MFS SERIES TRUST VI, 485BPOS, 1998-02-27

MFS SERIES TRUST VI
485BPOS, 1998-02-27

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<PAGE>

As filed with the Securities and Exchange Commission
on February 27, 1998

1933 Act File No. 33-34502
1940 Act File No. 811-6102

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

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

POST-EFFECTIVE AMENDMENT NO. 12

AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 14

MFS SERIES TRUST VI
(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 February 28, 1998 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.

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

<PAGE>

MFS SERIES TRUST VI

MFS World Total Return Fund
MFS Utilities Fund
MFS World Equity Fund

CROSS REFERENCE SHEET

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

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

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

2 (a) Expense Summary *

(b),(c) * *

3(a) Condensed Financial Information *

(b) * *

(d) Condensed Financial Information *

4(a) Front Cover Page; The Fund; *
Investment Objective and
Policies; Certain Securities and
Investment Techniques

(b) Investment Objective and *
Policies; Certain Securities and
Investment Techniques *

(c) Investment Objective and *
Policies; Additional Risk Factors
5(a) The Fund; Management of the *
Fund - Investment Adviser

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

(d) * *

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

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

(g) Additional Risk Factors - Portfolio *
Trading

5A(a) ** **

(b) ** **

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

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

(e) Shareholder Services *

(f) Information Concerning Shares *
of the Fund - Distributions;
Shareholder Services -
Distribution Options

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

(h) * *

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

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

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

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

(e) Information Concerning Shares *
of the Fund - Distribution Plan;
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) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases

(d) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases

9 * *

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

11 * Front Cover Page

12 The Fund Definitions

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

(d) * *

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

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
Expenses

(d) * Management of the Fund -
Investment Adviser

(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;
Shareholder Services

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

20 * Tax Status

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

22(a) * *

(b) * Determination of Net
Asset Value and Performance

23 * Independent Auditors
and Financial Statements
</TABLE>
- -----------------------
* Not Applicable
** Contained in Annual Report
<PAGE>
MFS WORLD TOTAL RETURN FUND

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

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

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

EXPENSE SUMMARY
<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 ...................................................................... 0.85%
Rule 12b-1 Fees........................................................................ None%
Other Expenses(1)(2)................................................................... 0.39%
Total Operating Expenses............................................................... 1.24%
</TABLE>

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

(1) "Other Expenses" is based on Class A expenses incurred during the fiscal
year ended October 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........................................ $13
3 years....................................... 39

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 should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders, which are
incorporated by reference into the SAI.

<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended
October 31, 1997*

Class I
Per share data (for a share outstanding throughout the period):
<S> <C>
Net asset value - beginning of period $12.51
Income from investment operations# -
Net investment income $ 0.30
Net realized and unrealized gain on investments and
foreign currency transactions 1.21
-------
Total from investment operations $ 1.51
-------
Less distributions declared to shareholders -
From net investment income $ (0.16)
Total distributions declared to shareholders $ (0.16)
Net asset value - end of period $13.86
------
Total return 12.08%*** Ratios (to average net assets)/Supplemental data:
Expenses## 1.24%**
Net investment income 2.72%**
Portfolio turnover 143%
Average commission rate $0.0277
Net assets at end of period (000 omitted) $1,848
</TABLE>
- --------------------------

* For the period from the inception of Class I shares, January 2, 1997,
through October 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

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

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

OTHER INFORMATION

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

THE DATE OF THIS SUPPLEMENT IS MARCH 1, 1998

<PAGE>

PROSPECTUS
MFS(R) WORLD TOTAL MARCH 1, 1998
RETURN FUND CLASS A SHARES OF BENEFICIAL INTEREST
(A member of the CLASS B SHARES OF BENEFICIAL INTEREST
MFS Family of Funds(R) CLASS C SHARES OF BENEFICIAL INTEREST
- --------------------------------------------------------------------------------
500 Boylston St., Boston, MA 02116 (617) 954-5000

This Prospectus pertains to MFS World Total Return Fund (the "Fund") a non-
diversified series of MFS Series Trust VI (the "Trust"), an open-end
management investment company presently consisting of three series. The Fund's
investment objective is to seek total return by investing in securities which
will provide above-average current income (compared to a portfolio invested
entirely in equity securities) and opportunities for long-term growth of
capital and income. The Fund will invest primarily in global equity and fixed
income securities (i.e., those of U.S. and non-U.S. issuers). THE FUND IS
DESIGNED FOR INVESTORS WHO WISH TO SPREAD THEIR INVESTMENTS BEYOND THE UNITED
STATES AND WHO ARE PREPARED TO ACCEPT THE RISKS ENTAILED IN SUCH INVESTMENTS,
WHICH MAY BE HIGHER THAN THOSE ASSOCIATED WITH CERTAIN U.S. INVESTMENTS (see
"Investment Objective and Policies"). The minimum initial investment 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 RISKS,
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 Fund and
the Trust that a prospective investor ought to know before investing. The
Trust, on behalf of the Fund, has filed with the Securities and Exchange
Commission (the "SEC") a Statement of Additional Information, dated March 1,
1998, as amended or supplemented from time to time (the "SAI"), which contains
more detailed information about the Trust and the Fund and is incorporated
into this Prospectus by reference. See page 40 for a further description of
the information set forth in the SAI. A copy of the SAI may be obtained
without charge by contacting the Shareholder Servicing Agent (see back cover
for address and phone number). The SEC maintains an Internet World Wide Web
site (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.

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

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

<PAGE>

TABLE OF CONTENTS
PAGE
----
1. Expense Summary .................................................... 3
2. Condensed Financial Information .................................... 5
3. The Fund ........................................................... 8
4. Investment Objective and Policies .................................. 8
5. Certain Securities and Investment Techniques ....................... 11
6. Additional Risk Factors ............................................ 17
7. Management of the Fund ............................................. 20
8. Information Concerning Shares of the Fund .......................... 21
Purchases ....................................................... 21
Exchanges ....................................................... 28
Redemptions and Repurchases ..................................... 29
Distribution Plan ............................................... 32
Distributions ................................................... 34
Tax Status ...................................................... 35
Net Asset Value ................................................. 36
Description of Shares, Voting Rights and Liabilities ............ 36
Performance Information ......................................... 36
9. Shareholder Services ............................................... 37
Appendix A ............................................................ A-1

<PAGE>

1. EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge Imposed on Purchases of Fund
Shares (as a percentage of offering price) ............. 4.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption proceeds, as
applicable) ............................................ See Below(1) 4.00% 1.00%

ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees .......................................... 0.85% 0.85% 0.85%
Rule 12b-1 Fees .......................................... 0.35%(2) 1.00%(3) 1.00%(3)
Other Expenses(4) ........................................ 0.39% 0.39% 0.39%
---- ---- ----
Total Operating Expenses ................................. 1.59% 2.24% 2.24%

</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 ("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. Distribution expenses under this Plan, together with the initial
sales charge, may cause long-term shareholders to pay more than the
maximum sales charge that would have been permissible if imposed entirely
as an initial sales charge. See "Information Concerning Shares of the Fund
-- Distribution Plan" below.

(3) The Fund's Distribution Plan provides that it will pay distribution/
service fees aggregating up to (but not necessarily all of) 1.00% per
annum of the average daily net assets attributable to Class B shares and
Class C shares, respectively. Distribution expenses paid under the
Distribution Plan, with respect to Class B or Class C shares, together
with any CDSC payable upon redemption of Class B and Class C shares, may
cause long-term shareholders to pay more than the maximum sales charge
that would have been permissible if imposed entirely as an initial sales
charge.

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

<PAGE>

EXAMPLE OF EXPENSES

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

<TABLE>
<CAPTION>
PERIOD CLASS A CLASS B CLASS C
- ------ ------- ------- -------
(1) (1)
<S> <C> <C> <C> <C> <C>
1 year ................................ $ 63 $ 63 $ 23 $ 33 $ 23
3 years ............................... 95 100 70 70 70
5 years ............................... 130 140 120 120 120
10 years ............................... 227 241(2) 241(2) 257 257

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

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

<PAGE>

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

<TABLE>
FINANCIAL HIGHLIGHTS
CLASS A, CLASS B AND CLASS C SHARES

<CAPTION>
YEAR ENDED OCTOBER 31, 1997 1996 1995 1994 1993 1992 1991 1990*
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period ................ $12.73 $11.57 $10.58 $11.19 $10.21 $ 9.42 $ 8.55 $ 8.50
------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income .............................. $ 0.31 $ 0.34 $ 0.33 $ 0.30 $ 0.28 $ 0.36 $ 0.37 $ 0.08
Net realized and unrealized gain (loss) on
investments and foreign currency transactions .... 1.61 1.46 0.79 0.15 1.42 0.86 0.88 (0.03)
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations ................... $ 1.92 $ 1.80 $ 1.12 $(0.45) $ 1.70 $ 1.22 $ 1.25 $ 0.05
------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income ......................... $(0.21) $(0.63) $(0.08) $(0.25) $(0.45) $(0.26) $(0.38) $ --
From net realized gain on investments and foreign
currency transactions ............................ (0.60) (0.01) (0.05) (0.33) (0.27) (0.17) -- --
In excess of net realized gain on investments and
foreign currency transactions .................... -- -- -- (0.38) -- -- -- --
From paid-in capital ............................... -- -- -- (0.10) -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders ... $(0.81) $(0.64) $(0.13) $(1.06) $(0.72) $(0.43) $(0.38) --
------ ------ ------ ------ ------ ------ ------ ------
Net asset value - end of period ...................... $13.84 $12.73 $11.57 $10.58 $11.19 $10.21 $ 9.42 $ 8.55
====== ====== ====== ====== ====== ====== ====== ======
Total return(+) ...................................... 15.71% 16.06% 10.63% 4.10% 17.78% 13.14% 14.94% 3.76%+
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ......................................... 1.59% 1.63% 1.77% 1.76% 1.92% 1.84% 2.18% 1.57%+
Net investment income .............................. 2.35% 2.79% 3.06% 2.81% 2.96% 3.65% 4.05% 3.14%+
PORTFOLIO TURNOVER ................................... 143% 167% 160% 118% 112% 72% 134% 2%
Average commission rate### ........................... $0.0277 $0.0187 -- -- -- -- -- --
NET ASSETS AT END OF PERIOD (000 OMITTED) ............ $152,919 $129,843 $110,294 $99,870 $71,262 $44,707 $30,847 $12,510

- ------------
*For the period from September 4, 1990 (commencement of investment operations) to October
31, 1990.
+Annualized.
#Per share data for the periods subsequent to October 31, 1993 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.
(+)Total returns do not include the applicable sales charge. If the sales charge had been
included, the results would have been lower.
###Average commission rate is calculated for funds with fiscal years beginning on or after
September 1, 1995.
</TABLE>
<PAGE>

<TABLE>

FINANCIAL HIGHLIGHTS - CONTINUED

<CAPTION>
YEAR ENDED OCTOBER 31, 1997 1996 1995 1994 1993**
- -----------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period ...... $12.71 $11.52 $10.54 $11.19 $10.84
------ ------ ------ ------ ------
Income from investment operation# -
Net investment income .................... $ 0.22 $ 0.25 $ 0.25 $ 0.25 $ 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions ........................... 1.62 1.46 0.77 0.13 0.35
------ ------ ------ ------ ------
Total from investment operations ....... $ 1.84 $ 1.71 $ 1.02 $ 0.38 $ 0.41
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income ............... $(0.13) $(0.47) $(0.03) $(0.24) $(0.06)
In excess of net investment income ....... -- (0.04) -- -- --
From net realized gain on investments and
foreign currency transactions .......... (0.60) (0.01) (0.01) (0.32) --
In excess of net realized gain on
investments and foreign currency
transactions ........................... -- -- -- (0.38) --
From paid-in capital ..................... -- -- -- (0.09) --
------ ------ ------ ------ ------
Total distribution declared to
shareholder ........................ $(0.73) $(0.52) $(0.04) $(1.03) $(0.06)
------ ------ ------ ------ ------
Net asset value - end of period ............ $13.82 $12.71 $11.52 $10.54 $11.19
====== ====== ====== ====== ======
TOTAL RETURN ............................... 15.00% 15.29% 9.75% 3.38% 3.79%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ............................... 2.25% 2.34% 2.49% 2.49% 2.77%+
Net investment income .................... 1.70% 2.07% 2.34% 2.33% 2.15%+
PORTFOLIO TURNOVER ......................... 143% 167% 160% 118% 112%
AVERAGE COMMISSION RATE### ................. $0.0277 $0.0187 -- -- --
NET ASSETS AT END OF PERIOD (000 OMITTED) .. $96,931 $71,788 $57,214 $47,677 $ 4,381
- ------------
**For the period from the inception of Class B shares, September 7, 1993, to October 31,
1993.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to October 31, 1993 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.
</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS - CONTINUED

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1997 1996 1995 1994***
- ----------------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period ............. $12.72 $11.52 $10.53 $11.06
------ ------ ------ ------
Income from investment operation# -
Net investment income ........................... $ 0.23 $ 0.26 $ 0.27 $ 0.27
Net realized and unrealized gain (loss) on
investments and foreign currency transactions . 1.61 1.46 0.76 (0.29)
------ ------ ------ ------
Total from investment operations .............. $ 1.84 $ 1.72 $ 1.03 $(0.02)
------ ------ ------ ------

Less distributions declared to shareholders -
From net investment income ...................... $(0.14) $(0.51) $(0.03) $(0.12)
From net realized gain on investments and foreign
currency transactions ......................... (0.60) (0.01) (0.01) (0.16)
In excess of net realized gain on investments and
foreign currency transactions ................. -- -- -- (0.18)
From paid-in capital ............................ -- -- -- (0.05)
------ ------ ------ ------
Total distribution declared to shareholder .. $(0.74) $(0.52) $(0.04) (0.51)
------ ------ ------ ------
Net asset value - end of period ................... $13.82 $12.72 $11.52 $10.53
====== ====== ====== ======
TOTAL RETURN ...................................... 14.97% 15.41% 9.84% (0.15)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ...................................... 2.24% 2.27% 2.42% 2.39%+
Net investment income ........................... 1.71% 2.14% 2.41% 2.51%+
PORTFOLIO TURNOVER ................................ 143% 167% 160% 118%
AVERAGE COMMISSION RATE### ........................ $0.0277 $0.0187 -- --
NET ASSETS AT END OF PERIOD (000 OMITTED) ......... $21,725 $14,248 $10,894 $10,903
- ------------
***For the period from the inception of Class C shares, January 3, 1994, to October 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to October 31, 1993 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.

</TABLE>

<PAGE>

3. THE FUND
The Fund is a non-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 April 30, 1990. The Trust presently
consists of three series, 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 (primarily
equity and debt securities) for its portfolio. Three classes of shares of the
Fund currently are offered for sale to the general public. Class A shares are
offered at net asset value plus an initial sales charge up to a maximum of
4.75% of the offering price (or a CDSC of 1.00% upon redemption during the
first year in the case of purchases of $1 million or more and certain
purchases by retirement plans) and 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 will convert to Class A shares approximately eight
years after purchase. Class C shares are offered at net asset value without an
initial sales charge but are subject to a CDSC of 1.00% upon redemption
during the first year and an annual distribution fee and service fee up to a
maximum of 1.00% per annum. Class C shares do not convert to any other class
of shares of the Fund. In addition, the Fund offers an additional class of
shares, Class I shares, exclusively to certain institutional investors. Class
I shares are made available by means of a separate Prospectus supplement
provided to institutional investors eligible to purchase Class I shares and
are offered at net asset value without an initial sales charge or CDSC upon
redemption and without an annual distribution and service fee.

The 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's investment objective is to seek total
return by investing in securities which will provide above-average current
income (compared to a portfolio invested entirely in equity securities) and
opportunities for long-term growth of capital and income. The Fund will invest
primarily in global equity and fixed income securities (i.e., those of U.S.
and non-U.S. issuers). Any investment involves risk and there can be no
assurance that the Fund will achieve its investment objective.

INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective
through a professionally managed, internationally diversified portfolio
consisting of equity and fixed income securities. The Fund attempts to provide
investors with an opportunity to enhance the value and increase the protection
of their investment against inflation and otherwise by taking advantage of
investment opportunities in the United States as well as in other countries
where opportunities may be more rewarding. It is believed that diversification
of assets on an international basis decreases the degree to which events in
any one country, including the United States, can affect the entire portfolio.
Although the percentage of the Fund's assets invested in securities issued
abroad and denominated or quoted in foreign currencies ("non-dollar
securities") will vary depending on the state of the economies of the various
countries of the world, their financial markets and the relationship of their
currencies to the U.S. dollar, under normal conditions the Fund will be
invested in at least three different countries, one of which will be the
United States. For temporary defensive reasons or during times of
international political or economic uncertainty or turmoil, most or all of the
Fund's investments may be in the United States.

Under normal economic and market conditions, the Fund will invest not less
than 40% and not more than 75% of its assets in equity securities. See
"Certain Securities and Investment Techniques -- Equity Securities" below.
Such securities will include common stocks and equivalents (such as
convertible securities and warrants) and preferred stocks of (i) U.S. issuers
which derive, or have the potential to derive, a meaningful portion
(approximately 25% or more) of their revenues and earnings in foreign markets;
(ii) non-U.S. issuers; and (iii) to a lesser extent, other U.S. issuers. The
Fund may invest up to 90% (and expects generally to invest between 25% to 90%)
of its total assets in foreign securities (not including American Depositary
Receipts), which may be traded on foreign exchanges. See "Certain Securities
and Investment Techniques -- American Depositary Receipts" below.

In managing the Fund conservatively, the Adviser attempts to exercise
prudence, discretion and intelligence in the selection of securities of high
or improving investment quality, with due regard for probable income and
probable safety of capital. The words "high investment quality" reflect the
intention of the Fund to invest in securities of well-known, established
issuers and to avoid the acquisition of speculative securities or those of
doubtful character even if the immediate prospect is tempting. The Adviser may
determine that a security possesses high or improving investment quality if,
for instance, there has been an increase in the issuer's sales and earnings or
if current trends indicate that an increase in the issuer's sales and earnings
is likely, or if the issuer's balance sheet is strong or has improved. The
opportunity for currency appreciation generally is not a significant factor in
the Fund's selection of equity securities.

Under normal economic and market conditions, at least 25% of the Fund's assets
will be invested in fixed income securities, such as bonds, debentures,
mortgage securities, notes, commercial paper, obligations issued or guaranteed
by a government or any of its political subdivisions, agencies or
instrumentalities, certificates of deposit, as well as debt obligations which
may have a call on common stock by means of attached warrants. Debt securities
in which the Fund may invest may also include zero coupon bonds. See "Certain
Securities and Investment Techniques -- Zero Coupon Bonds" below.

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

The Fund will invest in investment grade U.S. and non-U.S. fixed income
securities. Such securities will be rated BBB or better by Standard & Poor's
Ratings Services ("S&P") or Fitch Investors Services, Inc. ("Fitch"), or Baa
or better by Moody's, or if unrated, will be determined by the Adviser to be
of comparable quality. Securities rated BBB or Baa, while normally exhibiting
adequate protection parameters, have speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than in the case of
higher grade fixed income securities.

Assets invested in fixed income securities of non-U.S. issuers will be
diversified among countries where opportunities for total return are expected
to be most attractive. It is currently expected that fixed income investments
within foreign countries will be primarily in securities issued or guaranteed
by governments, including their political subdivisions, authorities, agencies
and instrumentalities, or supranational authorities (such as the World Bank)
to minimize credit risk. While the Fund will invest in fixed income securities
which are believed to have minimal credit risk, an error of judgment in
selecting a currency or an interest rate environment could result in a loss of
capital.

Although it may invest anywhere in the world, the Fund expects to invest most
of its assets in the equity securities of issuers located in Australia,
Canada, Europe, Japan or the United States and in the debt securities of
issuers located in any of such regions or countries or New Zealand. The Fund
may invest more than 25% of its assets in securities of issuers located in the
United States. The Adviser will determine the amount of the Fund's assets to
be invested in the United States and the amount to be invested abroad.

The Fund has registered as a "non-diversified" investment company. As a
result, the Fund is limited as to the percentage of its assets which may be
invested in the securities of any one issuer only by its own investment
restrictions and the diversification requirements imposed by the Internal
Revenue Code of 1986, as amended (the "Code"). U.S. Government securities are
not subject to any investment limitation. Since the Fund may invest a
relatively high percentage of its assets in a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence and to the financial conditions of the issuers in which it invests.

When unfavorable economic or market conditions exist, the Fund may, until
favorable conditions return, invest all or a portion of its assets in cash (or
foreign currency) or cash equivalents (such as certificates of deposit,
bankers' acceptances and time deposits), commercial paper, short-term
obligations, repurchase agreements and obligations issued or guaranteed by the
U.S. or any foreign government or any of their agencies, authorities or
instrumentalities.

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

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.

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

ZERO COUPON BONDS: Zero coupon bonds do not require the periodic payment of
interest and are issued at a significant discount from face value. The
discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash. Such investments will experience greater volatility in
market value than debt obligations with comparable maturities which make
regular payments of interest. The Fund's investment in zero coupon securities
and certain securities purchased at a market discount will cause it 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.

LENDING OF SECURITIES: The Fund may seek to increase its income by lending
portfolio securities. Such loans will usually be made only to member firms
(and subsidiaries thereof) of the New York Stock Exchange (the "Exchange") and
to member banks of the Federal Reserve System, and would be required to be
secured continuously by collateral in cash, U.S. Government securities or an
irrevocable letter of credit maintained on a current basis at an amount at
least equal to the market value of the securities loaned. The Fund will
continue to collect the equivalent of interest on the securities loaned and
will also receive either interest (through investment of cash collateral) or a
fee (if the collateral is U.S. Government securities or a letter of credit).
As with other extensions of credit, there are risks of delay in recovery or
even loss of rights in the collateral should the borrower of the securities
fail financially. However, the loans would be made only to 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.

"WHEN ISSUED" OR "FORWARD DELIVERY" SECURITIES -- The Fund may purchase
securities on a "when-issued" or on a "forward delivery" basis, which means
that the securities will be delivered to the Fund at a future date usually
beyond customary settlement time. The commitment to purchase a security for
which payment will be made on a future date may be deemed a separate security.
The Fund does not pay for the securities until received, and does not start
earning interest on the securities until the contractual settlement date.
While awaiting delivery of securities purchased on such bases, the Fund will
segregate liquid assets sufficient to cover its commitments. Although the Fund
does not intend to make such purchases for speculative purposes and intends to
adhere to the provisions of SEC policies, purchases of securities on such
bases may involve more risk than other types of purchases. For example, the
Fund may have to sell assets which have been set aside in order to meet
redemptions. Also, if the Fund determines it 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.

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

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

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

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

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

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

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

OPTIONS ON FIXED INCOME SECURITIES: The Fund may write (sell) covered put and
call options on fixed income securities and purchase put and call options. The
Fund will write such options for the purpose of increasing its return and/or
to protect the value of its portfolio. The Fund may also write combinations of
put and call options on the same security, known as "straddles." Such
transactions can generate additional premium income but also present increased
risk. The Fund may purchase put or call options in anticipation of declines in
the value of fixed income portfolio securities or increases in the value of
securities to be acquired.

The Fund may also enter into options on the yield "spread," or yield
differential, between two securities, a transaction referred to as a "yield
curve" option, for hedging and non-hedging (an effort to increase current
income) purposes. In contrast to other types of options, a yield curve option
is based on the difference between the yields of designated securities rather
than the actual prices of the individual securities, and is settled through
cash payments. Accordingly, a yield curve option is profitable to the holder
if this differential widens (in the case of a call) or narrows (in the case of
a put), regardless of whether the yields of the underlying securities increase
or decrease. Yield curve options written by the Fund will be covered as
described in the SAI. The trading of yield curve options is subject to all the
risks associated with trading other types of options, as discussed below under
"Additional Risk Factors" and in the SAI. In addition, such options present
risks of loss even if the yield on one of the underlying securities remains
constant, if the spread moves in a direction or to an extent which was not
anticipated.

The Fund may purchase and sell options that are traded on U.S. and foreign
exchanges, and options traded over-the-counter, with broker-dealers who deal
in these options. The ability to terminate over-the-counter options is more
limited than with exchange-traded options and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. The Fund will treat assets used to cover over-the-counter options
as illiquid unless the dealer is a primary dealer in U.S. Government
securities and has given the Fund the unconditional right to close such
options at a formula price, in which event only an amount of the cover
determined with reference to the formula will be considered illiquid. The Fund
may also write over-the-counter options with non-primary dealers, including
foreign dealers, and will treat the assets used to cover these options as
illiquid.

