MFS Series Trust III, et al. – ‘485APOS’ on 3/29/07

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Document/Exhibit                   Description                      Pages   Size 

 1: 485APOS     Mfs Series Trust Iii                                 567±  2.17M 
 4: EX-99.10(A)  Consent of Deloitte & Touche LLP                      1      6K 
 5: EX-99.10(B)  Consent of Ernst & Young LLP                          1      6K 
 6: EX-99.14    Plan -- Rule 18F-3(D)                                 13±    49K 
 7: EX-99.16(A)  Code of Ethics                                       27±    86K 
 2: EX-99.8(K)  Master Class R Plan -- Exhibit C                       2      6K 
 3: EX-99.9(B)  Legal Opinion Consent                                  1      6K 

485APOS   —   Mfs Series Trust Iii
Document Table of Contents

485APOS
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  As filed with the Securities and Exchange Commission on March 29, 2007

                                                     1933 Act File No. 2-60491
                                                    1940 Act File No. 811-2794

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

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

 FORM N-1A

  REGISTRATION STATEMENT
 UNDER
  THE SECURITIES ACT OF 1933
 POST-EFFECTIVE AMENDMENT NO. 40
  AND REGISTRATION STATEMENT
 UNDER
  THE INVESTMENT COMPANY ACT OF 1940
  AMENDMENT NO. 42

   MFS(R) SERIES TRUST III
  (Exact name of Registrant as Specified in Charter)

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

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

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

|_| immediately upon filing pursuant to paragraph (b)         
|_| on [date] pursuant to paragraph (b)                       
|_| 60 days after filing pursuant to paragraph (a)(i)         
|X| on May 31, 2007 pursuant to paragraph (a)(i)              
|_| 75 days after filing pursuant to paragraph (a)(ii)        
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.      

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

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

485APOS
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Class A Shares       Class 529A Shares     Class R Shares       Class R3 Shares 
Class B Shares       Class 529B Shares     Class R1 Shares      Class R4 Shares 
Class C Shares       Class 529C Shares     Class R2 Shares      Class R5 Shares 
Class I Shares                                                                  

MFS HIGH INCOME FUND                                                            

PROSPECTUS JUNE 1, 2007                                                         

This Prospectus describes the MFS High Income Fund. The investment objective of 
the fund is to seek total return with an emphasis on high current income, but   
also considering capital appreciation.                                          

RISK RETURN SUMMARY..........................................   XX              
EXPENSE SUMMARY..............................................   XX              
CERTAIN INVESTMENT POLICIES AND RISKS........................   XX              
MANAGEMENT OF THE FUND.......................................   XX              
DESCRIPTION OF SHARE CLASSES.................................   XX              
HOW TO PURCHASE, REDEEM, AND EXCHANGE SHARES.................   XX              
OTHER INFORMATION............................................   XX              
FINANCIAL HIGHLIGHTS.........................................   XX              

The Securities and Exchange Commission has not approved or disapproved the      
fund's shares or determined whether this prospectus is accurate or complete.    
Anyone who tells you otherwise is committing a crime.                           

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RISK RETURN SUMMARY                                                             

INVESTMENT OBJECTIVE                                                            

The fund's investment objective is to seek total return with an emphasis on     
high current income, but also considering capital appreciation. The fund's      
objective may be changed without shareholder approval.                          

PRINCIPAL INVESTMENT STRATEGIES                                                 

MFS (Massachusetts Financial Services Company, the fund's investment adviser)   
normally invests at least 80% of the fund's net assets in high income debt      
instruments.                                                                    

MFS may invest the fund's assets in other types of debt instruments.            

MFS may invest up to 100% of the fund's assets in lower quality debt            
instruments.                                                                    

MFS may invest the fund's assets in foreign securities.                         

MFS may also invest the fund's assets in derivatives.                           

MFS uses a bottom-up investment approach in buying and selling investments for  
the fund. Investments are selected primarily based on fundamental analysis of   
instruments and their issuers in light of current market, economic, political,  
and regulatory conditions. Factors considered may include the instrument's      
credit quality, collateral characteristics, and indenture provisions, and the   
issuer's management ability, capital structure, leverage, and ability to meet   
its current obligations. Quantitative analysis of the structure of the          
instrument and its features may also be considered.                             

PRINCIPAL INVESTMENT TYPES                                                      

DEBT INSTRUMENTS: Debt instruments represent obligations of corporations,       
governments, and other entities to repay money borrowed. The issuer or borrower 
usually pays a fixed, variable, or floating rate of interest, and must repay    
the amount borrowed, usually at the maturity of the instrument. Some debt       
instruments, such as zero coupon bonds, do not pay current interest but are     
sold at a discount from their face values. Other debt instruments, such as      
certain mortgage-backed and other asset-backed securities, make periodic        
payments of interest and/or principal. Some debt instruments are partially or   
fully secured by collateral supporting the payment of interest and principal.   

LOWER QUALITY DEBT INSTRUMENTS: Lower quality debt instruments, commonly        
referred to as "high yield securities" or "junk bonds" are debt instruments of  
less than investment grade quality.                                             

CORPORATE BONDS: Corporate bonds are debt instruments issued by domestic or     
foreign corporations or similar entities.                                       

FOREIGN GOVERNMENT SECURITIES: Foreign government securities are debt           
instruments issued, guaranteed, or supported, as to the payment of principal    
and interest, by foreign governments, foreign government agencies, foreign      
semi-governmental entities or supranational entities, or debt instruments       
issued by entities organized and operated for the purpose of restructuring the  
outstanding foreign government securities. Foreign government securities may    
not be supported as to the payment of principal and interest by the full faith  
and credit of the foreign government.                                           

FLOATING RATE LOANS: Floating rate loans are debt instruments issued by         
companies or other entities, with interest rates that reset periodically        
(typically daily, monthly, quarterly, or semiannually, based on a base lending  
rate such as the London Interbank Bank Offered Rate (LIBOR), plus a premium).   
Floating rate loans are typically structured and administered by a third party  
that acts as agent for the lenders participating in the floating rate loan.     
Floating rate loans can be acquired directly through the agent, by assignment   
from a third party holder of the loan, or as a participation interest in a      
third party holder's portion of the loan. Senior floating rate loans are        
secured by specific collateral of the borrower, and are senior to most other    
securities of the borrower (e.g., common stocks or other debt instruments) in   
the event of bankruptcy. Floating rate loans can be subject to restrictions on  
resale and can be less liquid than other types of securities.                   

DERIVATIVES: Derivatives are financial instruments whose value is based on the  
value of one or more indicators, such as a security, asset, currency, interest  
rate, credit rating or index. Derivatives often involve a counterparty to the   
transaction. Derivatives include futures, forward contracts, options,           
structured notes, indexed securities, inverse floating rate instruments, swaps, 
caps, floors, and collars.                                                      

PRINCIPAL RISKS                                                                 

As with any mutual fund, you could lose money on your investment in the fund.   
An investment in the fund is not a bank deposit and is not insured or           
guaranteed by the Federal Deposit Insurance Corporation or any other            
governmental agency.                                                            

The principal risks of investing in the fund are:                               

INTEREST RATE RISK: The price of a debt instrument changes in response to       
interest rate changes. In general, the price of a debt instrument falls when    
interest rates rise and rises when interest rates fall. Instruments with longer 
maturities, or that do not pay current interest, are more sensitive to interest 
rate changes. In addition, short-term and long-term interest rates do not       
necessarily move in the same direction or by the same amount. An instrument's   
reaction to interest rate changes depends on the timing of its interest and     
principal payments and the current interest rate for each of those time         
periods. Instruments with floating interest rates can be less sensitive to      
interest rate changes. In response to an interest rate decline, instruments     
that provide the issuer with the right to call or redeem the instrument prior   
to maturity may be called or redeemed, resulting in the reinvestment of         
proceeds in other investments at a lower interest rate.                         

CREDIT RISK: The value of a debt instrument depends, in part, on the issuer's   
or borrower's credit quality or ability to pay principal and interest when due. 
The value of a debt instrument is likely to fall if an issuer or borrower       
defaults on its obligation to pay principal or interest or if the instrument's  
credit rating is downgraded by a credit rating agency. The value of a debt      
instrument can also decline in response to changes in the financial condition   
of the issuer or borrower, changes in specific market, economic, industry,      
political, and regulatory conditions that affect a particular type of           
instrument, issuer, or borrower, and changes in general market, economic,       
political, and regulatory conditions. Certain unanticipated events, such as     
natural disasters, terrorist attacks, war, and other geopolitical events can    
have a dramatic effect on the value of a debt instrument. For certain types of  
instruments, including derivatives, the value of the instrument depends in part 
on the credit quality of the counterparty to the transaction. For other types   
of debt instruments, including collateralized instruments, the price of the     
debt instrument also depends on the credit quality and adequacy of the          
underlying assets or collateral. Enforcing rights against the underlying assets 
or collateral may be difficult, or the underlying assets or collateral may be   
insufficient, if the issuer defaults.                                           

Lower quality debt instruments and certain unrated debt instruments can involve 
a substantially greater risk of default, and their values can decline           
significantly over short periods of time. Lower quality debt instruments are    
regarded as having predominantly speculative characteristics with respect to    
capacity to pay interest and principal. Lower quality debt instruments tend to  
be more sensitive to adverse news about the issuer, or the market or economy in 
general, than higher quality debt instruments. The market for lower quality     
debt instruments and certain unrated debt instruments can be less liquid,       
especially during periods of recession or general market decline.               

FOREIGN RISK: Investments in securities of foreign companies, securities of     
companies with significant foreign exposure, and foreign currencies can involve 
additional risks relating to market, economic, political, or regulatory         
conditions and developments. Political, social, and economic instability, the   
imposition of currency or capital controls, or the expropriation or             
nationalization of assets in a particular country can cause dramatic declines   
in that country's economy. Less stringent regulatory, accounting, and           
disclosure requirements for issuers and markets are more common in certain      
foreign countries. Enforcing legal rights can be difficult, costly, and slow in 
certain foreign countries and can be particularly difficult against foreign     
governments. Changes in currency exchange rates can affect the U.S. dollar      
value of foreign currency investments and investments denominated in foreign    
currencies. Additional risks of foreign investments include trading,            
settlement, custodial, and other operational risks, and withholding and other   
taxes. These factors can make foreign investments, especially those in emerging 
markets, more volatile and less liquid than U.S. investments. In addition,      
foreign markets can react differently to market, economic, political, or        
regulatory developments than the U.S. market.                                   

DERIVATIVES RISK: Derivatives can be used to take both long and short positions 
(i.e., the value of a derivative can be positively or negatively related to the 
value of the underlying indicator(s) on which the derivative is based).         
Derivatives involve risks different from, and potentially greater than, those   
of the underlying indicator(s). The value of a derivative can move in           
unexpected ways, which may result in unanticipated losses and increased         
volatility if the relationship between the value of the derivative and the      
value of the indicator(s) is different than expected, or if the value of the    
underlying indicator(s) does not move in the direction or to the extent         
anticipated. Gains or losses from derivatives can be substantially greater than 
the derivatives' original cost. Derivatives can be less liquid than other types 
of investments.                                                                 

MANAGEMENT RISK: MFS' analysis of an investment can be incorrect and its        
selection of investments can lead to an investment focus that results in the    
fund underperforming other funds with similar investment strategies.            

COUNTERPARTY AND THIRD PARTY RISK: Transactions involving a counterparty other  
than the issuer of the instrument, or a third party responsible for servicing   
the instrument, are subject to the credit risk of the counterparty or third     
party, and to the counterparty's or third party's ability to perform in         
accordance with the terms of the transaction.                                   

LIQUIDITY RISK: Certain investments and types of investments are subject to     
restrictions on resale, may trade in the over-the-counter market or in limited  
volume, or may not have an active trading market, each of which can make it     
more difficult to purchase and sell them at an acceptable price.                

LEVERAGING RISK: Certain transactions, including when-issued, delayed-delivery, 
and forward commitment purchases, and some derivatives, can result in leverage. 
Leverage can cause increased volatility by magnifying gains or losses on        
underlying investments.                                                         

BAR CHART AND PERFORMANCE TABLE                                                 

The bar chart and performance table below are intended to indicate some of the  
risks of investing in the fund by showing changes in the fund's performance     
over time. The performance table also shows:                                    

o how the fund's performance over time compares with that of a broad measure
of market performance, and                                              

o returns before the deduction of taxes and returns after the deduction of  
certain taxes for Class A shares.                                       

The chart and table provide past performance information. The fund's past       
performance (before and after taxes) does not necessarily indicate how the fund 
will perform in the future. The performance information in the chart and table  
is based upon calendar year periods, while the performance information          
presented under the caption "Financial Highlights" and in the fund's            
shareholder reports is based upon the fund's fiscal year. Therefore, these      
performance results may differ.                                                 

BAR CHART. The bar chart shows changes over time in the annual total returns of 
Class A shares for each calendar year for the past ten years, assuming the      
reinvestment of distributions. The chart and related notes do not take into     
account any sales charges (loads) that you may be required to pay upon purchase 
or redemption of the fund's shares. If these sales charges were included, they  
would reduce these returns. The return of the fund's other classes of shares    
will differ from the Class A share returns shown in the bar chart, depending    
upon the expenses of those classes.                                             

CALENDAR YEAR                         

1997                    12.86%  
1998                     1.03%  
1999                     7.00%  
2000                    (7.04)% 
2001                     1.24%  
2002                     0.76%  
2003                    22.76%  
2004                     9.39%  
2005                     2.34%  
2006                    10.32%  

During the periods shown in the bar chart, the highest quarterly return was     
7.72% (for the calendar quarter ended June 30, 2003) and the lowest quarterly   
return was (7.74)% (for the calendar quarter ended September 30, 1998).         

PERFORMANCE TABLE. This table shows how the average annual total returns of     
each class of the fund, before the deduction of taxes ("Returns Before Taxes"), 
compare to a broad measure of market performance, and assumes the deduction of  
the maximum applicable sales loads (initial sales charge and/or contingent      
deferred sales charge (CDSC), as applicable), and the reinvestment of           
distributions. In addition, for Class A shares, this table shows Class A        
average annual total returns:                                                   

o after the deduction of taxes on distributions made on Class A shares, such
as capital gains and income distributions ("Class A Shares' Return After
Taxes on Distributions"), and                                           

o after the deduction of taxes on both distributions made on Class A shares 
  and on redemption of Class A shares, assuming that the shares are redeemed
at the end of the periods for which returns are shown ("Class A Shares' 
Return After Taxes on Distributions and Sale of Class A Shares").       

Average Annual Total Returns (for the Periods Ended December 31, 2006)          

--------------------------------------------------------------------------------
SHARE CLASS                                         1 YEAR   5 YEARS    10 YEARS
--------------------------------------------------------------------------------
RETURNS BEFORE TAXES                                                            
--------------------------------------------------------------------------------
B Shares, with CDSC (Declining over Six Years       5.55%     7.76%      5.05%  
from 4% to 0%)                                                                  
--------------------------------------------------------------------------------
C Shares, with CDSC (1% for 12 Months)              8.54%     8.10%      5.05%  
--------------------------------------------------------------------------------
I Shares, at Net Asset Value                        10.64%    9.14%      6.09%  
--------------------------------------------------------------------------------
529A Shares, With Initial Sales Charge (4.75%)      4.77%     7.48%      5.11%  
--------------------------------------------------------------------------------
529B Shares, with CDSC (Declining over Six Years                                
from 4% to 0%)                                      5.28%     7.47%      4.91%  
--------------------------------------------------------------------------------
529C Shares, with CDSC (1% for 12 Months)           8.28%     7.81%      4.91%  
--------------------------------------------------------------------------------
R Shares, at Net Asset Value                        10.38%    8.69%      5.71%  
--------------------------------------------------------------------------------
R1 Shares, at Net Asset Value                       9.44%     8.00%      5.03%  
--------------------------------------------------------------------------------
R2 Shares, at Net Asset Value                       9.82%     8.13%      5.09%  
--------------------------------------------------------------------------------
R3 Shares, at Net Asset Value                       9.94%     8.25%      5.15%  
--------------------------------------------------------------------------------
R4 Shares, at Net Asset Value                       10.21%    8.81%      5.76%  
--------------------------------------------------------------------------------
R5 Shares, at Net Asset Value                       10.54%    8.92%      5.82%  
--------------------------------------------------------------------------------
A Shares, With Initial Sales Charge (4.75%)         5.08%     7.79%      5.27%  
--------------------------------------------------------------------------------
RETURNS AFTER TAXES (CLASS A SHARES ONLY)                                       
--------------------------------------------------------------------------------
A Shares' Return After Taxes on Distributions,      2.46%     4.73%      1.85%  
with Initial Sales Charge (4.75%)                                               
--------------------------------------------------------------------------------
A Shares' Return After Taxes on Distributions and   3.21%     4.78%      2.29%  
Sale of Class A Shares, with Initial Sales Charge                               
(4.75%)                                                                         
--------------------------------------------------------------------------------
BENCHMARK COMPARISONS (RETURNS BEFORE TAXES)                                    
--------------------------------------------------------------------------------
Lehman Brothers U.S. High Yield Corporate Bond      11.87%    10.19%     6.59%  
Index *+                                                                        
--------------------------------------------------------------------------------

* The Lehman Brothers U.S. High Yield Corporate Bond Index measures the         
universe of non-investment grade, fixed rate debt.  Eurobonds, and debt     
issues from countries designated as emerging markets (e.g., Argentina,      
Brazil, Venezuela, etc.) are excluded.                                      
+ Source: FactSet Research Systems Inc.                                         

All performance results reflect any applicable fee and expense waivers in       
effect during the periods shown; without these, the results would have been     
lower.                                                                          

After-tax returns are calculated using the historical highest individual        
federal marginal income tax rates, and do not reflect the impact of state and   
local taxes. Your actual after-tax returns will depend on your own tax          
situation, and may differ from those shown. The after-tax returns shown are not 
relevant to investors who hold their shares through tax-deferred arrangements,  
such as 401(k) plans or individual retirement accounts. The after-tax returns   
are shown for only one of the fund's classes of shares, and after-tax returns   
for the fund's other classes of shares will vary from the returns shown.        

The fund commenced investment operations February 17, 1978 with the offering of 
Class A shares, and subsequently offered Class B shares on September 27, 1993;  
Class C shares on January 3, 1994; Class I shares on January 2, 1997; Class     
529A, Class 529B and Class 529C shares on July 31, 2002; Class R shares on      
December 31, 2002; Class R3 shares on October 31, 2003; and Class R1, R2, R4    
and R5 shares on April 1, 2005.                                                 

Performance for Class I, Class R, Class R4, Class R5, and Class 529A shares     
includes the performance of the fund's Class A shares for periods prior to      
their offering. Performance for Class R1, Class R2, Class R3, and Class 529B    
shares includes the performance of the fund's Class B shares for periods prior  
to their offering. Performance for Class 529C shares includes the performance   
of the fund's Class C shares for periods prior to their offering. Blended class 
performance has been adjusted to take into account differences in sales loads,  
if any, applicable to these share classes, but has not been adjusted to take    
into account differences in class specific operating expenses (such as Rule     
12b-1 fees). Compared to performance these share classes would have experienced 
had they been offered for the entire period, the use of blended performance     
generally results in higher performance for share classes with higher operating 
expenses than those of the share class to which they are blended, and lower     
performance for share classes with lower operating expenses than those of the   
share class to which they are blended.                                          

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EXPENSE SUMMARY                                                                 

EXPENSE TABLE                                                                   

This table describes the fees and expenses that you may pay when you buy,       
redeem, and hold shares of the fund. The annual fund operating expenses are     
based on expenses incurred during the fund's most recently completed fiscal     
year adjusted to reflect annualized expenses and current fee arrangements . The 
fund's annual operating expenses may vary in future years.                      

Shareholder Fees (fees paid directly from your investment):                     
------------------------------------------------------------------------------  
              A AND       B AND    C AND
SHARE CLASS                       529A         529B     529C      I      ALL R  
------------------------------------------------------------------------------  
Maximum Sales Charge                                                            
(Load) Imposed on                                                               
Purchases (as a                                                                 
percentage of offering                                                          
price)...................         4.75%        N/A      N/A      N/A      N/A   
Maximum Deferred Sales                                                          
Charge (Load) (as a                                                             
percentage of original                                                          
purchase price or                                                               
redemption proceeds,                                                            
whichever is less).......      See Below(#)   4.00%    1.00%     N/A      N/A   

Annual Fund Operating Expenses (expenses that are deducted from fund assets):   
--------------------------------------------------------------------------------
SHARE CLASS                              A           B           C           I  
--------------------------------------------------------------------------------
Management Fee .....................   0.46%       0.46%       0.46%       0.46%
Distribution and Service (12b-1)                                                
 Fees(1) ..........................   0.30%       1.00%       1.00%        N/A
Other Expenses(2) ..................   0.24%       0.24%       0.24%       0.24%
                                       -----       -----       -----       -----
Total Annual Fund Operating                                                     
  Expenses(2) ......................   1.00%       1.70%       1.70%       0.70%

--------------------------------------------------------------------------------
SHARE CLASS                                529A           529B            529C  
--------------------------------------------------------------------------------
Management Fee .....................      0.46%           0.46%          0.46%  
Distribution and Service (12b-1)                                                
Fees(1) ..........................      0.35%           1.00%          1.00%
Other Expenses(2) ..................      0.49%           0.49%          0.49%  
                                        -----           -----          -----
Total Annual Fund Operating                                                     
Expenses(2) ......................      1.30%           1.95%          1.95%

--------------------------------------------------------------------------------
SHARE CLASS                                 R              R1              R2   
--------------------------------------------------------------------------------
Management Fee .....................      0.46%           0.46%          0.46%  
Distribution and Service (12b-1)                                                
Fees(1) ..........................      0.50%           0.75%          0.50%
Other Expenses(2) ..................      0.24%           0.59%          0.49%  
                                        -----           -----          -----
Total Annual Fund Operating                                                     
Expenses(2) ......................      1.20%           1.80%          1.45%

--------------------------------------------------------------------------------
SHARE CLASS                                 R3             R4              R5   
--------------------------------------------------------------------------------
Management Fee......................      0.46%           0.46%          0.46%  
Distribution and Service (12b-1)                                                
Fees(1) ..........................      0.50%           0.25%           N/A 
Other Expenses(2)...................      0.39%           0.39%          0.34%  
                                        -----           -----          -----
Total Annual Fund Operating                                                     
Expenses(2).........................      1.35%           1.10%          0.80%  

#   A contingent deferred sales charge (referred to as a CDSC) of 1% may be     
deducted from your redemption proceeds if you buy $1 million or more of 
 Class A shares or if you are investing through a retirement plan and your
  Class A purchase meets certain requirements and you redeem your investment
   within 12 months of your purchase. Class 529A shares are not subject to any
CDSC.                                                                   
(1) The fund's Rule 12b-1 plan permits it to pay distribution and/or service    
 fees to support the sale and distribution of the fund's Class A, Class B,
 Class C, Class 529A, Class 529B, Class 529C, Class R, Class R1, Class R2,
Class R3, and Class R4 shares and the services provided by financial    
intermediaries. The maximum rates that may be charged under the plan,   
together with details of any fee reduction arrangements, are set forth  
under "Distribution and Service Fees."                                  
(2) The fund has entered into an expense offset arrangement that reduces the    
 fund's custodian fee based upon the amount of cash maintained by the fund
   with its custodian and dividend disbursing agent. Such fee reduction is not
reflected in the table. Had this fee reduction been taken into account, 
 "Net Expenses" would be lower. For the 529 classes only, "Other Expenses"
include the program management fee described under "Management of the   
   Fund." In addition, qualified tuition program accounts for which MFD serves
as program manager are generally subject to a $25 annual account        
   maintenance fee. Other qualified tuition program accounts may be subject to
other account fees. Please see the program description and materials    
  available from your financial intermediary for details about these account
  fees. For the Class R share classes only, "Other Expenses" also include an
annual retirement plan administration and services fee paid by the fund 
 from assets attributable to the respective class to MFS for the provision
by MFS, either directly or through other affiliated and/or unaffiliated 
entities, of various administrative, recordkeeping and                  
 communication/educational services in an amount equal to: 0.35% for Class
R1, 0.25% for Class R2, 0.15% for Class R3, 0.15% for Class R4 and 0.10%
for Class R5 shares.                                                    

EXAMPLE OF EXPENSES                                                             

These examples are intended to help you compare the cost of investing in the    
fund with the cost of investing in other mutual funds.                          

The examples assume that:                                                       

o You invest $10,000 in the fund for the time periods indicated and you     
redeem your shares at the end of the time periods (unless otherwise     
indicated);                                                             

o Your investment has a 5% return each year and dividends and other         
distributions are reinvested; and                                       

o The fund's operating expenses remain the same.                            

Although your actual costs may be higher or lower, under these assumptions your 
costs would be:                                                                 

------------------------------------------------------------------------------- 
SHARE CLASS                                1 YEAR   3 YEARS   5 YEARS   10 YEARS
------------------------------------------------------------------------------- 
A shares                                    $572      $778    $1,001     $1,641 
------------------------------------------------------------------------------- 
B shares(1)                                                                     
------------------------------------------------------------------------------- 
 Assuming redemption at end of period      $573      $836    $1,123     $1,823
------------------------------------------------------------------------------- 
 Assuming no redemption                    $173      $536    $  923     $1,823
------------------------------------------------------------------------------- 
C shares                                                                        
------------------------------------------------------------------------------- 
 Assuming redemption at end of period      $273      $536    $  923     $2,009
------------------------------------------------------------------------------- 
 Assuming no redemption                    $173      $536    $  923     $2,009
------------------------------------------------------------------------------- 
I shares                                    $ 72      $224    $  390     $  871 
------------------------------------------------------------------------------- 
529A shares                                 $601      $868    $1,154     $1,968 
------------------------------------------------------------------------------- 
529B shares(1)                                                                  
------------------------------------------------------------------------------- 
 Assuming redemption at end of period      $598      $912    $1,252     $2,107
------------------------------------------------------------------------------- 
 Assuming no redemption                    $198      $612    $1,052     $2,107
------------------------------------------------------------------------------- 
529C shares                                                                     
------------------------------------------------------------------------------- 
 Assuming redemption at end of period      $298      $612    $1,052     $2,275
------------------------------------------------------------------------------- 
 Assuming no redemption                    $198      $612    $1,052     $2,275
------------------------------------------------------------------------------- 
R shares                                    $122      $381    $  660     $1,455 
------------------------------------------------------------------------------- 
R1 shares                                   $183      $566    $  975     $2,116 
------------------------------------------------------------------------------- 
R2 shares                                   $148      $459    $  792     $1,735 
------------------------------------------------------------------------------- 
R3 shares                                   $137      $428    $  739     $1,624 
------------------------------------------------------------------------------- 
R4 shares                                   $112      $350    $  606     $1,340 
------------------------------------------------------------------------------- 
R5 shares                                   $ 82      $255    $  444     $  990 
------------------------------------------------------------------------------- 

(1) Class B shares convert to class A shares and class 529B shares convert to   
class 529A shares, approximately eight years after purchase; therefore, 
 years nine and ten reflect class A and class 529A expenses, respectively.

