<PAGE>
<TABLE>
<S> <C>
MFS-REGISTERED TRADEMARK- TOTAL RETURN
SERIES-SM-
MFS-REGISTERED TRADEMARK- UTILITIES
SERIES-SM-
MFS-REGISTERED TRADEMARK- WORLD GOVERNMENTS PROSPECTUS
SERIES-SM- May 1, 1996
</TABLE>
- --------------------------------------------------------------------------------
MFS-Registered Trademark- VARIABLE INSURANCE TRUST-SM-
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
MFS Variable Insurance Trust (the "Trust") is an open-end management investment
company offering insurance company separate accounts a selection of investment
vehicles for variable annuity and variable life insurance contracts (the
"Contracts"). The Trust has twelve separate portfolios or series, three of which
are offered pursuant to this Prospectus:
- -- MFS TOTAL RETURN SERIES (the "Total Return Series"), which seeks primarily to
provide above-average income (compared to a portfolio invested entirely in
equity securities) consistent with the prudent employment of capital and
secondarily to provide a reasonable opportunity for growth of capital and
income;
- -- MFS UTILITIES SERIES (the "Utilities Series"), which seeks capital growth and
current income (income above that available from a portfolio invested
entirely in equity securities); and
- -- MFS WORLD GOVERNMENTS SERIES (the "World Governments Series"), which seeks
not only preservation, but also growth of capital, together with moderate
current income.
-------------------
The investment adviser and distributor of the Total Return Series, Utilities
Series and World Governments Series (collectively hereinafter referred to as a
"Series" or the "Series") are Massachusetts Financial Services Company and MFS
Fund Distributors, Inc., respectively, both of which are located at 500 Boylston
Street, Boston, Massachusetts 02116.
BECAUSE OF THEIR INVESTMENT POLICIES PERMITTING INVESTMENT IN FOREIGN
SECURITIES, INVESTMENTS IN EACH SERIES MAY BE SUBJECT TO A GREATER DEGREE OF
RISK THAN INVESTMENTS IN OTHER INVESTMENT COMPANIES WHICH INVEST ENTIRELY IN
DOMESTIC SECURITIES.
-------------------
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.
-------------------
SHARES OF THE TRUST ARE AVAILABLE AND ARE BEING MARKETED AS A POOLED FUNDING
VEHICLE FOR LIFE INSURANCE COMPANIES WRITING ALL TYPES OF CONTRACTS.
This Prospectus sets forth concisely the information about each Series that a
prospective investor should know before applying for the Contracts offered by
the separate accounts of certain insurance companies ("Participating Insurance
Companies"). Investors are advised to read this Prospectus and the applicable
Contract prospectus carefully and retain them for future reference. If you
require more detailed information, a Statement of Additional Information ("SAI")
dated May 1, 1996, as amended or supplemented from time to time, is available
upon request without charge and may be obtained by calling or by writing to the
Shareholder Servicing Agent (see back cover for address and phone number). The
SAI, which is incorporated by reference into this Prospectus, has been filed
with the Securities and Exchange Commission (the "SEC").
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C>
1. Expense Summary............................................................................................ 3
2. Investment Concept of the Trust............................................................................ 3
3. Condensed Financial Information............................................................................ 5
4. Investment Objectives and Policies......................................................................... 8
MFS Total Return Series.................................................................................... 8
MFS Utilities Series....................................................................................... 9
MFS World Governments Series............................................................................... 10
5. Investment Techniques...................................................................................... 11
6. Additional Risk Factors.................................................................................... 18
7. Management of the Series................................................................................... 21
8. Information Concerning Shares of Each Series............................................................... 23
Purchases and Redemptions.................................................................................. 23
Net Asset Value............................................................................................ 24
Distributions.............................................................................................. 24
Tax Status................................................................................................. 24
Description of Shares, Voting Rights and Liabilities....................................................... 24
Performance Information.................................................................................... 25
Expenses................................................................................................... 25
Shareholder Communications................................................................................. 26
Appendix A -- Description of Bond Ratings............................................................................. A-1
Appendix B -- Principal Sectors of Utilities Industry................................................................. B-1
</TABLE>
2
<PAGE>
1. EXPENSE SUMMARY
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES OF EACH SERIES (AS PERCENTAGE OF AVERAGE
NET ASSETS):
MFS
TOTAL MFS MFS WORLD
RETURN UTILITIES GOVERNMENTS
SERIES SERIES SERIES
--------- --------- -----------
Management Fee.................................................. 0.75% 0.75% 0.75%
<S> <C> <C> <C>
Other Expenses (after fee reduction)(3)........................ 0.25%(1) 0.25%(1) 0.25%(2)
--- --- ---
Total Operating Expenses (after fee reduction)................. 1.00%(1) 1.00%(1) 1.00%(2)
<FN>
- ------------
1 The Adviser has agreed to bear, subject to reimbursement, expenses for each
of the Total Return Series and Utilities Series, such that each Series'
aggregate operating expense shall not exceed, on an annualized basis, 1.00%
of the average daily net assets of the Series from November 2, 1994 through
December 31, 1996, 1.25% of the average daily net assets of the Series from
January 1, 1997 through December 31, 1998, and 1.50% of the average daily net
assets of the Series from January 1, 1999 through December 31, 2004; provided
however, that this obligation may be terminated or revised at any time. See
"Information Concerning Shares of Each Series--Expenses" below. Absent this
expense arrangement, "Other Expenses" and "Total Operating Expenses" would be
2.02% and 2.77%, respectively, for the Total Return Series, and 2.33% and
3.08%, respectively, for the Utilities Series.
2 The Adviser has agreed to bear, subject to reimbursement, until December 31,
2004, expenses of the World Governments Series such that the Series' aggregate
operating expenses do not exceed 1.00%, on an annualized basis, of its average
daily net assets. See "Information Concerning Shares of Each Series--Expenses"
below. Absent this expense arrangement, "Other Expenses" and "Total Operating
Expenses" for the World Governments Series would be 1.24% and 1.99%,
respectively.
3 Each Series has an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with its
custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected under "Other Expenses."
</TABLE>
The purpose of the expense table above is to assist investors in understanding
the various costs and expenses that a shareholder of the Series will bear
directly or indirectly. The Series' annual operating expenses do not reflect
expenses imposed by separate accounts of Participating Insurance Companies
through which an investment in a Series is made or their related Contracts. A
separate account's expenses are disclosed in the prospectus through which the
Contract relating to that separate account is offered for sale.
2. INVESTMENT CONCEPT OF THE TRUST
The Trust is an open-end, registered management investment company with twelve
separate series, each of which is a segregated, separately managed portfolio of
securities. The Total Return Series is a diversified series of the Trust and the
World Governments Series and the Utilities Series are non-diversified series of
the Trust. The Trust was organized as a business trust under the laws of The
Commonwealth of Massachusetts by a Declaration of Trust dated February 1, 1994.
The Trust offers shares of its twelve Series to insurance company separate
accounts that fund Contracts. Separate accounts may purchase or redeem shares at
net asset value without any sales or redemption charge. Fees and charges imposed
by a separate account, however, will affect the actual return to the holder of a
Contract. A separate account may also impose certain restrictions or limitations
on the allocation of purchase payments or Contract value to the Series.
Prospective investors should consult the applicable Contract prospectus for
information regarding fees and expenses of the Contract and separate account and
any applicable restrictions or limitations. The Trust assumes no responsibility
for such prospectuses.
The Trust offers shares of the Series to the separate accounts of Participating
Insurance Companies that are affiliated or unaffiliated ("shared funding"), and
shares of the Series will serve as the underlying investments for both variable
annuity and variable life insurance contracts ("mixed funding"). Due to
differences in tax treatment or other considerations, the interests of various
Contract owners might at some time be in conflict. The Trust currently does not
foresee any such conflict. Nevertheless, the Trust's Board of Trustees intends
to monitor events in order to identify any material irreconcilable conflicts
3
<PAGE>
which may possibly arise and to determine what action, if any, should be taken
in response thereto. If such a conflict were to occur, one or more separate
accounts of the Participating Insurance Companies might be required to withdraw
its investments in one or more Series. This might force a Series to sell
securities at disadvantageous prices.
Individual Contract holders are not the "shareholders" of the Trust. Rather, the
Participating Insurance Companies and their separate accounts are the
shareholders or investors, although such companies may pass through voting
rights to their Contract holders.
The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust and the Series. Massachusetts Financial Services Company, a Delaware
corporation ("MFS" or the "Adviser"), is the investment adviser to each Series.
A majority of the Trustees of the Trust are not affiliated with the Adviser. The
Adviser is responsible for the management of the assets of each Series and the
officers of the Trust are responsible for the operations. The Adviser manages
the Series' portfolios from day to day in accordance with the investment
objectives and policies of each Series. The selection of investments and the way
they are managed depend on the conditions and trends in the economy and the
financial marketplaces.
4
<PAGE>
3. CONDENSED FINANCIAL INFORMATION
The following financial information has been audited since the commencement of
investment operations of each Series and should be read in conjunction with the
financial statements included in the Series' Annual Reports to shareholders.
