may also purchase securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act")
("restricted securities"), including those that can be offered and sold to
"qualified institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). 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 delegated to the Adviser the daily function of determining and
monitoring liquidity of Rule 144A securities. The Board, however, retains
oversight, 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 obligations
will be delivered to the Fund at a future date usually beyond customary
settlement time. It is expected that, under normal circumstances, the Fund will
take delivery of such securities. In general, the Fund does not pay for the
securities until received and does not start earning interest on the obligations
until the contractual settlement date. While awaiting delivery of the
obligations purchased on such bases, the Fund will establish a segregated
account consisting of liquid assets equal to the amount of the commitments to
purchase "when-issued" securities.

INVESTMENTS FOR TEMPORARY DEFENSIVE PURPOSES -- During periods of unusual market
conditions when the Adviser believes that investing for temporary defensive
purposes is appropriate, or in order to meet anticipated redemption requests, a
large portion or all of the assets of the Fund may be invested in cash or cash
equivalents including, but not limited to, obligations of banks with assets of
$1 billion or more (including certificates of deposit, bankers' acceptances and
repurchase agreements), commercial paper, short-term notes, U.S. Government
securities and related repurchase agreements. U.S. Government securities also
include interests in trusts or other entities representing interests in
obligations that are issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities. See Appendix C to this Prospectus for a
description of U.S. Government obligations and certain short-term investments.

CORPORATE ASSET-BACKED SECURITIES -- The Fund may invest in corporate asset-
backed securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card or automobile
loan receivables, representing the obligations of a number of different parties.
Corporate asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral.

LOANS AND OTHER DIRECT INDEBTEDNESS -- The Fund may invest a portion of its
assets in loans and other direct indebtedness. By purchasing a loan, the Fund
acquires some or all of the interest of a bank or other lending institution in a
loan to a corporate borrower. Many such loans are secured, and most impose
restrictive covenants which must be met by the borrower. These loans are made
generally to finance internal growth, mergers, acquisitions, stock repurchases,
leveraged buy-outs and other corporate activities. Such loans may be in default
at the time of purchase. The Fund may also purchase other direct indebtedness
such as trade or other claims against companies, which generally represent money
owed by the company to a supplier of goods and services. These claims may also
be purchased at a time when the company is in default. Certain of the loans and
other direct indebtedness acquired by the Fund may involve revolving credit
facilities or other standby financing commitments which obligate the Fund to pay
additional cash on a certain date or on demand.

The highly leveraged nature of many such loans and other direct indebtedness may
make such loans especially vulnerable to adverse changes in economic or market
conditions. Loans and other direct indebtedness may not be in the form of
securities or may be subject to restrictions on transfer, and only limited
opportunities may exist to resell such instruments. As a result, the Fund may be
unable to sell such investments at an opportune time or may have to resell them
at less than fair market value. For a further discussion of loans, other direct
indebtedness and the risks related to transactions therein, see the SAI.

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

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

AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in American Depositary
Receipts ("ADRs") which are certificates issued by a U.S. depository (usually a
bank) and represent a specified quantity of shares of an underlying non-U.S.
stock on deposit with a custodian bank as collateral. Because ADRs trade on
United States 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 exchange rates and more limited information about foreign issuers (see
"Additional Risk Factors Foreign Securities" below).

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

TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD CONTRACTS -- The Fund may enter
into transactions in options, futures and forward contracts on a variety of
instruments and indices, in order to protect against declines in the value of
portfolio securities or increases in the cost of securities or other assets to
be acquired and, subject to applicable law, to increase the Fund's gross income.
The types of instruments to be purchased and sold by the Fund are described in
the SAI, which should be read in conjunction with the following section. In
addition, the SAI contains a further discussion of the nature of the
transactions which may be entered into and the risks associated therewith.

OPTIONS
OPTIONS ON SECURITIES -- The Fund may write (sell) covered call and put options
and purchase call and put options on securities. The Fund will write options on
securities for the purpose of increasing its return on such securities 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 the portfolio security underlying
the option, 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 underlying security moves adversely to the Fund's position, the
option may be exercised and the Fund will be required to purchase or sell the
underlying security at a disadvantageous price, 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.

By writing a call option on a security, the Fund limits its opportunity to
profit from any increase in the market value of the underlying security, since
the holder will usually exercise the call option when the market value of the
underlying security exceeds the exercise price of the call. However, the Fund
retains the risk of depreciation in value of securities on which it has written
call options.

The Fund may also purchase put or call options in anticipation of market
fluctuations which may adversely affect the value of its portfolio or the prices
of securities that the Fund wants to purchase at a later date. In the event that
the expected market fluctuations 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 premium paid for a put or call option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise or liquidation of the option, and, unless the price of the underlying
security changes sufficiently, the option may expire without value to the Fund.

In certain instances, the Fund may enter into options on Treasury securities
which may be referred to as "reset" options or "adjustable strike" options.
These options provide for periodic adjustment of the strike price and may also
provide for the periodic adjustment of the premium during the term of the
option.

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, less related transaction costs,
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, less related
transaction costs. 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.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
FUTURES CONTRACTS -- The Fund may enter into stock index futures contracts.
(Unless otherwise specified, futures contracts on indices are referred to as
"Futures Contracts.") The Fund will utilize Futures Contracts for hedging and
non-hedging purposes, subject to applicable law. Purchases or sales of stock
index futures contracts for hedging purposes are used to attempt to protect the
Fund's current or intended stock investments from broad fluctuations in stock
prices. In the event that an anticipated decrease in the value of portfolio
securities occurs as a result of a general stock market decline, the adverse
effects of such changes may be offset, in whole or part, by gains on the sale of
Futures Contracts. Conversely, the increased cost of portfolio securities to be
acquired, caused by a general rise in the stock market, may be offset, in whole
or part, by gains on Futures Contracts purchased by the Fund. The Fund will
incur brokerage fees when it purchases and sells Futures Contracts, and it will
be required to make and maintain margin deposits.

OPTIONS ON FUTURES CONTRACTS -- The Fund may purchase and write options on stock
index futures contracts. (Unless otherwise specified, options on stock index
futures contracts are referred to as "Options on Futures Contracts.") Such
investment strategies will be used for hedging and non-hedging purposes, subject
to applicable law. Put and call Options on Futures Contracts may be traded by
the Fund in order to protect against declines in the values of portfolio
securities or against increases in the cost of securities to be acquired.
Purchases of Options on Futures Contracts may present less risk in hedging the
portfolio of the Fund than the purchase or sale of the underlying Futures
Contracts since the potential loss is limited to the amount of the premium plus
related transaction costs. The writing of such options, however, does not
present less risk than the trading of Futures Contracts and will constitute only
a partial hedge, up to the amount of the premium received. In addition, if an
option is exercised, the Fund may suffer a loss on the transaction.

FORWARD CONTRACTS ON FOREIGN CURRENCY -- The Fund may enter into 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 will enter into
Forward Contracts for hedging and non-hedging purposes, including transactions
entered into for the purpose of profiting from anticipated changes in foreign
currency exchange rates. Transactions in Forward Contracts entered into for
hedging purposes may 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. The Fund may also enter into Forward Contracts for
"cross hedging" purposes (e.g., the purchase or sale of a Forward Contract on
one type of currency as a hedge against adverse fluctuations in the value of a
second type of currency). 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. 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. Such
transactions, however, may be considered speculative and could involve
significant risk of loss, as set forth below. The Fund has established
procedures consistent with statements of the SEC and its staff regarding the use
of Forward Contracts by registered investment companies, which requires use of
segregated assets or "cover" in connection with the purchase and sale of such
Contracts.

Forward Contracts are traded over-the-counter, and not on organized commodities
or securities exchanges. As a result, such contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain risks
beyond those associated with transactions in the Futures and Options contracts
described above.

OPTIONS ON FOREIGN CURRENCIES -- The Fund may purchase and write put and call
options on foreign currencies for the purpose of protecting against declines in
the dollar value of 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 could be
required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may constitute an effective hedge against fluctuations in exchange rates
although, in the event of rate movements adverse to the Fund's position, it may
forfeit the entire amount of the premium plus related transaction costs. As in
the case of Forward Contracts, certain options on foreign currencies are traded
over-the-counter and involve risks which may not be present in the case of
exchange-traded instruments.

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

FIXED INCOME SECURITIES: The net asset value of the shares of an open-end
investment company which may invest to a limited extent in fixed income
securities changes as the general levels of interest rates fluctuate. When
interest rates decline, the value of a fixed income portfolio can be expected to
rise. Conversely, when interest rates rise, the value of a fixed income
portfolio can be expected to decline.

LOWER-RATED FIXED INCOME SECURITIES -- The Fund may invest up to 10% of its net
assets in lower-rated fixed income securities or comparable unrated securities.
Investments in lower-rated fixed income securities, while generally providing
greater income and opportunity for gain than investments in higher rated
securities, usually entail greater risk of principal and income (including the
possibility of default or bankruptcy of the issuers of such securities), and
involve greater volatility of price (especially during periods of economic
uncertainty or change) than investments in higher rated securities and because
yields may vary over time, no specified level of income can ever be assured. In
particular, securities rated lower than Baa by Moody's or BBB by S&P, Duff &
Phelps or Fitch or comparable unrated securities (commonly known as "junk
bonds") are considered speculative. These lower-rated high yielding fixed income
securities generally tend to reflect economic changes (and the outlook for
economic growth), short-term corporate and industry developments and the
market's perception of their credit quality (especially during times of adverse
publicity) to a greater extent than higher rated securities which react
primarily to fluctuations in the general level of interest rates (although these
lower-rated fixed income securities are also affected by changes in interest
rates). In the past, economic downturns or an increase in interest rates have
under certain circumstances caused a higher incidence of default by the issuers
of these securities and may do so in the future, especially in the case of
highly leveraged issuers. During certain periods, the higher yields on the
Fund's lower-rated high yielding fixed income securities are paid primarily
because of the increased risk of loss of principal and income, arising from such
factors as the heightened possibility of default or bankruptcy of the issuers of
such securities. Due to the fixed income payments of these securities, the Fund
may continue to earn the same level of interest income while its net asset value
declines due to portfolio losses, which could result in an increase in the
Fund's yield despite the actual loss of principal. The prices for these
securities may be affected by legislative and regulatory developments. Changes
in the value of securities subsequent to their acquisition will not affect cash
income or yield to maturity to the Fund but will be reflected in the net asset
value of shares of the Fund. The market for these lower-rated fixed income
securities may be less liquid than the market for investment grade fixed income
securities. Furthermore, the liquidity of these lower-rated securities may be
affected by the market's perception of their credit quality. Therefore, the
Adviser's judgment may at times play a greater role in valuing these securities
than in the case of investment grade fixed income securities, and it also may be
more difficult during times of certain adverse market conditions to sell these
lower-rated securities at their fair value to meet redemption requests or to
respond to changes in the market. No minimum rating standard is required by the
Fund, although it is contemplated that the Fund's non-convertible long-term debt
investments will consist primarily of "investment grade" securities (rated at
least Baa by Moody's or BBB by S&P, Duff & Phelps or Fitch) (see "Investment
Objective and Policies" above). To the extent the Fund invests in these
lower-rated fixed income securities, the achievement of its investment objective
may be more dependent on the Adviser's own credit analysis than in the case of a
fund investing in higher quality bonds. While the Adviser may refer to ratings
issued by established credit rating agencies, it is not a policy of the Fund to
rely exclusively on ratings issued by these agencies, but rather to supplement
such ratings with the Adviser's own independent and ongoing review of credit
quality.

The Fund may also invest in fixed income securities rated Baa by Moody's or BBB
by S&P, Duff & Phelps or Fitch and comparable unrated securities. These
securities, while normally exhibiting adequate protection parameters, may have
speculative characteristics and changes in economic conditions and other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher grade fixed income securities.

OPTIONS, FUTURES CONTRACTS AND FORWARD CONTRACTS -- Although the Fund will enter
into certain transactions in Futures Contracts, Options on Futures Contracts,
Forward Contracts and options for hedging purposes, such transactions do involve
certain risks. For example, a lack of correlation between the index or
instrument underlying an option, Futures Contract or Forward Contract and the
assets being hedged, or unexpected adverse price movements, could render the
Fund's hedging strategy unsuccessful and could result in losses. "Cross hedging"
transactions may involve greater correlation risks. In addition, there can be no
assurance that a liquid secondary market will exist for any contract purchased
or sold, and the Fund may be required to maintain a position until exercise or
expiration, which could result in losses. As noted, the Fund may also enter into
transactions in such instruments (except for options on foreign currencies) for
other than hedging purposes (subject to applicable law), including speculative
transactions, which involve greater risk. In entering into such transactions,
the Fund may experience losses which are not offset by gains on other portfolio
positions, thereby reducing its gross income. In addition, the markets for such
instruments may be extremely volatile from time to time, as discussed in the
SAI, which could increase the risks incurred by the Fund in entering into such
transactions.

Transactions in options may be entered into on U.S. exchanges regulated by the
SEC, in the over-the-counter market and on foreign exchanges, while Forward
Contracts may be entered into only in the over-the-counter market. Futures
Contracts and Options on Futures Contracts may be entered into on U.S. exchanges
regulated by the Commodity Futures Trading Commission (the "CFTC") and on
foreign exchanges. The securities underlying options and Futures Contracts
traded by the Fund may include domestic as well as foreign securities. Investors
should recognize that transactions involving foreign securities or foreign
currencies, and transactions entered into in foreign countries, may involve
considerations and risks not typically associated with investing in U.S.
markets.

Transactions in options, Futures Contracts, Options on Futures Contracts and
Forward Contracts entered into for non-hedging purposes involve greater risk and
could result in losses which are not offset by gains on other portfolio assets.
For example, the Fund may sell Futures Contracts on an index of securities in
order to profit from any anticipated decline in the value of the securities
comprising the underlying index. In such instances, any losses on the Futures
transaction will not be offset by gains on any portfolio securities comprising
such index, as might occur in connection with a hedging transaction. The risks
related to transactions in options, Futures Contracts, Options on Futures
Contracts and Forward Contracts entered into by the Fund are set forth in
greater detail in the SAI, which should be reviewed in conjunction with the
foregoing discussion.

FOREIGN SECURITIES: Investing in foreign securities or on foreign exchanges may
present a greater degree of risk than investing in domestic issuers. These risks
include changes in currency rates, exchange control regulations, governmental
administration, economic or monetary policy (in this country or abroad), war or
expropriation. In particular, the dollar value of portfolio securities of
non-U.S. issuers fluctuates with changes in market and economic conditions
abroad and with changes in relative currency values (when the value of the
dollar increases as compared to a foreign currency, the dollar value of a
foreign-denominated security decreases, and vice versa). 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 confiscatory
taxation and potential difficulties in enforcing contractual obligations and
could be subject to extended settlement periods. Therefore, an investment in
shares of the Fund may be subject to a greater degree of risk than investments
in other investment companies which invest exclusively in domestic securities.

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.
In that event, the Fund may promptly convert such currencies into dollars at the
then current exchange rate. Under certain circumstances, however, 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.

In addition, the Fund may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts it has entered into. This
could occur, for example, if an option written by the Fund is exercised or the
Fund is unable to close out a Forward Contract. The Fund may hold foreign
currency in anticipation of purchasing foreign securities. The Fund may also
elect to take delivery of the currencies underlying options or Forward Contracts
if, in the judgment of the Adviser, it is in the best interest of the Fund to do
so. In such instances as well, the Fund may promptly convert the foreign
currencies to dollars at the then current exchange rate, or 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, it also exposes the Fund to
risk of loss if such rates move in a direction adverse to the Fund's position.
Such losses could 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 of securities, and could reduce the dollar value of interest
or dividend payments received. In addition, the holding of currencies could
adversely affect the Fund's profit or loss on currency options or Forward
Contracts, as well as its hedging strategies.

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

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

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

PORTFOLIO TRADING
The Fund intends to manage its portfolio by buying and selling securities to
help attain its investment objective. The Fund will engage in portfolio trading
if it believes a transaction, net of costs (including custodian charges), will
help in attaining its investment objective (see "Portfolio Transactions and
Brokerage Commissions" in the SAI). For the fiscal year ended November 30, 1996,
the Fund had a portfolio turnover rate in excess of 100%. Transaction costs
incurred by the Fund and the realized capital gains and losses of the Fund may
be greater than that of a fund with a lesser portfolio turnover rate.

The primary consideration in placing portfolio security transactions with
broker-dealers 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 other investment company clients of MFD,
the Fund's distributor, as a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions. From time to time, the Adviser may
direct certain portfolio transactions to broker-dealer firms which, in turn,
have agreed to pay a portion of the Fund's operating expenses (e.g., fees
charged by the custodian of the Fund's assets). For a further discussion of
portfolio trading, see the SAI.
--------------------

The policies described above are not fundamental and may be changed without
shareholder approval, as may the Fund's investment objective. A change in the
Fund's investment objective may result in the Fund having an investment
objective different from the objective which the shareholder considered
appropriate at the time of investment in the Fund.

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

7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- MFS manages the Fund pursuant to an Investment Advisory
Agreement dated September 1, 1993 (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser provides the Fund with overall investment advisory
services. Stephen Pesek, Jr., a Vice President of the Adviser, has been the
Fund's portfolio manager since June 1, 1997. Mr. Pesek has been employed as a
portfolio manager by the Adviser since 1994. From 1987 to 1994, Mr. Pesek worked
at Fidelity Research Corporation as an analyst. Subject to such policies as the
Trustees may determine, the Adviser makes investment decisions for the Fund. For
its services and facilities, the Adviser receives a management fee, computed and
paid monthly, in an amount equal to 0.75% of the Fund's average daily net
assets. The Adviser has reduced its management fee to 0.65% per annum with
respect to any Fund assets in excess of $1 billion. This fee reduction may be
revised or rescinded by the Adviser with the consent of the Fund's Board of
Trustees without notice to shareholders. For the Fund's fiscal year ended
November 30, 1996, MFS received management fees under the Fund's Advisory
Agreement of $4,084,641.

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and 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 Union Standard 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.) ("Sun Life of Canada (U.S.)") in connection with the sale of
various fixed/variable annuity contracts. MFS and its wholly owned subsidiary,
MFS Institutional Advisors, Inc., provide investment advice to substantial
private clients.

MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of the MFS organization were
approximately $64.3 billion on behalf of approximately 2.6 million investor
accounts as of July 31, 1997. As of such date, the MFS organization managed
approximately $40.6 billion of assets invested in equity securities and
approximately $20.3 billion of assets invested in fixed income securities.
Approximately $4.1 billion of the assets managed by MFS are invested in
securities of foreign issuers and non-U.S. dollar denominated securities of U.S.
issuers. MFS is a subsidiary of Sun Life of Canada (U.S.), a subsidiary of Sun
Life of Canada (U.S.) Holdings, Inc., which in turn is a wholly owned subsidiary
of Sun Life Assurance Company of Canada ("Sun Life"). The Directors of MFS are
A. Keith Brodkin, Jeffrey L. Shames, Arnold D. Scott, John D. McNeil and Donald
A. Stewart. Mr. Brodkin is the Chairman, Mr. Shames is the President and Mr.
Scott is the Secretary and a Senior Executive Vice President of MFS. Messrs.
McNeil and 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.

A. Keith Brodkin, the Chairman of MFS, is also the Chairman and President of
the Trust. W. Thomas London, Stephen E. Cavan, James R. Bordewick, Jr., Leslie
J. Nanberg, James O. Yost, Ellen M. Moynihan and Mark E. Bradley, all of whom
are officers of MFS, are officers of the Trust.

MFS has established a strategic alliance with Foreign & Colonial Management Ltd.
("Foreign & Colonial"). Foreign & Colonial is a subsidiary of two of the world's
oldest financial services institutions, the London-based Foreign & Colonial
Investment Trust PLC, which pioneered the idea of investment management in 1868,
and HYPO-BANK (Bayerische Hypotheken-und Wechsel-Bank AG), the oldest publicly
listed bank in Germany, founded in 1835. As part of this alliance, the portfolio
managers and investment analysts of MFS and Foreign & Colonial share their views
on a variety of investment related issues, such as the economy, securities
markets, portfolio securities and their issuers, investment recommendations,
strategies and techniques, risk analysis, trading strategies and other portfolio
management matters. MFS has access to the extensive international equity
investment expertise of Foreign & Colonial, and Foreign & Colonial has access to
the extensive U.S. equity investment expertise of MFS. MFS and Foreign &
Colonial each have investment personnel working in each other's offices in
Boston and London, respectively.

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 or clients of
Foreign & Colonial. Some simultaneous transactions are inevitable when several
clients receive investment advice from MFS and Foreign & Colonial, 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.
Under this Agreement, the Fund pays MFS an administrative fee up to 0.015% per
annum of the Fund's average daily net assets. This fee reimburses MFS for a
portion of the costs it incurs to provide such services.

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

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

8. INFORMATION CONCERNING SHARES OF THE FUND

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

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

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

PURCHASES SUBJECT TO INITIAL SALES CHARGE. Class A shares are offered at
net asset value plus an initial sales charge as follows:
<TABLE>
<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 subject to an initial sales charge). In
the following five circumstances, Class A shares are offered at net asset value
without an initial sales charge but subject to a CDSC, equal to 1% of the lesser
of the value of the shares redeemed (exclusive of reinvested dividend and
capital gain distributions) or the total cost of such shares, in the event of a
share redemption within 12 months following the purchase:

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

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

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

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

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

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

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

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

For purposes of determining the level of commissions to be paid to dealers with
respect to a shareholder's new investment in Class A shares made on or after
April 1, 1996, 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
purchase).

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

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

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

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

provided, however, that the CDSC will not be waived (i.e., it will be imposed)
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 or partially 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:

YEAR OF CONTINGENT
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 or partially
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.

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.

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

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

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

RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. Purchases and exchanges
should be made for investment purposes only. The Fund and MFD each reserves the
right to reject 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
individudals, if (i) the individual or organization makes three or more exchange
requests out of the Fund per calendar year and (ii) any one of such exchange
requests represents shares equal in value to 1/2 of 1% or more of the Fund's net
assets at the time of the request. Accounts under common ownership or control,
including accounts administered by market timers, will be aggregated for
purposes of this definition.

As noted above, the Fund and MFD each reserves the right to reject or restrict
any specific purchase and exchange request and, in addition, may impose specific
limitations with respect to market timers, including delaying for up to seven
days the purchase side of an exchange request by market timers or specifically
rejecting or otherwise restricting purchase or exchange requests by market
timers. In the event that any individual or entity is determined either by the
Fund or MFD, in its sole discretion, to be a market timer with respect to any
calendar year, the Fund and/or MFD will reject all exchange requests into the
Fund during the remainder of that calendar year. Other funds in the MFS Family
of Funds may have different and/or more restrictive policies with respect to
market timers than the Fund. These policies are disclosed in the prospectuses of
these other MFS Funds.

DEALER CONCESSIONS. Dealers may receive different compensation with respect
to sales of Class A and Class B 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 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 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, payment for travel expenses, including lodging, incurred by
registered representatives 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 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 or Class B shares
("Direct Purchases") will be subject to a CDSC for a period of (i) with respect
to Class A 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 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 $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
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 and Class B 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 Plan would benefit the Fund and its shareholders.

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

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

SERVICE FEES. The Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to the
class of shares to which the Distribution Plan relates (i.e., Class A 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 provisions 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 commissions to dealers with respect to purchases
of $1 million or more and purchases by certain retirement plans of Class A
shares which are sold at net asset value but which are subject to a 1% CDSC for
one year after purchase). See "Purchases -- Class A Shares" above. In addition,
to the extent that the aggregate service and distribution fees paid under the
Distribution Plan do not exceed 0.35% per annum of the average daily net assets
of the Fund attributable to Class A shares, the Fund is permitted to pay such
distribution-related expenses or other distribution-related expenses.

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

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).

CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES: The Fund's Class A and Class B
distribution and service fees for its current fiscal year are 0.25% and 1.00%
per annum, respectively. Payment of the 0.10% per annum Class A distribution fee
will commence on such date as the Trustees of the Trust may determine.

DISTRIBUTIONS
The Fund intends to pay substantially all of its net investment income to its
shareholders as dividends on an annual 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. The Fund may make one or more distributions
during the calendar year to its shareholders from any long-term capital gains,
and may also make one or more distributions during the calendar year to its
shareholders from short-term capital gains. Shareholders may elect to receive
dividends and capital gain distributions in either cash or additional shares of
the same class with respect to which a distribution is made. See "Tax Status"
and "Shareholder Services -- Distribution Options" below. Distributions paid by
the Fund with respect to Class A shares will generally be greater than those
paid with respect to Class B shares because expenses attributable to Class B
shares will generally be higher.

TAX STATUS
The Fund is treated as an entity separate from the other series of the Trust for
federal income tax purposes. In order to minimize the taxes the Fund would
otherwise be required to pay, the Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (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 the distribution is in cash or in additional
shares. A portion of the dividends received from the Fund (but none of the
Fund's capital gain distributions) may qualify for the dividends received
deduction for corporations. Shortly after the end of each calendar year, each
shareholder will receive 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, the portion,
if any, representing a return of capital (which is free of current taxes but
results in a basis reduction) and the amount, if any, of federal income tax
withheld.