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CERTAIN INVESTMENT POLICIES AND RISKS                                           

TURNOVER                                                                        

MFS may engage in active and frequent trading in pursuing the fund's principal  
investment strategies. Frequent trading can result in the realization of a      
higher percentage of short-term capital gains and a lower percentage of         
long-term capital gains as compared to a fund that trades less frequently.      
Because short-term capital gains are distributed as ordinary income, this would 
generally increase your tax liability unless you hold your shares through a     
tax-deferred or exempt vehicle. Frequent trading also increases transaction     
costs, which may reduce the fund's return.                                      

TEMPORARY DEFENSIVE POLICY                                                      

In response to market, economic, political, or other conditions, MFS may depart 
from the fund's principal investment strategies by temporarily investing for    
defensive purposes. When MFS invests defensively, different factors could       
affect the fund's performance and the fund may not achieve its investment       
objective. In addition, the defensive strategy may not work as intended.        

FURTHER INFORMATION ON INVESTMENT STRATEGIES AND RISKS                          

Information about investment strategies and investment types not described in   
the Prospectus and the risks associated with those investment strategies and    
investment types are described in the fund's Statement of Additional            
Information ("SAI").                                                            

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MANAGEMENT OF THE FUND                                                          

INVESTMENT ADVISER                                                              

Massachusetts Financial Services Company ("MFS"), located at 500 Boylston       
Street, Boston, Massachusetts, serves as the investment adviser for the fund.   
Subject to the supervision of the Board of Trustees, MFS is responsible for     
managing the fund's investments, executing transactions and providing related   
administrative services and facilities under an Investment Advisory Agreement   
between the fund and MFS.                                                       

For the fiscal year ended January 31, 2007, the fund paid MFS an effective      
management fee equal to 0.46% of the fund's average daily net assets.           

The management fee set forth in the Investment Advisory Agreement is 0.46%      
annually of the first $1.4 billion, and 0.44% annually in excess of $1.4        
billion, of the fund's average daily net assets.                                

MFS has agreed in writing to reduce its management fee to 0.39% in excess of    
$1.4 billion annually of the fund's average daily net assets. MFS has agreed in 
writing to maintain this management fee reduction until February 28, 2009, as   
part of its settlement with the New York Attorney General concerning market     
timing and related matters.                                                     

A discussion regarding the basis for the Board of Trustees' approval of the     
Investment Advisory Agreement is available in the fund's most recent            
semi-annual report for the six month period that ends July 31.                  

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, Massachusetts Investors Trust. Net assets    
under the management of the MFS organization were approximately $187 billion as 
of December 31, 2006.                                                           

Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,      
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various    
MFS funds, certain current and/or former Trustees of the MFS funds, and certain 
officers of MFS have been named as defendants in multiple lawsuits filed in     
federal and state courts. The various lawsuits generally allege that some or    
all of the defendants (i) permitted or acquiesced in market timing and/or late  
trading in some of the MFS funds, and inadequately disclosed MFS' internal      
policies concerning market timing and such matters, (ii) received excessive     
compensation as fiduciaries with respect to the MFS funds, or (iii) permitted   
or acquiesced in the improper use of fund assets by MFS to support the          
distribution of MFS fund shares and inadequately disclosed MFS' use of fund     
assets in this manner. The lawsuits assert that some or all of the defendants   
violated the federal securities laws, including the Securities Act of 1933 and  
the Securities Exchange Act of 1934, the Investment Company Act of 1940, and    
the Investment Advisers Act of 1940, the Employee Retirement Income Security    
Act of 1974 (ERISA), as well as fiduciary duties and other violations of common 
law. The lawsuits variously have been commenced as class actions or individual  
actions on behalf of investors who purchased, held, or redeemed shares of the   
MFS funds during specified periods, as ERISA actions by participants in certain 
retirement plan accounts on behalf of those accounts, or as derivative actions  
on behalf of the MFS funds.                                                     

The lawsuits relating to market timing and related matters have been            
transferred to, and consolidated before, the United States District Court for   
the District of Maryland, as part of a multi-district litigation of market      
timing and related claims involving several other fund complexes (In re Mutual  
Funds Investment Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam,    
Allianz Dresdner), No. 1:04-md-15863 (transfer began March 19, 2004)). The      
market timing cases related to the MFS funds include Riggs v. MFS et al., Case  
No. 04-CV-01162-JFM (direct), Hammerslough v. MFS et al., Case No. 04-MD-01620  
(derivative), Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA), and   
Reaves v. MFS Series Trust I, et al., Case No. 1:05-CV-02220-JFM (Class B       
Shares). The plaintiffs in these consolidated lawsuits generally seek           
injunctive relief including removal of the named Trustees, adviser and          
distributor, rescission of contracts and 12b-1 Plans, disgorgement of fees and  
profits, monetary damages, punitive damages, attorney's fees and costs and      
other equitable and declaratory relief. Two lawsuits alleging improper          
brokerage allocation practices and excessive compensation are pending in the    
United States District Court for the District of Massachusetts (Forsythe v. Sun 
Life Financial Inc., et al., No. 04cv10584 (GAO) (a consolidated action, first  
filed on March 25, 2004) and Marcus Dumond, et al. v. Massachusetts Financial   
Servs. Co., et al., No. 04cv11458 (GAO) (filed on May 4, 2004)). The plaintiffs 
in these lawsuits generally seek compensatory damages, punitive damages,        
recovery of fees, rescission of contracts, an accounting, restitution,          
declaratory relief, equitable and/or injunctive relief and attorney's fees and  
costs. Insofar as any of the actions is appropriately brought derivatively on   
behalf of any of the MFS funds, any recovery will inure to the benefit of the   
MFS funds. Several claims of the various lawsuits have been dismissed; MFS and  
the other named defendants continue to defend the various lawsuits.             

DISCLOSURE OF PORTFOLIO HOLDINGS. The MFS funds have established a policy with  
respect to the disclosure of fund portfolio holdings. A description of this     
policy is provided in the SAI. In addition, by clicking on a fund name under    
"Select a fund" on the MFS Web site (MFS.COM), the following information is     
generally available to you:                                                     

-------------------------------------------------------------------   
                                     APPROXIMATE DATE OF POSTING
INFORMATION                             TO WEB SITE                   
-------------------------------------------------------------------   
Fund's full securities holdings as                                    
of each month's end                     24 days after month end       
-------------------------------------------------------------------   
Fund's top 10 securities holdings                                     
as of each month's end                  14 days after month end       
-------------------------------------------------------------------   

If a fund has substantial investments in both equity and debt instruments, the  
fund's top 10 equity holdings and top 10 debt holdings will be made available.  
In addition, for funds that primarily invest in shares of the other MFS funds,  
all securities holdings in shares of MFS funds, the top 10 aggregated equity    
holdings within the underlying MFS funds, and the top 10 aggregated debt        
holdings within the underlying MFS funds will be made available.                

Note that the funds or MFS may suspend the posting of this information or       
modify the elements of this web posting policy without notice to shareholders.  
Once posted, the above information will remain available on the Web site until  
at least the date on which the fund files a Form N-CSR or Form N-Q for the      
period that includes the date as of which the Web site information is current.  

PORTFOLIO MANAGER(S)                                                            

Information regarding the portfolio manager(s) of the fund is set forth below.  
Further information regarding the portfolio manager(s), including other         
accounts managed, compensation, ownership of fund shares, and possible          
conflicts of interest, is available in the fund's SAI. Each portfolio manager   
is primarily responsible for the day-to-day management of the fund.             

--------------------------------------------------------------------------------
PORTFOLIO MANAGER    PRIMARY ROLE   SINCE      TITLE AND FIVE YEAR HISTORY      
--------------------------------------------------------------------------------
                                             Vice President of MFS; employed
                     Portfolio                 in the investment management area
John Addeo           Manager           2000    of MFS since 1998.               
--------------------------------------------------------------------------------
                                             Vice President of MFS; employed
                                               in the investment management area
                                           of MFS since 2004; High Yield
                 Portfolio                 Analyst at Franklin Templeton
David P. Cole        Manager           2006    Investments from 1999 to 2004.   
--------------------------------------------------------------------------------

ADMINISTRATOR                                                                   

MFS provides the fund with certain financial, legal, and other administrative   
services under a Master Administrative Services Agreement between the fund and  
MFS. Under the Agreement, MFS is paid an annual fee for providing these         
services.                                                                       

In addition, MFS provides, either directly or through affiliated and/or         
unaffiliated entities, certain administrative, recordkeeping, and               
communication/educational services to the retirement plans and retirement plan  
participants which invest in Class R1, Class R2, Class R3, Class R4 and Class   
R5 shares under a Master Class R Administration and Services Agreement. Under   
the Agreement, the fund pays an annual fee to MFS for these services at the     
following percentages of the average daily net assets attributable to that      
class of shares: 0.35% for Class R1; 0.25% for Class R2; 0.15% for Class R3;    
0.15% for Class R4; and 0.10% for Class R5 shares.                              

DISTRIBUTOR                                                                     

MFS Fund Distributors, Inc. (referred to as MFD), a wholly owned subsidiary of  
MFS, is the distributor of shares of the fund.                                  

SHAREHOLDER SERVICING AGENT                                                     

MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS, provides   
transfer agent and recordkeeping functions in connection with the issuance,     
transfer, and redemption of each class of shares of the fund under a            
Shareholder Servicing Agent Agreement. Under the Agreement, MFSC may receive a  
fee based on the costs it incurs in providing these services, including         
payments made to affiliated and unaffiliated service providers that provide     
certain accounting, network, subtransfer agent and other shareholder services   
(shareholder servicing payments) and out-of-pocket expenses, plus a target      
profit margin.                                                                  

PROGRAM MANAGER(S)                                                              

MFD serves as program manager for a qualified tuition program under Section 529 
of the Internal Revenue Code through which 529 share classes of the fund are    
included as investment options to program participants. The fund's 529 share    
classes may also be offered through qualified tuition programs for which MFD    
does not serve as program manager. MFD provides, either directly or through     
third parties, recordkeeping, tax reporting, and account services, as well as   
services designed to maintain the programs' compliance with the Internal        
Revenue Code (the "Code") and other regulatory requirements under a Master 529  
Administrative Services Agreement.                                              

Under the Agreement, the fund pays MFD an annual fee for these services of up   
to 0.35% of the average daily net assets attributable to each 529 share class.  
The current annual fee has been established at 0.25% of the average daily net   
assets attributable to each 529 share class up to $10 billion in assets, 0.225% 
from $10 billion in assets up to $20 billion in assets, and 0.20% from $20      
billion in assets and above. The fee may only be increased with the approval of 
the fund's Board of Trustees. MFD may pay a portion of this fee to third        
parties who provide these services.                                             

Please consult the program description for your particular qualified tuition    
program for a discussion of the fees paid to and services received from the     
program manager.                                                                

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DESCRIPTION OF SHARE CLASSES                                                    

The fund offers Class A, Class B, Class C, Class I, Class 529A, Class 529B,     
Class 529C, Class R, Class R1, Class R2, Class R3, Class R4, and Class R5       
shares through this prospectus.                                                 

Class I shares generally are available only to the following eligible           
investors:                                                                      

o certain retirement plans established for the benefit of employees and     
former employees of MFS or its affiliates;                              

o funds distributed by MFD that invest primarily in shares of MFS funds;    

o retirement plans, endowments or foundations that: (i) have, at the time of
  purchase of Class I shares, aggregate assets of at least $100 million; and
(ii) invest at least $10 million in Class I shares of the fund and other
MFS funds;                                                              

o bank trust departments or law firms acting as trustee or manager for trust
accounts which, on behalf of their clients (i) initially invest at least
$100,000 in Class I shares of the fund, or (ii) have, at the time of    
purchase of Class I shares, aggregate assets of at least $10 million    
invested in Class I shares of the fund and other MFS funds; and         

o certain retirement plans offered, administered, or sponsored by insurance 
companies, as permitted by MFD based on their overall relationship with 
MFS.                                                                    

In addition, MFD may accept, in its sole discretion, investments in Class I     
shares from purchasers not listed above or that do not meet these qualification 
requirements.                                                                   

Class 529A, Class 529B and Class 529C shares are generally only available to    
qualified tuition programs (tuition programs) established in accordance with    
Section 529 of the Code.                                                        

Class R shares are available for purchase only by retirement plans that held    
Class R shares of a fund on March 31, 2005, and by retirement plans (other than 
plans for which MFS or an affiliate provides participant recordkeeping, and     
plans for which MFS Heritage Trust Company serves as a trustee) that are held   
by MFSC at the plan or omnibus level.                                           

Class R1, Class R2, Class R3, Class R4 and Class R5 shares generally are        
available only to 401(k) plans, 457 plans, employer-sponsored 403(b) plans,     
profit sharing and money purchase pension plans, defined benefit plans and      
non-qualified deferred compensation plans (eligible retirement plans). Class    
R1, Class R2, Class R3, Class R4 and Class R5 shares generally are available to 
retirement plans only if either MFS or one of its affiliates is responsible for 
providing participant recordkeeping services (Serviced Plan) or MFS or one of   
its affiliates has entered into an administrative arrangement with a third      
party to provide certain recordkeeping and/or administrative services (Alliance 
Plan). Class R1, Class R2, Class R3, Class R4 and Class R5 shares are not       
generally available to retail non-retirement accounts, traditional and Roth     
IRAs, Coverdell Educational Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs,      
individual 403(b) plans, and 529 tuition plans.                                 

A Serviced Plan will be limited as to which class of shares it will be eligible 
to purchase under the terms of the service agreement between MFS or an          
affiliate and the sponsor of the retirement plan. Currently only Class R1,      
Class R2, Class R3, Class R4, Class R5, and Class I shares are offered to       
Serviced Plans; provided that Serviced Plans that held certain other classes of 
shares of a fund on June 30, 2005 (March 31, 2005, with respect to Class R      
shares), may purchase additional shares of the same class of the fund and may   
exchange their shares for shares of the same class of any other fund.           

SALES CHARGES AND WAIVERS OR REDUCTIONS                                         

You may be subject to an initial sales charge when you purchase Class A or      
Class 529A shares, or a CDSC when you redeem Class A, Class B, Class C, Class   
529B or Class 529C shares. These sales charges are paid to MFD.                 

In the circumstances described below, you may qualify for a sales charge waiver 
or reduction for purchases or redemptions of Class A, Class B, Class C, Class   
529A, Class 529B, and Class 529C shares. In addition, other sales charge        
waivers or reductions may apply to certain transactions by retirement plans,    
section 529 tuition programs, and certain other groups (e.g., affiliated        
persons of MFS) and with respect to certain types of investment programs (e.g., 
certain wrap accounts or fund supermarket investments). Details regarding the   
types of investment programs and categories of investors eligible for these     
waivers or reductions are provided in the SAI, which is available to you free   
of charge, and on the fund's Web site at MFS.COM. Some of these programs and    
waivers or reductions may not be available to you if your shares are held       
through certain types of accounts, such as retirement accounts and 529s plans,  
or certain accounts that you may have with your financial intermediary. Waivers 
or reductions may be eliminated, modified, and added at any time without        
providing advance notice.                                                       

CLASS A AND CLASS 529A SHARES. You may purchase Class A and Class 529A shares   
at the offering price (which includes the applicable initial sales charge). In  
some cases, you may purchase Class A and Class 529A shares without an initial   
sales charge; in these cases, for Class A shares only, you will generally be    
subject to a 1% CDSC upon redemption within 12 months of your purchase.         

The amount of the initial sales charge you pay when you buy Class A or Class    
529A shares differs depending upon the amount you invest, as follows:           

--------------------------------------------------------------------------------
                                 INITIAL SALES CHARGE* AS PERCENTAGE OF:
                                 ---------------------------------------
       GROSS PURCHASE AMOUNT
AMOUNT OF PURCHASE                 (OFFERING PRICE*)         NET AMOUNT INVESTED
--------------------------------------------------------------------------------
Less than $50,000                        4.75%                      4.99%       
--------------------------------------------------------------------------------
$50,000 but less than $100,000           4.25%                      4.44%       
--------------------------------------------------------------------------------
$100,000 but less than $250,000          3.75%                      3.90%       
--------------------------------------------------------------------------------
$250,000 but less than $500,000          2.75%                      2.83%       
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000        2.00%                      2.04%       
--------------------------------------------------------------------------------
$1,000,000 or more                       None**                    None**       
--------------------------------------------------------------------------------

* Offering price is calculated by dividing the net asset value of a share by  
the difference between 1 and the initial sales charge percentage. Because 
the offering price is rounded to two decimal places, actual sales charges 
you pay may be more or less than those calculated using these percentages.
** For Class A shares only, a 1% CDSC will generally apply to such purchases.   

You pay no initial sales charge when you invest $1 million or more in Class A   
and Class 529A shares (or, with respect to certain retirement plans, if MFD     
determines in its sole discretion that the total purchases by the retirement    
plan (or by multiple plans maintained by the same plan sponsor) will equal or   
exceed within a reasonable period of time a specified threshold determined by   
MFD). However, for Class A shares, a CDSC of 1% will generally be deducted from 
your redemption proceeds if you redeem within 12 months of your purchase.       

CLASS B AND CLASS 529B SHARES. You may purchase Class B and Class 529B shares   
at net asset value without an initial sales charge, but if you redeem your      
shares within the first six years after purchase, you may be subject to a CDSC  
(declining from 4% during the first year to 0% after six years).                

The CDSC is imposed according to the following schedule:                        

---------------------------------------------------------------------------     
YEAR OF REDEMPTION AFTER PURCHASE        1st  2nd   3rd  4th  5th  6th  7th     
---------------------------------------------------------------------------     
CONTINGENT DEFERRED SALES CHARGE         4%    4%   3%   3%   2%   1%   0%      
---------------------------------------------------------------------------     

If you hold Class B or Class 529B shares for approximately eight years, they    
will convert to Class A or Class 529A shares of the fund, respectively. All     
Class B or Class 529B shares you acquire through the reinvestment of dividends  
and distributions will be held in a separate sub-account. Each time any Class B 
or Class 529B shares in your account convert to Class A or Class 529A shares, a 
proportionate number of the Class B or Class 529B shares in the sub-account     
will also convert to Class A or Class 529A shares, respectively.                

CLASS C AND CLASS 529C SHARES. You may purchase Class C or Class 529C shares at 
net asset value without an initial sales charge. However, a CDSC of 1% will     
generally be deducted from your redemption proceeds if you redeem within 12     
months of your purchase.                                                        

CLASS I SHARES. Eligible investors may purchase Class I shares at net asset     
value without an initial sales charge or a CDSC upon redemption.                

CLASS R, CLASS R1, CLASS R2, CLASS R3, CLASS R4, AND CLASS R5 SHARES. Eligible  
retirement plans may purchase Class R, Class R1, Class R2, Class R3, Class R4,  
and Class R5 shares at net asset value without an initial sales charge or a     
CDSC upon redemption.                                                           

SALES CHARGE WAIVERS OR REDUCTIONS. Below is a summary of certain investor      
programs whereby the applicable sales charge may be waived or reduced. You or   
your financial intermediary must inform MFSC upon purchasing fund shares of     
your intention to invest in a fund under one of the programs below. You can     
provide this information in your account application or through a separate      
document provided by your financial intermediary.                               

------------------------------------------------------------------------------- 
                                   INVESTMENTS ELIGIBLE FOR:
                                   -------------------------
                              WAIVED INITIAL   REDUCED INITIAL        WAIVED
PROGRAM                          SALES CHARGE      SALES CHARGE          CDSC   
------------------------------------------------------------------------------- 
Letter of Intent                                        X                       
------------------------------------------------------------------------------- 
Right of Accumulation                                   X                       
------------------------------------------------------------------------------- 
Automatic Exchange Plan               X*                                        
------------------------------------------------------------------------------- 
Exchange Privilege                    X*                                        
------------------------------------------------------------------------------- 
Systematic Withdrawal Plan                                               X**    
------------------------------------------------------------------------------- 
Distribution Reinvestment              X                                        
------------------------------------------------------------------------------- 
Distribution Investment Program        X                                        
------------------------------------------------------------------------------- 
Other Sales Charge Waivers             X                                  X     
------------------------------------------------------------------------------- 

* Investments under the Automatic Exchange Plan or certain other exchanges    
under the Exchange Privilege may be subject to a sales charge in certain  
cases.                                                                    
** Not available for Class A shares and limited for Class B, Class C, Class     
529B, and Class 529C shares.                                              

 o LETTER OF INTENT (LOI). You may pay a reduced or no initial sales charge on
purchases of Class A or Class 529A shares if you intend to invest a     
specific dollar amount, based on the gross amount of your investment    
(including the amount of any sales charge paid), including investments  
   through any linked accounts in any class of any MFS fund (and the MFS Fixed
Fund, a bank collective investment trust) within a 13-month period (36  
   months for a $1 million commitment). Distributions reinvested in additional
shares of the fund or distributions from other MFS funds automatically  
invested in shares of the fund will not apply toward the satisfaction of
the LOI.                                                                

For each purchase you make under the LOI you will pay the initial sales 
charge rate applicable to the total amount you intended to purchase. If,
 however, you do not purchase the intended amount within the relevant time
   period, your account will be adjusted by redemption of the amount of shares
   needed to pay the higher initial sales charge level for the amount actually
purchased.                                                              

 To establish a LOI, you may complete the Letter of Intent section of your
account application or service application. In order to benefit from the
   LOI, you or your financial intermediary must inform MFSC that the LOI is in
effect each time shares of a fund are purchased.                        

o RIGHT OF ACCUMULATION (ROA). Under the ROA, you may pay a reduced or no   
initial sales charge on purchases of Class A or Class 529A shares by    
 aggregating the total dollar amount of your investment with your existing
investments or any linked accounts in any class of any MFS fund (and the
  MFS Fixed Fund), based on the current maximum public offering price of the
   funds. For example, you will pay a sales charge on your current purchase at
the rate applicable to the total value of all eligible accounts based on
the sales charge schedule above.                                        

o LINKING ACCOUNTS FOR LOI AND ROA. For purposes of obtaining reduced sales 
charges under the LOI and ROA, you may combine the value of your current
  purchase of shares of an MFS fund with the value of existing accounts held
with the MFS funds (or the MFS Fixed Fund) by you, your spouse (or legal
  equivalent under applicable state law), and your children under the age of
21.                                                                     

Eligible accounts that you may link under a LOI and ROA may include:    

o Individual accounts;                                                  

o Joint accounts;                                                       

o Trust accounts of which you, your spouse (or legal equivalent under   
applicable state law), or child under the age of 21 is the grantor; 

o MFS 529 College Savings Plan accounts;                                

o Certain single-participant retirement plan accounts;                  

o Certain Individual Retirement Accounts;                               

o Uniform Gifts/Transfers to Minor Acts accounts; and                   

  o Accounts held in the name of your financial intermediary on your behalf,
except accounts investing in Class W shares of certain MFS funds.   

   In order to link such accounts under a LOI or ROA, the broker/dealer at the
  time of your current purchase must be the broker/dealer for any additional
 accounts to be linked. MFS fund shares held as follows cannot be combined
with your current purchase for purposes of a LOI or ROA:                

o Shares held indirectly through financial intermediaries other than the
     broker/dealer for your current purchase (or the clearing broker/dealer of
   your broker/dealer so long as the clearing broker/dealer has a separate
account with MFSC for your account) (for example, shares held in a  
    different broker/dealer's brokerage account or with a bank, an insurance
company separate account or an investment adviser); or              

  o Shares held directly in a MFS fund account on which the broker/dealer is
different than the broker/dealer for your current purchase.         