These financial statements are incorporated by reference into the SAI in
reliance upon the report of the Series' independent auditors given upon their
authority, as experts in accounting and auditing. The Series' current
independent auditors are Deloitte & Touche LLP.
TOTAL RETURN SERIES
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995*
------------------
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value--beginning of period............................. $10.00
------
Income from investment operations#--
Net investment incomeSection................................... $ 0.41
Net realized and unrealized gain on investments and foreign
currency transactions........................................ 2.32
------
Total from investment operations............................. $ 2.73
------
Less distributions declared to shareholders--
From net investment income..................................... $(0.25)
From net realized gain on investments and foreign currency
transactions................................................. (0.23)
------
Total distributions declared to shareholders................. $(0.48)
------
Net asset value--end of period................................... $12.25
------
------
Total return..................................................... 27.34%++
Ratios (to average net assets)/Supplemental dataSection:
Expenses....................................................... 1.00%+
Net investment income.......................................... 3.83%+
Portfolio turnover............................................... 16%
Net assets at end of period (000 omitted)........................ $2,797
<FN>
- --------------
* For the period from the commencement of investment operations, January 3, 1995 to December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
Section The Adviser voluntarily agreed to maintain the expenses of the Series at not more than 1.00% of average daily net
assets. To the extent actual expenses were over these limitations, the net investment income per share and the
ratios would have been:
Net investment income....................................... $0.22
Ratios (to average net assets):
Expenses.................................................. 2.77%+
Net investment income..................................... 2.09%+
</TABLE>
5
<PAGE>
UTILITIES SERIES
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995*
------------------
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value--beginning of period............................. $10.00
------
Income from investment operations#--
Net investment incomeSection................................... $ 0.39
Net realized and unrealized gain on investments and foreign
currency transactions........................................ 3.00
------
Total from investment operations............................. $ 3.39
------
Less distributions declared to shareholders--
From net investment income..................................... $(0.24)
From net realized gain on investments and foreign currency
transactions................................................. (0.58)
------
Total distributions declared to shareholders................. $(0.82)
------
Net asset value--end of period................................... $12.57
------
------
Total return..................................................... 33.94%++
Ratios (to average net assets)/Supplemental dataSection:
Expenses....................................................... 1.00%+
Net investment income.......................................... 3.66%+
Portfolio turnover............................................... 94%
Net assets at end of period (000 omitted)........................ $2,373
<FN>
- --------------
* For the period from the commencement of investment operations, January 3, 1995 to December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
Section The Adviser voluntarily agreed to maintain the expenses of the Series at not more than 1.00% of average daily net
assets. To the extent actual expenses were over these limitations, the net investment income per share and the
ratios would have been:
Net investment income....................................... $0.17
Ratios (to average net assets):
Expenses.................................................. 3.08%+
Net investment income..................................... 1.62%+
</TABLE>
6
<PAGE>
WORLD GOVERNMENTS SERIES
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994*
------------------ ------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value--beginning of period............................. $ 9.82 $10.00
------ ------
Income from investment operations#--
Net investment incomeSection................................... $ 0.63 $ 0.17
Net realized and unrealized gain (loss) on investments and
foreign currency transactions................................ 0.78 (0.09)
------ ------
Total from investment operations............................. $ 1.41 $ 0.08
------ ------
Less distributions declared to shareholders--
From net investment income..................................... $(0.42) $(0.17)
In excess of net investment income............................. (0.54) (0.09)
Tax return of capital.......................................... (0.10) --
------ ------
Total distributions declared to shareholders................. $(1.06) $(0.26)
------ ------
Net asset value--end of period................................... $10.17 $ 9.82
------ ------
------ ------
Total return..................................................... 14.38% 0.79%++
Ratios (to average net assets)/Supplemental dataSection:
Expenses##..................................................... 1.00% 1.00%+
Net investment income.......................................... 6.05% 4.68%+
Portfolio turnover............................................... 211% 62%
Net assets at end of period (000 omitted)........................ $7,424 $2,881
<FN>
- --------------
* For the period from the commencement of investment operations, June 14, 1994 to December 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## For fiscal years after September 1, 1995, the Series' expenses are calculated without reduction for fees paid
indirectly.
Section The Adviser voluntarily agreed to maintain the expenses of the Series at not more than 1.00% of average daily net
assets. To the extent actual expenses were over these limitations, the net investment income per share and the
ratios would have been:
Net investment income....................................... $0.53 $0.16
Ratios (to average net assets):
Expenses.................................................. 1.99 % 1.10 %+
Net investment income..................................... 5.09% 4.58%+
</TABLE>
Total return information does not reflect expenses that apply to the separate
accounts of Participating Insurance Companies or their related Contracts. The
inclusion of these charges would reduce the total return figure for the period
shown.
7
<PAGE>
4. INVESTMENT OBJECTIVES AND POLICIES
Each Series has different investment objectives which it pursues through
separate investment policies, as described below. The differences in objectives
and policies among the Series can be expected to affect the degree of market and
financial risk to which each Series is subject and the return of each Series.
The investment objectives and policies of each Series may, unless otherwise
specifically stated, be changed by the Board of Trustees of the Trust without a
vote of the shareholders. Any investment involves risk and there is no assurance
that the objectives of any Series will be achieved.
In addition to the specific investment practices described below, each Series
may also engage in certain investment techniques as described under the caption
"Investment Techniques" below and in the SAI under the caption "Investment
Techniques." The Series' investments are subject to certain risks, as described
in the above-referenced sections of the Prospectus and the SAI and as described
below under the caption "Additional Risk Factors."
MFS TOTAL RETURN SERIES -- The Total Return Series' primary investment objective
is to provide above-average income (compared to a portfolio invested entirely in
equity securities) consistent with the prudent employment of capital, and its
secondary objective is to provide a reasonable opportunity for growth of capital
and income, since many securities offering a better than average yield may also
possess growth potential. Thus, in selecting securities for its portfolio, the
Series considers each of these objectives. Under normal market conditions, at
least 25% of the Total Return Series' assets will be invested in fixed income
securities, and at least 40% and no more than 75% of the Series' assets will be
invested in equity securities.
The Total Return Series' policy is to invest in a broad list of securities,
including short-term obligations. The list may be diversified not only by
companies and industries, but also by type of security. Fixed income securities
and equity securities (which include: common and preferred stocks; securities
such as bonds, warrants or rights that are convertible into stock; and
depository receipts for those securities) may be held by the Series. Some fixed
income securities may also have a call on common stock by means of a conversion
privilege or attached warrants. The Total Return Series may vary the percentage
of assets invested in any one type of security in accordance with the Adviser's
interpretation of economic and money market conditions, fiscal and monetary
policy and underlying security values. The Series' debt investments may consist
of both "investment grade" securities (rated Baa or better by Moody's Investors
Services, Inc. ("Moody's") or BBB or better by Standard & Poor's Ratings
Services ("S&P") or by Fitch Investors Services, Inc. ("Fitch"), and securities
that are unrated or are in the lower rating categories (rated Ba or lower by
Moody's or BB or lower by S&P or by Fitch) (commonly known as "junk bonds")
including up to 20% of its assets in nonconvertible fixed income securities that
are in these lower rating categories and comparable unrated securities (see
"Additional Risk Factors" below). Generally, most of the Series' long-term debt
investments will consist of "investment grade" securities. See Appendix A to
this Prospectus for a description of these ratings.
The Series may also 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.
Consistent with the investment objective and policies described above, the
Series may also invest up to 20% of its net assets in foreign securities
(including emerging market securities and Brady Bonds) which are not traded on a
U.S. exchange.
8
<PAGE>
MFS UTILITIES SERIES -- The Utilities Series' investment objective is to seek
capital growth and current income (income above that available from a portfolio
invested entirely in equity securities).
The Utilities Series will seek to achieve its objective by investing, under
normal circumstances, at least 65% (but up to 100% at the discretion of the
Adviser) of its assets in equity and debt securities of both domestic and
foreign companies in the utilities industry. Equity securities in which the
Series may invest include common stocks, preferred stocks, securities
convertible into common stocks or preferred stocks, and warrants to purchase
common or preferred stocks. At least 80% of the debt securities held by the
Series will be rated at the time of investment at least Baa by Moody's or BBB by
S&P or by Fitch or will be of comparable quality as determined by the Adviser
(see "Additional Risk Factors" below). See Appendix A to this Prospectus for a
description of these ratings. The Series may also invest in debt and equity
securities of issuers in other industries, as discussed below, although under
normal circumstances not more than 35% of the Series' assets will be so
invested. In addition, the Series may hold a portion of its assets in cash and
money market instruments.
Companies in the utilities industry include (i) companies engaged in the
manufacture, production, generation, transmission, sale or distribution of
electric, gas or other types of energy, water or other sanitary services and
(ii) companies engaged in telecommunications, including telephone, cellular
telephones, telegraph, satellite, microwave, cable television and other
communications media (but not companies engaged in public broadcasting). The
Adviser deems a particular company to be in the utilities industry if, at the
time of investment, the Adviser determines that at least 50% of the company's
assets or revenues are derived from one or more of those industries. The portion
of the Utilities Series' assets invested in a particular type of utility and in
equity or debt securities will vary in light of changes in interest rates,
market conditions and economic conditions and other factors. For further
information on the principal sectors of the utilities industry in which the
Series may invest, see Appendix B.