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% on
dividends and other payments that are subject to such withholding and are made
to persons who are neither citizens nor residents of the U.S., regardless of
whether a lower rate may be permitted under an applicable treaty. The Fund is
also required in certain circumstances to apply backup withholding at a rate of
31% on taxable dividends and redemption proceeds paid to any shareholder
(including a 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. Assets in the Fund's portfolio are valued on
the basis of their current values or otherwise at their fair values, as
described in the SAI. All investments and assets are expressed in U.S. dollars
based upon current currency exchange rates. The net asset value 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, one of three series of the Trust, has two classes of shares which it
offers to the general public, entitled Class A and Class B Shares of Beneficial
Interest (without par value). The Fund also has a class of shares which it
offers exclusively to certain institutional investors, entitled Class I Shares.
The Trust has reserved the right to create and issue additional classes and
series of shares, in which case each class of shares of a series would
participate equally in the earnings, dividends and assets attributable to that
class of that particular series. Shareholders are entitled to one vote for each
share held and shares of each series would be entitled to vote separately to
approve investment advisory agreements or changes in investment restrictions,
but shares of all series would vote together in the election of Trustees and
selection of accountants. Additionally, each class of shares of a series will
vote separately on any material increases in the fees under the Distribution
Plan or on any other matter that affects solely that class of shares, but will
otherwise vote together with all other classes of shares of the series on all
other matters. The Trust does not intend to hold annual shareholder meetings.
The Declaration of Trust provides that a Trustee may be removed from office in
certain instances (see "Description of Shares, Voting Rights and Liabilities" in
the SAI).

Each share of a class of the Fund represents an equal proportionate interest in
the Fund with each other class share, subject to the liabilities of the
particular class. Shares have no pre-emptive or conversion rights (except as set
forth above in "Purchases -- Conversion of Class B Shares"). Shares are fully
paid and non-assessable. Should the Fund be liquidated, shareholders of each
class are entitled to share pro rata in the net assets attributable to that
class available for distribution to shareholders. Shares will remain on deposit
with the Shareholder Servicing Agent and certificates will not be issued except
in connection with pledges and assignments and in certain other limited
circumstances.

PERFORMANCE INFORMATION
From time to time, the Fund will provide 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. Total rate of return
quotations will reflect the average annual percentage change over stated periods
in the value of an investment in a class of shares of the Fund made at the
maximum public offering price of 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 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. The Fund offers multiple
classes of shares which were initially offered for sale to the public on
different dates. The calculation of total rate of return for a class of shares
which initially was offered for sale to the public subsequent to another class
of shares of the Fund is based both on (i) the performance of the Fund's newer
class from the date it initially was offered for sale to the public and (ii) the
performance of the Fund's oldest class from the date it initially was offered
for sale to the public up to the date that the newer class initially was offered
for sale to the public. See the SAI for further information on the calculation
of total rate of return for share classes initially offered for sale to the
public on different dates.

The Fund's total rate of return quotations are based on historical performance
and are not intended to indicate future performance. Total rate of return
reflects all components of investment return over a stated period of time. The
Fund's quotations may from time to time be used in advertisements, shareholder
reports or other communications to shareholders. For a discussion of the manner
in which the Fund will calculate its total rate of return, see the SAI. For
further information about the Fund's performance for the fiscal year ended
November 30, 1996, please see the Fund's Annual Report. A copy of the Annual
Report may be obtained without charge by contacting the Shareholder Servicing
Agent (see back cover for address and phone number). In addition to information
provided in shareholder reports, the Fund may, in its discretion, from time to
time, make a list of all or a portion of its holdings available to investors
upon request.

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

ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in his account. 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. Checks for dividends and capital
gain distributions in amounts less than $10 will automatically be reinvested in
additional shares of the Fund. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash, and the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, or
the shareholder does not respond to mailings from the Shareholder Servicing
Agent with regard to uncashed distribution checks, such shareholder's
distribution option will automatically be converted to having all dividends and
other distributions reinvested in additional shares. Any request to change a
distribution option must be received by the Shareholder Servicing Agent by the
record date for a dividend or distribution in order to be effective for that
dividend or distribution. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.

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

LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the SAI) anticipates purchasing $100,000 or more of Class A shares
of the Fund alone or in combination with shares of any class of other MFS Funds
or MFS Fixed Fund (a bank collective investment fund) within a 13-month period
(or 36-month period for purchases of $1 million or more), the shareholder may
obtain such shares 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, B and 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 another MFS Fund. Furthermore, distributions made by the Fund may be
automatically invested at net asset value in shares of the same class of another
MFS Fund, if shares of such Fund are available for sale (and without any
applicable CDSC).

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, a dollar cost averaging
program. The Automatic Exchange Plan provides for automatic monthly or quarterly
exchanges of funds from the shareholder's account in an MFS Fund for investment
in the same class of shares of other MFS Funds selected by the shareholder if
such fund is available for sale. Under the Automatic Exchange Plan, exchanges of
at least $50 each may be made to up to six different funds. A shareholder should
consider the objectives and policies of a fund and review its prospectus before
electing to exchange money into such fund through the Automatic Exchange Plan.
No transaction fee is imposed in connection with exchange transactions under the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market Fund,
MFS Government Money Market Fund or Class A shares of MFS Cash Reserve Fund will
be subject to any applicable sales charge. For federal and (generally) state
income tax purposes, an exchange is treated as a sale of 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 other corporate pension and profit-sharing plans.
Investors should consult with their tax adviser before establishing any of the
tax-deferred retirement plans described above.
--------------------

The Fund's SAI, dated September 1, 1997, as amended or supplemented from time to
time, contains more detailed information about the Trust and the Fund,
including, but not limited to, information related to (i) investment objective,
policies and restrictions, including the purchase and sale of options, Futures
Contracts, Options on Futures Contracts, Forward Contracts and Options on
Foreign Currencies, (ii) the Trustees, officers and investment adviser, (iii)
portfolio trading, (iv) the Fund's shares, including rights and liabilities of
shareholders, (v) tax status of dividends and distributions, (vi) the
Distribution Plan, (vii) the method used to calculate total rate of return
quotations and (viii) various services and privileges provided by the Fund for
the benefit of its shareholders, including additional information with respect
to the exchange privilege.

<PAGE>
APPENDIX A

WAIVERS OF SALES CHARGES

This Appendix sets forth the various circumstances in which all applicable sales
charges are waived (Section I), the initial sales charge and the contingent
deferred sales charge ("CDSC") for Class A shares are waived (Section II), and
the CDSC for Class B shares are waived (Section III). As used in this Appendix,
the term "dealer" includes any broker, dealer, bank (including bank trust
departments), registered investment adviser, financial planner and any other
financial institution having a selling agreement or other similar agreement with
MFS Fund Distributors, Inc. ("MFD").

I. WAIVERS OF ALL APPLICABLE SALES CHARGES

In the following circumstances, the initial sales charge imposed on
purchases of Class A shares and the CDSC imposed on certain redemptions of
Class A shares and on redemptions of Class B 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 MFS, Sun Life Assurance Company of Canada
("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 and other
financial institution ("dealers") which have a sales agreement with
MFD;

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 401(a) or ESP Plan
sponsor subscribes to the MFS FUNDamental 401(k) Plan or another
similar recordkeeping system made available by the Shareholder
Servicing Agent; and

o Distributions from a 401(a) or ESP Plan that has invested its assets
in one or more of the MFS Funds for more than 10 years from the
later to occur of: (i) January 1, 1993 or (ii) the date such 401(a)
or ESP Plan first invests its assets in one or more of the MFS
Funds. The sales charges will be waived in the case of a redemption
of all of the 401(a) or ESP Plan's shares in all MFS Funds (i.e.,
all the assets of the 401(a) or ESP Plan invested in the MFS Funds
are withdrawn), unless immediately prior to the redemption, the
aggregate amount invested by the 401(a) or ESP Plan in shares of the
MFS Funds (excluding the reinvestment of distributions) during the
prior four years equals 50% or more of the total value of the 401(a)
or ESP Plan's assets in the MFS Funds, in which case the sales
charges will not be waived.

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

o Death or disability of SRO Plan participant.

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

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

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

7. LOAN REPAYMENTS

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

II. WAIVERS OF CLASS A SALES CHARGES

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

1. WRAP ACCOUNT INVESTMENTS AND FUND "SUPERMARKET" INVESTMENTS

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

III. WAIVERS OF CLASS B 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 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>

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX B

DESCRIPTION OF BOND RATINGS

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

MOODY'S INVESTORS SERVICE, INC.

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

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

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

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

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

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

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

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

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

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

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

1. an application for rating was not received or accepted;

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

3. there is a lack of essential data pertaining to the issue or issuer;
and

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

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

STANDARD & POOR'S RATINGS SERVICES

AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

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

NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

FITCH INVESTORS SERVICE, INC.

AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".

A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions, however, are more likely to
have adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.

BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C: Bonds are in imminent default in payment of interest or principal.

PLUS (+) MINUS(-) Plus and minus signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the "AAA" category.

NR: Indicates that Fitch does not rate the specific issue.

CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.

SUSPENDED: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.

WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.

FITCHALERT: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive", indicating a potential
upgrade, "Negative", for potential downgrade, or "Evolving", where ratings may
be raised or lowered. FitchAlert is relatively short-term, and should be
resolved within 12 months.

DUFF & PHELPS CREDIT RATING CO.

BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business, and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within a rating category. Plus and
minus signs, however, are not used in the "AAA" category.

NR: Indicates that Duff & Phelps does not rate the specific issue.

DUFF & PHELPS SHORT-TERM RATINGS

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

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

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

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

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

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

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

<PAGE>
APPENDIX C

DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES, AUTHORITIES OR INSTRUMENTALITIES
U.S. GOVERNMENT OBLIGATIONS -- are issued by the Treasury and include bills,
certificates of indebtedness, notes and bonds. Agencies and instrumentalities
of the U.S. Government are established under the authority of an act of
Congress and include, but are not limited to, the Tennessee Valley Authority,
the bank for Cooperatives, the Farmers Home Administration, Federal Home Loan
Banks, Federal Intermediate Credit Banks and Federal Land Banks, as well as
those listed below.

FEDERAL FARM CREDIT CONSOLIDATED SYSTEMWIDE NOTES AND BONDS -- are bonds
issued by a cooperatively owned nationwide system of banks and associations
supervised by the Farm Credit Administration. These bonds are not guaranteed
by the U.S. Government.

MARITIME ADMINISTRATION BONDS -- are bonds issued by the Department of
Transportation of the U.S. Government.

FHA DEBENTURES -- are debentures issued by the Federal Housing Administration
of the U.S. Government and are fully and unconditionally guaranteed by the
U.S. Government.

GNMA CERTIFICATES -- are mortgage-backed securities, with timely payment
guaranteed by the full faith and credit of the U.S. Government, which
represent a partial ownership interest in a pool of mortgage loans issued by
lenders such as mortgage bankers, commercial banks and savings and loan
associations. Each mortgage loan included in the pool is also insured or
guaranteed by the Federal Housing Administration, the Veterans Administration
or the Farmers Home Administration.

FEDERAL HOME LOAN MORTGAGE CORPORATION BONDS -- are bonds issued and
guaranteed by the Federal Home Loan Mortgage Corporation and are not
guaranteed by the U.S. Government.

FEDERAL HOME LOAN BANK BONDS -- are bonds issued by the Federal Home Loan Bank
System and are not guaranteed by the U.S.Government.

FINANCING CORPORATION BONDS AND NOTES -- are bonds and notes issued and
guaranteed by the Financing Corporation.

FEDERAL NATIONAL MORTGAGE ASSOCIATION BONDS -- are bonds issued and guaranteed
by the Federal National Mortgage Association and are not guaranteed by the
U.S. Government.

RESOLUTION FUNDING CORPORATION BONDS AND NOTES -- are bonds and notes issued
and guaranteed by the Resolution Funding Corporation.

STUDENT LOAN MARKETING ASSOCIATION DEBENTURES -- are debentures backed by the
Student Loan Marketing Association and are not guaranteed by the U.S.
Government.

TENNESSEE VALLEY AUTHORITY BONDS AND NOTES -- are bonds and notes issued and
guaranteed by the Tennessee Valley Authority.

Some of the foregoing obligations, such as Treasury bills and GNMA pass-
through certificates, are supported by the full faith and credit of the U.S.
Government; others, such as securities of FNMA, by the right of the issuer to
borrow from the U.S. Treasury; still others, such as bonds issued by SLMA, are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. Government will provide financial support to instrumentalities
sponsored by the U.S. Government as it is not obligated by law, in certain
instances, to do so.

Although this list includes a description of the primary types of U.S.
Government agency, authorities or instrumentality obligations in which the
Fund intends to invest, the Fund may invest in obligations of U.S. Government
agencies or instrumentalities other than those listed above.

DESCRIPTION OF SHORT-TERM INVESTMENTS OTHER THAN
U.S. GOVERNMENT OBLIGATIONS
CERTIFICATES OF DEPOSIT -- are certificates issued against funds deposited in
a bank (including eligible foreign branches of U.S. banks), for a definite
period of time, earn a specified rate of return and are normally negotiable.

BANKERS' ACCEPTANCES -- are marketable short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.

COMMERCIAL PAPER -- refers to promissory notes issued by corporations in order
to finance their short-term credit needs.

CORPORATE OBLIGATIONS -- include bonds and notes issued by corporations in
order to finance long-term credit needs.

A-1 AND P-1 COMMERCIAL PAPER RATINGS

Description of S&P or Fitch and Moody's highest commercial paper ratings:

The rating "A" is the highest commercial paper rating assigned by S&P or
Fitch, and issues so rated are regarded as having the greatest capacity for
timely payment. Issues in the "A" category are delineated with the numbers 1,
2 and 3 to indicate the relative degree of safety. The A-1 designation
indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Those A-1 issues determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

The rating P-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated P-1 have a superior ability for repayment. P-1 repayment
capacity will normally be evidenced by the following characteristics: (1)
leading market positions in well established industries; (2) high rates of
return on funds employed; (3) conservative capitalization structure with
moderate reliance on debt and ample asset protection; (4) broad margins in
earnings coverage of fixed financial charges and high internal cash
generation; and (5) well established access to a range of financial markets
and assured sources of alternate liquidity.
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000

PRINCIPAL UNDERWRITER
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

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

MFS(RM) LARGE CAP GROWTH FUND
500 BOYLSTON STREET
BOSTON, MA 02116

[graphic omitted]
We invented the mutual fund(SM)

MFS(R) LARGE CAP GROWTH FUND

PROSPECTUS
September 1, 1997

MLC-1-9/97/190M 03/203

<PAGE>

[GRAPHIC OMITTED]
MFS(R) LARGE CAP STATEMENT OF
GROWTH FUND ADDITIONAL INFORMATION

(A member of the MFS Family of Funds(R)) September 1, 1997
- --------------------------------------------------------------------------------

Page

1. Definitions .................................................... 2
2. Investment Techniques .......................................... 2
3. Investment Restrictions ........................................ 12
4. Management of the Fund ......................................... 13
Trustees .................................................... 13
Officers .................................................... 13
Trustee Compensation Table .................................. 14
Investment Adviser .......................................... 14
Administrator ............................................... 15
Custodian ................................................... 15
Shareholder Servicing Agent ................................. 15
Distributor ................................................. 15
5. Portfolio Transactions and Brokerage Commissions ............... 16
6. Shareholder Services ........................................... 17
Investment and Withdrawal Programs .......................... 17
Exchange Privilege .......................................... 19
Tax-Deferred Retirement Plans ............................... 20
7. Tax Status ..................................................... 20
8. Determination of Net Asset Value; Performance Information....... 21
9. Distribution Plan .............................................. 23
10. Description of Shares, Voting Rights and Liabilities ........... 24
11. Independent Auditors and Financial Statements .................. 24
Appendix A ..................................................... A-1

MFS LARGE CAP GROWTH FUND
A Series of MFS Series Trust II
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000

This Statement of Additional Information as amended or supplemented from time to
time, (the "SAI"), sets forth information which may be of interest to investors
but which is not necessarily included in the Fund's Prospectus, dated September
1, 1997. 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 back cover 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" -- MFS Large Cap Growth Fund, a
diversified series of MFS
Series Trust II, (the
"Trust"), a Massachusetts
business trust. The Fund was
known as MFS Capital Growth
Fund from June 3, 1993 until
August 30, 1997, MFS Lifetime
Capital Growth Fund from
August 3, 1992 until June 3,
1993 and was known as
Lifetime Capital Growth Trust
prior to August 3, 1992. The
Fund became a series of the
Trust on June 3, 1993.

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

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

"Prospectus" -- The Prospectus of the Fund,
dated September 1, 1997, as
amended or supplemented from
time to time.

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

LENDING OF SECURITIES
The Fund may seek to increase its income by lending portfolio securities. Such
loans will usually be made only to member banks of the Federal Reserve System
and to member firms (and subsidiaries thereof) of the New York Stock Exchange
(the "Exchange") and would be required to be secured continuously by collateral
in cash, U.S. Government securities or an irrevocable letter of credit
maintained on a current basis at an amount at least equal to the market value of
the securities loaned. The Fund would have the right to call a loan and obtain
the securities loaned at any time on customary industry settlement notice (which
will usually not exceed five days). During the existence of a loan, the Fund
would continue to receive the equivalent of the interest or dividends paid by
the issuer on the securities loaned and would also receive compensation based on
investment of cash collateral or a fee. 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 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 20% of the value of the Fund's total assets.

"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 the General Statement of Policy of the Securities and Exchange
Commission (the "SEC") concerning such purchases. Since that policy currently
recommends that an amount of the Fund's assets equal to the amount of the
purchase be held aside or segregated to be used to pay for the commitment, the
Fund will always have liquid assets sufficient to cover any commitments or to
limit any potential risk. However, although the Fund does not intend to make
such purchases for speculative purposes and intends to adhere to policies
promulgated by the SEC, 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 is necessary to sell the "when-issued" or "forward delivery"
securities before delivery, it may incur a loss because of market fluctuations
since the time the commitment to purchase such securities was made. When the
time comes to pay for "when-issued" or "forward delivery" securities, the Fund
will meet its obligations from the then-available cash flow on the sale of
securities, or, although it would not normally expect to do so, from the sale of
the "when-issued" or "forward delivery" securities themselves (which may have a
value greater or less than the Fund's payment obligation).

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

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

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

REPURCHASE AGREEMENTS
As described in the Prospectus, the Fund may enter into repurchase agreements
with sellers who are member firms (or subsidiaries thereof) of the Exchange,
members of the Federal Reserve System, or 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, including accrued
interest, 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 the seller's creditworthiness
on an ongoing basis. Moreover, under such agreements, the value, including
accrued interest, 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.

LOANS AND OTHER DIRECT INDEBTEDNESS
As described in the Prospectus, the Fund may purchase loans and other direct
indebtedness. In purchasing a loan, the Fund acquires some or all of the
interest of a bank or other lending institution in a loan to a corporate
borrower. Many such loans are secured, although some may be unsecured. Such
loans may be in default at the time of purchase. Loans and other direct
indebtedness that are fully secured offer the Fund more protection than an
unsecured loan in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan or other direct indebtedness would satisfy the corporate borrower's
obligation, or that the collateral can be liquidated.

These loans and other direct indebtedness are made generally to finance internal
growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other
corporate activities. Such loans and other direct indebtedness loans are
typically made by a syndicate of lending institutions, represented by an agent
lending institution which has negotiated and structured the loan and is
responsible for collecting interest, principal and other amounts due on its own
behalf and on behalf of the others in the syndicate, and for enforcing its and
their other rights against the borrower. Alternatively, such loans and other
direct indebtedness may be structured as a novation, pursuant to which the Fund
would assume all of the rights of the lending institution in a loan, or as an
assignment, pursuant to which the Fund would purchase an assignment of a portion
of a lender's interest in a loan or other direct indebtedness either directly
from the lender or through an intermediary. The Fund may also purchase trade or
other claims against companies, which generally represent money owed by the
company to a supplier of goods or services. These claims may also be purchased
at a time when the company is in default.

Certain of the loans and other direct indebtedness acquired by the Fund may
involve revolving credit facilities or other standby financing commitments which
obligate the Fund to pay additional cash on a certain date or on demand. These
commitments may have the effect of requiring the Fund to increase its investment
in a company at a time when the Fund might not otherwise decide to do so
(including at a time when the company's financial condition makes it unlikely
that such amounts will be repaid). To the extent that the Fund is committed to
advance additional funds, it will at all times hold and maintain in a segregated
account liquid assets in an amount sufficient to meet such commitments.

The Fund's ability to receive payment of principal, interest and other amounts
due in connection with these investments will depend primarily on the financial
condition of the borrower. In selecting the loans and other direct indebtedness
which the Fund will purchase, the Adviser will rely upon its own (and not the
original lending institution's) credit analysis of the borrower. As the Fund may
be required to rely upon another lending institution to collect and pass on to
the Fund amounts payable with respect to the loan and to enforce the Fund's
rights under the loan and other direct indebtedness, an insolvency, bankruptcy
or reorganization of the lending institution may delay or prevent the Fund from
receiving such amounts. In such cases, the Fund will evaluate as well the
creditworthiness of the lending institution and will treat both the borrower and
the lending institution as an "issuer" of the loan for purposes of certain
investment restrictions pertaining to the diversification of the Fund's
portfolio investments. The highly leveraged nature of many such loans and other
direct indebtedness may make such loans and other direct indebtedness especially
vulnerable to adverse changes in economic or market conditions. Investments in
such loans and other direct indebtedness may involve additional risk to the
Fund. For example, if a loan or other direct indebtedness is foreclosed, the
Fund could become part owner of any collateral, and would bear the costs and
liabilities associated with owning and disposing of the collateral. In addition,
it is conceivable that under emerging legal theories of lender liability, the
Fund could be held liable. It is unclear whether loans and other forms of direct
indebtedness offer securities law protections against fraud and
misrepresentation. In the absence of definitive regulatory guidance, the Fund
relies on the Adviser's research in an attempt to avoid situations where fraud
and misrepresentation could adversely affect the Fund. In addition, loans and
other direct investments may not be in the form of securities or may be subject
to restrictions on transfer, and only limited opportunities may exist to resell
such instruments. As a result, the Fund may be unable to sell such investments
at an opportune time or may have to resell them at less than fair market value.
To the extent that the Adviser determines that any such investments are
illiquid, the Fund will include them in the investment limitations described
below.

FOREIGN SECURITIES
The Fund may invest up to 25% (and generally expects to invest between 0% and
20%) of its total assets in foreign securities which are not traded on a U.S.
exchange (not including American Depositary Receipts ("ADRs")). As discussed in
the Prospectus, investing in foreign securities generally presents 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. The
Fund may also hold foreign currency in anticipation of purchasing foreign
securities. 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.

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. 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
depository receipts in the United States can reduce costs and delays as well as
potential currency exchange and other difficulties. The Fund may purchase
securities in local markets and direct delivery of these ordinary shares to the
local depository of an ADR agent bank in the foreign country. Simultaneously,
the ADR agents create a certificate which settles at the Fund's custodian in
five days. The Fund may also execute trades on the U.S. markets using existing
ADRs. A foreign issuer of the security underlying an ADR is generally not
subject to the same reporting requirements in the United States as a domestic
issuer. Accordingly the information available to a U.S. investor will be limited
to the information the foreign issuer is required to disclose in its own country
and the market value of an ADR may not reflect undisclosed material information
concerning the issuer of the underlying security. ADRs may also be subject to
exchange rate risks if the underlying foreign securities are traded in foreign
currency.

OPTIONS

OPTIONS ON SECURITIES -- As noted in the Prospectus, the Fund may write covered
call and put options and purchase call and put options on securities. Call and
put options written by the Fund may be covered in the manner set forth below.

A call option written by the Fund is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in liquid assets in a segregated account with its custodian. A put
option written by the Fund is "covered" if the Fund maintains liquid assets with
a value equal to the exercise price in a segregated account with its custodian,
or else holds a put on the same security and in the same principal amount as the
put written where the exercise price of the put held is equal to or greater than
the exercise price of the put written or where the exercise price of the put
held is less than the exercise price of the put written if the difference is
maintained by the Fund in liquid assets in a segregated account with its
custodian. 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. If the writer's obligation is not so covered, it is subject to
the risk of the full change in value of the underlying security from the time
the option is written until exercise.

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

The Fund will realize a profit from a closing transaction if the premium paid in
connection with the closing of an option written by the Fund is less than the
premium received from writing the option, or if the premium received in
connection with the closing of an option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, the Fund will suffer a loss
if 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 repurchase 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 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. Buy-and-write transactions using in-the-money
call options may be used when it is expected that the price of the underlying
security will decline moderately during the option period. Buy-and-write
transactions using out-of-the-money call options may be used when it is expected
that the premiums received from writing the call option plus the appreciation in
the market price of the underlying security up to the exercise price will be
greater than the appreciation in the price of the underlying security alone. 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. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received, less related transaction costs. If the market price of the underlying
security declines or otherwise is below the exercise price, the Fund may elect
to close the position or retain the option until it is exercised, at which time
the Fund will be required to take delivery of the security at the exercise
price; the Fund's return will be the premium received from the put option minus
the amount by which the market price of the security is below the exercise
price, which could result in a loss. Out-of-the-money, at-the-money and
in-the-money put options may be used by the Fund in the same market environments
that call options are used in equivalent buy-and-write transactions.

