MFS INSTITUTIONAL TRUST, 485APOS, 1995-09-15

MFS INSTITUTIONAL TRUST
485APOS, 1995-09-15

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<PAGE>

As filed with the Securities and Exchange Commission on September 15, 1995
1933 Act File No. 33-37615
1940 Act File No. 811-6174

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

FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 8
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 12

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

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

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

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

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on [date] pursuant to paragraph (a)(i)
[X] 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

STATEMENT PURSUANT TO RULE 24f-2

Pursuant to Rule 24f-2, the Registrant has registered an indefinite number of
securities under the Securities Act of 1933 and filed a Rule 24f-2 Notice with
respect to its fiscal year ended June 30, 1995 on August 29, 1995.

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

MFS INSTITUTIONAL TRUST

MFS INSTITUTIONAL BROAD MARKET FIXED INCOME FUND
MFS INSTITUTIONAL RESEARCH FUND
MFS INSTITUTIONAL MID-CAP GROWTH FUND
MFS INSTITUTIONAL INTERNATIONAL 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>
ITEM NUMBER STATEMENT OF 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) * *

(b) * *

(d) * *

4 (a) Front Cover Page; The Funds; Investment *
Objectives and Policies; Investment
Techniques; Additional Risk Factors;
Information Concerning Shares of the Funds -
Description of Shares, Voting Rights and
Liabilities

(b) Investment Objectives and Policies; Investment *
Techniques; Additional Risk Factors

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

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

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

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

(f) Expense Summary; Information *
Concerning Shares of the Funds
- Investment Adviser

(g) Information Concerning Shares *
of the Funds - Purchases;
Investment Techniques - Portfolio
Trading

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

6 (a) Information Concerning Shares *
of the Funds - Description of
Shares, Voting Rights and
Liabilities; Information
Concerning Shares of the
Funds - Redemptions

(b) Description of Shareholder Voting *
Rights and Liabilities

(d) * *

(e) Shareholder Services *

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

(g) Information Concerning Shares *
of the Funds - Tax Status

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

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

(d) Front Cover Page; Information *
Concerning Shares of the Funds -
Purchases

(e) * *

(f) * *

8 (a) Information Concerning Shares *
of the Funds - Redemptions;
Information Concerning Shares
of the Funds - Purchases

(b), (c), (d) Information Concerning Shares *
of the Funds - Redemptions

9 * *
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
----------------- ------------------ -----------------------
<S> <C> <C>
10 (a), (b) * Front Cover Page

11 * Front Cover Page

12 * *

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

(d) Investment Techniques - *
Portfolio Trading

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

15 (a) * Management of the Funds -
Trustees and Officers

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

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

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

(d) * *

(e) * Portfolio Transactions and
Brokerage Commissions

(f) * *

(g) * *

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

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

17 (a), (c), * Portfolio Transactions and
Brokerage Commissions

(b),(d), (e) * *

18 (a) Information Concerning Shares Description of Shares,
of the Funds - Description Voting Rights and Liabilities
of Shares, Voting Rights and
Liabilities

(b) * *

19 (a) Information Concerning Shares Shareholder Services
of the Funds - Purchases

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

20 * Tax Status

21 (a) * Management of the Funds-
Distributor

(b),(c) * *

22 (a) * *

(b) * Determination of Net Asset
Value and Performance

23 * *

------------------------
* Not Applicable
</TABLE>

<PAGE>
MFS(R) INSTITUTIONAL BROAD MARKET
FIXED INCOME FUND
MFS(R) INSTITUTIONAL RESEARCH FUND
MFS(R) INSTITUTIONAL MID-CAP
GROWTH FUND PROSPECTUS
MFS(R) INSTITUTIONAL INTERNATIONAL [December 1, 1995]
EQUITY FUND Shares of Beneficial
Each a series of MFS(R) Institutional Trust Interest
--------------------------------------------------------------------------------

MFS INSTITUTIONAL BROAD MARKET FIXED INCOME FUND (the "Fixed Income Fund") --
The primary investment objective of the Fixed Income Fund is to provide as high
a level of current income as is believed to be consistent with prudent
investment risk. The Fund's secondary objective is to protect shareholders'
capital. The Fund invests, under normal market conditions, at least 65% of its
total assets in convertible and non-convertible fixed income securities,
preferred stock, U.S. Government securities, commercial paper, repurchase
agreements, and cash equivalents.

MFS INSTITUTIONAL RESEARCH FUND (the "Research Fund") -- The investment
objective of the Research Fund is to provide long-term growth of capital and
future income. The Fund invests, under normal market conditions, at least 65% of
its total assets in equity securities of companies believed to possess better
than average prospects for long-term growth.

MFS INSTITUTIONAL MID-CAP GROWTH FUND (the "Mid-Cap Fund") -- The investment
objective of the Mid-Cap Fund is to provide long-term growth of capital. The
Fund invests, under normal market conditions, at least 65% of its total assets
in the equity securities of companies with market capitalizations within the
range of approximately $500 million to $4 billion.

MFS INSTITUTIONAL INTERNATIONAL EQUITY FUND (the "International Equity Fund") --
The investment objective of the International Equity Fund is to provide
long-term growth of capital. The Fund invests, under normal market conditions,
at least 65% of its total assets in equity securities of companies whose
principal activities are located outside the United States ("U.S.").

No assurance can be given that the investment objective(s) of the Fixed Income
Fund, the Research Fund, the Mid-Cap Fund or the International Equity Fund
(individually referred to as a "Fund" and collectively referred to as the
"Funds") will be achieved. Each Fund is a diversified series of MFS
Institutional Trust (the "Trust"), an open-end management investment company.

The Funds' 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.

The Funds are designed exclusively for institutional investor clients of MFS and
MFS Asset Management, Inc., a wholly owned subsidiary of MFS. The minimum
initial investment is generally $3 million per investor (see "Purchases").

This Prospectus sets forth concisely the information concerning the Trust and
each Fund that a prospective investor ought to know before investing. The Trust,
on behalf of the Funds, has filed with the Securities and Exchange Commission
(the "SEC") a Statement of Additional Information, dated [December 1,] 1995,
which contains more detailed information about the Trust and the Funds and is
incorporated into this Prospectus by reference. See page 21 for a further
description of the information set forth in the Statement of Additional
Information. A copy of the Statement of Additional Information may be obtained
without charge by contacting the Shareholder Servicing Agent (see back cover for
address and phone number).

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

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

Page
----

1. Expense Summary ................................................. 3
2. The Funds ....................................................... 3
3. Investment Objectives and Policies .............................. 4
Fixed Income Fund ........................................... 4
Research Fund ............................................... 4
Mid-Cap Fund ................................................ 5
International Equity Fund ................................... 5
4. Investment Techniques ........................................... 6
5. Additional Risk Factors ......................................... 13
6. Management of the Funds ......................................... 15
7. Information Concerning Shares of the Funds ...................... 17
Purchases ................................................... 17
Exchanges ................................................... 18
Redemptions ................................................. 18
Distributions ............................................... 19
Tax Status .................................................. 19
Net Asset Value ............................................. 20
Description of Shares, Voting Rights and Liabilities ........ 20
Performance Information ..................................... 20
Expenses .................................................... 20
8. Shareholder Services ............................................ 21
Appendix A -- Description of Bond Ratings ....................... A-1
<PAGE>

FIXED INCOME RESEARCH MID-CAP INTERNATIONAL
1. EXPENSE SUMMARY FUND FUND FUND EQUITY FUND
------------ -------- ------- -------------

<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases of Shares ....... None None None None
Maximum Sales Load Imposed on Reinvested Dividends and
Distributions ......................................... None None None None

ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ......................................... 0.45% 0.60% 0.60% 0.75%
Other Expenses (after expense reimbursement)<F1>......... 0.15% 0.15% 0.15% 0.20%
----- ----- ----- -----
Total Operating Expenses
(after expense reimbursement)<F2> ...................... 0.60% 0.75% 0.75% 0.95%
<FN>
----------

<F1>"Other Expenses" are based on estimates for each Fund's fiscal year ending June 30, 1996.
<F2>MFS has agreed to bear, subject to reimbursement by each Fund, until December 31, 2005, expenses of each Fund
such that each Fund's aggregate expenses do not exceed the following percentage, on an annualized basis, of its
average daily net assets: 0.60% of the Fixed Income Fund, 0.75% of the Research Fund, 0.75% of the Mid-Cap Fund
and 0.95% of the International Equity Fund. Each arrangement may be terminated or revised by MFS at any time. See
"Information Concerning Shares of the Funds -- Expenses" below. Absent these expense arrangements, "Other
Expenses" and "Total Operating Expenses" for each respective Fund would be estimated to be, on an annualized
basis, 3.63% and 4.08% of the Fixed Income Fund, respectively, 3.63% and 4.23% of the Research Fund,
respectively, 3.63% and 4.23% of the Mid-Cap Fund, respectively, and 3.63% and 4.38% of the International Equity
Fund, respectively.
</FN>
</TABLE>

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

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

<TABLE>
<CAPTION>
FIXED INCOME RESEARCH MID-CAP INTERNATIONAL
PERIOD FUND FUND FUND EQUITY FUND
------ ------------ -------- ------- -------------
<C> <C> <C> <C> <C>
1 year ..................................................... $ 6 $ 8 $ 8 $10
3 years ..................................................... $19 $24 $24 $30
</TABLE>

The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of each Fund
will bear directly or indirectly. More complete descriptions of the expenses of
each Fund are set forth under the caption "Management of the Funds -- Investment
Adviser" and "Information Concerning Shares of the Funds -- Expenses" below.

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

2. THE FUNDS
Each Fund is a diversified series of the Trust, an open-end management
investment company which was organized as a business trust under the laws of The
Commonwealth of Massachusetts in 1990. The Trust presently consists of seven
separate series, each of which represents a portfolio with separate investment
policies. This Prospectus relates to the Fixed Income Fund, the Research Fund,
the Mid-Cap Fund and the International Equity Fund. Shares of the other three
series of the Trust (MFS Worldwide Fixed Income Fund, MFS Emerging Equities Fund
and MFS Emerging Markets Fixed Income Fund) are offered and sold pursuant to a
separate prospectus and statement of additional information. It is anticipated
that each Fund will commence investment operations in December of 1995. Shares
of each Fund are continuously offered and sold to investors and each Fund uses
the proceeds to buy securities for its portfolio. The Trust's Board of Trustees
provides broad supervision over the affairs of the Trust and each Fund. The
Adviser is responsible for the management of each Fund's assets and the officers
of the Trust are responsible for its operations. The Adviser manages the
portfolio from day to day in accordance with each Fund's investment objective(s)
and policies. Each Fund also offers to buy back (redeem) its shares from its
shareholders at any time at net asset value.

3. INVESTMENT OBJECTIVES AND POLICIES
Each Fund has different investment objectives which it pursues through separate
investment policies, as described below. Any investment involves risk and there
can be no assurance that the investment objective(s) of any Fund will be
achieved. The differences in objectives and policies among the Funds can be
expected to affect the market and financial risk to which each Fund is subject
and the performance of each Fund. The investment objective(s) and policies of
each Fund may, unless otherwise specifically stated, be changed by the Trustees
of the Trust without a vote of the shareholders. A change in a Fund's
objective(s) may result in the Fund having investment objective(s) different
from the objective(s) which the shareholder considered appropriate at the time
of investment in that Fund.

FIXED INCOME FUND -- The Fixed Income Fund's primary investment objective is to
provide as high a level of current income as is believed to be consistent with
prudent investment risk. The Fund's secondary objective is to protect
shareholders' capital.

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

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

(2) U.S. Government Securities (see "Investment Techniques -- U.S.
Government Securities" below);

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

Consistent with its investment objectives and policies, the Fund utilizes a
"broad market" approach, and may invest in a variety of fixed income
instruments, such as foreign securities, including emerging market securities
and Brady Bonds, lower rated fixed income securities, fixed income securities
issued by or on behalf of states, territories and possessions of the U.S. and
the District of Columbia and their political subdivisions, and asset-backed
securities. Not more than 20% of the Fund's net assets will be invested in
securities rated below the four highest grades by Standard & Poor's Ratings
Group ("S&P") or Fitch Investors Services, Inc. ("Fitch") (AAA, AA, A or BBB) or
by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) and in
comparable unrated securities. For a discussion of the risks of investing in
these securities, see "Additional Risk Factors -- Lower Rated Fixed Income
Securities" below. For a description of these ratings, see Appendix A to this
Prospectus.

Although the Fixed Income Fund may purchase Canadian and other foreign
securities, under normal market conditions it may not invest more than 20% of
its net assets in non-dollar denominated non-Canadian foreign securities.