Consistent with the investment objective and policies described above, the
Series may also invest up to 35% of its net assets in foreign securities
(including emerging market securities and Brady Bonds) which are not traded on a
U.S. exchange.
Since the Utilities Series' investments are concentrated in utility securities,
the value of the Series' shares will be especially affected by factors peculiar
to the utilities industry, and may fluctuate more widely than the value of
shares of a fund that invests in a broader range of industries. The rates many
utility companies may charge their customers are controlled by governmental
regulatory commissions which may result in a delay in the utility company
passing along increases in costs to its customers. Furthermore, there is no
assurance that regulatory authorities will, in the future, grant rate increases
or that such increases will be adequate to permit the payment of dividends on
common stocks. Many utility companies, especially electric and gas and other
energy related utility companies, are subject to various uncertainties,
including: risks of increases in fuel and other operating costs; the high cost
of borrowing to finance capital construction during inflationary periods;
difficulty obtaining adequate returns on invested capital, even if frequent rate
increases are approved by public service commissions; restrictions on operations
and increased costs and delays as a result of environmental and nuclear safety
regulations; securing financing for large construction projects during an
inflationary period; difficulties of the capital markets in absorbing utility
debt and equity securities; difficulty in raising capital in adequate amounts on
reasonable terms in periods of high inflation and unsettled capital markets;
technological innovations which may render existing plants, equipment or
products obsolete; the potential impact of natural or man-made disasters;
difficulties in obtaining natural gas for resale or fuel for electric generation
at reasonable prices; coping with the general effects of energy conservation,
particularly in light of changing policies regarding energy; and special risks
associated with the construction and operation of nuclear power generating
facilities, including technical factors and costs, and the possibility that
federal, state and municipal government authorities may from time to time review
existing requirements and impose additional requirements. Certain utility
companies, especially gas and telephone utility companies, have in recent years
been affected by increased competition, which could adversely affect the
profitability of such utility companies. Furthermore, there are uncertainties
resulting from certain
9
<PAGE>
telecommunications companies' diversification into new domestic and
international businesses as well as agreements by many such companies linking
future rate increases to inflation or other factors not directly related to the
active operating profits of the enterprise.
Foreign utility companies are also subject to regulation, although such
regulations may or may not be comparable to those in the U.S. Foreign utility
companies may be more heavily regulated by their respective governments than
utilities in the U.S. and, as in the U.S., generally are required to seek
government approval for rate increases. In addition, since many foreign
utilities use fuel that causes more pollution than those used in the U.S., such
utilities may be required to invest in pollution control equipment to meet any
proposed pollution restrictions. Foreign regulatory systems vary from country to
country and may evolve in ways different from regulation in the U.S.
The Utilities Series is permitted to invest in securities of issuers that are
outside the utilities industry, although under normal circumstances not more
than 35% of the Series' assets will be so invested. Such investments may include
common stocks, debt securities (including municipal debt securities) and
preferred stocks and will be selected to meet the Series' investment objective
of both capital growth and current income. These securities may be issued by
either U.S. or non-U.S. companies. Some of these issuers may be in industries
related to the utilities industry and, therefore, may be subject to similar
risks.
Investments outside the utilities industry may also include U.S. Government
Securities, as that term is defined under "Investment Objectives and
Policies--MFS Total Return Series" above. When and if available, U.S. Government
Securities may be purchased at a discount from face value. However, the Series
does not intend to hold such securities to maturity for the purpose of achieving
potential capital gains, unless current yields on the securities remain
attractive.
MFS WORLD GOVERNMENTS SERIES -- The World Governments Series' investment
objective is to seek not only preservation, but also growth, of capital,
together with moderate current income.
The World Governments Series seeks to achieve its investment objective through a
professionally managed, internationally diversified portfolio consisting
primarily of debt securities and to a lesser extent equity securities. The
Series attempts to provide investors with an opportunity to enhance the value
and increase the protection of their investment against inflation and otherwise
by taking advantage of investment opportunities in the U.S. as well as in other
countries where opportunities may be more rewarding. It is believed that
diversification of assets on an international basis decreases the degree to
which events in any one country, including the U.S., can affect the entire
portfolio. Although the percentage of the Series' assets invested in securities
issued abroad and denominated in foreign currencies will vary depending on the
state of the economies of the principal countries of the world, their financial
markets and the relationship of their currencies to the U.S. dollar, under
normal conditions the Series' portfolio is internationally diversified. However,
for temporary defensive reasons or during times of international political or
economic uncertainty or turmoil, most or all of the Series' investments may be
in the U.S.
Under normal economic and market conditions, at least 80% of the Series'
portfolio is invested in debt securities, such as bonds, debentures, mortgage
securities, notes, commercial paper, obligations issued or guaranteed by a
government or any of its political subdivisions, agencies or instrumentalities,
certificates of deposit, as well as debt obligations which may have a call on
common stock by means of a conversion privilege or attached warrants.
Consistent with its investment objective and policies described above, the
Series may invest up to 100% (and generally expects to invest not more than 80%)
of its net assets in foreign securities (including emerging market securities
and Brady Bonds) which are not traded on a U.S. exchange. Although the
percentage of the Series' assets invested in foreign securities will vary, at
least 65% of the Series' assets will be invested in at least three different
countries, one of which may be the United States, except when the Adviser
believes that investing for temporary defensive purposes is appropriate. The
Adviser will determine the amount of the World Governments Series' assets to be
invested in the United States and the amount to be invested abroad. The U.S.
assets will be invested in high quality debt securities and the remainder of the
assets will be diversified among countries where opportunities for total return
are expected to be most attractive. It is currently expected that
10
<PAGE>
investments within foreign countries will be primarily in government securities
to minimize credit risks. The Series will not invest 25% or more of the value of
its assets in the securities of any one foreign government. The portfolio will
be managed actively and the asset allocations modified as the Adviser deems
necessary.
The World Governments Series will purchase non-dollar securities denominated in
the currency of countries where the interest rate environment as well as the
general economic climate provide an opportunity for declining interest rates and
currency appreciation. If interest rates decline, such non-dollar securities
will appreciate in value. If the currency also appreciates against the dollar,
the total investment in such non-dollar securities would be enhanced further.
Conversely, a rise in interest rates or decline in currency exchange rates would
adversely affect the Series' return. Investments in non-dollar denominated
securities are evaluated primarily on the strength of a particular currency
against the dollar and on the interest rate climate of that country. Currency is
judged on the basis of fundamental economic criteria (E.G., relative inflation
levels and trends, growth rate forecasts, balance of payments status, and
economic policies) as well as technical and political data. In addition to the
foregoing, interest rates are evaluated on the basis of differentials or
anomalies that may exist between different countries. The Series may hold
foreign currency received in connection with investments in foreign securities
and in anticipation of purchasing foreign securities. (See "Additional Risk
Factors" below.)
The phrase "preservation of capital" when applied to a domestic investment
company is generally understood to imply that the portfolio is invested in very
low risk securities and that the major risk is loss of purchasing power through
the effects of inflation or major changes in interest rates. However, while the
World Governments Series invests in securities which are believed to have
minimal credit risk, an error of judgment in selecting a currency or an interest
rate environment could result in a loss of capital.
It is contemplated that the World Governments Series' long-term debt investments
will consist primarily of securities which are believed by the Adviser to be of
relatively high quality. If after the Series purchases such a security, the
quality of the security deteriorates significantly, the security will be sold
only if the Adviser believes it is advantageous to do so.
5. INVESTMENT TECHNIQUES
LENDING OF PORTFOLIO SECURITIES: Each Series may seek to increase its income by
lending portfolio securities. Such loans will usually be made to member firms
(and subsidiaries thereof) of the New York Stock Exchange (the "Exchange") and
to member banks of the Federal Reserve System, and would be required to be
secured continuously by collateral in cash, U.S. Treasury securities or an
irrevocable letter of credit maintained on a current basis at an amount at least
equal to the market value of the securities loaned. If the Adviser determines to
make securities loans, it is intended that the value of the securities loaned
would not exceed 10% of the value of the net assets of the Series making the
loans.
EMERGING MARKET SECURITIES: Consistent with their respective objectives, each
Series may invest in securities of issuers whose principal activities are
located in emerging market countries. Emerging market countries include any
country determined by the Adviser to have an emerging market economy, taking
into account a number of factors, including whether the country has a low- to
middle- income economy according to the International Bank for Reconstruction
and Development, the country's foreign currency debt rating, its political and
economic stability and the development of its financial and capital markets. The
Adviser determines whether an issuer's principal activities are located in an
emerging market country by considering such factors as its country of
organization, the principal trading market for its securities and the source of
its revenues and assets. The issuer's principal activities generally are deemed
to be located in a particular country if: (a) the security is issued or
guaranteed by the government of that country or any of its agencies, authorities
or instrumentalities; (b) the issuer is organized under the laws of, and
maintains a principal office in that country; (c) the issuer has its principal
securities trading market in that country; (d) the issuer derives 50% or more of
its total revenues from goods sold or services performed in that country; or (e)
the issuer has 50% or more of its assets in that country.