The Fund may also write combinations of put and call options on the same
security, known as "straddles," with the same exercise price and expiration
date. 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 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 the security remains stable and neither the
call nor the put is exercised. In those instances 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 not
be undertaken by the Fund solely for hedging purposes, 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 constitute
only a partial hedge against declines in the value of portfolio securities or
against increases in the value of securities to be acquired, up to the amount of
the premium.

The Fund may purchase options for hedging purposes or to increase its return.
Put options may be purchased to hedge against a decline in the value of
portfolio securities. If such decline occurs, the put options will permit the
Fund to sell the 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 by 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 increase
occurs, the call option will permit the Fund to purchase the securities at the
exercise price, or to close out the options at a profit. The premium paid for
the call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire worthless to the
Fund.

In certain instances, the Fund may enter into options on U.S. Treasury
securities which provide for periodic adjustment of the strike price and may
also provide for the periodic adjustment of the premium during the term of each
such option. Like other types of options, these transactions, which may be
referred to as "reset" options or "adjustable strike" options, grant the
purchaser the right to purchase (in the case of a "call") or sell (in the case
of a "put"), a specified type and series of U.S. Treasury security at any time
up to a stated expiration date (or, in certain instances, on such date). In
contrast to other types of options, however, the price at which the underlying
security may be purchased or sold under a "reset" option is determined at
various intervals during the term of the option, and such price fluctuates from
interval to interval based on changes in the market value of the underlying
security. As a result, the strike price of a "reset" option, at the time of
exercise, may be less advantageous to the Fund than if the strike price had been
fixed at the initiation of the option. In addition, the premium paid for the
purchase of the option may be determined at the termination, rather than the
initiation, of the option. If the premium is paid at termination, the Fund
assumes the risk that (i) the premium may be less than the premium which would
otherwise have been received at the initiation of the option because of such
factors as the volatility in yield of the underlying Treasury security over the
term of the option and adjustments made to the strike price of the option, and
(ii) the option purchaser may default on its obligation to pay the premium at
the termination of the option.

OPTIONS ON STOCK INDICES -- As noted in the Prospectus, the Fund may write
(sell) covered call and put options and purchase call and put options on stock
indices. In contrast to an option on a security, an option on a stock index
provides the holder with the right but not the obligation to make or receive a
cash settlement upon exercise of the option, rather than the right to purchase
or sell a security. The amount of this settlement is equal to (i) the amount, if
any, by which the fixed exercise price of the option exceeds (in the case of a
call) or is below (in the case of a put) the closing value of the underlying
index on the date of exercise, multiplied by (ii) a fixed "index multiplier."

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 underlying index, or by having an absolute and immediate right to
acquire such securities without additional cash consideration (or for additional
cash consideration held in a segregated account by its custodian) upon
conversion or exchange of other securities in its portfolio. 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. The 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 the difference is
maintained by the Fund in liquid assets, in a segregated account with its
custodian. The Fund may cover put options on stock indices by maintaining liquid
assets with a value equal to the exercise price in a segregated account with its
custodian, or 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 is equal to
or greater than the exercise price of the put written or where the exercise
price of the put held is less than the exercise price of the put written if the
difference is maintained by the Fund in liquid assets in a segregated account
with its custodian. Put and call options on stock indices 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 the 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 Fund may also 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.

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 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 index underlying a stock index option may be a "broad-based" index, such as
the Standard & Poor's 500 Index or the New York Stock Exchange Composite Index,
the changes in value of which ordinarily will reflect movements in the stock
market in general. In contrast, certain options may be based on narrower market
indices, such as the Standard & Poor's 100 Index, or on indices of securities of
particular industry groups, such as those of oil and gas or technology
companies. A stock index assigns relative values to the stocks included in the
index and the index fluctuates with changes in the market values of the stocks
so included. The composition of the index is changed periodically.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

FUTURES CONTRACTS -- As noted in the Prospectus, the Fund may enter into stock
index futures contracts. (Unless otherwise specified, futures contracts on
indices are referred to as "Futures Contracts.") Such investment strategies will
be used for hedging purposes and for non-hedging purposes, subject to applicable
law.

A Futures Contract is a bilateral agreement providing for the purchase and sale
of a specified type and amount of a financial instrument, 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 stock index 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 are used to attempt to
protect the Fund's current or intended stock investments from broad fluctuations
in stock prices. For example, the 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 the 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.

OPTIONS ON FUTURES CONTRACTS -- As noted in the Prospectus, the Fund may
purchase and write options to buy or sell Futures Contracts in which it may
invest ("Options on Futures Contracts"). Such investment strategies will be used
for hedging purposes and for non-hedging purposes, subject to applicable law.

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

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

Options on Futures Contracts that are written or purchased by the Fund on U.S.
exchanges are traded on the same contract market as the underlying Futures
Contract, and, like Futures Contracts, are subject to regulation by the
Commodities Futures Trading Commission ("CFTC") and the performance guarantee of
the exchange clearinghouse. In addition, Options on Futures Contracts may be
traded on foreign exchanges.

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
maintained by the Fund in liquid assets in a segregated account with its
custodian. 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 is equal to or greater than the exercise price of
the put written or where the exercise price of the put held is less than the
exercise price of the put written if the difference is maintained by the Fund in
liquid assets in a segregated account with its custodian. Put and call Options
on Futures Contracts may also be covered in such other manner as may be in
accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations. Upon the exercise of a call Option on a Futures
Contract written by 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 writing of a call Option on a Futures Contract for hedging purposes
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 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 the changes in the value of its
futures positions, the Fund's losses from existing Options on Futures Contracts
may to some extent be reduced or increased by changes in the value of portfolio
securities.

The Fund may purchase Options on Futures Contracts for hedging purposes instead
of 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.

FORWARD CONTRACTS ON FOREIGN CURRENCY
As noted in the Prospectus, the Fund may enter into forward foreign currency
exchange contracts ("Forward Contracts") for hedging purposes and non-hedging
purposes. Forward Contracts may be used for hedging to attempt to minimize the
risk to the Fund from adverse changes in the relationship between the U.S.
dollar and foreign currencies. The Fund intends to enter into Forward Contracts
for hedging purposes. In particular, a Forward Contract to sell a currency may
be entered into where the Fund seeks to protect against an anticipated increase
in the exchange rate for a specific currency which could reduce the dollar value
of portfolio securities denominated in such currency. Conversely, the Fund may
enter into a Forward Contract to purchase a given currency to protect against a
projected increase in the dollar value of securities denominated in such
currency which the Fund intends to acquire. The Fund also may enter into a
Forward Contract in order to assure itself of a predetermined exchange rate in
connection with a security denominated in a foreign currency. In addition, the
Fund may enter into Forward Contracts for "cross hedging" purposes; e.g., the
purchase or sale of a Forward Contract on one type of currency as a hedge
against adverse fluctuations in the value of a second type of currency.

If a hedging transaction in Forward Contracts is successful, the decline in the
value of portfolio securities or other assets or the increase in the cost of
securities or other assets to be acquired may be offset, at least in part, by
profits on the Forward Contract. Nevertheless, by entering into such Forward
Contracts, the Fund may be required to forego all or a portion of the benefits
which otherwise could have been obtained from favorable movements in exchange
rates. But, the Fund will usually seek to close out positions in such Contracts
by entering into offsetting transactions, which will serve to fix the Fund's
profit or loss based upon the value of the contracts at the time the offsetting
transaction is executed.

The Fund will also enter into transactions in Forward Contracts for other than
hedging purposes, which present greater profit potential but also involve
increased risk. For example, the Fund may purchase a given foreign currency
through a Forward Contract if, in the judgment of the Adviser, the value of such
currency is expected to rise relative to the U.S. dollar. Conversely, the Fund
may sell the currency through a Forward Contract if the Adviser believes that
its value will decline relative to the dollar.

The Fund will profit if the anticipated movements in foreign currency exchange
rates occurs, 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 and could involve significant risk of loss.

The Fund has established procedures consistent with statements by the SEC and
its staff regarding the use of Forward Contracts by registered investment
companies, which require the use of segregated assets or "cover" in connection
with the purchase and sale of such Contracts. In those instances in which the
Fund satisfies this requirement through segregation of assets, it will maintain,
in a segregated account, 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. While these Contracts are not presently regulated by 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.

OPTIONS ON FOREIGN CURRENCIES
As noted in the Prospectus, the Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in which Forward
Contracts will be utilized. For example, a decline in the dollar value of a
foreign currency in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in the value of
portfolio securities, the Fund may purchase put options on the foreign currency.
If the value of the currency does decline, the Fund will have the right to sell
such currency for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on its portfolio which otherwise would have
resulted.

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

The Fund may write options on foreign currencies for the same types of hedging
purposes. For example, where the Fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in exchange rates
it could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised, and the diminution in value of portfolio securities will be
offset by the amount of the premium received.

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

RISK FACTORS IN OPTIONS, FUTURES AND FORWARD TRANSACTIONS

RISK OF 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, Options on Futures
Contracts, Forward Contracts and options on foreign currencies depends 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. In the
case of futures and options based on an index, the portfolio will not duplicate
the components of the index, and in the case of futures and options on fixed
income securities, the portfolio securities which are being hedged may not be
the same type of obligation underlying such contract. The use of Forward
Contracts for "cross hedging" purposes may involve greater correlation risks. As
a result, the correlation probably will not be exact. Consequently, the Fund
bears the risk that the price of the portfolio securities being hedged will not
move in the same amount or direction as the underlying index or obligation.

For example, if the Fund purchases a put option on an index and the index
decreases less than the value of the hedged securities, the Fund would
experience a loss which is not completely offset by the put option. It is also
possible that there may be a negative correlation between the index or
obligation underlying an option or Futures Contract in which the Fund has a
position and the portfolio securities the Fund is attempting to hedge, which
could result in a loss on both the portfolio and the hedging instrument. In
addition, the Fund may enter into transactions in Forward Contracts or options
on foreign currencies in order to hedge against exposure arising from the
currencies underlying such forwards. In such instances, the Fund will be subject
to the additional risk of imperfect correlation between changes in the value of
the currencies underlying such forwards or options and changes in the value of
the currencies being hedged.

It should be noted that stock index 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 based on a broad market index. This
is due to the fact that 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. Nevertheless, where the Fund enters into transactions in options or
futures on narrow-based indices for hedging purposes, movements in the value of
the index should, if the hedge is successful, correlate closely with the portion
of the Fund's portfolio or the intended acquisitions being hedged.

The trading of Futures Contracts, options and Forward Contracts for hedging
purposes 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 the options, futures and forward markets. In this regard, trading by
speculators in options, futures and Forward 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.

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

Further, with respect to options on securities, options on stock indices,
options on currencies 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. This could increase the extent of any loss
suffered by the Fund in connection with such transactions.

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. For example, where the Fund covers a
call option written on a stock index through segregation of securities, such
securities may not match the composition of the index, and the Fund may not be
fully covered. As a result, the Fund could be subject to risk of loss in the
event of adverse market movements.

The writing of options on securities, options on stock indices or Options on
Futures Contracts constitutes only a partial hedge against fluctuations in the
value of the Fund's portfolio. When the Fund writes an option, it will receive
premium income in return for the holder's purchase of the right to acquire or
dispose of the underlying obligation. In the event that the price of such
obligation does not rise sufficiently above the exercise price of the option, in
the case of a call, or fall below the exercise price, in the case of a put, the
option will not be exercised and the Fund will retain the amount of the premium,
less related transaction costs, which will constitute a partial hedge against
any decline that may have occurred in the Fund's portfolio holdings or any
increase in the cost of the instruments to be acquired.

Where the price of the underlying obligation moves sufficiently in favor of the
holder to warrant exercise of the option, however, and the option is exercised,
the Fund will incur a loss which may only be partially offset by the amount of
the premium it received. Moreover, by writing an option, the Fund may be
required to forego the benefits which might otherwise have been obtained from an
increase in the value of portfolio securities or other assets or a decline in
the value of securities or assets to be acquired.

In the event of the occurrence of any of the foregoing adverse market events,
the Fund's overall return may be lower than if it had not engaged in the hedging
transactions.

It should also be noted that the Fund may enter into transactions into options
(except for options on foreign currencies), Futures Contracts, Options on
Futures Contracts and Forward Contracts not only for hedging purposes, but also
for non-hedging purposes intended to increase portfolio returns. Non-hedging
transactions in such investments involve greater risks and may result in losses
which may not be offset by increases in the value of portfolio securities or
declines in the cost of securities to be acquired. The Fund will only write
covered options, such that liquid assets will be segregated at all times, unless
the option is covered in such other manner as may be in accordance with the
rules of the exchange on which the option is traded and applicable laws and
regulations. Nevertheless, 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.

The Fund also may enter into transactions in Futures Contracts, Options on
Futures Contracts, Options on Foreign Currency, and Forward Contracts for other
than hedging purposes, which could expose the Fund to significant risk of loss
if foreign currency exchange rates, market prices or interest rates do not move
in the direction or to the extent anticipated. In this regard, the foreign
currency may be extremely volatile from time to time, as discussed in the
Prospectus and in this SAI, and the use of such transactions for non-hedging
purposes could therefore involve significant risk of loss.

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. Such transactions, therefore,
create an opportunity for increased return by providing the Fund with two
simultaneous premiums on the same security, but involve additional risk, since
the Fund may have an option exercised against it regardless of whether the price
of the security increases or decreases.

RISK OF A 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 has insufficient cash
available to meet margin requirements, it will be necessary to liquidate
portfolio securities or other assets at a time when it is 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 portfolio,
and could result in trading losses.

The liquidity of a secondary market in a Futures Contract or option thereon may
be adversely affected by "daily price fluctuation limits," established by
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day. Once the daily limit has been reached in the
Contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures or option positions and requiring
traders to make additional margin deposits. Prices have in the past moved the
daily limit on a number of consecutive trading days.

The trading of Futures Contracts and options is also subject to the risk of
trading halts, suspensions, exchange or clearinghouse equipment failures,
government intervention, insolvency of a brokerage firm or clearinghouse 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 or forward 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 enters into such transactions 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 or other
assets held by the Fund or decreases in the prices of securities or other assets
the Fund intends to acquire. Where the Fund enters into such transactions 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 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). Further, 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.

RISKS 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 security, index, currency or Futures Contract.

RISKS OF TRANSACTIONS RELATED TO FOREIGN CURRENCIES AND TRANSACTIONS NOT
CONDUCTED ON U.S. EXCHANGES. Transactions in Forward Contracts on foreign
currencies, as well as futures and options on foreign currencies and
transactions executed on foreign exchanges, 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. Further, 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,
24-hour market, events could occur in that market which will not be reflected in
the forward, futures or options markets until the following day, thereby making
it more difficult for the Fund to respond to such events in a timely manner.

Settlements of exercises of over-the-counter Forward Contracts or foreign
currency options 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 U.S. or foreign restrictions and regulations
regarding the maintenance of foreign banking relationships, fees, taxes or other
charges.

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

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 guarantee of an
exchange clearinghouse, and the Fund will therefore be subject to the risk of
default by, or the bankruptcy of, the financial institution serving as its
counterparty. One or more of such institutions also may decide to discontinue
their role as market-makers in a particular currency or security, thereby
restricting the Fund's ability to enter into desired hedging transactions. The
Fund will enter into an over-the-counter transaction only with parties whose
creditworthiness has been reviewed and found satisfactory by the Adviser.

Options on securities, options on stock indexes, Futures Contracts, Options on
Futures Contracts and options on foreign currencies may be traded on exchanges
located in foreign countries. Such transactions may not be conducted in the same
manner as those entered into on U.S. exchanges, and may be subject to different
margin, exercise, settlement or expiration procedures. As a result, many of the
risks of over-the-counter trading may be present in connection with such
transactions.

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

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

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

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

When the Fund purchases a Futures Contract, an amount of liquid assets will be
deposited in a segregated account with the Fund's custodian so that the amount
so segregated will at all times equal the value of the Futures Contract, thereby
insuring that the leveraging effect of such Futures Contract is minimized.

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 held by a Fund, cannot
exceed 15% 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 as such by the
Federal Reserve Bank of New York. Also, the contracts the Fund has in place with
such primary dealers 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 generally is based on a multiple of the
premium received by the Fund for writing the option, plus the amount, if any of
the option's intrinsic value (i.e., the amount that the option is in-the-money).
The formula may also include a factor to account for the difference between the
price of the security and the strike price of the option if the option is
written out-of-the-money. The Fund will treat all or a portion of the formula
as illiquid for purposes of the SEC illiquidity ceiling test imposed by the SEC
staff. The Fund may also write over-the-counter options with non-primary
dealers, including foreign dealers (where applicable), and will treat the assets
used to cover these options as illiquid for purposes of such SEC illiquidity
ceiling test.

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

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

3. INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions which cannot be changed without
the approval of the holders of a majority of the Fund's shares (which, as used
in this SAI, means the lesser of (i) more than 50% of the outstanding shares of
the Trust or a series or class, as applicable, or (ii) 67% or more of the
outstanding shares of the Trust or a series or class, as applicable, present at
a meeting if holders of more than 50% of the outstanding shares of the Trust or
a series or class, as applicable, are represented in person or by proxy). Except
for Investment Restriction (1), and the Fund's nonfundamental policy with
respect to illiquid securities, these investment restrictions 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.

The Fund may not:

(1) Borrow money in an amount in excess of 33 1/3% of its total assets, and
then only as a temporary measure for extraordinary or emergency purposes, or
pledge, mortgage or hypothecate an amount of its assets (taken at market
value) in excess of 15% of its total assets, in each case taken at the lower
of cost or market value. For the purpose of this restriction, collateral
arrangements with respect to options, Futures Contracts, Options on Futures
Contracts, Forward Contracts and options on foreign currencies, and payments
of initial and variation margin in connection therewith, are not considered a
pledge of assets.

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

(3) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the attainment of its investment objective, the Fund
may invest up to 25% of its assets (taken at market value at the time of each
investment) in securities of issuers in any one industry.

(4) Purchase or sell real estate (including limited partnership interests
but excluding securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein and securities secured by real
estate), or mineral leases, commodities or commodity contracts (except
contracts for the future or forward delivery of securities or foreign
currencies and related options, and except Futures Contracts and Options on
Futures Contracts) in the ordinary course of its business. The Fund reserves
the freedom of action to hold and to sell real estate or mineral leases,
commodities or commodity contracts acquired as a result of the ownership of
securities.

(5) Make loans to other persons except by the purchase of obligations in
which the Fund is authorized to invest and by entering into repurchase
agreements; provided that the Fund may lend its portfolio securities
representing not in excess of 30% of its total assets (taken at market value).
Not more than 10% of the Fund's total assets (taken at market value) may be
invested in repurchase agreements maturing in more than seven days. The Fund
may purchase all or a portion of an issue of debt securities distributed
privately to financial institutions. For these purposes the purchase of
short-term commercial paper or a portion or all of an issue of debt securities
which are part of an issue to the public shall not be considered the making of
a loan.

(6) Purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of its total assets (taken at market value)
to be invested in the securities of such issuer, other than U.S.
Government securities.

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

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

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

(10) Purchase any securities or evidences of interest therein on margin,
except that the Fund may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of securities and the Fund may make
margin deposits in connection with options, Futures Contracts, Options on
Futures Contracts, Forward Contracts and options on foreign currencies.

(11) Sell any security which the Fund does not own unless by virtue of its
ownership of other securities it has at the time of sale a equivalent in kind
and amount to the securities sold and provided that if such right is
conditional the sale is made upon equivalent conditions.

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

(13) Write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent the Fund from writing,
purchasing and selling puts, calls or combinations thereof with respect to
securities, indexes of securities or foreign currencies, and with respect to
Futures Contracts.

(14) Issue any senior security (as that term is defined in the 1940 Act), if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder. For the purposes of this restriction,
collateral arrangements with respect to options, Futures Contracts and Options
on Futures Contracts and collateral arrangements with respect to initial and
variation margins are not deemed to be the issuance of a senior security.

As a non-fundamental policy, the Fund will not knowingly invest in securities
which are subject to legal or contractual restrictions on resale (other than
repurchase agreements), unless the Board of Trustees has determined that such
securities are liquid based upon trading markets for the specific security, if,
as a result thereof, more than 15% of the Fund's net assets (taken at market
value) would be so invested.

OTHER OPERATING POLICIES
The Fund will not invest more than 5% of its total assets in companies which,
including their respective predecessors, have a record of less than three years"
continuous operation.

In order to comply with certain state statutes, the Fund will not, as a matter
of operating policy, pledge, mortgage or hypothecate its portfolio securities if
the percentage of securities so pledged, mortgaged or hypothecated would exceed
33 1/3%. The Fund also 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 within
such amount, but not to exceed 2% of the value 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.

These operating policies are not fundamental and may be changed without
shareholder approval.

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

TRUSTEES

A. KEITH BRODKIN,* Chairman and President (born 8/4/35)
Massachusetts Financial Services Company, Chairman.

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

MARSHALL N. COHAN (born 11/14/26)
Private Investor
Address: 2524 Bedford Mews Drive, Wellington, Florida

LAWRENCE H. COHN, M.D. (born 3/11/37)
Brigham and Women's Hospital, Chief of Cardiac Surgery; Harvard Medical
School, Professor of Surgery
Address: 75 Francis Street, Boston, Massachusetts

THE HON. SIR J. DAVID GIBBONS, KBE (born 6/15/27)
Edmund Gibbons Limited, Chief Executive Officer; The Bank of N.T. Butterfield
& Son Ltd., Chairman
Address: 21 Reid Street, Hamilton, Bermuda

ABBY M. O'NEILL (born 4/27/28)
Private Investor; Rockefeller Financial Services, Inc. (investment advisers),
Director
Address: 30 Rockefeller Plaza, Room 5600, New York, New York

WALTER E. ROBB, III (born 7/9/27)
Benchmark Advisers, Inc. (corporate financial consultants), President and
Treasurer; Benchmark Consulting Group, Inc. (office services), President;
Landmark Funds (mutual fund), Trustee
Address: is 110 Broad Street, Boston, 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, President

J. DALE SHERRATT (born 9/23/38)
Insight Resources, Inc. (acquisition planning specialists), President
Address: One Liberty Square, Boston, Massachusetts

WARD SMITH (born 9/13/30)
NACCO Industries (holding company), Chairman (prior to June 1994); Sundstrand
Corporation (diversified mechanical manufacturer), Director
Address: 5875 Landerbrook Drive, Mayfield Heights, Ohio

OFFICERS

LESLIE J. NANBERG,* Vice President (born 11/4/45)
Massachusetts Financial Services Company, Senior Vice President

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

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

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

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

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

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

- ----------
*"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 holds comparable positions with certain affiliates of
Massachusetts Financial Services Company ("MFS") or with certain other funds
of which MFS or a subsidiary is the investment adviser or distributor. Mr.
Brodkin, the Chairman of MFD, 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.)"), the corporate parent of MFS.

The Fund pays compensation of non-interested Trustees and Mr. Bailey who
currently receive a fee of $1,250 per year plus $225 per meeting and $225 per
committee meeting attended, together with such Trustee's out-of-pocket expenses.
The Trust has adopted a retirement plan for non-interested Trustees and Mr.
Bailey. Under this plan, a Trustee will retire upon reaching age 75 and if the
Trustee has completed at least five years of service, he would be entitled to
annual payments during his lifetime of up to 50% of such Trustee's average
annual compensation (based on the three years prior to his retirement) depending
on his length of service. A Trustee may also retire prior to age 75 and receive
reduced payments if he has completed at least five years of service. Under the
plan, a Trustee (or his beneficiaries) will also receive benefits for a period
of time in the event the Trustee is disabled or dies. These benefits will also
be based on the Trustee's average annual compensation and length of service.
There is no retirement plan provided by the Trust for Messrs. Brodkin, Scott and
Shames. The Fund will accrue its allocable share of compensation expenses each
year to cover current years service and amortize past service cost.

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

TRUSTEE COMPENSATION TABLE

<TABLE>
<CAPTION>
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 ..... $3,050 $ 875 10 $247,168
A. Keith Brodkin ...... --0-- --0-- N/A --0--
Marshall N. Cohan ..... 4,175 1,879 14 149,258
Dr. Lawrence Cohn ..... 3,725 542 18 136,508
Sir David Gibbons ..... 3,725 1,460 13 136,508
Abby M. O'Neill ....... 3,275 670 10 123,758
Walter E. Robb, III ... 4,175 2,087 15 149,258
Arnold D. Scott ....... --0-- --0-- N/A --0--
Jeffrey L. Shames ..... --0-- --0-- N/A --0--
J. Dale Sherratt ...... 4,175 609 20 149,258
Ward Smith ............ 4,175 820 13 149,258
</TABLE>

(1) For fiscal year ended November 30, 1996.
(2) Based on normal retirement age of 75.
(3) Information provided is for calendar year 1996. All Trustees receiving
compensation served as Trustees of 41 funds within the MFS fund complex
(having aggregate net assets at December 31, 1996, of approximately $14.9
billion) except Mr. Bailey, who served as Trustee of 81 funds within the MFS
fund complex (having aggregate net assets at December 31, 1996, of
approximately $38.5 billion).

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>
$2,745 $412 $ 686 $ 961 $1,373
3,115 467 779 1,090 1,557
3,484 523 871 1,219 1,742
3,854 578 963 1,349 1,927
4,223 633 1,056 1,478 2,112
4,593 689 1,148 1,607 2,296
</TABLE>

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

As of July 31, 1997, the Trustees and officers, as a group, owned less than 1%
of the outstanding shares of the Fund.