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

The Fund may engage in certain investment techniques as described below under
the caption "Investment Techniques" and as described in the Statement of
Additional Information under the caption "Investment Policies and Restrictions."
The Fund's investments are subject to certain risks, as described in the
above-referenced sections of this Prospectus and the Statement of Additional
Information and as described below under the caption "Additional Risk Factors."

RESEARCH FUND -- The Research Fund's investment objective is to provide
long-term growth of capital and future income.

The portfolio securities of the Research Fund are selected by the investment
research analysts in the Equity Research Group of the Adviser. The Fund's assets
are allocated to economic sectors (e.g., health care, technology, consumer
staples), and then to industry groups within these sectors (e.g., within the
health care sector, the managed care, drug and medical supply industries). The
allocation by sector and industry is determined by the analysts acting together
as a group. Individual analysts are then responsible for selecting what they
view as the best securities for capital appreciation and future income within
their assigned industries.

The Research Fund seeks to achieve its investment objective by investing, under
normal market conditions, at least 65% of its total assets in equity securities
of companies believed to possess better than average prospects for long-term
growth (see Investment Techniques -- Equity Securities" below). A smaller
proportion of the assets may be invested in bonds, short-term obligations,
preferred stocks or common stocks whose principal characteristic is income
production rather than growth. Such securities may also offer opportunities for
growth of capital as well as income. In the case of both growth stocks and
income issues, emphasis is placed on the selection of progressive, well-managed
companies. The Funds' non-convertible debt investments, if any, may consist of
"investment grade" securities (rated Baa or better by Moody's or BBB or better
by S&P or by Fitch), and, with respect to no more than 10% of the Fund's net
assets, securities in the lower rated categories (rated Ba or lower by Moody's
or BB or lower by S&P or by Fitch) or securities which the Adviser believes to
be of comparable quality to these lower rated securities (commonly known as
"junk bonds"). For a description of these bond ratings, see Appendix A to this
Prospectus.

Consistent with its investment objective and policies described above, the
Research Fund may invest up to 20% (and expects generally to invest between 5%
and 15%) of its net assets in foreign securities, including foreign growth
securities, which are not traded on a U.S. exchange. In addition, the Fund may
also hold foreign currency received in connection with investments in foreign
securities or in anticipation of purchasing foreign securities. (See "Additional
Risk Factors" below.)

MID-CAP FUND -- The Mid-Cap Fund's investment objective is to provide long-term
growth of capital.

The Fund seeks to achieve its investment objective by investing, under normal
market conditions, at least 65% of its total assets in equity securities of
companies with medium market capitalizations ("Mid-Cap Companies") (see
"Investment Techniques -- Equity Securities" below). Mid-Cap Companies are those
companies with a market capitalization within the range of approximately $500
million to $4 billion. Such companies generally would be expected to show
earnings growth over time that is well above the growth rate of the overall
economy and the rate of inflation, and would have the products, management and
market opportunities which are usually necessary to continue sustained growth.

Consistent with its investment objective and policies described above, the Fund
may invest up to 25% (and generally expects to invest between 0% and 10%) of its
net assets in foreign securities, including foreign growth securities, which are
not traded on a U.S. exchange. In addition, the Fund may hold foreign currency
received in connection with investments in foreign securities or in anticipation
of purchasing foreign securities. (See "Additional Risk Factors" below.) In
addition, the Fund may also hold foreign currency received in connection with
investments in foreign securities or in anticipation of purchasing foreign
securities (see "Additional Risk Factors" below.)

INTERNATIONAL EQUITY FUND -- The International Equity Fund's investment
objective is to provide long-term growth of capital.

The Fund seeks to achieve its objective by investing, under normal market
conditions, at least 65% of its total assets in equity securities of companies
whose principal activities are located outside the U.S. The equity securities in
which the Fund may invest include securities of more established companies which
represent opportunities for long-term growth (see "Investment Techniques --
Foreign Growth Securities" below). The Fund may also invest up to 25% of its net
assets in securities of companies located, or primarily conducting their
business in, emerging market countries. The selection of securities is made
solely on the basis of potential for capital appreciation. The Fund does not
intend to emphasize any particular country and, under normal market conditions,
will be invested in at least five countries. In addition, the Fund may hold
foreign currency received in connection with investments in foreign securities
or in anticipation of purchasing foreign securities. (See "Additional Risk
Factors" below.)

In determining where a company's principal activities are located, the Adviser
considers such factors as its country of organization, the principal trading
market for its securities and the source of its revenues and assets. The
company's principal activities generally are deemed to be located in a
particular country if: (a) the company is organized under the laws of, and
maintains a principal office in that country; (b) the company has its principal
securities trading market in that country, (c) the company derives 50% or more
of its total revenues from goods sold or services performed in that country; or
(d) the company has 50% or more of its assets in that country.

4. INVESTMENT TECHNIQUES
Consistent with each Fund's investment objective(s) and policies, each Fund may
engage in the following investment techniques, many of which are described more
fully in the Statement of Additional Information. See "Investment Policies and
Restrictions" in the Statement of Additional Information.

EQUITY SECURITIES: Each Fund except the Fixed Income 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 depositary receipts for those securities. These
securities may be listed on securities exchanges, traded in various
over-the-counter markets or have no organized market.

U.S. GOVERNMENT SECURITIES: The Fixed Income Fund, and for temporary defensive
reasons, each Fund may invest in United States government securities, 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 ten years); and U.S. Treasury
bonds (generally maturities of greater than ten 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, 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 (collectively, "U.S.
Government Securities"). The term "U.S. Government Securities" also includes
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.

REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements in order
to earn additional income on available cash or as a temporary defensive measure.
Under a repurchase agreement, a 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, a Fund's right to liquidate the securities may be
restricted (during which time the value of the securities could decline). As
discussed in the Statement of Additional Information, the Fund has adopted
certain procedures intended to minimize the risks of investing in repurchase
agreements.

LENDING OF PORTFOLIO SECURITIES: Each Fund may seek to increase its income by
lending portfolio securities to entities deemed creditworthy by the Adviser.
Such loans will usually be made to member firms (and subsidiaries thereof) of
the New York Stock Exchange and to member banks of the Federal Reserve System,
and would be required to be secured continuously by collateral in cash, letters
of credit or U.S. Government securities maintained on a current basis at an
amount at least equal to the market value of the securities loaned. If the
Adviser determines to make securities loans, it is intended that the value of
the securities loaned would not exceed 30% of the value of the total assets of
the relevant Fund.

RESTRICTED SECURITIES: Each Fund may also purchase securities that are not
registered under the Securities Act of 1933 (the "1933 Act") ("restricted
securities"), including those that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). The Trust's Board of Trustees determines, 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, will
retain sufficient oversight and be ultimately responsible for the
determinations. The Board will carefully monitor each Fund's investment in Rule
144A securities, focusing on such important factors, among others, as valuation,
liquidity and availability of information. This investment practice could have
the effect of decreasing the level of liquidity in a Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing Rule
144A securities held in a Fund's portfolio. Subject to each Fund's 15%
limitation on investments in illiquid investments, each Fund may also invest in
restricted securities that may not be sold under Rule 144A, which presents
certain risks. As a result, each Fund might not be able to sell these securities
when the Adviser wishes to do so, or might have to sell them at less than fair
value. In addition, market quotations are less readily available. Therefore, the
judgment of the Adviser may at times play a greater role in valuing these
securities than in the case of unrestricted securities.

WHEN-ISSUED OR FORWARD DELIVERY SECURITIES: Each Fund may purchase securities on
a "when-issued" or on a "forward delivery" basis, which means that the
obligations will be delivered to the Fund at a future date 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. Although each Fund is
not limited in the amount of securities for which it may have commitments to
purchase on such basis, it is expected that, under normal circumstances, each
Fund will not commit more than 30% of its assets to such purchases. The Fund
does not pay for the securities until received or start earning interest on them
until the contractual settlement date. In order to invest its assets
immediately, while awaiting delivery of securities purchased on such basis, a
Fund will hold cash, short-term money market instruments or U.S. Government
Securities in a segregated account to pay for the commitment. Although each Fund
does not intend to make such purchases for speculative purposes, purchases of
securities on such basis may involve more risk than other types of purchases.

AMERICAN DEPOSITARY RECEIPTS: Each Fund except the Fixed Income Fund may invest
in American Depositary Receipts ("ADRs"), which are certificates issued by a
U.S. depository (usually a bank) and represent a specified quantity of shares of
an underlying non-U.S. stock on deposit with a custodian bank as collateral.
Because ADRs trade on U.S. securities exchanges, the Adviser does not treat them
as foreign securities. However, they are subject to many of the risks of foreign
securities such as exchange rates and more limited information about foreign
issuers. (See "Additional Risk Factors -- Foreign Securities".)

FOREIGN GROWTH SECURITIES: Each Fund except the Fixed Income Fund may invest in
securities of foreign growth companies, including established foreign companies,
whose rates of earnings growth are expected to accelerate because of special
factors, such as rejuvenated management, new products, changes in consumer
demand, or basic changes in the economic environment or which otherwise
represent opportunities for long-term growth. See "Additional Risk Factors --
Foreign Securities" below. It is anticipated that these companies will primarily
be in nations with more developed securities markets, such as Japan, Australia,
Canada, New Zealand and most Western European countries, including Great
Britain.

EMERGING MARKET SECURITIES: Each Fund except the Research Fund may invest in
securities of issuers located in countries or regions with relatively low gross
national product per capita compared to the world's major economies, and in
countries or regions with the potential for rapid economic growth (emerging
markets). Emerging markets include any country: (i) having an "emerging stock
market" as defined by the International Finance Corporation; (ii) with low- to
middle-income economies according to the International Bank for Reconstruction
and Development (the World Bank); (iii) listed in World Bank publications as
developing; or (iv) determined by the Adviser to be an emerging market as
defined above. See "Risk Factors -- Emerging Markets" below. See "Investment
Objectives and Policies -- International Equity Fund" for a description of the
factors considered by the Adviser in determining where a company is located.

BRADY BONDS: The Fixed Income 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, Ecuador, Jordan, Mexico, Nigeria, the Philippines,
Poland, 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: (i) the collateralized repayment of principal at final maturity;
(ii) the collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) 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.

INVESTMENT IN OTHER INVESTMENT COMPANIES: Each Fund except the Research Fund may
invest in other investment companies to the extent permitted by the 1940 Act (i)
as a means by which a Fund may invest in securities of certain countries which
do not otherwise permit investment, (ii) as a means to purchase securities of
emerging market companies having limited free float, or (iii) when the Adviser
believes such investments may be more advantageous to a Fund than a direct
market purchase of securities. If a Fund invests in such investment companies,
the Fund's shareholders will bear not only their proportionate share of the
expenses of that particular Fund (including operating expenses and the fees of
the Adviser), but also will indirectly bear similar expenses of the underlying
investment companies.

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

The highly leveraged nature of many such loans may make such loans especially
vulnerable to adverse changes in economic or market conditions. Loans and other
direct investments may not be in the form of securities or may be subject to
restrictions on transfer, and only limited opportunities may exist to resell
such instruments. As a result, a Fund may be unable to sell such investments at
an opportune time or may have to resell them at less than fair market value.
<PAGE>
ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS: Fixed income
securities in which the Fixed Income Fund and the Research Fund may invest
include zero coupon bonds, deferred interest bonds and bonds on which the
interest is payable in kind ("PIK bonds"). Zero coupon and deferred interest
bonds are debt obligations which are issued or purchased at a significant
discount from face value. The discount approximates the total amount of interest
the bonds will accrue and compound over the period until maturity or the first
interest payment date at a rate of interest reflecting the market rate of the
security at the time of issuance. While zero coupon bonds do not require the
periodic payment of interest, deferred interest bonds provide for a period of
delay before the regular payment of interest begins. PIK bonds are debt
obligations which provide that the issuer thereof may, at its option, pay
interest on such bonds in cash or in the form of additional debt obligations.
Such investments benefit the issuer by mitigating its need for cash to meet debt
service, but also require a higher rate of return to attract investors who are
willing to defer receipt of such cash. Such investments may experience greater
volatility in market value due to changes in interest rates and other factors
than debt obligations which make regular payments of interest. A Fund will
accrue income on such investments for tax and accounting purposes, as required,
which is distributable to shareholders and which, because no cash is received at
the time of accrual, may require the liquidation of other portfolio securities
under disadvantageous circumstances to satisfy a Fund's distribution
obligations.

CORPORATE ASSET-BACKED SECURITIES: Each Fund except the Research 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. 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 services to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. The underlying
assets (e.g., loans) are also subject to prepayments which shorten the
securities' weighted average life and may lower their return.