BRADY BONDS: Each Series 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
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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, Dominican Republic, Ecuador, Jordan, Mexico, Nigeria, Panama, the
Philippines, Poland, Uruguay and Venezula. Brady Bonds have been issued only
recently, and for that reason do not have a long payment history. Brady Bonds
may be collateralized or uncollateralized, are issued in various currencies (but
primarily the U.S. dollar) and are actively traded in over-the-counter secondary
markets. U.S. dollar-denominated, collateralized Brady Bonds, which may be
fixed-rate bonds or floating-rate bonds, are generally collateralized in full as
to principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these uncollateralized
amounts constituting the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults of countries issuing Brady Bonds with
respect to commercial bank loans by public and private entities, investments in
Brady Bonds may be viewed as speculative.
REPURCHASE AGREEMENTS: Each Series may enter into repurchase agreements in order
to earn income on available cash or as a temporary defensive measure. Under a
repurchase agreement, a Series acquires securities subject to the seller's
agreement to repurchase at a specified time and price. If the seller becomes
subject to a proceeding under the bankruptcy laws or its assets are otherwise
subject to a stay order, the Series' right to liquidate the securities may be
restricted (during which time the value of the securities could decline). As
discussed in the SAI, each Series has adopted certain procedures intended to
minimize risk.
"WHEN-ISSUED" SECURITIES: The Total Return Series and the Utilities Series may
purchase securities on a "when-issued" or on a "forward delivery" basis, which
means that the securities will be delivered to the Series at a future date
usually beyond customary settlement time. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security. In general, the Series does not pay for such securities until
received, and does not start earning interest on the securities until the
contractual settlement date. While awaiting delivery of securities purchased on
such bases, a Series will normally invest in cash, cash equivalents and high
grade debt securities.
MORTGAGE "DOLLAR ROLL" TRANSACTIONS: Each Series may enter into mortgage "dollar
roll" transactions with selected banks and broker-dealers pursuant to which a
Series 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. A Series
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 Series
contracts to replace substantially similar securities on a future date fails to
deliver such securities, the Series 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.
RESTRICTED SECURITIES: Each Series may purchase securities that are not
registered under the Securities Act of 1933 ("1933 Act") ("restricted
securities"), including those that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). 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 the Series' 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 Series' investments 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 Series to the
extent that qualified institutional buyers become for a time uninterested in
purchasing Rule 144A securities held in a Series' portfolio.
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CORPORATE ASSET-BACKED SECURITIES: The Total Return Series and the Utilities
Series may invest in corporate asset-backed securities. These securities, issued
by trusts and special purpose corporations, are backed by a pool of assets, such
as credit card and automobile loan receivables, representing the obligations of
a number of different parties.
Corporate asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. The underlying
assets (E.G., loans) are also subject to prepayments which shorten the
securities' weighted average life and may lower their return.
Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection; and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. A Series
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.
ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS: Each Series may invest
in zero coupon bonds. The Total Return Series may also invest in deferred
interest bonds and PIK bonds. Zero coupon and deferred interest bonds are debt
obligations which are issued or purchased at a significant discount from face
value. The discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity or the first interest payment
date at a rate of interest reflecting the market rate of the security at the
time of issuance. While zero coupon bonds do not require the periodic payment of
interest, deferred interest bonds provide for a period of delay before the
regular payment of interest begins. PIK bonds are debt obligations which provide
that the issuer thereof may, at its option, pay interest on such bonds in cash
or in the form of additional debt obligations. Such investments benefit the
issuer by mitigating its need for cash to meet debt service, but also require a
higher rate of return to attract investors who are willing to defer receipt of
such cash. Such investments may experience greater volatility in market value
due to changes in interest rates than debt obligations which make regular
payments of interest. Each Series will accrue income on such investments for tax
and accounting purposes, as required, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities to satisfy the Series' distribution
obligations.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: The
World Governments Series and the Utilities Series may invest a portion of its
assets in collateralized mortgage obligations or "CMOs," which are debt
obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by certificates issued by GNMA,
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage
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Corporation ("FHLMC"), but also may be collateralized by whole loans or private
mortgage pass-through securities (such collateral collectively referred to as
"Mortgage Assets"). Each of these Series 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
are usually issued in multiple classes with different maturities. Each class of
CMOs, often referred to as a "tranche," is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates,
resulting in a loss of all or part of the premium if any has been paid. Certain
classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which
a Series invests, the investment may be subject to a greater or lesser risk of
prepayments than other types of mortgage-related securities.
The World Governments Series and the Utilities Series 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 SAI.
STRIPPED MORTGAGE-BACKED SECURITIES: The World Governments Series may invest a
portion of its assets in stripped mortgage-backed securities ("SMBS"), which are
derivative multiclass mortgage securities usually structured with two classes
that receive different proportions of interest and principal distributions from
an underlying pool of mortgage assets. For a further description of SMBS and the
risks related to transactions therein, see the SAI.
LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS: The Total Return Series may
invest a portion of its assets in "loan participations" and other direct
indebtedness. By purchasing a loan participation, the Series acquires some or
all of the interest of a bank or other lending institution in a loan to a
corporate borrower. Many such loans are secured, and most impose restrictive
covenants which must be met by the borrower. These loans are made generally to
finance internal growth, mergers, acquisitions, stock repurchases, leveraged
buy-outs and other corporate activities. Such loans may be in default at the
time of purchase. The Series may also purchase other direct indebtedness such as
trade or other claims against companies, which generally represent money owed by
the company to a supplier of goods and services. These claims may also be
purchased at a time when the company is in default. Certain of the loan
participations and other direct indebtedness acquired by the Series may involve
revolving credit facilities or other standby financing commitments which
obligate the Series to pay additional cash on a certain date or on demand.
The highly leveraged nature of many such loans and other direct indebtedness may
make such loans especially vulnerable to adverse changes in economic or market
conditions. Loan participations and other direct indebtedness may not be in the
form of securities or may be subject to restrictions on transfer, and only
limited opportunities may exist to resell such instruments. As a result, the
Series may be unable to sell such investments at an opportune time or may have
to resell them at less than fair market value. For a further discussion of loan
participations, other direct indebtedness and the risks related to transactions
therein, see the SAI.
MORTGAGE PASS-THROUGH SECURITIES: The Total Return Series and the World
Governments Series may invest in mortgage pass-through securities. Mortgage
pass-through securities are securities representing interests in "pools" of
mortgage loans. The Utilities Series may invest in mortgage pass-through
securities that are securities issued or guaranteed as to principal and interest
by the U.S. Government, its agencies, authorities or instrumentalities. Monthly
payments of interest and
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principal by the individual borrowers on mortgages are passed through to the
holders of the securities (net of fees paid to the issuer or guarantor of the
securities) as the mortgages in the underlying mortgage pools are paid off.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
GNMA); or guaranteed by U.S. Government-sponsored corporations (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). See the SAI for a further
discussion of these securities.
INDEXED SECURITIES: Each Series may invest in indexed securities whose value is
linked to foreign currencies, interest rates, commodities, indices or other
financial indicators. Most indexed securities are short to intermediate term
fixed-income securities whose values at maturity and/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.
SWAPS AND RELATED TRANSACTIONS: As one way of managing its exposure to different
types of investments, the World Governments Series 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 Series with another
party of cash payments based upon different interest rate indexes, currencies,
and other prices or rates, such as the value of mortgage prepayment rates. For
example, in the typical interest rate swap, the Series 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 World Governments Series 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 Series' investment exposure from one type
of investment to another. For example, if the Series 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 Series' 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 Series' 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
Series' 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 Series may also suffer losses
if it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions.
Swaps, caps, floors and collars are highly specialized activities which involve
certain risks. See the SAI for further information on, and the risks involved
in, these activities.
OPTIONS ON SECURITIES: The Total Return Series and the World Governments Series
may write (sell) covered put and call options and purchase put and call options
on securities. Each of these Series will write options on securities for the
purpose
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of increasing its return and/or to protect the value of its portfolio. In
particular, where a Series writes an option that expires unexercised or is
closed out by the Series at a profit, it will retain the premium paid for the
option which will increase its gross income and will offset in part the reduced
value of the portfolio security underlying the option, or the increased cost of
portfolio securities to be acquired. In contrast, however, if the price of the
underlying security moves adversely to the Series' position, the option may be
exercised and the Series will be required to purchase or sell the underlying
security at a disadvantageous price, which may only be partially offset by the
amount of the premium. Each Series may also write combinations of put and call
options on the same security, known as "straddles." Such transactions can
generate additional premium income but also present increased risk.