FUTURES CONTRACTS: The Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies or
contracts based on indices of fixed income securities as such instruments
become available for trading ("Futures Contracts"). Such transactions may be
entered into for hedging purposes, in order to protect the Fund's current or
intended investments from the effects of changes in interest or exchange
rates, as well as for non-hedging purposes to the extent permitted by
applicable law. The Fund will incur brokerage fees when it purchases and sells
Futures Contracts, and will be required to maintain margin deposits. In
addition, Futures Contracts entail risks. Although the Adviser believes that
use of such contracts will benefit the Fund, if its investment judgment about
the general direction of interest or exchange rates is incorrect, the Fund's
overall performance may be poorer than if it had not entered into any such
contract and the Fund may realize a loss.

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

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

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

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

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

Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed, or no
investment of cash. As a result, swaps can be highly volatile and may have a
considerable impact on the Fund's performance. Swap agreements are subject to
risks related to the counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness deteriorates. The Fund may also
suffer losses if it is unable to terminate outstanding swap agreements or
reduce its exposure through offsetting transactions.

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

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 Objective, Policies and Restrictions" in
the SAI.

OPTIONS, FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS
AND OPTIONS ON FOREIGN CURRENCIES: Although the Fund will enter into
transactions in Futures Contracts, Options on Futures Contracts and Options
on Foreign Currencies for hedging purposes, and will enter into certain option
transactions and certain Forward Contracts for non-hedging purposes, such
transactions nevertheless involve certain risks. For example, a lack of
correlation between the instrument underlying an option or Futures Contract
and the assets being hedged, or unexpected adverse price movements, could
render the Fund's hedging strategy unsuccessful and could result in losses.
The Fund also may enter into transactions in such instruments for non-hedging
purposes to the extent permitted by applicable law, which involves greater
risk. In particular, such transactions may result in losses for the Fund which
are not offset by gains on other portfolio positions, thereby reducing gross
income. In addition, foreign currency markets may be extremely volatile from
time to time. 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. In addition, the Fund may be required or may elect to receive delivery
of the foreign currencies underlying Forward Contracts or Options on Foreign
Currencies, which may involve certain risks. In such instances, the Fund may
hold the foreign currency when, in the judgment of the Adviser, it would be
beneficial to convert such currency into U.S. dollars at a later date, based
on anticipated changes in the relevant exchange rate. The SAI contains a
description of the nature and trading mechanics of options, Futures Contracts,
Options on Futures Contracts, Forward Contracts and Options on Foreign
Currencies, and includes a discussion of the risks related to transactions
therein.

Transactions in Forward Contracts may be entered into only in the over-the-
counter market. Futures Contracts and Options on Futures Contracts may be
entered into on United States exchanges regulated by the Commodity Futures
Trading Commission and on foreign exchanges. In addition, the fixed income
securities underlying options and Futures Contracts traded by the Fund will
include U.S. Government securities as well as foreign securities.

FOREIGN SECURITIES: Investors should recognize that transactions involving
foreign equity or debt securities or foreign currencies, and transactions
entered into in foreign countries, involve considerations and risks not
typically associated with investing in U.S. markets. Such investments may be
favorably or unfavorably affected by changes in interest rates, currency
exchange rates and exchange control regulations, and costs may be incurred in
connection with conversions between various currencies. Investments in foreign
countries could also be affected by other factors generally not thought to be
present in the United States, including the possibility of heavy taxation,
less publicly available financial and other information, different or lesser
regulatory protection, political or social instability, limitations on the
removal of funds or other assets of the Fund, expropriation of assets,
diplomatic developments adverse to U.S. investments and difficulties in
enforcing contractual obligations. In addition, while the holding of foreign
currencies will permit the Fund to take advantage of favorable movements in
the applicable exchange rate, it also exposes the Fund to risk of loss if such
rates move in a direction adverse to the Fund's position. Such losses could
also adversely affect the Fund's hedging strategies. The Fund will not invest
25% or more of the value of its assets in the securities of any one foreign
government.

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 against 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.

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

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

The portfolio will be managed actively and the asset allocations modified as
the Adviser deems necessary. Although the Fund does not intend to seek short-
term profits, securities in its portfolio will be sold whenever the Adviser
believes it is appropriate to do so without regard to the length of time the
particular asset may have been held. A high turnover rate involves greater
expenses, including higher brokerage and transaction costs, to the Fund. The
Fund engages in portfolio trading if it believes a transaction net of costs
(including custodian charges) will help in achieving its investment objective.
For the fiscal year ended October 31, 1997, 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.

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 charge by the custodian of the Fund's assets).
For a further discussion of portfolio trading, see the SAI.

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

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

7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement dated August 10, 1990 (the "Advisory Agreement"). Under the
Advisory Agreement the Adviser provides the Fund with overall investment
advisory services. Frederick J. Simmons, a Senior Vice President of the
Adviser, has been the Fund's portfolio manager since 1991. Mr. Simmons has
been employed as a portfolio manager by the Adviser since 1971. 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 the sum of
0.65% of the Fund's average daily net assets and 5% of the Fund's gross income
(i.e., income other than gains from the sale of securities, gains from options
and futures transactions, premium income from options written and gains from
foreign exchange transactions) for its then-current fiscal year. This
management fee is greater than the fee paid by most funds.

For the Fund's fiscal year ended October 31, 1997, MFS received fees under the
Advisory Agreement of $2,096,169 (of which $1,608,913 was based on average
daily net assets and $487,256 on gross income), equivalent on an annualized
basis to 0.85% of the Fund's average daily net assets.

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS
Intermediate Income Trust, MFS Charter Income Trust, MFS Special Value Trust,
MFS Institutional Trust, MFS Variable Insurance Trust, MFS/Sun Life Series
Trust and seven variable accounts, each of which is a registered investment
company established by Sun Life Assurance Company of Canada (U.S.). a
subsidiary of Sun Life Assurance Company of Canada, ("Sun Life") in connection
with the sale of various fixed/variable annuity contracts. MFS and its wholly
owned subsidiary, MFS Institutional Advisors, Inc., provide investment advice
to substantial private clients.

MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts
Investors Trust. Net assets under the management of the MFS organization were
approximately $72 billion on behalf of approximately 2.8 million investor
accounts as of January 31, 1998. As of such date, the MFS organization managed
approximately $47.2 billion of assets invested in equity securities and
approximately $20.8 billion of assets invested in fixed income securities.
Approximately $4.2 billion of the assets managed by MFS are invested in
securities of foreign issuers. MFS is a subsidiary of Sun Life of Canada
(U.S.) Financial Services Holdings, Inc., which in turn is an indirect wholly
owned subsidiary of Sun Life Assurance Company of Canada ("Sun Life"). The
Directors of MFS are Jeffrey L. Shames, Arnold D. Scott, John W. Ballen, John
D. McNeil and Donald A. Stewart. Mr. Shames is the Chairman and President and
Mr. Scott is the Secretary and a Senior Executive Vice President of MFS. Mr.
Ballen is an Executive Vice President and Chief Equity Officer of MFS. Messrs.
McNeil and Stewart are the Chairman and President, respectively, of Sun Life.
Sun Life, a mutual life insurance company, is one of the largest international
life insurance companies and has been operating in the United States since
1895, establishing a headquarters office here in 1973. The executive officers
of MFS report to the Chairman of Sun Life.

W. Thomas London, Stephen E. Cavan, James O. Yost, James R. Bordewick, Jr.,
Ellen Moynihan and Mark E. Bradley, all of whom are officers of MFS, are
officers of the Trust.

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

ADMINISTRATOR -- MFS provides the Fund with certain financial, legal,
compliance, shareholder communications and other administrative services
pursuant to a Master Administrative Services Agreement dated March 1, 1997, as
amended. Under this Agreement, the Fund pays MFS an administrative fee of 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 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, B and C shares of the Fund may be purchased at the public offering
price through any dealer. As used in the Prospectus and any appendices
thereto, the term "dealer" includes any broker, dealer, bank (including bank
trust departments), registered investment adviser, financial planner and any
other financial institutions having a selling agreement or other similar
agreement with MFD. Dealers may also charge their customers fees relating to
investments in the Fund.

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

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

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

<TABLE>
<CAPTION>
SALES CHARGE* AS
PERCENTAGE OF:
------------------------------------ DEALER ALLOWANCE
NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OF OFFERING PRICE
- ------------------ -------------- -------- -----------------
<S> <C> <C> <C>
Less than $100,000 ............................. 4.75% 4.99% 4.00%
$100,000 but less than $250,000 ................ 4.00 4.17 3.20
$250,000 but less than $500,000 ................ 2.95 3.04 2.25
$500,000 but less than $1,000,000 .............. 2.20 2.25 1.70
$1,000,000 or more ............................. None** None** See Below**
</TABLE>
- ----------
*Because of rounding in the calculation of offering price, actual sales
charges may be more or less than those calculated using the percentages
above.
**A CDSC will apply to such purchases, as discussed below.

MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 4% and MFD retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending on
the number of shares of the Fund as well as certain other MFS Funds owned or
being purchased, the existence of an agreement to purchase additional shares
during a 13-month period (or 36-month period for purchases of $1 million or
more) or other special purchase programs. A description of the Right of
Accumulation, Letter of Intent and Group Purchase privileges by which the
sales charge may be reduced is set forth in the SAI.

PURCHASES SUBJECT TO A CDSC (but not 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 had demonstrated to the satisfaction of MFD
that either (i) the employer had at least 25 employees or (ii) the
aggregate purchases by the retirement plan of Class A shares of
Funds in the MFS Funds would be in an aggregate amount of at least
$250,000 within a reasonable period of time, as determined by MFD in
its sole discretion;

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

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

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

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

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

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

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

WAIVERS OF INITIAL SALES CHARGE AND CDSC. In certain circumstances, the
initial sales charge imposed upon purchases of Class A shares and the CDSC
imposed upon redemption of Class A shares is waived. These circumstances are
described in Appendix A to this Prospectus. In addition to these
circumstances, the CDSC imposed upon the redemption of Class A shares is
waived with respect to shares held by certain retirement plans qualified under
Section 401(a) or 403(b) of the 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 under ERISA or is liquidated or dissolved; or
(iii) is acquired by, merged into, or consolidated with, any other entity.

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

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

The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividends or capital gain distributions.
See "Redemption 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
Fund's Distribution Plan. As discussed above, such retirement plans are
eligible to purchase Class A shares of the Fund at net asset value without an
initial sales charge but subject to a 1% CDSC if the plan has, at the time of
purchase, a market value of $500,000 or more invested in shares of any class
or classes of the MFS Funds. IN THIS EVENT, THE PLAN OR ITS SPONSORING
ORGANIZATION SHOULD INFORM THE SHAREHOLDER SERVICING AGENT THAT THE PLAN IS
ELIGIBLE TO PURCHASE CLASS A SHARES UNDER THIS CATEGORY; THE SHAREHOLDER
SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO DETERMINE WHETHER SUCH A
PLAN QUALIFIES UNDER THIS CATEGORY FOR THE PURCHASE OF CLASS A SHARES.

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

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

CLASS C SHARES: Class C shares are offered at net asset value without an
initial sales charge but are subject to a CDSC of 1.00% upon redemption during
the first year. Class C shares do not convert to any other class of shares of
the Fund. The maximum investment in Class C shares that may be made is up to
$1,000,000 per transaction.

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

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

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

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

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

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

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

RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. Purchases and exchanges
should be made for investment purposes only. The Fund and MFD each reserve the
right to reject or restrict any specific purchase or exchange request. In the
event that the Fund or MFD rejects an exchange request, neither the redemption
nor the purchase side of the exchange will be processed.

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

As noted above, the Fund and MFD each reserve 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 on the purchase side of an exchange request by market timers or
specifically rejecting or otherwise restricting purchase or exchange requests
by market timers. Other MFS Funds may have different and/or more or less
restrictive policies with respect to market timers than the Fund. These
policies are disclosed in the prospectuses of these other MFS Funds.

DEALER CONCESSIONS. Dealers may receive different compensation with
respect to sales of Class A, Class B and Class C shares. In addition, from
time to time, MFD may pay dealers 100% of the applicable sales charge on sales
of Class A shares of certain specified MFS Funds sold by such dealer during a
specified sales period. In addition, MFD or its affiliates may, from time to
time, pay dealers an additional commission equal to 0.50% of the net asset
value of all of the Class B and/or Class C shares of certain specified MFS
Funds sold by such dealer during a specified sales period. In addition, from
time to time, MFD, at its expense, may provide additional commissions,
compensation or promotional incentives ("concessions") to dealers which sell
or arrange for the sale of shares of the Fund. Such concessions provided by
MFD may include financial assistance to dealers in connection with preapproved
conferences or seminars, sales or training programs for invited registered
representatives and other employees, payment for travel expenses, including
lodging, incurred by registered representatives and other employees for such
seminars or training programs, seminars for the public, advertising and sales
campaigns regarding one or more MFS Funds, and/or other dealer-sponsored
events. From time to time, MFD may make expense reimbursements for special
training of a dealer's registered representatives and other employees in group
meetings or to help pay the expenses of sales contests. Other concessions may
be offered to the extent not prohibited by state laws or any self-regulatory
agency, such as the NASD.

SPECIAL INVESTMENT PROGRAMS. For shareholders who elect to participate in
certain investment programs (e.g., the Automatic Investment Plan) or other
shareholder services, MFD or its affiliates may either (i) give a gift of
nominal value, such as a hand-held calculator, or (ii) make a nominal
charitable contribution on their behalf.

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

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

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

EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e.,
an established account) may be exchanged for shares of the same class of any
of the other MFS Funds at net asset value (if available for sale).Shares of
one class may not be exchanged for shares of any other class.

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

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

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

GENERAL: A shareholder should read the prospectus of the other MFS Fund into
which an exchange is made and consider the differences in objectives, policies
and restrictions before making any exchange. Exchanges will be made only after
instructions in writing or by telephone (an "Exchange Request") are received
for an established account by the Shareholder Servicing Agent in proper form
(i.e., if in writing -- signed by the record owner(s) exactly as the shares
are registered; if by telephone -- proper account identification is given by
the dealer or shareholder of record) and each exchange must involve either
shares having an aggregate value of at least $1,000 ($50 in the case of
retirement plan participants whose sponsoring organizations subscribe to the
MFS FUNDamental 401(k) Plan or another similar 401(k) recordkeeping system
made available by the Shareholder Servicing Agent) or all the shares in the
account. If an Exchange Request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange
(generally, 4:00 p.m., Eastern time), 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.

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. See "Tax Status" below.

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 liable for any losses resulting
from unauthorized telephone transactions if it follows reasonable procedures
designed to verify the identity of the caller. The Shareholder Servicing Agent
will request personal or other information from the caller, and will normally
also record calls. Shareholders should verify the accuracy of confirmation
statements immediately after their receipt.

REPURCHASE THROUGH A DEALER: If a shareholder desires to sell his shares
through his dealer (a repurchase), the shareholder can place a repurchase
order with his dealer, who may charge the shareholder a fee. IF THE DEALER
RECEIVES THE SHAREHOLDER'S ORDER PRIOR TO THE CLOSE OF REGULAR TRADING ON THE
EXCHANGE AND COMMUNICATES IT TO MFD BEFORE THE CLOSE OF BUSINESS ON THE SAME
DAY, THE SHAREHOLDER WILL RECEIVE THE NET ASSET VALUE CALCULATED ON THAT DAY,
REDUCED BY THE AMOUNT OF ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX
REQUIRED TO BE WITHHELD.

CONTINGENT DEFERRED SALES CHARGE: Investments in Class A, Class B and Class C
shares ("Direct Purchases") will be subject to a CDSC for a period of: (i)
with respect to Class A and Class C shares, 12 months, (however, the CDSC on
Class A shares is only imposed with respect to purchases of $1 million or more
of Class A shares or purchases by certain retirement plans of Class A shares);
or (ii) with respect to Class B shares, six years. Purchases of Class A
shares made during a calendar month, regardless of when during the month the
investment occurred, will age one month on the last day of the month and each
subsequent month. Class C and Class B shares purchased on or after January 1,
1993 will be aggregated on a calendar month basis -- all transactions made
during a calendar month, regardless of when during the month they have
occurred, will age one year at the close of business on the last day of such
month in the following calendar year and each subsequent year. For Class B
shares of the Fund purchased prior to January 1, 1993, transactions will be
aggregated on a calendar year basis -- all transactions made during a calendar
year, regardless of when during the year they have occurred, will age one year
at the close of business on December 31 of that year and each subsequent year.

At the time of a redemption, the amount by which the value of a shareholder's
account for a particular class of shares represented by Direct Purchases
exceeds the sum of the six calendar year aggregations (12 months in the case
of purchases of Class C shares and of purchases of $1 million or more of Class
A shares or purchases by certain retirement plans of Class A shares) of Direct
Purchases may be redeemed without charge ("Free Amount"). Moreover, no CDSC is
ever assessed on additional shares acquired through the automatic reinvestment
of dividends or capital gain distributions ("Reinvested Shares"). Therefore,
at the time of redemption of a particular class, (i) any Free Amount is not
subject to the CDSC and (ii) the amount of the redemption equal to the then-
current value of Reinvested Shares is not subject to the CDSC, but (iii) any
amount of the redemption in excess of the aggregate of the then-current value
of Reinvested Shares and the Free Amount is subject to a CDSC. The CDSC will
first be applied against the amount of Direct Purchases which will result in
any such charge being imposed at the lowest possible rate. The CDSC to be
imposed upon redemptions of shares will be calculated as set forth in
"Purchases" above.

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

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

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

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

IN-KIND DISTRIBUTIONS. The Trust agrees to redeem shares of the Fund
solely in cash up to the lesser of $250,000 or 1% of the net asset value of
the Fund during any 90-day period for any one shareholder. The Fund has
reserved the right to pay other redemptions, either totally or partially, by a
distribution in-kind of securities (instead of cash) from the Fund's
portfolio. The securities distributed in such a distribution would be valued
at the same amount as that assigned to them in calculating the net asset value
for the shares being sold. If a shareholder received a distribution in-kind,
the shareholder could incur brokerage or transaction charges when converting
the securities to cash.

INVOLUNTARY REDEMPTIONS/SMALL ACCOUNTS. Due to the relatively high cost of
maintaining small accounts, the Fund reserves the right to redeem shares in
any account for their then-current value if at any time the total investment
in such account drops below $500 because of redemptions or exchanges, except
in the case of accounts being established for monthly automatic investments
and certain payroll savings programs, Automatic Exchange Plan accounts and
tax-deferred retirement plans, for which there is a lower minimum investment
requirement. See "Purchases -- General -- Minimum Investment." Shareholders
will be notified that the value of their account is less than the minimum
investment requirement and allowed 60 days to make an additional investment
before the redemption is processed.

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

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

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

SERVICE FEES. The Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to the
class of shares to which the Distribution Plan relates (i.e., Class A, Class B
or Class C shares, as appropriate) (the "Designated Class") annually in order
that MFD may pay expenses on behalf of the Fund relating to the servicing of
shares of the Designated Class. The service fee is used by MFD to compensate
dealers which enter into a sales agreement with MFD in consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to shares of the Designated Class owned by investors for whom
such dealer is the dealer or holder of record. MFD may from time to time
reduce the amount of the service fees paid for shares sold prior to a certain
date. Service fees may be reduced for a dealer that is the holder or dealer of
record for an investor who owns shares of the Fund having an aggregate net
asset value at or above a certain dollar level. Dealers may from time to time
be required to meet certain criteria in order to receive service fees. MFD or
its affiliates are entitled to retain all service fees payable under the
Distribution Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for
personal services and/or account maintenance services performed by MFD or its
affiliates to shareholder accounts.

DISTRIBUTION FEES. The Distribution Plan provides that the Fund may pay
MFD a distribution fee based on the average daily net assets attributable to
the Designated Class as partial consideration for distribution services
performed and expenses incurred in the performance of MFD's obligations under
its distribution agreement with the Fund. See "Management of the Fund --
Distributor" in the SAI. The amount of the distribution fee paid by the Fund
with respect to each class differs under the Distribution Plan, as does the
use by MFD of such distribution fees. Such amounts and uses are described
below in the discussion of the provisions of the Distribution Plan relating to
each class of shares. 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 in 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 with an initial sales
charge, a substantial portion of which is paid to or retained by the dealer
making the sale (and the remainder of which is paid to MFD). See "Purchases
- -- Class A Shares" above. In addition to the initial sales charge, the dealer
also generally receives the ongoing 0.25% per annum service fee, as discussed
above.

The distribution fee paid to MFD under the Distribution Plan is equal, on an
annual basis, to 0.10% of the Fund's average daily net assets attributable to
Class A shares. As noted above, MFD may use the distribution fee to cover
distribution-related expenses incurred by it under its distribution agreement
with the Fund, including commissions to dealers and payments to wholesalers
employed by MFD (e.g., MFD pays commission to dealers with respect to
purchases of $1 million or more and purchases by certain retirement plans of
Class A shares which are sold at net asset value but which are subject to a 1%
CDSC for one year after purchase). See "Purchases -- Class A Shares" above.
In addition, to the extent that the aggregate service and distribution fees
paid under the Distribution Plan do not exceed 0.35% per annum of the average
daily net assets of the Fund attributable to Class A shares, the Fund is
permitted to pay such distribution-related expenses or other distribution-
related expenses.

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

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

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

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

CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES: The Fund's Class A, Class B
and Class C distribution and service fees for its current fiscal year are
0.35%, 1.00% and 1.00% per annum, respectively.

DISTRIBUTIONS
The Fund intends to pay substantially all of its net investment income to its
shareholders as dividends on a semi-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 and Class C shares because expenses attributable to Class B and Class C
shares generally will be higher.

TAX STATUS
The Fund is treated as an entity separate from the other series of the Trust
for federal income tax purposes. In order to minimize the taxes the Fund would
otherwise be required to pay, the Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Code. Because the
Fund intends to distribute all of its net investment income and net realized
capital gains to its shareholders in accordance with the timing requirements
imposed by the Code, it is not expected that the Fund will be required to pay
any federal income or excise taxes, although the Fund's foreign-source income
may be subject to foreign withholding taxes.

Shareholders of the Fund normally will have to pay federal income taxes (and
any state or local taxes) on the dividends and capital gain distributions they
receive from the Fund, whether paid in cash or reinvested in additional
shares. 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
Fund shareholder will be sent a statement setting forth the federal income tax
status of all dividends and distributions for that year, including the portion
taxable as ordinary income, the portion taxable as long-term capital gain (as
well as the rate category or categories under which such gain is taxable), the
portion, if any, representing a return of capital (which is generally free of
current taxes but which results in a basis reduction), and the amount, if any,
of federal income tax withheld. In certain circumstances, the Fund may also
elect to "pass through" to shareholders foreign income taxes paid by the Fund.
Under those circumstances, the Fund will notify shareholders of their pro rata
portion of the foreign income taxes paid by the Fund; shareholders may be
eligible for foreign tax credits or deductions with respect to those taxes,
but will be required to treat the amount of the taxes as an amount distributed
to them and thus includable in their gross income for federal income tax
purposes.

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

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

NET ASSET VALUE
The net asset value per share of each class of shares of the Fund is
determined each day during which the Exchange is open for trading. This
determination is made once each day as of the close of regular trading on the
Exchange by deducting the amount of the liabilities attributable to the class
from the value of the assets attributable to the class and dividing the
difference by the number of shares of the class outstanding. Assets in the
portfolio are valued on the basis of their market 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 three classes of shares which
it offers to the general public, entitled Class A, Class B and Class C Shares
of Beneficial Interest (without par value). The Fund also has a class of
shares which it offers exclusively to certain institutional investors,
entitled Class I shares. The Trust has reserved the right to create and issue
additional classes and series of shares, in which case each class of shares of
a series would participate equally in the earnings, dividends and assets
attributable to that class of 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 or selection of Trustees and 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.

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

PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, current distribution rate and
total rate of return quotations for each class of shares and may also quote
fund rankings in the relevant fund category from various sources, such as the
Lipper Analytical Securities Corporation, Morningstar, Inc. and Wiesenberger
Investment Companies Service. Yield quotations are based on the annualized net
investment income per class share over a 30-day period stated as a percent of
the maximum public offering price on the last day of that period. Yield
calculations for Class B and Class C shares assume no CDSC is paid. The
current distribution rate for each class is generally based upon the total
amount of dividends per share paid by the Fund to shareholders of that class
during the past 12 months and is computed by dividing the amount of such
dividends by the maximum public offering price of that class at the end of
such period. Current distribution rate calculations for Class B and Class C
shares assume no CDSC is paid. The current distribution rate differs from the
yield calculation because it may include distributions to shareholders from
sources other than dividends and interest, such as premium income from option
writing, short-term capital gains, and return of invested capital, and is
calculated over a different period of time. Total rate of return quotations
will reflect the average annual percentage change over stated periods in the
value of an investment in each class of shares of the Fund made at the maximum
public offering price of shares of that class and with all distributions
reinvested and which will give effect to the imposition of any applicable CDSC
assessed upon redemptions of the Fund's Class B and Class C shares. Such total
rate of return quotations may be accompanied by quotations which do not
reflect the reduction in value of the initial investment due to the sales
charge or the deduction of a CDSC, and which will thus be higher. The Fund
offers multiple classes of shares which were initially offered for sale to,
and purchased by, the public on different dates (the class "inception date").
The calculation of total rate of return for a class of shares which has a
later class inception date than another class of shares of the Fund is based
both on (i) the performance of the Fund's newer class from its inception date
and (ii) the performance of the Fund's oldest class from its inception date up
to the class inception date of the newer class. See the SAI for further
information on the calculation of total rate of return for share classes with
different class inception dates.