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

MORTGAGE "DOLLAR ROLL" TRANSACTIONS: The Fixed Income Fund may enter into
mortgage "dollar roll" transactions with selected banks and broker-dealers
pursuant to which a 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. Each 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. In the event that the party with
whom the Fund contracts to replace substantially similar securities on a future
date fails to deliver such securities, the Fund may not be able to obtain such
securities at the price specified in such contract and thus may not benefit from
the price differential between the current sales price and the repurchase price.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: The
Fixed Income Fund may invest a portion of its assets in collateralized mortgage
obligations, or "CMOs," which are debt obligations collateralized by mortgage
loans or mortgage pass-through securities. Typically, CMOs are collateralized by
certificates issued by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"), but also may be collateralized by whole loans or
private mortgage pass-through securities (such collateral collectively referred
to as "Mortgage Assets"). The Fixed Income Fund may also invest a portion of its
assets in multiclass pass-through securities which are interests in a trust
composed of Mortgage Assets. CMOs (which include multiclass pass-through
securities) may be issued by agencies, authorities or instrumentalities of the
U.S. Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Payments of
principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities. In a CMO, a series of
bonds or certificates 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 CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which
the Fixed Income Fund invests, the investment may be subject to a greater or
lesser risk of prepayment than other types of mortgage-related securities.

The Fixed Income Fund may also invest in parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. PAC
Bonds generally require payments of a specified amount of principal on each
payment date. PAC Bonds are always parallel pay CMOs with the required principal
payment on such securities having the highest priority after interest has been
paid to all classes. For a further description of CMOs, parallel pay CMOs and
PAC Bonds and the risks related to transactions therein, see the Statement of
Additional Information.

STRIPPED MORTGAGE-BACKED SECURITIES: The Fixed Income Fund may invest a portion
of its assets in stripped mortgage-backed securities, which are derivative
multiclass mortgage securities usually structured with two classes that receive
different proportions of the interest and principal distributions from an
underlying pool of mortgage assets.

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

Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
GNMA); or guaranteed by agencies or instrumentalities of the U.S. Government
(such as FNMA or FHLMC, which are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations). Mortgage
pass-through securities may also be issued by non-governmental issuers (such as
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers). Some of these
mortgage pass-through securities may be supported by various forms of insurance
or guarantees.

OPTIONS ON SECURITIES: Each Fund may write (sell) covered put and call options
on securities ("Options") and purchase put and call Options that are traded on
foreign or U.S. securities exchanges and over the counter. A Fund will write
such Options for the purpose of increasing its return and/or protecting the
value of its portfolio. In particular, where a Fund writes an Option which
expires unexercised or is closed out by the Fund at a profit, it will retain the
premium paid for the Option, which will increase its gross income and will
offset in part the reduced value of a portfolio security in connection with
which the Option may have been written or the increased cost of portfolio
securities to be acquired. In contrast, however, if the price of the security
underlying the Option moves adversely to the relevant Fund's position, the
Option may be exercised and the Fund will be required to purchase or sell the
security at a disadvantageous price, resulting in losses which may only be
partially offset by the amount of the premium. Each 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.

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

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

The Fixed Income 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 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. Yield curve options written by the Fixed Income Fund will be
"covered" but could involve additional risks.

FUTURES CONTRACTS: Each 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 securities as such instruments become available
for trading ("Futures Contracts"). Such transactions will be entered into for
hedging purposes, in order to protect a Fund's current or intended investments
from the effects of changes in interest or exchange rates, or for non-hedging
purposes, to the extent permitted by applicable law. For example, in the event
that an anticipated decrease in the value of portfolio securities occurs as a
result of a general increase in interest rates or a decline in the dollar value
of foreign currencies in which portfolio securities are denominated, the adverse
effects of such changes may be offset, in whole or part, by gains on Futures
Contracts sold by a Fund. Conversely, the adverse effects of an increase in the
cost of portfolio securities to be acquired, occurring as a result of a decline
in interest rates or a rise in the dollar value of securities denominated in
foreign currencies, may be offset, in whole or in part, by gains on Futures
Contracts purchased by a Fund. Each 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 each Fund
believes that use of such contracts will benefit the Fund, if the Adviser's
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. Transactions
entered into for non-hedging purposes involve greater risk, including the risk
of losses which are not offset by gains on other portfolio assets. The Fund will
not enter into any Futures Contract if immediately thereafter the value of
securities and other obligations underlying all such Futures Contracts would
exceed 50% of the value of its total assets.

OPTIONS ON FUTURES CONTRACTS: Each Fund may purchase and write options on
Futures Contracts ("Options on Futures Contracts") for the purpose of protecting
against declines in the value of portfolio securities or against increases in
the cost of securities to be acquired, or 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.
Transactions entered into for non-hedging purposes involve greater risk,
including the risk of losses which are not offset by gains on other portfolio
assets.

FORWARD CONTRACTS: Each Fund may enter into forward foreign currency exchange
contracts for the purchase and sale of a fixed quantity of a foreign currency at
a future date ("Forward Contracts"). A Fund may enter into Forward Contracts for
hedging purposes as well as for non-hedging purposes. By entering into
transactions in Forward Contracts, however, a 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. 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. Each 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. Each Fund has established procedures consistent with
statements of the SEC and its staff regarding the use of Forward Contracts by
registered investment companies, which requires use of segregated assets or
"cover" in connection with the purchase and sale of such contracts.

OPTIONS ON FOREIGN CURRENCIES: Each Fund may 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 a 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 a Fund's position, it may forfeit the entire amount of the premium paid for
the Option plus related transaction costs. Options on foreign currencies to be
written or purchased by a Fund will be traded on foreign and U.S. exchanges or
over-the-counter.

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

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

SWAPS AND RELATED TRANSACTIONS: As one way of managing its exposure to different
types of investments, the Fixed Income 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, a Fund might exchange a sequence of cash
payments based on a floating rate index for cash payments based on a fixed rate.
Payments made by both parties to a swap transaction are based on a principal
amount determined by the parties.

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

Swap agreements will tend to shift the Fixed Income 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. 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.

INDEXED SECURITIES: The Fixed Income Fund may also 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 or interest
rates rise or fall according to the change in one or more specified underlying
instruments. Indexed securities may be positively or negatively indexed (i.e.,
their value 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.

DEFENSIVE INVESTMENTS: When the Adviser believes that investing for temporary
defensive reasons is appropriate, such as during times of international,
political or economic uncertainty or turmoil, or in order to meet anticipated
redemption requests, part or all of a Fund's assets may be invested in cash
(including foreign currency) or cash equivalent short-term obligations
including, but not limited to, certificates of deposit, commercial paper,
short-term notes and U.S. Government Securities.

PORTFOLIO TRADING: While it is not generally each Fund's policy to invest or
trade for short-term profits, each Fund may dispose of a portfolio security
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 to a Fund. A Fund engages in portfolio trading if it
believes a transaction net of costs (including custodian charges) will help in
achieving its investment objective.

The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. Consistent with the foregoing primary
consideration, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such other policies as the Trustees may determine,
the Adviser may consider sales of shares of each Fund and of the investment
company clients of MFD, a wholly owned subsidiary of MFS and the principal
underwriter of certain funds in the MFS Family of Funds (the "MFS Funds"), 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 each Fund's operating expenses (e.g. fee charged by the custodian of the
Fund's assets). For a further discussion of portfolio trading, see the Statement
of Additional Information. It is anticipated that the portfolio turnover rate of
the Fixed Income Fund, the Mid-Cap Fund, the Research Fund and the International
Equity Fund will not exceed 400%, 100%, 125% and 125%, respectively, during each
Fund's first fiscal year. Because each Fund may have a portfolio turnover rate
of 100% or more, transaction costs incurred by each Fund and the realized
capital gains and losses of the Fund may be greater than that of a fund with a
lesser portfolio turnover rate.

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

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

The Statement of Additional Information includes a discussion of investment
policies and a listing of specific investment restrictions which govern each
Fund's investment policies. The specific investment restrictions listed in the
Statement of Additional Information may be changed without shareholder approval
unless otherwise indicated. See "Investment Policies and Restrictions" in the
Statement of Additional Information. Each Fund's investment limitations and
policies are adhered to at the time of purchase or utilization of assets; a
subsequent change in circumstances will not be considered to result in a
violation of policy.

5. ADDITIONAL RISK FACTORS
FOREIGN SECURITIES: Transactions involving foreign equity and 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. These include changes in currency rates, exchange control regulations,
governmental administration or economic or monetary policy (in the U.S. or
abroad) or circumstances in dealings between nations. Costs may be incurred in
connection with conversions between various currencies. Special considerations
may also include more limited information about foreign issuers, higher
brokerage costs, different or less stringent accounting standards and thinner
trading markets. Foreign securities markets may also be less liquid, more
volatile and less subject to government supervision than in the U.S. Investments
in foreign countries could be affected by other factors including expropriation,
confiscatory taxation and potential difficulties in enforcing contractual
obligations and could be subject to extended settlement periods.

EMERGING MARKETS: 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 a
Fund is uninvested and no return is earned thereon. The inability of a Fund to
make intended security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to a Fund
due to subsequent declines in value of the portfolio security or, if a 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 a Fund bears the risk that the securities will not be
delivered and that the Fund's payment will not be returned. Securities prices in
emerging markets can be significantly more volatile than in the more developed
nations of the world, reflecting the greater uncertainties of investing in less
established markets and economies. In particular, countries with emerging
markets may have relatively unstable governments, present the risk of
nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with emerging
markets may be predominantly based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. Local securities markets
may trade a small number of securities and may be unable to respond effectively
to increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. Securities of issuers
located in countries with emerging markets may have limited marketability and
may be subject to more abrupt or erratic price movements.

Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. A 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 a Fund.

FIXED INCOME SECURITIES: To the extent a Fund invests in fixed income
securities, the net asset value of the Fund may change as the general levels of
interest rates fluctuate. When interest rates decline, the value of fixed income
securities can be expected to rise. Conversely, when interest rates rise, the
value of fixed income securities can be expected to decline. Each Fund has no
restrictions with respect to the maturities or duration of the fixed income
securities it holds. A Fund's investments in fixed income securities with longer
terms to maturity or greater duration are subject to greater volatility than the
Fund's shorter-term obligations.

LOWER RATED FIXED INCOME SECURITIES: Fixed income securities in which the Fixed
Income Fund and the Research Fund may invest may be rated Baa by Moody's or BBB
by S&P or Fitch (and comparable unrated securities). For a description of bond
ratings, see Appendix A to this Prospectus. 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.

The Fixed Income Fund and the Research Fund may also invest in fixed income
securities rated Ba or lower by Moody's or BB or lower by S&P or Fitch (and
comparable unrated securities). These securities are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds". These securities are
considered speculative and, while generally providing greater yield 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 be affected by 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 securities are also affected by changes in interest rates as
described below). 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 a
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, a Fund
may continue to earn the same level of interest income while its net asset value
declines due to portfolio losses, which could result in an increase in the
Fund's yield despite the actual loss of principal. The prices for these
securities may be affected by legislative and regulatory developments. For
example, federal rules require that savings and loan associations gradually
reduce their holdings of high-yield securities. An effect of such legislation
may be to depress the prices of outstanding lower rated high yielding fixed
income securities. 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 any 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. A Fund's achievement of
its investment objective may be more dependent on the Adviser's own credit
analysis than in the case of an investment company primarily investing in higher
quality fixed income securities.

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

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

6. MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER -- The Adviser manages each Fund pursuant to separate
Investment Advisory Agreements, each dated November 30, 1995 (the "Advisory
Agreements"). The Adviser provides each Fund with overall investment advisory
and administrative services, as well as general office facilities. Subject to
such policies as the Trustees may determine, the Adviser makes investment
decisions for each Fund. For its services and facilities, the Adviser receives a
management fee computed and paid monthly in an amount equal to the following
annual rates of the average daily net assets of each Fund:

PERCENTAGE OF THE AVERAGE
DAILY NET ASSETS
FUND OF EACH FUND
---- -------------------------

Fixed Income Fund ................................. 0.45%
Research Fund ..................................... 0.60%
Mid-Cap Fund ...................................... 0.60%
International Equity Fund ......................... 0.75%

The identity and background of the portfolio managers for the Fixed Income Fund,
the Research Fund, the Mid-Cap Fund and the International Equity Fund are set
forth below.

Fixed Income Fund -- Geoffrey L. Kurinsky, a Senior Vice President of the
Adviser, has been employed by the Adviser since 1987.

Research Fund -- Various equity research analysts employed by the Adviser
comprise a committee that manage the Fund.

Mid-Cap Fund -- John W. Ballen, Chief Equity Officer of the Adviser, has been
employed by the Adviser since 1984.

International Equity Fund -- David R. Mannheim, a Vice President of the Adviser,
has been employed by the Adviser since 1988.