By writing a call option on a security, a Series limits its opportunity to
profit from any increase in the market value of the underlying security, since
the holder will usually exercise the call option when the market value of the
underlying security exceeds the exercise price of the call. However, the Series
retains the risk of depreciation in value of securities on which it has written
call options.
Each of these Series may also purchase put or call options in anticipation of
market fluctuations which may adversely affect the value of its portfolio or the
prices of securities that the Series wants to purchase at a later date. In the
event that the expected market fluctuations occur, the Series may be able to
offset the resulting adverse effect on its portfolio, in whole or in part,
through the options purchased. The premium paid for a put or call option plus
any transaction costs will reduce the benefit, if any, realized by the Series
upon exercise or liquidation of the option, and, unless the price of the
underlying security changes sufficiently, the option may expire without value to
the Series.
OPTIONS ON STOCK INDICES: The Total Return Series and the Utilities Series may
write (sell) covered call and put options and purchase call and put options on
stock indices. Each of these Series may write options on stock indices for the
purpose of increasing its gross income and to protect its portfolio against
declines in the value of securities it owns or increases in the value of
securities to be acquired. When a Series 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 Series will either close out the option at a profit or
allow it to expire unexercised. Each of these Series 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
Series for the writing of the option, less related transaction costs. In
addition, if the value of an underlying index moves adversely to a Series'
option position, the option may be exercised, and the Series will experience a
loss which may only be partially offset by the amount of the premium received.
Each of these Series 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
Series' possible loss in either case will be limited to the premium paid for the
option, plus related transaction costs.
"YIELD CURVE" OPTIONS: The Total Return Series and the World Governments Series
may enter into options on the yield "spread," or yield differential, between two
securities, a transaction referred to as a "yield curve" option, for hedging and
non-hedging (an effort to increase current income) purposes. In contrast to
other types of options, a yield curve option is based on the difference between
the yields of designated securities rather than the actual prices of the
individual securities, and is settled through cash payments. Accordingly, a
yield curve option is profitable to the holder if this differential widens (in
the case of a call) or narrows (in the case of a put), regardless of whether the
yields of the underlying securities increase or decrease. Yield curve options
written by a Series will be covered as described in the SAI. The trading of
yield curve options is subject to all the risks associated with trading other
types of options, as discussed below under "Additional Risk Factors" and in the
SAI. In addition, such options present risks of loss even if the yield on one of
the underlying securities remains constant, if the spread moves in a direction
or to an extent which was not anticipated.
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FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS: Each Series may purchase and
sell Futures Contracts on foreign or domestic fixed income securities or indices
of such securities, including municipal bond indices and any other indices of
foreign or domestic fixed income securities that may become available for
trading. Each of these Series may also purchase and write options on such
Futures Contracts ("Options on Futures Contracts"). The Total Return Series may
purchase and sell Futures Contracts on stock indices. The Total Return Series,
the World Governments Series and the Utilities Series may purchase and sell
Futures Contracts on foreign currencies or indices of foreign currencies. Each
of these Series may also purchase and write Options on such Futures Contracts.
Such transactions will be entered into for hedging purposes or for non-hedging
purposes to the extent permitted by applicable law. Each of these Series will
incur brokerage fees when it purchases and sells Futures Contracts, and will be
required to maintain margin deposits. In addition, Futures Contracts entail
risks. Although the Adviser believes that use of such contracts will benefit a
Series, if its investment judgment about the general direction of exchange rates
or the stock market is incorrect, the Series' overall performance may be poorer
than if it had not entered into any such contract and the Series may realize a
loss. A Series will not enter into any Futures Contract if immediately
thereafter the value of securities and other obligations underlying all such
Futures Contracts held by such Series would exceed 50% of the value of its total
assets.
Purchases of Options on Futures Contracts may present less risk in hedging a
Series' portfolio than the purchase or sale of the underlying Futures Contracts
since the potential loss is limited to the amount of the premium plus related
transaction costs, although it may be necessary to exercise the option to
realize any profit, which results in the establishment of a futures position.
The writing of Options on Futures Contracts, however, does not present less risk
than the trading of Futures Contracts and will constitute only a partial hedge,
up to the amount of the premium received. In addition, if an option is
exercised, a Series may suffer a loss on the transaction.
Futures Contracts and Options on Futures Contracts that are entered into by a
Series will be traded on U.S. and foreign exchanges.
FORWARD CONTRACTS: Each Series may enter into forward foreign currency exchange
contracts for the purchase or sale of a fixed quantity of a foreign currency at
a future date ("Forward Contracts"). Each Series may enter into Forward
Contracts for hedging purposes and for non-hedging purposes (I.E., speculative
purposes). By entering into transactions in Forward Contracts for hedging
purposes, a Series 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, a Series may sustain losses which will reduce its gross
income. Such transactions, therefore, could be considered speculative. Forward
Contracts are traded over-the-counter and not on organized commodities or
securities exchanges. As a result, Forward Contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain risks
beyond those associated with transactions in Futures Contracts or options traded
on exchanges. A Series may choose to, or be required to, receive delivery of the
foreign currencies underlying Forward Contracts it has entered into. Under
certain circumstances, such as where the Adviser believes that the applicable
exchange rate is unfavorable at the time the currencies are received or the
Adviser anticipates, for any other reason, that the exchange rate will improve,
the Series may hold such currencies for an indefinite period of time. Each
Series may also enter into a Forward Contract on one currency to hedge against
risk of loss arising from fluctuations in the value of a second currency
(referred to as a "cross hedge") if, in the judgment of the Adviser, a
reasonable degree of correlation can be expected between movements in the values
of the two currencies. Each Series 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 Series may also purchase and write options
on foreign currencies ("Options on Foreign Currencies") for the purpose of
protecting against declines in the dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. As in the
case of other types of options, however, the writing of an Option on Foreign
Currency will constitute only a partial hedge, up to the amount of the premium
received, and a Series may be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase
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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 Series' position, it may forfeit the entire amount of the premium paid for
the option plus related transaction costs. A Series may also choose to, or be
required to, receive delivery of the foreign currencies underlying Options on
Foreign Currencies it has entered into. Under certain circumstances, such as
where the Adviser believes that the applicable exchange rate is unfavorable at
the time the currencies are received or the Adviser anticipates, for any other
reason, that the exchange rate will improve, a Series may hold such currencies
for an indefinite period of time.
6. ADDITIONAL RISK FACTORS
OPTIONS, FUTURES CONTRACTS AND FORWARD CONTRACTS: Although each Series will
enter into certain transactions in options, Futures Contracts, Options on
Futures Contracts, Forward Contracts and Options on Foreign Currencies for
hedging purposes, such transactions nevertheless involve certain risks. For
example, a lack of correlation between the instrument underlying an option or
Futures Contract and the assets being hedged, or unexpected adverse price
movements, could render a Series' hedging strategy unsuccessful and could result
in losses. A Series 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 a Series 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
Series may be required to maintain a position until exercise or expiration,
which could result in losses. The SAI contains a description of the nature and
trading mechanics of options, Futures Contracts, Options on Futures Contracts,
Forward Contracts and Options on Foreign Currencies, and includes a discussion
of the risks related to transactions therein.
Transactions in Forward Contracts may be entered into only in the
over-the-counter market. Futures Contracts and Options on Futures Contracts may
be entered into on U.S. exchanges regulated by the 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 Series will include both domestic and foreign securities.
LOWER RATED BONDS: The Total Return Series and the Utilities Series may invest
in fixed income securities rated Baa by Moody's or BBB by S&P or Fitch and
comparable unrated securities. These securities, while normally exhibiting
adequate protection parameters, have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than in the case of higher
grade securities.
Each of these Series may also invest in securities rated Ba or lower by Moody's
or BB or lower by S&P or Fitch and comparable unrated securities (commonly known
as "junk bonds") to the extent described above. See Appendix A to this
Prospectus for a description of these ratings. These securities are considered
speculative and, while generally providing greater income than investments in
higher rated securities, will involve greater risk of principal and income
(including the possibility of default or bankruptcy of the issuers of such
securities) and may involve greater volatility of price (especially during
periods of economic uncertainty or change) than securities in the higher rating
categories. However, since yields vary over time, no specific level of income
can ever be assured. These lower rated high yielding fixed income securities
generally tend to reflect economic changes and short-term corporate and industry
developments to a greater extent than higher rated securities which react
primarily to fluctuations in the general level of interest rates (although these
lower rated fixed income securities are also affected by changes in interest
rates, the market's perception of their credit quality, and the outlook for
economic growth). In the past, economic downturns or an increase in interest
rates have, under certain circumstances, caused a higher incidence of default by
the issuers of these securities and may do so in the future, especially in the
case of highly leveraged issuers. During certain periods, the higher yields on a
Series' 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 Series
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
Series' yield despite the actual loss of principal. The market for these lower
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<PAGE>
rated fixed income securities may be less liquid than the market for investment
grade fixed income securities, and judgment may at times play a greater role in
valuing these securities than in the case of investment grade fixed income
securities. Changes in the value of securities subsequent to their acquisition
will not affect cash income or yield to maturity to a Series but will be
reflected in the net asset value of shares of the Series. See the SAI for more
information on lower rated securities.