As of July 31, 1997, MFS Defined Contribution Plan, c/o Mark Leary,
Massachusetts Financial Services, 500 Bolyston Street, Boston, MA 02116-3740,
was the record owner of approximately 92.27% of the outstanding Class I shares
of the Fund. As of July 31, 1997, MFS Service Center, Inc., Audit Account
Reinvestments, 500 Boylston Street, Boston, MA 02116-3740, was the record owner
of approximately 7.73% of the outstanding Class I shares of the Fund.

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

INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a subsidiary of Sun Life of Canada (U.S.) which in turn is an
indirect wholly owned subsidiary of Sun Life Assurance Company of Canada.

The Adviser manages the assets of the Fund pursuant to an Investment Advisory
Agreement with the Fund dated as of September 1, 1993 (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 an annual management fee, computed
and paid monthly, in an amount equal to the sum of 0.75% of the Fund's average
daily net assets. The Adviser has reduced its management fee to 0.65% per annum
with respect to any Fund assets in excess of $1 billion. This fee reduction may
be revised or rescinded by the Adviser with the consent of the Fund's Board of
Trustees without notice to shareholders.

For the Fund's fiscal year ended November 30, 1996, MFS received in aggregate
$4,084,641 under its investment advisory agreement with the Fund. For the Fund's
fiscal year ended November 30, 1995, MFS received $3,363,454 under its
investment advisory agreement with the Fund. For the Fund's fiscal year ended
November 30, 1994, MFS received $3,217,779 under its investment advisory
agreement with the Fund.

The Fund pays the compensation of the Trustees who are not officers of MFS and
all expenses of the Fund (other than those assumed by the Adviser or MFD)
including: governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing share certificates, periodic reports, notices and proxy statements to
shareholders and to governmental officers and commissions; brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of State Street
Bank and Trust Company, the Fund's Custodian, for all services to the Fund,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of the Fund; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses are borne by the Fund except that the
Fund's Distribution Agreement with MFD requires MFD to pay for prospectuses that
are to be used for sales purposes. Expenses of the Trust which are not
attributable to a specific series are allocated among the series in a manner
believed by management of the trust to be fair and equitable. For a list of the
Fund's expenses, including the compensation paid to the Trustees who are not
officers of MFS, during the fiscal year ended November 30, 1996, see "Financial
Statements -- Statement of Operations" in the Annual Report to Shareholders.
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" below.

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

The Advisory Agreement with the Fund 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 provides that if MFS ceases to serve as the Adviser to
the Fund, the Fund will change its name so as to delete the term "MFS" and that
MFS may render services to others and may permit other fund clients to use the
term "MFS" in their names. The Advisory Agreement also provides that neither the
Adviser nor its personnel shall be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or omission
in the execution and management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by reason
of reckless disregard of its or their obligations and duties under the Advisory
Agreement.

ADMINISTRATOR
MFS provides the Fund with certain financial, legal, compliance, shareholder
communications and other administrative services pursuant to a Master
Administrative Services Agreement dated March 1, 1997. 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.

CUSTODIAN

State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest and dividends on the
Fund's investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value and public offering price of each class of shares of the Fund. The
Custodian does not determine the investment policies of the Fund or decide which
securities the Fund will buy or sell. The Fund may, however, invest in
securities of the Custodian and may deal with the Custodian as principal in
securities transactions. The Custodian also serves as the dividend and
distribution disbursing agent of the Fund. The Custodian has contracted with the
Adviser for the Adviser to perform certain accounting functions related to
options transactions for which the Adviser receives remuneration on a cost
basis.

SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agent Agreement with the Trust, dated as of September 10,
1986 (the "Agency Agreement"). The Shareholder Servicing Agent's
responsibilities under the Agency Agreement include administering and performing
transfer agent functions and the keeping of records in connection with the
issuance, transfer and redemption of each class of shares of the Fund. For these
services, the Shareholder Servicing Agent will receive a fee calculated as a
percentage of the average daily net assets of the Fund at an effective annual
rate of 0.13%. In addition, the Shareholder Servicing Agent will be reimbursed
by the Fund for certain expenses incurred by the Shareholder Servicing Agent on
behalf of the Fund. State Street Bank and Trust Company, the dividend and
distribution disbursing agent for 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"). 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 the Class A shares of the Fund is their
net asset value next computed after the sale plus a sales charge which varies
based upon the quantity purchased. The public offering price of a Class A share
of the Fund is calculated by dividing the net asset value of a Class A share by
the difference (expressed as a decimal) between 100% and the sales charge
percentage of offering price applicable to the purchase (see "Purchases" in the
Prospectus). The sales charge scale set forth in the Prospectus applies to
purchases of Class A shares of the Fund alone or in combination with shares of
all classes of certain other funds in the MFS Family of Funds (the "MFS Funds")
and other funds (as noted under Right of Accumulation) by any person, including
members of a family unit (e.g., husband, wife and minor children) and bona fide
trustees, 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 transactions as described in the Prospectus. Such sales
are made without a sales charge to promote good will with employees and others
with whom MFS, MFD and/or the Fund have business relationships, and because the
sales effort, if any, involved in making such sales is negligible.

MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of 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 underwriter 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 underwriter may vary and the total sales charge may be more
or less than the sales charge calculated using the sales charge expressed as a
percentage of the offering price or as a percentage of the net amount invested
as listed in the Prospectus. In the case of the maximum sales charge the dealer
retains 5% and MFD retains approximately 3/4 of 1% of the public offering price.
In addition, MFD pays a commission to dealers who initiate and are responsible
for purchases of $1 million or more as described in the Prospectus.

During the fiscal year ended November 30, 1996, MFD received sales charges of
$23,975 and dealers received sales charges of $171,664 (as their concession on
gross sales charges of $195,639) for selling Class A shares of the Fund; the
Fund received $10,014,085 representing the aggregate net asset value of such
shares.

During the fiscal year ended November 30, 1995, MFD received sales charges of
$9,592 and dealers received sales charges of $80,955 (as their concession on
gross sales charges of $90,547) for selling Class A shares of the Fund; the Fund
received $5,428,186 representing the aggregate net asset value of such shares.

During the fiscal year ended November 30, 1994, MFD received sales charges of
$6,476 and dealers received sales charges of $41,422 (as their concession on
gross sales charges of $47,898) for selling Class A shares of the Fund; the Fund
received $2,060,615 representing the aggregate net asset value of such shares.

During the fiscal years ended November 30, 1996, 1995 and 1994, the Contingent
Deferred Sales Charge ("CDSC") imposed on redemption of Class A shares was
$11,233, $1,900 and $42, respectively.

CLASS B SHARES AND CLASS I SHARES: MFD acts as agent in selling Class B shares
and Class I shares of the Fund. The public offering price of Class B shares and
Class I shares is their net asset value next computed after the sale (see
"Purchases" in the Prospectus and the Prospectus Supplement to which Class I
shares are offered).

During the fiscal years ended November 30, 1996, 1995, and 1994, the CDSC
imposed on redemption of Class B shares was $344,491, $472,200 and $748,300,
respectively.

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 Funds shares.

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 Trustees or by vote of a majority of the
Trust's shares (as defined in "Investment Restrictions") and in either case, by
a majority of the Trustees who are not parties to such Distribution Agreement or
interested persons of any such party. The Distribution Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 days' nor less than 30 days' notice.

5. PORTFOLIO TRANSACTIONS AND BROKERAGE
COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by
employees of the Adviser, who are appointed and supervised by its senior
officers. Changes in the Fund's investments are reviewed by the Board of
Trustees. The Fund's portfolio manager may serve other clients of the Adviser or
any subsidiary of MFS in a similar capacity.

The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities, such as government securities, which are
principally traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the Adviser
normally seeks to deal directly with the primary market makers, unless in its
opinion, better prices are available elsewhere. In the case of securities
purchased from underwriters, the cost of such securities generally includes a
fixed underwriting commission or concession. Securities firms or futures
commission merchants may receive brokerage commissions on transactions involving
options, Futures Contracts and Options on Futures Contracts and the purchase and
sale of underlying securities upon exercise of options. The brokerage
commissions associated with buying and selling options may be proportionately
higher than those associated with general securities transactions. From time to
time, soliciting dealer fees are available to the Adviser on the tender of the
Fund's portfolio securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Fund by the Adviser. At
present no other recapture arrangements are in effect.

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

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

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

Broker-dealers may be willing to furnish statistical, research and other factual
information or services ("Research") to the Adviser for no consideration other
than brokerage or underwriting commissions. Securities may be bought or sold
from time to time through such broker-dealer, on behalf of the Fund. The Trust's
Trustees (together with the Trustees of the other MFS Funds) have directed the
Adviser to allocate a total of $39,100 of commission business from the MFS Funds
to the Pershing Division of Donaldson Lufkin & Jenrette as consideration for the
annual renewal of 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. Results of this effort are sometimes used by the
Adviser as a consideration in the selection of brokers to execute portfolio
transactions. However, the Adviser is unable to quantify the amount of
commissions which will be paid as a result of such Research because a
substantial number of transactions will be effected through brokers which
provide Research but which were selected principally because of their execution
capabilities.

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

For the Fund's fiscal year ended November 30, 1996, the Fund paid total
brokerage commissions of $1,563,524 on total transactions (other than U.S.
Government Securities, purchased options transactions and short-term
obligations) of $923,701,659.

For the Fund's fiscal year ended November 30, 1995, the Fund paid total
brokerage commissions of $1,397,403 on total transactions (other than U.S.
Government securities, purchased options transactions and short-term
obligations) of $827,963,598.

For the Fund's fiscal year ended November 30, 1994, the Fund paid total
brokerage commissions of $712,538 on total transactions (other than U.S.
Government Securities, purchased options transactions and short-term
obligations) of $487,667,581.

During the fiscal year ended November 30, 1996, the Fund acquired and owned
securities issued by General Motors Acceptance Corp. in the amount of $7,646,000
as of November 30, 1996.

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 MFS or any subsidiary of MFS. Investment decisions for the Fund and for such
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed by the Adviser to be
equitable to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the Fund is
concerned. In other cases, however, it is believed that the Fund's ability to
participate in volume transactions will produce better executions for the Fund.

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

Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in the shareholder's name. All income dividends and
capital gain distributions on escrowed shares will be paid to the shareholder or
to his order. When the minimum investment so specified is completed (either
prior to or by the end of the 13-month 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 that shareholder's new
investment, together with the current offering price value of all the holdings
of Class A, B and C shares of that shareholder in the MFS Funds or MFS Fixed
Fund reaches a discount level (see "Purchases" in the Prospectus for the sales
charges on quantity purchases). For example, if a shareholder owns shares with a
current offering price value of $75,000 and purchases an additional $25,000 of
Class A shares of the Fund, the sales charge for the $25,000 purchase would be
at the rate of 4% (the rate applicable to single transactions of $100,000). A
shareholder must provide the Shareholder Servicing Agent (or his investment
dealer must provide MFD) with information to verify that the quantity sales
charge discount is applicable at the time the investment is made.

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

INVEST BY MAIL: Additional investments of $50 or more in the Fund may be made
at any time either 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 the 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 exchange of funds from the
shareholder's account in an MFS Fund for investment in the same class of shares
of other MFS Funds selected by the shareholder. Under the Automatic Exchange
Plan, exchanges of at least $50 each may be made to up to six different funds
effective on the seventh day of each month or of every third month, depending
whether monthly or quarterly exchanges are elected by the shareholder. If the
seventh day of the month is not a business day, the transaction will be
processed on the next business day. Generally, the initial exchange will occur
after receipt and processing by the Shareholder Servicing Agent of an
application in good order. Transfers will continue to be made from a
shareholder's account in any MFS Fund as long as the balance of the account is
sufficient to complete the 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
the month, the Exchange Change Request will be effective for the following
month's exchange.

A shareholder's right to make additional investments in any of the MFS Funds, to
make exchanges of shares from one MFS Fund to another and to withdraw from an
MFS Fund, as well as a shareholder's other rights and privileges are not
affected by a shareholder's participation in the Automatic Exchange Plan.

The Automatic Exchange Plan is part of the Exchange Privilege. For additional
information regarding the Automatic Exchange Plan, including the treatment of
any CDSC, see "Exchange Privilege" below.

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

EXCHANGE PRIVILEGE -- Subject to the requirements set forth below, some or all
of the shares in an account for which payment has been received by the Fund
(i.e., an established account) may be exchanged for shares of the same class of
any of the other MFS Funds (if available for sale and if 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 ($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. 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
Exchange, the exchange usually will occur on that day if all of the requirements
set forth above have been complied with at that time. However, payment of the
redemption proceeds by the Fund, and thus the purchase of shares of the other
MFS Fund, may be delayed for up to seven days if the Fund determines that such a
delay would be in the best interest of all its shareholders. Investment dealers
which have satisfied criteria established by MFD may also communicate a
shareholder's Exchange Request to the Shareholder Servicing Agent by facsimile
subject to the requirements set forth above.

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

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

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

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

TAX-DEFERRED RETIREMENT PLANS -- Shares of the Fund are available for purchase
by all types of tax-deferred retirement plans. MFD makes available through
investment dealers plans and/or custody agreements for the following:

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

Simplified Employee Pension (SEP-IRA) Plans;

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

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

Certain other qualified pension and profit-sharing plans.

The plan documents provided by MFD designate a trustee or custodian (unless
another trustee or custodian is designated by the individual or group
establishing the plan) and contain specific information about the plans. Each
plan provides that dividends and distributions will be reinvested automatically.
For further details with respect to any plan, including fees charged by the
trustee, custodian or MFD, tax consequences and redemption information, see the
specific documents for that plan. Plan documents 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.

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

7. TAX STATUS

The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting 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 the Fund's shares. Availability of the deduction to
particular 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 without regard to the length of time the shareholders
have held their shares. It is uncertain at this time whether all or any part of
such capital gains will be eligible to be taxed at a maximum rate below 28%. Any
Fund dividend that is declared in October, November, or December of any calendar
year, that is payable to shareholders of record in such a month, and that is
paid the following January will be treated as if received by the shareholders on
December 31 of the year in which the dividend is declared. The Fund will notify
shareholders regarding the federal tax status of its distributions after the end
of each calendar year.

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

In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss; a
long-term capital gain will be eligible for reduced tax rates if the shares were
held for more than 18 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 Class A shares of the Fund within 90 days after
their purchase followed by any purchase (including purchases by exchange or by
reinvestment) without payment of an additional sales charge of Class A shares of
the Fund or of another MFS Fund (or any other shares of an MFS Fund generally
sold subject to a sales charge).

The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders. Any
investment in zero coupon bonds and certain securities purchased at a market
discount will cause the Fund to recognize income prior to the receipt of cash
payments with respect to these securities. In order to distribute this income
and avoid a tax on the Fund, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially resulting
in additional taxable gain or loss to the Fund.

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, Forward Contracts, Futures
Contracts and related transactions to the extent necessary to meet the
requirements of Subchapter M of the Code.

Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will generally be
treated as ordinary income and losses. The 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 taxable year. This election may cause the
Fund to recognize ordinary income prior to the receipt of cash payments with
respect to those investments; in order to distribute this income and avoid a tax
on the Fund, the Fund may be required to liquidate portfolio securities that it
might otherwise have continued to hold. Investment income received by the Fund
from foreign securities may be subject to foreign income taxes withheld at the
source; the Fund does not expect to be able to pass through to shareholders
foreign tax credits or deductions with respect to such foreign taxes. The United
States has entered into tax treaties with many foreign countries that may
entitle the Fund to a reduced rate of tax or an exemption from tax on such
income; the Fund intends to qualify for treaty reduced rates where available. It
is not possible, however, to determine the Fund's effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested within various
countries is not known.

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

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

8. DETERMINATION OF NET ASSET VALUE;
PERFORMANCE INFORMATION
NET ASSET VALUE The net asset value per share of each class of the Fund is
determined each day during which the Exchange is open for trading. (As of the
date of this SAI, the Exchange is open for trading every weekday except for the
following holidays (or the days on which they are observed): New Year's Day,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.) This determination is made
once during each such day as of the close of regular trading on the Exchange by
deducting the amount of the liabilities attributable to the class from the value
of the assets attributable to the class and dividing the difference by the
number of shares of the class outstanding. Forward Contracts will be valued
using a pricing model taking into consideration market data from an external
pricing source. Use of the pricing services has been approved by the Board of
Trustees. All other securities, Futures Contracts and options in the Fund's
portfolio (other than short-term obligations) for which the principal market is
one or more securities or commodities exchanges (whether domestic or foreign)
will be valued at the last reported sale price or at the settlement price prior
to the determination (or if there has been no current sale, at the closing bid
price) on the primary exchange on which such securities, Futures Contracts or
options are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available, be
valued at current bid prices, unless such securities are reported on the NASDAQ
system, in which case they are valued at the last sale price or, if no sales
occurred during the day, at the last quoted bid price. Debt securities (other
than short-term obligations but 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 institutional-
sized trading in similar groups of securities, yields, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data, without
exclusive reliance upon quoted prices or exchange or over-the-counter prices,
since such valuations are believed to reflect more accurately the fair value of
such securities. Short-term obligations, if any, in the Fund's portfolio are
valued at amortized cost, which constitutes fair value as determined by the
Board of Trustees. Short-term securities with a remaining maturity in excess of
60 days will be valued based upon dealer supplied valuations. Portfolio
securities and over-the-counter options and Forward Contracts, for which there
are no quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Board of Trustees. A share's net asset value
is effective for orders received by the dealer prior to its calculation and
received by MFD, in its capacity as the Fund's distributor, or its agent, the
Shareholder Servicing Agent, prior to the close of the business day.

PERFORMANCE INFORMATION
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
(5% maximum for Class B shares purchased on and after January 1, 1993, but
before September 1, 1993 and 4% maximum for Class B shares) and therefore may
result in a higher rate of return, (ii) a total rate of return assuming an
initial account value of $1,000, which will result in a higher rate of return
since the value of the initial account will not be reduced by the sales charge
applicable to Class A shares (5.75% maximum) 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 sales charge or CDSC.

The Fund offers multiple classes of shares which were initially offered for sale
to the public on different dates. The calculation of total rate of return for a
class of shares which initially was offered for sale to the public subsequent to
another class of shares of the Fund is based both on (i) the performance of the
Fund's newer class from the date it initially was offered for sale to the public
and (ii) the performance of the Fund's oldest class from the date it initially
was offered for sale to the public up to the date that the newer class initially
was offered for sale to the public.

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

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

PERFORMANCE RESULTS
The performance results presented in Appendix A hereto under the heading
"Performance Results" assume an initial investment of $10,000 in Class B shares
and cover the period from January 1, 1987 through December 31, 1996. It has been
assumed that dividend and capital gain distributions were reinvested in
additional shares. Any performance results or total rate of return quotation
provided by the Fund should not be considered as representative of the
performance of the Fund in the future since the net asset value 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).

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 Adviser, USA Today, Pensions and
Investments, SmartMoney, Forbes, Global Finance, Registered Representative,
Institutional Investor, the Investment Company Institute, Johnson's Charts,
Morningstar, Lipper Analytical Services, Inc., CDA Wiesenberger, Shearson Lehman
and Saloman Bros. Indices, Ibbotson, Business Week, Lowry Associates, Media
General, Investment Company Data, The New York Times, Your Money, Strangers
Investment Adviser, 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.

The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against a loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals.

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

MFS FIRSTS: MFS has a long history of innovations.

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

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

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

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

-- 1936 -- Massachusetts Investors Trust is the first mutual fund to allow
shareholders to take capital gain distributions either in additional
shares or 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 Trust is the first closed-end, high-yield
municipal bond fund traded on the New York Stock Exchange.

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

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

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

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

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

9. DISTRIBUTION PLAN
The Trustees have adopted a Distribution Plan for Class A and Class B 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 November 30, 1996, 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 $ 297,412 $ 45,928 $251,484

Class B Shares $4,256,542 $3,286,783 $969,759

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.

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

Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of shareholders.
Although Trustees are not elected annually by the shareholders, shareholders
have under certain circumstances the right to remove one or more Trustees in
accordance with the provisions of Section 16(c) of the 1940 Act. No material
amendment may be made to the Declaration of Trust without the affirmative vote
of a majority of the Trust's shares. Shares have no pre-emptive or conversion
rights (except as described in "Purchases -- Conversion of Class B Shares" in
the Prospectus). Shares are fully paid and non-assessable. The Trust may enter
into a merger or consolidation, or sell all or substantially all of its assets
(or all or substantially all of the assets belonging to any series of the
Trust), if approved by the vote of the holders of two-thirds of the Trust's
outstanding shares voting as a single class, or of the affected series of the
Trust, as the case may be, except that if the Trustees of the Trust recommend
such merger, consolidation or sale, the approval by vote of the holders of a
majority of the Trust's or the affected series' outstanding shares (as defined
in "Investment Restrictions") will be sufficient. The Trust or any series of the
Trust may also be terminated (i) upon liquidation and distribution of its
assets, if approved by the vote of the holders of two-thirds of its outstanding
shares, or (ii) by the Trustees by written notice to the shareholders of the
Trust or the affected series. If not so terminated, the Trust will continue
indefinitely.

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

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

11. 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 November 30, 1996, the Statement of Assets and
Liabilities at November 30, 1996, the Statement of Operations for the year ended
November 30, 1996, the Statement of Changes in Net Assets for each of the two
years in the period ended November 30, 1996, the Notes to Financial Statements
and the Independent Auditors' Report, each of which is included in the Annual
Report to shareholders of the Fund, are incorporated by reference into this SAI
and have been so incorporated in reliance upon the report of Deloitte & Touche
LLP, independent auditors, as experts in accounting and auditing. A copy of the
Annual Report accompanies this SAI.

The Portfolio of Investments at May 31, 1997 and the Statement of Assets and
Liabilities at May 31, 1997, the Statement of Operations for the six months
ended May 31, 1997, the Statement of Changes in Net Assets for the six months
ended May 31, 1997 and for the year ended November 30, 1996, and the Notes to
Financial Statements, each of which is included in the unaudited Semi-annual
Report to shareholders of the Fund, are incorporated by reference into this SAI.
A copy of the Semiannual 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 B 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, 1987.................... $11,157 $ 0 $ 65 $11,222
December 31, 1988.................... 12,732 0 218 12,950
December 31, 1989.................... 16,218 0 529 16,747
December 31, 1990.................... 15,504 165 751 16,420
December 31, 1991.................... 18,613 1,768 993 21,374
December 31, 1992.................... 19,273 2,790 1,058 23,121
December 31, 1993.................... 18,559 4,021 1,561 24,141
December 31, 1994.................... 17,483 3,788 2,651 23,922
December 31, 1995.................... 20,982 8,378 3,999 33,359
December 31, 1996.................... 19,030 14,217 5,506 38,753
</TABLE>

Explanatory Notes: The results in the table assume that income dividends and
capital gain distributions were invested in additional shares. No adjustment has
been made for income taxes, if any, payable by shareholders.

PERFORMANCE QUOTATIONS

All performance quotations are as of May 31, 1997.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------
10 YEAR
OR LIFE
1 YEAR 5 YEAR OF FUND
------ ------ -------
<S> <C> <C> <C>
Class A Shares with sales charge .............................. 8.62% 14.41%(1) 11.72%(1)
Class A Shares without sales charge ........................... 15.23% 15.77%(1) 12.38%(1)
Class B Shares with CDSC ...................................... 10.71% 14.75% 12.00%
Class B Shares without CDSC ................................... 14.28% 14.98% 12.00%
Class I Shares ................................................ 13.98%(2) 14.92%(2) 11.97%(2)
</TABLE>

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

(2) Class I share performance includes the performance of the Fund's Class B
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 B shares differ. Class I share
performance has been adjusted to reflect that Class I shares are not subject
to a CDSC, whereas Class B shares generally are subject to a CDSC. 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

MFS(R)
LARGE CAP GROWTH
FUND

500 Boylston Street
Boston, MA 02116

[Graphic Omitted]

MLC-13-9/97/525 03/203

[cover]

[silhouette logo]
MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)

Annual Report
for Year Ended
November 30, 1996

MFS(R) Capital Growth Fund

[microchip photo]

America learns how "We invented the mutual fund" (see page 27)

<PAGE>

Table of Contents

Letter from the Chairman 1
A Discussion with the Portfolio Manager 3
Portfolio Manager's Profile 6
Performance Summary 6
Fund Facts 8
Portfolio of Investments 10
Financial Statements 14
Notes to Financial Statements 20
Independent Auditors' Report 26
The MFS Family of Funds(r) 28
Trustees and Officers 29

[boxed graphic]

Highlights

(bullet) For the 12 months ended November 30, 1996, Class A shares of the
Fund provided a total return at net asset value of 19.76%, while
Class B shares had a total return of 18.84%.

(bullet) While technology, financial services, and energy were among the
top-performing sectors in the Fund over the past year, two of the
larger holdings, Harrah's Entertainment and Alco Standard,
experienced significant price declines.

(bullet) The Fund's largest sector is financial services, which we expect to
benefit from an environment of low growth and low inflation. In this
sector, banks and insurance companies have generally performed well
over the past year.

(bullet) Our outlook for the equity market in 1997 is cautious. While
inflation is subdued, low unemployment levels may make further
interest rate reductions difficult. Valuation levels, by all
historic measures, are full, and earnings growth has decelerated.