MFS also serves as investment adviser to the other series of the Trust, each of
the MFS Funds and to MFS Municipal Income Trust, MFS Multimarket Income Trust,
MFS Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust, MFS Special Value Trust, MFS Union Standard Trust, MFS Variable
Insurance Trust, MFS/Sun Life Series Trust, Sun Growth Variable Annuity Fund,
Inc. 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 Asset Management, Inc., also
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 $
billion on behalf of approximately million investor accounts as of
, 1995. As of such date, the MFS organization managed approximately
$ billion of assets invested in equity securities, approximately $
billion of assets invested in fixed income securities, and $ billion of
assets invested in securities of foreign issuers and non-U.S. dollar
securities. MFS is a wholly owned subsidiary of Sun Life of Canada (U.S.),
which in turn is a wholly owned subsidiary of Sun Life Assurance Company of
Canada ("Sun Life"). The Directors of MFS are A. Keith Brodkin, Jeffrey L.
Shames, Arnold D. Scott, John D. McNeil and John R. Gardner. Mr. Brodkin is
the Chairman of MFS, Mr. Shames is the President of MFS, Mr. Scott is the
Secretary and a Senior Executive Vice President of MFS, and Messrs. McNeil and
Gardner 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 U.S. since 1895,
establishing a headquarters office in the U.S. in 1973. The executive officers
of MFS report to the Chairman of Sun Life.

A. Keith Brodkin, the Chairman and a Director of MFS, is also the Chairman,
President and a Trustee of the Trust. W. Thomas London, James O. Yost, Stephen
E. Cavan and James R. Bordewick, Jr., all of whom are officers of MFS, are
officers of the Trust.

MFS has established a strategic alliance with Foreign & Colonial Management Ltd.
("Foreign & Colonial"). Foreign & Colonial is a subsidiary of two of the world's
oldest financial services institutions, the London-based Foreign & Colonial
Investment Trust PLC, which pioneered the idea of investment management in 1868,
and HYPO-BANK (Bayerische Hypotheken-und Weschsel-Bank AG), the oldest publicly
listed bank in Germany, founded in 1835. As part of this alliance, the portfolio
managers and investment analysts of MFS and Foreign & Colonial will share their
views on a variety of investment-related issues, such as the economy, securities
markets, portfolio securities and their issuers, investment recommendations,
strategies and techniques, risk analysis, trading strategies and other portfolio
management matters. MFS will have access to the extensive international equity
investment expertise of Foreign & Colonial, and Foreign & Colonial will have
access to the extensive U.S. equity investment expertise of MFS. One or more MFS
investment analysts are expected to work for an extended period with Foreign &
Colonial's portfolio managers and investment analysts at their offices in
London. In return, one or more Foreign & Colonial employees are expected to work
in a similar manner at MFS' Boston offices.

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

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

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

7. INFORMATION CONCERNING SHARES OF THE FUNDS

PURCHASES
Each Fund is designed exclusively for institutional investor clients of MFS and
MFS Asset Management, Inc. Shares of each Fund may be purchased through MFD in
cash or in-kind without a sales charge at their net asset value next computed
after acceptance of the purchase order. The minimum initial investment is
generally $3 million. There is no minimum on additional investments.

Each Fund intends to be as fully invested at all times as is reasonably
practicable in order to maximize total return. In order to make investments
which will immediately generate income, each Fund must have federal funds
available to it (i.e., monies credited to its custodian bank by a Federal
Reserve bank). An order for the purchase of shares of a Fund is accepted upon
receipt of federal funds available for investment. Payment by federal funds sent
by wire is accepted immediately upon receipt and payment by check is accepted
when federal funds become available for investment, which generally occurs on
the next business day after receipt of a check. Therefore, a non-federal funds
investment will remain idle for one business day after receipt.

All investments in a Fund are credited to the shareholder's account in the form
of full and fractional shares at the net asset value per share next determined
after acceptance of the purchase order. The Funds do not generally issue share
certificates, but the Shareholder Servicing Agent maintains an account for each
shareholder and mails to each shareholder a confirmation of each purchase or
sale of shares in its account.

Each Fund reserves the right to reject any specific purchase order or to
restrict purchases by a particular purchaser (or group of related purchasers).
Purchases and exchanges should be made for investment purposes only. A pattern
of frequent exchanges may be deemed by MFS to be abusive and contrary to the
best interests of a Fund's other shareholders and, at the discretion of MFS, may
be limited by a Fund's refusal to accept additional purchases and/or exchanges
from the investor. Although the Funds do not have any specific definition of
what constitutes a pattern of frequent purchases or exchanges, and will consider
all relevant factors in determining whether a particular situation is abusive
and contrary to the best interests of a Fund and its other shareholders,
investors should be aware that each Fund may in its discretion limit or
otherwise restrict the number of times purchases or exchanges may be made by an
investor.

OPENING AN ACCOUNT: Payments by check should be made to the order of "(insert
name of Fund)" and sent to that particular Fund as follows: MFS Service Center,
Inc., P.O. Box 1400, Boston, MA 02107-9906. Payments of federal funds should be
sent by wire to the custodian of the Fund as follows: State Street Bank and
Trust Company, Attn: Mutual Funds Division, For the account of: [Shareholder's
name], Re: (insert name of Fund) (Account No. ) and Wire Number: [Assigned by
telephone].

Information on how to wire federal funds is available at any national bank or
any state bank which is a member of the Federal Reserve System. Shareholders
should also mail the Account Application to the Shareholder Servicing Agent.

A shareholder must first telephone the Shareholder Servicing Agent (see back
cover for telephone number) to advise of its intended action and, if funds are
to be wired, to obtain a wire order number.

IN-KIND PURCHASES: Subject to applicable state securities laws, shares of each
Fund may be purchased with securities acceptable to that particular Fund. A Fund
need not accept any security offered for an in-kind purchase unless it is
consistent with that Fund's investment objective, policies and restrictions and
is otherwise acceptable to the Fund. Securities accepted in-kind for shares will
be valued in accordance with the Fund's usual valuation procedures (see "Net
Asset Value" below). Investors interested in making an in-kind purchase of Fund
shares must first telephone the Shareholder Servicing Agent (see back cover for
telephone number) to advise of its intended action and obtain instructions for
an in-kind purchase.

EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with a Fund for which payment has been received by that Fund (i.e., an
established account) may be exchanged for shares of any of the other series of
the Trust (if available for sale) 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 in proper
form (see "Redemptions" below). If an Exchange Request is being used to open a
new account with any other series of the Trust, the exchange must involve shares
having an aggregate value of at least [$3 million.] If the Exchange Request is
received by the Shareholder Servicing Agent on any business day 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. 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 non-tax-exempt shareholders making the exchange. The
exchange privilege (or any aspect of it) may be changed or discontinued upon
sixty days prior written notice to shareholders.

REDEMPTIONS
Shares of a Fund may be redeemed on any business day in cash or in-kind. If the
Adviser determines, in its sole discretion, that it would be detrimental to the
best interests of the remaining shareholders of a Fund, a Fund may make payment
of the redemption price, either totally or partially, by a distribution in-kind
of securities (instead of cash) from that 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
(see "Net Asset Value" below). Securities distributed by a Fund will be selected
by the Adviser in light of the Fund's objective and will not generally represent
a pro rata distribution of each security held in the Fund's portfolio. If a
shareholder received a distribution in-kind, the shareholder would incur
brokerage charges when converting the securities to cash.

Within seven days after receipt of a redemption request in "good order" by the
Shareholder Servicing Agent, a Fund will make payment in cash in the amount of
(or, as described above, in-kind with a value equal to) the net asset value of
the shares next determined after such redemption request was received, except
during any period in which the right of redemption is suspended or date of
payment is postponed because the New York Stock Exchange (the "Exchange") is
closed or trading on the Exchange is restricted or to the extent otherwise
permitted by the 1940 Act, if an emergency exists. "Good order" generally means
that the stock power, written request for redemption, letter of instruction or
share 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 minimus exceptions to the above requirements
for redemptions. Redemptions in cash will be made by transfer of federal funds
for payment into the investor's account. Redemptions in-kind will be made by the
transfer and delivery of securities as directed by the investor.

When opening an account with a Fund, shareholders will be required to designate
the account(s) to which funds or securities may be transferred upon redemption.
Designation of additional accounts and any change in the accounts originally
designated must be made in writing.

The value of shares redeemed may be more or less than the shareholder's cost,
depending on portfolio performance and distributions made during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
a shareholder that is not an exempt shareholder may realize a gain or loss (see
"Tax Status" below).

The Trust reserves the right to redeem shares in any account for their
then-current value (which will be promptly paid to the shareholder) if at any
time the total investment in such account drops below $500,000 because of
redemptions. 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.

SIGNATURE GUARANTEE: In order to protect shareholders to the greatest extent
possible against fraud, each 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. With
respect to written requests for redemptions, no signature guarantee or evidence
that the individual executing the stock power, written request for redemption,
letter of instruction or certificate will be required if the amount of the
redemption proceeds does not exceed specified minimums established from time to
time by MFD and the proceeds are wired or mailed to a predesignated account or
address.

DISTRIBUTIONS
Each Fund intends to pay substantially all of its net investment income to its
shareholders as dividends on an annual basis. In determining the net investment
income available for distributions, a 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. If the Fund earns less than projected, or
otherwise distributes more than its earnings for the year, a portion of the
distributions may constitute a return of capital. A 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. Each Fund intends to
distribute premiums from options, if any, annually. Shareholders may elect to
receive dividends and capital gain distributions in either cash or additional
shares. See "Tax Status" and "Shareholder Services -- Distribution Options"
below.

TAX STATUS
In order to minimize the taxes each Fund would otherwise be required to pay,
each 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"), and
to make distributions to its shareholders in accordance with the timing and
certain other requirements imposed by the Code. It is expected that each Fund
will not be required to pay entity level federal income or excise taxes although
foreign-source income received by any Fund may be subject to foreign withholding
taxes. Shareholders of a Fund normally will have to pay federal income taxes,
and any state or local taxes, on dividends and capital gain distributions from a
Fund whether paid in cash or additional shares.

Shortly after the end of each calendar year, each individual shareholder will be
sent a statement setting forth the federal income status of all dividends and
distributions for that year, including the portion taxable as ordinary income,
the portion taxable as long-term capital gain, the portion if any, representing
a return of capital (which is free of current taxes but results in a basis
reduction) and the amount, if any, of federal income tax withheld. In certain
circumstances, a Fund may elect to "pass through" to shareholders foreign income
taxes paid by that 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 includible in their gross income for
federal income tax purposes.

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

Each Fund intends to withhold U.S. federal income tax at a rate of 30% on
dividends and certain other payments that are subject to such withholding, and
that are made to non-exempt persons who are neither citizens nor residents of
the U.S., regardless of whether a lower rate may be permitted under an
applicable law or treaty. Each Fund is also required in certain circumstances to
apply backup withholding of 31% on reportable 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. However,
backup withholding will not be applied to such shareholders payments which have
had 30% withholding taken. Prospective shareholders should read the Account
Application for information regarding backup withholding of federal income tax
and should consult their own tax advisers as to the tax consequences of an
investment in the Fund.

NET ASSET VALUE
The net asset value of shares of each 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 a Fund's
liabilities from the value of its assets and dividing the difference by the
number of its shares outstanding. Assets in a Fund's portfolio are valued on the
basis of their market values or otherwise at their fair values, as described in
the Statement of Additional Information. 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 a Fund prior to its
calculation and received by a Fund prior to the close of that business day.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust has only one class of shares, entitled Shares of Beneficial Interest
(without par value). The Trust presently has seven series and has reserved the
right to create and issue additional series. Each share of a series represents
an equal proportionate interest in that series with each other share of that
series. The shares of each series participate equally in the earnings, dividends
and assets of the particular series. Shares when issued are fully paid and
non-assessable. Shareholders are entitled to one vote for each share held.
Shares of each series generally vote separately, for example to approve
investment advisory agreements, but shares of all series vote together,
including shares of other series of the Trust, to the extent required under the
1940 Act, in the election or selection of Trustees and accountants. Shareholders
of each series would be entitled to share pro rata in the net assets of that
series available for distribution to shareholders upon liquidation of the Trust
or that series. The Trust is not required to and has no current intention to
hold annual shareholder meetings, although special meetings may be called for
purposes of electing or removing Trustees, changing fundamental investment
restrictions or approving an investment advisory agreement.

Because the Adviser has furnished the intital capital of each Fund, as of the
date of this Prospectus, the Adviser owns 100% of each Fund's shares and,
therefore, controls each Fund.