It is your responsibility to inform the broker/dealer for each current  
purchase of any accounts held with the MFS funds that you believe are   
eligible to be linked under a LOI or a ROA. If you have not designated a
broker/dealer, you should inform MFSC directly of any accounts held with
 the MFS funds that you believe are eligible to be linked under a LOI or a
  ROA. You should provide your financial intermediary (including MFSC if you
   have not designated a broker/dealer) with certain supporting information at
 the time of each purchase regarding accounts held with the MFS funds that
  are eligible to be combined for purposes of a LOI or ROA. Such information
may include shareholder identification numbers or applicable account    
numbers or account statements. You should request that your financial   
intermediary provide this information to the funds or their agents when 
placing each purchase order.                                            

  SPECIAL NOTE FOR LOI OR ROA ELIGIBLE ACCOUNTS LINKED PRIOR TO MAY 1, 2006.
 Any LOI or ROA eligible accounts linked prior to May 1, 2006, will remain
   linked to the extent the broker/dealer information for such accounts is not
 modified. In the event you change the broker/dealer for any such account,
 your accounts will no longer be eligible to be linked under a LOI or ROA.
   In addition, you will not be able to link additional accounts to the extent
they do not meet the criteria discussed above.                          

  o AUTOMATIC EXCHANGE PLAN (not available for R share classes). If you have
     an account balance of at least $2,000 in the fund, you may participate in
   the automatic exchange plan, a dollar-cost averaging program. This plan
     permits you to make automatic periodic exchanges from your account in the
fund for shares of the same class of other MFS funds. Exchanges will
  generally be made at net asset value without any sales charges. If you
    exchange shares out of the MFS Money Market Fund or MFS Government Money
   Market Fund, or if you exchange Class A or Class 529A shares out of the
    MFS Cash Reserve Fund into Class A or Class 529A shares of any other MFS
   fund, you will pay an initial sales charge if you have not already paid
this charge on these shares.                                        

o SYSTEMATIC WITHDRAWAL PLAN. If you have an account balance of at least
$5,000 in your account in the fund, you may elect to receive (or    
     designate someone else to receive) regular periodic payments (of at least
 $50 if by check) through an automatic redemption of Class A, Class B,
    Class C, Class I, Class 529A, Class 529B, Class 529C, Class R, Class R1,
    Class R2, Class R3, Class R4, and Class R5 shares. For Class B, Class C,
 Class 529B, and Class 529C shares, you may incur a CDSC when Class B,
     Class C, Class 529B, or Class 529C shares are redeemed under the plan (or
   plans if more than one plan is established) if amounts greater than 10%
   of the value of your account are withdrawn under the plan(s) in any one
 year (with respect to Class B or Class 529B shares, determined at the
time of your first withdrawal under the plan(s) or January 1, 2007, 
whichever is later and reset annually thereafter and with respect to
Class C or Class 529C shares, determined at the time the plan is    
established). For Class A shares, you may incur a CDSC when Class A 
shares are redeemed under this plan.                                

o DISTRIBUTION REINVESTMENT. You may automatically reinvest dividend and
 capital gain distributions in the same fund without paying an initial
sales charge.                                                       

  o DISTRIBUTION INVESTMENT PROGRAM. You may automatically reinvest dividend
  and capital gain distributions into the same class of another MFS fund
without paying a CDSC or an initial sales charge.                   

CALCULATION OF CDSC. As discussed above, certain investments in Class A, Class  
B, Class C, Class 529B, and Class 529C shares are subject to a CDSC. For        
purposes of calculating the CDSC, purchases made on any day during a calendar   
month will age one month on the last day of that month, and on the last day of  
each subsequent month. For example, a 1% CDSC on Class A shares purchased on    
August 10 will expire at the close of business on July 31 of the following      
calendar year, and a redemption of those shares made on or after August 1 of    
the following calendar year will not be subject to the CDSC.                    

Shares acquired through reinvestment of distributions are not subject to a      
CDSC. The CDSC is based on the original purchase cost or the current market     
value of the shares being sold, whichever is less. For purposes of determining  
the CDSC, if you sell only some of your shares, shares not subject to a CDSC    
are sold first, followed by shares held the longest.                            

DISTRIBUTION AND SERVICE FEES                                                   

The fund has adopted a plan in accordance with Rule 12b-1 under the Investment  
Company Act of 1940, as amended (the "Distribution Plan"). Under the            
Distribution Plan, the fund pays distribution and service fees to MFD to        
support the sale and distribution of Class A, Class B, Class C, Class 529A,     
Class 529B, Class 529C, Class R, Class R1, Class R2, Class R3, and Class R4     
shares, as well as shareholder servicing and account maintenance activities.    
The fund has not adopted a Rule 12b-1 plan with respect to its Class I or Class 
R5 shares. These distribution and service fees equal on an annual basis up to   
the following maximum percentages of average daily net assets of the class:     

--------------------------------------------------------------------------------
                                                                 MAXIMUM TOTAL
                       MAXIMUM                                  DISTRIBUTION AND
CLASS             DISTRIBUTION FEE      MAXIMUM SERVICE FEE        SERVICE FEE  
--------------------------------------------------------------------------------
Class A                 0.10%                  0.25%                  0.35%     
--------------------------------------------------------------------------------
Class B                 0.75%                  0.25%                  1.00%     
--------------------------------------------------------------------------------
Class C                 0.75%                  0.25%                  1.00%     
--------------------------------------------------------------------------------
Class 529A              0.25%                  0.25%                  0.50%     
--------------------------------------------------------------------------------
Class 529B              0.75%                  0.25%                  1.00%     
--------------------------------------------------------------------------------
Class 529C              0.75%                  0.25%                  1.00%     
--------------------------------------------------------------------------------
Class R                 0.25%                  0.25%                  0.50%     
--------------------------------------------------------------------------------
Class R1                0.50%                  0.25%                  0.75%     
--------------------------------------------------------------------------------
Class R2                0.25%                  0.25%                  0.50%     
--------------------------------------------------------------------------------
Class R3                0.25%                  0.25%                  0.50%     
--------------------------------------------------------------------------------
Class R4                 N/A                   0.25%                  0.25%     
--------------------------------------------------------------------------------

These fees are paid out of fund assets of the applicable class of shares.       
Because these fees are an ongoing expense of the fund, they increase the cost   
of your investment over time and may cost you more than other types of sales    
charges.                                                                        

Assets attributable to Class A shares sold prior to March 1, 1991 are subject   
to a service fee of 0.15% annually. However, to the extent the Class A service  
fees paid under the distribution plan do not exceed 0.25% annually, the fund    
may pay the remaining amount of service fees available under the plan for       
distribution-related expenses.                                                  

A portion of the Class A distribution fee equal to 0.05% is currently in        
effect; the remaining portion is currently not in effect but may be implemented 
on such date as the Board of Trustees may determine. A portion of the Class     
529A distribution fee equal to 0.10% is currently in effect; the remaining      
portion is currently not in effect but may be implemented on such date as the   
Board of Trustees may determine.                                                

FINANCIAL INTERMEDIARY COMPENSATION                                             

The term "financial intermediary" includes any broker/dealer, bank (including   
bank trust departments), registered investment adviser, financial planner,      
retirement plan administrator, third-party administrator, insurance company,    
and any other institutions having a selling, administration, or any similar     
agreement with MFD, MFS, or one of its affiliates.                              

Financial intermediaries receive various forms of compensation in connection    
with the sale of shares of a fund and/or the servicing of shareholder accounts. 
Financial intermediaries may receive such compensation (i) in the form of up    
front commissions and ongoing asset-based compensation paid by MFD based on     
sales charges received and expected to be received by MFD from shareholders and 
Distribution Plan distribution and service payments received by MFD from the    
fund, (ii) in the form of 529 administrative services payments, retirement plan 
administrative and service payments, and shareholder servicing payments paid by 
MFD and/or one or more of its affiliates (for purposes of this section only,    
collectively, "MFD") based on the receipt of such payments by MFD from the      
fund, and (iii) in the form of payments paid by MFD from MFD's own additional   
resources.                                                                      

The types of payments described above are not exclusive. Accordingly, financial 
intermediaries may receive payments under all or any combination of the         
above-referenced categories and such payments can be significant to the         
financial intermediary. In addition, the compensation that financial            
intermediaries receive may vary by class of shares sold and among financial     
intermediaries. Depending upon the arrangements in place at any particular      
time, financial intermediaries may have a financial incentive to recommend a    
particular fund or share class.                                                 

Financial intermediaries may receive up front commissions of up to the          
following percentage amounts for sales of the following share classes:          

------------------------------------------------------------------------------- 
                                          UP FRONT COMMISSION AS A
        SHARE CLASS                       PERCENTAGE OF OFFERING PRICE
------------------------------------------------------------------------------- 
Class A or Class 529A                             4.75%         
------------------------------------------------------------------------------- 
Class B or Class 529B                             3.75%         
------------------------------------------------------------------------------- 
Class C or Class 529C                             1.00%         
------------------------------------------------------------------------------- 

Financial intermediaries may also receive all or a portion of the following     
payments: Distribution Plan distribution and service fees as described in       
"Description of Share Classes - Distribution and Service Fees"; 529             
administrative services fees as described in "Management of the Fund - Program  
Manager"; retirement plan administration and service fees as described in       
"Management of the Fund - Administrator"; and shareholder servicing payments as 
described in "Management of the Fund - Shareholder Servicing Agent."            

In addition, financial intermediaries may receive payments from MFD from MFD's  
own additional resources as incentives to market the MFS funds, to cooperate    
with MFD's promotional efforts and/or in recognition of their marketing,        
administrative services, and/or processing support. This compensation from MFD  
is not reflected in the fees and expenses listed in the fee table section of    
the fund's prospectus. MFD compensates financial intermediaries based on        
criteria established by MFD from time to time that consider, among other        
factors, the level and/or type of marketing and administrative support provided 
by the financial intermediary, the level of assets attributable to and/or sales 
by the financial intermediary and the quality of the overall relationship with  
the financial intermediary.                                                     

These additional payments by MFD may take the form of payments to financial     
intermediaries that provide marketing support and administrative services to    
MFD with respect to fund shares sold or held through the financial              
intermediary's retail distribution network and/or through programs such as      
retirement programs, qualified tuition programs, fund supermarkets, fee-based   
advisory or wrap fee programs, bank trust programs, and insurance (e.g.,        
individual or group annuity) programs. MFD may also make payments to financial  
intermediaries to help offset the cost associated with client account           
maintenance support, statement preparation, and transaction processing. To the  
extent permitted by SEC and NASD rules and other applicable laws and            
regulations, MFD may make other payments or allow other promotional incentives  
or payments to financial intermediaries.                                        

You can find further details in the SAI about the payments made by MFD and the  
services provided by financial intermediaries. Financial intermediaries may     
charge you additional fees and/or commissions other than those disclosed in     
this prospectus. You can ask your financial intermediary for information about  
any payments it receives from MFD and any services it provides, as well as      
about fees and/or commissions it charges. Financial intermediaries that sell    
fund shares may also act as a broker/dealer in connection with a MFS fund's     
purchase or sale of portfolio securities. However, the fund and MFS do not      
consider financial intermediaries' sales of shares of a MFS fund as a factor    
when choosing broker/dealers to effect portfolio transactions for the MFS       
funds.                                                                          

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HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES                                     

You may purchase, redeem, and exchange shares of the fund in the manner         
described below. If you buy or sell shares of a fund through a retirement       
account, 529 plan, or financial intermediary, the procedures for buying,        
selling, and exchanging shares of the fund and the features, policies and fees  
may differ from those discussed in this prospectus.                             

HOW TO PURCHASE SHARES                                                          

Your shares will be bought at the offering price (the net asset value per share 
plus any applicable initial sales charge) next calculated after your purchase   
order is received in proper form. MFSC reserves the right to reject any         
purchase order that is not in proper form. The specific requirements for proper 
form vary among account types and transactions. Certain restrictions apply to   
the use of a transfer on death registration. You or your financial intermediary 
should contact MFSC to obtain a Transfer on Death registration form and for     
information regarding MFSC's other requirements for transfer on death           
registrations.                                                                  

The fund may reject for any reason, or cancel as permitted or required by law,  
any purchase orders, including exchanges. The fund may stop offering shares     
completely, or may offer shares only on a limited basis, for a period of time   
or permanently.                                                                 

The fund is required by law to obtain from you certain personal information     
that will be used to verify your identify. If you do not provide the            
information, the fund may not be able to open your account. The fund must also  
take certain steps to verify that the account information you provide is        
correct.                                                                        

CLASS A, CLASS B, AND CLASS C SHARES. With respect to Class A, Class B, and     
Class C shares, you can establish an account by having your financial           
intermediary process your purchase. The minimum initial investment is generally 
$1,000, except for: fee-based and wrap accounts offered through certain         
financial intermediaries, for which there is no minimum initial investment; and 
IRAs, for which the minimum initial investment is generally $250 ($200 for      
rollovers from certain Serviced Plans). In addition, the minimum initial        
investment is $50 for automatic investment or exchange plans. MFSC waives or    
lowers the initial investment minimum for certain types of investors and        
investments.                                                                    

Purchases of Class B shares are subject to a total account value limitation at  
the time of purchase of $99,999, and purchases of Class C shares are subject to 
a total account value limitation at the time of purchase of $999,999. If your   
existing accounts for all share classes held with the MFS funds have a total    
value equal to $99,999 for Class B share purchases or $999,999 for Class C      
share purchases, you will not be able to purchase Class B or Class C shares, as 
applicable. For the purpose of determining your total account value, existing   
accounts for all share classes held with the MFS funds that are linked under a  
LOI or ROA will be included.                                                    

The fund or its agents may at their discretion accept a purchase request for    
Class B shares or Class C shares that would otherwise exceed the total account  
value limitation of $99,999 and $999,999, respectively, under certain           
circumstances, including, but not limited to, purchases by certain types of     
group retirement plans sponsored or serviced by MFS or an affiliate.            

You may have your financial intermediary process your subsequent purchases or   
you may contact MFS directly. Generally, there is no minimum for subsequent     
investments except there is generally a $50 minimum for subsequent investments  
by check and through automatic exchange plans.                                  

o ADDITIONAL PURCHASES DIRECTLY THROUGH MFSC.                               

 o BY MAIL. You may purchase additional shares by mailing a check with the
returnable portion of your statement to MFSC.                       

   o BY TELEPHONE. You may purchase additional shares by transferring money by
phone from your pre-designated bank account. You must elect this    
privilege on your account application or service application.       

  o ELECTRONICALLY. You may purchase additional shares from a pre-designated
 bank account via the Internet at mfs.com (MFS Access). You must elect
 this privilege on your account application or service application and
 establish a personal identification number (PIN) on MFS Access to use
this service.                                                       

o BY WIRE. To purchase additional shares by wire, call MFSC for         
instructions.                                                       

o AUTOMATIC INVESTMENT PLAN. You may purchase additional shares by      
     automatically investing a designated amount from your checking or savings
  account on any day of the month. You must elect this privilege on your
account application or service application.                         

 o ADDITIONAL PURCHASES THROUGH YOUR FINANCIAL INTERMEDIARY. You can have your
financial intermediary purchase shares on your behalf. Your financial   
  intermediary will be responsible for furnishing all necessary documents to
MFSC and may charge you for this service.                               

CLASS I SHARES. With respect to Class I shares, you can establish an account    
through your MFD representative, by contacting MFSC directly, or by having your 
financial intermediary process your purchase. Generally, there are no initial   
or subsequent investment minimums except as may be required to be an eligible   
purchaser of Class I shares.                                                    

R SHARE CLASSES. With respect to the R share classes, you can establish an      
account through your financial intermediary or by contacting MFSC directly.     
Generally, there are no initial or subsequent investment minimums except as may 
be required to be an eligible purchaser of such class of shares.                

Class R shares are available for purchase only by retirement plans that held    
Class R shares of a fund on March 31, 2005, and by retirement plans (other than 
plans for which MFS or an affiliate provides participant recordkeeping, and     
plans for which MFS Heritage Trust Company serves as a trustee) that are held   
by MFSC at the plan or omnibus level.                                           

529 SHARE CLASSES. With respect to the 529 share classes, you can establish an  
account by having your financial intermediary process your purchase. Generally, 
the minimum initial investment is $250. MFSC waives or lowers the initial       
investment minimums for certain types of investors and investments.             

You may have your financial intermediary process your subsequent purchases or   
you may contact MFSC directly. Generally, there is no minimum for subsequent    
investments except there is generally a $50 minimum for subsequent investments  
by check and through automatic exchange plans.                                  

Purchases of Class 529B shares are subject to a total account value limitation  
at the time of purchase of $99,999, and purchases of Class 529C shares are      
subject to a total account value limitation at the time of purchase of          
$999,999. If your existing accounts for all share classes held with the MFS     
funds have a total value equal to $99,999 for Class 529B share purchases or     
$999,999 for Class 529C share purchases, you will not be able to purchase Class 
529B or Class 529C shares, as applicable. For the purpose of determining your   
total account value, existing accounts for all share classes held with the MFS  
funds that are linked under a LOI or ROA will be included.                      

In addition, the Code and tuition programs impose a maximum total contribution  
limitation for designated beneficiaries on behalf of whom assets under tuition  
programs are held, which may result in a limitation on your ability to purchase 
the fund's 529 share classes. Please see the program description for details    
concerning the maximum contribution limitation and its application. An account  
owner of a newly-established account under a tuition program in which the       
designated beneficiary is age 12 or older will not be permitted to purchase     
Class 529B shares, unless the newly established account results from a transfer 
of registration from another MFS fund account. Please see the program           
description for details and additional restrictions.                            

o ADDITIONAL PURCHASES DIRECTLY THROUGH MFSC.                               

 o BY MAIL. You may purchase additional shares by mailing a check with the
returnable portion of your statement to MFSC.                       

   o BY TELEPHONE. You may purchase additional shares by transferring money by
phone from your pre-designated bank account. You must elect this    
privilege on your account application or service application.       

  o ELECTRONICALLY. You may purchase additional shares from a pre-designated
 bank account via the Internet at mfs.com (MFS Access). You must elect
 this privilege on your account application or service application and
 establish a personal identification number (PIN) on MFS Access to use
this service.                                                       

o BY WIRE. To purchase additional shares by wire, call MFSC for         
instructions.                                                       

o AUTOMATIC PURCHASE PLAN. You may purchase additional shares by        
     automatically investing a designated amount from your checking or savings
  account on any day of the month. You must elect this privilege on your
account application or service application.                         

 o ADDITIONAL PURCHASES THROUGH YOUR FINANCIAL INTERMEDIARY. You can have your
financial intermediary purchase shares on your behalf. Your financial   
  intermediary will be responsible for furnishing all necessary documents to
MFSC and may charge you for this service.                               

HOW TO REDEEM SHARES                                                            

Your shares will be sold at the net asset value per share next calculated after 
your redemption order is received in proper form, minus any applicable CDSC.    
MFSC reserves the right to reject any redemption request that is not in proper  
form. The specific requirements for proper form vary among types of accounts    
and transactions. In certain circumstances, you may need to have your signature 
guaranteed and/or submit additional documentation to redeem your shares. In     
general, no signature guarantee is required for a redemption order for up to    
$100,000 that is signed by all owners or fiduciaries identified in the account  
registration, paid as registered, and mailed to the address of record.          

The fund normally sends out your redemption proceeds within seven days after    
your request is received in proper form. Under unusual circumstances, such as   
when the New York Stock Exchange is closed, trading on the Exchange is          
restricted, or as permitted by the SEC, the fund may suspend redemptions or     
postpone payment for more than seven days. Redemption proceeds (other than      
exchanges) may be delayed until money from prior purchases sufficient to cover  
your redemption has been received and collected. This can take up to seven days 
after a purchase.                                                               

You may redeem your shares either by having your financial intermediary process 
your redemption or by contacting MFSC directly.                                 

REDEEMING DIRECTLY THROUGH MFSC.                                                

o BY MAIL. To redeem shares by mail, you can send a letter to MFSC with the 
 name of the fund, your account number, and the number of shares or dollar
amount to be redeemed.                                                  

o BY TELEPHONE. If a signature guarantee is not required, you can call MFSC 
to have shares redeemed from your account and proceeds mailed to the    
address of record on the account. You can also call MFSC to have shares 
redeemed from your account and the proceeds wired directly to a         
  pre-designated bank account. You must elect this privilege on your account
application or service application if you wish to have proceeds wired to
your bank account.                                                      

o ELECTRONICALLY. You can have shares redeemed from your account and the    
 proceeds wired directly to a pre-designated bank account via the Internet
at mfs.com (MFS Access). You must elect this privilege on your account  
  application or service application and establish a personal identification
number (PIN) on MFS Access to use this service.                         

o SYSTEMATIC WITHDRAWAL PLAN. For Class A, Class B, Class C, Class I, Class 
  529A, Class 529B, Class 529C, Class R, Class R1, Class R2, Class R3, Class
  R4, and Class R5 shares shares, you may elect to automatically receive (or
designate someone else to receive) regular periodic payments through an 
automatic redemption of such classes. Please contact MFSC for details.  

REDEEMING THROUGH YOUR FINANCIAL INTERMEDIARY. You can have your financial      
intermediary process a redemption on your behalf. Your financial intermediary   
will be responsible for furnishing all necessary documents to MFSC and may      
charge you for this service.                                                    

SIGNATURE GUARANTEE/ADDITIONAL DOCUMENTATION. If a signature guarantee is       
required, your signature may be guaranteed by an eligible bank, broker/dealer,  
credit union, national securities exchange, registered securities association,  
clearing agency, or savings association. MFSC may require additional            
documentation for certain types of registrations and transactions. Signature    
guarantees and this additional documentation shall be accepted in accordance    
with policies established by MFSC, and MFSC may, at its discretion, make        
certain exceptions to these requirements. Please contact MFSC with any          
questions and for the requirements for your particular situation.               

SHARE CERTIFICATES. If certificates are outstanding for your shares, you may    
only redeem such shares by mailing the certificates to MFSC. Telephone,         
electronic, and systematic withdrawal plan redemptions and checkwriting are not 
available if certificates are outstanding for your shares.                      

REDEMPTIONS IN KIND. If, during any 90-day period, you redeem shares in an      
amount greater than the lesser of $250,000 or 1% of fund net assets, the fund   
has the right to pay the redemption amount above such threshold by a            
distribution in-kind of portfolio securities (redemption in kind). In the event 
that the fund makes a redemption in kind, you should expect to incur brokerage  
and other transaction charges when converting the securities to cash, and the   
securities may increase or decrease in value before you sell them.              

INVOLUNTARY REDEMPTIONS. Because it is costly to maintain small accounts, the   
MFS funds have reserved the right to redeem your shares without your permission 
when your account contains less than $500 due to your redemptions or exchanges. 
Any applicable CDSC will be assessed. Before the fund makes such a redemption,  
you will be notified and given 60 days to increase your investment to at least  
$500.                                                                           

In addition, the MFS funds have reserved the right to redeem your shares        
without your permission in cases of threatening conduct or suspicious,          
fraudulent, or illegal activity. Any applicable CDSC will be assessed upon      
redemption of your shares.                                                      

HOW TO EXCHANGE SHARES                                                          

An exchange involves the redemption of shares of one fund and the purchase of   
shares of another fund.                                                         

EXCHANGE PRIVILEGE. You can exchange your shares for shares of the same class   
of most other MFS funds by having your financial intermediary process your      
exchange request or by contacting MFSC directly. Your shares will be bought at  
the net asset value next calculated after your exchange order is received in    
proper form.                                                                    

You can exchange your Class A shares and your Class I shares for shares of the  
MFS Money Market Fund or the MFS Government Money Market Fund.                  

Eligible qualified retirement plans other than Serviced Plans can exchange      
their Class R, Class R1, Class R2, Class R3, Class R4 and Class R5 shares for   
shares of the MFS Money Market Fund. In addition, Serviced Plans holding Class  
R or Class R3 shares on March 31, 2005, can exchange their Class R or Class R3  
shares for shares of the MFS Money Market Fund.                                 

Certain qualified retirement plans may make certain exchanges between the MFS   
funds and the MFS Fixed Fund. With respect to Class C shares subject to a CDSC, 
you will only be eligible to make the exchange to the MFS Fixed Fund if the     
CDSC would have been waived had the Class C shares been redeemed. Contact MFSC  
for information concerning transactions involving the MFS Fixed Fund.           

Your ability to exchange your Class 529A, Class 529B, or Class 529C shares of   
the fund for corresponding Class 529A, Class 529B, and Class 529C shares of     
other MFS funds may be limited under Section 529 of the Code and the tuition    
program through which your investment in the MFS funds is made. Please see the  
program description for details.                                                

The MFS funds allow certain financial intermediaries to place exchange orders   
on behalf of a group of their discretionary investment advisory clients ("group 
exchange orders"). As with any exchange request, the funds and their agents     
reserve the right to reject any group exchange order, and the funds' agents     
will generally reject any group exchange order received by the funds or their   
agents after 1 p.m., Eastern time. In addition, MFD has agreements with certain 
financial intermediaries which set forth the terms and conditions under which   
group exchange orders may be placed by these financial intermediaries. These    
conditions may be more restrictive than those applicable to individual exchange 
orders, and may include the requirement to provide the funds or their agents    
with advance notice of group exchange orders.                                   

Except with respect to the R share classes, the minimum exchange amount is      
generally $1,000 (generally $50 for exchanges made under the automatic exchange 
plan) or all the shares in an account. MFSC waives or lowers the minimum        
exchange amount for certain types of investors and investments. There is no     
minimum exchange amount for the R share classes.                                

Shares otherwise subject to a CDSC will not be charged a CDSC in an exchange.   
Shares will retain the CDSC schedule in effect based upon a pro rata share of   
the CDSC from the exchanged fund and the original purchase date of the shares   
subject to the CDSC.                                                            

Other funds may have different exchange restrictions. You should read the       
prospectus of the MFS fund into which you are exchanging and consider the       
differences in objectives, policies, and risks before making any exchange. The  
exchange privilege may be changed or discontinued at any time, and all          
exchanges are subject to certain limitations and MFS funds' policies concerning 
excessive trading practices, which are designed to protect the funds and their  
shareholders from the harmful effects of frequent trading.                      

OTHER CONSIDERATIONS                                                            

FREQUENT TRADING                                                                

o RIGHT TO REJECT OR RESTRICT PURCHASE AND EXCHANGE ORDERS. The Board of    
  Trustees of the MFS funds has adopted the purchase and exchange limitation
policies described below, which it believes are reasonably designed to  
discourage frequent fund share transactions. MFSC seeks to monitor and  
enforce these policies, subject to oversight by the Board of Trustees,  
   pursuant to procedures approved by the Board of Trustees. The MFS funds may
alter their policies at any time without notice to shareholders.        

o GENERAL PURCHASE AND EXCHANGE LIMITATION POLICIES. The MFS funds reserve  
the right to restrict, reject, or cancel (with respect to cancellations,
within one business day of the order), without any prior notice, any    
purchase or exchange order, including transactions believed to represent
frequent trading activity. For example, MFSC may in its discretion      
restrict, reject, or cancel a purchase or exchange order even if the    
transaction is not subject to specific exchange or other limitations    
described in this prospectus if MFSC determines that accepting the order
could interfere with the efficient management of a fund's portfolio,    
 increase costs to the fund, dilute the value of an investment in the fund
to long-term shareholders, or otherwise not be in the fund's best       
 interests. In the event that MFSC rejects or cancels an exchange request,
neither the redemption nor the purchase side of the exchange will be    
 processed. Each MFS fund reserves the right to delay for one business day
  the processing of exchange requests in the event that, in MFSC's judgment,
such delay would be in the fund's best interest, in which case both the 
redemption and purchase side of the exchange will receive the fund's net
asset values at the conclusion of the delay period.                     

o SPECIFIC EXCHANGE AND PURCHASE LIMITATION POLICIES. Under the MFS Funds'  
purchase and exchange limitation policy, MFSC will generally restrict,  
reject or cancel purchase and exchange orders if MFSC determines that an
  accountholder has made two exchanges, each in an amount of $5,000 or more,
 out of an account in an MFS fund during a calendar quarter ("two exchange
limit"). This policy does not apply to exchanges:                       

o out of the MFS money market funds; or                                 

 o initiated by a retirement plan trustee or sponsor rather than by a plan
participant, and other similar non-discretionary exchanges (e.g., in
connection with fund mergers/acquisitions/liquidations).            