All performance quotations are based on historical performance and are not
intended to indicate future performance. Yields reflects only net portfolio
income as of a stated period of time and current distribution rate reflects
only the rate of distributions paid by the Fund over a stated period of time,
while total rate of return reflects all components of investment return over a
stated period of time. The Fund's quotations may from time to time be used in
advertisements, shareholder reports or other communications to shareholders.
For a discussion of the manner in which the Fund will calculate its yield,
current distribution rate and total rate of return, see the SAI. For further
information about the Fund's performance for the fiscal year ended October 31,
1997, 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 distributions for that year,
including whether any portion represents a return of capital (see "Tax Status"
above).

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; long-term distributions reinvested in additional
shares;

-- Dividends and capital gain distributions in cash.

Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the record date. Dividends and capital gain
distributions in amounts less than $10 will automatically be reinvested in
additional shares of the Fund. If a shareholder has elected to receive
dividends and/or capital gain distributions in cash and the postal or other
delivery service is unable to deliver checks to the shareholder's address of
record, or the shareholder does not respond to mailings from the Shareholder
Servicing Agent with regard to uncashed distribution checks, such
shareholder's distribution option will automatically be converted to having
all dividends and other distributions reinvested in additional shares. Any
request to change a distribution option must be received by the Shareholder
Servicing Agent by the record date for a dividend or distribution in order to
be effective for that dividend or distribution. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.

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

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

RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together
with the current offering price value of all holdings of Classes 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 (and without any applicble
CDSC) in shares of the same class of another MFS Fund, if shares of such Fund
are available for sale.

DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account on any day of the month. If the
Shareholder does not specify a date, the investment will automatically occur
on the first business day of the month. Required forms are available from the
Shareholder Servicing Agent or investment dealers.

AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may participate in the Automatic Exchange Plan. The
Automatic Exchange Plan provides for automatic exchanges of funds from the
shareholder's account in an MFS Fund for investment in the same class of 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 from 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
assessment of the CDSC for certain share redemptions in the case of Class A
and Class B shares.

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

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

The Fund's SAI, dated March 1, 1998, contains more detailed information about
the Trust and the Fund, including, but not limited to, information related to
(i) the 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 CDSC
for Class A shares is waived (Section II), and the CDSC for Class B and Class
C shares is 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
institutions having a selling agreement with MFS Fund Distributors, Inc.
("MFD").

I. WAIVERS OF ALL APPLICABLE SALES CHARGES

In the following circumstances, the initial sales charge imposed on
purchases of Class A shares and the CDSC imposed on certain redemptions of
Class A shares and on redemptions of Class B and Class C shares, as
applicable, 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 MFS Fund 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 or any of their subsidiary
companies;

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

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

o Employees or registered representatives of dealers;

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

o Institutional Clients of MFS or MFS Institutional Advisors, Inc.

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 Plan participant;

o Loan from 401(a) Plan or ESP Plan;

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

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

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

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 Plan participant.

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

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

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

7. LOAN REPAYMENTS

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

II. WAIVERS OF CLASS A SALES CHARGES

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

1. WRAP ACCOUNT AND FUND "SUPERMARKET" INVESTMENTS

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

2. INVESTMENT BY INSURANCE COMPANY SEPARATE ACCOUNTS

o Shares acquired by insurance company separate accounts.

3. RETIREMENT PLANS

ADMINISTRATIVE SERVICES ARRANGEMENTS

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

REINVESTMENT OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS

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

Shares redeemed on account of distributions made under the following
circumstances:

IRA'S

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

o Tax-free returns of excess IRA contributions.

401(a) PLANS

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

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

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

5. BANK TRUST DEPARTMENTS AND LAW FIRMS

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

III. WAIVERS OF CLASS B AND CLASS C SALES CHARGES

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

1. SYSTEMATIC WITHDRAWAL PLAN

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

2. DEATH OF OWNER

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

3. DISABILITY OF OWNER

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
<PAGE>
------------
[LOGO] M F S(SM) BULK RATE
INVESTMENT MANAGEMENT U.S. POSTAGE
We invented the mutual fund(SM) PAID
MFS
------------

MFS(R) WORLD TOTAL RETURN FUND
500 Boylston Street, Boston, MA 02116-3741

This is your fund's current prospectus.
Please keep it with your financial records
because it provides important information
about your investment.

MWT-1-3/98/177M 24/224/334

<PAGE>

[LOGO] M F S(SM)
INVESTMENT MANAGEMENT

MFS(R) WORLD STATEMENT OF
TOTAL RETURN FUND ADDITIONAL INFORMATION
(A member of the MFS Family of Funds(R) March 1, 1998
- --------------------------------------------------------------------------------
Page
---
1. Definitions .......................................................... 2
2. Investment Objective, Policies and Restrictions ...................... 2
Certain Securities and Investment Techniques ...................... 2
3. Management of the Fund ............................................... 11
Trustees .......................................................... 11
Officers .......................................................... 11
Trustee Compensation Table ........................................ 12
Investment Adviser ................................................ 12
Administrator ..................................................... 13
Custodian ......................................................... 13
Shareholder Servicing Agent ....................................... 13
Distributor ....................................................... 13
4. Portfolio Transactions and Brokerage Commissions ..................... 14
5. Shareholder Services ................................................. 15
Investment and Withdrawal Programs ................................ 15
Exchange Privilege ................................................ 17
Tax-Deferred Retirement Plans ..................................... 18
6. Tax Status ........................................................... 18
7. Determination of Net Asset Value and Performance ..................... 19
8. Distribution Plan .................................................... 22
9. Description of Shares, Voting Rights and Liabilities ................. 22
10. Independent Auditors and Financial Statements ........................ 23
Appendix A ........................................................... A-1
Appendix B ........................................................... B-1

MFS WORLD TOTAL RETURN FUND
A Series of MFS Series Trust VI
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 March 1, 1998. This SAI should be read in conjunction with the
Prospectus, a copy of which may be obtained without charge by contacting the
Shareholder Servicing Agent (see 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(R) World Total Return Fund, a
non-diversified series of MFS Series Trust VI (the
"Trust"), a Massachusetts business trust, formerly
known as MFS Worldwide Total Return Fund until
June 29, 1993. Prior to August 3, 1992, the Trust
was known as MFS Worldwide Total Return Trust.

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

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

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

2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE. The Fund's investment objective is to seek total return
by investing in securities which will provide above-average current income
(compared to a portfolio invested entirely in equity securities) and
opportunities for long-term growth of capital and income. The Fund will invest
primarily in global equity and fixed income securities (i.e., those of U.S.
and non-U.S. issuers). Any investment involves risk and there can be no
assurance that the Fund will achieve its investment objective.

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

CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

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

RISKS OF INVESTING IN LOWER RATED SECURITIES: The Fund may invest in fixed
income securities rated Baa by Moody's Investors Service, Inc. ("Moody's") or
BBB by Standard & Poor's Ratings Group ("S&P") or by Fitch Investors Service,
Inc. ("Fitch"), and comparable unrated securities. These securities, while
normally exhibiting adequate protection parameters, have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher grade fixed income securities. See
Appendix A for a description of ratings.

Such securities are considered speculative and may be questionable as to
principal and interest payments. The Fund may have difficulty disposing of
such securities because there may be a thin trading market for them. Because
not all dealers maintain markets in all lower-rated convertible securities,
there is no established retail secondary market for many of these securities
and the Fund anticipates that such securities could only be sold to a limited
number of dealers or institutional investors. To the extent a secondary market
for these securities does exist, it is generally not as liquid as the
secondary market for higher-rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and the Fund's ability to
dispose of a particular security when necessary to meet the Fund's liquidty
needs or in response to a specific event like the deterioration of the
issuer's creditworthiness. The lack of a liquid secondary market for some
lower-rated convertible securities may make it more difficult for the Fund to
obtain accurate market quotations for the purpose of valuing such securities.
Market quotations are generally only available from a limited number of
dealers and may not necessarily represent firm bids of such dealers or prices
for actual sales. The market value of lower-rated convertible securities tends
to reflect individual corporate developments to a greater extent than higher-
rated securities, which react primarily to the general level of interest
rates. Such lower-rated securities also tend to be more sensitive to economic
conditions than are higher-rated securities.

NON-DOLLAR FIXED INCOME SECURITIES: The Fund will purchase non-dollar fixed
income securities denominated in the currency of countries where the interest
rate environment as well as the general economic climate provide an
opportunity for declining interest rates and currency appreciation. If
interest rates decline, such non-dollar fixed income securities will
appreciate in value. If the currency also appreciates against the dollar, the
total investment in such non-dollar fixed income securities would be enhanced
further. (For example, if United Kingdom bonds yield 14% during a year when
interest rates decline causing the bonds to appreciate by 5% and the pound
rises 3% versus the dollar, then the annual total return of such bonds would
be 22%. This example is illustrative only.) Conversely, a rise in interest
rates or decline in currency exchange rates would adversely affect the Fund's
return.

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

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

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

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

"WHEN-ISSUED" SECURITIES: When the Fund commits to purchase a security on a
"when-issued" or "forward delivery" basis, it will set up procedures
consistent with the General Statement of Policy of the Securities and Exchange
Commission (the "SEC") concerning such purchases. Since that policy currently
recommends that an amount of the Fund's assets equal to the amount of the
purchase be held aside or segregated to be used to pay for the commitment, the
Fund will always have liquid assets sufficient to cover any commitments or to
limit any potential risk. However, although the Fund does not intend to make
such purchases for speculative purposes and intends to adhere to the
provisions of the SEC policy, purchases of securities on such bases may
involve more risk than other types of purchases. For example, the Fund may
have to sell assets which have been set aside in order to meet redemptions.
Also, if the Fund determines it 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. The Fund does not intend to invest more than 5% of the value of its
total assets in such securities.

SECURITIES LENDING: The Fund may seek to increase its income by lending fixed
income portfolio securities. Such loans will usually be made only to member
banks of the Federal Reserve System and to member firms (or subsidiaries
thereof) of 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 also receive a fee from the
borrower. The Fund would receive compensation based on investment of cash
collateral, less a fee paid to the borrower, if the collateral is in the form
of cash. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material
matter affecting the investment. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would be made
only to firms deemed by MFS to be of good standing, and when, in the judgment
of MFS, the consideration which could be earned currently from securities
loans of this type justifies the attendant risk. If MFS determines to make
securities loans, it is not intended that the value of the securities loaned
would exceed 30% of the value of the Fund's total assets.

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

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

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

The FHLMC is also a government-sponsored corporation owned by private
stockholders. The FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages (i.e., not federally insured or
guaranteed) from the FHLMC's national portfolio. The FHLMC guarantees timely
payment of interest and ultimate collection of principal regardless of the
status of the underlying mortgage loans.

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

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.

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
instrument in such a security.

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

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 positively or negatively indexed;
that is, their maturity value may increase when the specified currency value
increases, resulting in a security that performs similarly to a foreign-
denominated instrument, or their maturity value may decline when foreign
currencies increase, resulting in a security whose price characteristics are
similar to a put on the underlying currency. Currency-indexed securities may
also have prices that depend on the values of a number of different foreign
currencies relative to each other.

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

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

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

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

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

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

The Fund may also purchase put and call options. Put options are purchased to
hedge against a decline in the value of securities held in the Fund's
portfolio. If such a decline occurs, the put options will permit the Fund to
sell the securities underlying such options at the exercise price, or to close
out the options at a profit. The Fund will purchase call options to hedge
against an increase in the price of securities that the Fund anticipates
purchasing in the future. If such an increase occurs, the call option will
permit the Fund to purchase the securities underlying such option at the
exercise price or to close out the option at a profit. The premium paid for a
call or put option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the price of the
underlying security rises or declines sufficiently, the option may expire
worthless to the Fund. In addition, in the event that the price of the
security in connection with which an option was purchased moves in a direction
favorable to the Fund, the benefits realized by the Fund as a result of such
favorable movement will be reduced by the amount of the premium paid for the
option and related transaction costs.

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

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

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

FUTURES CONTRACTS: The Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies or
contracts based on indexes of fixed income securities as such instruments
become available for trading ("Futures Contracts"). This investment technique
is designed to hedge (i.e., to protect) against anticipated future changes in
interest or exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of long-term
bonds or other securities which the Fund intends to purchase at a later date.
A "sale" of a Futures Contract means a contractual obligation to deliver the
securities or foreign currency called for by the contract at a fixed price at
a specified time in the future. A "purchase" of a Futures Contract means a
contractual obligation to acquire the securities or foreign currency at a
fixed price at a specified time in the future. The Fund may also enter into
such transactions for non-hedging purposes, to the extent permitted by
applicable law, which involves greater risk.

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

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

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

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

A Futures Contract on an index of fixed income securities provides for the
making and acceptance of a cash settlement based on changes in value of the
underlying index. The index underlying such a Futures Contract will generally
be a broad based index of fixed income securities designed to reflect
movements in the relevant market as a whole.

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

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

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
liquid assets representing the difference are segregated by the Fund. 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 is less than the exercise price of the put written if
liquid assets representing the difference are segregated by the Fund. Put and
call Options on 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. An Option on a
Futures Contract is traded on the same contract market as the underlying
Futures Contact, subject to regulation by the Commodity Futures Trading
Commission ("CFTC") and the performance guarantee of the exchange clearing
house. Options on Futures Contracts, as noted in the Prospectus, are also
traded on foreign exchanges.

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

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

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

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

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

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

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

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

The correlation between prices of fixed income securities and prices of
options, Futures Contracts or Forward Contracts may be distorted due to
differences in the nature of the markets, such as differences in margin
requirements, the liquidity of such markets and the participation of
speculators in the option, Futures Contract and Forward Contract markets. Due
to the possibility of distortion, a correct forecast of general interest rate
trends by the Adviser may still not result in a successful transaction. The
trading of Options on Futures Contracts also entails the risk that changes in
the value of the underlying Futures Contract will not be fully reflected in
the value of the option. The risk of imperfect correlation, however, generally
tends to diminish as the maturity or termination date of the option, Futures
Contract or Forward Contract approaches.

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

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

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

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

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

ADDITIONAL RISKS OF TRANSACTIONS RELATED TO FOREIGN CURRENCIES AND
TRANSACTIONS NOT CONDUCTED ON UNITED STATES EXCHANGES -- The available
information on which the Fund will make trading decisions concerning
transactions related to foreign currencies or foreign securities may not be as
complete as the comparable data on which the Fund makes investment and trading
decisions in connection with other transactions. Moreover, because the foreign
currency market is a global, 24-hour market, and the markets for foreign
securities as well as markets in foreign countries may be operating during
non-business hours in the United States, events could occur in such markets
which would not be reflected until the following day, thereby rendering it
more difficult for the Fund to respond in a timely manner.

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

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

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

As a result of its investments in foreign securities, the Fund may receive
interest or dividend payments, or the proceeds of the sale or redemption of
such securities, in foreign currencies. The Fund may also be required to
receive delivery of the foreign currencies underlying Options on Foreign
Currencies or Forward Contracts it has entered into. This could occur, for
example, if an option written by the Fund is exercised or the Fund is unable
to close out a Forward Contract it has entered into. In addition, the Fund may
elect to take delivery of such currencies. Under such circumstances, the Fund
may promptly convert the foreign currencies into dollars at the then current
exchange rate. Alternatively, the Fund may hold such currencies for an
indefinite period of time if the Adviser believes that the exchange rate at
the time of delivery is unfavorable or if, for any other reason, the Adviser
anticipates favorable movements in such rates.

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

ADDITIONAL POLICIES ON THE USE OF OPTIONS AND FUTURES: In order to assure that
the Fund will not be deemed to be a "commodity pool" for purposes of the
Commodity Exchange Act, regulations of the CFTC require that the Fund enter
into transactions in Futures Contracts, Options on Futures Contracts and
Options on Foreign Currencies traded on a CFTC-regulated exchange only (i) for
bona fide hedging purposes (as defined in CFTC regulations), or (ii) for non-
bona fide hedging purposes, provided that the aggregate initial margin and
premiums required to establish such non-bona fide positions does not exceed 5%
of the liquidation value of the Fund's assets after taking into account
unrealized profits and unrealized losses on any such contracts the Fund has
entered into, and excluding, in computing such 5%, the in-the-money amount
with respect to an option that is in-the-money at the time of purchase.

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

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

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 at which holders of more
than 50% of the outstanding shares of the Trust or a series or class, as
applicable, are represented in person or by proxy):

The Fund may not:

(1) Borrow amounts in excess of 10% of its gross assets, and then only
as a temporary measure for extraordinary or emergency purposes, or pledge,
mortgage or hypothecate its assets (taken at market value) to an extent
greater than 33 1/3% of its gross assets, in each case taken at the lower
of cost or market value and subject to a 300% asset coverage requirement
(for the purpose of this restriction, collateral arrangements with respect
to options, Futures Contracts, Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies and payments of initial and
variation margin in connection therewith are not considered a pledge of
assets). While such borrowings exceed 5% of the Fund's gross assets, no
securities may be purchased; however, the Fund may complete the purchase
of securities already contracted for;

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

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

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

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

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

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

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

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

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

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

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

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

In addition, the Fund will not invest in illiquid investments, including
securities subject to legal or contractual restrictions on resale or for which
there is no readily available market (e.g., trading in the security is
suspended, or, in the case of unlisted securities, where no market exists) if
more than 15% of the Fund's assets (taken at market value) would be invested
in such securities. Repurchase agreements maturing in more than seven days
will be deemed to be illiquid for purposes of the Fund's limitation on
investment in illiquid securities. Securities that are not registered under
the Securities Act of 1933, as amended, and sold in reliance on Rule 144A
thereunder, but are determined to be liquid by the Trust's Board of Trustees
(or its delegee), will not be subject to this 15% limitation.

According to certain state securities commissions, the term "illiquid
investments" includes all foreign equity securities that are not listed on a
recognized foreign or U.S. stock exchange. Except with respect to Investment
Restriction (1) and the Fund's policy on investing in illiquid securities,
these investment restrictions are adhered to at the time of purchase or
utilization of assets; a subsequent change in circumstances will not be
considered to result in a violation of policy. As a non-fundamental policy,
repurchase agreements maturing in more than seven days will be deemed to be
illiquid for purposes of the Fund's limitation on investment in illiquid
securities. During the coming year, less than 5% of the Fund's assets will be
used to engage in short sales permitted by Investment Restriction (12). In
addition, purchases of warrants will not exceed 5% of the Fund's net assets.
Included within that amount, but not exceeding 2% of the Fund's net assets,
may be warrants not listed on the New York or American Stock Exchange.

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

TRUSTEES

RICHARD B. BAILEY* (born 9/14/26)
Private Investor; Massachusetts Financial Services Company, former Chairman
(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; Colonial Insurance Company
Ltd., Chairman; The Bank of N.T. Butterfield & Son Ltd., Chairman (prior to
November 1997)
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 8/18/26)
Benchmark Advisors, Inc. (corporate financial consultants), President and
Treasurer; Benchmark Consulting Group, Inc. (office services), President;
Landmark Funds (mutual funds), Trustee
Address: 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, Chairman, Chief Executive Officer
and President

J. DALE SHERRATT (born 9/23/38)
Insight Resources, Inc. (acquisition planning specialists), President
Address: One Liberty Square, 10th Floor, Boston, Massachusetts

WARD SMITH (born 9/13/30)
NACCO Industries (holding company), Chairman (prior to June, 1994); Sundstrand
Corporation (diversified mechanical manufacturer), Director; Society
Corporation (bank holding company), Director (prior to April, 1992); Society
National Bank (commercial bank), Director (prior to April, 1992)
Address: 36080 Shaker Blvd., Hunting Valley, Ohio

OFFICERS

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

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

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

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

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

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

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

Each Trustee and officer holds comparable positions with certain affiliates of
MFS or with certain other funds of which MFS or a subsidiary is the investment
adviser or distributor. Messrs. Shames and Scott, Directors of MFD, and Mr.
Cavan, the Secretary of MFD, hold similar positions with certain other MFS
affiliates.

The Fund pays the 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 72
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 72
and receive reduced payments if he has completed at least five years of
service. Under the plan, a Trustee (or his beneficiaries) will also receive
benefits for a period of time in the event the Trustee is disabled or dies.
These benefits will also be based on the Trustee's average annual compensation
and length of service. There is no retirement plan provided by the Trust for
Messrs. Scott and Shames. The Fund will accrue its allocable share of
compensation expenses each year to cover current year's service and amortize
past service cost.

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

TRUSTEE COMPENSATION TABLE

<TABLE>
<CAPTION>
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......... $3,725 $ 685 8 $283,647
Marshall N. Cohan ........ 4,175 850 8 148,067
Dr. Lawrence Cohn ........ 3,500 1,490 22 123,917
Sir J. David Gibbons ..... 3,725 745 8 129,842
Abby M. O'Neill .......... 3,725 670 9 129,842
Walter E. Robb, III ...... 4,175 850 8 148,067
Arnold D. Scott .......... 0 0 N/A 0
Jeffrey L. Shames ........ 0 0 N/A 0
J. Dale Sherratt ......... 5,300 1,700 24 184,067
Ward Smith ............... 5,300 850 12 184,067
</TABLE>

(1) For fiscal year ended October 31, 1997.
(2) Based on normal retirement age of 75. See the table below for the
estimated annual benefits payable upon retirement by the Fund to a Trustee
based on his or her estimated credited years of service.
(3) For calendar year 1997. All Trustees receiving compensation served as
Trustees of 42 funds within the MFS fund complex (having aggregate net
assets at December 31, 1997, of approximately $18.9 billion) except Mr.
Bailey, who served as Trustee of 69 funds within the MFS fund complex
(having aggregate net assets at December 31, 1997, of approximately $47.8
billion).

ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND UPON RETIREMENT(4)

YEARS OF SERVICE
--------------------------------------------------
AVERAGE TRUSTEE FEES 3 5 7 10 OR MORE
- --------------------------------------------------------------------------------
$3,150 $473 $ 788 $1 103 $1,575
3,686 553 922 1,290 1,843
4,222 633 1,056 1,478 2,111
4,758 714 1,190 1,665 2,379
5,294 794 1,324 1,853 2,647
5,830 875 1,458 2,041 2,915
(4) Other funds in the MFS fund complex provide similar retirement benefits to
the Trustees.

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

As of January 31, 1998, Merrill Lynch Pierce, Fenner & Smith, Inc., for the
sole benefit of its customers, 4800 Deer Lake Drive East, Jacksonville, FL,
32246-6484, was the record owner of approximately 8.11% and 13.83% of the
outstanding Class B and Class C shares of the Fund, respectively. As of
January 31, 1998, the MFS Defined Contribution Plan, 500 Boylston Street,
Boston, MA, was the record owner of approximately 100% of the outstanding
Class I shares of the Fund.

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

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

The Adviser manages the Fund pursuant to an Investment Advisory Agreement
dated August 10, 1990 (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser provides the Fund with overall investment advisory
services. Subject to such policies as the Trustees may determine, the Adviser
makes investment decisions for the Fund. For these services and facilities,
the Adviser receives a management fee computed and paid monthly in an amount
equal to the sum of 0.65% of the Fund's average daily net assets and 5% of its
gross income (i.e., income other than gains from the sale of securities, gains
from options and futures transactions, premium income from options written and
gains from foreign exchange transactions).

For the Fund's fiscal year ended October 31, 1997, MFS received management
fees under the Advisory Agreement of $2,096,169 (of which $1,608,913 was based
on average daily net assets and $487,256 on gross income), equivalent on an
annualized basis to 0.85% of the Fund's average daily net assets. For the
Fund's fiscal year ended October 31, 1996, MFS received management fees under
the Advisory Agreement of $1,716,121 (of which $1,279,166 was based on average
daily net assets and $436,955 on gross income), equivalent on an annualized
basis to 0.87% of the Fund's average daily net assets. For the Fund's fiscal
year ended October 31, 1995, MFS received management fees under the Advisory
Agreement of $1,479,587 (of which $1,079,919 was based on average daily net
assets and $399,668 on gross income), equivalent, on an annualized basis to
0.89% of the Fund's average daily net assets.