PERFORMANCE INFORMATION
From time to time, a Fund will provide total rate of return and yield quotations
and may also quote fund rankings from various sources, such as the Lipper
Analytical Services, Inc. and Wiesenberger Investment Companies Service. Total
rate of return quotations will reflect the average annual percentage change over
stated periods in the value of an investment in a Fund made at the net asset
value with all distributions reinvested. Yield quotations are based on the
annualized net investment income per share of a Fund over a 30-day period stated
as a percent of the net asset value on the last day of that period. Each Fund's
total rate of return and yield quotations are based on historical performance
and are not intended to indicate future performance. Total rate of return
reflects all components of investment return over a stated period of time, while
yield reflects only net portfolio income as of a stated time. A 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
each Fund will calculate its total rate of return and yield, see the Statement
of Additional Information.

EXPENSES
The Trust pays the compensation of its Trustees who are not officers of MFS and
all expenses of each Fund (other than those assumed by MFS) including but not
limited to: governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to each Fund, fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of each Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses, periodic reports, notices and proxy statements to
shareholders and to governmental officers and commissions; brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of State Street
Bank and Trust Company, the Trust's Custodian, for all services to a Fund,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of each Fund;
and expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of each Fund and the preparation,
printing and mailing of prospectuses are borne by each Fund except that the
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 of the Trust are allocated among the series in a manner
believed by management of the Trust to be fair and equitable.

MFS has agreed to pay until December 31, 2005 the expenses of each Fund such
that the aggregate operating expenses of each Fund do not exceed the following
percentage, on an annualized basis, of its average daily net assets: 0.60% of
the Fixed Income Fund, 0.75% of the Research Fund, 0.75% of the Mid-Cap Fund and
0.95% of the International Equity Fund. Each obligation to pay expenses may be
terminated or revised at any time by MFS without the consent of the Trust or the
Fund by notice in writing from MFS to the Trust on behalf of the Fund. Such
payments by MFS are subject to reimbursement by each Fund which will be
accomplished by the payment by each Fund of an expense reimbursement fee to MFS
computed and paid monthly at a percentage of its average daily net assets for
its then current fiscal year, with a limitation that immediately after such
payment the aggregate operating expenses of each Fund would not exceed the
following percentage, on an annualized basis, of its average daily net assets:
0.60% of the Fixed Income Fund, 0.75% of the Research Fund, 0.75% of the Mid-Cap
Fund and 0.95% of the International Equity Fund. The expense reimbursement
agreement terminates for each Fund on the earlier of the date on which payments
made thereunder by the Fund equal the prior payment of such reimbursable
expenses by MFS or December 31, 2005.

8. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of a Fund, should contact the Shareholder Servicing
Agent.

ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in its account. At the
end of each calendar year, each shareholder will receive income tax information
regarding any reportable dividends, capital gain distributions or other
distributions for that year.

DISTRIBUTION OPTIONS -- The following options are available to all accounts and
may be changed as often as desired by notifying the Shareholder Servicing Agent:

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

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

-- Dividends and capital gain distributions in cash.

Dividends and capital gains distributions will be reinvested (net of any tax
withholding) in additional full and fractional 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 a Fund. 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 distributions or redemption checks.
----------------

The Funds' Statement of Additional Information, dated [December 1, 1995],
contains more detailed information about the Trust and the Funds, including, but
not limited to, information related to: (i) each Fund's investment 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 Adviser; (iii) portfolio trading;
(iv) each Fund's shares, including rights and liabilities of shareholders; (v)
tax status of dividends and distributions; and (vi) various services and
privileges provided by each Fund for the benefit of its shareholders.
<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 debt instruments. It should be emphasized, however, that ratings are
not absolute standards of quality. Consequently, debt instruments with the same
maturity, coupon and rating may have different yields while debt instruments of
the same maturity and coupon with different ratings may have the same yield.

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

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

A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment 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 ever attaining any
real investment standing.

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

Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted;
2. the issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy;
3. there is a lack of essential data pertaining to the issue or issuer;
and
4. the issue was privately placed, in which case the rating is not
published in Moody's publications.

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

STANDARD & POOR'S RATINGS GROUP

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

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

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

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

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

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

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

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

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

C1: The rating C1 is reserved for income bonds on which no interest is being
paid.

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

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

A-1 AND P-1 COMMERCIAL PAPER RATINGS
Description of S&P, Fitch and Moody's highest commercial paper ratings:

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

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

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 forseeble events.

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

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

BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions 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 of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

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

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

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

PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rated 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 a "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
(800) 637-8730

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

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

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

SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street
Boston MA 02116
Toll free: (800) 637-8730

MAILING ADDRESS
P.O. Box 1400
Boston, MA 02107-9906

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

MFS(RM)
THE FIRST NAME IN MUTUAL FUNDS

MFS(R) INSTITUTIONAL BROAD MARKET FIXED
INCOME FUND
MFS(R) INSTITUTIONAL RESEARCH FUND
MFS(R) INSTITUTIONAL MID-CAP GROWTH FUND
MFS(R) INSTITUTIONAL INTERNATIONAL EQUITY FUND

500 BOYLSTON STREET
BOSTON, MA 02116 8/95

[LOGO] MFS
THE FIRST NAME IN MUTUAL FUNDS

MFS(R) INSTITUTIONAL BROAD MARKET
FIXED INCOME FUND
MFS(R) INSTITUTIONAL RESEARCH FUND
MFS(R) INSTITUTIONAL MID-CAP GROWTH FUND
MFS(R) INSTITUTIONAL INTERNATIONAL
EQUITY FUND

Prospectus
December 1, 1995

<PAGE>

[LOGO] M F S (SM)
THE FIRST NAME IN MUTUAL FUNDS

MFS(R) INSTITUTIONAL BROAD MARKET
FIXED INCOME FUND
MFS(R) INSTITUTIONAL RESEARCH FUND
MFS(R) INSTITUTIONAL MID-CAP
GROWTH FUND STATEMENT OF
MFS(R) INSTITUTIONAL INTERNATIONAL ADDITIONAL INFORMATION
EQUITY FUND [December 1, 1995]
-------------------------------------------------------------------------------
Page
----
1. Definitions .......................................................... 2
2. Investment Policies and Restrictions ................................. 2
3. Management of the Funds .............................................. 12
Trustees ......................................................... 12
Officers ......................................................... 12
Investment Adviser ............................................... 12
Custodian ........................................................ 12
Shareholder Servicing Agent ...................................... 13
Distributor ...................................................... 13
4. Portfolio Transactions and Brokerage Commissions ..................... 13
5. Tax Status ........................................................... 14
6. Determination of Net Asset Value and Performance ..................... 15
7. Description of Shares, Voting Rights and Liabilities ................. 16
8. Independent Accountants and Financial Statements ..................... 16
Exhibit A - Trustee Compensation Table ................................... 17

MFS(R) INSTITUTIONAL BROAD MARKET FIXED INCOME FUND
MFS(R) INSTITUTIONAL RESEARCH FUND
MFS(R) INSTITUTIONAL MID-CAP GROWTH FUND
MFS(R) INSTITUTIONAL INTERNATIONAL EQUITY FUND
Each a Series of MFS Institutional Trust
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000

This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Funds'
Prospectus, dated [December 1, 1995]. This Statement of Additional Information
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 STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A
CURRENT PROSPECTUS.
<PAGE>
1. DEFINITIONS

"Fixed Income Fund" -- MFS Institutional Broad Market Fixed Income
Fund, a diversified series of MFS
Institutional Trust.

"Research Fund" -- MFS Institutional Research Fund, a
diversified series of MFS Institutional
Trust.

"Mid-Cap Fund" -- MFS Institutional Mid-Cap Growth Fund, a
diversified series of MFS Institutional
Trust.

"International Equity Fund" -- MFS Institutional International Equity Fund,
a diversified series of MFS Institutional
Trust.

"Funds" -- Fixed Income Fund, Research Fund, Mid-Cap
Fund and International Equity Fund.

"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 December 1,
1995.

"Trust" -- MFS Institutional Trust, a Massachusetts
business trust. On June 1, 1992, the Trust
changed its name from Public Funds Investment
Trust. The Trust is currently comprised of
seven series, including the Funds.

2. INVESTMENT POLICIES AND RESTRICTIONS

INVESTMENT POLICIES. The investment objective(s) and policies of the Funds are
described in the Prospectus. The following discussion of the Fund's investment
policies and restrictions supplements and should be read in conjunction with the
information set forth in the "Investment Objectives and Policies" section of the
Prospectus.

REPURCHASE AGREEMENTS: As described in the Prospectus, each Fund may enter into
repurchase agreements with sellers who are member firms (or a subsidiary
thereof) of the New York Stock Exchange or members of the Federal Reserve
System, recognized domestic or foreign securities dealers or institutions which
the Adviser has determined to be of comparable creditworthiness. The securities
that a Fund purchases and holds have values that 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 a 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.

The repurchase agreement provides that in the event the seller fails to pay the
price agreed upon on the agreed upon delivery date or upon demand, as the case
may be, a 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. Each Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, each 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 each Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.

LENDING OF PORTFOLIO SECURITIES: Each Fund may seek to increase its income by
lending portfolio securities to entities deemed creditworthy by the Adviser.
Such loans would be required to be secured continuously by collateral in cash,
letters of credit or U.S. Government securities maintained on a current basis at
an amount at least equal to the market value of the securities loaned. A Fund
would have the right to call a loan and obtain the securities loaned at any time
on customary industry settlement notice (which will usually not exceed five
days). During the existence of a loan, a Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive compensation based on investment of the
collateral. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of their consent on a material matter affecting
the investment. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which could be earned currently from securities loans
of this type justifies the attendant risk. If the Adviser determines to make
securities loans, it is not intended that the value of the securities loaned
would exceed 30% of the value of each Fund's total assets.

FOREIGN SECURITIES: Each Fund may invest in foreign securities as discussed in
the Prospectus. Investments in foreign issues involve considerations and
possible risks not typically associated with investments in securities issued by
domestic companies or with debt securities issued by foreign governments. There
may be less publicly available information about a foreign company than about a
domestic company, and many foreign companies are not subject to accounting,
auditing and financial reporting standards and requirements comparable to those
to which U.S. companies are subject. Foreign securities markets, while growing
in volume, have substantially less volume than U.S markets, and securities of
many foreign companies are less liquid and their prices more volatile than
securities of comparable domestic companies. Fixed brokerage commissions and
other transaction costs on foreign securities exchanges are generally higher
than in the U.S. There is also less government supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the U.S.

WHEN-ISSUED OR FORWARD DELIVERY SECURITIES: When a 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 SEC concerning
such purchases. Since that policy currently recommends that an amount of a
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 cash, short-term
money market instruments or high quality debt securities sufficient to cover any
commitments or to limit any potential risk. However, although each 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, a Fund may have to
sell assets which have been set aside in order to meet redemptions. Also, if a
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.

AMERICAN DEPOSITARY RECEIPTS: American Depositary Receipts ("ADRs") are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. ADRs may be sponsored or unsponsored. A sponsored
ADR is issued by a depository which has an exclusive relationship with the
issuer of the underlying security. An unsponsored ADR may be issued by any
number of U.S. depositories. Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
depository of an unsponsored ADR, on the other hand, is under no obligation to
distribute shareholder communications received from the issuer of the deposited
securities or to pass through voting rights to ADR holders in respect of the
deposited securities. Each Fund except the Fixed Income 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. A 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.
A 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.

INVESTMENT IN OTHER INVESTMENT COMPANIES: A Fund's investment in other
investment companies, as described in the Prospectus, is limited in amount by
the Investment Company Act of 1940, as amended (the "1940 Act"), so that a Fund
may purchase shares in another investment company unless (i) such a purchase
would cause a Fund to own in aggregate more than 3% of the total outstanding
voting stock of the company or (ii) such a purchase would cause a Fund to have
more than 5% of its total assets invested in one investment company or more than
10% of its total assets invested in aggregate in all other investment companies.
Such investment may also involve the payment of substantial premiums above the
value of such investment companies' portfolio securities, and the total return
on such investment will be reduced by the operating expenses and fees of such
other investment companies, including advisory fees.

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

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

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

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

MORTGAGE "DOLLAR ROLL" TRANSACTIONS: As described in the Prospectus, the Fixed
Income 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. During the roll period, the Fund fore- goes 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.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: The
Fixed Income Fund may invest a portion of its assets in collateralized mortgage
obligations or "CMOs," which are debt obligations collateralized by mortgage
loans or mortgage pass-through securities. Typically, CMOs are collateralized by
certificates issued by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA"), or the Federal Home Loan
Mortgage Association ("FHLMC"), but also may be collateralized by whole loans or
private mortgage pass-through securities (such collateral collectively
hereinafter referred to as "Mortgage Assets"). The Fixed Income Fund may also
invest a portion of its assets in multiclass pass-through securities which are
equity interests in a trust composed of Mortgage Assets. 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 scheduuled distributions on the multiclass
pass-through securities. CMOs may be issued by agencies or instrumentalities of
the United States government or by private originators of, or investors in,
mortgage loans, including savings and loan associations, mortgage banks,
commercial banks, investment banks and special purpose subsidiaries of the
foregoing. The issuer of a series of CMOs may elect to be treated as a Real
Estate Mortgage Investment Conduit (a "REMIC").