In circumstances where shareholders hold shares through financial       
intermediaries, the MFS funds may rely upon the financial intermediary's
policy to restrict frequent trading and its monitoring of such policy in
lieu of the MFS funds' two-exchange limit if MFSC believes that the     
financial intermediary's policy is reasonably designed to identify and  
curtail trading activity that is not in the best interest of the fund.  

 In addition, MFSC may make exceptions to this policy if, in its judgment,
the transaction does not represent frequent trading activity, such as   
  purchases made through systematic purchase plans or payroll contributions.
  In applying this policy, MFSC considers the information available to it at
   the time and reserves the right to consider trading multiple accounts under
common ownership, control, or influence to be trading out of a single   
account.                                                                

Exchanges made on the same day in the same account are aggregated for   
  purposes of counting the number and dollar amount of exchanges made by the
accountholder (e.g., a shareholder who on the same day exchanges $6,000 
  from one MFS fund into two other MFS funds, by exchanging $3,000 into each
of the two MFS funds, will be viewed as having made one exchange        
transaction exceeding $5,000 in value).                                 

o LIMITATIONS ON THE ABILITY TO DETECT AND CURTAIL FREQUENT TRADING         
   PRACTICES. Shareholders seeking to engage in frequent trading practices may
   deploy a variety of strategies to avoid detection, and, despite the efforts
 of MFSC to prevent frequent trading, there is no assurance that MFSC will
 be able to identify such shareholders or curtail their trading practices.
The ability of MFSC to detect and curtail frequent trading practices may
also be limited by operational systems and technological limitations.   

MFSC receives purchase, exchange, and redemption orders through certain 
financial intermediaries that hold omnibus accounts with an MFS fund.   
Omnibus account arrangements are common forms of holding shares of MFS  
   funds, particularly among certain financial intermediaries such as brokers,
retirement and 529 plans, investment advisors, and variable insurance   
products. A financial intermediary's policy restricting frequent trading
may be more or less restrictive than the MFS funds' policies, may permit
  certain transactions not permitted by the MFS funds' policies, or prohibit
transactions not subject to the MFS funds' policies.                    

 MFSC is generally not able to identify trading by a particular underlying
shareholder within an omnibus account, which makes it difficult or      
   impossible to determine if a particular underlying shareholder has violated
the two exchange limit or is otherwise engaged in frequent trading.     
However, MFSC reviews trading activity at the omnibus level to detect   
   suspicious trading activity. If MFSC detects suspicious trading activity at
the omnibus level it will contact the financial intermediary to request 
underlying shareholder level activity to determine whether there is     
underlying shareholder level frequent trading. In certain instances, a  
financial intermediary may be unwilling or unable to provide MFSC with  
information about underlying shareholder level activity.                

If frequent trading is identified, MFSC will take appropriate action.   
   MFSC's ability to monitor and deter frequent trading in omnibus accounts at
the underlying shareholder level is dependent upon the capability and   
  cooperation of the financial intermediary. Accordingly, depending upon the
composition of a fund's shareholder accounts, the level of cooperation  
provided by the financial intermediary and in light of efforts made by  
certain shareholders to evade these limitations, MFSC may not be in a   
position to monitor and deter frequent trading with respect to a        
significant percentage of a fund's shareholders. You should consult your
 financial intermediary regarding the application of these limitations and
whether your financial intermediary imposes any additional or different 
limitations.                                                            

o FREQUENT TRADING RISKS. To the extent that the MFS funds or their agents  
are unable to curtail excessive trading practices in a fund, these      
practices may interfere with the efficient management of the fund's     
portfolio, may result in increased transaction and administrative costs,
and may adversely impact the fund's performance.                        

   In addition, to the extent that the fund invests in foreign securities, the
   interests of long-term shareholders may be diluted as a result of time-zone
 arbitrage, a short-term trading practice that seeks to exploit changes in
   the value of the fund's investments that result from events occurring after
  the close of the foreign markets on which the investments trade, but prior
   to the time the fund determines its net asset value. The fund's use of fair
valuation can serve to reduce arbitrage opportunities available to      
short-term traders, but there is no assurance that the fund's fair      
 valuation policies and procedures will prevent dilution of the fund's net
asset value by short-term traders.                                      

 To the extent that the fund invests in securities that trade infrequently
or are difficult to value, such as the securities of smaller companies, 
high yield debt instruments, and floating rate loans, the interests of  
long-term shareholders may be diluted as a result of price arbitrage, a 
short-term trading strategy that seeks to exploit perceived pricing     
inefficiencies in the fund's investments. Such short-term trading       
  strategies may interfere with efficient management of the fund's portfolio
to a greater degree than funds that invest in more frequently traded or 
liquid securities, in part because the fund may have difficulty selling 
   these portfolio securities at advantageous times or prices to satisfy large
and/or frequent redemption requests. Any successful price arbitrage may 
   also cause dilution in the value of fund shares held by other shareholders.

UNAUTHORIZED TRANSACTIONS. MFS will not be responsible for losses that result   
from unauthorized transactions unless MFSC does not follow procedures           
reasonably designed to verify your identity. If an account has more than one    
owner or authorized person, MFSC will accept telephone and online instructions  
from any one owner or authorized person. It is important that you contact MFSC  
immediately about any transactions you believe to be unauthorized.              

ABILITY TO CONTACT MFSC. Certain methods of contacting MFSC, such as by mail,   
telephone, or electronically, may be unavailable or delayed (for example, after 
natural disasters or during periods of significant/major political, social, or  
economic instability).                                                          

RESERVATION OF OTHER RIGHTS. In addition to the rights expressly stated         
elsewhere in this prospectus, MFSC reserves the right to: 1) alter, add, or     
discontinue any conditions of purchase, service, or privilege at any time       
without notice; and 2) freeze any account or suspend account services when MFSC 
has received reasonable notice (written or otherwise) of a dispute between      
registered or beneficial account owners or when MFSC believes a fraudulent      
transaction may occur or has occurred.                                          

ANTI-MONEY LAUNDERING RESTRICTIONS. Federal law requires the fund to implement  
policies and procedures reasonably designed to prevent, detect and report money 
laundering and other illegal activity. The fund may redeem your shares and      
close your account; suspend, restrict or cancel purchase and redemption orders; 
process redemption requests and withhold your proceeds; and take other action   
if it is unable to verify your identity within a reasonable time or conduct     
required due diligence on your account or as otherwise permitted by its         
anti-money laundering policies and procedures. Any applicable CDSC will be      
assessed upon redemption of your shares.                                        

CONFIRMATIONS IN QUARTERLY STATEMENTS. Transactions made under certain periodic 
investment and withdrawal programs (including reinvestment plans) will be       
confirmed on quarterly account statements.                                      

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OTHER INFORMATION                                                               

VALUATION                                                                       

The price of each class of the fund's shares is based on its net asset value.   
The net asset value of each class of shares is determined each day the New York 
Stock Exchange (the Exchange) is open for trading as of the close of regular    
trading on the Exchange (generally 4:00 p.m. Eastern time). However, net asset  
value may be calculated earlier as permitted by the SEC. Net asset value per    
share is computed by dividing the net assets allocated to each share class by   
the number of shares outstanding for that class. On days when the Exchange is   
closed (such as week-ends and holidays), net asset value is not calculated, and 
the fund does not transact purchase and redemption orders. To the extent the    
fund's assets are traded in other markets on days when the fund does not price  
its shares, the value of the fund's assets may change when you will not be able 
to purchase or redeem shares.                                                   

To determine net asset value, the fund's investments for which reliable market  
quotations are readily available are valued at market value. Certain short term 
debt instruments are valued at amortized cost.                                  

The Board of Trustees has delegated primary responsibility for determining or   
causing to be determined the value of the fund's investments (including any     
fair valuation) to the adviser pursuant to valuation policies and procedures    
approved by the Board. If the adviser determines that reliable market           
quotations are not readily available, investments are valued at fair value as   
determined in good faith by the adviser in accordance with such procedures      
under the oversight of the Board of Trustees.                                   

Under the fund's valuation policies and procedures, market quotations are not   
considered to be readily available for many types of debt instruments and       
certain types of derivatives. These investments are generally valued at fair    
value based on information from independent pricing services. These valuations  
can be based on both dealer-supplied valuations and electronic data processing  
techniques, which take into account factors such as institutional-size trading  
in similar groups of securities, yield, quality, coupon rate, maturity, type of 
issue, trading characteristics, and other market data.                          

In addition, investments may be valued at fair value if the adviser determines  
that an investment's value has been materially affected by events occurring     
after the close of the exchange or market on which the investment is            
principally traded (such as a foreign exchange or market) and prior to the      
determination of the fund's net asset value, or after the halting of trading of 
a specific security where trading does not resume prior to the close of the     
exchange or market on which the security is principally traded. The adviser may 
rely on independent pricing services or other information (such as the          
correlation with price movements of similar securities in the same or other     
markets; the type, cost and investment characteristics of the security; the     
business and financial condition of the issuer; and trading and other market    
data) to assist in determining whether to fair value and at what value to fair  
value an investment. The value of an investment for purposes of calculating the 
fund's net asset value can differ depending on the source and method used to    
determine value. When fair valuation is used, the value of investments used to  
determine the fund's net asset value may differ from quoted or published prices 
for the same investments.                                                       

DISTRIBUTIONS                                                                   

The fund intends to declare a dividend daily and to pay these dividends to      
shareholders at least monthly.                                                  

Any capital gains are distributed at least annually.                            

DISTRIBUTION OPTIONS                                                            

The following distribution options are generally available:                     

o Dividend and capital gain distributions reinvested in additional shares   
(this option will be assigned if no other option is specified);         

o Dividend distributions in cash; capital gain distributions reinvested in  
additional shares;                                                      

o Dividend and capital gain distributions in cash; or                       

o Dividend and capital gain distributions reinvested into the same class of 
shares of another MFS Fund.                                             

Dividends and capital gain distributions for Class R, Class R1, Class R2, Class 
R3, Class R4, Class R5, Class 529A, Class 529B, and Class 529C will             
automatically be reinvested in additional shares of the fund.                   

The distribution option for accounts with dividend distributions of less than   
$10 will generally be changed to reinvestment in additional shares of the fund. 
If you have elected to receive distributions in cash, and the postal service is 
unable to deliver checks to your address of record, or you do not respond to    
mailings from MFSC with regard to uncashed distribution checks, your            
distribution option may be converted to having all distributions reinvested in  
additional shares. You should contact MFSC to change your distribution option,  
and your request to do so must be received by MFSC before the record date for a 
distribution in order to be effective for that distribution. No interest will   
accrue on amounts represented by uncashed distribution checks.                  

TAX CONSIDERATIONS                                                              

The following discussion is very general. You are urged to consult your tax     
adviser regarding the effect that an investment in the fund may have on your    
particular tax situation, including possible foreign, state, and local taxes.   
Also, this discussion does not apply to shares of the fund held through         
tax-exempt retirement plans.                                                    

The fund expects to distribute substantially all of its income and gains        
annually. Distributions from the fund are taxable whether you receive them in   
cash or reinvest them in additional shares. If you buy shares when a fund has   
realized but not yet distributed ordinary income or capital gains, you will pay 
full price for the shares and then receive a portion back as a taxable          
distribution.                                                                   

Any gain resulting from the sale or exchange of your shares will generally also 
be subject to tax.                                                              

For federal income tax purposes, distributions of investment income are         
generally taxable as ordinary income. Taxes on distributions of capital gains   
are determined by how long the fund owned the investments that generated them,  
rather than how long you have owned your shares. Distributions of net capital   
gains from the sale of investments that the fund owned for more than one year   
and that are properly designated by the fund as capital gain dividends will be  
taxable as long-term capital gains. Distributions of gains from the sale of     
investments that the fund owned for one year or less will be taxable as         
ordinary income. For taxable years beginning before January 1, 2011, if some or 
all of the fund's income derives from "qualified dividend income" and if you    
are an individual who meets holding period and other requirements with respect  
to the fund's shares, those distributions that are properly designated by the   
fund as derived from "qualified dividend income" are taxed at the rates         
applicable to long-term capital gains. The fund does not expect a significant   
portion of fund distributions to be derived from qualified dividend income.     

The fund's investments in certain debt instruments may cause the fund to        
recognize income in excess of the cash generated by such instruments. Thus, the 
fund could be required at times to liquidate other investments in order to      
satisfy its distribution requirements.                                          

Long-term capital gain rates applicable to most individuals have been           
temporarily reduced for taxable years beginning before January 1, 2011.         

The Form 1099 that is mailed to you every January details your distributions    
and how they are treated for federal tax purposes.                              

SPECIAL CONSIDERATIONS FOR 529 SHARE CLASSES. In addition to the tax            
considerations discussed above, please note the following tax considerations    
that apply specifically to the ownership of the fund's 529 share classes        
through a tuition program that qualifies under Section 529 of the Code.         

The fund is an investment option under one or more tuition programs designed to 
qualify under Section 529 so that earnings on investments are not subject to    
federal income tax (to either a contributor to the tuition program or a         
designated beneficiary) until the earnings are withdrawn. Withdrawals of        
earnings that are used to pay "qualified higher education expenses" are         
tax-free for federal income tax purposes. State and local income taxes may      
still apply. These tax benefits are not available to 529 shares that are not    
owned through a qualifying Section 529 tuition program.                         

Withdrawals of earnings that are not used for the designated beneficiary's      
qualified higher education expenses generally are subject not only to federal   
income tax but also to a 10% penalty tax (unless such amounts are transferred   
within sixty (60) days to another tuition program for the same designated       
beneficiary or another designated beneficiary who is a member of the family of  
the designated beneficiary with respect to which the distribution was made and  
certain other conditions are satisfied). The 10% penalty tax will not apply to  
distributions made under certain circumstances, including certain distributions 
made after the designated beneficiary dies, becomes disabled, or receives a     
scholarship or other tax-free payment for educational expenses that does not    
exceed the amount of the distribution. Distributions attributable to            
contributions to the tuition program (including the portion of any rollover     
from another tuition program that is attributable to contributions to that      
program) are not subject to tax.                                                

You are urged to consult your own tax adviser for information about the         
federal, state, and local tax consequences of your investment in the fund's 529 
share classes.                                                                  

PROVISION OF ANNUAL AND SEMIANNUAL REPORTS AND PROSPECTUSES                     

The fund produces financial reports every six months and updates its prospectus 
annually. To avoid sending duplicate copies of materials to households, only    
one copy of the fund's annual and semiannual report and prospectus will be      
mailed to shareholders having the same residential address on the fund's        
records. However, any shareholder may contact MFSC (please see back cover for   
address and telephone number) to request that copies of these reports and       
prospectuses be sent personally to that shareholder.                            

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FINANCIAL HIGHLIGHTS                                                            

The financial highlights tables are intended to help you understand a fund's    
financial performance for the past five years (or, if shorter, the period of    
the fund's operation). Certain information reflects financial results for a     
single fund share. The total returns in the table represent the rate by which   
an investor would have earned (or lost) on an investment in a fund (assuming    
reinvestment of all distributions) held for the entire period. This information 
has been audited by the fund's independent registered public accounting firm,   
whose report, together with the fund's financial statements, are included in    
the fund's Annual Report to shareholders. The fund's Annual Report is available 
upon request by contacting MFS Service Center, Inc. (please see back cover for  
address and telephone number). The financial statements contained in the Annual 
Report are incorporated by reference into the SAI. The fund's independent       
registered public accounting firm is Deloitte & Touche LLP.                     

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                                                                           YEARS ENDED 1/31                     
                                              ----------------------------------------------------------------- 
                                                2007           2006          2005          2004          2003   
                                                                                                                
CLASS A                                                                                                         
Net asset value, beginning of period          $   3.82       $   3.98      $   3.98      $   3.52      $   3.78 
                                              --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                        
Net investment income (d)                     $   0.27       $   0.27      $   0.29      $   0.30      $   0.33 
Net realized and unrealized gain (loss)                                                                         
on investments and foreign currency               0.11          (0.13)         0.01(g)       0.46         (0.25)
                                              --------       --------      --------      --------      -------- 
Total from investment operations              $   0.38       $   0.14      $   0.30      $   0.76      $   0.08 
                                              --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                     
From net investment income                    $  (0.28)      $  (0.30)     $  (0.30)     $  (0.30)     $  (0.34)
Redemption fees added to paid-in capital (d)  $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                              --------       --------      --------      --------      -------- 
Net asset value, end of period                $   3.92       $   3.82      $   3.98      $   3.98      $   3.52 
                                              ========       ========      ========      ========      ======== 
Total return (%) (r)(s)(t)                       10.30           3.61          7.74         22.83          2.34 
                                              --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)            1.00           1.00          0.99          0.99          1.00 
Expenses after expense reductions (f)             1.00           1.00          0.99           N/A           N/A 
Net investment income                             7.09           6.85          7.31          7.87          9.32 
Portfolio turnover                                  89             51            68            81            80 
Net assets at end of period (000 omitted)     $671,019       $703,305      $799,651      $934,958      $769,069 

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                                                                       YEARS ENDED 1/31                         
                                                --------------------------------------------------------------- 
                                                2007           2006          2005          2004          2003   
                                                                                                                
CLASS B                                                                                                         
Net asset value, beginning of period          $   3.83       $   3.99      $   3.99      $   3.53      $   3.79 
                                              --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                        
Net investment income (d)                     $   0.25       $   0.24      $   0.26      $   0.27      $   0.31 
Net realized and unrealized gain (loss)                                                                         
on investments and foreign currency               0.10          (0.13)         0.01(g)       0.47         (0.26)
                                              --------       --------      --------      --------      -------- 
Total from investment operations              $   0.35       $   0.11      $   0.27      $   0.74      $   0.05 
                                              --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                     
From net investment income                    $  (0.25)      $  (0.27)     $  (0.27)     $  (0.28)     $  (0.31)
Redemption fees added to paid-in capital (d)  $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                              --------       --------      --------      --------      -------- 
Net asset value, end of period                $   3.93       $   3.83      $   3.99      $   3.99      $   3.53 
                                              ========       ========      ========      ========      ======== 
Total return (%) (r)(s)(t)                        9.53           2.90          7.10         21.65          1.64 
                                              --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)            1.71           1.72          1.69          1.69          1.70 
Expenses after expense reductions (f)             1.71           1.72          1.69           N/A           N/A 
Net investment income                             6.40           6.26          6.63          7.18          8.65 
Portfolio turnover                                  89             51            68            81            80 
Net assets at end of period (000 omitted)     $195,028       $275,363      $379,253      $471,520      $411,533 

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                                                                      YEARS ENDED 1/31                          
                                              ----------------------------------------------------------------- 
                                                2007           2006          2005          2004          2003   
                                                                                                                
CLASS C                                                                                                         
Net asset value, beginning of period          $   3.84       $   4.00      $   4.00      $   3.54      $   3.80 
                                              --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                        
Net investment income (d)                     $   0.24       $   0.24      $   0.26      $   0.27      $   0.30 
Net realized and unrealized gain (loss)                                                                         
on investments and foreign currency               0.11          (0.13)         0.01(g)       0.47         (0.25)
                                              --------       --------      --------      --------      -------- 
Total from investment operations              $   0.35       $   0.11      $   0.27      $   0.74      $   0.05 
                                              --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                     
From net investment income                    $  (0.25)      $  (0.27)     $  (0.27)     $  (0.28)     $  (0.31)
Redemption fees added to paid-in capital (d)  $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                              --------       --------      --------      --------      -------- 
Net asset value, end of period                $   3.94       $   3.84      $   4.00      $   4.00      $   3.54 
                                              ========       ========      ========      ========      ======== 
Total return (%) (r)(s)(t)                        9.52           2.91          7.10         21.61          1.64 
                                              --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)            1.70           1.72          1.69          1.69          1.70 
Expenses after expense reductions (f)             1.70           1.72          1.69           N/A           N/A 
Net investment income                             6.39           6.26          6.63          7.18          8.59 
Portfolio turnover                                  89             51            68            81            80 
Net assets at end of period (000 omitted)     $ 92,050       $108,181      $148,073      $214,915      $183,364 

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                                                                       YEARS ENDED 1/31                         
                                              ----------------------------------------------------------------- 
                                                2007           2006          2005          2004          2003   
                                                                                                                
CLASS I                                                                                                         
Net asset value, beginning of period          $   3.82       $   3.98      $   3.98      $   3.52      $   3.78 
                                              --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                        
Net investment income (d)                     $   0.28       $   0.28      $   0.29      $   0.30      $   0.33 
Net realized and unrealized gain (loss)                                                                         
on investments and foreign currency               0.11          (0.13)         0.02(g)       0.47         (0.24)
                                              --------       --------      --------      --------      -------- 
Total from investment operations              $   0.39       $   0.15      $   0.31      $   0.77      $   0.09 
                                              --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                     
From net investment income                    $  (0.29)      $  (0.31)     $  (0.31)     $  (0.31)     $  (0.35)
Redemption fees added to paid-in capital (d)  $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                              --------       --------      --------      --------      -------- 
Net asset value, end of period                $   3.92       $   3.82      $   3.98      $   3.98      $   3.52 
                                              ========       ========      ========      ========      ======== 
Total return (%) (r)(s)                          10.62           3.92          8.17         22.88          2.66 
                                              --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)            0.70           0.71          0.68          0.69          0.70 
Expenses after expense reductions (f)             0.70           0.71          0.68           N/A           N/A 
Net investment income                             7.38           7.24          7.55          8.03          9.58 
Portfolio turnover                                  89             51            68            81            80 
Net assets at end of period (000 omitted)     $246,306       $231,455      $170,679      $ 93,887      $ 26,373 

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                                                                      YEARS ENDED 1/31                            
                                              -----------------------------------------------------------------   
                                                 2007           2006          2005          2004         2003(i)  
                                                                                                                  
CLASS R                                                                                                           
Net asset value, beginning of period            $ 3.83         $ 3.98        $ 3.98        $ 3.52        $ 3.51   
                                                ------         ------        ------        ------        ------   
Income (loss) from investment operations                                                                          
Net investment income (d)                       $ 0.26         $ 0.26        $ 0.28        $ 0.28        $ 0.02   
Net realized and unrealized gain (loss) on                                                                        
investments and foreign currency                  0.11          (0.12)         0.01(g)       0.48          0.02(g)
                                                ------         ------        ------        ------        ------   
Total from investment operations                $ 0.37         $ 0.14        $ 0.29        $ 0.76        $ 0.04   
                                                ------         ------        ------        ------        ------   
Less distributions declared to shareholders                                                                       
From net investment income                      $(0.27)        $(0.29)       $(0.29)       $(0.30)       $(0.03)  
Redemption fees added to paid-in capital (d)    $ 0.00(w)      $ 0.00(w)     $ 0.00(w)     $   --        $   --   
                                                ------         ------        ------        ------        ------   
Net asset value, end of period                  $ 3.93         $ 3.83        $ 3.98        $ 3.98        $ 3.52   
                                                ======         ======        ======        ======        ======   
Total return (%) (r)(s)                          10.07           3.68          7.63         22.29          1.03(n)
                                                ------         ------        ------        ------        ------   
Ratios (%) (to average net assets) and                                                                            
Supplemental data:                                                                                                
Expenses before expense reductions (f)            1.20           1.21          1.18          1.20          1.20(a)
Expenses after expense reductions (f)             1.20           1.21          1.18           N/A           N/A   
Net investment income                             6.88           6.76          7.06          7.46          7.97(a)
Portfolio turnover                                  89             51            68            81            80   
Net assets at end of period (000 omitted)       $5,072         $5,422        $4,021        $1,359        $   40   

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                                                            YEARS ENDED 1/31      
                                                           -------------------    
                                                            2007        2006(i)   
                                                                                  
CLASS R1                                                                          
Net asset value, beginning of period                       $ 3.83       $ 3.89    
                                                           ------       ------    
Income (loss) from investment operations                                          
Net investment income (d)                                  $ 0.24       $ 0.19    
Net realized and unrealized gain (loss) on investments                            
and foreign currency                                         0.11        (0.03)(g)
                                                           ------       ------    
Total from investment operations                           $ 0.35       $ 0.16    
                                                           ------       ------    
Less distributions declared to shareholders                                       
From net investment income                                 $(0.25)      $(0.22)   
Redemption fees added to paid-in capital (d)               $ 0.00(w)    $ 0.00(w) 
                                                           ------       ------    
Net asset value, end of period                             $ 3.93       $ 3.83    
                                                           ======       ======    
Total return (%) (r)(s)                                      9.41         4.28(n) 
                                                           ------       ------    
Ratios (%) (to average net assets) and Supplemental data:                         
Expenses before expense reductions (f)                       1.89         1.91(a) 
Expenses after expense reductions (f)                        1.79         1.85(a) 
Net investment income                                        6.27         6.08(a) 
Portfolio turnover                                             89           51    
Net assets at end of period (000 omitted)                  $  361       $  231    

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                                                                              YEARS ENDED 1/31      
                                                                             -------------------    
                                                                              2007        2006(i)   
                                                                                                    