<PAGE>

Letter from the Chairman

[photo]
A. Keith Brodkin

Dear Shareholders:

The U.S. economy appears to have settled into a pattern of moderate growth
and inflation -- two factors that we think can be important contributors to a
favorable long-term investment climate. During the first quarter of 1996,
real (inflation-adjusted) economic growth was 2.3% on an annualized basis,
followed by a rate of 4.7% in the second quarter. However, this unexpectedly
high level was followed by a more moderate 2.0% pace during the third
quarter. Overall, real growth in gross domestic product has surpassed our
expectations this year, and we now expect that growth for all of 1996 could
exceed 2.5%. While the consumer appears to be carrying an excessive debt
load, this sector, which represents two-thirds of the economy, provided some
support to the automobile and housing markets throughout much of the year.
Consumer spending has also been positively impacted by widespread job growth
and, more recently, modestly rising wages. Retail sales, which have been flat
for several months, appear to be improving during the holiday shopping
season. The economies of Europe and Japan, meanwhile, continue to be in the
doldrums, weakening U.S. export markets. Finally, the capital spending plans
of American corporations are far from robust. Thus, while economic growth
should continue, we expect some slackening toward the end of the year.

We believe U.S. equity investors should lower their expectations for 1997.
The expected slowdown in corporate earnings growth and interest rate
increases earlier in the year have raised some near-term concerns, as was
seen in July's stock market correction. Further increases in interest rates
and an acceleration of inflation, coupled with an additional slowdown in
corporate earnings growth, could have a negative effect on the stock market
in the near term. However, to the extent that some earnings disappointments
are taken as a sign that the economy is not overheating, this may prove
beneficial for the equity market's longer-term health. We believe many of the
technology-driven productivity gains that U.S. companies have made in recent
years will continue to enhance corporate America's competitiveness and
profitability. Therefore, while we have some near-term concerns, we remain
quite constructive on the long-term viability of the equity market.

Finally, as you may notice, this report to shareholders incorporates a
number of changes which we hope you will find informative and useful.
Following a discussion with the Portfolio Manager, we have added new
information on the Fund's holdings, including a chart illustrating the
portfolio's

1
<PAGE>

Letter from the Chairman -- continued

concentration in the types of investments that meet its criteria. Near the
back of the report, telephone numbers and addresses are listed if you would
like to contact MFS.

We appreciate your support and welcome any questions or comments you may
have.

Respectfully,

/s/ A. Keith Brodkin

A. Keith Brodkin
Chairman and President

December 12, 1996

2
<PAGE>

A Discussion with the Portfolio Manager

[photo]
John F. Brennan, Jr.

For the 12 months ended November 30, 1996, Class A shares of the Fund
provided a total return of 19.76%, while Class B shares had a total return of
18.84%. These returns, which include the reinvestment of distributions but
exclude the effects of any sales charges, compare to a 27.76% return for the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged
index of common stock performance.

Q. What do you think were some of the major reasons for the Fund's
performance over the past year, John?

A. Technology, financial services, and energy were among the top-performing
sectors over the past year. Relative to the S&P 500, the Fund was
significantly underweighted in energy (5.6% of the portfolio versus 10.0% for
the index) and somewhat underweighted in technology (10.5% versus 12.6%). In
financial services, the Fund was slightly overweighted (15.9% versus 15.0%).
In addition, two large portfolio holdings, Harrah's Entertainment and Alco
Standard, experienced significant price declines.

The rapid rise of the stock market, particularly the S&P 500, has made it
increasingly difficult to find compelling investments, and our cash position
has risen to 16% of net assets. This higher level of cash has also impeded
performance relative to the S&P 500.

Q. How would you describe the business and economic environment you faced
over the past year, particularly as it relates to the Fund?

A. Moderate growth and low inflation prevailed throughout 1996. Earnings
growth for the S&P 500 is likely to be at less than 5.0% for all of 1996,
while long-term interest rates have increased from 6.0% at the beginning of
the year to 6.4% currently, after peaking at over 7.0% during the third
quarter. While low inflation and interest rates continue to favor financial
services holdings and blue-chip growth companies, we do not believe the stock
market can continue its ascent unless earnings growth accelerates without
igniting inflation, or interest rates decline significantly while earnings
remain solid. Given the higher level of risk, we have positioned the Fund
conservatively.

3
<PAGE>

A Discussion with the Portfolio Manager -- continued

Q. We noticed that financial services is the largest sector in the Fund. What
is it you like about this sector, and could you discuss any sub-groups
within financial services that you find particularly attractive?

A. The environment of low growth and low inflation is generally positive for
financial stocks. Both banks and insurance companies have generally performed
well over the past year.

Q. Could you give us some of your favorite financial services holdings and
tell us what you think makes them attractive?

A. Freddie Mac (Federal National Mortgage Corporation), Wells Fargo and Union
Planters all performed strongly in 1996. Wells Fargo and Union Planters are
banks that are benefiting from the ongoing consolidation in that industry.
Each bank has executed an acquisition strategy which could result in
significant cost savings and strong earnings growth. Freddie Mac has begun to
experience an acceleration in earnings growth as it becomes more aggressive
in adding mortgage-backed securities to its portfolio. While earnings growth
is strong for all of these securities, valuations continue to be reasonable.

Q. However, your largest holdings are not financial services companies but
Promus Hotels and Tyco International. What makes these companies attractive
to you?

A. Promus Hotels is a hotel operator and franchiser of Embassy Suites,
Hampton Inns, and Homewood Suites. Earnings growth should exceed 25% over the
next three to five years as Promus continues to grow its franchise base.
Given this growth, we believe Promus is attractively valued.

Tyco International is a multi-industry company. Its main operations are
fire protection systems and service, flow control products, and health care
supplies. Internal growth, new acquisitions, and strong management incentives
should combine to produce earnings growth of 20% to 25% over the next three
to five years. While Tyco has performed well over the past few years, we
believe further earnings growth should result in solid stock price
appreciation.

Q. In general, what characteristics or qualities do you look for in selecting
stocks for the Fund?

A. The primary objective is to find companies with good earnings growth,
generally 15% to 20% per year. Management incentive programs are considered a
key factor in determining the likelihood of achieving growth targets. Once an
expected growth rate is determined, our objective is to buy the stock at a
significant discount to its expected fair value.

4
<PAGE>

A Discussion with the Portfolio Manager -- continued

Q. Can you talk about some other stocks or sectors that performed as well as
or better than expected and tell us why you think they did well?

A. Both the pharmaceutical and lodging industries performed well last year.
The pharmaceutical industry was aided by strong earnings growth and the
expectation of low inflation and low economic growth, which enhanced
valuation levels. In the lodging industry, supply tightened significantly,
which resulted in higher room prices and stronger occupancy levels.

Q. Now, could you talk about some other stocks or sectors that did not
perform as well as you expected?

A. Harrah's Entertainment and Alco Standard had disappointing performance in
1996. Harrah's was hurt by competitive pressures in several casino markets,
and Alco Standard felt the impact of falling paper prices on its paper
distribution business. However, we believe the long-term prospects for both
companies are unimpaired, and we expect results to resume a positive trend in
1997.

Q. Can you tell us about some sectors you might be avoiding, and why?

A. We avoided the basic materials and auto sectors over the past year
because, in our opinion, the prospects for an economic pickup were not good,
particularly with higher interest rates prevailing for most of the year.
However, the recent decline in interest rates may improve the outlook for
these sectors in 1997.

Q. As you look ahead, what changes do you see in the overall market or
economic environment, particularly as it relates to the Fund, and how are you
positioning the Fund to try to take advantage of those changes?

A. Our outlook for the equity market in 1997 is cautious. While inflation is
currently subdued, low unemployment levels may make further interest rate
reductions difficult. Valuation levels, by all historic measures, are full,
and earnings growth has decelerated. We are therefore taking a cautious
approach to our investment selections.

Respectfully,

/s/ John F. Brennan, Jr.

John F. Brennan, Jr.
Portfolio Manager

5
<PAGE>

[boxed graphic]

Portfolio Manager's Profile

John F. Brennan, Jr. has been a member of the MFS investment staff since
1985. A graduate of the University of Rhode Island and Stanford University's
Graduate School of Business Administration, he began his career at MFS as an
industry specialist and was promoted to Assistant Vice President -
Investments in 1987. He was named Vice President - Investments in 1988 and
Senior Vice President - Investments in 1995. Mr. Brennan became Portfolio
Manager of MFS Capital Growth Fund in 1995.

Performance Summary

The information below illustrates the historical performance of MFS Capital
Growth Fund Class B shares in comparison to various market indicators. Graph
results do not reflect the deduction of any contingent deferred sales charges
(CDSC) since the CDSC is not applicable after a six-year period. Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. You cannot
invest in an index. All results are historical and assume the reinvestment of
dividends and capital gains. The performance of the Fund's Class A shares
will be greater or less than the line shown, based on differences in loads
and fees.

Growth of a Hypothetical $10,000 Investment
(For the Period from January 1, 1987 to November 30, 1996)

[line chart]

MFS Capital Growth Consumer Price S&P 500
Fund Class B Index-U.S. Composite

1/87 10000 10000 10000
10225 10444 9777
11/88 12760 10881 12042
16603 11388 15746
11/90 15806 12102 15196
19003 12464 18284
11/92 22920 12844 21650
23767 13188 23833
11/94 23407 13541 24078
32338 13888 32944
11/96 38431 14364 42091

6
<PAGE>

Performance Summary - continued

<TABLE>
<CAPTION>
Average Annual Total Returns 1 Year 3 Years 5 Years Life of Fund+
- -------------------------------------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C>
MFS Capital Growth Fund (Class A)
including 5.75% sales charge +12.86% +16.16% +14.46% +14.08%
- -------------------------------------- --------- --------- --------- ----------------
MFS Capital Growth Fund (Class A)
at net asset value +19.76% +18.47% +15.82% +14.76%
- -------------------------------------- --------- --------- --------- ----------------
MFS Capital Growth Fund (Class B) with
CDSC +14.84% +16.64% +14.90% +14.41%
- -------------------------------------- --------- --------- --------- ----------------
MFS Capital Growth Fund (Class B)
without CDSC +18.84% +17.37% +15.13% +14.41%
- -------------------------------------- --------- --------- --------- ----------------
Average capital appreciation fund** +18.05% +14.99% +15.37% +12.29%
- -------------------------------------- --------- --------- --------- ----------------
Standard & Poor's 500 Composite
Index+++ +27.76% +20.88% +18.15% +15.28%
- -------------------------------------- --------- --------- --------- ----------------
Consumer Price Index* +3.42% +2.89% +2.88% +3.73%
- -------------------------------------- --------- --------- --------- ----------------
</TABLE>

*The Consumer Price Index is a popular measure of change in prices.
**Source: Lipper Analytical Services.
+For the period from the commencement of investment operations, December 29,
1986 to November 30, 1996.
+++Source: CDA/Weisenberg.
#Benchmark comparisons begin on January 1, 1987.

Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past
performance is no guarantee of future results.

Class B results with the contingent deferred sales charge (CDSC) reflect the
applicable CDSC which declines over six years as follows: 4%, 4%, 3%, 3%, 2%,
1%, 0%.

Class A share performance includes the performance of the Fund's Class B
shares for periods prior to the commencement of offering of Class A shares on
September 7, 1993. Sales charges and operating expenses for Class A and Class
B shares differ. The Class B share performance, which is included within the
Class A share performance, including the 5.75% sales charge, has been
adjusted to reflect the initial sales charge generally applicable to Class A
shares rather than the CDSC generally applicable to Class B shares. Class A
share performance has not been adjusted, however, to reflect differences in
operating expenses (e.g., Rule 12b-1 fees), which generally are higher for
Class B shares.

Fund results reflect any applicable expense subsidies and waivers, without
which the performance results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details.

7
<PAGE>

[boxed graphic]

Fund Facts

Strategy: The Fund seeks to provide growth of capital by
investing generally in companies believed to
possess above-average growth opportunities.

Commencement of
investment operations: December 29, 1986

Size: $581.2 million net assets as of November 30, 1996

[pie chart]

Largest Sectors

Financial Services 15.9%
Leisure 14.8%
Technology 10.5%
Utilities & Communication 9.4%
Health Care 9.3%
Other 40.1%

[boxed graphic]

Tax Form Summary

In January 1997, shareholders will be mailed a tax form summary reporting the
federal tax status of all distributions paid during the calendar year 1996.

The Fund has designated $61,004,801 as a long-term capital gain distribution
for tax purposes. This distribution was made to shareholders of record as of
December 28, 1995, payable December 29, 1995.

For the year ended November 30, 1996, the amount of distributions from income
eligible for the 70% dividends-received deduction for corporations came to
17.34%.

8
<PAGE>

Portfolio Concentration as of November 30, 1996

Top Ten Equity Holdings

Promus Hotel Corp.
Hotel franchiser

Harrah's Entertainment, Inc.
Gaming operator in several states

Tyco International Ltd.
Manufacturer of fire protection, packaging,
and electronic equipment

Sybase, Inc.
On-line software and services company

St. Jude Medical, Inc.
Manufacturer of medical technology products

MCI Communications Corp.
Telecommunications company

Wells Fargo Corp.
Western U.S. bank

Progressive Corp.
Auto insurance company

Host Marriott Corp.
Hotel owner/operator

PowerGen PLC
British electric utility

9
<PAGE>

Portfolio of Investments - November 30, 1996

Stocks - 82.3%
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------- ---------------
Issuer Shares Value
- ----------------------------------------------------- ------------- ---------------
<S> <C> <C>
U.S. Stocks - 72.5%
Aerospace - 5.9%
Allied Signal, Inc. 65,000 $ 4,761,250
Boeing Co. 59,200 5,883,000
Lockheed-Martin Corp. 121,000 10,965,625
McDonnell Douglas Corp. 180,000 9,517,500
Raytheon Co. 55,400 2,832,325
---------------
$33,959,700
- ----------------------------------------------------- ------------- ---------------
Agricultural Products - 0.8%
Case Corp. 83,200 $ 4,368,000
- ----------------------------------------------------- ------------- ---------------
Apparel and Textiles - 0.6%
Nike, Inc., "B" 58,800 $ 3,344,250
- ----------------------------------------------------- ------------- ---------------
Banks and Credit Companies - 2.2%
Wells Fargo & Co. 45,533 $12,959,830
- ----------------------------------------------------- ------------- ---------------
Business Services - 3.3%
ADT Ltd.* 493,700 $10,120,850
Alco Standard Corp. 176,300 9,123,525
---------------
$19,244,375
- ----------------------------------------------------- ------------- ---------------
Cellular Telephones - 1.0%
Telephone & Data Systems, Inc. 154,900 $ 5,789,388
- ----------------------------------------------------- ------------- ---------------
Chemicals - 0.2%
Betzdearborn, Inc. 20,600 $ 1,192,225
- ----------------------------------------------------- ------------- ---------------
Computer Software - Systems - 3.2%
Adobe Systems, Inc. 119,800 $ 4,732,100
Sybase, Inc.* 770,900 13,587,113
---------------
$18,319,213
- ----------------------------------------------------- ------------- ---------------
Consumer Goods and Services - 5.8%
Colgate-Palmolive Co. 34,600 $ 3,204,825
Gillette Co. 47,800 3,525,250
Philip Morris Cos., Inc. 74,600 7,693,125
Tyco International Ltd. 299,400 16,392,150
UST, Inc. 91,300 2,978,662
---------------
$33,794,012
- ----------------------------------------------------- ------------- ---------------
Defense Electronics - 0.4%
Loral Space & Communications Corp.* 119,700 $ 2,214,450
- ----------------------------------------------------- ------------- ---------------
Electronics - 2.0%
Atmel Corp.* 180,700 $ 5,940,512
Intel Corp. 45,900 5,823,563
---------------
$11,764,075
- ----------------------------------------------------- ------------- ---------------
Entertainment - 3.2%
Chancellor Broadcast Corp., "A"* 6,700 $ 194,300
Harrah's Entertainment, Inc.* 1,040,400 18,467,100
---------------
$18,661,400
- ----------------------------------------------------- ------------- ---------------
Financial Institutions - 4.0%
Beneficial Corp. 114,700 $ 7,125,737
Federal Home Loan Mortgage Corp. 62,800 7,174,900
Union Planters Corp. 219,200 9,069,400
---------------
$23,370,037
- ----------------------------------------------------- ------------- ---------------

10
<PAGE>

Portfolio of Investments - continued

Stocks - continued
- ----------------------------------------------------- ------------- ---------------
Issuer Shares Value
- ----------------------------------------------------- ------------- ---------------
U.S. Stocks - continued
Food and Beverage Products - 1.3%
PepsiCo, Inc. 258,600 $ 7,725,675
- ----------------------------------------------------- ------------- ---------------
Forest and Paper Products - 1.2%
Kimberly-Clark Corp. 72,900 $ 7,125,975
- ----------------------------------------------------- ------------- ---------------
Insurance - 5.3%
Chubb Corp. 89,100 $ 4,833,675
Cigna Corp. 12,800 1,809,600
ITT Hartford Group, Inc. 90,900 6,215,287
PennCorp Financial Group, Inc. 183,400 6,304,375
Progressive Corp. - Ohio 170,000 11,857,500
---------------
$31,020,437
- ----------------------------------------------------- ------------- ---------------
Machinery - 0.9%
Stewart & Stevenson Services, Inc. 208,600 $ 5,162,850
- ----------------------------------------------------- ------------- ---------------
Medical and Health Products - 2.7%
Pharmacia & Upjohn, Inc. 178,300 $ 6,886,838
Rhone-Poulenc Rorer, Inc. 117,400 8,731,625
---------------
$15,618,463
- ----------------------------------------------------- ------------- ---------------
Medical and Health Technology and Services - 4.2%
Pacificare Health Systems, Inc., "B"* 38,700 $ 3,212,100
St. Jude Medical, Inc.* 323,100 13,489,425
United Healthcare Corp. 175,400 7,564,125
---------------
$24,265,650
- ----------------------------------------------------- ------------- ---------------
Oil Services - 0.5%
Tidewater, Inc. 71,400 $ 3,123,750
- ----------------------------------------------------- ------------- ---------------
Oils - 3.0%
Mobil Corp. 60,000 $ 7,260,000
Occidental Petroleum Corp. 187,200 4,492,800
Texaco, Inc. 57,900 5,739,338
---------------
$17,492,138
- ----------------------------------------------------- ------------- ---------------
Photographic Products - 1.5%
Eastman Kodak Co. 110,000 $ 8,910,000
- ----------------------------------------------------- ------------- ---------------
Printing and Publishing - 1.4%
Gannett Co., Inc. 53,200 $ 4,176,200
Scripps (E.W.) Howard, Inc. 84,600 2,939,850
Tribune Co. 11,840 1,024,160
---------------
$ 8,140,210
- ----------------------------------------------------- ------------- ---------------
Railroads - 2.1%
Burlington Northern Santa Fe Railway Co. 86,600 $ 7,783,175
Wisconsin Central Transportation Corp.* 108,400 4,417,300
---------------
$12,200,475
- ----------------------------------------------------- ------------- ---------------
Restaurants and Lodging - 6.5%
FelCor Suite Hotels, Inc. 82,900 $ 2,953,313
Host Marriott Corp. 777,300 11,853,825
Promus Hotel Corp.* 717,650 23,144,212
---------------
$37,951,350
- ----------------------------------------------------- ------------- ---------------

11
<PAGE>

Portfolio of Investments - continued

Stocks - continued
- ----------------------------------------------------- ------------- ---------------
Issuer Shares Value
- ----------------------------------------------------- ------------- ---------------
U.S. Stocks - continued
Stores - 2.3%
Rite Aid Corp. 194,900 $ 7,722,913
Sears, Roebuck & Co. 111,100 5,527,225
---------------
$ 13,250,138
- ----------------------------------------------------- ------------- ---------------
Supermarkets - 1.4%
Vons Cos., Inc.* 156,000 $ 8,209,500
- ----------------------------------------------------- ------------- ---------------
Telecommunications - 1.8%
Cabletron Systems, Inc.* 260,400 $ 10,513,650
- ----------------------------------------------------- ------------- ---------------
Utilities - Electric - 1.5%
CMS Energy Corp. 85,200 $ 2,769,000
Illinova Corp. 214,400 5,681,600
---------------
$ 8,450,600
- ----------------------------------------------------- ------------- ---------------
Utilities - Telephone - 2.3%
MCI Communications Corp. 437,700 $ 13,349,850
- ----------------------------------------------------- ------------- ---------------
Total U.S. Stocks $421,491,666
- ----------------------------------------------------- ------------- ---------------
Foreign Stocks - 9.8%
France - 1.0%
Union des Assurances Federales S.A. (Insurance) 46,400 $ 5,725,655
- ----------------------------------------------------- ------------- ---------------
Germany - 0.9%
Adidas AG (Stores) 59,700 $ 5,182,022
- ----------------------------------------------------- ------------- ---------------
Hong Kong - 0.4%
Giordano International Ltd. (Stores) 2,704,000 $ 2,378,219
- ----------------------------------------------------- ------------- ---------------
Italy - 0.7%
Olivetti Group (Office Equipment) 10,926,800 $ 3,842,870
- ----------------------------------------------------- ------------- ---------------
New Zealand - 1.0%
Lion Nathan Ltd. (Consumer Goods and Services) 2,217,000 $ 5,691,196
- ----------------------------------------------------- ------------- ---------------
South Korea - 1.0%
Korea Mobile Telecom (Telecommunications) 6,110 $ 6,112,064
- ----------------------------------------------------- ------------- ---------------
Spain
Cubiertas Y Mzov (Consumer Goods and Services) 4,452 $ 353,045
- ----------------------------------------------------- ------------- ---------------
Sweden - 1.8%
Astra AB, Free, "B" (Pharmaceuticals) 100,000 $ 4,693,334
Enator AB (Computer Services) 229,800 5,606,296
---------------
$ 10,299,630
- ----------------------------------------------------- ------------- ---------------
United Kingdom - 3.0%
British Petroleum PLC, ADR (Oils) 44,100 $ 6,118,875
PowerGen PLC (Utilities - Electric) 1,167,189 11,379,859
---------------
$ 17,498,734
- ----------------------------------------------------- ------------- ---------------
Total Foreign Stocks $ 57,083,435
- ----------------------------------------------------- ------------- ---------------
Total Stocks (Identified Cost, $409,547,153) $478,575,101
- ----------------------------------------------------- ------------- ---------------
Warrants - 0.1%
- ----------------------------------------------------- ------------- ---------------
Warrants
- ----------------------------------------------------- ------------- ---------------
Enator AB, Rights (Identified Cost, $0) 229,800 $ 495,678
- ----------------------------------------------------- ------------- ---------------
</TABLE>

12
<PAGE>

Portfolio of Investments - continued

Short-Term Obligations - 15.8%

<TABLE>
<CAPTION>
- -------------------------------------------------- ---------------- --------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------- ---------------- --------------
<S> <C> <C>
Federal Home Loan Mortgage Corp.,
due 12/05/96 - 12/24/96 $ 47,235 $ 47,157,752
Federal National Mortgage Assn.,
due 12/06/96 - 12/17/96 22,680 22,644,994
General Motors Acceptance Corp., due 12/13/96 7,660 7,646,493
Raytheon Co., due 12/05/96 6,790 6,786,001
Student Loan Marketing, due 12/03/96 7,440 7,437,847
- -------------------------------------------------- ---------------- --------------
Total Short-Term Obligations, at Amortized Cost $ 91,673,087
- -------------------------------------------------- ---------------- --------------
Equity Put Option Purchased - 0.7%
----------------------------------------------------------------------------------
Principal Amount
of Contracts
Description/Expiration Date/Strike Price (000 Omitted)
- -------------------------------------------------- ---------------- --------------
Standard & Poor's 500 Index/September 1997/775
(Premiums Paid, $5,393,872) $105,700 $ 4,254,425
- -------------------------------------------------- ---------------- --------------
Total Investments (Identified Cost, $506,614,112) $574,998,291
Other Assets, Less Liabilities - 1.1% 6,199,028
- ------------------------------------------------------------------- --------------
Net Assets - 100.0% $581,197,319
- -------------------------------------------------- ---------------- --------------
</TABLE>

*Non-income producing security.

See notes to financial statements

13
<PAGE>

Financial Statements

Statement of Assets and Liabilities
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
November 30, 1996
- ------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $506,614,112) $574,998,291
Cash 6,155
Receivable for investments sold 18,995,532
Receivable for Fund shares sold 828,239
Dividends and interest receivable 664,186
Other assets 35,111
---------------
Total assets $595,527,514
---------------
Liabilities:
Payable for investments purchased $ 13,430,877
Payable for Fund shares reacquired 329,526
Payable to affiliates -
Management fee 35,759
Shareholder servicing agent fee 9,628
Distribution fee 269,467
Accrued expenses and other liabilities 254,938
---------------
Total liabilities $ 14,330,195
---------------
Net assets $581,197,319
---------------
Net assets consist of:
Paid-in capital $384,076,170
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies 68,386,600
Accumulated undistributed net realized gain on investments and foreign currency
transactions 128,778,610
Accumulated net investment loss (44,061)
---------------
Total $581,197,319
---------------
Shares of beneficial interest outstanding 32,332,260
---------------
Class A shares:
Net asset value per share
(net assets of $150,261,307 / 8,337,128 shares of beneficial interest
outstanding) $18.02
---------------
Offering price per share (100/94.25) $19.12
---------------
Class B shares:
Net asset value and offering price per share
(net assets of $430,936,012 / 23,995,132 shares of beneficial interest
outstanding) $17.96
---------------
</TABLE>

On sales of $50,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A
and Class B shares.