The Fund pays all of the Fund's expenses (other than those assumed by the
Adviser or MFD, the Fund's distributor), including: governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of
preparing, printing and mailing share certificates, shareholder reports,
notices, proxy statements and reports to governmental officers and
commissions; brokerage and other expenses connected with the execution,
recording and settlement of portfolio security transactions; insurance
premiums; fees and expenses of State Street Bank and Trust Company, the Fund's
Custodian, for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of
calculating the net asset value of shares of the Fund; and expenses of
shareholder meetings. Expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing
of prospectuses for such purposes are borne by the Fund except that the Fund's
Distribution Agreement with 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 its fiscal year ended October 31, 1997 see
"Financial Statements -- Statement of Operations" in the Fund's Annual Report
to shareholders dated October 31, 1997 incorporated by reference into this
SAI. Payment by the Fund of brokerage commissions for brokerage and research
services of value to the Adviser in serving its clients is discussed under the
caption "Portfolio Transactions and Brokerage Commissions" below.

The Adviser 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 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 Objective, Policies and
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 Objective, Policies and 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, as amended. Under this
Agreement, the Fund pays MFS an administrative fee up to 0.015% per annum of
the Fund's average daily net assets. This fee reimburses MFS for a portion of
the costs it incurs to provide such services. For the period commencing March
1, 1997 through the period ended October 31, 1997, MFS received fees under the
Administrative Services Agreement of $26,017.

CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery
of securities, determining income and collecting interest and dividends on the
Fund's investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily
net asset value of each class of shares of the Fund. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities of the
Custodian and may deal with the Custodian as principal in securities
transactions.

SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, effective August 10, 1990, as amended (the
"Agency Agreement") with the Trust. 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 0.1125%. In addition, the Shareholder Servicing Agent
will be reimbursed by the Fund for certain expenses incurred by the
Shareholder Servicing Agent on behalf of the Fund. State Street Bank and Trust
Company, the dividend and distribution disbursing agent of the Fund, has
contracted with the Shareholder Servicing Agent to perform certain dividend
disbursing agent functions for the Fund.

DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as the distributor for the
continuous offering of shares of the Fund pursuant to a Distribution
Agreement dated as of 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 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"). The difference between the total
amount invested and the sum of (a) the net proceeds to the Fund and (b) the
dealer commission is the commission paid to the underwriter. 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 4% 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.

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

GENERAL: Neither MFD nor dealers are permitted to delay placing orders to
benefit themselves by a price change. On occasion, MFD may obtain brokers
loans from various banks, including the custodian banks for the MFS Funds, to
facilitate the settlement of sales of shares of the Fund to dealers. MFD may
benefit from its temporary holding of funds paid to it by investment dealers
for the purchase of Fund shares.

During the Fund's fiscal year ended October 31, 1997, gross sales charges on
sales of Class A shares of the Fund amounted to $420,817, of which $56,871 was
retained by MFD and $363,946 by dealers and certain other financial
institutions; the Fund received $22,906,633, representing the aggregate net
asset value of such shares. During the Fund's fiscal year ended October 31,
1996, gross sales charges on sales of Class A shares of the Fund amounted to
$388,523, of which $53,235 was retained by MFD and $335,288 by dealers and
certain other financial institutions; the Fund received $24,782,083,
representing the aggregate net asset value of such shares. During the Fund's
fiscal year ended October 31, 1995, gross sales charges on sales of Class A
shares of the Fund amounted to $366,111, of which $48,590 was retained by MFD
and $317,521 by dealers and certain other financial institutions; the Fund
received $17,766,340, representing the aggregate net asset value of such
shares. During the Fund's fiscal years ended October 31, 1997, 1996 and 1995,
the CDSC imposed on the redemption of Class A shares was $895, $2,201 and
$376, respectively. During the Fund's fiscal years ended October 31, 1997,
1996 and 1995, the CDSC imposed on the redemption of Class B shares was
$111,555, $88,243 and $91,996, respectively. During the Fund's fiscal year
ended October 31, 1997, and during the period from April 1, 1996, through
October 31, 1996, the CDSC imposed on the redemption of Class C shares was
$3,270 and $566, respectively. There was no CDSC imposed on the redemption of
Class C shares for the fiscal year ended October 31, 1995.

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 the Distribution
Agreement or interested persons of any such party. The Distribution Agreement
terminates automatically if it is assigned and may be terminated without
penalty by either party on not more than 60 days' nor less than 30 days'
notice.

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

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

Consistent with the foregoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers (the "NASD") and such other
policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund and of the other investment company clients of MFD as a
factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.

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

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

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

Broker-dealers may be willing to furnish statistical, research and other
factual information or services ("Research") to the Adviser for no
consideration other than brokerage or underwriting commissions. Securities may
be bought or sold from time to time through such broker-dealers on behalf of
the Fund. The Trustees (together with the Trustees of the other MFS Funds)
have directed the Adviser to allocate a total of $50,980 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 set forth below which were paid as a result of such Research
because a substantial number of transactions were effected through brokers
which provide Research but which were selected principally because of their
execution capabilities.

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

For the Fund's fiscal years ended October 31, 1997, 1996 and 1995, total
brokerage commissions of $257,335, $263,498 and $297,101 were paid on total
transactions of $117,292,685, $101,653,688 and $112,709,102, respectively. Not
all of the Fund's transactions are equity security transactions which involve
the payment of brokerage commissions.

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

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

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

Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in the shareholder's name. All income dividends and
capital gain distributions on escrowed shares will be paid to the shareholder
or to his order. When the minimum investment so specified is completed (either
prior to or by the end of the 13-month 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.

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

GROUP PURCHASES: A bona fide group (and all its members) may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent), obtain quantity sales charge discounts on the purchase of Class A
shares if the group (1) gives its endorsement or authorization to the
investment program so it may be used by the investment dealer to facilitate
solicitation of the membership, thus effecting economies of sales effort; (2)
has been in existence for at least six months and has a legitimate purpose
other than to purchase mutual fund shares at a discount; (3) is not a group of
individuals whose sole organizational nexus is as credit cardholders of a
company, policyholders of an insurance company, customers of a bank or broker-
dealer, clients of an investment adviser or other similar groups; and (4)
agrees to provide certification of membership of those members investing money
in the MFS Funds upon the request of MFD.

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 (a bank collective investment Fund) reaches a discount level (see
"Purchases" in the Prospectus for the sales charges on quantity purchases).
For example, if a shareholder owns shares valued at $75,000 and purchases an
additional $25,000 of Class A shares of the Fund, the sales charge for the
$25,000 purchase would be at the rate of 4% (the rate applicable to single
transactions of $100,000). A shareholder must provide the Shareholder
Servicing Agent (or his investment dealer must provide MFD) with information
to verify that the quantity sales charge discount is applicable at the time
the investment is made.

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

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

AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares
of other MFS Funds (if available for sale) under the Automatic Exchange Plan,
a dollar cost averaging program. The Automatic Exchange Plan provides for
automatic exchanges of funds from the shareholder's account in an MFS Fund for
investment in the same class of shares of other MFS Funds selected by the
shareholder. Under the Automatic Exchange Plan, exchanges of at least $50 each
may be made to up to six different funds effective on the seventh day of each
month or of every third month, depending whether monthly or quarterly
exchanges are elected by the shareholder. If the seventh day of the month is
not a business day, the transaction will be processed on the next business
day. Generally, the initial exchange will occur after receipt and processing
by the Shareholder Servicing Agent of an application in good order. Exchanges
will continue to be made from a shareholder's account in any MFS Fund, as long
as the balance of the account is sufficient to complete the exchanges.
Additional payments made to a shareholder's account will extend the period
that exchanges will continue to be made under the Automatic Exchange Plan.
However, if additional payments are added to an account subject to the
Automatic Exchange Plan shortly before a exchange is scheduled, such funds may
not be available for exchange 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, transfers of shares of MFS Money Market
Fund, MFS Government Money Market Fund and Class A shares of MFS Cash Reserve
Fund will be subject to any applicable sales charge. Changes in amounts to be
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 (a "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 before the close of business on the last business day of a
month, the Exchange Change Request will be effective for the following month's
exchange.

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

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

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

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

Each Exchange Request must be in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as the shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of
record), and each exchange must involve either shares having an aggregate
value of at least $1,000 or all the shares in the account (except that the
minimum is $50 for accounts of retirement plan participants whose sponsoring
organizations subscribe to the MFS FUNDamental 401(k) Plan or another similar
401(k) recordkeeping system made available by the Shareholder Servicing Agent)
or all the shares in the account. Each exchange involves the redemption of
shares of the Fund to be exchanged and the purchase at net asset value (i.e.,
without a sales charge) of shares of the same class of the other MFS Fund. Any
gain or loss on the redemption of the shares exchanged is reportable on the
shareholder's federal income tax return, unless both the shares received and
the shares surrendered in the exchange are held in a tax-deferred retirement
plan or other tax-exempt account. No more than five exchanges may be made in
any one Exchange Request by telephone. If the Exchange Request is received by
the Shareholder Servicing Agent prior to the close of regular trading on the
Exchange, the exchange usually will occur on that day if all the requirements
set forth above have been complied with at that time. However, payment of the
redemption proceeds by the Fund, and thus the purchase of shares of the other
MFS Fund, may be delayed for up to seven days if the Fund determines that such
a delay would be in the best interest of all its shareholders. Investment
dealers which have satisfied criteria established by MFD may also communicate
a shareholder's Exchange Request to MFD by facsimile subject to the
requirements set forth above.

No CDSC is imposed on exchanges among the MFS Funds, although liability for
the CDSC is carried forward to the exchanged shares. For purposes of
calculating the CDSC upon redemption of shares acquired in an exchange, the
purchase of shares acquired in one or more exchanges is deemed to have
occurred at the time of the original purchase of the exchanged shares. Any
gain or loss on the redemption of the shares exchanged is reportable on the
shareholder's federal income tax return, unless such shares were held in a
tax-deferred retirement plan.

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

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

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

TAX-DEFERRED RETIREMENT PLANS -- Except as noted below, shares of the Fund may
be purchased by all types of tax-deferred retirement plans. 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 (the "Code");

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

Certain other qualified pension and profit-sharing plans.

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

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

6. TAX STATUS
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Code, by meeting all
applicable requirements of Subchapter M, including requirements as to the
nature of the Fund's gross income, the amount of Fund distributions, and the
composition of the Fund's portfolio assets. Because the Fund intends to
distribute all of its net investment income and net realized capital gains to
shareholders in accordance with the timing requirements imposed by the Code,
it is not expected that the Fund will be required to pay any federal income or
excise taxes, although the Fund's foreign-source income may be subject to
foreign withholding taxes. If the Fund should fail to qualify as a "regulated
investment company" in any year, the Fund would incur a regular corporate
federal income tax upon its taxable income and Fund distributions would
generally be taxable as ordinary dividend income to the shareholders.

Shareholders of the Fund normally will have to pay federal income taxes, and
any state or local taxes, on the dividends and capital gain distributions they
receive from the Fund. Dividends from ordinary income and any distributions
from net short-term capital gains are taxable to shareholders as ordinary
income for federal income tax purposes whether the distributions are paid in
cash or reinvested in additional shares. A portion of the Fund's ordinary
income dividends is normally eligible for the dividends received deduction for
corporations if the recipient otherwise qualifies for that deduction with
respect to its holding of Fund shares. Availability of the deduction for
particular corporate shareholders is subject to certain limitations, and
deducted amounts may be subject to the alternative minimum tax or result in
certain basis adjustments. Distributions of net capital gains (i.e., the
excess of net long-term capital gains over net short-term capital losses),
whether paid in cash or reinvested in additional shares, are taxable to
shareholders as long-term capital gains for federal income tax purposes
without regard to the length of time the shareholders have held their shares.
Such capital gains will generally be taxable to shareholders as if the
shareholders had directly realized gains from the same sources from which they
were realized by the Fund. Any Fund dividend that is declared in October,
November or December of any 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 12 months and otherwise as a short-term capital gain or loss; a
long-term capital gain realized by an individual, estate or trust may be
eligible for reduced tax rates if the shares were held for more than 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 ninety days after their
purchase followed by any purchase (including purchases by exchanges 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 those securities. In order to distribute this income
and avoid a tax on the Fund, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially
resulting in additional taxable gain or loss to the Fund.

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

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

Investment income received by the Fund from foreign securities may be subject
to foreign income taxes withheld at the source. The 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. If the Fund holds more than 50% of its assets in foreign
securities at the close of its taxable year, the Fund may elect to "pass
through" to the Fund's shareholders foreign income taxes paid. If the Fund so
elects, shareholders will be required to treat their pro rata portion of the
foreign income taxes paid by the Fund as part of the amounts distributed to
them by the Fund and thus includable in their gross income for federal income
tax purposes. Shareholders who itemize deductions would then be allowed to
claim a deduction or credit (but not both) on their federal income tax returns
for such amounts, subject to certain limitations. Shareholders who do not
itemize deductions would (subject to such limitations) be able to claim a
credit but not a deduction. No deduction will be permitted to individuals in
computing their alternative minimum tax liability. If the Fund does not
qualify or elect to "pass through" to the Fund's shareholders foreign income
taxes paid by it, shareholders will not be able to claim any deduction or
credit for any part of the foreign taxes paid by the Fund.

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

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

Distributions of the Fund that are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities (but
generally not from capital gains realized upon the disposition of such
obligations) may be exempt from state and local taxes. The Fund intends to
advise shareholders of the extent, if any, to which its distributions consist
of such interest. Shareholders are urged to consult their tax advisers
regarding the possible exclusion of such portion of their dividends for state
and local income tax purposes as well as regarding the tax consequences of an
investment in the Fund.

7. DETERMINATION OF NET ASSET VALUE AND PERFORMANCE

NET ASSET VALUE: The net asset value per share of each class of the Fund is
determined each day during which the Exchange is open for trading. (As of the
date of this SAI, such Exchange is open for trading every weekday except for
the following holidays or the days on which they are observed: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.) This
determination is made once each day as of the close of regular trading on such
Exchange by deducting the amount of the liabilities attributable to the class
from the value of the assets attributable to the class and dividing the
difference by the number of shares of the class outstanding.

Equity securities in the Fund's portfolio are valued at the last sale price on
the exchange on which they are primarily traded or on the Nasdaq stock market
for unlisted national market issues, or at the last quoted bid price for
securities in which there were no sales during the day or for unlisted
securities not reported on the Nasdaq stock market. Bonds and other fixed
income securities (other than short-term obligations) of U.S. issuers in the
Fund's portfolio are valued on the basis of valuations furnished by a pricing
service which utilizes both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect the fair value
of such securities. Forward Contracts will be valued using a pricing model
taking into consideration market data from an external pricing source. Use of
the pricing services has been approved by the Board of Trustees. All other
securities, futures contracts and options in the Fund's portfolio (other than
short-term obligations) for which the principal market is one or more
securities or commodities exchanges (whether domestic or foreign) will be
valued at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities, futures contracts or options
are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available,
be valued at current bid prices, unless such securities are reported on the
Nasdaq stock market, in which case they are valued at the last sale price or,
if no sales occurred during the day, at the last quoted bid price. Short-term
obligations with a remaining maturity in excess of 60 days will be valued upon
dealer supplied valuations. Other short-term obligations in the Fund's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Portfolio investments for which there are
no such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees.

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

All investments and assets are expressed in U.S. dollars based upon current
currency exchange rates. A share's net asset value is effective for orders
received by the dealer prior to its calculation and received by MFD in its
capacity as the Fund's distributor, or its agent, the Shareholder Servicing
Agent, prior to the close of that business day.

TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for
each class of shares for certain periods by determining the average annual
compounded rates of return over those periods that would cause an investment
of $1,000 (made with all distributions reinvested and reflecting the CDSC or
the maximum public offering price) to reach the value of that investment at
the end of the periods. The Fund may also calculate (i) a total rate of
return, which is not reduced by the CDSC (4% maximum for Class B shares and 1%
maximum for Class C shares) and therefore may result in a higher rate of
return, (ii) a total rate of return assuming an initial account value of
$1,000, which will result in a higher rate of return with respect to Class A
shares since the value of the initial account will not be reduced by the sales
charge (4.75% maximum for Class A Shares) and/or (iii) total rates of return
which represent aggregate performance over a period or year-by-year
performance, and which may or may not reflect the effect of the maximum or
other sales charge or CDSC.

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

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

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

PERFORMANCE RESULTS: The performance results for Class A shares presented in
Appendix B attached hereto under the heading "Performance Results", assume an
initial investment of $10,000 and cover the period from September 4, 1990
through December 31, 1997. It has been assumed that dividends and capital
gains were reinvested in additional shares. These performance results, as well
as any total rate of return quotation provided by the Fund, should not be
considered as representative of the performance of the Fund in the future
since the net asset value and public offering price of shares of the Fund will
vary based not only on the type, quality and maturities of the securities held
in the Fund's portfolio, but also on changes in the current value of such
securities and on changes in the expenses of the Fund. These factors and
possible differences in the methods used to calculate 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. The current net asset value and account balance
information may be obtained by calling 1-800-MFS-TALK (637-8255).

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

CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the SEC, is not indicative of the amounts which were or will be
paid to the Fund's shareholders. Amounts paid to shareholders of each class
are reflected in the quoted "current distribution rate" for that class. The
current distribution rate for a class computed by dividing the total amount of
dividends per share paid by the Fund to shareholders of that class during the
past 12 months by the maximum public offering price of that class at the end
of such period. Under certain circumstances, such as when there has been a
change in the amount of dividend payout, or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid over the
period such policies were in effect, rather than using the dividends paid
during the past 12 months. The current distribution rate differs from the
yield computation because it may include distributions to shareholders from
sources other than dividends and interest, such as premium income for option
writing, short-term capital gains and return of invested capital, and is
calculated over a different period of time. The Fund's current distribution
rate calculation for Class A shares assumes a maximum sales charge of 4.75%.
The Fund's current distribution rate calculation for Class B and Class C
shares assumes no CDSC is paid. Current distribution rate quotations for each
class of shares are presented in Appendix B attached hereto under the heading
"Performance Quotations."

GENERAL: From time to time each Fund may, as appropriate, quote Fund rankings
or reprint all or a portion of evaluations of fund performance and operations
appearing in various independent publications, including but not limited to
the following: Money, Fortune, U.S. News and World Report, Kiplinger's
Personal Finance, The Wall Street Journal, Barron's, Investors Business Daily,
Newsweek, Financial World, Financial Planning, Investment Advisor, USA Today,
Pensions and Investments, SmartMoney, Forbes, Global Finance, Registered
Representative, Institutional Investor, the Investment Company Institute,
Johnson's Charts, Morningstar, Lipper Analytical Services, Inc., CDA
Wiesenberger, Shearson Lehman and Salomon Bros. Indices, Ibbotson, Business
Week, Lowry Associates, Media General, Investment Company Data, The New York
Times, Your Money, Strangers Investment Advisor, Financial Planning on Wall
Street, Standard and Poor's, Individual Investor, The 100 Best Mutual Funds
You Can Buy, by Gordon K. Williamson, Consumer Price Index, and Sanford C.
Bernstein & Co. Fund performance may also be compared to the performance of
other mutual funds tracked by financial or business publications or
periodicals.

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

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

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

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

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

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 Regatta becomes America's first non-
qualified market-value-adjusted fixed-variable annuity.

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

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

-- 1993 -- MFS becomes money manager of MFS(R) Union Stan-
dard 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.

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

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

SERVICE FEES: With respect to Class A shares, no service fees will be paid:
(i) to any dealer who is the holder or dealer of record for investors who own
Class A shares having an aggregate net asset value less than $750,000, or such
other amount as may be determined from time to time by MFD (MFD, however, may
waive this minimum amount requirement from time to time); or (ii) to any
insurance company which has entered into an agreement with the Fund and MFD
that permits such insurance company to purchase Class A shares from the Fund
at their net asset value in connection with annuity agreements issued in
connection with the insurance company's separate accounts. Dealers may from
time to time be required to meet certain other criteria in order to receive
service fees.

With respect to Class B shares, except in the case of the first year service
fee, no service fees will be paid to any securities dealer who is the holder
or dealer of record for investors who own Class B shares having an aggregate
net asset value of less than $750,000 or such other amount as may be
determined by MFD from time to time. MFD, however, may waive this minimum
amount requirement from time to time. Dealers may from time to time be
required to meet certain other criteria in order to receive service fees.

MFD or its affiliates shall be entitled to receive any service fee payable
under the Distribution Plan for which there is no dealer of record or for
which qualification standards have not been met as partial consideration for
personal services and/or account maintenance services performed by MFD or its
affiliates for shareholder accounts.

DISTRIBUTION FEES: The purpose of distribution payments to MFD under the
Distribution Plan is to compensate MFD for its distribution services to the
Fund. MFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution-related
expenses, including, without limitation, the cost necessary to provide
distribution-related services, or personnel, travel, office expenses and
equipment.

DISTRIBUTION AND SERVICE FEES PAID DURING THE FUND'S LAST FISCAL YEAR: During
the fiscal year ended October 31, 1997, the Fund paid the following
Distribution Plan expenses:

AMOUNT OF AMOUNT OF AMOUNT OF
DISTRIBUTION DISTRIBUTION DISTRIBUTION
AND SERVICE AND SERVICE AND SERVICE
FEES PAID FEES RETAINED FEES RECEIVED
CLASSES OF SHARES BY FUND BY MFD BY DEALERS
- ----------------- ------------ ------------- -------------
Class A Shares $498,606 $195,751 $302,855

Class B Shares $852,056 $665,751 $186,305

Class C Shares $183,530 $ 17,124 $166,406

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 to
such Plan ("Distribution Plan Qualified Trustees"). The Distribution Plan also
requires that the Fund and MFD each shall provide to the Trustees, and the
Trustees shall review, at least quarterly, a written report of the amounts
expended (and purposes therefor) under such Plan. The Distribution Plan may be
terminated at any time by vote of a majority of the Distribution Plan
Qualified Trustees or by vote of the holders of a majority of the respective
class of the Fund's shares (as defined in "Investment Restrictions"). All
agreements relating to the Distribution Plan entered into between the Fund or
MFD and other organizations must be approved by the Board of Trustees,
including a majority of the Distribution Plan Qualified Trustees. Agreements
under the Distribution Plan must be in writing, will be terminated
automatically if assigned, and may be terminated at any time without payment
of any penalty, by vote of a majority of the Distribution Plan Qualified
Trustees or by vote of the holders of a majority of the respective class of
the Fund's shares. The Distribution Plan may not be amended to increase
materially the amount of permitted distribution expenses without the approval
of a majority of the respective class of the Fund's shares (as defined in
"Investment Restrictions") or may not be materially amended in any case
without a vote of the Trustees and a majority of the Distribution Plan
Qualified Trustees. The selection and nomination of Distribution Plan
Qualified Trustees shall be committed to the discretion of the non-interested
Trustees then in office. No Trustee who is not an "interested person" has any
financial interest in the Distribution Plan or in any related agreement.

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

Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have the right to remove one or more Trustees. No material
amendment may be made to the Declaration of Trust without the affirmative vote
of a majority of its outstanding shares of the Trust (as defined in
"Investment Restrictions"). 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 the Trust shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance)
for the protection of the Trust and its shareholders and the Trustees,
officers, employees and agents of the Trust covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.

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

10. INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
Ernst & Young LLP are the Fund's independent auditors, providing audit
services, tax services, and assistance and consultation with respect to the
preparation of filings with the SEC.

The Portfolio of Investments and the Statement of Assets and Liabilities at
October 31, 1997, the Statement of Operations for the year ended October 31,
1997, the Statement of Changes in Net Assets for each of the two years in the
period ended October 31, 1997, the Notes to Financial Statements and the
Report of Independent Auditors, each of which is included in the Annual Report
to Shareholders of the Fund, are incorporated by reference into this SAI in
reliance upon the report of Ernst & Young LLP, independent auditors, given
upon their authority as experts in accounting and auditing. A copy of the
Annual Report accompanies this SAI.

<PAGE>

APPENDIX A
DESCRIPTION OF BOND RATINGS

The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of various bonds. IT SHOULD BE EMPHASIZED, HOWEVER, THAT RATINGS ARE
NOT ABSOLUTE STANDARDS OF QUALITY. CONSEQUENTLY, BONDS WITH THE SAME MATURITY,
COUPON AND RATING MAY HAVE DIFFERENT YIELDS WHILE BONDS 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 edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

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

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

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

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during 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 over 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 that are not
rated as a matter of policy.

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

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

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

STANDARD & POOR'S RATINGS SERVICES

AAA: Debt rated "AAA" has the highest rating assigned by S&P. 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 very 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
bonds in this category than in higher rated categories.

BB, B, CCC, CC, AND C: Debt rated "BB", "B", "CCC", "CC", and "C" is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.

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: The rating "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
which 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 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
rating 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-l +".

A: Bonds considered to be investment grade and of very 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 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.

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
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 lowered, FitchAlert is relatively short-term, and should be
resolved within 12 months.

<PAGE>

APPENDIX B
PERFORMANCE INFORMATION

The performance results and quotations below should not be considered as
representative of the performance of the fund in the future since the net
asset value and public offering price of shares of the Fund will vary. See
"Determination of Net Asset Value and Performance" in the SAI.