CLASS R2                                                                                            
Net asset value, beginning of period                                         $ 3.83       $ 3.89    
                                                                             ------       ------    
Income (loss) from investment operations                                                            
Net investment income (d)                                                    $ 0.26       $ 0.21    
Net realized and unrealized gain (loss) on investments and foreign currency    0.10        (0.04)(g)
                                                                             ------       ------    
Total from investment operations                                             $ 0.36       $ 0.17    
                                                                             ------       ------    
Less distributions declared to shareholders                                                         
From net investment income                                                   $(0.26)      $(0.23)   
Redemption fees added to paid-in capital (d)                                 $ 0.00(w)    $ 0.00(w) 
                                                                             ------       ------    
Net asset value, end of period                                               $ 3.93       $ 3.83    
                                                                             ======       ======    
Total return (%) (r)(s)                                                        9.80         4.56(n) 
                                                                             ------       ------    
Ratios (%) (to average net assets) and Supplemental data:                                           
Expenses before expense reductions (f)                                         1.59         1.59(a) 
Expenses after expense reductions (f)                                          1.44         1.51(a) 
Net investment income                                                          6.63         6.50(a) 
Portfolio turnover                                                               89           51    
Net assets at end of period (000 omitted)                                    $  460       $  277    

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                                                                            YEARS ENDED 1/31                     
                                                           ---------------------------------------------------   
                                                            2007          2006            2005          2004(i)  
                                                                                                                 
CLASS R3                                                                                                         
Net asset value, beginning of period                       $ 3.83        $ 3.98          $ 3.98         $ 3.85   
                                                           ------        ------          ------         ------   
Income (loss) from investment operations                                                                         
Net investment income (d)                                  $ 0.26        $ 0.24          $ 0.25         $ 0.07   
Net realized and unrealized gain (loss) on investments                                                           
and foreign currency                                         0.10         (0.11)           0.03(g)        0.13(g)
                                                           ------        ------          ------         ------   
Total from investment operations                           $ 0.36        $ 0.13          $ 0.28         $ 0.20   
                                                           ------        ------          ------         ------   
Less distributions declared to shareholders                                                                      
From net investment income                                 $(0.26)       $(0.28)         $(0.28)        $(0.07)  
Redemption fees added to paid-in capital (d)               $ 0.00(w)     $ 0.00(w)       $ 0.00(w)      $ --     
                                                           ------        ------          ------         ------   
Net asset value, end of period                             $ 3.93        $ 3.83          $ 3.98         $ 3.98   
                                                           ======        ======          ======         ======   
Total return (%) (r)(s)                                      9.91          3.45            7.37           5.32(n)
                                                           ------        ------          ------         ------   
Ratios (%) (to average net assets) and Supplemental data:                                                        
Expenses before expense reductions (f)                       1.44          1.46            1.49           1.43(a)
Expenses after expense reductions (f)                        1.34          1.42            1.49            N/A   
Net investment income                                        6.71          6.61            6.58           7.07(a)
Portfolio turnover                                             89            51              68             81   
Net assets at end of period (000 omitted)                  $2,406        $1,212          $  246         $   42   

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                                                                               YEARS ENDED 1/31     
                                                                             ---------------------  
                                                                              2007         2006(i)  
                                                                                                    
CLASS R4                                                                                            
Net asset value, beginning of period                                         $ 3.82       $ 3.88    
                                                                             ------       ------    
Income (loss) from investment operations                                                            
Net investment income (d)                                                    $ 0.27       $ 0.21    
Net realized and unrealized gain (loss) on investments and foreign currency    0.10        (0.02)(g)
                                                                             ------       ------    
Total from investment operations                                             $ 0.37       $ 0.19    
                                                                             ------       ------    
Less distributions declared to shareholders                                                         
From net investment income                                                   $(0.27)      $(0.25)   
Redemption fees added to paid-in capital (d)                                 $ 0.00(w)    $ 0.00(w) 
                                                                             ------       ------    
Net asset value, end of period                                               $ 3.92       $ 3.82    
                                                                             ======       ======    
Total return (%) (r)(s)                                                       10.18         4.94(n) 
                                                                             ------       ------    
Ratios (%) (to average net assets) and Supplemental data:                                           
Expenses before expense reductions (f)                                         1.07         1.15(a) 
Expenses after expense reductions (f)                                          1.07         1.15(a) 
Net investment income                                                          6.90         6.73(a) 
Portfolio turnover                                                               89           51    
Net assets at end of period (000 omitted)                                    $5,143       $  393    

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                                                                              YEARS ENDED 1/31      
                                                                             -------------------    
                                                                              2007        2006(i)   
                                                                                                    
CLASS R5                                                                                            
Net asset value, beginning of period                                         $ 3.82       $ 3.88    
                                                                             ------       ------    
Income (loss) from investment operations                                                            
Net investment income (d)                                                    $ 0.28       $ 0.23    
Net realized and unrealized gain (loss) on investments and foreign currency    0.11        (0.03)(g)
                                                                             ------       ------    
Total from investment operations                                             $ 0.39       $ 0.20    
                                                                             ------       ------    
Less distributions declared to shareholders                                                         
From net investment income                                                   $(0.29)      $(0.26)   
Redemption fees added to paid-in capital (d)                                 $ 0.00(w)    $ 0.00(w) 
                                                                             ------       ------    
Net asset value, end of period                                               $ 3.92       $ 3.82    
                                                                             ======       ======    
Total return (%) (r)(s)                                                       10.52         5.20(n) 
                                                                             ------       ------    
Ratios (%) (to average net assets) and Supplemental data:                                           
Expenses before expense reductions (f)                                         0.80         0.80(a) 
Expenses after expense reductions (f)                                          0.80         0.80(a) 
Net investment income                                                          7.29         7.11(a) 
Portfolio turnover                                                               89           51    
Net assets at end of period (000 omitted)                                    $   58       $   53    

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                                                                     YEARS ENDED 1/31                           
                                              --------------------------------------------------------------    
                                               2007           2006          2005          2004         2003(i)  
                                                                                                                
CLASS 529A                                                                                                      
Net asset value, beginning of period          $ 3.82         $ 3.98        $ 3.98        $ 3.52        $ 3.42   
                                              ------         ------        ------        ------        ------   
Income (loss) from investment operations                                                                        
Net investment income (d)                     $ 0.26         $ 0.26        $ 0.27        $ 0.28        $ 0.13   
Net realized and unrealized gain (loss) on                                                                      
investments and foreign currency                0.11          (0.14)         0.02(g)       0.47          0.13(g)
                                              ------         ------        ------        ------        ------   
Total from investment operations              $ 0.37         $ 0.12        $ 0.29        $ 0.75        $ 0.26   
                                              ------         ------        ------        ------        ------   
Less distributions declared to shareholders                                                                     
From net investment income                    $(0.27)        $(0.28)       $(0.29)       $(0.29)       $(0.16)  
Redemption fees added to paid-in capital (d)  $ 0.00(w)      $ 0.00(w)     $ 0.00(w)     $   --        $   --   
                                              ------         ------        ------        ------        ------   
Net asset value, end of period                $ 3.92         $ 3.82        $ 3.98        $ 3.98        $ 3.52   
                                              ======         ======        ======        ======        ======   
Total return (%) (r)(s)(t)                      9.97           3.30          7.53         22.16          7.70(n)
                                              ------         ------        ------        ------        ------   
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)          1.30           1.32          1.29          1.30          1.30(a)
Expenses after expense reductions (f)           1.30           1.32          1.29           N/A           N/A   
Net investment income                           6.78           6.65          6.97          7.42          8.66(a)
Portfolio turnover                                89             51            68            81            80   
Net assets at end of period (000 omitted)     $  854         $  776        $  768        $  406        $   53   

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                                                                      YEARS ENDED 1/31                          
                                              ---------------------------------------------------------------   
                                               2007           2006          2005          2004         2003(i)  
                                                                                                                
CLASS 529B                                                                                                      
Net asset value, beginning of period          $ 3.82         $ 3.97        $ 3.98        $ 3.52        $ 3.42   
                                              ------         ------        ------        ------        ------   
Income (loss) from investment operations                                                                        
Net investment income (d)                     $ 0.23         $ 0.23        $ 0.25        $ 0.25        $ 0.11   
Net realized and unrealized gain (loss)                                                                         
on investments and foreign currency             0.11          (0.12)         0.00(g)(w)    0.48          0.14(g)
                                              ------         ------        ------        ------        ------   
Total from investment operations              $ 0.34         $ 0.11        $ 0.25        $ 0.73        $ 0.25   
                                              ------         ------        ------        ------        ------   
Less distributions declared to shareholders                                                                     
From net investment income                    $(0.24)        $(0.26)       $(0.26)       $(0.27)       $(0.15)  
Redemption fees added to paid-in capital (d)  $ 0.00(w)      $ 0.00(w)     $ 0.00(w)     $   --        $   --   
                                              ------         ------        ------        ------        ------   
Net asset value, end of period                $ 3.92         $ 3.82        $ 3.97        $ 3.98        $ 3.52   
                                              ======         ======        ======        ======        ======   
Total return (%) (r)(s)(t)                      9.26           2.89          6.57         21.39          7.35(n)
                                              ------         ------        ------        ------        ------   
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)          1.95           1.96          2.01          1.95          1.95(a)
Expenses after expense reductions (f)           1.95           1.96          2.01           N/A           N/A   
Net investment income                           6.13           6.00          6.29          6.80          8.37(a)
Portfolio turnover                                89             51            68            81            80   
Net assets at end of period (000 omitted)     $  202         $  157        $  139        $  119        $   31   

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                                                                         YEARS ENDED 1/31                          
                                                 --------------------------------------------------------------    
                                                  2007           2006          2005          2004          2003(i) 
                                                                                                                   
CLASS 529C                                                                                                         
Net asset value, beginning of period             $ 3.83         $ 3.99        $ 3.99        $ 3.53        $ 3.43   
                                                 ------         ------        ------        ------        ------   
Income (loss) from investment operations                                                                           
Net investment income (d)                        $ 0.23         $ 0.23        $ 0.25        $ 0.26        $ 0.13   
Net realized and unrealized gain (loss) on                                                                         
investments and foreign currency                   0.11          (0.13)         0.01(g)       0.47          0.12(g)
                                                 ------         ------        ------        ------        ------   
Total from investment operations                 $ 0.34         $ 0.10        $ 0.26        $ 0.73        $ 0.25   
                                                 ------         ------        ------        ------        ------   
Less distributions declared to shareholders                                                                        
From net investment income                       $(0.24)        $(0.26)       $(0.26)       $(0.27)       $(0.15)  
Redemption fees added to paid-in capital (d)     $ 0.00(w)      $ 0.00(w)     $ 0.00(w)     $   --        $   --   
                                                 ------         ------        ------        ------        ------   
Net asset value, end of period                   $ 3.93         $ 3.83        $ 3.99        $ 3.99        $ 3.53   
                                                 ======         ======        ======        ======        ======   
Total return (%) (r)(s)(t)                         9.26           2.64          6.84         21.35          7.33(n)
                                                 ------         ------        ------        ------        ------   
Ratios (%) (to average net assets) and                                                                             
Supplemental data:                                                                                                 
Expenses before expense reductions (f)             1.95           1.96          1.97          1.95          1.95(a)
Expenses after expense reductions (f)              1.95           1.96          1.97           N/A           N/A   
Net investment income                              6.13           6.00          6.31          6.79          8.05(a)
Portfolio turnover                                   89             51            68            81            80   
Net assets at end of period (000 omitted)        $  500         $  417        $  347        $  189        $   43   

(a) Annualized.                                                                                                    
(d) Per share data are based on average shares outstanding.                                                        
(f) Ratios do not reflect reductions from fees paid indirectly.                                                    
(g) The per share amount is not in accordance with the net realized and unrealized gain/loss for the period        
    because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and    
    losses at such time.                                                                                           
(i) For the period from the class' inception, July 31, 2002 (Classes 529A, 529B, and 529C), December 31, 2002      
    (Class R), October 31, 2003 (Class R3), April 1, 2005 (Classes R1, R2, R4, and R5) through the stated period   
    end.                                                                                                           
(n) Not annualized.                                                                                                
(r) Certain expenses have been reduced without which performance would have been lower.                            
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would   
    be lower.                                                                                                      
(t) Total returns do not include any applicable sales charges.                                                     
(w) Per share amount was less than $0.01.                                                                          

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MFS HIGH INCOME FUND                                                            

SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF TRUSTEES. The Board of Trustees of 
the MFS funds has adopted procedures by which shareholders may send             
communications to the Board. Shareholders may mail written communications to    
the Board to the attention of the Board of Trustees, [fund name], Massachusetts 
Financial Services Company, 500 Boylston Street, Boston, MA 02116-3741,         
Attention: Frank Tarantino, Independent Chief Compliance Officer of the Fund.   
Shareholder communications must (i) be in writing and be signed by the          
shareholder, (ii) identify the MFS fund to which they relate and (iii) identify 
the class and number of shares held by the shareholder.                         

IF YOU WANT MORE INFORMATION ABOUT MFS HIGH INCOME FUND, THE FOLLOWING          
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:                                      

ANNUAL/SEMIANNUAL REPORTS. These reports contain information about the fund's   
actual investments. Annual reports discuss the effect of recent market          
conditions and investment strategies on the fund's performance during its last  
fiscal year.                                                                    

STATEMENT OF ADDITIONAL INFORMATION (SAI). The SAI, dated June 1, 2007,         
provides more detailed information about the fund and is incorporated into this 
prospectus by reference.                                                        

You can get free copies of the annual/semiannual reports, the SAI and other     
information about the fund, and make inquiries about the fund, by contacting:   

MFS Service Center, Inc.                                      
500 Boylston Street                                           
Boston, MA 02116-3741                                         
Telephone: 1-800-225-2606                                     
Internet: MFS.COM                                             

Information about the fund (including its prospectus, SAI and shareholder       
reports) can be reviewed and copied at the:                                     

Public Reference Room                                         
Securities and Exchange Commission                            
100 F Street, N.E., Room 1580                                 
Washington, D.C., 20549                                       

Information on the operation of the Public Reference Room may be obtained by    
calling the Commission at 202-551-5850. Reports and other information about the 
fund are available on the Edgar Database on the Commission's Internet Web site  
at HTTP://WWW.SEC.GOV, and copies of this information may be obtained, upon     
payment of a duplicating fee, by electronic request at the following e-mail     
address: PUBLICINFO@SEC.GOV or by writing the Public Reference Section at the   
above address.                                                                  

The fund's Investment Company Act file number is 811-2794.

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M F S(R)                                 STATEMENT OF ADDITIONAL INFORMATION    
INVESTMENT MANAGEMENT                    JUNE 1, 2007                           

MFS HIGH INCOME FUND                                                            
A SERIES OF MFS SERIES TRUST III                                                
500 BOYLSTON STREET, BOSTON, MA 02116                                           

This Statement of Additional Information ("SAI") contains additional information
about the Fund and should be read in conjunction with the Fund's Prospectus     
dated June 1, 2007. The Fund's financial statements are incorporated into this  
SAI by reference to the Fund's most recent Annual Report to shareholders. A copy
of the Annual Report accompanies this SAI. You may obtain a copy of the Fund's  
Prospectus and Annual Report without charge by contacting the Fund's transfer   
agent, MFS Service Center, Inc. (please see the back cover of Part II of this   
SAI for address and telephone number).                                          

This SAI is divided into two Parts -- Part I and Part II. Part I contains       
information that is particular to the Fund, while Part II contains information  
that generally applies to all of the funds in the MFS Family of Funds (the "MFS 
Funds"). Each part of this SAI has a variety of appendices which can be found at
the end of Part I and Part II, respectively.                                    

THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE  
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.              

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STATEMENT OF ADDITIONAL INFORMATION (SAI) - PART I                              

Part I of this SAI contains information that is particular to the Fund.         

DEFINITIONS ............................................................   XX   
MANAGEMENT OF THE FUND..................................................   XX   
SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS............................   XX   
INVESTMENT STRATEGIES, RISKS, AND RESTRICTIONS..........................   XX   
TAX CONSIDERATIONS......................................................   XX   
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS........................   XX   
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS..   XX   
APPENDIX A - TRUSTEE COMPENSATION AND COMMITTEES........................   XX   
APPENDIX B - SHARE OWNERSHIP............................................   XX   
APPENDIX C - PORTFOLIO MANAGER(S).......................................   XX   
APPENDIX D - CERTAIN SERVICE PROVIDER COMPENSATION......................   XX   
APPENDIX E - SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS...............   XX   
APPENDIX F - PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS...........   XX   

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DEFINITIONS                                                                     
"Fund" - MFS High Income Fund, a series of the Trust                            

"Trust" - MFS Series Trust III, a Massachusetts business trust, organized on    
December 15, 1977. The Trust was known as "Massachusetts Financial High Income  
Trust" until it's name was changed on August 20, 1993.                          

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

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

"MFSC" - MFS Service Center, Inc., a Delaware corporation.                      

"Prospectus" - The Prospectus of the Fund, dated June 1, 2007, as amended or    
supplemented from time to time.                                                 

MANAGEMENT OF THE FUND                                                          

THE FUND                                                                        

The Fund is a diversified open-end management investment company.               

TRUSTEES AND OFFICERS - IDENTIFICATION AND BACKGROUND                           

The identification and background of the Trustees and officers of the Trust are 
set forth in Appendix A to Part II of this SAI.                                 

TRUSTEE COMPENSATION AND COMMITTEES                                             

Compensation paid to the non-interested Trustees for certain specified periods, 
as well as information regarding committees of the Board of Trustees, is set    
forth in Appendix A to this Part I.                                             

SHARE OWNERSHIP                                                                 

Information concerning the ownership of Fund shares by Trustees and officers of 
the Trust as a group, as well as the dollar value range of each Trustee's share 
ownership in the Fund and, on an aggregate basis, in all MFS Funds overseen by  
the Trustee, by investors who are deemed to "control" the Fund, if any, and by  
investors who own 5% or more of any class of Fund shares, if any, is set forth  
in Appendix B to this Part I.                                                   

PORTFOLIO MANAGER(S)                                                            

Information regarding the Fund's portfolio manager(s), including other accounts 
managed, compensation, ownership of Fund shares, and possible conflicts of      
interest, is set forth in Appendix C to this Part I.                            

CERTAIN SERVICE PROVIDER COMPENSATION                                           

Compensation paid by the Fund to certain of its service providers -- for        
advisory services, administrative services, and transfer agency services -- for 
certain specified periods, is set forth in Appendix D to this Part I.           

CUSTODIAN                                                                       

JPMorgan Chase Bank, with a place of business at One Chase Manhattan Plaza, New 
York, NY 10081, serves as a custodian of the assets of the Fund (the            
"Custodian"). The Custodian is responsible for safekeeping and controlling the  
Fund's cash and securities, handling the receipt and delivery of securities,    
collecting interest and dividends on the Fund's investments, serving as the     
Fund's foreign custody manager, and providing reports on foreign securities     
depositaries. An affiliate of the Custodian, J. P. Morgan Investor Services     
Co., with a place of business at 73 Tremont Street, Boston, MA 02108, is        
responsible for maintaining books of original entry and other required books    
and accounts for the Fund and calculating the daily net asset value of each     
class of shares of the Fund. The Fund may invest in securities of the Custodian 
and its affiliates and may deal with the Custodian and its affiliates as        
principal in securities transactions.                                           

The fund has an expense offset arrangement that reduces the fund's custodian    
fees based upon the amount of cash maintained by the fund with its custodian.   

SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS                                    

SALES CHARGES                                                                   

Sales charges paid for certain specified periods in connection with the         
purchase and sale of the Fund's shares are set forth in Appendix E to this      
Part I.                                                                         

DISTRIBUTION PLAN PAYMENTS                                                      

Payments made by the Fund under the Fund's plan in accordance with Rule 12b-1   
under the Investment Company Act of 1940, as amended (the "Distribution Plan"), 
for the Fund's most recent fiscal year, are set forth in Appendix E to this     
Part I.                                                                         

INVESTMENT STRATEGIES, RISKS, AND RESTRICTIONS                                  

INVESTMENT STRATEGIES AND RISKS                                                 

Certain investment strategies and risks are described in Appendix E to Part II  
of this SAI.                                                                    

INVESTMENT RESTRICTIONS                                                         

The Fund has adopted certain investment restrictions which are described in     
Appendix F of Part II of this SAI.                                              

TAX CONSIDERATIONS                                                              

For a discussion of tax considerations, see Part II of this SAI.                

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                                

Brokerage commissions paid by the Fund for certain specified periods,           
information concerning purchases by the Fund of securities issued by its        
regular broker/dealers for its most recent fiscal year, and information         
concerning the amount of transactions and related commissions to broker/dealer  
firms that MFS has determined provide valuable research for the Fund's most     
recent fiscal year, are set forth in Appendix F to this Part I. Portfolio       
transactions and brokerage commissions are more fully described in Part II of   
this SAI under the heading "Portfolio Transactions and Brokerage Commissions."  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS          

Deloitte & Touche LLP is the Independent Registered Public Accounting Firm,     
providing audit services, tax return review, and other related services and     
assistance in connection with the review of various Securities and Exchange     
Commission filings.                                                             

The Fund's Financial Statements and Financial Highlights for the fiscal year    
ended January 31, 2007, are incorporated by reference into this SAI from the    
Fund's Annual Report to shareholders and have been audited by Deloitte & Touche 
LLP, independent registered public accounting firm, as stated in their report,  
which is incorporated herein by reference, and have been so incorporated in     
reliance upon reports of such firm, given upon their authority as experts in    
accounting and auditing. A copy of the Fund's Annual Report accompanies this    
SAI.                                                                            

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                                                             PART I - APPENDIX A

TRUSTEE COMPENSATION AND COMMITTEES                                             

The Fund pays the non-interested Trustees an annual fee plus a fee for each     
meeting attended. In addition, the non-interested Trustees are reimbursed for   
their out-of-pocket expenses.                                                   

TRUSTEE COMPENSATION TABLE                                                      

------------------------------------------------------------------------------- 
                           TRUSTEE    RETIREMENT BENEFITS   TOTAL TRUSTEE FEES
                          FEES FROM    ACCRUED AS PART OF   FROM FUND AND FUND
TRUSTEE NAME                FUND(1)        FUND EXPENSE          COMPLEX(2)     
------------------------------------------------------------------------------- 
INTERESTED TRUSTEES                                                             
------------------------------------------------------------------------------- 
Robert J. Manning             N/A              N/A                  N/A         
------------------------------------------------------------------------------- 
Robert C. Pozen               N/A              N/A                  N/A         
------------------------------------------------------------------------------- 

------------------------------------------------------------------------------- 
NON-INTERESTED TRUSTEES                                                         
------------------------------------------------------------------------------- 
Robert E. Butler            $2,783             N/A                $210,289      
------------------------------------------------------------------------------- 
Lawrence H. Cohn, M.D.      $2,755            $    0              $208,289      
------------------------------------------------------------------------------- 
David H. Gunning            $2,921             N/A                $219,642      
------------------------------------------------------------------------------- 
William R. Gutow            $2,755             N/A                $208,289      
------------------------------------------------------------------------------- 
Michael Hegarty             $2,769             N/A                $209,289      
------------------------------------------------------------------------------- 
J. Atwood Ives              $3,839            $2,108              $285,289      
------------------------------------------------------------------------------- 
Amy B. Lane(3)              $  669             N/A                $ 50,423      
------------------------------------------------------------------------------- 
Lawrence T. Perera          $3,032            $2,314              $228,289      
------------------------------------------------------------------------------- 
J. Dale Sherratt            $3,337            $    0              $250,289      
------------------------------------------------------------------------------- 
Laurie J. Thomsen           $2,769             N/A                $209,289      
------------------------------------------------------------------------------- 
Robert W. Uek               $3,025             N/A                $227,789      
------------------------------------------------------------------------------- 

(1) For the fiscal year ended January 31, 2007.                                 
(2) Information provided is for calendar year 2006. Each Trustee receiving      
compensation served as Trustee of 97 funds within the MFS Fund Complex  
(having aggregate net assets at December 31, 2006, of approximately $102
billion).                                                               
(3) Messrs. Butler and Uek became Trustees of the Fund on January 1, 2006.      
(4) Ms. Lane retired as a Trustee of the Fund on February 22, 2006.             

Retirement Benefit Deferral Plan-- Under a Retirement Benefit Deferral Plan,    
certain Trustees have deferred benefits from a prior retirement plan. The value 
of the benefits is periodically readjusted as though the Trustee had invested   
an equivalent amount in Class A shares of the Fund(s) designated by such        
Trustee. The value of the deferred benefits will be paid to the Trustees upon   
retirement or thereafter. The plan does not obligate a Fund to retain the       
services of any Trustee or pay any particular level of compensation to any      
Trustee. The plan is not funded and a Fund's obligation to pay the Trustee's    
deferred compensation is a general unsecured obligation.                        

COMMITTEES                                                                      

The Board has established the following Committees:                             

------------------------------------------------------------------------------- 
NUMBER OF                         
MEETINGS                          
              IN LAST                                  CURRENT
NAME OF COMMITTEE    FISCAL YEAR      FUNCTIONS                MEMBERS(1)       
------------------------------------------------------------------------------- 
AUDIT COMMITTEE           9       Oversees the accounting      Butler*, Gutow*, 
                           and auditing procedures of   Sherratt*,
                              the Fund and, among other    Thomsen*, and
                     duties, considers the        Uek*
    selection of the
           independent accountants
              for the Fund and the scope
     of the audit, and
           considers the effect on
             the independence of those
      accountants of any
           non-audit services such
              accountants provide to the
         Fund and any audit or
           non-audit services such
          accountants provide to
        other MFS Funds, MFS
              and/or certain affiliates.
         The Committee is also
   responsible for
           establishing procedures
    for the receipt,
            retention, and treatment
             of complaints received by
      the Fund regarding
        accounting, internal
           accounting controls, or
            auditing matters and the
           confidential, anonymous
          submission of concerns
          regarding questionable
              fund accounting matters by
            officers of the Fund and
           employees of the Fund's
       investment adviser,
            administrator, principal
             underwriter, or any other
provider of 
      accounting-related
         services to the Fund.