In a CMO, a series of bonds or certificates are usually issued in multiple
classes with different maturities. Each class of CMOs, often referred to as a
"tranche," is issued at a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates, resulting in a loss of all
or a part of the premium if any has been paid. Interest is paid or accrues on
all classes of the CMOs on a monthly, quarterly or semiannual basis. The
principal of and interest on the Mortgage Assets may be allocated among the
several classes of a series of a CMO in innumerable ways. In a common structure,
payments of principal, including any principal prepayments, on the Mortgage
Assets are applied to the classes of the series of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment of
principal will be made on any class of CMOs until all other classes having an
earlier stated maturity or final distribution date have been paid in full.
Certain CMOs may be stripped (securities which provide only the principal or
interest factor of the underlying security). See "Stripped Mortgage-Backed
Securities" below for a discussion of the risks of investing in these stripped
securities and of investing in classes consisting primarily of interest payments
or principal payments.

The Fixed Income 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.

STRIPPED-MORTGAGE-BACKED SECURITIES: The Fixed Income Fund may invest a portion
of its assets in stripped mortgage-backed securities ("SMBS") which are
derivative multiclass mortgage securities issued by agencies of or
instrumentalities of the U.S. Government, or by private originators of, or
investors in mortgage loans, including savings and loan institutions, mortgage
banks, commmercial banks and investment banks.

SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions from a pool of mortgage assets. A
common type of SMBS will have one class receiving some of the interest and most
of the principal from the Mortgage Assets, while the other class will receive
most of the interest and the remainder of the principal. In the most extreme
case, one class will receive all of the interest (the interest-only or "IO"
class) while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity on an IO is extremely
sensitive to the rate of principal payments, including prepayments on the
related underlying Mortgage Assets, and a rapid rate of principal payments may
have a material adverse effect on such security's yield to maturity. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, the Fixed Income Fund may fail to fully recoup its initial investment
in these securities. The market value of the class consisting primarily or
entirely of principal payments generally is unusually volatile in response to
changes in interest rates. Because SMBS were only recently introduced,
established trading markets for these securities have not yet developed,
although the securities are traded among institutional investors and investment
banking firms.

MORTGAGE PASS-THROUGH SECURITIES: The Fixed Income 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 GNMA, are described as "modified pass-through" securities. These
securities entitle the holder to receive all interest and principal payments
owed on the mortgages in the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether the mortgagor actually makes the
payment.

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

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

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

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

OPTIONS ON SECURITIES: Each Fund may write (sell) covered call and put options
on securities ("Options") and purchase call and put Options. A Fund may write
Options for the purpose of increasing its return and for hedging purposes. In
particular, if a 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.

A Fund may write Options in connection with buy-and-write transactions; that is,
the Fund may purchase a security and then write a call Option against that
security. The exercise price of the call Option a Fund determines to write
depends upon the expected price movement of the underlying security. The
exercise price of a call Option may be below ("in-the-money"), equal to ("at-
the-money") or above ("out-of-the-money") the current value of the underlying
security at the time the Option is written.

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 a Fund
in the same market environments in which call Options are used in equivalent
buy-and-write transactions.

A Fund may also write combinations of put and call Options on the same security,
a practice known as a "straddle." By writing a straddle, a 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 a 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, a 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, a 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 each 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.

A 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. A 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 a Fund, the benefits
realized by a 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 certain 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
each Fund's writing of over-the-counter options in accordance with the following
procedure. Except as provided below, each 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 each 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 a 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. A Fund will treat all or a
portion of the formula as illiquid for purposes of the SEC illiquidity ceiling
imposed by the SEC staff. A 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.

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

OPTIONS ON STOCK INDICES: Each fund except the Fixed Income Fund may write
(sell) covered call and put options and purchase call and put options on stock
indices ("Options on Stock Indices"). Each Fund may cover call Options on Stock
Indices by owning securities whose price changes, in the opinion of the Adviser,
are expected to be similar to those of the underlying index, or by having an
absolute and immediate right to acquire such securities without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities in its
portfolio. Where a 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 the difference is
maintained by the Fund in cash or cash equivalents in a segregated account with
its custodian. A Fund may cover put options on stock indices by maintaining cash
or cash equivalents with a value equal to the exercise price in a segregated
account with its custodian, or else by holding a put on the same security and in
the same principal amount as the put written where the exercise price of the put
held (a) is equal to or greater than the exercise price of the put written or
(b) is less than the exercise price of the put written if the difference is
maintained by the Fund in cash or cash equivalents in a segregated account with
its custodian. Put and call options on stock indices may also be covered in such
other manner as may be in accordance with the rules of the exchange on which, or
the counterparty with which, the option is traded and applicable laws and
regulations.

A Fund will receive a premium from writing a put or call option on a stock
index, 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 a
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, a Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation in
the Fund's stock investment. By writing a put option, a Fund assumes the risk of
a decline in the index. To the extent that the price changes of securities owned
by the Fund correlate with changes in the value of the index, writing covered
put options on indexes will increase a 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.

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

The purchase of call options on stock indices may be used by a 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 a Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for
this purpose, a Fund will also bear the risk of losing all or a portion of the
premium paid if the value of the index does not rise. The purchase of call
options on stock indices when a 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 a Fund owns.

YIELD CURVE OPTIONS: The Fixed Income Fund may also enter into options on the
yield "spread" or yield differential between two securities, transactions
referred to as a "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 Fixed Income 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
maintains in a segregated account with its custodian cash or cash equivalents
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 a 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 counter party with which the option is traded and applicable
laws and regulations. Yield curve options are traded over-the-counter, and
because they have been only recently introduced, established trading markets for
these securities have not yet developed.

FUTURES CONTRACTS: Each Fund may enter into contracts for the purchase or sale
for future delivery of securities or foreign currencies or contracts based on
indexes of 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 each Fund intends
to purchase at a later date. Futures Contracts may also be entered into for
non-hedging purposes to the extent permitted by applicable law. A "sale" of a
Futures Contract means a contractual obligation to deliver the securities 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.

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. A Fund will incur
brokerage fees when it purchases and sells Futures Contracts. At the time such a
purchase or sale is made, a 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 a Fund may provide or receive
cash that reflects the decline or increase in the value of the contract.

The purpose of the purchase or sale of a Futures Contract, for hedging purposes
in the case of a portfolio holding long-term debt securities, is to protect a
Fund from fluctuations in interest rates without actually buying or selling
long-term debt securities. For example, if a 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. A 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 a Fund to maintain a
defensive position without having to sell its portfolio securities. Transactions
entered into for non-hedging purposes include greater risk, including the risk
of losses which are not offset by gains on other portfolio assets.

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, a 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 a 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 a Fund could have the effect of diluting dividend
earnings. To the extent a Fund enters into Futures Contracts for this purpose,
the assets in the segregated asset account maintained to cover a Fund's
obligations with respect to such Futures Contracts will consist of cash, cash
equivalents or short-term money market instruments 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 securities provides for the making and
acceptance of a cash settlement based on changes in value of the underlying
index. The Mid-Cap Fund, the International Equity Fund and the Research 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 and for
non-hedging purposes to the extent permitted by applicable law. For example, a
Fund may sell stock index futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of the Fund's
securities portfolio that might otherwise result. If such decline occurs, the
loss in value of portfolio securities may be offset, in whole or in part, by
gains on the futures position. When a Fund is not fully invested in the
securities market and anticipates a significant market advance, it may purchase
stock index futures contracts in order to gain rapid market exposure that may,
in part or in whole, offset increases in the cost of securities that Fund
intends to purchase. As such acquisitions are made, the corresponding positions
in stock index futures contracts will be closed out. In a substantial majority
of these transactions, a 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. Futures
Contracts on other securities indexes may be used in a similar mannner in order
to protect the portfolio from broad fluctuations in securities prices and for
non-hedging purposes to the extent permitted by applicable law.

OPTIONS ON FUTURES CONTRACTS: Each 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 constitutes a partial hedge against declining
prices of the security or currency underlying the Futures Contract. If the
futures price at expiration of the option is below the exercise price, a Fund
will retain the full amount of the option premium, less related transaction
costs, which provides a partial hedge against any decline that may have occurred
in the Fund's portfolio holdings. The writing of a put Option on a Futures
Contract constitutes a partial hedge against increasing prices of the security
or currency underlying the Futures Contract. If the futures price at expiration
of the option is higher than the exercise price, a 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 a 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, a
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.

A Fund may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts, or for
non-hedging purposes to the extent permitted by applicable law. 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, a 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 a 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, a 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 a 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 a Fund to forego all or a portion of such benefits up to the amount of
the premium paid and related transaction costs. Transactions entered into for
non-hedging purposes include greater risk, including the risk of losses which
are not offset by gains on other portfolio assets.

FORWARD CONTRACTS: Each 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"). A Fund may enter
into Forward Contracts for hedging purposes as well as for non-hedging purposes.
A Fund may also enter into Forward Contracts for "cross hedging" purposes 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, a Fund
may be required to forego the benefits of advantageous changes in exchange
rates. A 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, a Fund may purchase or sell such currency, respectively,
through a Forward Contract. If the expected changes in the value of the currency
occur, a 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, a Fund may sustain losses which will reduce its gross income. Such
transactions, therefore, could be considered speculative.

Each Fund has established procedures consistent with statements by the SEC and
its staff regarding the use of Forward Contracts by registered investment
companies, which require the use of segregated assets or "cover" in connection
with the purchase and sale of such contracts. In those instances in which a Fund
satisfies this requirement through segregation of assets, it will maintain, in a
segregated account, cash, cash equivalents or high grade debt securities, which
will be marked to market on a daily basis, in an amount equal to the value of
its commitments under Forward Contracts.

OPTIONS ON FOREIGN CURRENCIES: Each 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,
a Fund may purchase put options on the foreign currency. If the value of the
currency did decline, a 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, a 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 a 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, a Fund could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the benefits of
advantageous changes in such rates.

A 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.

RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S
PORTFOLIO -- Each 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
instruments correlate with price movements in the relevant portion of that
Fund's portfolio. If the values of portfolio securities being hedged do not move
in the same amount or direction as the instruments underlying options, Futures
Contracts or Forward Contracts traded, a Fund's hedging strategy may not be
successful and a 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, Future
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, a Fund's overall return could be less than if the
hedging transaction had not been undertaken. In the case of futures and options
based on an index of securities or individual fixed income securities, the
portfolio will not duplicate the components of the index, and in the case of
futures and options on fixed income securities, the portfolio securities which
are being hedged may not be the same type of obligation underlying such
contract. As a result, the correlation probably will not be exact. Consequently,
a 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. In addition, where a 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),
a Fund incurs the risk of imperfect correlation between changes in the values of
the two currencies, which could result in losses.

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.

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, a Fund's overall performance may be poorer than if
it had not entered into any such contract. For example, if a Fund has hedged
against the possibility of an increase in interest rates, and rates instead
decline, a 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.

It should be noted that a Fund may purchase and write Options not only for
hedging purposes, but also for the purpose of increasing its return. As a
result, a 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.

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 a 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 a 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 a 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.

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 a
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 a 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 a 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 a
Fund's position, unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with a 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 a 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 the Commodities Futures
Trading Commission ("CFTC") has 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 a Fund to enter into the trading strategies
identified herein or to liquidate existing positions.

As a result of its investments in foreign securities, a Fund may receive
interest or dividend payments, or the proceeds of the sale or redemption of such
securities, in foreign currencies. A 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 a Fund is exercised or the Fund is unable to close out a
Forward Contract it has entered into. In addition, a 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, a 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 a 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 a Fund's position.
Such losses could also adversely affect a Fund's hedging strategies. Certain tax
requirements may limit the extent to which a Fund will be able to hold
currencies.

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

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

When a Fund purchases a Futures Contract, an amount of cash and cash equivalents
will be deposited in a segregated account with a Fund's custodian so that the
amount so segregated will at all times equal the value of the Futures Contract,
thereby insuring that the use of such Futures is unleveraged.

SWAPS AND RELATED TRANSACTIONS: The Fixed Income 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 Fixed
Income 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 Fixed Income Fund is not limited to any particular form or variety of swap
agreement if MFS determines it is consistent with the Fund's investment
objective and policies.

The Fixed Income Fund will maintain cash or appropriate liquid assets with its
custodian 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
its Custodian 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
counter-party's creditworthiness declined, the value of the swap agreement would
be likely to decline, potentially resulting in losses. If the counterparty
defaults, the Fund's risk of loss consists of the net amount of payments that
the Fund is contractually entitled to receive. The Fixed Income 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.