PERFORMANCE RESULTS - CLASS A SHARES
<TABLE>
<CAPTION>
VALUE OF VALUE OF
VALUE OF INITIAL CAPITAL GAIN REINVESTED
YEAR ENDED $10,000 INVESTMENT DISTRIBUTIONS DIVIDENDS TOTAL VALUE
---------- ------------------ ------------- ---------- -----------

<S> <C> <C> <C> <C>
December 31, 1990* $ 9,764 $ 0 $ 105 $ 9,870
December 31, 1991 11,244 203 486 11,934
December 31, 1992 10,986 527 1,020 12,534
December 31, 1993 12,421 851 1,956 15,229
December 31, 1994 11,412 1,214 2,136 14,762
December 31, 1995 13,105 1,402 3,250 17,758
December 31, 1996 14,147 2,088 4,245 20,481
December 31, 1997 14,798 3,397 4,992 23,188
</TABLE>

*Class A shares of the Fund commenced investment operations on September 4,
1990.

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

PERFORMANCE QUOTATIONS

All performance quotations are as of October 31, 1997.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------- CURRENT
LIFE DISTRIBUTION
1 YEAR 5 YEAR OF FUND 30-DAY YIELD RATE
------ ------ ------- ------------ ------------

<S> <C> <C> <C> <C> <C>
Class A shares with sales charge .......................... 10.25% 11.63% 12.11%(1) 1.55% 1.44%
Class A shares without sales charge ....................... 15.71% 12.72% 12.88%(1)
Class B shares with CDSC .................................. 11.00% 11.84%(2) 12.44%(2)
Class B shares without CDSC ............................... 15.00% 12.10%(2) 12.44%(2) 0.97% 0.91%
Class C shares with CDSC .................................. 13.97% 12.16%(3) 12.48%(3)
Class C shares without CDSC ............................... 14.97% 12.16%(3) 12.48%(3) 0.97% 0.96%
Class I shares ............................................ 15.97%(4) 12.77%(4) 12.91%(4) 1.98% 1.66%(5)
</TABLE>

(1) From the inception of Class A shares on September 4, 1990, to the period
ended October 31, 1997.
(2) Class B share performance includes the performance of the Fund's Class A
shares for periods prior to the inception of Class B shares on September
7, 1993. Sales charges, expenses and expense ratios, and therefore
performance, for Class A and Class B shares differ. Class B share
performance has been adjusted to reflect that Class B shares generally are
subject to CDSC (unless the performance quotation does not give effect to
the CDSC) whereas Class A shares generally are subject to an initial sales
charge. Class B share performance has not, however, been adjusted to
reflect differences in operating expenses (e.g., Rule 12b-1 fees), which
generally are lower for Class A shares.
(3) Class C share performance includes the performance of the Fund's Class A
shares for periods prior to the inception of Class C shares on January 3,
1994. Sales charges, expenses and expense ratios, and therefore
performance, for Class A and Class C shares differ. Class C share
performance has been adjusted to reflect that Class C shares generally are
subject to CDSC (unless the performance quotation does not give effect to
the CDSC) whereas Class A shares generally are subject to an initial sales
charge. Class C share performance has not, however, been adjusted to
reflect differences in operating expenses (e.g., Rule 12b-1 fees), which
generally are lower for Class A shares.
(4) Class I share performance includes the performance of the Fund's Class A
shares for the periods prior to the inception of Class I shares on January
2, 1997. Sales charges, expenses and expense ratios, and therefore
performance for Class I and A shares differ. Class I share performance has
been adjusted to reflect that Class I shares are not subject to an initial
sales charge, whereas Class A shares generally are subject to an initial
sales charge. Class I share performance has not, however, been adjusted to
reflect differences in operating expenses (e.g., Rule 12b-1 fees), which
generally are lower for Class I shares.
(5) The current distribution rate for Class I shares is estimated using the
dividend declared on the Fund's Class A shares for the period prior to the
inception of Class I shares on January 2, 1997.

<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
Ernst & Young LLP
200 Clarendon Street, Boston, MA 02116

MFS(R)
WORLD TOTAL
RETURN FUND

500 BOYLSTON STREET
BOSTON, MA 02116

[LOGO] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)

MWT-13-3/98/500 24/224/324

<PAGE>

MFS UTILITIES FUND

Supplement to the March 1, 1998 Prospectus and
Statement of Additional Information

The following information should be read in conjunction with the Fund's
Prospectus and Statement of Additional Information ("SAI"), dated March 1, 1998,
and contains a description of Class I shares.

Class I shares are available for purchase only by certain investors as
described under the caption "Eligible Purchasers" below.

EXPENSE SUMMARY

<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 (after expense limitation)(1).......................................... 0.50%
Rule 12b-1 Fees........................................................................ None
Other Expenses(2)(3)................................................................... 0.35%
Total Operating Expenses (after expense limitation)(4)................................. 0.85%
</TABLE>

.........

(1) Effective April 1, 1997, the Adviser voluntarily reduced the management fee
to 0.50% of the Fund's average daily net assets for an indefinite period of
time. Absent this reduction, the management fee would have been 0.65% of
the Fund's average daily net assets for the fiscal year ended October 31,
1997.
(2) "Other Expenses" is based on Class A expenses incurred during the fiscal
year ended October 31, 1997.

(3) 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."

(4) Absent the fee reductions described above, "Total Operating Expenses" would
have been 1.00%.

EXAMPLE OF EXPENSES

PERIOD CLASS I

1 year........................................ $ 9
3 years....................................... 27

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 should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders, which are
incorporated by reference into the SAI.

<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended
October 31, 1997*

Class I
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $8.90
Income from investment operations# -
Net investment income@ $ 0.29
Net realized and unrealized gain on
investments and foreign currency transactions 1.48
-------
Total from investment operations $ 1.77
-------
Less distributions declared to shareholders -
From net investment income $ (0.28)
- -------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions __
Total distributions declared to shareholders $ (0.28)
Net asset value - end of period $10.39
------
Total return 20.15%***
Ratios (to average net assets)/Supplemental data:@
Expenses## 0.86%**
Net investment income 3.39%**
Portfolio turnover 153%
Average commission rate $0.0359
Net assets at end of period (000 omitted) $ 725
</TABLE>

- --------------------------
* For the period from the inception of Class I shares, January 2, 1997, through
October 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.
@ The investment adviser voluntarily waived a portion of its management
fee for certain of the periods indicated. If the fee had been incurred
by the Fund, the net investment income per share and the ratios would
have been:

Net investment income $ 0.27
Ratios (to average net assets):
Expenses## 1.05%**
Net investment income 3.20%**

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;

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

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

SHARE CLASSES OFFERED BY THE FUND

OTHER INFORMATION

Effective April 1, 1997, the Adviser voluntarily reduced the management fee
to 0.50% of the Fund's average daily net assets for an indefinite period of
time. Prior to that date, the Adviser voluntarily reduced the management fee to
0.375% of the Fund's average daily net assets.

THE DATE OF THIS SUPPLEMENT IS MARCH 1, 1998

<PAGE>

PROSPECTUS
MARCH 1, 1998
CLASS A SHARES OF BENEFICIAL INTEREST
MFS(R) UTILITIES FUND CLASS B SHARES OF BENEFICIAL INTEREST
(A member of the CLASS C SHARES OF BENEFICIAL INTEREST
MFS Family of Funds(R))
- --------------------------------------------------------------------------------
500 Boylston St., Boston, MA 02116 (617) 954-5000

This Prospectus pertains to MFS Utilities Fund (the "Fund"), a non-diversified
series of MFS Series Trust VI (the "Trust"), an open-end management investment
company consisting of three series. The Fund's investment objective is to seek
capital growth and current income (income above that available from a portfolio
invested entirely in equity securities). The Fund seeks to achieve its objective
by investing at least 65% of its assets, under normal market conditions, in
equity and debt securities issued by domestic and foreign utility companies (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 RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED, AND WILL FLUCTUATE IN VALUE. YOU
MAY RECEIVE MORE OR LESS THAN YOU PAID WHEN YOU REDEEM YOUR SHARES.

This Prospectus sets forth concisely the information concerning the Trust and
the Fund that a prospective investor ought to know before investing. The Trust,
on behalf of the Fund, has filed with the Securities and Exchange Commission
(the "SEC") a Statement of Additional Information, dated March 1, 1998, as
amended or supplemented from time to time (the "SAI"), which contains more
detailed information about the Trust and the Fund and is incorporated into this
Prospectus by reference. See page 40 for a further description of the
information set forth in the SAI. A copy of the SAI may be obtained without
charge by contacting the Shareholder Servicing Agent (see back cover for address
and phone number). The SEC maintains an Internet World Wide Web site
(http://www.sec.gov) that contains the SAI, materials that are incorporated by
reference into this Prospectus and the SAI, and other information regarding the
Fund. This Prospectus is available on the Adviser's Internet World Wide Web site
at http://www.mfs.com.

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

TABLE OF CONTENTS
PAGE
----

1. Expense Summary .................................................... 3
2. Condensed Financial Information .................................... 5
3. The Fund ........................................................... 8
4. Investment Objective and Policies .................................. 8
5. Certain Securities and Investment Techniques ....................... 10
6. Additional Risk Factors ............................................ 16
7. Management of the Fund ............................................. 20
8. Information Concerning Shares of the Fund .......................... 22
Purchases ....................................................... 22
Exchanges ....................................................... 29
Redemptions and Repurchases ..................................... 30
Distribution Plan ............................................... 33
Distributions ................................................... 35
Tax Status ...................................................... 35
Net Asset Value ................................................. 36
Description of Shares, Voting Rights and Liabilities ............ 36
Performance Information ......................................... 37
9. Shareholder Services ............................................... 38
Appendix A ......................................................... A-1
Appendix B ......................................................... B-1
Appendix C ......................................................... C-1
<PAGE>

<TABLE>
<CAPTION>
1. EXPENSE SUMMARY
CLASS A CLASS B CLASS C
------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge Imposed on Purchases of Fund
<S> <C> <C> <C>

Shares (as a percentage of offering price) ............. 4.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption proceeds, as
applicable) ............................................ See Below(1) 4.00% 1.00%
ANNUAL OPERATING EXPENSES OF THE FUND
(AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees (after applicable fee reduction)(2) ...... 0.50% 0.50% 0.50%
Rule 12b-1 Fees (after applicable expense reduction) ..... 0.25%(3) 1.00%(4) 1.00%(4)
Other Expenses(6) ........................................ 0.35% 0.35% 0.35%
---- ---- ----
Total Operating Expenses (after applicable expense
reduction)(5)......................................... 1.10% 1.85% 1.85%
</TABLE>

(2) As of April 1, 1997, the Adviser voluntarily reduced the management fee to
0.50% of the Fund's average daily net assets for an indefinite period of
time. Prior to that date, the Adviser voluntarily reduced the management
fee to 0.375% of the Fund's average daily net assets. Absent this
reduction, the management fee would have been 0.65% of the Fund's average
daily net assets for the fiscal year ended October 31, 1997. See
"Management of the Fund" below.

(3) The Fund has adopted a distribution plan for its shares in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act") (the "Distribution Plan"), which provides that it will pay
distribution/service fees aggregating up to (but not necessarily all of)
0.35% per annum of the average daily net assets attributable to 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 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.

(4) The Fund's Distribution Plan provides that it will pay distribution/
service fees aggregating up to (but not necessarily all of) 1.00% per
annum of the average daily net assets attributable to Class B shares and
Class C shares, respectively. Distribution expenses paid under the
Distribution Plan with respect to Class B and Class C shares, together
with any CDSC payable upon redemption of Class B and Class C shares, may
cause long-term shareholders to pay more than the maximum sales charge
that would have been permissible if imposed entirely as an initial sales
charge. See "Information Concerning Shares of the Fund -- Distribution
Plan" below.

(5) Absent the fee reductions described above, "Total Operating Expenses" for
Class A, Class B and Class C shares would have been 1.25%, 2.00% and
2.00%, respectively, of the Fund's average daily net assets attributable
to such shares on an annualized basis.

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

EXAMPLE OF EXPENSES

PERIOD CLASS A CLASS B CLASS C
- ------ ------- ---------------- ----------------
(1) (1)
<S> <C> <C> <C> <C> <C>
1 year ................................ $ 58 $ 59 $ 19 $ 29 $ 19
3 years ............................... 81 88 58 58 58
5 years ............................... 105 120 100 100 100
10 years ............................... 175 197(2) 197(2) 217 217
</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 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 of the Prospectus: (i)
varying sales charges on share purchases -- "Purchases"; (ii) varying CDSCs --
"Purchases"; (iii) management fees -- "Investment Adviser"; and (iv) Rule
12b-1 (i.e., distribution plan) fees -- "Distribution Plan."

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

2. CONDENSED FINANCIAL INFORMATION
The following information has been audited since inception of the Fund and
should be read in conjunction with financial statements included in the Fund's
Annual Report to shareholders which are incorporated by reference into the SAI
in reliance upon the report of the Fund's independent auditors, given upon
their authority as experts in accounting and auditing. The Fund's independent
auditors are Ernst & Young LLP.

FINANCIAL HIGHLIGHTS
CLASS A, CLASS B AND CLASS C SHARES

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992*
------------ ------------ ------------ ------------ ------------ -------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of
period .............................. $ 9.12 $ 8.20 $ 7.00 $ 7.86 $ 6.68 $ 6.33
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) ............ $ 0.32 $ 0.38 $ 0.31 $ 0.33 $ 0.40 $ 0.17
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ..... 2.08 1.07 1.22 (0.63) 1.19 0.30
------ ------ ------ ------ ------ ------
Total from investment
operations .................... $ 2.40 $ 1.45 $ 1.53 $(0.30) $ 1.59 $ 0.47
------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders -
From net investment income .......... $(0.34) $(0.32) $(0.33) $(0.35) $(0.38) $(0.12)

From net realized gain on
investments and foreign
currency transactions ............. (0.79) (0.21) -- (0.21) (0.03) --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders ............... $(1.13) $(0.53) $(0.33) $(0.56) $(0.41) $(0.12)
------ ------ ------ ------ ------ ------
Net asset value - end of period ....... $10.39 $ 9.12 $ 8.20 $ 7.00 $ 7.86 $ 6.68
====== ====== ====== ====== ====== ======
TOTAL RETURN(+) ....................... 28.62% 18.41% 22.48% (3.89)% 24.39% 11.02%+
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## .......................... 1.10% 1.08% 0.83% 0.65% 0.65% 0.65%+
Net investment income ............... 3.27% 4.37% 4.30% 4.58% 4.57% 5.44%+
PORTFOLIO TURNOVER .................... 153% 137% 152% 115% 119% 63%
AVERAGE COMMISSION RATE### ........... $0.0359 $0.0422 $ -- $ -- $ -- $ --
NET ASSETS AT END OF PERIOD (000
OMITTED) ............................. $90,083 $60,345 $52,474 $42,027 $43,423 $12,859

*For the period from the commencement of investment operations, February 14, 1992, to
October 31, 1992.
+Annualized.
#Per share data for the periods subsequent to October 31, 1993 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 sales
charge had been included, the results would have been lower.

(S)The investment adviser and/or the distributor voluntarily waived a portion of their
management fee and/or distribution fee, respectively, for certain of the periods indicated.
If this fee had been incurred by the Fund, the net investment income per share and the
ratios would have been:

Net investment income ............. $ 0.30 $ 0.34 $ 0.28 $ 0.28 $ 0.31 $ 0.13
RATIOS (TO AVERAGE NET ASSETS):
Expenses## ...................... 1.29% 1.42% 1.23% 1.41% 1.68% 2.63%+
Net investment income ........... 3.08% 4.03% 3.90% 3.82% 4.20% 3.46%+

</TABLE>
<PAGE>

FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>

YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
1997 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 .... $ 9.10 $ 8.18 $ 6.98 $ 7.84 $ 7.83
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) ............... $ 0.24 $ 0.31 $ 0.24 $ 0.25 $ 0.05
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ......................... 2.08 1.07 1.22 (0.63) 0.01
------ ------ ------ ------ ------
Total from investment operations ... $ 2.32 $ 1.38 $ 1.46 (0.38) $ 0.06
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income ............. $(0.27) $(0.25) $(0.26) $(0.27) $(0.05)
From net realized gain on investments
and foreign currency transactions .... (0.79) (0.21) -- (0.21) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders ..................... $(1.06) $(0.46) $(0.26) $(0.48) $(0.05)
------ ------ ------ ------ ------
Net asset value - end of period .......... $10.36 $ 9.10 $ 8.18 $ 6.98 $ 7.84
====== ====== ====== ====== ======
TOTAL RETURN ............................. 27.59% 17.50% 21.43% (4.92)% 0.69%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## ............................. 1.87% 1.89% 1.74% 1.72% 1.50%+
Net investment income .................. 2.49% 3.53% 3.33% 3.51% 1.80%+
PORTFOLIO TURNOVER ....................... 153% 137% 152% 115% 119%
AVERAGE COMMISSION RATE### ............... $0.0359 $0.0422 $ -- $ -- $ --
NET ASSETS AT END OF PERIOD (000 OMITTED) $91,973 $49,877 $33,239 $19,774 $5,412

**For the period from the inception of Class B shares, September 7, 1993, to October 31, 1993.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to October 31, 1993 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.
(S)The investment adviser voluntarily waived a portion of its management fee. If this fee had
been incurred by the Fund, the net investment income per share and ratios would have been:

Net investment income (loss) ......... $ 0.22 $ 0.28 $ 0.21 $ 0.20 $(0.07)
RATIOS (TO AVERAGE NET ASSETS):
Expenses## ......................... 2.06% 2.23% 2.14% 2.48% 3.27%+
Net investment income .............. 2.30% 3.19% 2.93% 2.74% 1.53%+

</TABLE>
<PAGE>

FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------
1997 1996 1995 1994***
------------ ------------ ------------ ---------------
CLASS C
---------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C>
Net asset value - beginning of period ........... $ 9.10 $ 8.18 $ 6.99 $ 7.48
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) ...................... $ 0.24 $ 0.31 $ 0.24 $ 0.25
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions ................................ 2.09 1.07 1.21 (0.54)
------ ------ ------ ------
Total from investment operations .......... $ 2.33 $ 1.38 $ 1.45 $(0.29)
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income .................... $(0.27) $(0.25) $(0.26) $(0.20)
From net realized gain on investments and
foreign currency transactions ............... (0.79) (0.21) -- --
------ ------ ------ ------
Total distributions declared to
shareholders ............................ $(1.06) $(0.46) $(0.26) $(0.20)
------ ------ ------ ------
Net asset value - end of period ................. $10.37 $ 9.10 $ 8.18 $ 6.99
====== ====== ====== ======
TOTAL RETURN .................................... 27.71% 17.57% 21.19% (3.87)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## .................................... 1.85% 1.82% 1.81% 1.65%+
Net investment income ......................... 2.47% 3.60% 3.32% 3.56%+
PORTFOLIO TURNOVER .............................. 153% 137% 152% 115%
AVERAGE COMMISSION RATE### ...................... $0.0359 $0.0422 $ -- $ --
NET ASSETS AT END OF PERIOD (000 OMITTED) ....... $22,788 $8,231 $4,943 $2,399

***For the period from the inception of Class C shares, January 3, 1994, to October 31, 1994.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without
reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning on or after
September 1, 1995.
(S)The investment adviser voluntarily waived a portion of its management fee. If this fee had
been incurred by the Fund, the net investment income per share and ratios would have been:

Net investment income ....................... $ 0.22 $ 0.28 $ 0.21 $ 0.20
RATIOS (TO AVERAGE NET ASSETS):

Expenses## ................................ 2.04% 2.16% 2.21% 2.41%+
Net investment income ..................... 2.28% 3.26% 2.83% 2.80%+

</TABLE>
<PAGE>

3. THE FUND
The Fund is a non-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 April 30, 1990. The Trust presently
consists of three series, 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. Three classes of shares of the Fund currently are offered for sale
to the general public. Class A shares are offered at net asset value plus an
initial sales charge up to a maximum of 4.75% of the offering price (or a CDSC
of 1.00% upon redemption during the first year in the case of purchases of $1
million or more and certain purchases by retirement plans) and 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 will convert to Class A
shares approximately eight years after purchase. Class C shares are offered at
net asset value without an initial sales charge but are subject to a CDSC of
1.00% upon redemption during the first year and an annual distribution fee and
service fee of 1.00% per annum. Class C shares do not convert to any other
class of shares of the Fund. In addition, the Fund offers an additional class
of shares, Class I shares, exclusively to certain institutional investors.
Class I shares are made available by means of a separate Prospectus supplement
provided to institutional investors eligible to purchase Class I shares and
are offered at net asset value without an initial sales charge or CDSC upon
redemption and without an annual distribution and service fee.

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

4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund's investment objective is to seek capital
growth and current income (income above that available from a portfolio
invested entirely in equity securities). Any investment involves risk and
there can be no assurance that the Fund will achieve its investment objective.

INVESTMENT POLICIES --
INVESTMENT IN THE UTILITIES INDUSTRY: The Fund seeks to achieve its objective
by investing, under normal circumstances, at least 65% (but up to 100% at the
discretion of the Adviser) of its assets in equity and debt securities of both
domestic and foreign companies in the utilities industry. See "Certain
Securities and Investment Techniques -- Equity Securities" below. At least 80%
of the debt securities held by the Fund will be rated at the time of
investment at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB
by Standard & Poor's Ratings Services ("S&P") or by Fitch Investors Service,
Inc. ("Fitch") or will be of comparable quality as determined by the Adviser
(see "Additional Risk Factors -- Lower Rated Debt Securities" below for a
discussion of securities rated Baa or BBB and securities rated below Baa and
BBB (commonly referred to as "junk bonds")). The Fund may also invest in debt
and equity securities of issuers in other industries, as discussed below. In
addition, the Fund may hold a portion of its assets in cash and money market
instruments.

Companies in the utilities industry include (i) companies engaged in the
manufacture, production, generation, transmission, sale or distribution of
electric, gas or other types of energy, water or other sanitary services and
(ii) companies engaged in telecommunications, including telephone, cellular
telephones, telegraph, satellite, microwave, cable television and other
communications media (but not companies engaged in public broadcasting). The
Adviser deems a particular company to be in the utilities industry if, at the
time of investment, the Adviser determines that at least 50% of the company's
assets or revenues are derived from one or more of those industries.

The portion of the Fund's assets invested in a particular type of utility and
in equity or debt securities will vary in light of changes in interest rates,
market conditions and economic conditions and other factors. The Fund may
invest in foreign securities, including non-dollar denominated securities,
although under normal circumstances it is not expected that more than 35% of
the Fund's assets will be so invested (not including American Depositary
Receipts). Securities that are issued by foreign companies or are denominated
in foreign currencies are subject to the risks outlined below under
"Additional Risk Factors -- Foreign Securities." For further information on
the principal sectors of the utilities industry in which the Fund may invest,
see Appendix B.

INVESTMENT OUTSIDE THE UTILITIES INDUSTRY: The Fund is permitted to invest in
securities of issuers that are outside the utilities industry, although under
normal circumstances not more than 35% of the Fund's assets will be so
invested. Such investments may include common stocks, debt securities
(including municipal debt securities) and preferred stocks and will be
selected to meet the Fund's investment objective of both capital appreciation
and current income. These securities may be issued by either U.S. or non-U.S.
companies. Some of these issuers may be in industries related to the utilities
industry and, therefore, may be subject to similar risks. Investments outside
the utilities industry may also include securities that are issued or
guaranteed as to principal and interest by the U.S. Government, its agencies,
authorities or instrumentalities ("Government Securities"). See "Certain
Securities and Investment Techniques -- Government Securities" below.

When and if available, Government Securities may be purchased at a discount
from face value. However, the Fund does not intend to hold such securities to
maturity for the purpose of achieving potential capital gains, unless current
yields on these securities remain attractive.

Government Securities do not generally involve the credit risks associated
with other types of interest bearing securities, although, as a result, the
yields available from Government Securities are generally lower than the
yields available from corporate interest bearing securities. Like other
interest bearing securities, however, the values of Government Securities
change as interest rates fluctuate as noted under "Additional Risk Factors --
Lower Rated Debt Securities."

When unfavorable economic or market conditions exist, the Fund may, until
favorable conditions return, invest up to 75% of its assets in cash (or
foreign currency), cash equivalents (such as certificates of deposit, bankers'
acceptances and time deposits), commercial paper, short-term obligations,
repurchase agreements and obligations issued or guaranteed by the U.S. or any
foreign government or any of their agencies, authorities or instrumentalities.

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

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.