------------------------------------------------------------------------------- 
COMPLIANCE AND            8       Oversees the development     Butler*, Cohn*,  
GOVERNANCE COMMITTEE              and implementation of the    Gunning*,        
                            Fund's regulatory and        Gutow*, and
                          fiduciary compliance         Sherratt*
             policies, procedures, and
            practices under the 1940
             Act, and other applicable
              laws, as well as oversight
             of compliance policies of
         the Fund's investment
             adviser and certain other
             service providers as they
              relate to Fund activities.
          The Fund's Independent
            Chief Compliance Officer
           reports directly to the
             Committee and assists the
             Committee in carrying out
            its responsibilities. In
           addition, the Committee
     advises and makes
          recommendations to the
    Board on matters
      concerning Trustee
 practices and
              recommendations concerning
            the functions and duties
            of the committees of the
Board.      
------------------------------------------------------------------------------- 
CONTRACTS REVIEW          5       Requests, reviews, and       All              
COMMITTEE                         considers the information    non-interested   
                                deemed reasonably            Trustees of the
                               necessary to evaluate the    Board (Butler,
                               terms of the investment      Cohn, Gunning,
                                advisory and principal       Gutow, Hegarty,
                              underwriting agreements      Ives, Perera,
                          and the Plan of              Sherratt,
                         Distribution under Rule      Thomsen,
                         12b-1 that the Fund          and Uek)
        proposes to renew or
             continue, and to make its
          recommendations to the
             full Board of Trustees on
  these matters.
------------------------------------------------------------------------------- 
NOMINATION AND            1       Recommends qualified         All              
COMPENSATION                      candidates to the Board in   non-interested   
COMMITTEE                         the event that a position    Trustees of the  
                               is vacated or created. The   Board (Butler,
                               Committee will consider      Cohn, Gunning,
                                recommendations by           Gutow, Hegarty,
                              shareholders when a          Ives, Perera,
                          vacancy exists.              Sherratt,
                         Shareholders wishing to      Thomsen,
                         recommend candidates for     and Uek)
             Trustee for consideration
              by the Committee may do so
            by writing to the Fund's
              Secretary at the principal
           executive office of the
              Fund. Such recommendations
          must be accompanied by
    biographical and
            occupational data on the
        candidate (including
         whether the candidate
           would be an "interested
           person" of the Fund), a
          written consent by the
              candidate to be named as a
           nominee and to serve as
              Trustee if elected, record
             and ownership information
        for the recommending
            shareholder with respect
      to the Fund, and a
      description of any
   arrangements or
            understandings regarding
         recommendation of the
 candidate for
      consideration. The
     Committee is also
          responsible for making
          recommendations to the
       Board regarding any
          necessary standards or
              qualifications for service
     on the Board. The
              Committee also reviews and
            makes recommendations to
       the Board regarding
        compensation for the
            non-interested Trustees.
------------------------------------------------------------------------------- 
PORTFOLIO TRADING         8       Oversees the policies,       Cohn*, Gunning*, 
AND MARKET REVIEW                 procedures, and practices    Hegarty*, and    
COMMITTEE                         of the Fund with respect     Perera*          
             to brokerage transactions
       involving portfolio
       securities as those
         policies, procedures,
             and practices are carried
      out by MFS and its
             affiliates. The Committee
     also oversees the
         administration of the
       Fund's proxy voting
           policies and procedures
            by MFS. In addition, the
              Committee receives reports
          from MFS regarding the
             policies, procedures, and
            practices of MFS and its
            affiliates in connection
            with their marketing and
          distribution of shares
of the Fund.
------------------------------------------------------------------------------- 
PRICING COMMITTEE         8       Oversees the determination   Hegarty*,        
                         of the value of the          Perera*,
                          portfolio securities and     Thomsen*,
                         other assets held by the     and Uek*
          Fund and determines or
           causes to be determined
     the fair value of
             securities and assets for
           which market quotations
    are not "readily
            available" in accordance
          with the 1940 Act. The
       Committee delegates
              primary responsibility for
      carrying out these
             functions to MFS and MFS'
      internal valuation
         committee pursuant to
        pricing policies and
              procedures approved by the
            Committee and adopted by
         the full Board. These
    policies include
       methodologies to be
      followed by MFS in
        determining the fair
       values of portfolio
        securities and other
           assets held by the Fund
    for which market
              quotations are not readily
            available. The Committee
           meets periodically with
       the members of MFS'
      internal valuation
           committee to review and
              assess the quality of fair
       valuation and other
          pricing determinations
        made pursuant to the
           Fund's pricing policies
          and procedures, and to
         review and assess the
           policies and procedures
             themselves. The Committee
      also exercises the
           responsibilities of the
             Board under the Amortized
             Cost Valuation Procedures
            approved by the Board on
             behalf of each Fund which
         holds itself out as a
          "money market fund" in
             accordance with Rule 2a-7
       under the 1940 Act.
------------------------------------------------------------------------------- 
SERVICES CONTRACTS        8       Reviews and evaluates the    Gunning*,        
COMMITTEE                         contractual arrangements     Sherratt*,       
                          of the Fund relating to      Thomsen*,
                         transfer agency,             and Uek*
            administrative services,
        custody, pricing and
             bookkeeping services, and
        lending of portfolio
         securities, and makes
          recommendations to the
             full Board of Trustees on
  these matters.
------------------------------------------------------------------------------- 

(1) The Trustees' identification and background are set forth in Appendix A to  
Part II.                                                                
  * Non-interested or independent Trustees. Although Mr. Ives is not a member of
all Committees of the Board, he is invited to and attends many of the   
Committees' meetings in his capacity as Chair of the Trustees.          

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                                                             PART I - APPENDIX B

SHARE OWNERSHIP                                                                 

OWNERSHIP BY TRUSTEES AND OFFICERS                                              

As of February 28, 2007, the current Trustees and officers of the Trust as a    
group owned less than 1% of any class of the Fund's shares. The following table 
shows the dollar range of equity securities beneficially owned by each current  
Trustee in the Fund and, on an aggregate basis, in all MFS Funds overseen by    
each current Trustee, as of December 31, 2006.                                  

The following dollar ranges apply:                                              

N. None                                                                         
A. $1 - $10,000                                                                 
B. $10,001 - $50,000                                                            
C. $50,001 - $100,000                                                           
D. Over $100,000                                                                

------------------------------------------------------------------------------- 
                                                     AGGREGATE DOLLAR RANGE OF
                                                      EQUITY SECURITIES IN ALL
                         DOLLAR RANGE OF EQUITY      MFS FUNDS OVERSEEN BY
NAME OF TRUSTEE             SECURITIES IN THE FUND             TRUSTEE          
------------------------------------------------------------------------------- 
INTERESTED TRUSTEES                                                             
------------------------------------------------------------------------------- 
Robert J. Manning                     N                           D             
------------------------------------------------------------------------------- 
Robert C. Pozen                       N                           D             
------------------------------------------------------------------------------- 
NON-INTERESTED TRUSTEES                                                         
------------------------------------------------------------------------------- 
Robert E. Butler                      N                           D             
------------------------------------------------------------------------------- 
Lawrence H. Cohn, M.D.                N                           D             
------------------------------------------------------------------------------- 
David H. Gunning                      N                           D             
------------------------------------------------------------------------------- 
William R. Gutow                      N                           D             
------------------------------------------------------------------------------- 
Michael Hegarty                       N                           D             
------------------------------------------------------------------------------- 
J. Atwood Ives                        C                           D             
------------------------------------------------------------------------------- 
Lawrence T. Perera                    B                           D             
------------------------------------------------------------------------------- 
J. Dale Sherratt                      N                           D             
------------------------------------------------------------------------------- 
Laurie J. Thomsen                     N                           D             
------------------------------------------------------------------------------- 
Robert W. Uek                         N                           D             
------------------------------------------------------------------------------- 

25% OR GREATER OWNERSHIP OF THE FUND                                            

The following table identifies those investors who own 25% or more of the       
Fund's shares (all share classes taken together) as of February 28, 2007, and   
are therefore presumed to control the Fund. All holdings are of record unless   
otherwise indicated.                                                            

------------------------------------------------------------------------------- 
NAME AND ADDRESS OF INVESTOR               PERCENTAGE OWNERSHIP                 
------------------------------------------------------------------------------- 
N/A                                        N/A                                  
------------------------------------------------------------------------------- 

5% OR GREATER OWNERSHIP OF SHARE CLASS                                          

The following table identifies those investors who own 5% or more of any class  
of the Fund's shares as of February 28, 2007. All holdings are of record unless 
otherwise indicated.                                                            

------------------------------------------------------------------------------- 
NAME AND ADDRESS OF INVESTOR                     PERCENTAGE OWNERSHIP           
------------------------------------------------------------------------------- 
Citigroup Global Markets Inc                                                    
Surpas House Account                                                            
ATTN: Cindy Tempesta 7th Floor                                                  
333 W 34th Street                                5.96% of Class B Shares        
New York NY 10001- 2402                          6.43% of Class C Shares        
------------------------------------------------------------------------------- 
Merrill Lynch Pierce Fenner & Smith, Inc.                                       
For the Sole Benefit of its Customers            9.17% of Class A Shares        
4800 Deerlake Drive East, 3rd Floor              5.20% of Class B Shares        
Jacksonville, FL 32246-6484                      12.38% of Class C Shares       
------------------------------------------------------------------------------- 
State Street Bank as Custodian of MFS                                           
Growth Allocation Fund 52Y6                                                     
Attn: LCC 3rd FL MFS GRP                                                        
2 Avenue De Lafayette                                                           
Boston, MA 02111-1724                            52.42% of Class I Shares       
------------------------------------------------------------------------------- 
State Street Bank as Custodian of MFS                                           
Moderate Allocation Fund 52Y5                                                   
Attn: LCC 3rd FL MFS GRP                                                        
2 Avenue De Lafayette                                                           
Boston, MA 02111-1724                            44.00% of Class I Shares       
------------------------------------------------------------------------------- 
MFS 529 Savings Plan                             100% of Class 529A Shares      
500 Boylston Street                              100% of Class 529B Shares      
Boston, MA 02116                                 100% of Class 529C Shares      
------------------------------------------------------------------------------- 
Melissa Cohn, Trustee                                                           
Manhattan Mortgage 401(k) Plan                                                  
MFS Investment Management                                                       
500 Boylston St                                                                 
Boston, MA 02116                                 5.09% of Class R Shares        
------------------------------------------------------------------------------- 
Chang,Chen,Sides & Huang Trustees                                               
Actiontec Electronics, Inc 401K                                                 
MFS Investment Management                                                       
500 Boylston St                                                                 
Boston, MA 02116                                 6.47% of Class R Shares        
------------------------------------------------------------------------------- 
Jeffrey W. Smith Trustee                                                        
Pottstown Medical Specialists, Inc                                              
MFS Investment Management                                                       
500 Boylston St                                                                 
Boston, MA 02116                                 7.94% of Class R Shares        
------------------------------------------------------------------------------- 
Fields,Tsai,Karamichos,Colodny,                                                 
Greenfield Trustees                                                             
MFS Investment Management                                                       
500 Boylston St                                                                 
Boston, MA 02116                                 6.30% of Class R Shares        
------------------------------------------------------------------------------- 
MFS Heritage Trust Company TR                                                   
Houston Exploration CO 401K Plan                                                
MFS Investment Management                                                       
500 Boylston St                                                                 
Boston, MA 02116                                 8.33% of Class R Shares        
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Gita 401K PSP                                                                   
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           14.66% of Class R1 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
IOP Publishing Inc 401K PSP                                                     
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           13.57% of Class R1 Shares      
------------------------------------------------------------------------------- 
Massachusetts Financial Services Co                                             
Attn: Thomas Hastings 9th FL                                                    
500 Boylston St                                                                 
Boston, MA 02116                                 13.29% of Class R1 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Maryland Mechanical Systems Plan                                                
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           11.22% of Class R1 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Neffsville Plumbing & Heating PSP                                               
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           6.54% of Class R1 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
OBARS Machine & Tool Company 401K Plan                                          
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           5.42% of Class R1 Shares       
------------------------------------------------------------------------------- 
John Uhrynowich FBO                                                             
Harmony Heating Corporation                                                     
401K Profit Sharing Plan & Trust                                                
MFS Investment Management                                                       
500 Boylston St                                                                 
Boston, MA 02116                                 5.23% of Class R1 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Custodian                                                    
QSAC, Inc 403(B) Plan                                                           
MFS Investment Management                                                       
500 Boylston St                                                                 
Boston, MA 02116                                 16.99% of Class R2 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Ultra Modern Pool & Patio 401K Plan                                             
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           22.09% of Class R2 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Digital Cyclone Inc 401K Plan                                                   
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           15.64% of Class R2 Shares      
------------------------------------------------------------------------------- 
Massachusetts Financial Services Co                                             
Attn: Thomas Hastings 9th FL                                                    
500 Boylston St                                                                 
Boston, MA 02116-3741                            12.55% of Class R2 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Tile & Carpet Center PSP                                                        
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           9.43% of Class R2 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Jan Companies 401K Plan                                                         
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           8.67% of Class R2 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Animal Hospital of Dauphin CTY Plan                                             
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           7.28% of Class R2 Shares       
------------------------------------------------------------------------------- 
Dieker,Walden & Bauer Trustees                                                  
IOLA Pharmacy, INC 401K PS Plan                                                 
MFS Investment Management                                                       
500 Boylston St                                                                 
Boston, MA 02116                                 5.43% of Class R3 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Scales Air Compressor EE Savings Plan                                           
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           27.31% of Class R3 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Albert Pharmacy Srvcs, Inc Retirement                                           
Plan                                                                            
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           5.60% of Class R3 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
IATSE Local 11 401K Annuity Plan                                                
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           11.43% of Class R4 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Marchon Eyewear Retirement Plan Savings                                         
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           10.04% of Class R4 Shares      
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Norris Electric Co-Op PensPlan                                                  
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           6.50% of Class R4 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Wendel 401K Plan                                                                
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           6.08% of Class R4 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Alliance Radiology Inc PSP                                                      
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           5.63% of Class R4 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
Physicians Women Inc Retirement Plan                                            
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           5.63% of Class R4 Shares       
------------------------------------------------------------------------------- 
MFS Heritage Trust Co FBO                                                       
DRS Winston & Hoffman PSP                                                       
PO Box 79377                                                                    
Atlanta, GA 30357-7377                           5.17% of Class R4 Shares       
------------------------------------------------------------------------------- 
Massachusetts Financial Services Co                                             
Attn: Thomas Hastings 9th FL                                                    
500 Boylston St                                                                 
Boston, MA 02116-3741                            100% of Class R5 Shares        
------------------------------------------------------------------------------- 

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                                                             PART I - APPENDIX C

PORTFOLIO MANAGER(S)                                                            

COMPENSATION                                                                    

Portfolio manager total cash compensation is a combination of base salary and   
performance bonus:                                                              

Base Salary - Base salary represents a smaller percentage of portfolio manager  
total cash compensation (generally below 33%) than incentive compensation.      

Performance Bonus - Generally, incentive compensation represents a majority of  
portfolio manager total cash compensation.                                      

The performance bonus is based on a combination of quantitative and qualitative 
factors, with more weight given to the former (generally over 60%) and less     
weight given to the latter.                                                     

The quantitative portion is based on pre-tax performance of all of the accounts 
managed by the portfolio manager (which includes the Fund and any other         
accounts managed by the portfolio manager) over a one-, three-, and five-year   
period relative to the appropriate Lipper peer group universe and/or one or     
more benchmark indices with respect to each account. Primary weight is given to 
portfolio performance over a three-year time period with lesser consideration   
given to portfolio performance over one- and five-year periods (adjusted as     
appropriate if the portfolio manager has served for shorter periods).           

The qualitative portion is based on the results of an annual internal peer      
review process (conducted by other portfolio managers, analysts, and traders)   
and management's assessment of overall portfolio manager contributions to       
investor relations and the investment process (distinct from fund and other     
account performance).                                                           

Portfolio managers also typically benefit from the opportunity to participate   
in the MFS Equity Plan. Equity interests and/or options to acquire equity       
interests in MFS or its parent company are awarded by management, on a          
discretionary basis, taking into account tenure at MFS, contribution to the     
investment process, and other factors.                                          

Finally, portfolio managers are provided with a benefits package including a    
defined contribution plan, health coverage and other insurance, which are       
available to other employees of MFS on substantially similar terms. The         
percentage such benefits represent of any portfolio manager's compensation      
depends upon the length of the individual's tenure at MFS and salary level, as  
well as other factors.                                                          

OWNERSHIP OF FUND SHARES                                                        

The following table shows the dollar range of equity securities of the Fund     
beneficially owned by the Fund's portfolio manager(s) as of the Fund's fiscal   
year ended January 31, 2007. The following dollar ranges apply:                 

N. None                                                                         
A. $1 - $10,000                                                                 
B. $10,001 - $50,000                                                            
C. $50,001 - $100,000                                                           
D. $100,001 - $500,000                                                          
E. $500,001 - $1,000,000                                                        
F. Over $1,000,000                                                              

----------------------------------------------------------------------------    
NAME OF PORTFOLIO MANAGER        DOLLAR RANGE OF EQUITY SECURITIES IN FUND      
----------------------------------------------------------------------------    
John Addeo                                           D                          
----------------------------------------------------------------------------    
David P. Cole                                        N                          
----------------------------------------------------------------------------    
OTHER ACCOUNTS                                                                  

In addition to the Fund, the Fund's portfolio manager is responsible (either    
individually or jointly) for the day-to-day management of certain other         
accounts, the number and total assets of which, as of the Fund's fiscal year    
ended January 31, 2007, were as follows:                                        

--------------------------------------------------------------------------------
REGISTERED INVESTMENT      OTHER POOLED           
                  COMPANIES*       INVESTMENT VEHICLES    OTHER ACCOUNTS
--------------------------------------------------------------------------------
             NUMBER OF                NUMBER OF   TOTAL     NUMBER OF  TOTAL
NAME            ACCOUNTS  TOTAL ASSETS  ACCOUNTS    ASSETS    ACCOUNTS   ASSETS 
--------------------------------------------------------------------------------
John Addeo         14     $4.8 billion     3        $538         2        $549  
                                                   million               million
--------------------------------------------------------------------------------
David P. Cole      11     $4.4 billion     2        $266         0         N/A  
                             million
--------------------------------------------------------------------------------

* Includes the Fund.                                                            

Advisory fees are not based upon performance of any of the accounts identified  
in the table above.                                                             

POTENTIAL CONFLICTS OF INTEREST                                                 

MFS seeks to identify potential conflicts of interest resulting from a          
portfolio manager's management of both the Fund and other accounts, and has     
adopted policies and procedures designed to address such potential conflicts.   

The management of multiple funds and accounts (including proprietary accounts)  
may give rise to potential conflicts of interest if the funds and accounts have 
different objectives and strategies, benchmarks, time horizons and fees as a    
portfolio manager must allocate his or her time and investment ideas across     
multiple funds and accounts. In certain instances there may be securities which 
are suitable for the Fund's portfolio as well as for accounts of MFS or its     
subsidiaries with similar investment objectives. A Fund's trade allocation      
policies may give rise to conflicts of interest if the Fund's orders do not get 
fully executed or are delayed in getting executed due to being aggregated with  
those of other accounts of MFS or its subsidiaries. A portfolio manager may     
execute transactions for another fund or account that may adversely impact the  
value of the Fund's investments. Investments selected for funds or accounts     
other than the Fund may outperform investments selected for the Fund.           

When two or more clients are simultaneously engaged in the purchase or sale of  
the same security, the securities are allocated among clients in a manner       
believed by MFS to be fair and equitable to each. It is recognized that in some 
cases this system could have a detrimental effect on the price or volume of the 
security as far as the Fund is concerned. In most cases, however, MFS believes  
that the Fund's ability to participate in volume transactions will produce      
better executions for the Fund.                                                 

MFS does not receive a performance fee for its management of the Fund. As a     
result, MFS and/or a portfolio manager may have a financial incentive to        
allocate favorable or limited opportunity investments or structure the timing   
of investments to favor accounts other than the Fund - for instance, those that 
pay a higher advisory fee and/or have a performance fee.                        

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                                                             PART I - APPENDIX D

CERTAIN SERVICE PROVIDER COMPENSATION                                           

The Fund paid compensation for advisory services, administrative services, and  
transfer agency services, over the specified periods as follows. For            
information regarding sales charges and distribution payments paid to MFD, see  
Appendix E to this Part I.                                                      

                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------    
                     NET AMOUNT PAID                               NET AMOUNT PAID TO       
  FISCAL YEAR           TO MFS FOR            AMOUNT WAIVED        MFSC FOR TRANSFER        
     ENDED          ADVISORY SERVICES            BY MFS            AGENCY SERVICES(1)       
----------------------------------------------------------------------------------------    
                                                                                            
January 31, 2007        $5,708,387               $     0               $1,127,639           
----------------------------------------------------------------------------------------    
January 31, 2006        $6,322,478                 N/A                 $1,458,523           
----------------------------------------------------------------------------------------    
January 31, 2005        $6,943,866               $50,257               $1,441,274           
----------------------------------------------------------------------------------------    

----------------------------------------------------------------------------------------    
                     NET AMOUNT PAID     NET AMOUNT PAID TO MFS                             
                    TO MFS FOR GENERAL     FOR RETIREMENT PLAN     NET AMOUNT PAID TO       
  FISCAL YEAR         ADMINISTRATIVE         ADMINISTRATION         MFD FOR PROGRAM         
     ENDED               SERVICES            AND SERVICES(2)     MANAGEMENT SERVICES(4)     
----------------------------------------------------------------------------------------    
January 31, 2007         $204,086               $8,304                  $3,609              
----------------------------------------------------------------------------------------    
January 31, 2006         $168,479               $2,670(3)               $3,202              
----------------------------------------------------------------------------------------    
January 31, 2005         $132,511               $  285                  $2,260              
----------------------------------------------------------------------------------------    
(1) In addition to the fees disclosed, the Fund reimbursed MFSC for certain out-of-pocket   
    expenses and for payments made under agreements with affiliated and unaffiliated        
    entities that provide shareholder services in an amount equal to $331,526 for the       
    fiscal year ended January 31, 2007.                                                     
(2) Payment solely from assets attributable to Class R1, R2, R3, R4 and R5 shares.          
(3) With respect to Class R1, R2, R4 and R5 shares, for the period from their initial public
    offering on April 1, 2005.                                                              
(4) Payment solely from assets attributable to Class 529A, 529B, and 529C shares.           

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                                                        [Enlarge/Download Table]

                                                             PART I - APPENDIX E         

SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS                                             

SALES CHARGES                                                                            

The following sales charges were paid during the specified periods:                      

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

                  CLASS A INITIAL SALES CHARGES:         CDSC PAID TO MFD ON:            
-----------------------------------------------------------------------------------------
                                         REALLOWED TO                                    
                              RETAINED    FINANCIAL     CLASS A     CLASS B     CLASS C  
FISCAL YEAR END      TOTAL     BY MFD   INTERMEDIARIES   SHARES      SHARES     SHARES   
-----------------------------------------------------------------------------------------
                                                                                         
January 31, 2007    $437,970  $ 68,412     $369,558      $ 1,601    $367,547    $ 3,465  
-----------------------------------------------------------------------------------------
January 31, 2006    $639,511  $101,331     $538,180      $ 6,423    $692,477    $ 7,976  
-----------------------------------------------------------------------------------------
January 31, 2005    $862,468  $134,530     $727,938      $33,849    $996,203    $35,896  
-----------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------
                CLASS 529A INITIAL SALES CHARGES:         CDSC PAID TO MFD ON:           
-----------------------------------------------------------------------------------------
                                         REALLOWED TO                                    
                              RETAINED    FINANCIAL    CLASS 529A  CLASS 529B  CLASS 529C
FISCAL YEAR END      TOTAL     BY MFD   INTERMEDIARIES   SHARES      SHARES      SHARES  
-----------------------------------------------------------------------------------------
January 31, 2007    $  5,289  $    916     $  4,373         N/A     $     26    $     0  
-----------------------------------------------------------------------------------------
January 31, 2006    $  4,592  $    746     $  3,846         N/A     $      0    $     0  
-----------------------------------------------------------------------------------------
January 31, 2005    $  6,710  $  1,087     $  5,623         N/A     $    480    $   129  
-----------------------------------------------------------------------------------------

DISTRIBUTION PLAN PAYMENTS                                                               

During the fiscal year ended January 31, 2007, the Fund made the following Distribution  
Plan payments:                                                                           

-----------------------------------------------------------------------------------------
                                 AMOUNT OF DISTRIBUTION AND/OR SERVICE FEES:             
-----------------------------------------------------------------------------------------
                                                                PAID TO FINANCIAL        
CLASS OF SHARES         PAID BY FUND    RETAINED BY MFD         INTERMEDIARIES(1)        
-----------------------------------------------------------------------------------------
Class A Shares           $1,972,520       $  430,413                $1,542,107           
-----------------------------------------------------------------------------------------
Class B Shares           $2,295,329       $1,705,198                $  590,131           
-----------------------------------------------------------------------------------------
Class C Shares           $  949,671       $   51,973                $  897,698           
-----------------------------------------------------------------------------------------
Class I Shares              N/A               N/A                      N/A               
-----------------------------------------------------------------------------------------
Class 529A Shares        $    2,775       $    1,100                $    1,675           
-----------------------------------------------------------------------------------------
Class 529B Shares        $    1,743       $    1,404                $      339           
-----------------------------------------------------------------------------------------
Class 529C Shares        $    4,527       $    1,152                $    3,375           
-----------------------------------------------------------------------------------------
Class R Shares                                                                           
(formerly Class                                                                          
R1 Shares)               $   25,859       $    4,507                $   21,352           
-----------------------------------------------------------------------------------------
Class R1 Shares          $    2,086       $      553                $    1,533           
-----------------------------------------------------------------------------------------
Class R2 Shares          $    1,744       $      365                $    1,379           
-----------------------------------------------------------------------------------------
Class R3 Shares                                                                          
(formerly Class                                                                          
R1 Shares)               $    8,848       $      764                $    8,084           
-----------------------------------------------------------------------------------------
Class R4 Shares          $    6,374       $    1,175                $    5,199           
-----------------------------------------------------------------------------------------
Class R5 Shares             N/A               N/A                      N/A               
-----------------------------------------------------------------------------------------

(1) May include amounts paid to financial intermediaries affiliated with MFD.            