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

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

INVESTMENT RESTRICTIONS. Each Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of that
Fund's shares (which, as used in this Statement of Additional Information, means
the lesser of (i) more than 50% of its outstanding shares, or (ii) 67% or more
of its outstanding shares present at a meeting at which holders of more than 50%
of its outstanding shares are represented in person or by proxy):

Each Fund may not:

(1) borrow amounts in excess of 33 1/3% of its assets including
amounts borrowed;

(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) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein and securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein), interests in oil, gas or
mineral leases, commodities or commodity contracts (excluding Options,
Options on Futures Contracts, Options on Stock Indices, Options on Foreign
Currencies and any other type of option, and Futures Contracts) in the
ordinary course of its business. Each Fund reserves the freedom of action to
hold and to sell real estate, mineral leases, commodities or commodity
contracts (including Options, Options on Futures Contracts, Options on Stock
Indices, Options on Foreign Currencies and any other type of option, and
Futures Contracts) acquired as a result of the ownership of securities;

(4) issue any senior securities except as permitted by the 1940 Act. For
purposes of this restriction, collateral arrangements with respect to any
type of option (including Options, Options on Futures Contracts, Options on
Stock Indices, Options on Foreign Currencies), Forward Contracts, Futures
Contracts and swap and collateral arrangements with respect to initial and
variation margin are not deemed to be the issuance of a senior security;

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

(6) purchase any securities of an issuer of a particular industry if, as
a result, 25% or more of its gross assets would be invested in securities of
issuers whose principal business activities are in the same industry (except
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements collateralized by such
obligations).

In addition, each Fund has adopted the following nonfundamental policies which
may be changed without shareholder approval. Each Fund will not:

(1) 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 net 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 a 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;

(2) purchase securities issued by any other investment company in excess
of the amount permitted by the 1940 Act, except when such purchase is part
of a plan of merger or consolidation;

(3) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the
Trust, or is an officer or a director of the investment adviser of the Fund,
if one or more of such persons also owns beneficially more than 0.5% of the
securities of such issuer, and such persons owning more than 0.5% of such
securities together own beneficially more than 5% of such securities;

(4) purchase any securities or evidences of interest therein on margin,
except that each Fund may obtain such short-term credit as may be necessary
for the clearance of any transaction and except that each Fund, may make
margin deposits in connection with any type of option (including Options on
Futures Contracts, Options, Options on Foreign Currencies and Options on
Stock Indices) and Futures Contracts;

(5) sell any security which a 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;

(6) invest more than 5% of its gross assets in companies which,
including predecessors, controlling persons, sponsoring entities, general
partners and guarantors, have a record of less than three years' continuous
operation or relevant business experience;

(7) pledge, mortgage or hypothecate in excess of 33 1/3% of its gross
assets. For purposes of this restriction, collateral arrangements with
respect to any type of option (including Options on Futures Contracts,
Options and Options on Foreign Currencies and Options on Stock Indices),
Futures Contracts and payments of initial and variation margin in connection
therewith, are not considered a pledge of assets;

(8) borrow, except as a temporary measure for extraordinary or
emergency purposes;

(9) purchase or sell any put or call option or any combination thereof,
provided that this shall not prevent (a) the purchase, ownership, holding or
sale of (i) warrants where the grantor of the warrants is the issuer of the
underlying securities or (ii) put or call options or combinations thereof
with respect to securities, indexes of securities, Options, Options on
Futures Contracts, Options on Foreign Currencies or (b) the purchase,
ownership, holding or sale of contracts for the future delivery of
securities or currencies; or

(10) invest for the purpose of exercising control or management.

3. MANAGEMENT OF THE FUND

The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust. The Adviser is responsible for the investment management of each 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
A. KEITH BRODKIN,* Chairman and President
Massachusetts Financial Services Company, Chairman and Director

NELSON J. DARLING, JR.
Director or Trustee of several corporations or trusts, including Eastern
Enterprises (diversified holding company)
Address: 18 Tremont Street, Boston, Massachusetts

WILLIAM R. GUTOW
Executive Vice-President of Capitol Entertainment Management Company
Address: 3 Ruedulac, Dallas, Texas

OFFICERS
W. THOMAS LONDON,* Treasurer
Massachusetts Financial Services Company, Senior Vice President and Assistant
Treasurer

STEPHEN E. CAVAN,* Secretary and Clerk
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Assistant Secretary

JAMES O. YOST,* Assistant Treasurer
Massachusetts Financial Services Company, Vice President

JAMES R. BORDEWICK, JR.,* Assistant Secretary
Massachusetts Financial Services Company, Vice President and Associate General
Counsel

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

Each Trustee and officer holds comparable positions with certain MFS affiliates
or with certain other funds of which MFS or a subsidiary of MFS is the
investment adviser or distributor.

Each Fund pays the compensation of any Trustee who is not affiliated with the
Adviser (who will receive from $[ ] to $[ ] annually, depending on attendance at
meetings, plus fees for meetings of special committees, such as the Audit
Committee).

Set forth in Exhibit A hereto is certain information concerning cash
compensation paid to non-interested Trustees.

The Trust's Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liabilities to the Trust or its shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
with respect to any matter unless it is adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best interest
of the Trust. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination based upon a
review of readily available facts, by vote of a majority of disinterested
Trustees or in a written opinion of independent counsel, that such officers and
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.

INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a wholly owned subsidiary of Sun Life Assurance Company of
Canada (U.S.) which in turn is a wholly owned subsidiary of Sun Life Assurance
Company of Canada. The Prospectus contains information with respect to the
management of the Adviser and other investment companies for which MFS serves as
investment adviser.

The Adviser manages the assets of each Fund pursuant to an Investment Advisory
Agreement, dated [November 30,] 1995, (the "Advisory Agreement"). The Adviser
provides each Fund with overall investment advisory and administrative services,
as well as general office facilities. Subject to such policies as the Trustees
may determine, the Adviser makes investment decisions for each Fund. For these
services and facilities, the Adviser receives a management fee computed and paid
monthly equal on an annualized basis to 0.45% of the Fixed Income Fund's average
daily net assets, 0.60% of the Research Fund's average daily net assets, 0.60%
of the Mid-Cap Fund's average daily net assets and 0.75% of the International
Equity Fund's average daily net assets.

MFS pays the compensation of the Trust's officers and any Trustee who is
affiliated with the Adviser. 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 each Fund's investments, effecting each Fund's
portfolio transactions and, in general, administering the Funds' affairs.

The Advisory Agreement with each Fund will remain in effect until [November 30,
1997], 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 each Fund's outstanding voting securities (as defined in "Investment
Policies and Restrictions -- 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. Each Advisory Agreement terminates
automatically if it is assigned and may be terminated without penalty by vote of
a majority of each Fund's outstanding voting securities (as defined in
"Investment Policies and Restrictions -- Investment Restrictions") or by either
party on not more than 60 days' nor less than 30 days' written notice. Each
Advisory Agreement further provides that MFS may render services to others. Each
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 each 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.

CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of each
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling each Fund's cash and securities, handling the receipt and delivery
of securities, determining income and collecting interest and dividends on each
Fund's investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of shares of each Fund. The Custodian does not determine the
investment policies of each Fund or decide which securities each Fund will buy
or sell. Each Fund may, however, invest in securities, including repurchase
agreements, issued by the Custodian and may deal with the Custodian as principal
in securities transactions. The Trustees have reviewed and approved as in the
best interests of the Fund and its shareholders subcustodial arrangements with
the Custodian for securities of each Fund held outside the United States. The
Custodian also acts as the dividend disbursing agent of each Fund. The Custodian
has contracted with the Adviser for the Adviser to perform certain accounting
functions related to option transactions for which the Adviser receives
remuneration on a cost basis.

SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Trust's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, dated [November 30, 1995] (the "Agency
Agreement"). The Shareholder Servicing Agent's responsibilities under the Agency
Agreement include administering and performing transfer agent functions and
keeping records in connection with the issuance, transfer and redemption of the
shares of each Fund. For these services, the Shareholder Servicing Agent will
receive a fee based on the net assets of each Fund computed and paid monthly. In
addition, the Shareholder Servicing Agent will be reimbursed by each 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 each Fund, has contracted with the Shareholder Servicing
Agent to perform certain dividend and distribution disbursing functions for each
Fund.

DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as the distributor for the
continuous offering of shares of the Trust pursuant to a Distribution Agreement
dated as of June 15, 1994 (the "Distribution Agreement").

The Distribution Agreement will remain in effect until June 15, 1996 and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Trust's shares (as defined in "Investment Restrictions") and in either case, by
a majority of the Trustees who are not parties to such Distribution Agreement or
interested persons of any such party. The Distribution Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 days' nor less than 30 days' notice.

4. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

Specific decisions to purchase or sell securities for the Funds are made by
employees of the Adviser who are appointed and supervised by its senior
officers. Changes in each Fund's investments are reviewed by its Board of
Trustees. Each Fund's portfolio manager or management committee may serve other
clients of the Adviser or any subsidiary of the Adviser in a similar capacity.

The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. The Adviser has complete freedom as to
the markets in and 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 may, as authorized
by each 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 Rules of Fair Practice
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 Trust and of the other investment company clients of MFD, the
principal underwriter of certain funds in the MFS Family of Funds (the "MFS
Funds"), as a factor in the selection of broker-dealers to execute the Trust's
portfolio transactions.

Under the Advisory Agreements and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Adviser may cause a 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 a
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 a
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
through such broker-dealers, but at present, unless otherwise directed by a
Fund, a commission higher than one charged elsewhere will not be paid to such a
firm solely because it provided such Research.

In certain instances there may be securities which are suitable for a 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 a 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 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 a Fund is concerned. In
other cases, however, the Adviser believes that a Fund's ability to participate
in volume transactions will produce better executions for the Fund.

5. TAX STATUS

Each Fund intends to elect to be treated and to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Because each Fund intends to distribute all of
its net investment income and net realized capital gains to shareholders in
accordance with the timing and certain other requirements imposed by the Code,
it is not expected that any Fund will be required to pay any federal income or
excise taxes, although a Fund's foreign-source income may be subject to foreign
withholding taxes. If a 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 shareholders.

Shareholders of each 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 income, including certain foreign currency
gains, and any distributions from net short-term capital gains (whether received
in cash or reinvested in additional shares) are taxable to each Fund's
shareholders as ordinary income for federal income tax purposes. Because the
Fixed Income Fund expects to earn primarily interest income, it is expected that
none of that Fund's dividends will qualify for the dividends received deduction
for corporations. A portion of the ordinary income dividends paid by each Fund
other than the Fixed Income Fund 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 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 the net long-term capital gains over the short-term capital losses), whether
received in cash or invested in additional shares, are taxable to each Fund's
shareholders as long-term capital gains regardless of how long they have owned
shares in the Fund. Fund dividends declared in October, November or December and
paid the following January will be taxable to shareholders as if received on
December 31 of the year in which they are declared.

Any dividend or distribution will have the effect of reducing the per share net
asset value of shares in the paying Fund by the amount of the dividend or
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 a
Fund by a shareholder that holds such shares as a capital asset will be treated
as long-term capital gain or loss if the shares have been held for more than
twelve months and otherwise as a short-term capital gain or loss. However, any
loss realized upon a disposition of shares in a 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
redemption of shares may also be disallowed under rules relating to wash sales.
Gain may be increased (or loss reduced) upon a redemption of shares within
ninety days after their purchase followed by any purchase (including purchases
by exchanges or by reinvestment) of that Fund or of another MFS Fund (or other
shares of an MFS Fund generally sold subject to a sales charge) without payment
of an additional sales charge.

Any transactions in options, Futures Contracts and Forward Contracts undertaken
by a Fund will be subject to special tax rules that may affect the amount,
timing and character of distributions to shareholders. For example, certain
positions held by a Fund on the last business day of each taxable year will be
marked to market (i.e., treated as if closed out) on such day, and any gain or
loss associated with such positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by a 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 may 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. Each 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.

Each 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. Each
Fund's investment in zero coupon bonds and certain securities purchased at a
market discount will cause it to realize 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, that 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.

Special tax considerations apply with respect to foreign investments of a Fund.
For example, foreign exchange gains and losses (including exchange gains and
losses on Forward Contracts) realized by a Fund will generally be treated as
ordinary income or losses. Use of foreign currencies and Forward Contracts for
nonhedging purposes and investment by a Fund in certain "passive foreign
investment companies" may be limited in order to avoid imposition of a tax on
that Fund. Investment income received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
may entitle a Fund to a reduced rate of tax or an exemption from tax on such
income; the Funds intend to qualify for treaty reduced rates where available. It
is impossible to determine the effective rate of foreign tax in advance since
the amount of each Fund's assets to be invested within various countries is not
known.