FOREIGN SECURITIES: Each Series may invest in dollar-denominated and
non-dollar/denominated foreign securities. Investing in securities of foreign
issuers generally involves risks not ordinarily associated with investing in
securities of domestic issuers. These include changes in currency rates,
exchange control regulations, governmental administration or economic or
monetary policy (in the United States or abroad) or circumstances in dealings
between nations. Costs may be incurred in connection with conversions between
various currencies. Special considerations may also include more limited
information about foreign issuers, higher brokerage costs, different accounting
standards and thinner trading markets. Foreign securities markets may also be
less liquid, more volatile and less subject to government supervision than in
the United States. Investments in foreign countries could be affected by other
factors including expropriation, confiscatory taxation and potential
difficulties in enforcing contractual obligations and could be subject to
extended settlement periods. Each of these Series may hold foreign currency
received in connection with investments in foreign securities when, in the
judgment of the Adviser, it would be beneficial to convert such currency into
U.S. dollars at a later date, based on anticipated changes in the relevant
exchange rate. Each of these Series may also hold foreign currency in
anticipation of purchasing foreign securities. See the SAI for further
discussion of foreign securities and the holding of foreign currency, as well as
the associated risks.
AMERICAN DEPOSITARY RECEIPTS: Each Series may invest in ADRs, which are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. Because ADRs trade on United States securities
exchanges, the Adviser does not treat them as foreign securities. However, they
are subject to many of the risks of foreign securities such as changes in
exchange rates and more limited information about foreign issuers.
EMERGING MARKETS SECURITIES: Each Series may invest in emerging markets. In
addition to the general risks of investing in foreign securities, investments in
emerging markets involve special risks. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. These securities may be considered speculative and, while
generally offering higher income and the potential for capital appreciation, may
present significantly greater risk. Emerging markets may have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when a portion of the
assets of the Series is uninvested and no return is earned thereon. The
inability of the Series to make intended security purchases due to settlement
problems could cause the Series to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result in losses to the Series due to subsequent declines in value of the
portfolio securities, a decrease in the level of liquidity in a Series'
portfolio, or if the Series has entered into a contract to sell the security,
possible liability to the purchaser. Certain markets may require payment for
securities before delivery and in such markets the Series bear the risk that the
securities will not be delivered and that the Series' payments will not be
returned. Securities prices in emerging markets can be significantly more
volatile than in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions of repatriation of assets, and may have less
protection of property rights than more developed countries. The economies of
countries with emerging markets may be predominantly based on only a few
industries, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may
be unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible at
times. Securities of issuers located in countries with emerging markets may have
limited marketability and may be subject to more abrupt or erratic movements.
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<PAGE>
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Series 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 Series of any
restrictions on investments.
Investment in certain foreign emerging market debt obligations may be restricted
or controlled to varying degrees. These restrictions or controls may at times
preclude investment in certain foreign emerging market debt obligations and
increase the expenses of the Series.
NON-DIVERSIFICATION: The World Governments Series and the Utilities Series are
"non-diversified," as that term is defined in the Investment Company Act of 1940
(the "1940 Act"), but intends to qualify as a "regulated investment company" for
federal income tax purposes. This means, in general, that although more than 5%
of each of these Series' total assets may be invested in the securities of one
issuer (including a foreign government), at the close of each quarter of its
taxable year the aggregate amount of such holdings may not exceed 50% of the
value of its total assets, and no more than 25% of the value of its total assets
may be invested in the securities of a single issuer. To the extent that a
non-diversified Series at times may hold the securities of a smaller number of
issuers than if it were "diversified" (as defined in the 1940 Act), that Series
will at such times be subject to greater risk with respect to its portfolio
securities than a fund that invests in a broader range of securities, because
changes in the financial condition or market assessment of a single issuer may
cause greater fluctuations in the Series' total return and the net asset value
of its shares.
-------------------
SHORT-TERM INVESTMENTS FOR TEMPORARY DEFENSIVE PURPOSES -- During periods of
unusual market conditions when the Adviser believes that investing for temporary
defensive purposes is appropriate, or in order to meet anticipated redemption
requests, a large portion or all of the assets of each Series may be invested in
cash (including foreign currency) or cash equivalents including, but not limited
to, obligations of banks (including certificates of deposit, bankers'
acceptances, time deposits and repurchase agreements), commercial paper,
short-term notes, U.S. Government Securities and related repurchase agreements.
PORTFOLIO TRADING
Each Series intends to manage its portfolio by buying and selling securities, as
well as holding securities to maturity, to help attain its investment objectives
and policies.
Each Series will engage in portfolio trading if it believes a transaction, net
of costs (including custodian charges), will help in attaining its investment
objectives. In trading portfolio securities, each Series seeks to take advantage
of market developments, yield disparities and variations in the creditworthiness
of issuers. For a description of the strategies which may be used by these
Series in trading portfolio securities, see "Portfolio Transactions and
Brokerage Commissions" in the SAI. The Total Return Series' portfolio will be
managed actively with respect to the Series' fixed income securities and the
asset allocations modified as the Adviser deems necessary. Although the Series
does not intend to seek short-term profits, fixed income securities in its
portfolio will be sold whenever the Adviser believes it is appropriate to do so
without regard to the length of time the particular asset may have been held.
With respect to its equity securities, the Total Return Series does not intend
to trade in securities for short-term profits and anticipates that portfolio
securities ordinarily will be held for one year or longer. However, the Series
will effect trades whenever it believes that changes in its portfolio securities
are appropriate.
Because the World Governments Series is expected to have a portfolio turnover
rate of over 100%, transaction costs incurred by the Series and the realized
capital gains and losses of the Series may be greater than that of a fund with a
lesser portfolio turnover rate.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. Consistent with
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<PAGE>
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 Board of Trustees of the Trust may determine, the Adviser may consider sales
of Contracts for which the Trust is an investment option, together with sales of
shares of other investment company clients of MFS Fund Distributors, Inc., the
distributor of shares of the Trust and of the MFS Family of Funds, as a factor
in the selection of broker-dealers to execute each Series' portfolio
transactions. From time to time the Adviser may direct certain portfolio
transactions to broker-dealer firms which, in turn, have agreed to pay a portion
of the Series' operating expenses (e.g. fees charged by the custodian of the
Series' assets). For a further discussion of portfolio trading, see the SAI.
-------------------
The SAI includes a discussion of other investment policies and listing of
specific investment restrictions which govern the investment policies of each
Series. The specific investment restrictions listed in the SAI may be changed
without shareholder approval unless indicated otherwise (see the SAI). The
Series' investment limitations, policies and rating standards are adhered to at
the time of purchase or utilization of assets; a subsequent change in
circumstances will not be considered to result in a violation of policy.
7. MANAGEMENT OF THE SERIES
The Trust's Board of Trustees, as part of its overall management responsibility,
oversees various organizations responsible for each Series' day-to-day
management.
INVESTMENT ADVISER -- MFS manages each Series pursuant to an Investment Advisory
Agreement with the Trust on behalf of each Series dated April 14, 1994 (the
"Advisory Agreement"). MFS provides the Series with overall investment advisory
and administrative services, as well as general office facilities. Subject to
such policies as the Trustees may determine, MFS makes investment decisions for
each Series. For its services and facilities, MFS 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 Series:
<TABLE>
<CAPTION>
PERCENTAGE OF THE
AVERAGE DAILY NET
ASSETS
SERIES OF EACH SERIES
- ------------------------------------------------------------ -----------------
<S> <C>
Total Return Series......................................... 0.75%
Utilities Series............................................ 0.75%
World Governments Series.................................... 0.75%
</TABLE>
MFS or its affiliates will pay a fee to Connecticut General Life Insurance
Company ("CIGNA") equal, on an annualized basis, to 0.10% of the aggregate net
assets of the Series up to $100 million and 0.20% of the aggregate net assets of
the Series over $100 million attributable to Contracts offered by separate
accounts of CIGNA or its affiliates. Such fee will not be paid by the Series,
their shareholders or by Contract holders.
For the fiscal year ended December 31, 1995, MFS received the following
management fees from the Series under the Advisory Agreement and assumed the
following amounts of the Series' expenses (see "Expenses" below);
<TABLE>
<CAPTION>
MANAGEMENT FEE EXPENSES ASSUMED
SERIES PAID TO MFS BY MFS
- ---------------------------------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Total Return Series............................................................... $ 10,826 $ 25,092
Utilities Series.................................................................. 9,376 25,513
World Governments Series.......................................................... 33,869 43,311
</TABLE>
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<PAGE>
The identity and background of the portfolio manager for each Series is set
forth below. Unless indicated otherwise each portfolio manager has acted in that
capacity since the commencement of investment operations of each Series.
<TABLE>
<CAPTION>
SERIES PORTFOLIO MANAGERS
- ----------------------------- --------------------------------------------------------------------------------------
<S> <C>
Total Return Series David M. Calabro, a Vice President of MFS, has been employed by the Adviser as a
portfolio manager since 1992. Mr. Calabro is the head of this portfolio management
team and a manager of the common stock portion of the Series' portfolio. Geoffrey L.