GOVERNMENT SECURITIES: The Fund may invest in securities that are issued or
guaranteed as to principal and interest by the U.S. Government, its agencies,
authorities or instrumentalities, including: (1) U.S. Treasury obligations,
which differ only in their interest rates, maturities and times of issuance --
U.S. Treasury bills (maturities of one year or less), U.S. Treasury notes
(maturities of one to 10 years) and U.S. Treasury bonds (generally maturities
of greater than 10 years), all of which are backed by the full faith and
credit of the U.S. Government; and (2) obligations issued or guaranteed by
U.S. Government agencies, authorities or instrumentalities, some of which are
backed by the full faith and credit of the U.S. Treasury, e.g., direct pass-
through certificates of the Government National Mortgage Association ("GNMA"),
some of which are supported by the right of the issuer to borrow from the U.S.
Government but are not guaranteed by the U.S. Government, e.g., obligations of
Federal Home Loan Banks, and some of which are backed only by the credit of
the issuer itself, e.g., obligations of the Student Loan Marketing
Association. Government Securities also include interests in trusts or other
entities representing interests in obligations that are backed by the full
faith and credit of the U.S. Government or are issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities.

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

ZERO COUPON BONDS: Debt securities in which the Fund may invest also include
zero coupon bonds. Zero coupon bonds are debt obligations which are issued or
purchased at a significant discount from face value. The discount approximates
the total amount of interest the bonds will accrue and compound over the
period until maturity, at a rate of interest reflecting the market rate of the
security at the time of issuance. Zero coupon bonds do not require the
periodic payment of interest. Such investments benefit the issuer by
mitigating its need for cash to meet debt service, but also require a higher
rate of return to attract investors who are willing to defer receipt of such
cash. Such investments may experience greater volatility in market value due
to changes in interest rates than debt obligations which make regular payments
of interest. The Fund will accrue income on such investments for tax and
accounting purposes, which is distributable to shareholders and which, because
no cash is received at the time of accrual, may require the liquidation of
other portfolio securities to satisfy the Fund's distribution obligations.

MORTGAGE PASS-THROUGH SECURITIES: The Fund may invest in mortgage pass-through
securities. Mortgage pass-through securities are securities representing
interests in "pools" of mortgage loans. Monthly payments of interest and
principal by the individual borrowers on mortgages are passed through to the
holders of the securities (net of fees paid to the issuer or guarantor of the
securities) as the mortgages in the underlying mortgage pools are paid off.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of the U.S. Government (in the case of securities
guaranteed by the GNMA); or guaranteed by U.S. Government-sponsored
corporations (such as the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation, which are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Mortgage pass-through securities may also be issued by non-governmental
issuers (such as commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary market
issuers).

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. Most
isssuers 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. 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. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the return on an instrument in such a
security.

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

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

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 P. 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 consitituting 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.

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

RESTRICTED SECURITIES: The Fund may also purchase securities that are not
registered under the Securities Act of 1933 ("1933 Act") ("restricted
securities"), including those that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). A determination is made based upon a continuing review of the
trading markets for a specific Rule 144A security, whether such security is
liquid and thus not subject to a Fund's limitation on investing not more than
10% of its net assets in illiquid investments. The Board of Trustees has
adopted guidelines and delegated to MFS the daily function of determining and
monitoring the liquidity of Rule 144A securities. The Board, however, retains
oversight of the liquidity determinations, focusing on factors such as
valuation, liquidity and availability of information. Investing in Rule 144A
securities could have the effect of decreasing the level of liquidity in the
Fund to the extent that qualified institutional buyers become for a time
uninterested in purchasing Rule 144A securities held in the Fund's portfolio.
Subject to the Fund's 10% limitation on investments in illiquid investments,
the Fund may also invest in restricted securities that may not be sold under
Rule 144A, which presents certain risks. As a result, the Fund might not be
able to sell these securities when the Adviser wishes to do so, or might have
to sell them at less than fair value. In addition, market quotations are less
readily available. Therefore, judgment may at times play a greater role in
valuing these securities than in the case of unrestricted securities.

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

The Fund may also purchase a Stock Index Option in order 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 Stock Index Option,
plus related transaction costs. See "Additional Risk Factors -- Options,
Futures Contracts and Forward Contracts" below and the SAI for further
information on Stock Index Options and the risks associated therewith.

FUTURES CONTRACTS: The Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies or
contracts based on indices of foreign currencies or fixed income securities
including municipal bond indices (as such instruments become available for
trading) as well as stock index futures contracts (collectively "Futures
Contracts"). Such transactions may be entered into for hedging purposes, in
order to protect the Fund's current or intended investments from the effects
of changes in interest or exchange rates or declines in the stock market, as
well as for non-hedging purposes to the extent permitted by applicable law.
The Fund will incur brokerage fees when it purchases and sells Futures
Contracts, and will be required to maintain margin deposits. In addition,
Futures Contracts entail risks. Although the Adviser believes that use of such
contracts will benefit the Fund, if its investment judgment about the general
direction of interest, exchange rates or the stock market is incorrect, the
Fund's overall performance may be poorer than if it had not entered into any
such contract and the Fund may realize a loss.

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

FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts for the purchase or sale of a fixed quantity of a foreign currency
at a future date ("Forward Contracts"). The Fund may enter into Forward
Contracts for hedging purposes as well as for non-hedging purposes (i.e.,
speculative purposes). By entering into transactions in Forward Contracts,
however, the Fund may be required to forego the benefits of advantageous
changes in exchange rates and, in the case of Forward Contracts entered into
for non-hedging purposes, the Fund may sustain losses which will reduce its
gross income. Such transactions, therefore, could be considered speculative.
Forward Contracts are traded over-the-counter and not on organized commodities
or securities exchanges. As a result, Forward Contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain
risks beyond those associated with transactions in Futures Contracts or
options traded on exchanges. The Fund may choose to, or be required to,
receive delivery of the foreign currencies underlying Forward Contracts it has
entered into. Under certain circumstances, such as where the Adviser believes
that the applicable exchange rate is unfavorable at the time the currencies
are received or the Adviser anticipates, for any other reason, that the
exchange rate will improve, the Fund may hold such currencies for an
indefinite period of time. The Fund may also enter into a Forward Contract on
one currency to hedge against risk of loss arising from fluctuations in the
value of a second currency (referred to as a "cross hedge") if, in the
judgment of the Adviser, a reasonable degree of correlation can be expected
between movements in the values of the two currencies. The Fund has
established procedures which require the use of segregated assets or "cover"
in connection with the purchase and sale of such contracts.

OPTIONS ON FOREIGN CURRENCIES: The Fund may also purchase and write options on
foreign currencies ("Options on Foreign Currencies") for the purpose of
protecting against declines in the dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. As in the
case of other types of options, however, the writing of an Option on Foreign
Currency will constitute only a partial hedge, up to the amount of the premium
received, and the Fund may be required to purchase or sell foreign currencies
at disadvantageous exchange rates, thereby incurring losses. The purchase of
an Option on Foreign Currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the
premium paid for the option plus related transaction costs. The Fund may also
choose to, or be required to, receive delivery of the foreign currencies
underlying Options on Foreign Currencies it has entered into. Under certain
circumstances, such as where the Adviser believes that the applicable exchange
rate is unfavorable at the time the currencies are received or the Adviser
anticipates, for any other reason, that the exchange rate will improve, the
Fund may hold such currencies for an indefinite period of time.

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 "Certain Securities and Investment Techniques" in the
SAI.

UTILITY COMPANIES: Since the Fund's investments are concentrated in utility
securities, the value of the shares of the Fund will be especially affected by
factors peculiar to the utilities industry, and may fluctuate more widely than
the value of shares of a fund that invests in a broader range of industries.
The rates many utility companies may charge their customers are controlled by
governmental regulatory commissions which may result in a delay in the utility
company passing along increases in costs to its customers. Furthermore, there
is no assurance that regulatory authorities will, in the future, grant rate
increases or that such increases will be adequate to permit the payment of
dividends on common stocks. Many utility companies, especially electric and
gas and other energy related utility companies, are subject to various
uncertainties, including: risks of increases in fuel and other operating
costs; the high cost of borrowing to finance capital construction during
inflationary periods; difficulty obtaining adequate returns on invested
capital, even if frequent rate increases are approved by public service
commissions; restrictions on operations and increased costs and delays as a
result of environmental and nuclear safety regulations; securing financing for
large construction projects during an inflationary period; difficulties of the
capital markets in absorbing utility debt and equity securities; difficulty in
raising capital in adequate amounts on reasonable terms in periods of high
inflation and unsettled capital markets; technological innovations which may
render existing plants, equipment or products obsolete; the potential impact
of natural or man-made disasters; difficulties in obtaining natural gas for
resale or fuel for electric generation at reasonable prices; coping with the
general effects of energy conservation, particularly in light of changing
policies regarding energy; and special risks associated with the construction
and operation of nuclear power generating facilities, including technical
factors and costs, and the possibility that federal, state and municipal
government authorities may from time to time review existing requirements and
impose additional requirements. Certain utility companies, especially gas and
telephone utility companies, have in recent years been affected by increased
competition, which could adversely affect the profitability of such utility
companies. Furthermore, there are uncertainties resulting from certain
telecommunications companies' diversification into new domestic and
international businesses as well as agreements by many such companies linking
future rate increases to inflation or other factors not directly related to
the active operating profits of the enterprise.

FOREIGN UTILITY COMPANIES: Foreign utility companies are also subject to
regulation, although such regulations may or may not be comparable to those in
the U.S. Foreign utility companies may be more heavily regulated by their
respective governments than utilities in the U.S. and, as in the U.S.,
generally are required to seek government approval for rate increases. In
addition, since many foreign utilities use fuel that causes more pollution
than those used in the U.S., such utilities may be required to invest in
pollution control equipment to meet any proposed pollution restrictions.
Foreign regulatory systems vary from country to country and may evolve in ways
different from regulation in the U.S.

FOREIGN SECURITIES: The Fund may invest in foreign securities. Under normal
circumstances, the Fund may invest up to 35% of its total assets in foreign
securities (not including ADRs). Investing in securities of foreign issuers
generally involves risks not ordinarily associated with investing in
securities of domestic issuers. These include changes in currency rates,
exchange control regulations, governmental administration, economic or
monetary policy (in the U.S. or abroad) or circumstances in dealings between
nations. Costs may be incurred in connection with conversions between various
currencies. Special considerations also include more limited information about
foreign issuers, higher brokerage costs, different accounting standards and
thinner trading markets. Foreign securities markets are generally less liquid,
more volatile and less subject to government supervision than in the U.S.
Investments in foreign countries are generally affected by other factors
including expropriation, confiscatory taxation and potential difficulties in
enforcing contractual obligations and are generally subject to extended
settlement periods. The Fund may hold foreign currency received in connection
with investments in foreign securities when, in the judgment of the Adviser,
it would be beneficial to convert such currency into U.S. dollars at a later
date, based on anticipated changes in the relevant exchange rate. The Fund may
also hold foreign currency in anticipation of purchasing foreign securities.

EMERGING MARKET SECURITIES: The risks of investing in foreign securities may
be intensified in the case of investments in emerging markets. Securities of
many issuers in emerging markets may be less liquid and more volatile than
securities of comparable domestic issuers. Emerging markets also have
different clearance and settlement procedures, and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when a portion of the
assets of the Fund is uninvested and no return is earned thereon. The
inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result in losses to the Fund due to subsequent declines in value of the
portfolio security, a decrease in the level of liquidity in the Fund's
portfolio, or if the Fund has entered into a contract to sell the security, in
possible liability to the purchaser. Certain markets may require payment for
securities before delivery and in such markets the Fund bears the risk that
the securities will not be delivered and that the Fund's payments will not be
returned. Securities prices in emerging markets can be significantly more
volatile than in the more developed nations of the world, reflecting the
greater uncertainties of investing in less established markets and economies.
In particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions
on foreign ownership, or prohibitions against 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.

LOWER RATED DEBT SECURITIES: Securities rated BBB by S&P or Fitch or Baa by
Moody's (and comparable unrated securities), while normally exhibiting
adequate protection parameters, have speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than higher rated
securities. If a security purchased by the Fund is subsequently downgraded to
below BBB by S&P or Fitch or Baa by Moody's (or comparable standards for
unrated securities), the security will be sold only if the Adviser believes it
is advantageous to do so.

As indicated above, up to 20% of the debt securities held by the Fund may be
bonds rated Ba or lower by Moody's or BB or lower by S&P or Fitch and
comparable unrated securities (commonly known as "junk bonds"). No minimum
rating standard is required by the Fund. These securities are considered
speculative and, while generally providing greater income than investments in
higher rated securities, will involve greater risk of principal and income
(including the possibility of default or bankruptcy of the issuers of such
securities) and may involve greater volatility of price (especially during
periods of economic uncertainty or change) than securities in the higher
rating categories. However, since yields vary over time, no specific level of
income can ever be assured. These lower rated high yielding fixed income
securities generally tend to reflect economic changes and short-term corporate
and industry developments to a greater extent than higher rated securities
which react primarily to fluctuations in the general level of interest rates.
These lower rated fixed income securities are also affected by changes in
interest rates, the market's perception of their credit quality, and the
outlook for economic growth. In the past, economic downturns or an increase in
interest rates have, under certain circumstances, caused a higher incidence of
default by the issuers of these securities and may do so in the future,
especially in the case of highly leveraged issuers. During certain periods,
the higher yields on the Fund's lower rated high yielding fixed income
securities are paid primarily because of the increased risk of loss of
principal and income, arising from such factors as the heightened possibility
of default or bankruptcy of the issuers of such securities. Due to the fixed
income payments of these securities, the Fund may continue to earn the same
level of interest income while its net asset value declines due to portfolio
losses, which could result in an increase in the Fund's yield despite the
actual loss of principal. The market for these lower rated fixed income
securities may be less liquid than the market for investment grade fixed
income securities. Therefore, judgment may at times play a greater role in
valuing these securities than in the case of investment grade fixed income
securities.

See Appendix C for a further description of these and other bond ratings and
see "Certain Securities and Investment Techniques -- Risk of Investing in
Lower Rated Debt Securities" in the SAI for further information on these lower
rated securities.

The value of debt securities, including utility debt securities and Government
Securities, generally has an inverse relationship to the movement of interest
rates and, to the extent the Fund invests in debt securities, the value of the
Fund's shares will also have this relationship.

NON-DIVERSIFIED STATUS: The Fund has registered as a "non-diversified"
investment company. As a result, the proportion of its assets that may be
invested in the securities of any one issuer is limited only by the Fund's own
investment restrictions and the diversification requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). Government Securities are not
subject to any investment limitation. Since the Fund may invest a relatively
high percentage of its assets in a limited number of issuers, the Fund will be
more susceptible to any single economic, political or regulatory occurrence
and to the financial conditions of the issuers in which it invests.

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

Transactions in Forward Contracts may be entered into only in the over-the-
counter market. Futures Contracts and Options on Futures Contracts may be
entered into on U.S. exchanges regulated by the Commodity Futures Trading
Commission and on foreign exchanges. In addition, the securities underlying
Stock Index Options, Futures Contracts and Options on Futures Contracts
traded by the Fund will include both domestic and foreign securities.

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

Because of the Fund's significant investments in the utilities industry and
the risks discussed above, an investment in shares of the Fund should not be
considered a complete investment program. Each prospective purchaser should
take into account his investment objectives as well as his other investments
when considering the purchase of shares of the Fund.

PORTFOLIO TRADING -- The primary consideration in placing portfolio security
transactions with broker-dealers is execution at the most favorable prices.
Consistent with the forgoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD") and such other
policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund and of the other investment company clients of MFD, the
Fund's distributor, as a factor in the selection of broker-dealers to execute
the Fund's portfolio transactions. From time to time, the Adviser may direct
certain portfolio transactions to broker-dealer firms which, in turn, have
agreed to pay a portion of the Fund's operating expenses (e.g., fees charged
by the custodian of the Fund's assets). For a further discussion of portfolio
trading, see "Portfolio Transactions and Brokerage Commissions" in the SAI.

The portfolio will be managed actively and the selection of securities
modified as the Adviser deems necessary. Although the Fund does not intend to
seek short-term profits, securities in its portfolio will be sold whenever the
Adviser believes it is appropriate to do so without regard to the length of
time the particular asset may have been held. For the fiscal year ended
October 31, 1997, 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 a fund with a lesser portfolio turnover
rate.

The SAI includes a discussion of investment policies and a listing of specific
investment restrictions which govern the Fund's investment policies. The
specific investment restrictions listed in the SAI may be changed without
shareholder approval unless indicated otherwise (see "Investment Objective,
Policies and Restrictions -- Investment Restrictions" in the SAI).

7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement, dated September 1, 1993 (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser provides the Fund with overall investment
advisory services. Maura A. Shaughnessy, a Senior Vice President of the
Adviser, has been the Fund's portfolio manager since 1992. Ms. Shaughnessy has
been employed as a portfolio manager by the Adviser since 1991. Subject to
such policies as the Trustees may determine, the Adviser makes investment
decisions for the Fund. For its services and facilities, the Adviser is
entitled to receive a management fee, computed and paid monthly, in an amount
equal to the sum of 0.375% of the Fund's average daily net assets and 6.25% of
the Fund's gross income (i.e., income other than gains from the sale of
securities, gains from options and futures transactions, premium income from
options written and gains from foreign exchange transactions) of the Fund for
its then-current fiscal year. Commencing April 1, 1997, the Adviser
voluntarily agreed to reduce the management fee to 0.50% of the Fund's average
daily net assets. This voluntary fee reduction may be rescinded at any time
without notice to shareholders as to the fee accruing after the date of such
rescission. From March 1, 1995 to March 31, 1997 the Adviser voluntarily
agreed to reduce its management fee to 0.375% of the Fund's daily net assets.

For the Fund's fiscal year ended October 31, 1997, MFS received management
fees totalling $721,515. If MFS had not reduced its management fee, MFS would
have received management fees of $1,015,624 (of which $589,990 would have been
based on average daily net assets and $425,634 on gross income), equivalent to
0.65% of the Fund's average daily net assets.

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS
Intermediate Income Trust, MFS Charter Income Trust, MFS Special Value Trust,
MFS Institutional Trust, MFS Variable Insurance Trust, MFS/Sun Life Series
Trust and seven variable accounts, each of which is a registered investment
company established by Sun Life Assurance Company of Canada (U.S.) ("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 U.S., Massachusetts Investors Trust.
Net assets under the management of the MFS organization were approximately $72
billion on behalf of approximately 2.8 million investor accounts as of January
31, 1998. As of such date, the MFS organization managed approximately $47.2
billion of assets invested in equity securities and approximately $20.8
billion of assets invested in fixed income securities. Approximately $4.2
billion of the assets managed by MFS are invested in securities of foreign
issuers. MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services
Holdings, Inc., which in turn is an indirect wholly owned subsidiary of Sun
Life Assurance Company of Canada ("Sun Life"). The Directors of MFS are
Jeffrey L. Shames, Arnold D. Scott, John W. Ballen, John D. McNeil and Donald
A. Stewart. Mr. Shames is the Chairman and President of MFS and Mr. Scott is a
Senior Executive Vice President and the Secretary of MFS. Mr. Ballen is an
Executive Vice President and Chief Equity Officer of MFS. Messrs. McNeil and
Stewart are the Chairman and the President, respectively, of Sun Life. Sun
Life, a mutual life insurance company, is one of the largest international
life insurance companies and has been operating in the U.S. since 1895,
establishing a headquarters office here in 1973. The executive officers of MFS
report to the Chairman of Sun Life.

W. Thomas London, Stephen E. Cavan, James O. Yost, James R. Bordewick, Jr.,
Ellen Moynihan and Mark E. Bradley, all of whom are officers of MFS, are
officers of the Trust.

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

8. INFORMATION CONCERNING SHARES OF THE FUND

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

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

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

<S> <C> <C> <C> <C>
Less than $100,000 ............................. 4.75% 4.99% 4.00%
$100,000 but less than $250,000 ................ 4.00 4.17 3.20
$250,000 but less than $500,000 ................ 2.95 3.04 2.25
$500,000 but less than $1,000,000 .............. 2.20 2.25 1.70
$1,000,000 or more ............................. None** None** See Below**
</TABLE>

- ------------
*Because of rounding in the calculation of offering price, actual sales
charges may be more or less than those calculated using the percentages
above.
**A CDSC will apply to such purchases, as discussed below.

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

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

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

COMMISSION PAID BY MFD TO DEALERS CUMULATIVE PURCHASE AMOUNT

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

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

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

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

CONTINGENT
YEAR OF REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE

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

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

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

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

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

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

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

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

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

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

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 or restrict any specific purchase or exchange request. In the event
that the Fund or MFD rejects an exchange request, neither the redemption nor
the purchase side of the exchange will be processed.

DEALER CONCESSIONS. Dealers may receive different compensation with respect to
sales of Class A, Class B and Class C shares. In addition, from time to time,
MFD may pay dealers 100% of the applicable sales charge on sales of Class A
shares of certain specified MFS Funds sold by such dealer during a specified
sales period. In addition, MFD or its affiliates may, from time to time, pay
dealers an additional commission equal to 0.50% of the net asset value of all
of the Class B and/or Class C shares of certain specified MFS Funds sold by
such dealer during a specified sales period. In addition, from time to time,
MFD, at its expense, may provide additional commissions, compensation or
promotional incentives ("concessions") to dealers which sell or arrange for
the sale of shares of the Fund. Such concessions provided by MFD may include
financial assistance to dealers in connection with preapproved conferences or
seminars, sales or training programs for invited registered representatives
and other employees, payment for travel expenses, including lodging, incurred
by registered representatives and other employees for such seminars or
training programs, seminars for the public, advertising and sales campaigns
regarding one or more MFS Funds, and/or other dealer-sponsored events. From
time to time, MFD may make expense reimbursements for special training of a
dealer's registered representatives and other employees in group meetings or
to help pay the expenses of sales contests. Other concessions may be offered
to the extent not prohibited by state laws or any self-regulatory agency, such
as the NASD.

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

EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e.,
an established account) may be exchanged for shares of the same class of any
of the other MFS Funds at net asset value (if available for sale). Shares of
one class may not be exchanged for shares of any other class.

CONTINGENT DEFERRED SALES CHARGE: Investments in Class A, Class B and Class C
shares ("Direct Purchases") will be subject to a CDSC for a period of: (i)
with respect to Class A and Class C shares, 12 months, (however, the CDSC on
Class A shares is only imposed with respect to purchases of $1 million or more
of Class A shares; or purchases by certain retirement plans of Class A
shares); or (ii) with respect to Class B shares, six years. Purchases of Class
A shares made during a calendar month, regardless of when during the month the
investment occurred, will age one month on the last day of the month and each
subsequent month. Class B and Class C shares purchased on or after January 1,
1993 will be aggregated on a calendar month basis -- all transactions made
during a calendar month, regardless of when during the month they have
occurred, will age one year at the close of business on the last day of such
month in the following calendar year and each subsequent year. For Class B
shares of the Fund purchased prior to January 1, 1993, transactions will be
aggregated on a calendar year basis -- all transactions made during a calendar
year, regardless of when during the year they have occurred, will age one year
at the close of business on December 31 of that year and each subsequent year.

At the time of a redemption, the amount by which the value of a shareholder's
account for a particular class of shares represented by Direct Purchases
exceeds the sum of the six calendar year aggregations (12 months in the case
of purchases of Class C shares and purchases of $1 million or more of Class A
shares or purchases by certain retirement plans of Class A shares) of Direct
Purchases may be redeemed without charge ("Free Amount"). Moreover, no CDSC is
ever assessed on additional shares acquired through the automatic reinvestment
of dividends or capital gain distributions ("Reinvested Shares"). Therefore,
at the time of redemption of a particular class, (i) any Free Amount is not
subject to the CDSC and (ii) the amount of the redemption equal to the then-
current value of Reinvested Shares is not subject to the CDSC, but (iii) any
amount of the redemption in excess of the aggregate of the then-current value
of Reinvested Shares and the Free Amount is subject to a CDSC. The CDSC will
first be applied against the amount of Direct Purchases which will result in
any such charge being imposed at the lowest possible rate. The CDSC to be
imposed upon redemptions of shares will be calculated as set forth in
"Purchases" above.

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

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

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

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

IN-KIND DISTRIBUTIONS. The Trust agrees to redeem shares of the Fund solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the Fund
during any 90-day period for any one shareholder. The Fund has reserved the
right to pay other redemptions, either totally or partially, by a distribution
in-kind of securities (instead of cash) from the Fund's portfolio. The
securities distributed in such a distribution would be valued at the same
amount as that assigned to them in calculating the net asset value for the
shares being sold. If a shareholder received a distribution in-kind, the
shareholder could incur brokerage or transaction charges when converting the
securities to cash.

In certain circumstances, the fees described below have not yet been imposed
or are being waived. These circumstances are described below under the
heading "Current Level of Distribution and Service Fees."

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

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 in 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 operationg 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.

CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES: The Fund's Class A, Class B
and Class C distribution and service fees for its current fiscal year are
0.25%, 1.00% 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 declare daily and pay to its shareholders substantially
all of its net investment income as dividends on a monthly basis. Dividends
are generally distributed on the first business day of the following month.
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 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 -- Distributions Options"
below). Distributions paid by the Fund with respect to Class A shares will
generally be greater than those paid with respect to Class B and Class C
shares because expenses attributable to Class B and Class C shares will
generally be higher.