Amounts retained by MFD may represent fees paid to MFD but not yet reallowed to          
intermediaries as of the close of the period, compensation to MFD for                    
commissions advanced by MFD to financial intermediaries upon sale of Fund                
shares, and/or compensation for MFD's distribution and shareholder servicing             
costs.                                                                                   

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                                                           PART I - APPENDIX F

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                                

Brokerage Commissions                                                           

The Following brokerage commissions were paid by the Fund during the specified  
time periods:                                                                   

-------------------------------------------------------------------------       
FISCAL YEAR END                   BROKERAGE COMMISSIONS PAID BY FUND            
-------------------------------------------------------------------------       
January 31, 2007                               $99,486                          
-------------------------------------------------------------------------       
January 31, 2006                               $35,478                          
-------------------------------------------------------------------------       
January 31, 2005                               $119,211                         
-------------------------------------------------------------------------       

Securities Issued By Regular Broker/Dealers                                     

During the fiscal year ended January 31,2007, the Fund purchased securities     
issued by the following regular broker/dealers of the Fund, which had the       
following values as of January 31,2007:                                         

---------------------------------------------------------------------------     
BROKER/DEALER                              VALUE OF SECURITIES                  
---------------------------------------------------------------------------     
Lehman Brothers                                  $772,587                       
---------------------------------------------------------------------------     
Morgan Stanley                                  $1,367,755                      
---------------------------------------------------------------------------     

Transactions with Research Firms                                                

During the fiscal year ended January 31, 2007, the Fund allocated the following 
amount of transactions, and related commissions, to broker/dealer firms that    
have been deemed by MFS to provide valuable Research ("Research Firms"). The    
provision of Research was not necessarily a factor in the placement of this     
business with such Research Firms. (1)                                          

------------------------------------------------------------------------------- 
DOLLAR AMOUNT OF TRANSACTIONS WITH      COMMISSIONS PAID ON TRANSACTIONS WITH   
RESEARCH FIRMS                                      RESEARCH FIRMS              
------------------------------------------------------------------------------- 
$48,058,299                                            $57,809                  
------------------------------------------------------------------------------- 
(1) The amounts shown do not include transactions directed to electronic        
communication networks (ECNs) owned by the Research Firms.              

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STATEMENT OF ADDITIONAL INFORMATION                                             

PART II                                                                         

Part II of this SAI, updated through September 1, 2006, as amended or           
supplemented from time to time, describes policies and practices that apply to  
the Funds in the MFS Family of Funds. References in this Part II to a "Fund"    
mean each Fund in the MFS Family of Funds, unless noted otherwise. References   
in this Part II to a "Trust" mean the Massachusetts business trust of which the 
Fund is a series, or, if the Fund is itself a Massachusetts business trust,     
references to a "Trust" shall mean the Fund.                                    

TABLE OF CONTENTS                                                               

I.    Definitions........................................................     2 

II.   Management of the Fund.............................................     2 

III.  Sales Charge Waivers...............................................     7 

IV.   Distribution Plan..................................................     7 

V.    Financial Intermediary Compensation................................     9 

VI.   Investment Techniques, Practices, Risks and Restrictions...........    10 

VII.  Net Income and Distributions.......................................    10 

VIII. Tax Considerations.................................................    11 

IX.   Portfolio Transactions and Brokerage Commissions...................    22 

X.    Disclosure of Portfolio Holdings...................................    24 

XI.   Determination of Net Asset Value...................................    28 

XII.  Shareholder Services...............................................    30 

XIII. Description of Shares, Voting Rights and Liabilities ..............    32 

Appendix A. Trustees and Officers - Identification and Background .......    34 

Appendix B. Proxy Voting Policies and Procedures.........................    39 

Appendix C. Waivers of Sales Charges.....................................    69 

Appendix D. Financial Intermediary Compensation..........................    77 

Appendix E. Investment Strategies and Risks..............................    88 

Appendix F. Investment Restrictions......................................   117 

Appendix G. Recipients of Non-Public Portfolio Holdings on an Ongoing           
           Basis.........................................................  120

Appendix H. Description of Bond Ratings..................................   122 

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I. DEFINITIONS                                                              

 "Alliance Plans" - include retirement plans with respect to which MFS (or one
of its affiliates) has entered into an administrative arrangement with a    
third party to provide certain recordkeeping and/or administrative services.

"Financial intermediary" - includes any broker, dealer, bank (including bank
trust departments), registered investment adviser, financial planner,       
retirement plan administrator, third-party administration, and any other    
 institutions having a selling, administration or other similar agreement with
MFD, MFS or one of its affiliates.                                          

"Majority Shareholder Vote" - as defined currently in the 1940 Act to be the
lesser of (i) 67% or more of the voting securities present at a meeting at  
which holders of voting securities representing more than 50% of the        
outstanding voting securities are present or represented by proxy, or (ii)  
more than 50% of the outstanding voting securities.                         

"MFS Serviced Plans" - include retirement plans for which MFS (or one of its
affiliates) is responsible for providing participant recordkeeping services.

"1940 Act"- the Investment Company Act of 1940 and the rules and regulations
thereunder, as amended from time to time, and as such Act, rules or         
regulations are interpreted by the Securities and Exchange Commission.      

II. MANAGEMENT OF THE FUND                                                  
> TRUSTEES/OFFICERS                                                             

Board Oversight -- The Board of Trustees which oversees the Fund provides   
broad supervision over the business and operations of the Fund.             

Trustees and Officers -- Identification and Background -- The identification
and background of the Trustees and Officers of the Trust are set forth in   
Appendix A of this Part II.                                                 

> INVESTMENT ADVISER                                                            

MFS provides the Fund with investment advisory services. MFS and its        
predecessor organizations have a history of money management dating from    
1924. MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services   
 Holdings, Inc., which in turn is an indirect majority-owned subsidiary of Sun
Life Financial, Inc. (a diversified financial services company).            

Unless otherwise noted, MFS votes proxies on behalf of the Funds pursuant to
 the proxy voting policies described in Appendix B to this SAI Part II (except
for the MFS Union Standard Equity Fund, for which JMR Financial, Inc., votes
proxies as described in Appendix B to this SAI Part II). Information        
 regarding how each Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, 2006 is available without    
 charge by visiting MFS.COM and clicking on "Proxy Voting" and by visiting the
SEC's Web site at http://www.sec.gov.                                       

INVESTMENT SUB-ADVISER - MFS has engaged Sun Capital Advisers LLC (referred 
to as Sun Capital or the Sub-Adviser) to act as sub-adviser with respect to 
the real estate related portion of the MFS Diversified Income Fund's        
portfolio. Sun Capital is located at One Sun Life Executive Park, Wellesley 
Hills, Massachusetts 02481. Sun Capital is an indirect wholly-owned         
subsidiary of Sun Life Financial Inc. ("Sun Life Financial"), a corporation 
organized in Canada as well as an affiliate of MFS. Sun Life Financial and  
its affiliates currently transact business in Canada, the United States and 
Asia Pacific region. Sun Life Financial is a reporting company under the    
 Securities Exchange Act of 1934 with common shares listed on the Toronto, New
York, and Philippine stock exchanges. Sun Life Financial Inc. is located at 
150 King Street West, Toronto, Canada, M5H 1J9.                             

The Sub-Adviser is a Delaware limited liability company and a registered    
investment adviser. The Sub-Adviser provides investment management and      
supervisory services to mutual funds and institutional accounts.            

INVESTMENT ADVISORY AGREEMENT -- MFS manages the Fund pursuant to an        
Investment Advisory Agreement (the "Advisory Agreement"). Under the Advisory
Agreement, MFS provides the Fund with investment advisory services. Subject 
to such policies as the Trustees may determine, MFS makes investment        
 decisions for the Fund. For these services, MFS receives an annual investment
 advisory fee, computed and paid monthly, as disclosed in the Prospectus under
the heading "Management of the Fund(s)."                                    

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

 The Trust pays the compensation of the Trustees who are "not affiliated" with
MFS and all expenses of the Fund incurred in its operation and offering of  
 shares (other than those assumed by MFS in writing) including but not limited
to: management fees; Rule 12b-1 fees; administrative services fees;         
retirement plan administration services fees; program management services   
fees; governmental fees; interest charges; taxes; membership dues in the    
Investment Company Institute allocable to the Fund; fees and expenses of    
 independent auditors, of legal counsel, and of any transfer agent, registrar,
or dividend disbursing agent of the Fund; expenses of repurchasing and      
redeeming shares and servicing shareholder accounts; expenses of preparing, 
printing and mailing stock certificates, shareholder reports, notices, proxy
statements, confirmations, periodic investment statements and reports to    
 governmental officers and commissions; brokerage and other expenses connected
with the execution, recording, and settlement of portfolio security         
transactions; insurance premiums; fees and expenses of the Fund's custodian,
for all services to the Fund, including safekeeping of funds and securities 
and maintaining required books and accounts; expenses of calculating the net
asset value of shares of the Fund; organizational and start up costs; and   
such non-recurring or extraordinary expenses as may arise, including those  
relating to actions, suits, or proceedings to which the Fund is a party or  
otherwise may have an exposure, and the legal obligation which the Fund may 
have to indemnify the Trust's Trustees and officers with respect thereto.   
Expenses relating to the issuance, registration and qualification of shares 
of the Fund and the preparation, printing and mailing of prospectuses for   
such purposes are borne by the Fund except to the extent that the           
Distribution Agreement with MFS Fund Distributors, Inc. ("MFD"), provides   
that MFD is to pay all of such expenses. 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.        

The Advisory Agreement has an initial two-year term and continues in effect 
thereafter only if such continuance is specifically approved at least       
annually by the Board of Trustees or by Majority Shareholder Vote and, in   
either case, by a majority of the Trustees who are not "interested persons" 
of the Fund or MFS as defined by the 1940 Act. The Advisory Agreement       
terminates automatically if it is assigned and may be terminated without    
penalty by a Majority Shareholder Vote, or by either party on not more than 
 60 days' nor less than 30 days' written notice. The Advisory Agreement may be
approved, renewed, amended, or terminated as to one Fund in the Trust, even 
though the Agreement is not approved, renewed, amended, or terminated as to 
any other Fund in the Trust.                                                

 The Advisory Agreement also provides that neither MFS nor its personnel shall
 be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and       
management of the Fund, except for willful misfeasance, bad faith, gross    
negligence, or reckless disregard of its or their duties and obligations    
under the Advisory Agreement.                                               

SUB-ADVISORY AGREEMENT - Sun Capital serves as the MFS Diversified Income   
Fund's Sub-Adviser pursuant to a Sub-Investment Advisory Agreement between  
the Adviser and Sun Capital (the "Sub-Advisory Agreement"). The Sub-Advisory
Agreement provides that the Adviser delegate to Sun Capital the authority to
make investment decisions for a portion of the MFS Diversified Income Fund  
(for the purposes of this paragraph, the "Fund"). Sun Capital will provide  
portfolio management services for the Fund for the portion of the portfolio 
invested in REITs ("real estate investment trust") and other real estate    
related investments. For these services, the Adviser pays the Sub-Adviser an
investment advisory fee, computed daily and paid monthly in arrears, at the 
annual rate of 0.30% of the Fund's average daily net assets managed by the  
Sub-Adviser. The Sub-Advisory Agreement will continue in effect after its   
initial two year period provided that such continuance is specifically      
approved at least annually by a majority of the Independent Trustees. The   
Sub-Advisory Agreement terminates automatically if it is assigned and may be
terminated without penalty by a majority of the Independent Trustees, by a  
Majority Shareholder Vote, or by the Adviser or Sub-Adviser on not less than
60 days' written notice. The Sub-Advisory Agreement specifically provides   
that neither the Sub-Adviser nor its personnel shall be liable for any error
of judgment or mistake of law or for any loss arising out of any investment 
or for any act or omission in the execution and management of the Fund,     
except for willful misconduct, bad faith, reckless disregard, or gross      
negligence in the performance of its duties or by reason of reckless        
disregard of its obligations and duties under the Sub-Advisory Agreement.   

> ADMINISTRATOR                                                                 

MFS provides the Fund with certain financial, legal and other administrative
services under a Master Administrative Services Agreement between the Fund  
and MFS. Under the Agreement, the fund pays an annual fee to MFS for        
providing these services.                                                   

Effective August 1, 2006, the maximum annual fee payable by each Fund is    
$17,500 plus an amount equal to the following percentage of the Fund's      
average daily net assets (except for Funds investing primarily in shares of 
MFS Funds):                                                                 

-----------------------------------------------------------------------     
On the first $50,000,000 in assets                              0.0000%     
-----------------------------------------------------------------------     
$50,000,000 - $750,000,000 in assets                            0.0175%     
-----------------------------------------------------------------------     
$750,000,000 - $1,500,000,000 in assets                         0.0170%     
-----------------------------------------------------------------------     
$1,500,000,000 - $2,500,000,000 in assets                       0.0165%     
-----------------------------------------------------------------------     
$2,500,000,000 - $4,000,000,000 in assets                       0.0120%     
-----------------------------------------------------------------------     
Over $4,000,000,000                                             0.0000%     

 The fees are subject to minimum and maximum fees, based on the asset level of
the MFS Funds.                                                              

In addition, MFS provides, either directly or through affiliated and/or     
unaffiliated entities, certain administrative, recordkeeping, and           
communication/educational services to the retirement plans and retirement   
plan participants which invest in Class R1, Class R2, Class R3, Class R4 and
 Class R5 shares under a Master Class R Administration and Services Agreement.
 Under the Agreement, the Fund pays an annual fee to MFS for these services at
the following percentages of the average daily net assets attributable to   
 that class of shares: 0.45% for Class R1; 0.40% for Class R2; 0.25% for Class
R3; 0.15% for Class R4; and 0.10% for Class R5 shares. In addition, MFS has 
agreed in writing to waive the fee to 0.35% for Class R1, 0.25% for Class R2
and 0.15% for Class R3, until at least September 30, 2007.                  

> SHAREHOLDER SERVICING AGENT                                                   

 MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS, provides
transfer agent and recordkeeping functions in connection with the issuance, 
transfer, and redemption of each class of shares of the Fund under a        
Shareholder Servicing Agent Agreement. Under the Agreement, MFSC may receive
 a fee based on the costs it incurs in providing these services, plus a target
profit margin. MFSC may also contract with other third party service        
providers to provide some or all of the services described above. MFSC has  
contracted with State Street Bank and Trust Company to perform dividend     
disbursing agent functions for the Fund.                                    

 Under the Agreement, MFSC may receive a fee from the Fund designed to achieve
a target pre-tax annual profit margin. Taking into account this goal,       
effective April 1, 2006, the Fund (except Funds investing primarily in other
MFS Funds) pays MFSC a fee based on its average daily net assets equal to   
 0.0964%. Such fee rate shall continue until modified by agreement between the
Fund and MFSC, taking into account MFSC's pre-tax profit margin target.     

In addition, MFSC is reimbursed by the Fund for certain expenses incurred by
 MFSC on behalf of the Fund. These reimbursements include payments for certain
out-of-pocket expenses, such as costs related to mailing shareholder        
 statements and the use of third party recordkeeping systems, incurred by MFSC
in performing the services described above. MFSC is also reimbursed for     
payments made under agreements with third parties that provide omnibus      
accounting, network, subtransfer agency and other shareholder services,     
including without limitation recordkeeping, reporting and transaction       
 processing services. Payments made under these agreements are based either on
the Fund's average daily net assets or the Fund accounts serviced by the    
third party.                                                                

> DISTRIBUTOR                                                                   

MFS Fund Distributors, Inc. ("MFD" or the "Distributor"), a wholly owned    
subsidiary of MFS, serves as distributor for the continuous offering of     
shares of the Fund pursuant to a Distribution Agreement. The Agreement      
obligates MFD to use best efforts to find purchasers for shares of the Fund.

See Appendix D to this Part II for information regarding sales charges and  
Rule 12b-1 distribution and service payments paid to MFD.                   

> PROGRAM MANAGER(S)                                                            

MFD serves as program manager for a qualified tuition program under Section 
529 of the Internal Revenue Code through which 529 share classes are        
 available as investment options to program participants. The Fund's 529 share
classes may also be offered through qualified tuition programs for which MFD
does not serve as program manager. MFD provides, either directly or through 
 third parties, recordkeeping, tax reporting, and account services, as well as
services designed to maintain the programs' compliance with the Internal    
Revenue Code and other regulatory requirements under a Master 529           
Administrative Services Agreement.                                          

Under the Agreement, the Fund pays MFD a fee for these services of up to    
0.35% annually of the assets attributable to the 529 share classes. The     
current annual fee has been established at 0.25% of the average daily net   
assets attributable to each 529 share class up to $10 billion in assets,    
 0.225% from $10 billion in assets up to $20 billion in assets, and 0.20% from
$20 billion in assets and above. The fee may only be increased with the     
approval of the Fund's Board of Trustees. MFD pays a portion of this fee to 
third parties who provide these services.                                   

Please consult the program description for your particular qualified tuition
program for a discussion of the fees paid to and services received from the 
program manager.                                                            

> CODE OF ETHICS                                                                

The Fund, its Adviser, its sub-adviser (if applicable) and Distributor have 
 adopted separate codes of ethics as required under the Investment Company Act
of 1940 ("the 1940 Act"). Subject to certain conditions and restrictions,   
each code permits personnel subject to the code to invest in securities for 
their own accounts, including securities that may be purchased, held or sold
by the Fund. Securities transactions by some of these persons may be subject
to prior approval of the Adviser's or sub-adviser's Compliance Departments, 
and securities transactions of certain personnel are subject to quarterly   
reporting and review requirements.                                          

III.      SALES CHARGE WAIVERS                                              

In certain circumstances, the initial sales charge paid to MFD and imposed  
 upon purchases of Class A and Class 529A shares, and the CDSC paid to MFD and
imposed upon redemptions of Class A, Class B, Class C, Class 529B, and Class
529C shares, are waived. These circumstances are described in Appendix C of 
this Part II. The Fund, MFS, and their affiliates reserve the right to      
eliminate, modify, and add waivers at any time in their discretion.         

IV. DISTRIBUTION PLAN                                                       

The Trustees have approved a plan in accordance with Rule 12b-1 under the   
1940 Act for Class A, Class B, Class C, Class 529A, Class 529B, Class 529C, 
Class R, Class R1, Class R2, Class R3, Class R4, Class W and Class J shares 
(the "Distribution Plan"). The Fund has not adopted a Distribution Plan with
respect to its Class I or Class R5 shares. In approving the Distribution    
Plan, the Trustees, including a majority of the Trustees who are not        
"interested persons" of the Trust as defined in the 1940 Act and have no    
direct or indirect financial interest in the operation of the Distribution  
Plan or any agreements relating to the Distribution Plan ("Distribution Plan
Qualified Trustees"), concluded that there is a reasonable likelihood that  
the Distribution Plan would benefit the Fund and each respective class of   
shareholders.                                                               

The Distribution Plan is designed to promote sales of shares and minimize   
redemptions, as well as to assist in the servicing and maintenance of       
 shareholder accounts. Increasing a Fund's net assets through sales of shares,
or minimizing reductions in net assets by minimizing redemptions, may help  
reduce a Fund's expense ratio by spreading the Fund's fixed costs over a    
larger base and may reduce the potential adverse effect of selling a Fund's 
portfolio securities to meet redemptions. There is, however, no assurance   
that the net assets of the Fund will increase or not be reduced, or that    
other benefits will be realized as a result of the Distribution Plan.       

The Distribution Plan remains in effect from year to year only if its       
continuance is specifically approved at least annually by vote of both the  
Trustees and a majority of the Distribution Plan Qualified Trustees. The    
Distribution Plan also requires that the Fund and MFD each provide the      
Trustees, and that the Trustees review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Distribution Plan.
The Distribution Plan may be terminated at any time by vote of a majority of
 the Distribution Plan Qualified Trustees or by a Majority Shareholder Vote of
the shares of the class to which the Distribution Plan relates ("Designated 
Class"). The Distribution Plan may not be amended to increase materially the
amount of permitted distribution expenses without the approval of a majority
of the shares of the Designated Class of the Fund, or may not be materially 
amended in any case without a vote of the Trustees and a majority of the    
Distribution Plan Qualified Trustees.                                       

The distribution and service fees paid to MFD equal on an annual basis up to
the following maximum percentages of average daily net assets of the class: 

 -----------------------------------------------------------------------------
                                                                 MAXIMUM TOTAL
                        MAXIMUM             MAXIMUM               DISTRIBUTION
                    DISTRIBUTION           SERVICE               AND SERVICE
    CLASS           FEE                 FEE                      FEE
 -----------------------------------------------------------------------------
Class A                0.10%                0.25%                    0.35%  
 -----------------------------------------------------------------------------
Class 529A             0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class B                0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class 529B             0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class C                0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class 529C             0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class R                0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R1               0.50%                0.25%                    0.75%  
 -----------------------------------------------------------------------------
Class R2               0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R3               0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R4               0.00%                0.25%                    0.25%  
 -----------------------------------------------------------------------------
Class W                0.10%                0.00%                    0.10%  
 -----------------------------------------------------------------------------
 Class J                0.25%                0.70%/0.75%           0.95%/1.00%
 -----------------------------------------------------------------------------
Service Class          0.25%                0.00%                    0.25%  
 -----------------------------------------------------------------------------

In certain circumstances, the fees described below may not be implemented,  
are being waived, or do not apply to certain MFS Funds. Current distribution
and service fees for each Fund are reflected under the captions "Expense    
Summary" and "Description of Share Classes -- Distribution and Service Fees"
in the Prospectus.                                                          

> SERVICE FEES                                                                  

The Distribution Plan provides that the Fund may pay MFD a service fee based
on the average daily net assets attributable to the Designated Class, (i.e.,
 Class A, Class B, Class C, Class 529A, Class 529B, Class 529C, Class R, Class
R1, Class R2, Class R3, Class R4, or Class J shares, as appropriate)        
annually. Class W shares do not pay a service fee. MFD may, at its          
discretion, retain all or a portion of such payments or pay all or a portion
of such payments to financial intermediaries. Service fees compensate MFD   
and/or financial intermediaries for shareholder servicing and account       
maintenance activities, including, but not limited to, shareholder          
recordkeeping (including assisting in establishing and maintaining customer 
accounts and records), transaction processing (including assisting with     
 purchase, redemption and exchange requests), shareholder reporting, arranging
for bank wires, monitoring dividend payments from the Funds on behalf of    
customers, forwarding certain shareholder communications from the Funds to  
customers, corresponding with shareholders and customers regarding the Funds
(including receiving and responding to inquiries and answering questions    
regarding the Funds), and aiding in maintaining the investment of their     
respective customers in the Funds. Financial intermediaries may from time to
time be required to meet certain criteria in order to receive service fees. 

> DISTRIBUTION FEES                                                             

The Distribution Plan provides that the Fund may pay MFD a distribution fee 
 based on the average daily net assets attributable to the Designated Class as
partial consideration for distribution services performed and expenses      
incurred in the performance of MFD's obligations under its distribution     
agreement with the Fund. Distribution fees compensate MFD and/or financial  
 intermediaries for their expenses in connection with the distribution of Fund
shares, including, but not limited to, commissions to financial             
intermediaries, printing prospectuses and reports used for sales purposes,  
the preparation and printing of sales literature, personnel, travel, office 
expense and equipment, payments made to wholesalers employed by MFD         
(employees may receive additional compensation if they meet certain targets 
 for sales of one or more MFS Funds), and other distribution-related expenses.
The amount of the distribution fee paid by the Fund with respect to each    
class differs under the Distribution Plan, as does the use by MFD of such   
distribution fees. While the amount of compensation received by MFD in the  
form of distribution fees during any year may be more or less than the      
expenses incurred by MFD under its distribution agreement with the Fund, the
 Fund is not liable to MFD for any losses MFD may incur in performing services
under its Distribution Agreement with the Fund.                             

In addition, with respect to Massachusetts Investors Trust, Massachusetts   
Investors Growth Stock Fund, MFS Growth Opportunities Fund, MFS Emerging    
Growth Fund, MFS High Income Fund, MFS Total Return Fund, MFS Research Fund,
 MFS Capital Opportunities Fund, MFS Strategic Income Fund, and MFS Bond Fund,
to the extent that the annualized aggregate service and distribution fees   
paid under the Distribution Plan do not exceed 0.35% of Class A shares'     
average daily net assets, the Fund is permitted to pay such                 
distribution-related expenses or other distribution-related expenses.       

V. FINANCIAL INTERMEDIARY COMPENSATION                                      

MFD and/or its affiliates may pay commissions, Rule 12b-1 distribution and  
service fees, 529 administrative services fees, retirement plan             
administrative and service fees, shareholder servicing fees, and other      
payments to financial intermediaries that sell Fund shares as described in  
Appendix D of this Part II.                                                 

VI. INVESTMENT TECHNIQUES, PRACTICES, RISKS AND RESTRICTIONS                

Set forth in Appendix E of this Part II is a description of investment      
techniques and practices which the MFS Funds may generally use in pursuing  
their investment objectives and investment policies to the extent such      
techniques and practices are consistent with their investment objectives and
investment policies, and a description of the risks associated with these   
investment techniques and practices. Set forth in Appendix F of this Part II
is a description of investment restrictions to which the Fund is subject.   