See notes to financial statements

14
<PAGE>

Financial Statements - continued

Statement of Operations
<TABLE>
<CAPTION>
--------------------------------------------------------------------------- ---------------
Year Ended November 30, 1996
--------------------------------------------------------------------------- ---------------
<S> <C>
Net investment income:
Income -
Dividends $ 7,321,336
Interest 2,165,629
---------------
Total investment income $ 9,486,965
---------------
Expenses -
Management fee $ 4,084,641
Trustees' compensation 39,628
Shareholder servicing agent fee (Class A) 178,447
Shareholder servicing agent fee (Class B) 936,736
Distribution and service fee (Class A) 297,412
Distribution and service fee (Class B) 4,256,542
Custodian fee 251,805
Postage 112,136
Printing 51,895
Auditing fees 34,595
Legal fees 9,941
Miscellaneous 308,019
---------------
Total expenses $ 10,561,797
Fees paid indirectly (40,552)
---------------
Net expenses $ 10,521,245
---------------
Net investment loss $ (1,034,280)
---------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $131,032,857
Written option transactions (1,181,346)
Foreign currency transactions (15,736)
---------------
Net realized gain on investments and foreign currency transactions $129,835,775
---------------
Change in unrealized appreciation (depreciation) -
Investments $(34,845,157)
Translation of assets and liabilities in foreign currencies 3,810
---------------
Net unrealized loss on investments and foreign currency translation $(34,841,347)
---------------
Net realized and unrealized gain on investments and foreign currency $ 94,994,428
---------------
Increase in net assets from operations $ 93,960,148
---------------
</TABLE>

See notes to financial statements

15
<PAGE>

Financial Statements - continued

Statement of Changes in Net Assets
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Year Ended November 30, 1996 1995
-----------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income (loss) $ (1,034,280) $ 540,622
Net realized gain on investments and foreign
currency transactions 129,835,775 74,848,998
Net unrealized gain (loss) on investments and
foreign currency translation (34,841,347) 70,041,904
---------------- ----------------
Increase in net assets from operations $ 93,960,148 $ 145,431,524
---------------- ----------------
Distributions declared to shareholders -
From net investment income (Class A) $ (300,226) $ (43,087)
From net investment income (Class B) -- (1,541,960)
From net realized gain on investments and
foreign currency transactions (Class A) (13,120,408) (120,843)
From net realized gain on investments and
foreign currency transactions (Class B) (60,999,950) (17,999,182)
In excess of net investment income (Class A) (535,376) --
---------------- ----------------
Total distributions declared to shareholders $ (74,955,960) $ (19,705,072)
---------------- ----------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 178,620,223 $ 162,346,739
Net asset value of shares issued to
shareholders in reinvestment of distributions 69,743,534 18,312,867
Cost of shares reacquired (202,733,785) (176,934,987)
---------------- ----------------
Increase in net assets from Fund share
transactions $ 45,629,972 $ 3,724,619
---------------- ----------------
Total increase in net assets $ 64,634,160 $ 129,451,071
Net assets:
At beginning of period 516,563,159 387,112,088
---------------- ----------------
At end of period (including accumulated
undistributed (distributions in excess of)
net investment income of $(44,061) and
$300,226, respectively) $ 581,197,319 $ 516,563,159
---------------- ----------------
</TABLE>

See notes to financial statements

16
<PAGE>

Financial Statements - continued

Financial Highlights
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Year Ended November 30, 1996 1995 1994 1993*
-----------------------------------------------------------------------------------------------
Class A
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 17.67 $ 13.49 $14.75 $14.58
----------- --------- ------------------
Income from investment operations# -
Net investment income $ 0.08 $ 0.11 $ 0.21 $ 0.03
Net realized and unrealized gain (loss) on
investments 2.96 4.91 (0.25) 0.14
----------- --------- ------------------
Total from investment operations $ 3.04 $ 5.02 $(0.04) $ 0.17
----------- --------- ------------------
Less distributions declared to shareholders -
From net investment income $ (0.16) $ (0.22) $(0.06) $ --
From net realized gain on investments (2.53) (0.62) (1.16) --
----------- --------- ------------------
Total distributions declared to
shareholders $ (2.69) $ (0.84) $(1.22) $ --
----------- --------- ------------------
Net asset value - end of period $ 18.02 $ 17.67 $13.49 $14.75
----------- --------- ------------------
Total return++ 19.76% 39.51% (0.47)% 5.01%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.31% 1.27% 1.12% 0.91%+
Net investment income 0.47% 0.67% 1.59% 1.67%+
Portfolio turnover 112% 91% 50% 70%
Average commission rate### $ 0.0387 -- -- --
Net assets at end of period (000 omitted) $150,261 $88,119 $2,608 $ 196
</TABLE>

* For the period from the commencement of offering of Class A shares,
September 7, 1993 to November 30, 1993.

+ Annualized.

# Per share data for the periods subsequent to November 30, 1992 is based
on average shares outstanding.

## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.

### Average commission rate is calculated for funds with 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.

See notes to financial statements

17
<PAGE>

Financial Statements - continued

Financial Highlights - continued
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Year Ended November 30, 1996 1995 1994 1993
--------------------------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 17.56 $ 13.37 $ 14.72 $ 14.83
----------- ----------- ---------------------
Income from investment operations# -
Net investment income (loss) $ (0.06) $ 0.01 $ 0.04 $ 0.03
Net realized and unrealized gain (loss) on
investments 2.97 4.85 (0.23) 0.50
----------- ----------- ---------------------
Total from investment operations $ 2.91 $ 4.86 $ (0.19) $ 0.53
----------- ----------- ---------------------
Less distributions declared to shareholders -
From net investment income $ -- $ (0.05) $ 0.00** $ (0.02)
From net realized gain on investments (2.51) (0.62) (1.16) (0.62)
----------- ----------- ---------------------
Total distributions declared to
shareholders $ (2.51) $ (0.67) $ (1.16) $ (0.64)
----------- ----------- ---------------------
Net asset value - end of period $ 17.96 $ 17.56 $ 13.37 $ 14.72
----------- ----------- ---------------------
Total return 18.84% 38.16% (1.52)% 3.70%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.13% 2.14% 2.18% 2.15%
Net investment income (loss) (0.38)% 0.08% 0.32% 0.10%
Portfolio turnover 112% 91% 50% 70%
Average commission rate### $ 0.0387 -- -- --
Net assets at end of period (000 omitted) $430,936 $428,445 $384,504 $454,089
</TABLE>

** The per share distribution from net investment income on Class B shares
was $0.00312.

# Per share data for the periods subsequent to November 30, 1992 is based on
average shares outstanding.

## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.

### Average commission rate is calculated for funds with fiscal years
beginning on or after September 1, 1995.

See notes to financial statements

18
<PAGE>

Financial Statements - continued

Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Year Ended November 30, 1992 1991 1990 1989 1988 1987**
- --------------------------------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59 $ 7.50
----------- ---------------------- ----------- ----------- ----------
Income from investment
operations -
Net investment income $ 0.02 $ 0.10 $ 0.18 $ 0.17 $ 0.12 $ 0.04
Net realized and unrealized
gain (loss) on investments 2.61 2.15 (0.75) 2.63 1.76 0.06
----------- ---------------------- ----------- ----------- ----------
Total from investment
operations $ 2.63 $ 2.25 $ (0.57) $ 2.80 $ 1.88 $ 0.10
----------- ---------------------- ----------- ----------- ----------
Less distributions declared to
shareholders -
From net investment income $ -- $ (0.14) $ (0.19) $ (0.13) $ (0.09) $ (0.01)
From net realized gain on
investments (1.07) (0.13) -- -- -- --
----------- ---------------------- ----------- ----------- ----------
Total distributions declared to
shareholders $ (1.07) $ (0.27) $ (0.19) $ (0.13) $ (0.09) $ (0.01)
----------- ---------------------- ----------- ----------- ----------
Net asset value - end of period $ 14.83 $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59
----------- ---------------------- ----------- ----------- ----------
Total return 20.61% 20.22% (4.80)% 30.11% 24.79% 1.41%+
Ratios (to average net assets)/
Supplemental data:
Expenses 2.24% 2.28% 2.38% 2.46% 2.17% 2.26%+
Net investment income 0.18% 0.75% 1.56% 1.56% 1.34% 0.36%+
Portfolio turnover 65% 86% 68% 58% 93% 139%
Net assets at end of period
(000 omitted) $436,561 $317,375 $226,245 $202,861 $130,961 $88,471
</TABLE>

** For the period from the commencement of investment operations, December
29, 1986 to November 30, 1987.

+ Annualized.

See notes to financial statements

19
<PAGE>

Notes to Financial Statements

(1) Business and Organization
MFS Capital Growth Fund (the Fund) is a diversified series of MFS Series
Trust II (the Trust). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company.

(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Investments in foreign securities are vulnerable to the effects of
changes in the relative values of the local currency and the U.S. dollar and
to the effects of changes in each country's legal, political and economic
environment.

Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are
not available are valued at last quoted bid prices. 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 Trustees. Debt
securities (other than short-term obligations which mature in 60 days or
less), including listed issues and forward contracts, are valued on the basis
of valuations furnished by dealers or by a pricing service with consideration
to factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market
value. Non-U.S. dollar denominated short-term obligations are valued at
amortized cost as calculated in the base currency and translated into U.S.
dollars at the closing daily exchange rate. Futures contracts, options and
options on futures contracts listed on commodities exchanges are valued at
closing settlement prices. Over-the-counter options are valued by brokers
through the use of a pricing model which takes into account closing bond
valuations, implied volatility and short-term repurchase rates. 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 Trustees.

Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions.

20
<PAGE>

Notes to Financial Statements - continued

Gains and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized
gains and losses on investments. Gains and losses attributable to foreign
exchange rate movements on income and expenses are recorded for financial
statement purposes as foreign currency transaction gains and losses. That
portion of both realized and unrealized gains and losses on investments that
results from fluctuations in foreign currency exchange rates is not
separately disclosed.

Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable
change in the price of the securities underlying the written option. In
general, written call options may serve as a partial hedge against decreases
in value in the underlying securities to the extent of the premium received.
Written options may also be used as part of an income producing strategy
reflecting the view of the Fund's management on the direction of interest
rates.

Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividend and interest payments received in additional securities are
recorded on the ex-dividend or ex-interest date in an amount equal to the
value of the security on such date.

Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on
the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.

21
<PAGE>

Notes to Financial Statements - continued

which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return and,
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV. Foreign taxes have been provided for on interest and dividend
income earned on foreign investments in accordance with the applicable
country's tax rates and to the extent unrecoverable are recorded as a
reduction of investment income. Distributions to shareholders are recorded on
the ex-dividend date.

The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return
of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are
classified as distributions in excess of net investment income or accumulated
net realized gains.

During the year ended November 30, 1996, $1,525,595 was reclassified to
accumulated net investment loss from accumulated net realized gain on
investments due to differences between book and tax accounting for net
operating losses and short-term capital gains. This change had no effect on
the net assets or net asset value per share.

Multiple Classes of Shares of Beneficial Interest - The Fund offers both
Class A and Class B shares. The two classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the
average daily net assets of each class, without distinction between share
classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses.

(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of average daily net assets.

The Fund pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees'

22
<PAGE>

Notes to Financial Statements - continued

compensation is a net periodic pension expense of $11,653 for the year ended
November 30, 1996.

Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$10,782 for the year ended November 30, 1996, as its portion of the sales
charge on sales of Class A shares of the Fund. The Trustees have adopted
separate distribution plans for Class A and Class B shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:

The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service
fee to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer, a
distribution fee to MFD of up to 0.10% per annum of the Fund's average daily
net assets attributable to Class A shares, commissions to dealers and
payments to MFD wholesalers for sales at or above a certain dollar level, and
other such distribution-related expenses that are approved by the Fund. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $45,928 for the year ended November 30, 1996. Payment of
the 0.10% per annum Class A distribution fee will commence on such date as
the Trustees of the Trust may determine. Fees incurred under the distribution
plan during the year ended November 30, 1996 were 0.25% of average daily net
assets attributable to Class A shares on an annualized basis.

The Class B distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B shares.
MFD will pay to securities dealers that enter into a sales agreement with MFD
all or a portion of the service fee attributable to Class B shares. The
service fee is intended to be additional consideration for services rendered
by the dealer with respect to Class B shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $94,376
for Class B shares for the year ended November 30, 1996. Fees incurred under
the distribution plan during the year ended November 30, 1996 were 1.00% of
average daily net assets attributable to Class B shares on an annualized
basis.

Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed

23
<PAGE>

Notes to Financial Statements - continued

during the year ended November 30, 1996 were $11,233 and $344,491 for Class A
and Class B shares, respectively.

Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the average daily net assets of each class of shares at an
effective annual rate of up to 0.15% and up to 0.22% attributable to Class A
and Class B shares, respectively.

(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$558,748,179 and $653,696,202, respectively.

The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:

Aggregate cost $506,614,112
---------------
Gross unrealized appreciation $ 90,283,815
Gross unrealized depreciation (21,899,636)
---------------
Net unrealized appreciation $ 68,384,179
---------------

(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares 1996 1995
------------------------------- --------------------------------
Year Ended November 30, Shares Amount Shares Amount
------------------------------- -------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 5,081,001 $ 84,871,838 5,253,774 $ 82,156,749
Shares issued to shareholders
in reinvestment of
distributions 808,554 12,468,050 12,226 158,371
Shares reacquired (2,540,176) (42,196,319) (471,616) (7,482,670)
-------------- ---------------- --------------- ----------------
Net increase 3,349,379 $ 55,143,569 4,794,384 $ 74,832,450
-------------- ---------------- --------------- ----------------

Class B Shares 1996 1995
------------------------------- --------------------------------
Year Ended November 30, Shares Amount Shares Amount
------------------------------- -------------- ---------------- --------------- ----------------
Shares sold 5,593,976 $ 93,748,385 5,400,613 $ 80,189,990
Shares issued to shareholders
in reinvestment of
distributions 3,699,918 57,275,484 1,397,497 18,154,496
Shares reacquired (9,692,478) (160,537,466) (11,169,472) (169,452,317)
-------------- ---------------- --------------- ----------------
Net decrease (398,584) $ (9,513,597) (4,371,362) $ (71,107,831)
-------------- ---------------- --------------- ----------------
</TABLE>

24
<PAGE>

Notes to Financial Statements - continued

(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to
each fund, based on its borrowings, at a rate equal to the bank's base rate.
In addition, a commitment fee, based on the average daily unused portion of
the line of credit, is allocated among the participating funds at the end of
each quarter. The commitment fee allocated to the Fund for the year ended
November 30, 1996 was $5,804.

25
<PAGE>

Independent Auditors' Report

To the Trustees of MFS Series Trust II and Shareholders of MFS Capital Growth
Fund:

We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Capital Growth Fund (one of
the series constituting MFS Series Trust II) as of November 30, 1996, the
related statement of operations for the year then ended, the statement of
changes in net assets for the years ended November 30, 1996 and 1995, and the
financial highlights for each of the years in the ten-year period ended
November 30, 1996. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned at November 30, 1996 by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Capital
Growth Fund at November 30, 1996, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 3, 1997

- ------------------------------------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.

26
<PAGE>

27
<PAGE>

28
<PAGE>

MFS(r) Capital Growth Fund

Trustees

A. Keith Brodkin* - Chairman and President

Richard B. Bailey* - Private Investor; Former Chairman and Director (until
1991), Massachusetts Financial Services Company; Director, Cambridge Bancorp;
Director, Cambridge Trust Company

Marshall N. Cohan - Private Investor

Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School

The Hon. Sir J. David Gibbons, KBE - Chief Executive Officer, Edmund Gibbons
Ltd.; Chairman, Bank of N.T. Butterfield & Son Ltd.

Abby M. O'Neill - Private Investor; Director, Rockefeller Financial Services,
Inc. (investment advisers)

Walter E. Robb, III - President and Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); President, Benchmark Consulting Group, Inc.
(office services); Trustee, Landmark Funds (mutual funds)

Arnold D. Scott* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company

Jeffrey L. Shames* - President and Director, Massachusetts Financial Services
Company

J. Dale Sherratt - President, Insight Resources, Inc. (acquisition planning
specialists)

Ward Smith - Former Chairman (until 1994), NACCO Industries; Director,
Sundstrand Corporation

Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741

Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741

Portfolio Manager
John F. Brennan, Jr.*

Treasurer
W. Thomas London*

Assistant Treasurer
James O. Yost*

Secretary
Stephen E. Cavan*

Assistant Secretary
James R. Bordewick, Jr.*

*Affiliated with the Investment Adviser

Custodian
State Street Bank and Trust Company

Auditors
Deloitte & Touche llp

Investor Information
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.

For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m.
to 5 p.m. Eastern time (or leave a message anytime).

Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906

For general information, call toll free: 1-800-225-2606 any business day from 8
a.m to 8 p.m. Eastern time.

For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)

For share prices, account balances, and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.

World Wide Web
www.mfs.com

*************[dalbar boxed graphic]*************

[logo--DALBAR
MFS #1
TOP-RATED SERVICE]

For the third year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office Operations Service Quality Category. The
firm achieved a 3.48 overall score on a scale of 1 to 4 in the 1996 survey. A
total of 110 firms responded, offering input on the quality of service they
received from 29 mutual fund companies nationwide. The survey contained
questions about service quality in 15 categories, including "knowledge of
phone service contacts," "accuracy of transaction processing," and "overall
ease of doing business with the firm."

29
<PAGE>

[back cover]

MFS(R) Capital
Growth Fund

500 Boylston Street
Boston, MA 02116

[silhouette logo]
MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)

[DALBAR LOGO]
DALBAR
MFS #1
TOP-RATED SERVICE

[indicia]
Bulk Rate
U.S. Postage
PAID
Permit #55638
Boston, MA

MCG-2 1/97 59M 3/203

Table of Contents

Letter from the Chairman ............ 1
Portfolio Manager's Overview ...... 2
Portfolio Manager's Profile ......... 3
Fund Facts ........................ 4
Performance Summary ............... 4
Portfolio Concentration ............ 6
Portfolio of Investments ............ 7
Financial Statements ............... 11
Notes to Financial Statements ...... 18
Trustees and Officers ............ 25

[shaded box]

Highlights

[bullet] For the six months ended May 31, 1997, Class A shares of the Fund
provided a total return at net asset value of 10.31%, Class B shares
9.83%, and Class I shares 9.54%.

[bullet] While the Fund was overweighted in technology, which was one of the
best-performing sectors of the Standard & Poor's 500 Composite Index,
it was underweighted in consumer staples and health care, which were
also top-performing sectors.

[bullet] Leisure, our largest sector, is focused on lodging, in which room
prices reflect the tight supply outlook. While we see some signs of a
possible end to this cycle, we believe near-term fundamentals are
positive.

[bullet] Technology, our second-largest sector, is focused on franchise
software companies trading at what we view as reasonable prices
relative to their expected growth rates.
<PAGE>

Letter from the Chairman

[Photo of A. Keith Brodkin]

Dear Shareholders:

After more than six years of expansion, the U.S. economy is experiencing another
year of growth in 1997, although a few signs point to the possibility of a
modest rise in inflation during the year. On the positive side, the pattern of
moderate growth and inflation set over the past few years now seems fairly well
entrenched in the economy and, short of a major international or domestic
crisis, appears to have enough momentum to remain on track for some time. The
U.S. economy exhibited a great deal of strength in the first quarter of 1997,
growing at an annualized rate of 5.8%. This pace would clearly lead to
inflationary pressures were it to continue, as could the ongoing tightness in
the labor market. Moreover, there is reason for caution as a result of the
continuing high level of consumer debt and rising personal bankruptcies. Given
these somewhat conflicting indicators, we expect real (inflation-adjusted)
growth to revolve around 2% to 2-1/2% in 1997, with the strength of the first
quarter moderating as we move through the balance of the year.

We continue to urge U.S. equity investors to remain cautious for 1997. Just as
the slowdown in corporate earnings growth and the increases in interest rates in
1996 raised some near-term concerns, further interest-rate increases and the
fear of an acceleration of inflation have added some volatility to the stock
market in 1997. However, while the U.S. equity market enjoyed several years
without a major correction, we would like to point out that such downturns are a
natural part of the investment environment and, when they end, they often result
in more attractive valuations for stocks.

We appreciate your support and welcome any questions or comments you may have.

Respectfully,

/s/ A. Keith Brodkin

A. Keith Brodkin
Chairman and President

June 12, 1997

1
<PAGE>

Portfolio Manager's Overview

[Photo of John F. Brennan, Jr.]

Dear Shareholders:

For the six months ended May 31, 1997, Class A shares of the Fund provided a
total return of 10.31%, Class B shares 9.83%, and Class I shares 9.54%. These
returns, which include the reinvestment of distributions but exclude the effects
of any sales charges, compare to a 13.18% return for the Standard & Poor's 500
Composite Index (the S&P 500), a popular, unmanaged index of common stock total
return performance.

Over the past six months, the three best-performing sectors of the S&P 500
were consumer staples, which gained 19.5%; technology, which advanced 18.6%;
and health care, which was up 15.9%. The worst-performing sector was basic
materials, which gained 6.5%. The Fund was significantly underweighted in
consumer staples, with 4.9% of equities invested versus 12.6% for the S&P 500;
overweighted in technology (14.6% versus 12.9%); and underweighted in health
care (9.9% versus 11.2%).

Leisure, our largest sector, is focused on the lodging industry, in which room
prices continue to react favorably to the tight supply outlook. While we are
beginning to see several warning signs that may be indicating the end of this
cycle, we believe near-term fundamentals continue to be positive.

Technology, our second-largest sector, is primarily focused on franchise
software companies trading at what we view as reasonable prices relative to
their respective growth rates. We try to take advantage of periods of
uncertainty and establish positions at what we see as attractive valuations
relative to long-term prospects. Two recent examples include Synopsys and
Computer Associates. Both of these software companies have significant
leadership positions in attractive markets, but their stock prices have been
depressed by short-term earnings concerns. In each case we were able to
establish significant holdings at what we believe are excellent long-term
valuations.

Our largest holding, ADT Ltd., has recently agreed to merge in a pooling
transaction with Tyco International. The surviving entity will be Tyco
International, and we expect significant earnings leverage going forward as
cost savings are realized.

<PAGE>

Portfolio Manager's Overview - continued

Our outlook for the balance of the year is cautious. With stock market
valuations at record levels and with the recent uptick in interest rates, we
believe the market is vulnerable to any negative news. We are, therefore,
positioned conservatively.

Respectfully,

/s/ John F. Brennan, Jr.

John F. Brennan, Jr.
Portfolio Manager

[shaded box]

Portfolio Manager's Profile

John F. Brennan, Jr., has been a member of the MFS investment staff since 1985.
A graduate of the University of Rhode Island and the Stanford University
Graduate School of Business Administration, he began his career at MFS as an
industry specialist and was promoted to Assistant Vice President - Investments
in 1987, Vice President - Investments in 1988, and Senior Vice President in
1995. Mr. Brennan became Portfolio Manager of MFS(R) Capital Growth Fund in
1995.

3
<PAGE>

[shaded box]

Fund Facts

Strategy: The Fund seeks to provide growth of capital by
investing generally in companies believed to possess
above-average growth opportunities.

Commencement of
investment operations: Class A: September 7, 1993
Class B: December 29, 1986
Class I: January 2, 1997

Size: $603.6 million net assets as of May 31, 1997

Performance Summary

Because mutual funds like MFS Capital Growth Fund are designed for investors
with long-term goals, we have provided cumulative results as well as the
average annual total returns for Class A, Class B, and Class I shares for the
applicable time periods.

Average Annual and Cumulative Total Rates of Return
as of May 31, 1997

Class A Investment Results
(net asset value change including reinvested distributions)

6 Months 1 Year 5 Years 10 Years
-------- ------- -------- --------
Cumulative Total Return +10.31% +15.23% +107.96% +221.28%
- ---------------------------- -------- ------- -------- --------
Average Annual Total Return -- +15.23% + 15.77% + 12.38%
- ---------------------------- -------- ------- -------- --------
SEC Results -- + 8.62% + 14.41% + 11.72%
- ---------------------------- -------- ------- -------- --------

Class B Investment Results
(net asset value change including reinvested distributions)

6 Months 1 Year 5 Years 10 Years
-------- ------- -------- ---------
Cumulative Total Return +9.83% +14.28% +100.96% +210.58%
- ---------------------------- ------- ------- -------- --------
Average Annual Total Return -- +14.28% + 14.98% + 12.00%
- ---------------------------- ------- ------- -------- --------
SEC Results -- +10.71% + 14.75% + 12.00%
- ---------------------------- ------- ------- -------- --------

Class I Investment Results
(net asset value change including reinvested distributions)

6 Months 1 Year 5 Years 10 Years
-------- ------- -------- ---------
Cumulative Total Return +9.54% +13.98% +100.44% +209.75%
- ---------------------------- ------- ------- -------- --------
Average Annual Total Return -- +13.98% + 14.92% + 11.97%
- ---------------------------- ------- ------- -------- --------

<PAGE>

Performance Summary - continued

All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.