TAX STATUS
The Fund is treated as an entity separate from the other series of the Trust
for federal income tax purposes. In order to minimize the taxes the Fund would
otherwise be required to pay, the Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the 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.

Fund distributions of net capital gains or net short-term capital gains will
reduce the Fund's net asset value per share. Shareholders who buy shares
shortly before the Fund makes such 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.

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 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 three classes of shares which
it offers to the general public, entitled Class A, Class B and Class C Shares
of Beneficial Interest (without par value). The Fund also has a class of
shares which it offers exclusively to certain institutional investors,
entitled Class I shares. The Trust has reserved the right to create and issue
additional classes and series of shares, in which case each class of shares of
a series would participate equally in the earnings, dividends and assets
attributable to that class of 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).

PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, current distribution rate and
total rate of return quotations for each class of shares and may also quote
fund rankings in the relevant fund category from various sources, such as
Lipper Analytical Securities Corporation, Morningstar, Inc. and Wiesenberger
Investment Companies Service. Yield quotations are based on the annualized net
investment income per class share over a 30-day period stated as a percent of
the maximum public offering price on the last day of that period. Yield
calculations for Class B and Class C shares assume no CDSC is paid. The
current distribution rate for each class is generally based upon the total
amount of dividends per share paid by the Fund to shareholders of that class
during the past 12 months and is computed by dividing the amount of such
dividends by the maximum public offering price of that class at the end of
such period. Current distribution rate calculations for Class B and Class C
shares assume no CDSC is paid. The current distribution rate differs from the
yield calculation because it may include distributions to shareholders from
sources other than dividends and interest, such as premium income from option
writing, short-term capital gains, and return of invested capital, and is
calculated over a different period of time. Total rate of return quotations
will reflect the average annual percentage change over stated periods in the
value of an investment in each class of shares of the Fund made at the maximum
public offering price of the shares of that class and with all distributions
reinvested and which will give effect to the imposition of any applicable CDSC
assessed upon redemptions of the Fund's Class B and Class C shares. Such total
rate of return quotations may be accompanied by quotations which do not
reflect the reduction in value of the initial investment due to the sales
charge or the deduction of the CDSC, and which will thus be higher. The Fund
offers multiple classes of shares which were initially offered for sale to,
and purchased by, the public on different dates (the class "inception date").
The calculation of total rate of return for a class of shares which has a
later class inception date than another class of shares of the Fund is based
both on (i) the performance of the Fund's newer class from its inception date
and (ii) the performance of the Fund's oldest class from its inception date up
to the class inception date of the newer class. See the SAI for further
information on the calculation of total rate of return for share classes with
different class inception dates.

All performance quotations are based on historical performance and are not
intended to indicate future performance. Yield reflects only net portfolio
income as of a stated period of time and current distribution rate reflects
only the rate of distributions paid by the Fund over a stated period of time,
while total rate of return reflects all components of investment return over a
stated period of time. The Fund's quotations may from time to time be used in
advertisements, shareholder reports or other communications to shareholders.
For a discussion of the manner in which the Fund will calculate its yield,
current distribution rate and total rate of return, see the SAI. For further
information about the Fund's performance for the fiscal year ended October 31,
1997, 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").

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

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

-- Dividends and capital gain distributions in cash.

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

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 a 36-month period for purchases of $1 million or more), the shareholder
may obtain such shares at the same reduced sales charge as though the total
quantity were invested in one lump sum, subject to escrow agreements and the
appointment of an attorney for redemptions from the escrow amount if the
intended purchases are not completed, by completing the Letter of Intent
section of the Account Application.

RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchase of Class A shares when his new investment, together with
the current offering price value of all holdings of Class A, B and C shares of
that shareholder in the MFS Funds or MFS Fixed Fund (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 other MFS Funds. Furthermore, distributions made by the Fund may
be automatically invested at net asset value (and without any applicable CDSC)
in shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.

DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made through
a shareholder's checking account on any day of the month. If the shareholder
does not specify a date, the investment will automatically occur on the first
business day of the month. Required forms are available from the Shareholder
Servicing Agent or investment dealers.

AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares
of the other MFS Funds under the Automatic Exchange Plan provided such shares
are available for sale. The Automatic Exchange Plan provides for automatic
monthly or quarterly exchanges of funds from the shareholder's account in such
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 -- Except as noted under "Purchases -- Class C
Shares," shares of the Fund may be purchased by all types of tax-deferred
retirement plans, including IRAs, SEP-IRA plans, 401(k) plans, 403(b) plans
and other corporate pension and profit-sharing plans. Investors should consult
with their tax adviser before establishing any of the tax-deferred retirement
plans described above.

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

The Fund's SAI, dated March 1, 1998, 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 Stock Index 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; and (vii)
various services and privileges provided by the Fund for the benefit of its
shareholders, including additional information with respect to the exchange
privilege.
<PAGE>
APPENDIX A

WAIVERS OF SALES CHARGES

I. WAIVERS OF ALL APPLICABLE SALES CHARGES

1. DIVIDEND REINVESTMENT

o Shares acquired through dividend or capital gain reinvestment; and

o Shares acquired by automatic reinvestment of distributions of
dividends and capital gains of any MFS Fund 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 or any of their subsidiary
companies;

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

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

o Employees or registered representatives of dealers;

o Institutional Clients of MFS or MFS Institutional Advisors, Inc.

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 Plan participant;

o Loan from 401(a) Plan or ESP Plan;

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

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

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

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 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

1. WRAP ACCOUNT AND FUND "SUPERMARKET" INVESTMENTS

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

2. INVESTMENT BY INSURANCE COMPANY SEPARATE ACCOUNTS

o Shares acquired by insurance company separate accounts.

3. RETIREMENT PLANS

ADMINISTRATIVE SERVICES ARRANGEMENTS

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

REINVESTMENT OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS

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

Shares redeemed on account of distributions made under the following
circumstances:

IRA'S

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

o Tax-free returns of excess IRA contributions.

401(a) PLANS

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

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

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

5. BANK TRUST DEPARTMENTS AND LAW FIRMS

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

III. WAIVERS OF CLASS B AND CLASS C SALES CHARGES

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

1. SYSTEMATIC WITHDRAWAL PLAN

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

2. DEATH OF OWNER

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

3. DISABILITY OF OWNER

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

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

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

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

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

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

PRINCIPAL SECTORS OF THE UTILITIES INDUSTRY

The principal sectors of the utility industry in which the Fund may invest are
discussed below.

ELECTRIC -- The electric utility industry consists of companies that are
engaged principally in the generation, transmission and sale of electric
energy, although many also provide other energy-related services. Domestic
electric utility companies, in general, recently have been favorably affected
by lower fuel and financing costs and the full or near completion of major
construction programs. In addition, many of these companies recently have
generated cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Some electric utilities have also taken advantage of the right to
sell power outside of their traditional geographic areas. Electric utility
companies historically have been subject to the risks associated with
increases in fuel and other operating costs, high interest costs on borrowings
needed for capital construction programs, costs associated with compliance
with environmental and safety regulations and changes in the regulatory
climate.

In the U.S., the construction and operation of nuclear power facilities is
subject to increased scrutiny by, and evolving regulations of, the Nuclear
Regulatory Commission and state agencies having comparable jurisdiction.
Increased scrutiny might result in higher operating costs and higher capital
expenditures, with the risk that the regulators may disallow inclusion of
these costs in rate authorizations or the risk that a company may not be
permitted to operate or complete construction of a facility. In addition,
operators of nuclear power plants may be subject to significant costs for
disposal of nuclear fuel and for the decommissioning of such plants.

TELECOMMUNICATIONS -- The telephone industry is large and highly concentrated.
Companies that distribute telephone services and provide access to the
telephone networks comprise the greatest portion of this segment. Telephone
companies in the U.S. are still experiencing the effects of the breakup of
American Telephone & Telegraph Company, which occurred in 1984. Since 1984,
companies engaged in telephone communication services have expanded their non-
regulated activities into other businesses, including cellular telephone
services, data processing, equipment retailing, computer software and hardware
services, and financial services. This expansion has provided significant
opportunities for certain telephone companies to increase their earnings and
dividends at faster rates than had been allowed in traditionally regulated
businesses. Increasing competition, technological innovations and other
structural changes, however, could adversely affect the profitability of such
utilities.

GAS -- Gas transmission companies and gas distribution companies are also
undergoing significant changes. In the U.S., interstate transmission companies
are regulated by the Federal Energy Regulatory Commission, which is reducing
its regulation of the industry. Many companies have diversified into oil and
gas exploration and development, making returns more sensitive to energy
prices. In the recent decade, gas utility companies have been adversely
affected by disruptions in the oil industry and have also been affected by
increased concentration and competition. In the opinion of the Adviser,
however, environmental considerations could improve the gas industry outlook
in the future. For example, natural gas is the cleanest of the hydrocarbon
fuels, and this may result in incremental shifts in fuel consumption toward
natural gas and away from oil and coal.

WATER -- Water supply utilities are companies that collect, purify, distribute
and sell water. In the U.S. and around the world, the industry is highly
fragmented because most of the supplies are owned by local authorities.
Companies in this industry are generally mature and are experiencing little or
no per capita volume growth.
--------------------

There can be no assurance that the positive developments noted above,
including those relating to changing regulation, will occur or that risk
factors other than those noted above will not develop in the future.
<PAGE>
APPENDIX C

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.

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

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 over 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 that are not
rated as a matter of policy.

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

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

STANDARD & POOR'S RATING SERVICES

AAA: Debt rated "AAA" has the highest rating assigned by S&P. 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.

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 rating "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
which is assigned an actual or implied "CCC" rating.

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

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

FITCH INVESTORS SERVICE, INC.

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 protect. Default in payment of interest and/or
principal seems probable over time.

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

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 lowered, FitchAlert is relatively short-term, and should be
resolved within 12 months.
<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
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116

<PAGE>
------------
[LOGO] M F S(SM) BULK RATE
INVESTMENT MANAGEMENT U.S. POSTAGE
We invented the mutual fund(SM) PAID
MFS
------------

MFS(R) UTILITIES FUND
500 Boylston Street, Boston, MA 02116-3741

This is your fund's current prospectus.
Please keep it with your financial records
because it provides important information
about your investment.

MUF-1-3/98/185M 35/235/335

<PAGE>

[LOGO] M F S(SM)
INVESTMENT MANAGEMENT

STATEMENT OF
MFS(R) UTILITIES FUND ADDITIONAL INFORMATION
(A Member of the MFS Family of Funds(R))
March 1, 1998
- --------------------------------------------------------------------------------
Page
----
1. Definitions ......................................................... 2
2. Investment Objectives, Policies and Restrictions .................... 2
Certain Securities and Investment Techniques ...................... 2
3. Management of the Fund .............................................. 10
Trustees .......................................................... 10
Officers .......................................................... 11
Trustee Compensation Table ........................................ 11
Investment Adviser ................................................ 11
Administrator ..................................................... 12
Custodian ......................................................... 12
Shareholder Servicing Agent ....................................... 13
Distributor ....................................................... 13
4. Portfolio Transactions and Brokerage Commissions .................... 14
5. Shareholder Services ................................................ 15
Investment and Withdrawal Programs ................................ 15
Exchange Privilege ................................................ 17
Tax-Deferred Retirement Plans ..................................... 17
6. Tax Status .......................................................... 17
7. Determination of Net Asset Value and Performance .................... 19
8. Description of Shares, Voting Rights and Liabilities ................ 21
9. Distribution Plan ................................................... 22
10. Independent Auditors and Financial Statements ....................... 22
Appendix A .......................................................... A-1

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

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(R) Utilities Fund, a non-
diversified series of MFS Series
Trust VI, a Massachusetts business
trust (the "Trust"), formerly known
as MFS Worldwide Total Return Fund,
until its name was changed on June
29, 1993. Prior to August 3, 1992,
the Trust was known as MFS
Worldwide Total Return Trust. The
Fund was a separate open-end, non-
diversified management company,
organized as a Massachusetts
business trust in 1991 and was
known as MFS Utilities Trust prior
to August 3, 1992. The Fund became
a series of the Trust on September
7, 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
March 1, 1998, as amended or
supplemented from time to time.

2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE. The Fund's investment objective is to seek capital
growth and current income (income above that available from a portfolio
invested entirely in equity securities). Any investment involves risk and
there can be no assurance that the Fund will achieve its investment objective.

INVESTMENT POLICIES. The Fund seeks to achieve its investment objective by
investing at least 65% of its assets, under normal market conditions, in
equity and debt securities issued by domestic and foreign utility companies as
well as by investing in certain other securities. The Prospectus contains a
discussion of the various types of securities in which the Fund may invest and
certain risks involved in such investments. Some of these investment
techniques and the risks associated therewith are discussed below.

CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

NON-DIVERSIFIED STATUS: The Fund has registered as a "non-diversified"
investment company so that the proportion of its assets that may be invested
in the securities of any one issuer is limited only by the Fund's own
investment restrictions and the diversification requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). U.S. Government securities,
which are generally considered free of credit risk and are assured as to
payment of principal and interest if held to maturity, are not subject to any
investment limitation.

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

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

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

FOREIGN SECURITIES: The Fund may invest up to 35% of its total assets in
foreign securities (not including American Depositary Receipts). Investing in
foreign securities generally represents a greater degree of risk than
investing in domestic securities, due to possible exchange rate fluctuations,
less publicly available information, more volatile markets, less securities
regulation, less favorable tax provisions, war or expropriation. As a result
of its investments in foreign securities, the Fund may receive interest or
dividend payments, or the proceeds of the sale or redemption of such
securities, in the foreign currencies in which such securities are
denominated. Under certain circumstances, such as where the Adviser believes
that the applicable exchange rate is unfavorable at the time the currencies
are received or the Adviser anticipates, for any other reason, that the
exchange rate will improve, the Fund may hold such currencies for an
indefinite period of time. While the holding of currencies will permit the
Fund to take advantage of favorable movements in the applicable exchange rate,
such strategy also exposes the Fund to risk of loss if exchange rates move in
a direction adverse to the Fund's position. Such losses could reduce any
profits or increase any losses sustained by the Fund from the sale or
redemption of securities and could reduce the dollar value of interest or
dividend payments received.

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. 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 denominated in foreign currency.

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

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

In a CMO, a series of bonds or certificates is usually issued in multiple
classes with different maturities. Each class of CMOs, often referred to as a
"tranche," is issued at a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates resulting in a loss of all
or part of the premium if any has been paid. Certain classes of CMO's have
priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, depending on the type of CMOs in which the Fund invests,
the investment may be subject to a greater or lesser risk of prepayment than
other types of mortgage-related securities. Interest is paid or accrued on all
classes of the CMOs on a monthly, quarterly or semiannual basis. The principal
of and interest on the Mortgage Assets may be allocated among the several
classes of a series of a CMO in innumerable ways. In a common structure,
payments of principal, including any principal prepayments, on the Mortgage
Assets are applied to the classes of the series of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment
of principal will be made on any class of CMOs until all other classes having
an earlier stated maturity or final distribution date have been paid in full.

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

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 provisions 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
instrument in such a security.

LENDING OF PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities. Such loans will usually be made only to member
banks of the Federal Reserve System and member firms (or subsidiaries thereof)
of 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 in an amount at least equal to the market
value of the securities loaned. The Fund would also receive a fee from the
borrower. The Fund would receive compensation from the investment of cash
collateral, less a fee paid to the borrower, if the collateral is in the form
of cash. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material
matter affecting the investment. As with other extensions of credit there are
risks of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would be made
only to entities deemed by MFS to be of good standing, and when, in the
judgment of MFS, the consideration which can be earned currently from
securities loans of this type justifies the attendant risk. If MFS determines
to make securities loans, it is not intended that the value of the securities
loaned would exceed 30% of the value of the Fund's total assets.

"WHEN-ISSUED" SECURITIES: The Fund may purchase debt securities on a "when-
issued" or on a "forward delivery" basis. The commitment to purchase an
obligation for which payment will be made on a future date may be deemed a
separate security. The Fund does not pay for these securities until received,
and does not start earning interest on them until the contractual settlement
date. When the Fund commits to purchase these securities on a "when-issued" or
"forward delivery" basis, it will set up procedures consistent with the
General Statement of Policy of the Securities and Exchange Commission (the
"SEC") concerning such purchases. Since that policy currently recommends that
an amount of the Fund's assets equal to the amount of the purchase be held
aside or segregated to be used to pay for the commitment, the Fund will always
have liquid assets sufficient to cover any commitments or to limit any
potential risk. Although the Fund does not intend to make such purchases for
speculative purposes and intends to adhere to the provisions of the SEC
policy, purchases of securities on such bases may involve more risk than other
types of purchases. For example, the Fund may have to sell assets which have
been set aside in order to meet redemptions. Also, if the Fund determines it
is necessary to sell the "when-issued" or "forward delivery" securities before
delivery, the Fund may incur a loss because of market fluctuations since the
time the commitment to purchase such securities was made.

RISKS OF INVESTING IN LOWER RATED DEBT SECURITIES: As noted in the Prospectus,
up to 20% of the debt securities held by the Fund may be bonds rated Ba or
lower by Moody's Investors Service, Inc. ("Moody's") or BB or lower by
Standard & Poor's Ratings Services ("S&P") or Fitch Investors Service, Inc.
("Fitch") and comparable unrated securities (commonly known as "junk bonds").
No minimum rating standard is required by the Fund. These securities are
considered speculative and, while generally providing greater income than
investments in higher rated securities, will involve greater risk of principal
and income (including the possibility of default or bankruptcy of the issuers
of such securities) and may involve greater volatility of price (especially
during periods of economic uncertainty or change) than securities in the
higher rating categories and because yields vary over time, no specific level
of income can ever be assured. These lower rated high yielding fixed income
securities generally tend to reflect economic changes (and 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. The prices for these
securities may be affected by legislative and regulatory developments. 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 to meet redemption requests or to respond to changes in the market.

While the Adviser may refer to ratings issued by established credit rating
agencies, it is not the Fund's policy to rely exclusively on ratings issued by
these rating agencies, but rather to supplement such ratings with the
Adviser's own independent and ongoing review of credit quality. To the extent
the Fund invests in these lower rated 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 fixed income
securities. These lower rated securities may also include zero coupon bonds
which are described in the Prospectus.

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

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

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

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

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

Stock Index Options, and stock index futures contracts, described below,
provide for the making and acceptance of a cash settlement based on changes in
the value of the underlying index, rather than delivery of an underlying
security. The index underlying a Stock Index Option is typically a broad-based
index, such as the Standard & Poor's 500 Index, designed to measure movements
in the equity market as a whole. In the event that Stock Index Options, or
stock index futures contracts, are introduced on indices of utility
securities, the Fund would likely trade such instruments for the same purposes
described herein.

FUTURES CONTRACTS: The Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies (or
contracts based on indices of foreign currencies or fixed income securities,
including municipal bond indices, as such instruments become available for
trading) as well as stock index futures contracts (collectively "Futures
Contracts"). This investment technique is designed to hedge (i.e., to protect)
against anticipated future changes in interest or exchange rates or declines
in the stock market which otherwise might adversely affect the value of the
Fund's portfolio securities or adversely affect the prices of long-term bonds
or other securities which the Fund intends to purchase at a later date. Such
transactions may also be entered into for non-hedging purposes, to the extent
permitted by applicable law, which involves greater risks.

The following discussion applies to Futures Contracts other than stock index
Futures Contracts.

A "sale" of a Futures Contract means a contractual obligation to deliver the
securities or foreign currency called for by the contract at a fixed price at
a specified time in the future. A "purchase" of a Futures Contract means a
contractual obligation to acquire the securities or foreign currency at a
fixed price at a specified time in the future.

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

Stock Index Futures Contracts. The Fund may enter into stock index Futures
Contracts in order to protect the Fund's current or intended stock investments
from broad fluctuations in stock prices. For example, the Fund may sell
Futures Contracts in anticipation of or during a decline in market prices to
attempt to offset the decrease in market value of the Fund's securities
portfolio that might otherwise result. If such market decline occurs, the loss
in value of portfolio securities may be offset, in whole or in 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 Futures
Contracts in order to gain rapid market exposure that may, in part or in
whole, offset increases in the cost of securities that the Fund intends to
purchase. As such acquisitions are made, the corresponding positions in
Futures Contracts will be closed out. In a substantial majority of these
transactions, the Fund will purchase such securities upon the termination of
the futures position, but under unusual market conditions, a long futures
position may be terminated without a related purchase of securities. The
trading of stock index Futures Contracts is also subject to the initial
deposit and margin requirements described above. The Fund may also enter into
transactions in Futures Contracts for non-hedging purposes to the extent
permitted by applicable law.

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

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

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
liquid assets representing the difference are segregated by the Fund. 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 is less than the exercise price of the put written if liquid
assets representing the difference are segregated by the Fund. Put and call
Options on 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, since 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 Futures Contract, will close out its futures position. An Option
on a Futures Contract is traded on the same contract market as the underlying
Futures Contact, subject to regulation by the Commodity Futures Trading
Commission ("CFTC") and the performance guarantee of the exchange clearing
house. Options on Futures Contracts, as noted in the Prospectus, are also
traded on foreign exchanges.

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

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

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

RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S
PORTFOLIO -- The Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in options, Futures Contracts, and Forward
Contracts will depend on the degree to which price movements in the underlying
index or instrument correlate with price movements in the relevant portion of
the Fund's portfolio. If the values of the portfolio securities being hedged
do not move in the same amount or direction as the instruments underlying
options, Futures Contracts or Forward Contracts traded, the Fund's hedging
strategy may not be successful and the Fund could sustain losses on its
hedging strategy which would not be offset by gains on its portfolio. It is
also possible that there may be a negative correlation between the instrument
underlying an option, Futures Contract or Forward Contract traded and the
portfolio securities being hedged, which could result in losses both on the
hedging transaction and the portfolio securities. In such instances, the
Fund's overall return could be less than if the hedging transaction had not
been undertaken. In the case of Futures and options, the portfolio securities
which are being hedged may not be the same type of obligation underlying such
contract. As a result, the correlation probably will not be exact.
Consequently, the Fund bears the risk that the price of the portfolio
securities being hedged will not move in the same amount or direction as the
underlying index or obligation. It should be noted that Futures Contracts or
options, based upon a narrower index of securities, such as those of a
particular industry group, may present greater risk than options or Futures
Contracts based on a broad market index, because a narrower index is more
susceptible to rapid and extreme fluctuations as a result of changes in the
value of a small number of securities. The correlation between prices of
securities and prices of options, Futures Contracts or Forward Contracts may
be distorted due to differences in the nature of the markets, such as
differences in margin requirements, the liquidity of such markets and the
participation of speculators in the option, Futures Contract and Forward
Contract markets. Due to the possibility of distortion, a correct forecast of
general interest rate trends by the Adviser may still not result in a
successful transaction. The trading of Options on Futures Contracts also
entails the risk that changes in the value of the underlying Futures Contract
will not be fully reflected in the value of the option. The risk of imperfect
correlation, however, generally tends to diminish as the maturity or
termination date of the option, Futures Contract or Forward Contract
approaches. In addition, where the Fund enters into Forward Contracts as a
"cross hedge" (i.e., the purchase or sale of a Forward Contract on one
currency to hedge against risk of loss arising from changes in value of a
second currency), the Fund incurs the risk of imperfect correlation between
changes in the values of the two currencies which would result in losses.

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

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

As a result, the Fund will incur the risk that losses on such transactions
will not be offset by corresponding increases in the value of portfolio
securities or decreases in the cost of securities to be acquired.

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

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

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

ADDITIONAL RISKS OF TRANSACTIONS RELATED TO FOREIGN CURRENCIES AND
TRANSACTIONS NOT CONDUCTED ON U.S. EXCHANGES -- The available information on
which the Fund will make trading decisions concerning transactions related to
foreign currencies or foreign securities may not be as complete as the
comparable data on which the Fund makes investment and trading decisions in
connection with other transactions. Moreover, because the foreign currency
market is a global, 24-hour market, and the markets for foreign securities as
well as markets in foreign countries may be operating during non-business
hours in the U.S., events could occur in such markets which would not be
reflected until the following day, thereby rendering it more difficult for the
Fund to respond in a timely manner.

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

Transactions on exchanges located in foreign countries 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. Moreover, the SEC or CFTC have jurisdiction
over the trading in the U.S. of many types of over-the-counter and foreign
instruments, and such agencies could adopt regulations or interpretations
which would make it difficult or impossible for the Fund to enter into the
trading strategies identified herein or to liquidate existing positions.

RESTRICTIONS ON THE USE OF OPTIONS AND FUTURES: In order to assure that the
Fund will not be deemed to be a "commodity pool" for purposes of the Commodity
Exchange Act, regulations of the CFTC require that the Fund enter into
transactions in Futures Contracts, Options on Futures Contracts and Options on
Foreign Currencies traded on a CFTC-regulated exchange only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-bona fide
hedging purposes, provided that the aggregate initial margin and premiums
required to establish such non-bona fide hedging positions does not exceed 5%
of the liquidation value of the Fund's assets after taking into account
unrealized profits and unrealized losses on any such contracts the Fund has
entered into, and excluding, in computing such 5%, the in-the-money amount
with respect to an option that is in-the-money at the time of purchase.