Kurinsky, a Senior Vice President of MFS, has been employed by the Adviser as a
portfolio manager since 1987. Mr. Kurinsky is the manager of the Series' fixed income
securities. Judith N. Lamb, a Vice President of MFS, has been employed by the Adviser
as a portfolio manager since 1992. Ms. Lamb is the manager of the Series' convertible
securities. Lisa B. Nurme, a Vice President of MFS, has been employed by the Adviser
as a portfolio manager since 1987. Ms. Nurme is a manager of the common stock portion
of the Series' portfolio. Maura A. Shaughnessy, a Vice President of MFS, has been
employed by the Adviser as a portfolio manager since 1991. Ms. Shaughnessy is a
manager of the common stock portion of the Series' portfolio. Each individual became a
portfolio manager of the Series on July 19, 1995.
Utilities Series Maura A. Shaughnessy, a Vice President of the Adviser, has been employed by the
Adviser as a portfolio manager since 1991.
World Governments Series Stephen C. Bryant, a Senior Vice President of the Adviser, has been employed by the
Adviser as a portfolio manager since 1987.
</TABLE>
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS-Registered Trademark- Municipal
Income Trust, MFS Multimarket Income Trust, MFS Government Markets Income Trust,
MFS Intermediate Income Trust, MFS Charter Income Trust, MFS Special Value
Trust, MFS Institutional Trust, MFS Union Standard Trust, MFS/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., provide investment advice to substantial
private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of the MFS organization were
approximately $43.9 billion on behalf of approximately 1.9 million investor
accounts as of February 29, 1996. As of such date, the MFS organization managed
approximately $20 billion of assets invested in equity securities and
approximately $20 billion of assets invested in fixed income securities.
Approximately $3.8 billion of the assets managed by MFS are invested in
securities of foreign issuers and non-U.S. dollar-denominated securities of U.S.
issuers. MFS is a subsidiary of Sun Life of Canada (U.S.), 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, Mr. Shames is
the President and Mr. Scott is the Secretary and a Senior Executive Vice
President of MFS. 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
United States since 1895, establishing a headquarters office here in 1973. The
executive officers of MFS report to the Chairman of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is the Chairman and
President and a Trustee of the Trust. W. Thomas London, Stephen E. Cavan, James
R. Bordewick, Jr., and James O. Yost, all of whom are officers of MFS, are
officers of the Trust.
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<PAGE>
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 Series'
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 Series is concerned, in other cases, however, it may
produce increased investment opportunities for the Series.
From time to time, the Adviser may purchase, redeem and exchange shares of any
Series. The purchase by the Adviser of shares of a Series may have the effect of
lowering that Series' expense ratio, while the redemption by the Adviser of
shares of a Series may have the effect of increasing that Series' expense ratio.
DISTRIBUTOR -- MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary of
MFS, is the distributor of shares of each Series and also serves as distributor
for certain of the other mutual funds managed by MFS.
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 Series.
8. INFORMATION CONCERNING SHARES OF EACH SERIES
PURCHASES AND REDEMPTIONS
The separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of each Series based on, among other things, the
amount of premium payments to be invested and surrender and transfer requests to
be effected on that day pursuant to Contracts. Orders received by the Trust are
effected on days on which the Exchange is open for trading. For orders received
by the Trust before the close of regular trading on the Exchange (normally 4
p.m. eastern standard time), such purchases and redemptions of the shares of
each Series are effected at the respective net asset values per share determined
as of the close of regular trading on the Exchange on that same day.
Participating Insurance Companies shall be the designee of the Trust for receipt
of purchase and redemption orders from Contract holders and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of such order by 9:30 a.m. eastern standard time on the next following
day on which the Exchange is open for trading. Payment for shares shall be by
federal funds transmitted by wire and must be received by 2:00 p.m. eastern
standard time on the next following day on which the Exchange is open for
trading after the purchase order is received. Redemption proceeds shall be by
federal funds transmitted by wire and shall be sent by 2:00 p.m. eastern
standard time on the next following day on which the Exchange is open for
trading after the redemption order is received. No fee is charged the
shareholders when they redeem Series shares.
The offering of shares of any Series may be suspended for a period of time and
each Series reserves the right to refuse any specific purchase order. Purchase
orders may be refused if, in the Adviser's opinion, they are of a size that
would disrupt the management of a Series. The Trust may suspend the right of
redemption of shares of any Series and may postpone payment for any period: (i)
during which the Exchange is closed other than customary weekend and holiday
closings or during which trading on the Exchange is restricted; (ii) when the
SEC determines that a state of emergency exists which may make
23
<PAGE>
payment or transfer not reasonably practicable; (iii) as the SEC may by order
permit for the protection of the security holders of the Trust; or (iv) at any
time when the Trust may, under applicable laws, rules and regulations, suspend
payment on the redemption of its shares.
Should any conflict between Contract holders arise which would require that a
substantial amount of net assets be withdrawn from any Series, orderly portfolio
management could be disrupted to the potential detriment of such Contract.
NET ASSET VALUE
The net asset value per share of each Series is determined each day during which
the Exchange is open for trading. This determination is made once during each
such day as of the close of regular trading on the Exchange by deducting the
amount of the Series' liabilities from the value of the Series' assets and
dividing the difference by the number of shares of the Series outstanding.
Values of assets in a Series' portfolio are determined on the basis of their
market or other fair value as described in the SAI. All investments, assets and
liabilities are expressed in U.S. dollars based upon current currency exchange
rates.
DISTRIBUTIONS
Substantially all of each Series' net investment income for any calendar year is
declared as dividends and paid to its shareholders as dividends on an annual
basis. In addition, each Series may make one or more distributions during the
calendar year to its shareholders from any long-term capital gains, and may also
make one or more distributions to its shareholders from short-term capital
gains. In determining the net investment income available for distribution, each
of these Series may rely on projections of its anticipated net investment income
(which may include short-term capital gains from the sales of securities or
other assets, and, if allowed by each of these Series' investment restrictions,
premiums from options written), over a longer term, rather than its actual net
investment income for the period.
Shareholders of these Series may elect to receive dividends and capital gain
distributions in either cash or additional shares.
TAX STATUS
Each Series of the Trust is treated as a separate entity for federal income tax
purposes. In order to minimize the taxes each Series would otherwise be required
to pay, each Series 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 requirements imposed by the Code. It is not expected that any Series
will be required to pay entity level federal income or excise taxes.
Shares of the Series are offered only to the Participating Insurance Companies'
separate accounts that fund Contracts. See the applicable Contract prospectus
for a discussion of the federal income tax treatment of (1) the separate
accounts that purchase and hold Series shares and (2) the holders of the
Contracts that are funded through those accounts. In addition to the
diversification requirements of Subchapter M of the Code, each Series also
intends to diversify its assets as required by Code Section 817(h)(1), and the
regulations thereunder. See also "Tax Status" in the SAI.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Each Series of the Trust currently has one class of shares, entitled Shares of
Beneficial Interest (without par value). The Trust has reserved the right to
create and issue additional classes and series of shares, in which case each
class of shares of a series would participate equally in the earnings, dividends
and assets attributable to that class of that particular series. Shareholders
are entitled to one vote for each share held, and shares of each Series are
entitled to vote separately to approve investment advisory agreements or changes
in investment restrictions with respect to that Series, but shares of all Series
vote together in the election of Trustees and selection of accountants.
Additionally, each Series will vote separately on any other matter that affects
solely that Series, but will otherwise vote together with all other Series on
all other matters. The Trust does not intend to hold annual shareholder
meetings. The Declaration of Trust provides that a Trustee may be removed from
office in certain instances. See "Description of Shares, Voting Rights and
Liabilities" in the SAI.
24
<PAGE>
Each share of a Series represents an equal proportionate interest in the Series
with each other share, subject to the liabilities of the particular Series.
Shares have no pre-emptive or conversion rights. Shares are fully paid and
non-assessable. Should a Series be liquidated, shareholders are entitled to
share PRO RATA in the net assets available for distribution to shareholders.
Shares will remain on deposit with the Shareholder Servicing Agent and
certificates will not be issued.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed (E.G., fidelity bonding and omission insurance) and the Trust
itself was unable to meet its obligations.
PERFORMANCE INFORMATION
Each Series' performance may be quoted in advertising in terms of yield and
total return. Performance is based on historical results and is not intended to
indicate future performance. Performance quoted for a Series includes the effect
of deducting that Series' expenses, but may not include charges and expenses
attributable to any particular insurance product. Excluding these charges from
quotations of a Series' performance has the effect of increasing the performance
quoted. Performance for a Series will vary based on, among other things, changes
in market conditions, the level of interest rates and the level of the Series'
expenses. For further information about the Total Return, Utilities and World
Governments Series' performance for the fiscal year ended December 31, 1995,
please see the Series' Annual Reports. A copy of these Annual Reports may be
obtained by contacting your Participating Insurance Company.