Class A share SEC results include the maximum 5.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class I
shares, which became available on January 2, 1997, have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.

Class A share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
commencement of offering of Class A shares. Because operating expenses
attributable to Class B shares are greater than those of Class A shares, Class
A share performance generally would have been higher than Class B share
performance. The Class B share performance included within the Class A share
SEC performance has been adjusted to reflect the maximum sales charge generally
applicable to Class A shares rather than the CDSC generally applicable to Class
B shares.

Class I share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
commencement of offering of Class I shares. Because operating expenses
attributable to Class B shares are greater than those of Class I shares, Class
I share performance generally would have been higher than Class B share
performance. The Class B share performance included in the Class I share
performance has been adjusted to reflect the fact that Class I shares have no
CDSC.

Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time.

<PAGE>

Portfolio Concentration as of May 31, 1997

Top 10 Holdings

ADT Ltd.
Commercial and residential security company

Promus Hotel Corp.
Hotel operator

Rite Aid Corp.
U.S. drug store chain

Harrah's Entertainment, Inc.
Gaming operator in several states

Tyco International Ltd.
Manufacturer of fire protection, packaging, and electronic equipment

Bristol-Myers Squibb Co.
Pharmaceutical products company

Computer Associates International, Inc.
Computer software company

Sybase, Inc.
Online software and services company

Hilton Hotels Corp.
U.S. hotel company

McDonnell Douglas Corp.
Commercial and defense aircraft manufacturer

Largest Sectors

For a more complete breakdown, refer to the Portfolio of Investments.

<PAGE>

Portfolio of Investments (Unaudited) - May 31, 1997

Stocks - 85.8%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 76.9%
Aerospace - 4.3%
AlliedSignal, Inc. 37,200 $ 2,855,100
Lockheed-Martin Corp. 121,000 11,328,625
McDonnell Douglas Corp. 180,000 11,587,500
------------
$25,771,225
- --------------------------------------------------------------------------------
Automotive - 0.1%
Autoliv Inc.* 15,788 $ 588,103
- --------------------------------------------------------------------------------
Banks and Credit Companies - 0.4%
Wells Fargo & Co. 9,733 $ 2,564,646
- --------------------------------------------------------------------------------
Building - 1.0%
Newport News Shipbuilding, Inc. 355,400 $ 5,908,525
- --------------------------------------------------------------------------------
Business Services - 6.4%
ADT Ltd.* 951,200 $27,703,700
Computer Sciences Corp.* 63,900 4,944,262
First Data Corp. 146,200 5,848,000
------------
$38,495,962
- --------------------------------------------------------------------------------
Cellular Telephones - 1.2%
Telephone & Data Systems, Inc. 187,300 $ 7,269,581
- --------------------------------------------------------------------------------
Chemicals - 1.8%
du Pont (E.I.) de Nemours & Co., Inc. 79,300 $ 8,633,787
Morton International, Inc. 64,000 2,064,000
------------
$10,697,787
- --------------------------------------------------------------------------------
Computer Software - Systems - 6.9%
BMC Software, Inc.* 68,100 $ 3,685,913
Compaq Computer Corp.* 56,000 6,062,000
Computer Associates International, Inc. 245,200 13,424,700
Compuware Corp.* 127,700 5,922,087
Sybase, Inc.* 770,900 12,286,219
------------
$41,380,919
- --------------------------------------------------------------------------------
Consumer Goods and Services - 6.5%
Colgate-Palmolive Co. 69,200 $ 4,290,400
Gillette Co. 47,800 4,248,225
Hertz Corp., "A"* 6,200 212,350
Philip Morris Cos., Inc. 233,300 10,265,200
Tyco International Ltd. 282,000 17,907,000
UST, Inc. 91,300 2,602,050
------------
$39,525,225
- --------------------------------------------------------------------------------
Containers - 0.6%
Stone Container Corp. 254,600 $ 3,500,750
- --------------------------------------------------------------------------------
Electronics - 4.0%
Analog Devices, Inc.* 73,900 $ 1,976,825
Atmel Corp.* 54,000 1,552,500
Intel Corp. 46,600 7,059,900
Kulicke & Soffa Industries, Inc.* 128,800 4,347,000
Sony Corp. 28,400 2,421,100
</TABLE>

7
<PAGE>

Portfolio of Investments (Unaudited) - continued

Stocks - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Electronics - continued
Teradyne, Inc.* 101,900 $ 4,177,900
Texas Instruments, Inc. 25,900 2,327,762
------------
$23,862,987
- --------------------------------------------------------------------------------
Entertainment - 4.6%
Clear Channel Communications, Inc.* 169,000 $ 8,935,875
Harrah's Entertainment, Inc.* 1,002,200 18,665,975
------------
$27,601,850
- --------------------------------------------------------------------------------
Financial Institutions - 3.4%
American Express Co. 65,100 $ 4,524,450
Federal Home Loan Mortgage Corp. 198,700 6,557,100
Union Planters Corp. 197,000 9,308,250
------------
$20,389,800
- --------------------------------------------------------------------------------
Forest and Paper Products - 1.0%
Kimberly-Clark Corp. 77,400 $ 3,879,675
Unisource Worldwide, Inc. 109,800 1,907,775
------------
$ 5,787,450
- --------------------------------------------------------------------------------
Insurance - 6.3%
Chubb Corp. 97,600 $ 5,953,600
CIGNA Corp. 34,800 6,046,500
Conseco, Inc. 44,400 1,776,000
Hartford Financial Services Group 79,900 6,232,200
Hartford Life, Inc.* 5,600 187,600
PennCorp Financial Group, Inc. 243,100 8,295,788
Progressive Corp. 122,900 9,724,462
------------
$38,216,150
- --------------------------------------------------------------------------------
Machinery - 1.0%
Stewart & Stevenson Services, Inc. 216,000 $ 5,778,000
- --------------------------------------------------------------------------------
Medical and Health Products - 4.0%
American Home Products Corp. 69,700 $ 5,314,625
Boston Scientific Corp.* 36,600 1,953,525
Bristol-Myers Squibb Co. 205,420 15,072,692
McKesson Corp. 27,400 2,058,425
------------
$24,399,267
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.1%
St. Jude Medical, Inc.* 163,400 $ 5,535,175
United Healthcare Corp. 129,800 7,333,700
------------
$12,868,875
- --------------------------------------------------------------------------------
Oils - 1.0%
Mobil Corp. 200 $ 27,975
Texaco, Inc. 57,900 6,318,338
------------
$ 6,346,313
- --------------------------------------------------------------------------------
Photographic Products - 1.2%
Eastman Kodak Co. 84,900 $ 7,036,088
- --------------------------------------------------------------------------------
</TABLE>

8
<PAGE>

Portfolio of Investments (Unaudited) - continued

Stocks - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Railroads - 1.2%
Burlington Northern Santa Fe Railway Co. 36,100 $ 2,996,300
Wisconsin Central Transportation Corp.* 115,100 4,157,988
-------------
$ 7,154,288
- --------------------------------------------------------------------------------
Restaurants and Lodging - 7.7%
Hilton Hotels Corp. 417,600 $ 11,797,200
Host Marriott Corp.* 486,800 8,579,850
Promus Hotel Corp.* 721,550 26,065,994
-------------
$ 46,443,044
- --------------------------------------------------------------------------------
Stores - 5.0%
CVS Corp. 174,800 $ 8,368,550
Rite Aid Corp. 429,600 19,976,400
Staples, Inc.* 85,600 1,883,200
-------------
$ 30,228,150
- --------------------------------------------------------------------------------
Supermarkets - 0.3%
Safeway, Inc.* 36,500 $ 1,642,500
- --------------------------------------------------------------------------------
Telecommunications - 1.2%
3Com Corp.* 93,700 $ 4,544,450
Ascend Communications, Inc.* 53,000 2,954,750
-------------
$ 7,499,200
- --------------------------------------------------------------------------------
Utilities - Electric - 1.2%
CMS Energy Corp. 85,200 $ 2,864,850
Illinova Corp. 214,400 4,690,000
-------------
$ 7,554,850
- --------------------------------------------------------------------------------
Utilities - Telephone - 2.5%
MCI Communications Corp. 236,900 $ 9,091,037
Sprint Corp. 124,500 6,084,938
-------------
$ 15,175,975
- --------------------------------------------------------------------------------
Total U.S. Stocks $463,687,510
- --------------------------------------------------------------------------------
Foreign Stocks - 8.9%
France - 0.9%
Union des Assurances Federales S.A. (Insurance) 46,400 $ 5,641,827
- --------------------------------------------------------------------------------
Ireland - 0.7%
Elan Corp., PLC, ADR (Health Products)* 95,200 $ 3,879,400
- --------------------------------------------------------------------------------
Netherlands - 0.5%
Asm Lithography Holdings (Machinery)* 60,000 $ 3,033,304
- --------------------------------------------------------------------------------
Portugal - 0.5%
Banco Totta E Acores (Banks and Credit Cos.)## 195,100 $ 2,784,722
- --------------------------------------------------------------------------------
South Korea - 0.5%
Korea Mobile Telecommunications
(Utilities - Telephone) 5,233 $ 3,228,782
- --------------------------------------------------------------------------------
Switzerland - 1.2%
Novartis AG (Pharmaceuticals) 5,400 $ 7,340,177
- --------------------------------------------------------------------------------
</TABLE>

9
<PAGE>

Portfolio of Investments (Unaudited) - continued
Stocks - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
United Kingdom - 4.6%
ASDA Group PLC (Retail) 3,158,000 $ 6,211,909
British Petroleum PLC, ADR (Oils) 62,415 9,042,373
Danka Business Systems, ADR (Business Services) 117,400 4,710,675
PowerGen PLC (Utilities - Electric)* 259,010 2,959,246
Smithkline Beecham PLC, ADR (Health Products) 29,500 2,581,250
Storehouse PLC (Retail) 688,700 2,455,393
-------------
$ 27,960,846
- --------------------------------------------------------------------------------
Total Foreign Stocks $ 53,869,058
- --------------------------------------------------------------------------------
Total Stocks (Identified Cost, $430,080,522) $517,556,568
- --------------------------------------------------------------------------------
Short-Term Obligations - 13.0%
- --------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- --------------------------------------------------------------------------------
Federal Farm Credit Bank, due 06/03/97 $ 9,315 $ 9,312,216
Federal Farm Credit Bank, due 06/11/97 3,540 3,534,739
Federal Home Loan Bank, due 06/19/97 5,270 5,255,811
Federal Home Loan Mortgage Corp., due 06/04/97 7,620 7,616,539
Federal Home Loan Mortgage Corp., due 06/05/97 3,840 3,837,679
Federal Home Loan Mortgage Corp., due 06/19/97 2,330 2,323,738
Federal Home Loan Mortgage Corp., due 06/24/97 7,600 7,573,829
Federal National Mortgage Assn., due 06/06/97 6,300 6,295,266
Federal National Mortgage Assn., due 06/16/97 865 863,039
Federal National Mortgage Assn., due 06/20/97 3,510 3,499,904
Federal National Mortgage Assn., due 06/27/97 13,880 13,826,169
General Electric Capital Corp., due 06/02/97 6,675 6,673,961
General Electric Capital Corp., due 06/13/97 7,895 7,880,526
- --------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 78,493,416
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $508,573,938) $596,049,984

Other Assets, Less Liabilities - 1.2% 7,510,736
- --------------------------------------------------------------------------------
Net Assets - 100.0% $603,560,720
- --------------------------------------------------------------------------------
</TABLE>

*Non-income producing security.
##SEC Rule 144A restriction.

See notes to financial statements

10
<PAGE>

Financial Statements
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
May 31, 1997
- -------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $508,573,938) $596,049,984
Cash 5,586
Receivable for investments sold 6,087,651
Receivable for Fund shares sold 2,419,261
Dividends and interest receivable 388,765
Other assets 6,128
-------------
Total assets $604,957,375
=============
Liabilities:
Payable for investments purchased $ 351,568
Payable for Fund shares reacquired 448,561
Net payable for forward currency exchange contracts 68,843
Payable to affiliates -
Management fee 24,650
Administrative fee 495
Shareholder servicing agent fee 4,263
Distribution fee 271,649
Accrued expenses and other liabilities 226,626
-------------
Total liabilities $ 1,396,655
-------------
Net assets $603,560,720
=============
Net assets consist of:
Paid-in capital $480,755,320
Unrealized appreciation on investments and translation of assets and liabilities
in foreign currencies 87,407,923
Accumulated undistributed net realized gain on investments and foreign
currency transactions 35,555,939
Accumulated net investment loss (158,462)
-------------
Total $603,560,720
=============
Shares of beneficial interest outstanding 39,238,514
=============
Class A shares:
Net asset value per share
(net assets of $184,232,426 [divided by] 12,001,455 shares of beneficial interest
outstanding) $15.35
=============
Offering price per share (100 [divided by] 94.25) $16.29
=============
Class B shares:
Net asset value and offering price per share
(net assets $419,327,790 [divided by] 27,237,026 shares of beneficial interest
outstanding) $15.40
=============
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $503.75 [divided by] 32.80 shares of beneficial interest $15.36
outstanding) =============

</TABLE>

On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.

See notes to financial statements

11
<PAGE>

Financial Statements - continued
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six Months Ended May 31, 1997
- --------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 2,991,999
Interest 2,217,664
-----------
Total investment income $ 5,209,663
-----------
Expenses -
Management fee $ 2,179,038
Trustees' compensation 26,335
Administrative fee 22,060
Shareholder servicing agent fee 313,997
Shareholder servicing agent fee (Class A) 19,079
Shareholder servicing agent fee (Class B) 79,824
Distribution and service fee (Class A) 204,252
Distribution and service fee (Class B) 2,087,899
Custodian fee 145,018
Postage 61,914
Printing 29,423
Auditing fees 15,097
Legal fees 1,835
Miscellaneous 207,090
-----------
Total expenses $ 5,392,861
Fees paid indirectly (68,797)
-----------
Net expenses $ 5,324,064
-----------
Net investment loss $ (114,401)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $35,844,471
Foreign currency transactions (40,626)
-----------
Net realized gain on investments and foreign currency transactions $35,803,845
-----------
Change in unrealized appreciation (depreciation) -
Investments $19,091,867
Translation of assets and liabilities in foreign currencies (70,544)
-----------
Net unrealized gain on investments and foreign currency translation $19,021,323
-----------
Net realized and unrealized gain on investments and foreign currency $54,825,168
-----------
Increase in net assets from operations $54,710,767
===========
</TABLE>

See notes to financial statements

12
<PAGE>

Financial Statements - continued
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six Months Ended
May 31, 1997 Year Ended
(Unaudited) November 30, 1996
===========================================================================================
<S> <C> <C>
Increase in net assets:
From operations -
Net investment loss $ (114,401) $ (1,034,280)
Net realized gain on investments and foreign
currency transactions 35,803,845 129,835,775
Net unrealized gain (loss) on investments and
foreign currency translation 19,021,323 (34,841,347)
-------------- --------------
Increase in net assets from operations $ 54,710,767 $ 93,960,148
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ -- $ (300,226)
From net realized gain on investments and
foreign currency transactions (Class A) (35,176,024) (13,120,408)
From net realized gain on investments and
foreign currency transactions (Class B) (93,850,492) (60,999,950)
In excess of net investment income (Class A) -- (535,376)
-------------- --------------
Total distributions declared to shareholders $ (129,026,516) $ (74,955,960)
-------------- --------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 103,805,182 $ 178,620,223
Net asset value of shares issued to
shareholders in reinvestment of
distributions 119,836,430 69,743,534
Cost of shares reacquired (126,962,462) (202,733,785)
-------------- --------------
Increase in net assets from Fund share
transactions $ 96,679,150 $ 45,629,972
-------------- --------------
Total increase in net assets $ 22,363,401 $ 64,634,160
Net assets:
At beginning of period 581,197,319 516,563,159
-------------- --------------
At end of period (including accumulated
distributions in excess of net investment
income of $158,462 and $44,061
respectively) $ 603,560,720 $ 581,197,319
============== ==============
</TABLE>

See notes to financial statements

13
<PAGE>

Financial Statements - continued
Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended November 30,
Six Months Ended --------------------------------------------------------
May 31, 1997
(Unaudited) 1996 1995 1994 1993*
----------------- ------------ ------------ ----------- ------------
Class A
-----------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value -
beginning of period $ 18.02 $ 17.67 $ 13.49 $ 14.75 $ 14.58
---------- -------- -------- ---------- ----------
Income from investment
operations# -
Net investment income $ 0.04 $ 0.08 $ 0.11 $ 0.21 $ 0.03
Net realized and unrealized
gain (loss) on investments 1.39 2.96 4.91 (0.25) 0.14
---------- -------- -------- ---------- ----------
Total from investment
operations $ 1.43 $ 3.04 $ 5.02 $ (0.04) $ 0.17
---------- -------- -------- ---------- ----------
Less distributions declared to
shareholders -
From net investment
income $ -- $ (0.16) $ (0.22) $ (0.06) $ --
From net realized gain on
investments (4.10) (2.53) (0.62) (1.16) --
---------- -------- -------- ---------- ----------
Total distributions
declared to shareholders $ (4.10) $ (2.69) $ (0.84) $ (1.22) $ --
---------- -------- -------- ---------- ----------
Net asset value - end of
period $ 15.35 $ 18.02 $ 17.67 $ 13.49 $ 14.75
========== ======== ======== ========== ==========
Total return[dbldag] 10.31%++ 19.76% 39.51% (0.47)% 5.01%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.30%+ 1.31% 1.27% 1.12% 0.91%+
Net investment income 0.50%+ 0.47% 0.67% 1.59% 1.67%
Portfolio turnover 63% 112% 91% 50% 70%+
Average commission rate### $ 0.0255 $ 0.0387 $ -- $ -- $ --
Net assets at end of period
(000 omitted) $ 184,232 $150,261 $ 88,119 $ 2,608 $ 196
</TABLE>

*For the period from the commencement of offering of Class A shares,
September 7, 1993, to November 30, 1993.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to November 30, 1992, are based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
dbldag]Total returns for Class A shares do not include the applicable sales
charge. If the sales charge had been included, the results would have been
lower.

See notes to financial statements

14
<PAGE>

Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended November 30,
Six Months Ended --------------------------------------------------------
May 31, 1997
(Unaudited) 1996 1995 1994 1993
----------------- ------------ ------------ ----------- ------------
Class B
-----------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning
of period $ 17.96 $ 17.56 $ 13.37 $ 14.72 $ 14.83
---------- ---------- -------- ---------- --------
Income from investment
operations# -
Net investment income
(loss) $ (0.02) $ (0.06) $ 0.01 $ 0.04 $ 0.03
Net realized and unrealized
gain (loss) on investments 1.40 2.97 4.85 (0.23) 0.50
---------- ---------- -------- ---------- --------
Total from investment
operations $ 1.38 $ 2.91 $ 4.86 $ (0.19) $ 0.53
---------- ---------- -------- ---------- --------
Less distributions declared to
shareholders -
From net investment
income $ -- $ -- $ (0.05) $ --** $ (0.02)
From net realized gain on
investments (3.94) (2.51) (0.62) (1.16) (0.62)
---------- ---------- -------- ---------- --------
Total distributions
declared to shareholders $ (3.94) $ (2.51) $ (0.67) $ (1.16) $ (0.64)
---------- ---------- -------- ---------- --------
Net asset value - end of
period $ 15.40 $ 17.96 $ 17.56 $ 13.37 $ 14.72
========== ========== ======== ========== ========
Total return 9.83%++ 18.84% 38.16% (1.52)% 3.70%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.04%+ 2.13% 2.14% 2.18% 2.15%
Net investment income
(loss) (0.25)%+ (0.38)% 0.08% 0.32% 0.10%
Portfolio turnover 63% 112% 91% 50% 70%
Average commission rate### $ 0.0255 $ 0.0387 $ -- $ -- $ --
Net assets at end of period
(000 omitted) $ 419,328 $430,936 $428,445 $384,504 $454,089
</TABLE>

**The per share distribution from net investment income on Class B shares was
$0.00312.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to November 30, 1992, are based on
average shares outstanding.
##For the fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.

See notes to financial statements

15
<PAGE>

Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended November 30, 1992 1991 1990 1989 1988 1987**
- --------------------------------- ---------- ------------ ----------- ------------ ------------ ------------
Class B
----------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning
of period $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59 $ 7.50
-------- -------- -------- -------- -------- ----------
Income from investment
operations -
Net investment income $ 0.02 $ 0.10 $ 0.18 $ 0.17 $ 0.12 $ 0.04
Net realized and unrealized
gain (loss) on investments 2.61 2.15 (0.75) 2.63 1.76 0.06
-------- -------- -------- -------- -------- ----------
Total from investment
operations $ 2.63 $ 2.25 $ (0.57) $ 2.80 $ 1.88 $ 0.10
-------- -------- -------- -------- -------- ----------
Less distributions declared to
shareholders -
From net investment income $ -- $ (0.14) $ (0.19) $ (0.13) $ (0.09) $ (0.01)
From net realized gain on
investments (1.07) (0.13) -- -- -- --
-------- -------- -------- -------- -------- ----------
Total distributions declared
to shareholders $ (1.07) $ (0.27) $ (0.19) $ (0.13) $ (0.09) $ (0.01)
-------- -------- -------- -------- -------- ----------
Net asset value - end of period $ 14.83 $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59
======== ======== ======== ======== ======== ==========
Total return 20.61% 20.22% (4.80)% 30.11% 24.79% 1.41%+
Ratios (to average net assets)/Supplemental data:
Expenses 2.24% 2.28% 2.38% 2.46% 2.17% 2.26%+
Net investment income 0.18% 0.75% 1.56% 1.56% 1.34% 0.36%+
Portfolio turnover 65% 86% 68% 58% 93% 139%
Net assets at end of period
(000 omitted) $436,561 $317,375 $226,245 $202,861 $130,961 $ 88,471
</TABLE>

**For the period from the commencement of investment operations, December 29,
1986, to November 30, 1987.
+Annualized.

See notes to financial statements

16
<PAGE>

Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Period Ended
May 31, 1997***
(Unaudited)
----------------
Class I
----------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 13.99
----------
Income from investment operations# -
Net investment income $ 0.06
Net realized and unrealized gain (loss) on investments 1.31
----------
Total from investment operations $ 1.37
----------
Less distributions declared to shareholders -
From net investment income $ --
From net realized gain on investments --
----------
Total distributions declared to shareholders $ --
----------
Net asset value - end of period $ 15.36
==========
Total return 9.79%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.08%+
Net investment income 0.91%+
Portfolio turnover 63%
Average commission rate### 0.0255
Net assets at end of period (000 omitted) $ 1
</TABLE>

***For the period from the commencement of offering of Class I shares, January
2, 1997, to May 31, 1997.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to November 30, 1992, is based on
average shares outstanding.
##For the periods ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.

See notes to financial statements

17
<PAGE>

Notes to Financial Statements (Unaudited)

(1) Business and Organization
MFS Capital Growth Fund (the Fund) is a diversified series of MFS Series Trust
II (the Trust). The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.

(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.

Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are
not available are valued at last quoted bid prices. 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 Trustees. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed
issues and forward contracts, are valued on the basis of valuations furnished
by dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Non-U.S. dollar denominated
short-term obligations are valued at amortized cost as calculated in the base
currency and translated into U.S. dollars at the closing daily exchange rate.
Futures contracts, options, and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices. Over-the-counter
options are valued by brokers through the use of a pricing model which takes
into account closing bond valuations, implied volatility, and short-term
repurchase rates. 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 Trustees.

Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such

18
<PAGE>

Notes to Financial Statements (Unaudited) - continued

transactions. Gains and losses attributable to foreign currency exchange rates
on sales of securities are recorded for financial statement purposes as net
realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result from fluctuations in foreign currency exchange rates is not
separately disclosed.

Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized until the
contract settlement date. On contract settlement date the gains or losses are
recorded as realized foreign currency transactions.

19
<PAGE>

Notes to Financial Statements (Unaudited) - continued

Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of
net investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return and,
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV.

Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.

Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective
distribution and service fees. All shareholders bear the common expenses of the
Fund pro rata based on average daily net assets of each class, without
distinction between share classes. Dividends are declared separately for each
class. No class has preferential dividend rights; differences in per share
dividend rates are generally due to differences in separate class expenses.

(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee was computed daily and paid monthly at an annual rate of 0.75%
of average daily net assets.

Administrator - Effective March 1, 1997, the Fund has an administrative
services agreement with MFS to provide the Fund with certain financial, legal,
compliance, shareholder communications, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an administrative fee up to 0.015% per annum of the Fund's average daily
net assets, provided that the administrative fee is not assessed on Fund assets
that exceed $3 billion.

The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees'

20
<PAGE>

Notes to Financial Statements (Unaudited) - continued

compensation is a net periodic pension expense of $5,878 for the six months
ended May 31, 1997.

Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$18,296 for the six months ended May 31, 1997, as its portion of the sales
charge on sales of Class A shares of the Fund.

The Trustees have adopted a distribution plan for Class A and Class B shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:

The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.10% per annum of the Fund's average daily net assets
attributable to Class A shares, commissions to dealers, and payments to MFD
wholesalers for sales at or above a certain dollar level, and other such
distribution-related expenses that are approved by the Fund. MFD retains the
service fee for accounts not attributable to a securities dealer, which
amounted to $32,588 for the six months ended May 31, 1997. Payment of the 0.10%
per annum Class A distribution fee will commence on such date as the Trustees
of the Trust may determine. Fees incurred under the distribution plan during
the six months ended May 31, 1997, were 0.25% of average daily net assets
attributable to Class A shares on an annualized basis.