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

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

The Fund may not:

(1) Borrow amounts in excess of 33 1/3% of its gross assets, and then
only as a temporary measure for extraordinary or emergency purposes, or
pledge, mortgage or hypothecate its assets (taken at market value) to an
extent greater than 33 1/3% of its gross assets, in each case taken at the
lower of cost or market value and subject to a 300% asset coverage
requirement (for the purpose of this restriction, collateral arrangements
with respect to options, Futures Contracts, Options on Futures Contracts,
Forward Contracts and Options on Foreign Currencies and payments of
initial and variation margin in connection therewith are not considered a
pledge of assets); while such borrowings exceed 5% of the Fund's gross
assets, no securities may be purchased; however, the Fund may complete the
purchase of securities already contracted for;

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

(3) Invest 25% or more of the market value of its total assets in
securities of issuers in any one industry (excluding obligations of the
U.S. Government and repurchase agreements collateralized by obligations of
the U.S. Government), except that the Fund will invest at least 25% of its
total assets in the utilities industry;

(5) Make loans to other persons except through the lending of its
portfolio securities and except through repurchase agreements. For these
purposes the purchase of commercial paper or all or a portion of an issue
of debt securities shall not be considered the making of a loan;

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

(7) 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 any transactions and except that the Fund
may make margin deposits in connection with Futures Contracts, Options on
Futures Contracts, Forward Contracts, options and Options on Foreign
Currencies;

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

(9) Invest in illiquid investments, including securities which are
subject to legal or contractual restrictions on resale, or for which there
is no readily available market (e.g., trading in the security is suspended
or, in the case of unlisted securities, market makers do not exist or will
not entertain bids or offers), unless the Board of Trustees has determined
that such securities are liquid based upon trading markets for the
specific security, if more than 10% of the Fund's assets (taken at market
value) would be invested in such securities.

Except with respect to Investment Restrictions (1) and (9), these investment
restrictions are adhered to at the time of purchase or utilization of assets;
a subsequent change in circumstances will not be considered to result in a
violation of policy.

OTHER INVESTMENT POLICIES. The Fund has also adopted the following additional
investment policies that may be required by various laws and administrative
positions. These investment policies are not fundamental and may be changed by
the Fund without approval of its shareholders.

(a) Repurchase agreements maturing in more than seven days will be deemed to
be illiquid for purposes of the Fund's limitation on investment in illiquid
securities; (b) during the coming year, (i) less than 5% of the Fund's assets
will be used to engage in short sales permitted by Investment Restriction (8)
and (ii) purchases of warrants will not exceed 5% of the Fund's net assets
(included within that amount, but not exceeding 2% of the Fund's net assets,
may be warrants not listed on the New York or American Stock Exchange); (c)
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; (d) the Fund will not purchase or retain in its
portfolio any securities issued by an issuer any of whose officers, directors,
trustees or security holders is an officer or Trustee of the Fund, or is a
partner, officer, Director or Trustee of the Adviser, if after the purchase of
the securities of such issuer by the Fund one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both, of
such issuer, and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or
securities, or both; (e) the Fund will not 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 (including yields on securities), indexes
of securities, foreign currencies and Futures Contracts; (f) the Fund may not
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 (for this purpose, all indebtedness of an
issuer shall be deemed a single class and all preferred stock of an issuer
shall be deemed a single class); (g) the Fund will not purchase securities
issued by any closed-end investment company except by purchase in the open
market where no commission or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan of merger or
consolidation; provided, however, that the Fund shall not purchase such
securities if such purchase at the time thereof would cause more than 10% of
its total assets (taken at market value) to be invested in the securities of
such issuers, or more than 3% of the total outstanding voting securities of
any closed-end investment company to be held by the Fund. The Fund shall not
purchase securities issued by any open-end investment company; (h) the Fund
may not 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 (for this purpose, all indebtedness of an
issuer shall be deemed a single class and all preferred stock of an issuer
shall be deemed a single class); (i) the Fund will only borrow amounts from
banks and then only as permitted by Investment Restriction (1).

TRUSTEES

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

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

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

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

J. DALE SHERRATT (born 9/23/38)
Insight Resources, Inc. (acquisition planning specialists), President
Address: One Liberty Square, 10th Floor, Boston, Massachusetts

OFFICERS

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

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

JAMES O. YOST,* Assistant Treasurer (born 6/12/62)
Massachusetts Financial Services Company, Vice President

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

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

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

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

The Fund pays the 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) and has adopted a retirement plan for non-interested Trustees and
Mr. Bailey. Under this plan, a Trustee will retire upon reaching age 72 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 72
and receive reduced payments if he has completed at least five years of
service. Under the plan, a Trustee (or his beneficiaries) will also receive
benefits for a period of time in the event the Trustee is disabled or dies.
These benefits will also be based on the Trustee's average annual compensation
and length of service. There is no retirement plan provided by the Trust for
Messrs. Scott and Shames. The Fund will accrue its allocable share of
compensation expenses each year to cover current year's service and amortize
past service cost.

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

TRUSTEE COMPENSATION TABLE

<TABLE>
<CAPTION>
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 ..... $3,725 $ 685 8 $283,647
Marshall N. Cohan...... 4,175 850 8 148,067
Dr. Lawrence Cohn . 3,500 1,117 20 123,917
Sir J. David Gibbons 3,725 745 8 129,842
Abby M. O'Neill ....... 3,725 670 9 129,842
Walter E. Robb, III . 4,175 850 8 148,067
Arnold D. Scott ....... --0-- --0-- N/A --0--
Jeffrey L. Shames . --0-- --0-- N/A --0--
J. Dale Sherratt ...... 5,300 1,275 22 184,067
Ward Smith ............ 5,300 850 12 184,067
</TABLE>

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>

$3,150 $473 $ 788 $1,103 $1,575
3,686 553 922 1,290 1,843
4,222 633 1,056 1,478 2,111
4,758 714 1,190 1,665 2,379
5,294 794 1,324 1,853 2,647
5,830 875 1,458 2,041 2,915
</TABLE>

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

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

As of January 31, 1998, the MFS Defined Contribution Plan, 500 Boylston
Street, Boston, MA, and RSBCO, P.O. Box 1410, Ruston, LA, were the record
owners of approximately 85.62% and 11.48%, respectively, of the outstanding
Class I shares of the Fund.

The Adviser manages the Fund pursuant to an Investment Advisory Agreement,
dated September 1, 1993 (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser provides the Fund with overall investment advisory
services. Subject to such policies as the Trustees may determine, the Adviser
makes investment decisions for the Fund. For its services and facilities, the
Adviser is entitled to receive a management fee, computed and paid monthly, in
an amount equal to the sum of 0.375% of the Fund's average daily net assets
and 6.25% of the Fund's gross income (i.e., income other than gains from the
sale of securities, gains from options and futures transactions, premium
income from options written and gains from foreign exchange transactions) of
the Fund for its then-current fiscal year. Commencing April 1, 1996, the
Adviser voluntarily agreed to reduce the management fee to 0.50% of the Fund's
average daily net assets. This voluntary fee reduction may be rescinded at any
time without notice to shareholders as to fees accruing after the date of such
rescission. For the period March 1, 1995 through March 31, 1996, the Adviser
voluntarily agreed to reduce the management fee to 0.375% of the Fund's
average daily net assets. Prior to March 1, 1995, the Adviser voluntarily
agreed to reduce the management fee to 0% of the Fund's average daily net
assets.

For the Fund's fiscal year ended October 31, 1997, MFS voluntarily reduced its
management fee to $721,515. If MFS had not reduced its management fee, MFS
would have received management fees of $1,015,624 (of which $589,990 would
have been based on daily net assets and $425,634 on gross income), equivalent
to 0.65% of the Fund's net assets on an annualized basis.

For the Fund's fiscal year ended October 31, 1996, MFS voluntarily reduced its
management fee to $385,142, equivalent to 0.373% of the Fund's net assets on
an annualized basis. If MFS had not reduced its management fee, MFS would have
received management fees of $732,288 (of which $387,237 would have been based
on average daily net assets and $345,051 on gross income), equivalent to 0.71%
of the Fund's net assets on an annualized basis.

For the Fund's fiscal year ended October 31, 1995, MFS received management
fees of $219,400, equivalent to 0.30% of the Fund's net assets on an
annualized basis. If MFS had not reduced its management fee, MFS would have
received management fees under a prior investment advisory agreement of
$505,241 (of which $270,402 would have been based on average daily net assets
and $234,839 on gross income), equivalent to 0.70% of the Fund's net assets on
an annualized basis.

The Fund pays all of the Fund's expenses (other than those assumed by MFS or
MFD, the Fund's principal underwriter), including: governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable
to the Fund; fees and expenses of independent auditors, of legal counsel, and
of any transfer agent, registrar or dividend disbursing agent of the Fund;
expenses of repurchasing and redeeming shares; expenses of preparing, printing
and mailing share certificates, shareholder reports, notices, proxy statements
and reports to governmental officers and commissions; brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of State Street
Bank and Trust Company, the Fund's Custodian, for all services to the Fund,
including safekeeping of funds and securities and maintaining required books
and accounts; expenses of calculating the net asset value of shares of the
Fund; and expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses for such purposes are borne by the Fund
except that the Fund's Distribution Agreement with MFD requires MFD to pay for
prospectuses that are to be used for sales purposes. For a list of the Fund's
expenses, including the compensation paid to Trustees who are not officers of
MFS, for the fiscal year ended October 31, 1997, see the "Statement of
Operations" in the Fund's Annual Report incorporated by reference into this
SAI. Payment by the Fund of brokerage commissions for brokerage and research
services of value to the Adviser in serving its clients is discussed under the
caption "Portfolio Transactions and Brokerage Commissions" 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 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 initials "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 Amendment dated March 1, 1997, as amended. Under this
Agreement, the Fund pays MFS an administrative fee up to 0.015% per annum of
the Fund's average daily net assets. This fee reimburses MFS for a portion of
the costs it incurs to provide such services. For the period commencing March
1, 1997 through the period ended October 31, 1997, MFS received fees under the
Administrative Services Agreement of $17,086.

SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, dated December 11, 1991 (the "Agency
Agreement") with the Fund. The Shareholder Servicing Agent's responsibilities
under the Agency Agreement include administering and performing transfer agent
functions and the keeping 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
0.1125%. In addition, the Shareholder Servicing Agent will be reimbursed by
the Fund for certain expenses incurred by the Shareholder Servicing Agent on
behalf of the Fund. State Street Bank and Trust Company, the dividend and
distribution disbursing agent of the Fund, has contracted with the Shareholder
Servicing Agent to perform certain dividend disbursing agent functions for the
Fund.

DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as distributor for the
continuous offering of shares of the Fund pursuant to a Distribution
Agreement, dated 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 Class A shares of the Fund is their net
asset value next computed after the sale plus a sales charge which varies
based upon the quantity purchased. The public offering price of Class A shares
of the Fund is calculated by dividing the net asset value of a Class A share
by the difference (expressed as a decimal) between 100% and the sales charge
percentage of offering price applicable to the purchase (see "Purchases" in
the Prospectus). The sales charge scale set forth in the Prospectus applies to
purchases of Class A shares of the Fund alone or in combination with shares of
all classes of certain other funds in the MFS Family of Funds (the "MFS
Funds") and other funds (as noted under Right of Accumulation) by any person,
including members of a family unit (e.g., husband, wife and minor children)
and bona fide trustees, and also applies to purchases made under the Right of
Accumulation or a Letter of Intent (see "Investment and Withdrawal Programs"
below). A group might qualify to obtain quantity sales charge discounts (see
"Shareholder Services -- Investment and Withdrawal Programs" below).

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

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

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

During the Fund's fiscal year ended October 31, 1997, gross sales charges on
sales of Class A shares of the Fund amounted to $656,332, of which $108,685
was retained by MFD and $547,647 by dealers and certain banks and other
financial institutions; the Fund received $27,348,721, representing the
aggregate net asset value of such shares. During the Fund's fiscal year ended
October 31, 1996, gross sales charges on sales of Class A shares of the Fund
amounted to $345,085, of which $54,931 was retained by MFD and $290,154 by
dealers and certain banks and other financial institutions; the Fund received
$12,921,658, representing the aggregate net asset value of such shares. During
the Fund's fiscal year ended October 31, 1995, gross sales charges on sales of
Class A shares of the Fund amounted to $161,721, of which $26,665 was retained
by MFD and $135,056 by dealers and certain banks and other financial
institutions; the Fund received $6,475,310, representing the aggregate net
asset value of such shares.

During the Fund's fiscal years ended October 31, 1997, 1996 and 1995, the CDSC
imposed on certain redemptions of Class A shares was $138, $700 and $41,
respectively.

During the Fund's fiscal years ended October 31, 1997, 1996 and 1995, the CDSC
imposed on redemption of Class B shares was $141,942, $96,691 and $76,193,
respectively.

During the Fund's fiscal year ended October 31, 1997, and for the period from
April 1, 1996 to October 31, 1996, the CDSC imposed on the redemption of Class
C shares was $4,517 and $716, respectively. There was no CDSC imposed on the
redemption of Class C shares for the fiscal year ended October 31, 1995.

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

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

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

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

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

During the Fund's fiscal years ended October 31, 1997, 1996 and 1995, the Fund
paid brokerage commissions of $647,563, $886,781 and $293,905 on total
transactions of $316,372,661, $302,767,949 and $137,197,646, respectively.

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

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

RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on the purchase of Class A shares when his new investment, together
with the current offering price value of all holdings of Class A, B and C
shares of that shareholder in the MFS Funds or MFS Fixed Fund (a bank
collective investment fund) reaches a discount level. See "Purchases" in the
Prospectus for the sales charges on quantity discounts. For example, if a
shareholder owns shares valued at $75,000 and purchases an additional $25,000
of Class A shares of the Fund, the sales charge for the $25,000 purchase would
be at the rate of 4.00% (the rate applicable to single transactions of
$100,000). A shareholder must provide the Shareholder Servicing Agent (or his
investment dealer must provide MFD) with information to verify that the
quantity sales charge discount is applicable at the time the investment is
made.

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

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

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

GROUP PURCHASES: A bona fide group and all its members may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent), obtain quantity sales charge discounts on the purchase of Class A
shares if the group (1) gives its endorsement or authorization to the
investment program so it may be used by the investment dealer to facilitate
solicitation of the membership, thus effecting economies of sales effort; (2)
has been in existence for at least six months and has a legitimate purpose
other than to purchase mutual fund shares at a discount; (3) is not a group of
individuals whose sole organizational nexus is as credit cardholders of a
company, policyholders of an insurance company, customers of a bank or broker-
dealer, clients of an investment adviser or other similar groups; and (4)
agrees to provide certification of membership of those members investing money
in the MFS Funds upon the request of MFD.

AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares
of the other MFS Funds (if available for sale) under the Automatic Exchange
Plan. The Automatic Exchange Plan provides for automatic exchanges of funds
from the shareholder's account in an MFS Fund for investment in the same class
of shares of other MFS Funds selected by the shareholder. Under the Automatic
Exchange Plan, exchanges of at least $50 each may be made to up to six
different funds effective on the seventh day of each month or of every third
month, depending whether monthly or quarterly exchanges are elected by the
shareholder. If the seventh day of the month is not a business day, the
transaction will be processed on the next business day. Generally, the initial
exchange will occur after receipt and processing by the Shareholder Servicing
Agent of an application in good order. Exchanges will continue to be made from
a shareholder's account in any MFS Fund, as long as the balance of the
account is sufficient to complete the transfers. 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 a
transfer is scheduled, such funds may not be available for transfer 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 from either of MFS Money Market
Fund, MFS Government Money Market Fund and Class A shares of MFS Cash Reserve
Fund will be subject to any applicable sales charge. Changes in amounts to be
exchanged to each fund, the funds to which exchanges are to be made and the
timing of exchanges (monthly or quarterly), or termination of a shareholder's
participation in the Automatic Exchange Plan will be made after instructions
in writing or by telephone (an "Exchange Change Request") are received by the
Shareholder Servicing Agent in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of
record). Each Exchange Change Request (other than termination of participation
in the program) must involve at least $50. Generally, if an Exchange Change
Request is received by telephone or in writing before the close of business on
the last business day of a month, the Exchange Change Request will be
effective for the following month's exchange.

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

Each Exchange Request must be in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as the shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of
record), and each exchange must involve either shares having an aggregate
value of at least $1,000 or all the shares in the account (except that the
minimum is $50 for accounts of retirement plan participants whose sponsoring
organizations subscribe to the MFS FUNDamental 401(k) Plan or another similar
401(k) recordkeeping system made available by the Shareholder Servicing
Agent). 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 another MFS Fund. Any gain or loss on the
redemption of the shares exchanged is reportable on the shareholder's federal
income tax return, unless such shares were and the shares received in the
exchange are held in a tax-deferred retirement plan or other tax-exempt
account. No more than five exchanges may be made in any one Exchange Request
by telephone. If an Exchange Request is received by the Shareholder Servicing
Agent prior to the close of regular trading on the Exchange, the exchange
usually will occur on that day if all the restrictions 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 another MFS Fund, may be
delayed for up to seven days if the Fund determines that such a delay would be
in the best interest of all its shareholders. Investment dealers which have
satisfied criteria established by MFD may also communicate a shareholder's
Exchange Request to the Shareholder Servicing Agent by facsimile subject to
the restrictions and requirements set forth above.

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

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

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 (the "Code");

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

Certain other qualified pension and profit-sharing plans.

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

6. TAX STATUS
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Code by meeting all
applicable requirements of Subchapter M, including requirements as to the
nature of the Fund's gross income, the amount of Fund distributions, and the
composition of the Fund's portfolio assets. Because the Fund intends to
distribute all of its net investment income and net realized capital gains to
shareholders in accordance with the timing requirements imposed by the Code,
it is not expected that the Fund will be required to pay any federal income or
excise taxes, although the Fund's foreign-source income may be subject to
foreign withholding taxes. If the Fund should fail to qualify as a "regulated
investment company" in any year, the Fund would incur a regular corporate
federal income tax upon its taxable income and Fund distributions would
generally be taxable as ordinary dividend income to the shareholders.

Shareholders of the Fund normally will have to pay federal income taxes, and
any state or local taxes, on the dividends and capital gain distributions they
receive from the Fund. Dividends from ordinary income and any distributions
from net short-term capital gains are taxable to shareholders as ordinary
income for federal income tax purposes, whether the distributions are paid in
cash or reinvested in additional shares. A portion of the Fund's ordinary
income dividends is normally eligible for the dividends received deduction for
corporations if the recipient otherwise qualifies for that deduction with
respect to its holding of Fund shares. Availability of the deduction for
particular corporate shareholders is subject to certain limitations, and
deducted amounts may be subject to the alternative minimum tax or result in
certain basis adjustments. Distributions of net capital gains (i.e., the
excess of net long-term capital gains over net short-term capital losses),
whether paid in cash or reinvested in additional shares, are taxable to
shareholders as long-term capital gains for federal income tax purposes
without regard to the length of time the shareholders have held their shares.
Such capital gains will generally be taxable to shareholders as if the
shareholders had directly realized gains from the same sources from which they
were realized by the Fund. Any Fund dividend that is declared in October,
November or December of any calendar year, that is payable to shareholders of
record in such a month, and that is paid the following January will be treated
as if received by the shareholders on December 31 of the year in which the
dividend is declared. The Fund will notify shareholders regarding the federal
tax status of its distributions after the end of each calendar year.

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

In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as 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 realized by an individual, estate or trust may 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 ninety days after their
purchase followed by any purchase (including purchases by exchange or by
reinvestment) without payment of an additional sales charge of Class A shares
of the Fund or of another MFS Fund (or any other shares of an MFS Fund
generally sold subject to a sales charge).

The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders. Any investment in zero
coupon bonds and certain securities purchased at a market discount will cause
the Fund to recognize income prior to the receipt of cash payments with
respect to those securities. In order to distribute this income and avoid a
tax on the Fund, the Fund may be required to liquidate portfolio securities
that it might otherwise have continued to hold, potentially resulting in
additional taxable gain or loss to the Fund. An investment in residual
interests of a CMO that has elected to be treated as a real estate mortgage
investment conduit, or "REMIC", can create complex tax problems, especially if
the Fund has state or local governments or other tax-exempt organizations as
shareholders.

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

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

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

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

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

7. DETERMINATION OF NET ASSET VALUE AND PERFORMANCE

NET ASSET VALUE: The net asset value per share of each class of the Fund is
determined each day during which the Exchange is open for trading. (As of the
date of this SAI, the Exchange is open for trading every weekday except for
the following holidays or the days on which they are observed: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.) This
determination is made once each day as of the close of regular trading on the
Exchange by deducting the amount of the liabilities attributable to each class
from the value of the assets attributable to the class and dividing the
difference by the number of shares of the class outstanding.

Equity securities in the Fund's portfolio are valued at the last sale price on
the exchange on which they are primarily traded or on the NASDAQ system for
unlisted national market issues, at the last quoted bid price for securities
in which there were no sales during the day or for unlisted securities not
reported on the NASDAQ system. Bonds and other fixed income securities (other
than short-term obligations, but including listed issues) of U.S. issuers in
the Fund's portfolio are valued on the basis of valuations furnished by a
pricing service which utilizes both dealer-supplied valuations and electronic
data processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect the fair value
of such securities. Forward Contracts will be valued using a pricing model
taking into consideration market data from an external pricing source. Use of
the pricing services has been approved by the Board of Trustees. All other
securities, futures contracts and options in the Fund's portfolio (other than
short-term obligations) for which the principal market is one or more
securities or commodities exchanges (whether domestic or foreign) will be
valued at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities, futures contracts or options
are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available,
be valued at current bid prices, unless such securities are reported on the
NASDAQ system, in which case they are valued at the last sale price or, if no
sales occurred during the day, at the last quoted bid price. Short-term
obligations with remaining maturities in excess of 60 days will be valued upon
dealer supplied valuations. Other short-term obligations in the Fund's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Portfolio investments for which there are
no such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees.

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

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

PERFORMANCE INFORMATION
TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for
each class of shares for certain periods by determining the average annual
compounded rates of return over those periods that would cause an investment
of $1,000 (made with all distributions reinvested and reflecting the CDSC or
the maximum public offering price) to reach the value of that investment at
the end of the periods. The Fund may also calculate (i) a total rate of
return, which is not reduced by the CDSC (4% maximum for Class B shares and 1%
maximum for Class C shares) and therefore may result in a higher rate of
return, (ii) a total rate of return assuming an initial account value of
$1,000, which will result in a higher rate of return with respect to Class A
shares since the value of the initial account will not be reduced by the
maximum sales charge (currently 4.75% for Class A shares) and/or (iii) total
rates of return which represent aggregate performance over a period or year-
by-year performance, and which may or may not reflect the effect of the
maximum or other sales charge or CDSC.

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

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

PERFORMANCE RESULTS: The performance results presented in Appendix A attached
hereto under the heading "Performance Results" assume an initial investment of
$10,000 in Class A shares and cover the period from February 14, 1992
(commencement of investment operations) through December 31, 1997. It has been
assumed that dividends and capital gain distributions were reinvested in
additional shares. These performance results, as well as any total rate of
return or yield quotation provided by the Fund, should not be considered as
representative of the performance of the Fund in the future since the net
asset value and public offering price of shares of the Fund will vary based
not only on the type, quality and maturities of the securities held in the
Fund's portfolio, but also on changes in the current value of such securities
and on changes in the expenses of the Fund. These factors and possible
differences in the methods used to calculate yields and total rates of return
should be considered when comparing the yield and total rate of return of the
Fund to yields and total rates of return published for other investment
companies or other investment vehicles. Total rate of return reflects the
performance of both principal and income whereas yield reflects only net
portfolio income. Current net asset value and account balance information may
be obtained by calling 1-800-MFS-TALK (637-8255).

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

CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the SEC, is not indicative of the amounts which were or will be
paid to the Fund's shareholders. Amounts paid to shareholders of each class
are reflected in the quoted "current distribution rate" for that class. The
current distribution rate for a class computed by dividing the total amount of
dividends per share paid by the Fund to shareholders of that class during the
past twelve months by the maximum public offering price of that class at the
end of such period. Under certain circumstances, such as when there has been a
change in the amount of dividend payout, or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid over the
period such policies were in effect, rather than using the dividends during
the past twelve months. The current distribution rate differs from the yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income for option writing,
short-term capital gains and return of invested capital, and is calculated
over a different period of time. The Fund's current distribution rate
calculation assumes no CDSC is paid. Current distribution rate quotations for
each class of shares are presented in Appendix A attached hereto under the
heading "Performance Quotations."