From time to time, quotations of a Series' total return and yield may be
included in advertisements, sales literature or reports to shareholders or
prospective investors. The total return of a Series refers to return assuming an
investment has been held in the Series for one year and for the life of the
Series (the ending date of which will be stated). The total return quotations
may be expressed in terms of average annual or cumulative rates of return for
all periods quoted. Average annual total return refers to the average annual
compound rate of return of an investment in a Series. Cumulative total return
represents the cumulative change in value of an investment in a Series. Both
will assume that all dividends and capital gains distributions were reinvested.
The yield of a Series refers to net investment income generated by a Series over
a specified 30-day (or one month) period. This income is then "annualized." That
is, the amount of income generated by the Series during that 30-day (or one
month) period is assumed to be generated over a 12-month period and is shown as
a percentage of net asset value.
EXPENSES
The Trust pays the compensation of the Trustees who are not officers of MFS and
all expenses of each Series (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 Series; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of each Series; 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 Investors Bank &
Trust Company, the Trust's Custodian, for all services to each Series, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of calculating the net asset value of shares of each Series; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of each Series and the preparation,
printing and mailing of prospectuses are borne by each Series except that the
Distribution Agreement with MFD requires MFD to pay for printing prospectuses
that are to be used for sales purposes. Expenses of the Trust which are not
attributable to a specific Series are allocated between the Series in a manner
believed by management of the Trust to be fair and equitable.
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<PAGE>
MFS has agreed to pay until December 31, 2004 the expenses of the World
Governments Series such that the Series' aggregate operating expenses do not
exceed, on an annualized basis, 1.00% of its average daily net assets; provided,
however, that this obligation may be terminated or revised at any time by MFS
without the consent of the Trust or the Series by notice in writing from MFS to
the Trust on behalf of the Series. Such payments by MFS are subject to
reimbursement by the World Governments Series which will be accomplished by the
payment by the Series 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 the Series would not exceed, on an annualized basis, 1.00%
of its average daily net assets. The expense reimbursement agreement terminates
for the World Governments Series on the earlier of the date on which payments
made thereunder by the Series equal the prior payment of such reimbursable
expenses by MFS or December 31, 2004.
MFS has agreed to pay expenses of each of the Total Return Series and the
Utilities Series such that the respective Series' aggregate operating expenses
shall not exceed, on an annualized basis, 1.00% of the average daily net assets
of the respective Series from November 2, 1994 through December 31, 1996, 1.25%
of the average daily net assets of the respective Series from January 1, 1997
through December 31, 1998, and 1.50% of the average daily net assets of the
respective Series from January 1, 1999 through December 31, 2004; provided,
however, that this obligation may be terminated or revised at any time by MFS
without the consent of the Trust or the Series by notice in writing from MFS to
the Trust on behalf of the Series. Such payments by MFS are subject to
reimbursement by each Series which will be accomplished by the payment by the
Series of an expense reimbursement fee to MFS computed and paid monthly at a
percentage of the respective Series' average daily net assets for its then
current fiscal year, with a limitation that immediately after such payment the
aggregate operating expenses of the respective Series would not exceed, on an
annualized basis, 1.00% of the average daily net assets of the respective Series
from November 2, 1994 through December 31, 1996, 1.25% of the average daily net
assets of the respective Series from January 1, 1997 through December 31, 1998,
and 1.50% of the average daily net assets of the respective Series from January
1, 1999 through December 31, 2004. This expense reimbursement agreement
terminates for each such Series on the earlier of the date on which payments
made thereunder by the respective Series equal the prior payment of such
reimbursable expenses by MFS or December 31, 2004.
SHAREHOLDER COMMUNICATIONS
Owners of Contracts issued by Participating Insurance Companies for which shares
of one or more Series are the investment vehicle will receive from the
Participating Insurance Companies semi-annual financial statements and audited
year-end financial statements certified by the Trust's independent certified
public accountants. Each report will show the investments owned by the Trust and
the valuations thereof as determined by the Trustees and will provide other
information about the Trust and its operations.
Participating Insurance Companies with inquiries regarding the Trust may call
the Trust's Shareholder Servicing Agent. (See back cover for address and phone
number.)
-------------------
The SAI for the Trust, dated May 1, 1996, contains more detailed information
about each of the Series, including information related to: (i) the investment
policies and restrictions of each Series; (ii) the Trustees, officers and
investment adviser of the Trust; (iii) portfolio transactions; (iv) the shares
of each Series, including rights and liabilities of shareholders; (v) the method
used to calculate yield and total rate of return quotations of each Series; (vi)
the determination of net asset value of shares of each Series; and (vii) certain
voting rights of shareholders of each Series.
26
<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;
A-1
<PAGE>
3. there is a lack of essential data pertaining to the issue or issuer; or
4. the issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
STANDARD & POOR'S RATINGS SERVICES
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest 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.
CL: The rating Cl 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-2
<PAGE>
A-1 AND P-1 COMMERCIAL PAPER RATINGS
Description of S&P, Moody's, and Fitch 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 foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated 'AAA'. Because bonds rated in the 'AAA' and
'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated 'F-1+'.
A: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin 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.
A-3
<PAGE>
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.
A-4
<PAGE>
APPENDIX B
PRINCIPAL SECTORS OF THE UTILITIES INDUSTRY
The principal sectors of the utility industry in which the Utilities Series may
invest are discussed below.
ELECTRIC -- The electric utility industry consists of companies that are engaged
principally in the generation, transmission and sale of electric energy,
although many also provide other energy-related services. Domestic electric
utility companies, in general, recently have been favorably affected by lower
fuel and financing costs and the full or near completion of major construction
programs. In addition, many of these companies recently have generated cash
flows in excess of current operating expenses and construction expenditures,
permitting some degree of diversification into unregulated businesses. Some
electric utilities have also taken advantage of the right to sell power outside
of their traditional geographic areas. Electric utility companies historically
have been subject to the risks associated with increases in fuel and other
operating costs, high interest costs on borrowings needed for capital
construction programs, costs associated with compliance with environmental and
safety regulations and changes in the regulatory climate.
In the U.S., the construction and operation of nuclear power facilities is
subject to increased scrutiny by, and evolving regulations of, the Nuclear
Regulatory Commission and state agencies having comparable jurisdiction.
Increased scrutiny might result in higher operating costs and higher capital
expenditures, with the risk that the regulators may disallow inclusion of these
costs in rate authorizations or the risk that a company may not be permitted to
operate or complete construction of a facility. In addition, operators of
nuclear power plants may be subject to significant costs for disposal of nuclear
fuel and for the de-commissioning of such plants.
TELECOMMUNICATIONS -- The telephone industry is large and highly concentrated.
Companies that distribute telephone services and provide access to the telephone
networks comprise the greatest portion of this segment. Telephone companies in
the U.S. are still experiencing the effects of the breakup of American Telephone
& Telegraph Company, which occurred in 1984. Since 1984, companies engaged in
telephone communication services have expanded their non-regulated activities
into other businesses, including cellular telephone services, data processing,
equipment retailing, computer software and hardware services, and financial
services. This expansion has provided significant opportunities for certain
telephone companies to increase their earnings and dividends at faster rates
than had been allowed in traditionally regulated businesses. Increasing
competition, technological innovations and other structural changes, however,
could adversely affect the profitability of such utilities.
GAS -- Gas transmission companies and gas distribution companies are also
undergoing significant changes. In the U.S., interstate transmission companies
are regulated by the Federal Energy Regulatory Commission, which is reducing its
regulation of the industry. Many companies have diversified into oil and gas
exploration and development, making returns more sensitive to energy prices. In
the recent decade, gas utility companies have been adversely affected by
disruptions in the oil industry and have also been affected by increased
concentration and competition. In the opinion of the Adviser, however,
environmental considerations could improve the gas industry outlook in the
future. For example, natural gas is the cleanest of the hydrocarbon fuels, and
this may result in incremental shifts in fuel consumption toward natural gas and
away from oil and coal.
WATER -- Water supply utilities are companies that collect, purify, distribute
and sell water. In the U.S. and around the world, the industry is highly
fragmented because most of the supplies are owned by local authorities.
Companies in this industry are generally mature and are experiencing little or
no per capita volume growth.
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There can be no assurance that the positive developments noted above, including
those relating to changing regulation, will occur or that risk factors other
than those noted above will not develop in the future.
B-1
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(800)-637-8730
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
CUSTODIAN
Investors Bank & Trust Company
89 South Street, Boston, MA 02111
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 02104-9985
For additional information,
contact your financial adviser.
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
[LOGO]
MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES-SM-
MFS-REGISTERED TRADEMARK- UTILITIES SERIES-SM-
MFS-REGISTERED TRADEMARK- WORLD GOVERNMENTS SERIES-SM-
500 Boylston Street, Boston, MA 02116
------------------------------------
MFS-REGISTERED TRADEMARK-
TOTAL RETURN
SERIES-SM-
MFS-REGISTERED TRADEMARK- UTILITIES SERIES-SM-
MFS-REGISTERED TRADEMARK- WORLD
GOVERNMENTS SERIES-SM-
[LOGO]
PROSPECTUS
MAY 1, 1996
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