If a Fund holds more than 50% of its assets in securities of foreign
corporations at the close of its taxable year, the Fund may elect to "pass
through" to that 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 includible 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 be able (subject to such limitations) to claim a credit but not
a deduction.

Dividends and certain other payments to non-exempt persons who are not citizens
or residents of the United States ("Non-U.S. Persons") are generally subject to
U.S. tax withholding at the rate of 30%. Each Fund intends to withhold U.S.
Federal income tax at the rate of 30% on any taxable dividends and other
payments made to Non-U.S. Persons that are subject to such withholding,
regardless of whether a lower treaty rate may be permitted. 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 applicable to such
claims. Distributions received from a Fund by Non-U.S. Persons may also be
subject to tax under the laws of their own jurisdictions. Each Fund is also
required in certain circumstances to apply backup withholding 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. However, backup withholding
will not be applied to payments which have had 30% withholding taken.

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

6. DETERMINATION OF NET ASSET VALUE AND PERFORMANCE

NET ASSET VALUE -- The net asset value of shares of each Fund is determined each
day during which the New York Stock Exchange (the "Exchange") is open for
trading. (As of the date of this Statement of Additional Information, such
Exchange is open for trading every week day except for the following holidays or
the days on which they are observed: New Year's Day; President's Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and
Christmas Day.) This determination of net asset value of shares of a Fund is
made once during each such day as of the close of regular trading on such
Exchange by deducting the amount of the Fund's liabilities from the value of its
assets and dividing the difference by the number of its shares outstanding.
Bonds and other fixed income securities (other than short-term obligations but
including listed issues) in a 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 by the Board of Trustees to reflect the fair value of such securities.
Use of the pricing service has been approved by the Board of Trustees. Forward
Contracts will be valued using a pricing model taking into consideration market
data from an external pricing source. All other securities, futures contracts
and listed options in a 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 securities with a remaining maturity in excess of
60 days will be valued upon dealer supplied valuations. Other short-term
obligations are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Portfolio 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.

Short-term obligations with a remaining maturity in excess of 60 days will be
valued based upon dealer supplied valuations. Other short-term obligations in a
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 New York Stock
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 a 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, each Fund's
distributor, prior to the close of that business day.

TOTAL RATE OF RETURN: Each Fund will calculate its total rate of return for
certain periods by determining the average annual compounded rates of return
over those periods that would cause an investment of $1,000 (made at net asset
value with all distributions reinvested) to reach the value of that investment
at the end of the periods. Each Fund may also calculate total rates of return
which represent aggregate performance over a period or year-by-year performance.
Total rate of return reflects the performance of both principal and income.

YIELD: Any yield quotation of a Fund is based on the annualized net investment
income per share of the Fund over a 30-day period. The yield for the Fund is
calculated by dividing the net investment income per share of the Fund earned
during the period by the net asset value per share of the Fund on the last day
of that period. The resulting figure is then annualized. Net investment income
per share is determined by dividing (i) the dividends and interest earned by the
Fund during the period, minus accrued expenses for the period, by (ii) the
average number of Fund shares entitled to receive dividends during the period
multiplied by the net asset value per share on the last day of the period.

PERFORMANCE INFORMATION: Any yield or total rate of return quotation provided by
a Fund should not be considered as representative of the performance of a Fund
in the future since the net asset value of shares of each Fund will vary based
not only on the type, quality and maturities of the securities held in a Fund's
portfolio, but also on changes in the current value of such securities and on
changes in the expenses of a 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 a Fund to yields and total
rates of return published for other investment companies or other investment
vehicles.

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 re- ports.

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

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

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

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

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

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

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

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

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

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

-- 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(R) Union Standard Trust is the first fund to invest solely in
companies deemed to be union-friendly by an Advisory Board of senior labor
officials, senior managers of companies with significant labor contracts,
academics and other national labor leaders.

7. 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) and to
divide or combine the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interests in the Trust. The Trust
presently has seven series and reserves the right to create and issue additional
series of shares. Each share of a series represents an equal proportionate
interest in that series with each other share of that series. Shares of each
series participate equally in the earnings, dividends and assets of the
particular series. Shares of each series vote separately to approve investment
advisory agreements or changes in investment restrictions, but shares of all
series vote together in the election of Trustees or selection of accountants.
Should the Trust be liquidated, shareholders of each series would be entitled to
share pro rata in the net assets of their respective series available for
distribution to shareholders.

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 under certain circumstances to remove one or more Trustees. No
material amendment may be made to the Declaration of Trust without the
affirmative vote of the holders of a majority of the Trust's outstanding shares
(as defined in "Investment Policies and Restrictions -- Investment
Restrictions"). Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable. The Trust may be terminated (i) upon
the merger or consolidation of the Trust with another organization or upon the
sale of all or substantially all of its assets, if approved by the vote of the
holders of two-thirds of the outstanding shares of the Trust, except that if the
Trustees recommend such merger, consolidation or sale, the approval by vote of
the holders of more than 50% of the outstanding shares will be sufficient, (ii)
upon liquidation and distribution of the assets of the Trust or the Fund (as
applicable), if approved by the holders of not less than two-thirds of the
outstanding shares of the Trust or the Fund (as applicable), or (iii) by the
Trustees by written notice to the Trust's shareholders or Fund shareholders (as
applicable). If not so terminated, the Trust will continue indefinitely.

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

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

8. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

Deloitte & Touche LLP are each Fund's independent certified public accountants.
<PAGE>
EXHIBIT A

TRUSTEE
COMPENSATION TABLE

TOTAL TRUSTEE FEES
TRUSTEE FEES FROM FROM FUNDS AND
EACH FUND(1) FUND COMPLEX(2)
NAME OF TRUSTEE
--------------- ----------------- ------------------
Nelson J. Darling ......... $ $10,618
William R. Gutow .......... $ $10,618

NOTES:
(1) Estimated, for fiscal year ending June 30, 1996.
(2) Estimated, for calendar year ended December 31 1995. All Trustees served as
Trustees of 17 funds advised by MFS (having aggregate net assets at
December 31, 1994 of approximately $143 million).
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Trustees of MFS Institutional Trust and Shareholders of MFS
Emerging Markets Fixed Income Fund:

We have audited the accompanying statement of assets and liabilities of MFS
Emerging Markets Fixed Income Fund (the "Fund") (a series of MFS Institutional
Trust (the "Trust")) as of May 16, 1995. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the statement
of assets and liabilities. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit of the statement of assets and liabilities provides a reasonable basis
for our opinion.

In our opinion, such statement of assets and liabilities present fairly, in
all material respects, the financial position of the Fund at May 16, 1995 in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts
May 16, 1995
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
(800) 637-8730

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) 637-8730

MAILING ADDRESS:
P.O. Box 1400, Boston, MA 02107-9906

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

MFS(R) INSTITUTIONAL BROAD MARKET FIXED INCOME FUND
MFS(R) INSTITUTIONAL RESEARCH FUND
MFS(R) INSTITUTIONAL MID-CAP GROWTH FUND
MFS(R) INSTITUTIONAL INTERNATIONAL EQUITY FUND

500 BOYLSTON STREET
BOSTON, MA 02116

[LOGO] M F S (SM)
THE FIRST NAME IN MUTUAL FUNDS
11/94
<PAGE>
PART C

<TABLE>
<S> <C>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(A) FINANCIAL STATEMENTS ON BEHALF OF MFS INSTITUTIONAL BROAD MARKET FIXED INCOME FUND, MFS
INSTITUTIONAL RESEARCH FUND, MFS INSTITUTIONAL MID-CAP GROWTH FUND AND MFS INSTITUTIONAL
INTERNATIONAL EQUITY FUND

INCLUDED IN PART A OF THIS REGISTRATION STATEMENT:
None

INCLUDED IN PART B OF THIS REGISTRATION STATEMENT:
None

(B) EXHIBITS ON BEHALF OF MFS INSTITUTIONAL TRUST

1 (a) Declaration of Trust, dated September 13, 1990. (6)

(b) Certificate of Amendment to Declaration of Trust, dated June 1, 1992. (6)

(d) Amendment to Declaration of Trust - Designation of Series dated May 16, 1995. (6)

(e) Amendment to Declaration of Trust - Designation of Series dated August 29, 1995;
filed herewith.

2 (a) Amended and Restated By-Laws, dated June 1, 1992. (2)

(b) Amendment No. 1 to Amended and Restated By-Laws, dated October 14, 1993. (4)

3 Not Applicable.

4 (a) Specimen of Certificate representing ownership of the Registrant's Shares of
Beneficial Interest. (1)

(b) Form of Share Certificate for MFS Emerging Markets Fixed Income Fund. (6)

(c) Form of Share Certificate for MFS Institutional Broad Market Fixed Income Fund, MFS
Institutional Research Fund, MFS Institutional Mid-Cap Growth Fund and MFS
Institutional Equity Fund; filed herewith.

5 (a) Investment Advisory Agreement between MFS Emerging Equities Fund and
Massachusetts Financial Services Company, as adviser, dated August 7, 1992. (3)

(b) Investment Advisory Agreement between MFS Worldwide Fixed Income Fund and
Massachusetts Financial Services Company, as adviser, dated August 7, 1992. (3)

(c) Investment Advisory Agreement between the Registrant, on behalf of MFS
Emerging Markets Fixed Income Fund, and Massachusetts Financial Services
Company, as adviser. (6)

(d) Form of Investment Advisory Agreement between the Registrant, on behalf of MFS
Institutional Broad Market Fixed Income Fund, and Massachusetts Financial Services
Company, as adviser; filed herewith.

(e) Form of Investment Advisory Agreement between the Registrant, on behalf of MFS
Institutional Research Fund, and Massachusetts Financial Services Company, as
adviser; filed herewith.

(f) Form of Investment Advisory Agreement between the Registrant, on behalf of MFS
Institutional Mid-Cap Growth Fund, and
Massachusetts Financial Services Company, as
adviser; filed herewith.

(g) Form of Investment Advisory Agreement between the Registrant, on behalf of MFS
Institutional International Equity Fund, and
Massachusetts Financial Services Company, as
adviser; filed herewith.

6 Not Applicable.

7 Not Applicable.

8 (a) Custodian Agreement between the Registrant and State Street Bank and Trust Company,
dated July 31, 1995; filed herewith.

(b) Form of Amendment to Custodian Contract dated November 30, 1995; filed herewith.

9 (a) Form of Amended and Restated Shareholder Servicing Agent Agreement between
Registrant and MFS Service Center, Inc. as Shareholder Servicing Agent dated
November 30, 1995; filed herewith.

(b) Form of Exchange Privilege Agreement between the MFS Institutional Trust, on behalf
of each of its series, and MFS Fund Distributors, Inc. (6)

(c) Dividend Disbursing Agency Agreement between the Registrant and State Street Bank
and Trust Company, dated October 31, 1990. (1)

10 Opinion and Consent of Counsel for the fiscal year ended June 30, 1995 filed
with Rule 24f-2 Notice on August 29, 1995.

11 Not Applicable.

12 Not Applicable.

13 (a) Investment representation letter from initial shareholder of MFS Emerging
Markets Fixed Income Fund. (6)

(b) Form of Investment representation letter from initial shareholder of MFS
Institutional Broad Market Fixed Income Fund, MFS Institutional Research Fund, MFS
Institutional Mid-Cap Growth Fund and MFS Institutional Equity Fund; filed herewith.

14 Not Applicable.

15 Distribution Agreement by and between MFS Institutional Trust and MFS Fund
Distributors, Inc., dated June 15, 1994. (5)

16 Schedule of Computation for Performance Quotations - Aggregate Total Rate of
Return, Average Annual Total Rate of Return and Yield Calculations. (4)

17 Not Applicable

18 Not Applicable.

Power of Attorney dated August 12, 1994. (5)

--------------------
(1) Incorporated by reference to Registrant's initial Registration Statement on Form N-1A filed with the SEC on November 5, 1990
(2) Incorporated by reference to Post-Effective Amendment No. 2 to Registrant's Registration Statement on Form
N-1A filed with the SEC on June 8, 1992
(3) Incorporated by reference to Post-Effective Amendment No. 4 to Registrant's Registration Statement on Form
N-1A filed with the SEC on February 5, 1993.
(4) Incorporated by reference to Post-Effective Amendment No. 5 to Registrant's Registration Statement on Form
N-1A filed with the SEC on October 28, 1993.
(5) Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement on
Form N-1A filed with the SEC on August 29, 1994.
(6) Incorporated by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement on
Form N-1A filed with the SEC via EDGAR on May 18, 1995.

</TABLE>

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

Not applicable

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

MFS INSTITUTIONAL EMERGING EQUITIES FUND

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

Shares of Beneficial Interest 28
(without par value) (as of August 31, 1995)

MFS INSTITUTIONAL WORLDWIDE FIXED INCOME FUND