The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B shares. MFD will pay to
securities dealers that enter into a sales agreement with MFD all or a portion
of the service fee attributable to Class B shares. The service fee is intended
to be additional consideration for services rendered by the dealer with respect
to Class B shares. MFD retains the service fee for accounts not attributable to
a securities dealer, which amounted to $46,525 for Class B shares, for the six
months ended May 31, 1997. Fees incurred under the distribution plans during
the six months ended May 31, 1997, were 1.00% of average daily net assets
attributable to Class B shares on an annualized basis.

Purchases over $1 million of Class A shares and certain purchases by retirement
plans are subject to a contingent deferred sales charge in the event of a
shareholder redemption within 12 months following such purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class B shares
in the event of a shareholder redemption within six years of purchase. MFD
receives all contingent deferred sales charges. Contingent

21
<PAGE>

Notes to Financial Statements (Unaudited) - continued

deferred sales charges imposed during the six months ended May 31, 1997, were
$467 and $120,085 for Class A and Class B shares, respectively.

Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate
of 0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of
the average daily net assets of each class of shares at an effective annual
rate of up to 0.15% and up to 0.22% attributable to Class A and Class B shares,
respectively.

(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, aggregated $309,732,905 and $326,279,561,
respectively.

The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:

<TABLE>
<S> <C>
Aggregate cost $ 508,573,938
==============
Gross unrealized appreciation $ 108,302,038
Gross unrealized depreciation $ (20,825,992)
--------------
Net unrealized appreciation $ 87,476,046
==============
</TABLE>

22
<PAGE>

Notes to Financial Statements (Unaudited) - continued

Class A Shares

<TABLE>
<CAPTION>
Six Months Ended May 31, 1997 Year Ended November 30, 1996
------------------------------- ----------------------------------
Shares Amount Shares Amount
-------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 4,522,229 $ 67,119,816 5,081,001 $ 84,871,838
Shares issued to
shareholders in
reinvestment of
distributions 2,243,772 31,300,586 808,554 12,468,050
Shares transferred to
Class I (14) (202) -- --
Shares reacquired (3,101,660) (45,448,434) (2,540,176) (42,196,319)
----------- ------------- ------------ --------------
Net increase 3,664,327 52,971,766 3,349,379 55,143,569
----------- ------------- ------------ --------------
</TABLE>

Class B Shares

<TABLE>
<CAPTION>
Six Months Ended May 31, 1997 Year Ended November 30, 1996
---------------------------------- -----------------------------------
Shares Amount Shares Amount
---------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Shares sold 2,447,415 $ 36,469,310 5,593,976 $ 93,748,385
Shares issued to
shareholders in
reinvestment of
distributions 6,305,963 88,535,844 3,699,918 57,275,484
Shares reacquired (5,511,484) (81,295,221) (9,692,478) (160,537,466)
------------ -------------- ------------ ---------------
Net increase (decrease) 3,241,894 43,709,933 (398,584) (9,513,597)
------------ -------------- ------------ ---------------
</TABLE>

Class I Shares

<TABLE>
<CAPTION>
Period Ended May 31, 1997*
----------------------------------
Shares Amount
---------------- -----------------
<S> <C> <C>
Shares sold 14,566 215,854
Shares transferred from
Class A 14 202
Shares reacquired (14,547) (218,605)
------------ -------------
Net increase (decrease) 33 (2,549)
------------ -------------
</TABLE>

*For the period from the commencement of offering of Class I shares, January 2,
1997, to May 31, 1997.

23
<PAGE>

Notes to Financial Statements (Unaudited) - continued

(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $400 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the six months ended May
31, 1997, was $2,154.

(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include forward foreign currency exchange contracts. The notional
or contractual amounts of these instruments represent the investment the Fund
has in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. A summary of obligations under these
financial instruments at May 31, 1997, is as follows:

Forward Foreign Currency Exchange Contracts -

<TABLE>
<CAPTION>
Settlement Contracts to In Exchange Contracts Net Unrealized
Date Deliver/Receive for At Value Depreciation
------------ ----------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Sales GBP 9/30/97 9,252,406 15,133,401 15,069,855 (63,546)
Purchases GBP 8/26/97 4,626,203 7,574,713 7,569,416 (5,297)
--------
(68,843)
========
</TABLE>

At May 31, 1997, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.

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

This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.

<PAGE>

PART C

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(A) FINANCIAL STATEMENTS INCLUDED IN PART A:

For the period from the commencement of investment operations
(December 29, 1986 for MFS Emerging Growth Fund ("MEG") and MFS
Capital Growth Fund ("MCG") and August 1, 1988 for MFS
Intermediate Income Fund ("MII") and MFS Gold & Natural Resources
Fund ("MGN") to November 30, 1996:

Financial Highlights

For the six-month period ended May 31, 1997 for MCG: Financial
Highlights (unaudited)

FINANCIAL STATEMENTS INCLUDED IN PART B:

At November 30, 1996:
Portfolio of Investments*
Statement of Assets and Liabilities*

For each of the two years in the period ended November 30, 1996:
Statement of Changes in Net Assets*

For the year ended November 30, 1996:
Statement of Operations*

At May 31, 1997 (for MCG):
Portfolio of Investments**

Statement of Assets and Liabilities (unaudited)**

For the year ended November 30, 1996 and the six months ended May
31, 1997: Statement of Changes in Net Assets (unaudited)**

For the six months ended May 31, 1997:
Statement of Operations (unaudited)**

- ------------------------------
* Incorporated herein by reference to the Fund's Annual Report to
Shareholders, dated November 30, 1996, filed with the SEC for MII on
February 3, 1997; for MEG and MCG on February 4, 1997 and for MGN on
February 7, 1997.

** Incorporated herein by reference to the Fund's Semiannual Report
(unaudited) to Shareholders, dated May 31, 1997 for MCG filed with the SEC
on August8, 1997.

(B) EXHIBITS

1 (a) Amended and Restated Declaration of Trust, dated
February 3, 1995. (3)

(b) Amendment to Declaration of Trust, dated February
21, 1996. (8)

(d) Amendment to Declaration of Trust, dated December
19, 1996. (10)

(e) Form of Amendment to Declaration of Trust, to
redesignate name of MFS Capital Growth Fund to MFS
Large Cap Growth Fund. (16)

2 Amended and Restated By-Laws, dated December
14, 1994. (3)

3 Not Applicable.

4 Form of Share Certificate for Classes of Shares. (7)

5 (a) Investment Advisory Agreement for MFS Emerging
Growth Fund, dated August 1, 1993 as amended through
August 9, 1995. (8)

(b) Investment Advisory Agreement for MFS Capital Growth
Fund, dated September 1, 1993. (3)

(d) Investment Advisory Agreement for MFS Gold & Natural
Resources Fund, dated September 1, 1993. (3)

6 (a) Distribution Agreement between the Trust and MFS Fund
Distributors, Inc., 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. (13)

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

8 (a) Custodian Agreement, dated January 28, 1988. (6)

(b) Amendment to Custodian Agreement, dated February 29,
1988. (6)

(d) Amendment to the Custodian Agreement, dated October 9,
1991. (6)

9 (a) Shareholder Servicing Agent Agreement, dated
September 10, 1986. (6)

(b) Amendment to Shareholder Servicing Agent Agreement,
dated January 1, 1997, to amend fee schedule. (16)

(c) Exchange Privilege Agreement, dated September 1, 1993,
as amended and restated through and including January
1, 1997. (11)

(d) Loan Agreement by and among the Banks named therein,
the MFS Funds named therein, and The First National
Bank of Boston, dated as of February 21, 1995. (2)

(e) 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)

(f) Master Administrative Services Agreement dated March 1,
1997. (12)

(g) Dividend Disbursing Agent Agreement, dated February 1,
1986. (4)

10 Consent and Opinion of Counsel for the
fiscal year ended November 30, 1996, filed
with the Rule 24f-2 Notice on January 28, 1997.

11 Consent of Deloitte & Touche LLP with respect to
financial statements for fiscal year ended November 30,
1996; filed herewith.

12 Not Applicable.

13 Investment Representation Letter. (6)

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)

15 Master Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act of
1940, effective January 1, 1997 and amended
thereto on April 10, 1997. (15)

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

17 (a) Financial Data Schedules for MFS Large Cap Growth Fund
for the fiscal year ended November 30, 1996. (16)

17 (b) Financial Data Schedules for MFS Large Cap Growth Fund
for the period ended May 31, 1997; filed herewith.

18 Plan pursuant to Rule 18f-3(d) under the Investment
Company Act of 1940. (7)

Power of Attorney, dated August 11, 1994. (3)

- -----------------------------
(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 Post-Effective 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 Registrant's Post-Effective Amendment No. 16
filed with the SEC via EDGAR on March 30, 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 Registrant's Post-Effective Amendment No. 17
filed with the SEC via EDGAR on October 13, 1995.

(7) Incorporated by reference to MFS Series Trust I (File Nos. 33-7638 and
811-4777) Post-Effective Amendment No. 25 filed with the SEC via EDGAR on
August 27, 1996.

(8) Incorporated by reference to Registrant's Post-Effective Amendment No. 18
filed with the SEC via EDGAR on March 28, 1996.

(9) Incorporated by reference to Registrant's Post-Effective Amendment No. 19
filed with the SEC via EDGAR on August 27, 1996.

(10) Incorporated by reference to Registrant's Post-Effective Amendment No. 20
filed with the SEC via EDGAR on January 27, 1997.

(11) Incorporated by reference to MFS Series Trust VIII (File Nos. 33-37972 and
811-5262) Post-Effective Amendment No. 13 filed with the SEC via EDGAR on
February 27, 1997.

(12) Incorporated by reference to MFS/Sun Life Series Trust (File Nos. 2-83616
and 811-3732) Post-Effective Amendment No. 19 filed with the SEC via EDGAR
on March 18, 1997.

(13) 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
May 29, 1997.

(14) Incorporated by reference to MFS Series Trust I (File No. 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 Government Limited Maturity Fund (File
Nos. 2-96738 and 811-4253) Post-Effective Amendment No. 18 filed with the
SEC via EDGAR on April 29, 1997.

(16) Incorporated by reference to Registrant's Post-Effective Amendment No. 22
filed with the SEC via EDGAR on July 1, 1997.

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

Not applicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

FOR MFS EMERGING GROWTH FUND

<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS

<S> <C>
Class A Shares of Beneficial Interest 201,222
(without par value) (as of July 31, 1997)

Class B Shares of Beneficial Interest 318,965
(without par value) (as of July 31, 1997)

Class C Shares of Beneficial Interest 12,265
(without par value) (as of July 31, 1997)

Class I Shares of Beneficial Interest 9
(without par value) (as of July 31, 1997)

FOR MFS LARGE CAP GROWTH FUND (FORMERLY KNOWN AS MFS CAPITAL GROWTH FUND)

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

Class A Shares of Beneficial Interest 16,284
(without par value) (as of July 31, 1997)

Class B Shares of Beneficial Interest 29,685
(without par value) (as of July 31, 1997)

Class I Shares of Beneficial Interest 2
(without par value) (as of July 31, 1997)

FOR MFS INTERMEDIATE INCOME FUND

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

Class A Shares of Beneficial Interest 2,347
(without par value) (as of July 31, 1997)

Class B Shares of Beneficial Interest 7,738
(without par value) (as of July 31, 1997)

Class I Shares of Beneficial Interest 2
(without par value) (as of July 31, 1997)

FOR MFS GOLD & NATURAL RESOURCES FUND

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

Class A Shares of Beneficial Interest 929
(without par value) (as of July 31, 1997)

Class B Shares of Beneficial Interest 1,404
(without par value) (as of July 31, 1997)

</TABLE>

ITEM 27. INDEMNIFICATION

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

Reference is hereby made to (a) Article V of the Trust's Declaration
of Trust, incorporated by reference to Post-Effective Amendment No. 16, filed
with the SEC on March 30, 1995 and (b) Section 8 of the Shareholder Servicing
Agent Agreement, incorporated by reference to Registrant's Post-Effective
Amendment No. 17 filed with the SEC via EDGAR on October 13, 1995.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

MFS serves as investment adviser to the following open-end Funds
comprising the MFS Family of Funds: Massachusetts Investors Trust, Massachusetts
Investors Growth Stock Fund, MFS Growth Opportunities Fund, MFS Government
Securities Fund, MFS Government Limited Maturity Fund, MFS Series Trust I (which
has thirteen series: MFS Managed Sectors Fund, MFS Cash Reserve Fund, MFS World
Asset Allocation Fund, MFS Aggressive Growth Fund, MFS Research Growth and
Income Fund, MFS Core Growth Fund, MFS Equity Income Fund, MFS Special
Opportunities Fund, MFS Convertible Securities Fund, MFS Blue Chip Fund, MFS New
Discovery Fund, MFS Science and Technology Fund and MFS Research International
Fund), MFS Series Trust II (which has four series: MFS Emerging Growth Fund, MFS
Capital Growth Fund, MFS Intermediate Income Fund and MFS Gold & Natural
Resources Fund), MFS Series Trust III (which has two series: MFS High Income
Fund and MFS Municipal High Income Fund), MFS Series Trust IV (which has four
series: MFS Money Market Fund, MFS Government Money Market Fund, MFS Municipal
Bond Fund and MFS OTC Fund), MFS Series Trust V (which has two series: MFS Total
Return Fund and MFS Research Fund), MFS Series Trust VI (which has three series:
MFS World Total Return Fund, MFS Utilities Fund and MFS World Equity Fund), MFS
Series Trust VII (which has two series: MFS World Governments Fund and MFS Value
Fund), MFS Series Trust VIII (which has two series: MFS Strategic Income Fund
and MFS World Growth Fund), MFS Series Trust IX (which has three series: MFS
Bond Fund, MFS Limited Maturity Fund and MFS Municipal Limited Maturity Fund),
MFS Series Trust X (which has four series: MFS Government Mortgage Fund,
MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign & Colonial
International Growth Fund and MFS/Foreign & Colonial International Growth and
Income Fund), and MFS Municipal Series Trust (which has 16 series: MFS Alabama
Municipal Bond Fund, MFS Arkansas Municipal Bond Fund, MFS California Municipal
Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia Municipal Bond Fund, MFS
Maryland Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS
Mississippi Municipal Bond Fund, MFS New York Municipal Bond Fund, MFS North
Carolina Municipal Bond Fund, MFS Pennsylvania Municipal Bond Fund, MFS South
Carolina Municipal Bond Fund, MFS Tennessee Municipal Bond Fund, MFS Virginia
Municipal Bond Fund, MFS West Virginia Municipal Bond Fund and MFS Municipal
Income Fund) (the "MFS Funds"). The principal business address of each of the
MFS Funds is 500 Boylston Street, Boston, Massachusetts 02116.

MFS also serves as investment adviser of the following no-load,
open-end Funds: MFS Institutional Trust ("MFSIT") (which has seven series), MFS
Variable Insurance Trust ("MVI") (which has twelve series) and MFS Union
Standard Trust ("UST"). The principal business address of each of the
aforementioned funds is 500 Boylston Street, Boston, Massachusetts 02116.

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

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

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 Government Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund, MFS Meridian World Total
Return Fund, MFS Meridian U.S. Equity Fund, MFS Meridian Research Fund, MFS
Meridian U.S. High Yield Fund and MFS Emerging Markets Debt Fund (collectively
the "MFS Meridian Funds"). Each of the MFS Meridian Funds is organized as an
exempt company under the laws of the Cayman Islands. The principal business
address of each of the MFS Meridian Funds is P.O. Box 309, Grand Cayman, Cayman
Islands, British West Indies.

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

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

Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned subsidiary
of MFS, serves as distributor for certain life insurance and annuity contracts
issued by Sun Life Assurance Company of Canada (U.S.).

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

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

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

MFS

The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames, Arnold
D. Scott, Donald A. Stewart and John D. McNeil. Mr. Brodkin is the Chairman, Mr.
Shames is the President, Mr. Scott is a Senior Executive Vice President and
Secretary, Bruce C. Avery, William S. Harris, William W. Scott, Jr., 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

A. Keith Brodkin is the Chairman and President, 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

A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg,
Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, 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

A. Keith Brodkin is the Chairman and President, James T. Swanson,
Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, 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

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

MFS SERIES TRUST VII

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

MFS SERIES TRUST VIII

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

MFS MUNICIPAL SERIES TRUST

A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L. Schechter and
David R. King, Vice Presidents of MFS, are Vice Presidents, Daniel E. McManus,
Vice President of MFS, is an Assistant Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, 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 UNION STANDARD TRUST
MFS INSTITUTIONAL TRUST

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

MFS MUNICIPAL INCOME TRUST

A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, 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

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

MFS SPECIAL VALUE TRUST

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

MFS/SUN LIFE SERIES TRUST

John D. McNeil, Chairman and Director of Sun Life Assurance Company of
Canada, is the Chairman, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, 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.

MIL

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

MIL-UK

A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott,
Jeffrey L. Shames, and James R. Bordewick, Jr., are Directors, Stephen E. Cavan
is a Director and the Secretary, James E. Russell is the Treasurer, and Robert
T. Burns is the Assistant Secretary.

MIL FUNDS

A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle, Richard W. S. Baker and William F. Waters are
Directors, Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer,
James O. Yost is the Assistant Treasurer and James R. Bordewick, Jr., is the
Assistant Secretary.

MFS MERIDIAN FUNDS

A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle, Richard W. S. Baker, Arnold D. Scott, Jeffrey L. Shames
and William F. Waters are Directors, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James R. Bordewick, Jr., is the Assistant
Secretary and James O. Yost is the Assistant Treasurer.

MFD

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

CIAI

A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery is
the Vice President, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings
is the Assistant Treasurer, Stephen E. Cavan is the Secretary, and Robert T.
Burns is the Assistant Secretary.

MFSC

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

MFSI

A. Keith Brodkin is the Chairman and a Director, Jeffrey L. Shames,
and Arnold D. Scott are Directors, Thomas J. Cashman, Jr., is the President and
a Director, Leslie J. Nanberg is a Senior Vice President, a Managing Director
and a Director, George F. Bennett, Carol A. Corley, John A. Gee, Brianne Grady
and Kevin R. Parke (who is an Executive Vice President of MFS) are Senior Vice
Presidents and Managing Directors, Joseph W. Dello Russo is the Treasurer,
Thomas B. Hastings is the Assistant Treasurer and Robert T. Burns is the
Secretary.

RSI

William W. Scott, Jr. and Bruce C. Avery are Directors, Arnold D.
Scott is the Chairman and a Director, Joseph W. Dello Russo is the Treasurer,
Thomas B. Hastings is the Assistant Treasurer, Stephen E. Cavan is the
Secretary, Robert T. Burns is the Assistant Secretary and Sharon A. Brovelli and
Martin E. Beaulieu are Senior Vice Presidents.

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

A. Keith Brodkin Director, Sun Life Assurance Company of Canada
(U.S.), One Sun Life Executive Park, Wellesley
Hills, Massachusetts
Director, Sun Life Insurance and Annuity
Company of New York, 67 Broad Street, New
York, New York

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

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

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

ITEM 29. DISTRIBUTORS

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

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

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

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

NAME ADDRESS

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

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

State Street Bank and State Street South
Trust Company (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>
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 August, 1997.

MFS SERIES TRUST II

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 August 27, 1997.

SIGNATURE TITLE

A. KEITH BRODKIN* Chairman, President (Principal
- -------------------------- Executive Officer) and Trustee
A. Keith Brodkin

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

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

MARSHALL N. COHAN* Trustee
- --------------------------
Marshall N. Cohan

LAWRENCE H. COHN, M.D.* Trustee
- --------------------------
Lawrence H. Cohn, M.D.

SIR J. DAVID GIBBONS* Trustee
- --------------------------
Sir J. David Gibbons

<PAGE>
INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ---------- ---------------------- ---------

11 Consent of Deloite & Touche LLP with respect to
financial statements for fiscal year ended
November 30, 1996.

17 (b) Financial Data Schedules for the period ended
May 31, 1997 for MFS Large Cap Growth Fund.

<PAGE>

EXHIBIT NO. 99.11

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Post-Effective
Amendment No. 23 to Registration Statement No. 33-7637 of MFS Series Trust II,
of our reports each dated January 3, 1997, appearing in the annual reports to
shareholders for the year ended November 30, 1996, of MFS Emerging Growth Fund,
MFS Intermediate Income Fund and MFS Capital Growth Fund, each a series of MFS
Series Trust II, 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

Boston, Massachusetts
August 26, 1997

<PAGE>
<ARTICLE> 6
<CIK> 0000798250
<NAME> MFS SERIES TRUST II
<SERIES>
<NUMBER> 021
<NAME> MFS CAPITAL GROWTH FUND - CLASS A
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 508573938
<INVESTMENTS-AT-VALUE> 596049984
<RECEIVABLES> 8895677
<ASSETS-OTHER> 6128
<OTHER-ITEMS-ASSETS> 5586
<TOTAL-ASSETS> 604957375
<PAYABLE-FOR-SECURITIES> 351568
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1045087
<TOTAL-LIABILITIES> 1396655
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 480755320
<SHARES-COMMON-STOCK> 12001455
<SHARES-COMMON-PRIOR> 8337128
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (158462)
<ACCUMULATED-NET-GAINS> 35555939
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 87407923
<NET-ASSETS> 603560720
<DIVIDEND-INCOME> 2991999
<INTEREST-INCOME> 2217664
<OTHER-INCOME> 0
<EXPENSES-NET> (5324064)
<NET-INVESTMENT-INCOME> (114401)
<REALIZED-GAINS-CURRENT> 35803845
<APPREC-INCREASE-CURRENT> 19021323
<NET-CHANGE-FROM-OPS> 54710767
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (35176024)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4522229
<NUMBER-OF-SHARES-REDEEMED> (3101674)
<SHARES-REINVESTED> 2243772
<NET-CHANGE-IN-ASSETS> 22363401
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 128778610
<OVERDISTRIB-NII-PRIOR> (44061)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2179038
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5392861
<AVERAGE-NET-ASSETS> 581035048
<PER-SHARE-NAV-BEGIN> 18.02
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 1.39
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (4.10)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.35
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000798250
<NAME> MFS SERIES TRUST II
<SERIES>
<NUMBER> 022
<NAME> MFS CAPITAL GROWTH FUND - CLASS B
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 508573938
<INVESTMENTS-AT-VALUE> 596049984
<RECEIVABLES> 8895677
<ASSETS-OTHER> 6128
<OTHER-ITEMS-ASSETS> 5586
<TOTAL-ASSETS> 604957375
<PAYABLE-FOR-SECURITIES> 351568
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1045087
<TOTAL-LIABILITIES> 1396655
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 480755320
<SHARES-COMMON-STOCK> 27237026
<SHARES-COMMON-PRIOR> 23995132
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (158462)
<ACCUMULATED-NET-GAINS> 35555939
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 87407923
<NET-ASSETS> 603560720
<DIVIDEND-INCOME> 2991999
<INTEREST-INCOME> 2217664
<OTHER-INCOME> 0
<EXPENSES-NET> (5324064)
<NET-INVESTMENT-INCOME> (114401)
<REALIZED-GAINS-CURRENT> 35803845
<APPREC-INCREASE-CURRENT> 19021323
<NET-CHANGE-FROM-OPS> 54710767
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (93850492)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2447415
<NUMBER-OF-SHARES-REDEEMED> (5511484)
<SHARES-REINVESTED> 6305963
<NET-CHANGE-IN-ASSETS> 22363401
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 128778610
<OVERDISTRIB-NII-PRIOR> (44061)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2179038
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5392861
<AVERAGE-NET-ASSETS> 581035048
<PER-SHARE-NAV-BEGIN> 17.96
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 1.40
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (3.94)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.40
<EXPENSE-RATIO> 2.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000798250
<NAME> MFS SERIES TRUST II
<SERIES>
<NUMBER> 023
<NAME> MFS CAPITAL GROWTH FUND - CLASS I
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 508573938
<INVESTMENTS-AT-VALUE> 596049984
<RECEIVABLES> 8895677
<ASSETS-OTHER> 6128
<OTHER-ITEMS-ASSETS> 5586
<TOTAL-ASSETS> 604957375
<PAYABLE-FOR-SECURITIES> 351568
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1045087
<TOTAL-LIABILITIES> 1396655
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 480755320
<SHARES-COMMON-STOCK> 33
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (158462)
<ACCUMULATED-NET-GAINS> 35555939
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 87407923
<NET-ASSETS> 603560720
<DIVIDEND-INCOME> 2991999
<INTEREST-INCOME> 2217664
<OTHER-INCOME> 0
<EXPENSES-NET> (5324064)
<NET-INVESTMENT-INCOME> (114401)
<REALIZED-GAINS-CURRENT> 35803845
<APPREC-INCREASE-CURRENT> 19021323
<NET-CHANGE-FROM-OPS> 54710767
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14580
<NUMBER-OF-SHARES-REDEEMED> (14547)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 22363401
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 128778610
<OVERDISTRIB-NII-PRIOR> (44061)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2179038
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5392861
<AVERAGE-NET-ASSETS> 581035048
<PER-SHARE-NAV-BEGIN> 13.99
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 1.31
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.36
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>