VII. NET INCOME AND DISTRIBUTIONS                                           

> MONEY MARKET FUNDS                                                            

The net income attributable to each MFS Fund that is a money market fund is 
determined each day during which the New York Stock Exchange is open for    
 trading (see "Determination of Net Asset Value" below for a list of days that
the Exchange is closed).                                                    

For this purpose, the net income attributable to shares of a money market   
 fund (from the time of the immediately preceding determination thereof) shall
consist of (i) all interest income accrued on the portfolio assets of the   
money market fund less (ii) all actual and accrued expenses of the money    
market fund determined in accordance with generally accepted accounting     
principles. Interest income shall include discount earned (including both   
original issue and market discount) on discount paper accrued ratably to the
date of maturity.                                                           

Since the net income is declared as a dividend each time the net income is  
determined, the net asset value per share (i.e., the value of the net assets
of the money market fund divided by the number of shares outstanding) is    
expected to remain at $1.00 per share immediately after each such           
determination and dividend declaration. Any increase in the value of a      
shareholder's investment, representing the reinvestment of dividend income, 
is reflected by an increase in the number of shares in the shareholder's    
account.                                                                    

It is expected that the shares of the money market fund will have a positive
net income at the time of each determination thereof. If for any reason the 
net income determined at any time is a negative amount, which could occur,  
for instance, upon default by an issuer of a portfolio security, the money  
market fund would first offset the negative amount with respect to each     
 shareholder account from the dividends declared during the month with respect
to each such account. If and to the extent that such negative amount exceeds
such declared dividends at the end of the month (or during the month in the 
case of an account liquidated in its entirety), the money market fund could 
reduce the number of its outstanding shares by treating each shareholder of 
the money market fund as having contributed to its capital that number of   
full and fractional shares of the money market fund in the account of such  
shareholder which represents its proportion of such excess. Each shareholder
of the money market fund will be deemed to have agreed to such contribution 
in these circumstances by his or her investment in the money market fund.   
 This procedure would permit the net asset value per share of the money market
fund to be maintained at a constant $1.00 per share.                        

In addition, the money market funds intend to distribute net realized short-
and long-term capital gains, if any, at least annually.                     

> OTHER FUNDS                                                                   

Each MFS Fund other than the MFS money market funds intends to distribute to
 its shareholders all or substantially all of its net investment income. These
Funds' net investment income consists of non-capital gain income less       
expenses. In addition, these Funds intend to distribute net realized short- 
and long-term capital gains, if any, at least annually. Shareholders will be
 informed of the tax consequences of such distributions, including whether any
portion represents a return of capital, after the end of each calendar year.

VIII. TAX CONSIDERATIONS                                                    

The following discussion is a brief summary of some of the important federal
(and, where noted, state) income tax consequences affecting the Fund and its
shareholders. The discussion is very general, and therefore prospective     
investors are urged to consult their tax advisers about the impact an       
investment in the Fund may have on their own tax situations.                

> TAX TREATMENT OF THE FUND                                                     

Federal Taxes -- The Fund (even if it is a Fund in a Trust with multiple    
 series) is treated as a separate entity for federal income tax purposes under
the Internal Revenue Code of 1986, as amended (the "Code"). The Fund has    
elected (or in the case of a new Fund, intends to elect) to be, and intends 
 to qualify to be treated each year as, a "regulated investment company" under
Subchapter M of the Code.                                                   

In order to qualify for the special tax treatment accorded regulated        
investment companies and their shareholders, the Fund must, among other     
things:                                                                     

  (a) derive at least 90% of its gross income for each taxable year from (i)
   dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including but not limited to gains from    
options, futures, or forward contracts) derived with respect to its     
   business of investing in such stock, securities, or currencies and (ii) net
 income derived from interests in "qualified publicly traded partnerships"
(as defined below);                                                     

   (b) distribute with respect to each taxable year at least 90% of the sum of
  its investment company taxable income (as that term is defined in the Code
without regard to the deduction for dividends paid-generally, taxable   
   ordinary income and the excess, if any, of the net short-term capital gains
  over net long-term capital losses) and net tax-exempt interest income, for
such year; and                                                          

(c) diversify its holdings so that, at the end of each quarter of the   
Fund's taxable year, (i) at least 50% of the market value of the Fund's 
total assets is represented by cash and cash items, U.S. Government     
 securities, securities of other regulated investment companies, and other
   securities limited in respect of any one issuer to a value not greater than
5% of the value of the Fund's total assets and not more than 10% of the 
   outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of the Fund's total assets is invested (x) in the securities  
(other than those of the U.S. Government or other regulated investment  
companies) of any one issuer or of two or more issuers which the Fund   
 controls and which are engaged in the same, similar, or related trades or
businesses or (y) in the securities of one or more qualified publicly   
traded partnerships (as defined below).                                 

In the case of the Fund's investment in loan participations, the Fund shall 
treat a financial intermediary as an issuer for the purposes of meeting the 
diversification requirement described in paragraph (c).                     

 In general, for purposes of the 90% income requirement described in paragraph
(a) above, income derived from a partnership will be treated as qualifying  
income only to the extent such income is attributable to items of income of 
 the partnership which would be qualifying income if realized by the regulated
investment company. However, 100% of the net income derived from an interest
in a "qualified publicly traded partnership" (which is defined as any       
partnership (i) whose interests are traded on an established securities     
market or whose interests are readily traded on a secondary market or the   
substantial equivalent thereof and (ii) that derives less than 90% of its   
income from the qualifying income described in paragraph (a)(i) above) will 
 be treated as qualifying income. In addition, although in general the passive
loss rules of the Code do not apply to regulated investment companies, such 
rules do apply to a regulated investment company with respect to items      
attributable to an interest in a qualified publicly traded partnership.     
Finally, for purposes of paragraph (c) above, the term "outstanding voting  
securities of such issuer" will include the equity securities of a qualified
publicly traded partnership.                                                

As a regulated investment company, the Fund will not be subject to any      
federal income or excise taxes on its net investment income and net realized
capital gains that it distributes to shareholders in accordance with the    
 timing requirements imposed by the Code. The Fund's foreign-source income, if
any, may be subject to foreign withholding taxes. If the Fund failed to     
qualify as a "regulated investment company" in any year, it would incur a   
 regular federal corporate income tax on all of its taxable income, whether or
not distributed, and Fund distributions would generally be taxable as       
dividend income to the shareholders.                                        

If the Fund fails to distribute in a calendar year substantially all of its 
ordinary income for such year and substantially all of its capital gain net 
income for the one-year period ending October 31 (or later if the Fund is   
 permitted so to elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the undistributed      
amounts. A dividend paid to shareholders by the Fund in January of a year   
generally is deemed to have been paid by the Fund on December 31 of the     
preceding year, if the dividend was declared and payable to shareholders of 
record on a date in October, November, or December of that preceding year.  
The Fund intends generally to make distributions sufficient to avoid        
imposition of the 4% excise tax.                                            

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

> TAXATION OF SHAREHOLDERS                                                      

Tax Treatment of Distributions -- Subject to the special rules discussed    
 below for Municipal Funds, shareholders of the Fund normally will have to pay
federal income tax and any state or local income taxes on the dividends and 
"Capital Gain Dividends" (as defined below) they receive from the Fund.     
 Except as described below, any distributions from ordinary income or from net
short-term capital gains are taxable to shareholders as ordinary income for 
federal income tax purposes whether paid in cash or reinvested in additional
shares.                                                                     

For taxable years beginning before January 1, 2011, "qualified dividend     
income" received by an individual will be taxed at the rates applicable to  
long-term capital gains. In order for some portion of the dividends received
by a Fund shareholder to be qualified dividend income, the Fund must meet   
holding period and other requirements with respect to some portion of the   
 dividend-paying stocks in its portfolio and the shareholder must meet holding
period and other requirements with respect to the Fund's shares. A dividend 
will not be treated as qualified dividend income (at either the Fund or     
shareholder level) (1) if the dividend is received with respect to any share
of stock held for fewer than 61 days during the 121-day period beginning on 
the date which is 60 days before the date on which such share becomes       
ex-dividend with respect to such dividend (or, in the case of certain       
preferred stock, 91 days during the 181-day period beginning 90 days before 
such date), (2) to the extent that the recipient is under an obligation     
 (whether pursuant to a short sale or otherwise) to make related payments with
 respect to positions in substantially similar or related property, (3) if the
recipient elects to have the dividend income treated as investment interest,
 or (4) if the dividend is received from a foreign corporation that is (a) not
eligible for the benefits of a comprehensive income tax treaty with the     
United States (with the exception of dividends paid on stock of such a      
foreign corporation readily tradable on an established securities market in 
the United States) or (b) treated as a passive foreign investment company.  
Payments in lieu of dividends, such as payments pursuant to securities      
 lending arrangements, also do not qualify to be treated as qualified dividend
income.                                                                     

In general, a distribution of investment income designated by the Fund as   
derived from qualified dividend income will be treated as qualified dividend
 income by a shareholder taxed as an individual provided the shareholder meets
 the holding period and other requirements described above with respect to the
 Fund's shares. In any event, if the qualified dividend income received by the
Fund during any taxable year is 95% or more of its gross income for that    
taxable year, then 100% of the Fund's dividends (other than Capital Gain    
Dividends), will be eligible to be treated as qualified dividend income. For
 this purpose, in the case of a sale or other disposition of the Fund of stock
or securities, the only gain included in the term "gross income" is the     
excess of net short-term capital gain from such sales or dispositions over  
the net long-term capital loss from such sales or dispositions.             

Properly designated distributions of net capital gain (i.e., the excess of  
net long-term capital gain over the net short-term capital loss) ("Capital  
Gains Dividends"), whether paid in cash or reinvested in additional shares, 
 are taxable to shareholders as long-term capital gains for federal income tax
purposes without regard to the length of time the shareholders have held    
their shares.                                                               

Long-term capital gain rates applicable to individuals have been temporarily
reduced for taxable years beginning before January 1, 2011.                 

Any Fund dividend that is declared in October, November, or December of any 
calendar year, payable to shareholders of record in such a month and paid   
during the following January, will be treated as if received by the         
shareholders on December 31 of the year in which the dividend is declared.  
The Fund will notify shareholders regarding the federal tax status of its   
distributions after the end of each calendar year.                          

Any Fund distribution, other than dividends that are declared by the Fund on
 a daily basis, will have the effect of reducing the per share net asset value
of Fund shares by the amount of the distribution. If you buy shares when a  
fund has realized but not yet distributed ordinary income or capital gains, 
you will pay full price for the shares and then receive a portion back as a 
taxable distribution.                                                       

 Capital Loss Carryovers-- Distributions from capital gains are generally made
after applying any available capital loss carryovers. The amounts and       
expiration dates of any capital loss carryovers available to the Fund are   
shown in the notes to the financial statements for the Fund.                

 Dividends-Received Deduction-- If the Fund receives dividend income from U.S.
corporations, a portion of the Fund's ordinary income dividends is normally 
eligible for the dividends-received deduction for corporations if the       
recipient otherwise qualifies for that deduction with respect to its holding
of Fund shares. Availability of the deduction for particular corporate      
shareholders is subject to certain limitations, and deducted amounts may be 
subject to the alternative minimum tax or result in certain basis           
adjustments.                                                                

Disposition of Shares-- In general, any gain or loss realized upon a        
disposition of Fund shares by a shareholder that holds such shares as a     
capital asset will be treated as a long-term capital gain or loss if the    
shares have been held for more than 12 months and otherwise as a short-term 
capital gain or loss. However, any loss realized upon a disposition of Fund 
shares held for six months or less will be treated as a long-term capital   
loss to the extent of any Capital Gain Dividends made with respect to those 
shares.                                                                     

Shares Purchased Through Tax-Qualified Plans -- Distributions by the Fund to
retirement plans that qualify for tax-exempt treatment under federal income 
tax laws will not be taxable. Special tax rules apply to investments through
such plans. You should consult your tax adviser to determine the suitability
of the Fund as an investment through such a plan and the tax treatment of   
distributions (including distributions of amounts attributable to an        
investment in the Fund) from such a plan.                                   

U.S. Taxation of Non-U.S. Persons -- Capital Gain Dividends and             
exempt-interest dividends, if any, will not be subject to withholding of    
federal income tax. However, distributions properly designated as           
exempt-interest dividends may be subject to backup withholding, as discussed
below. In general, dividends other than Capital Gain Dividends and          
exempt-interest dividends, if any, paid by the Fund to a shareholder that is
not a "U.S. person" within the meaning of the Code (such shareholder, a     
"Non-U.S. Person") are subject to withholding of U.S federal income tax at a
rate of 30% (or lower applicable treaty rate) even if they are funded by    
income or gains (such as portfolio interest, short-term capital gains, or   
foreign-source dividend and interest income) that, if paid to a Non-U.S.    
Person directly, would not be subject to withholding. However, effective for
taxable years of the Fund beginning after December 31, 2004, and before     
January 1, 2008, the Fund will not be required to withhold any amounts with 
respect to (i) distributions (other than distributions to a Non-U.S. Person 
(w) that has not provided a satisfactory statement that the beneficial owner
is not a U.S. person, (x) to the extent that the dividend is attributable to
certain interest on an obligation if the Non-U.S. Person is the issuer or is
 a 10% shareholder of the issuer, (y) that is within certain foreign countries
that have inadequate information exchange with the United States, or (z) to 
the extent the dividend is attributable to interest paid by a person that is
a related person of the Non-U.S. Person and the Non-U.S. Person is a        
controlled foreign corporation) from U.S.-source interest income that would 
 not be subject to U.S. federal income tax if earned directly by an individual
Non-U.S. Person (an "interest-related dividend"), and (ii) distributions    
(other than distributions to an individual Non-U.S. Person who is present in
 the United States for a period or periods aggregating 183 days or more during
the year of the distribution) of net short-term capital gains in excess of  
net long-term capital losses (a "short-term capital gain dividend"), in each
such case to the extent such distributions are properly designated by the   
Fund. This provision will first apply to the Fund (1) with respect to its   
direct portfolio investments (if any) in its taxable year beginning after   
December 31, 2004, and, (2) with respect to its investments in underlying   
 Funds (if any), with respect to designated distributions from such underlying
Funds in their taxable years beginning after December 31, 2004, that are    
received by the Fund in its taxable year beginning after December 31, 2004. 
Depending on the circumstances, the Fund may make such designations with    
respect to all, some or none of its potentially eligible dividends and/or   
treat such dividends, in whole or in part, as ineligible for this exemption 
for withholding. The Fund does not currently intend to designate            
distributions as interest-related dividends or as short-term capital gain   
dividends except with respect to Research Bond Fund J shares. In order to   
qualify for this exemption from withholding, a foreign person will need to  
comply with applicable certification requirements relating to its non-U.S.  
status (including, in general, furnishing an IRS Form W-8BEN or substitute  
Form). In the case of shares held through an intermediary, the intermediary 
may withhold even if the Fund makes a designation with respect to a payment.
Foreign persons should contact their intermediaries with respect to the     
application of these rules to their accounts.                               

If a beneficial holder who is a Non-U.S. Person has a trade or business in  
the United States, and the dividends are effectively connected with the     
 conduct by the beneficial holder of a trade or business in the United States,
the dividend will be subject to U.S. federal net income taxation at regular 
income tax rates.                                                           

In general, special tax rules apply to distributions that a "qualified      
investment entity" (a "QIE") pays to foreign shareholders that are          
attributable to gain from the Fund's sale or exchange of "U.S. real property
 interests" (a "USRPI Distribution"). A Fund will be a QIE if it is both (i) a
regulated investment company and (ii) a "U.S. real property holding         
corporation" (determined without regard to certain exceptions, described    
below, for 5% holders of publicly traded classes of stock and for interests 
in domestically-controlled regulated investment companies and real estate   
investment trusts ("REITs")). Under the Code, a "U.S. real property holding 
corporation" is any corporation that holds (or held during the previous     
five-year period) "U.S. real property interests" ("USRPIs") (defined as U.S.
real property and interests (other than solely as a creditor) in "U.S. real 
property holding corporations") with an aggregate fair market value equal to
50% or more of the fair market value of the corporation's real property     
assets and other trade-or-business assets. A USRPI does not include (i) any 
class of stock of a corporation that is traded on an established securities 
market with respect to a person who holds 5% or less of such class of stock 
at all times during the previous five-year period and (ii) a regulated      
investment company's interests in domestically controlled REITs and other   
regulated investment companies.                                             

For taxable years beginning on or after January 1, 2006, where a foreign    
shareholder has owned more than 5% of a class of shares of a Fund that is a 
QIE during the one-year period preceding the date of the USRPI Distribution,
the Fund will be required to withhold 35% of any USRPI Distribution and the 
 foreign shareholder will have an obligation to file a U.S. tax return and pay
tax. For all other foreign shareholders of a Fund that is a QIE, a USRPI    
Distribution will be treated as ordinary income (notwithstanding any        
designation by the Fund that such distribution is a Capital Gain Dividend)  
and the Fund will be required to withhold 30% (or lower applicable treaty   
rate) of such distribution. If a Fund that is a QIE makes a distribution to 
its foreign shareholders that is attributable to a USRPI Distribution       
 received by the Fund from a "lower-tier" REIT or regulated investment company
that is a QIE, that distribution will retain its character as a USRPI       
 Distribution when passed through to the foreign shareholder regardless of the
Fund's percentage ownership of the "lower-tier" REIT or regulated investment
company.                                                                    

Under U.S. federal tax law, a beneficial holder of shares who is a foreign  
shareholder is not, in general, subject to U.S. federal income tax on gains 
 (and is not allowed a deduction for losses) realized on the sale of shares of
the Fund or on Capital Gain Dividends unless (i) such gain or Capital Gain  
Dividend is effectively connected with the conduct of a trade or business   
carried on by such holder within the United States, (ii) in the case of an  
 individual holder, the holder is present in the United States for a period or
periods aggregating 183 days or more during the year of the sale or Capital 
Gain Dividend and certain other conditions are met, or (iii) the shares are 
USRPIs or the Capital Gain Dividends are USRPI Distributions.               

Foreign shareholders in the Fund should consult their tax advisers with     
respect to the potential application of the above rules.                    

Backup Withholding -- The Fund is also required in certain circumstances to 
apply backup withholding at the rate of 28% on taxable dividends, including 
Capital Gain Dividends, redemption proceeds (except for redemptions by money
market funds), and certain other payments that are paid to any non-corporate
shareholder (including a Non-U.S. Person) who does not furnish to the Fund  
certain information and certifications or who is otherwise subject to backup
withholding. Backup withholding will not, however, be applied to payments   
that have been subject to the 30% withholding tax on shareholders who are   
neither citizens nor residents of the United States. The back-up withholding
rules also apply to distributions that are properly designated as           
exempt-interest dividends.                                                  

Foreign Income Taxation of a Non-U.S. Person -- Distributions received from 
the Fund by a Non-U.S. Person may also be subject to tax under the laws of  
their own jurisdictions.                                                    

 State and Local Income Taxes: U.S. Government Securities -- Dividends paid by
 the Fund that are derived from interest on obligations of the U.S. Government
and certain of its agencies and instrumentalities (but generally not        
distributions of capital gains realized upon the disposition of such        
obligations) may be exempt from state and local income taxes. The Fund      
generally intends to advise shareholders of the extent, if any, to which its
dividends consist of such interest. Shareholders are urged to consult their 
tax advisers regarding the possible exclusion of such portion of their      
dividends for state and local income tax purposes.                          

 Certain Investments -- Any investment in zero coupon bonds, deferred interest
bonds, payment-in-kind bonds, certain stripped securities, and certain      
securities purchased at a market discount (including certain high yield debt
obligations) will cause the Fund to recognize income prior to the receipt of
 cash payments with respect to those securities. To distribute this income and
avoid a tax on the Fund, the Fund may be required to liquidate portfolio    
securities that it might otherwise have continued to hold, potentially      
resulting in additional taxable gain or loss to the Fund. The Fund's        
 investments in REIT equity securities may also require the Fund to accrue and
distribute income not yet received and may at other times result in the     
Fund's receipt of cash in excess of the REIT's earnings. If the Fund        
distributes such amounts, such distribution could constitute a return of    
capital to Fund shareholders for federal income tax purposes. Income from   
REIT securities generally will not be eligible for treatment as qualified   
dividend income. Any investment in residual interests of a Collateralized   
 Mortgage Obligation (a "CMO") that has elected to be treated as a real estate
mortgage investment conduit (a "REMIC") can create complex tax problems,    
especially if the Fund has state or local governments or other tax-exempt   
organizations as shareholders. Under current law, the Fund serves to block  
unrelated business taxable income ("UBTI") from being realized by its       
tax-exempt shareholders. Notwithstanding the foregoing, a tax-exempt        
shareholder could realize UBTI by virtue of its investment in the Fund if   
 either: (1) the Fund invests in REITs that hold residual interests in REMICs;
or (2) shares in the Fund constitute debt-financed property in the hands of 
the tax-exempt shareholder within the meaning of Code Section 514(b). If a  
 charitable remainder trust (as defined in Code Section 664) realizes any UBTI
for a taxable year, it will lose its tax-exempt status for the year.        

Options, Futures Contracts, and Forward Contracts -- The Fund's transactions
in options, futures contracts, forward contracts, short sales "against the  
 box," and swaps and related transactions will be subject to special tax rules
that may affect the amount, timing, and character of Fund income and        
distributions to shareholders. For example, certain positions held by the   
Fund on the last business day of each taxable year will be marked to market 
 (i.e., treated as if closed out on that day), and any gain or loss associated
with the positions will be treated as 60% long-term and 40% short-term      
capital gain or loss. Certain positions held by the Fund that substantially 
diminish its risk of loss with respect to other positions in its portfolio  
may constitute "straddles," and may be subject to special tax rules that    
would cause deferral of Fund losses, adjustments in the holding periods of  
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects with   
respect to those investments; in order to distribute this income and avoid a
tax on the Fund, the Fund may be required to liquidate portfolio securities 
that it might otherwise have continued to hold, potentially resulting in    
additional taxable gain or loss to the Fund. The Fund will limit its        
activities in options, futures contracts, forward contracts, short sales    
"against the box" and swaps and related transactions to the extent necessary
to meet the diversification requirements of Subchapter M of the Code.       

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

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

If more than 50% of the total assets of a Fund are represented by direct    
 investments in foreign stock and securities at the close of its taxable year,
 the Fund may elect to "pass through" to its shareholders foreign income taxes
paid by it. If the Fund so elects, shareholders will be required to treat   
their pro rata portions of the foreign income taxes paid by the Fund as part
of the amounts distributed to them by it and thus includable in their gross 
income for federal income tax purposes. Shareholders who do not itemize     
deductions would (subject to such limitations) be able to claim a credit but
not a deduction. No deduction will be permitted to individuals in computing 
 their alternative minimum tax liability. If the Fund is not eligible, or does
not elect, to "pass through" to its shareholders foreign income taxes it has
paid, shareholders will not be able to claim any deduction or credit for any
part of the foreign taxes paid by the Fund. In addition, the Fund's         
investments in certain foreign securities (including fixed income securities
 and derivatives) denominated in foreign currencies may increase or accelerate
the Fund's recognition of ordinary income and may affect the timing, amount,
or character of the Fund's distributions.                                   

Tax Shelter Reporting -- Under Treasury regulations, if a shareholder       
 recognizes a loss with respect to the Fund's shares of $2 million or more for
 an individual shareholder or $10 million or more for a corporate shareholder,
the shareholder must file with the Internal Revenue Service a disclosure    
statement on Form 8886. Shareholders should consult their tax advisers to   
 determine the applicability of these regulations in light of their individual
circumstances.                                                              

Underlying Funds -- If the Fund invests all of its assets in shares of      
underlying Funds, its distributable income and gains will normally consist  
entirely of distributions from underlying Funds' income and gains and gains 
and losses on the dispositions of shares of underlying Funds. To the extent 
that an underlying Fund realizes net losses on its investments for a given  
taxable year, the Fund will not be able to recognize its share of those     
losses (so as to offset distributions of net income or capital gains from   
other underlying Funds) until it disposes of shares of the underlying Fund. 
Moreover, even when the Fund does make such a disposition, a portion of its 
 loss may be recognized as a long-term capital loss, which will not be treated
as favorably for federal income tax purposes as a short-term capital loss or
 an ordinary deduction. In particular, the Fund will not be able to offset any
capital losses from its dispositions of underlying Fund shares against its  
ordinary income, which includes distributions of any net short-term capital 
 gains realized by an underlying Fund. As a result of the foregoing rules, and
certain other special rules, it is possible that the amounts of net         
investment income and net capital gains that the Fund will be required to   
distribute to shareholders will be greater than such amounts would have been
had the Fund invested directly in the securities held by the underlying     
Funds, rather than investing in shares of the underlying Funds. For similar 
reasons, the character of distributions from a Fund (i.e., long-term capital
gains, eligibility for dividends-received deduction, etc.) will not         
necessarily be the same as it would have been had the Fund invested directly
in the securities held by the underlying Funds.                             

If the Fund received dividends from an underlying Fund that qualifies as a  
regulated investment company, and the underlying Fund designates such       
dividends as "qualified dividend income," then the Fund is permitted in turn
 to designate a portion of its distributions as "qualified dividend income" as
well, provided the Fund meets holding period and other requirements with    
respect to shares of the underlying Fund.                                   

 Depending on the Fund's percentage ownership in an underlying Fund before and
after a redemption of shares of such underlying Fund, such a redemption may 
cause the Fund to be treated as receiving a dividend on the full amount of  
the distribution instead of receiving capital gain income on the shares of  
the underlying Fund. This would be the case where the Fund holds a          
significant interest in an underlying Fund and redeems only a small portion 
of such interest. It is possible that such a dividend will qualify as       
"qualified dividend income;" otherwise, it will be taxable as ordinary      
income.                                                                     

The fact that a Fund achieves its investment objectives by investing in     
underlying Funds will generally not adversely affect the Fund's ability to  
pass on to foreign shareholders the full benefit of the interest-related    
dividends and short-term capital gain dividends that it receives from its   
underlying investments in the Funds, except possibly to the extent that (1) 
interest-related dividends received by the Fund are offset by deductions    
allocable to the Fund's qualified interest income or (2) short-term capital 
gain dividends received by the Fund are offset by the Fund's net short- or  
 long-term capital losses, in which case the amount of a distribution from the
Fund to a foreign shareholder that is properly designated as either an      
interest-related dividend or a short-term capital gain dividend,            
respectively, may be less than the amount that such shareholder would have  
received had they invested directly in the underlying Funds. Furthermore, if
the Fund is a QIE and invests in an underlying Fund that is a QIE, a        
distribution to a foreign shareholder that is attributable to a USRPI       
Distribution received by the Fund will retain its character as a USRPI      
 Distribution when passed through to the foreign shareholder regardless of the
Fund's percentage ownership of the underlying Fund.                         

Under the current law, a Fund of Funds cannot pass through to shareholders  
foreign tax credits borne in respect of foreign securities income earned by 
an underlying Fund. A Fund is permitted to elect to pass through to its     
 shareholders foreign income taxes it pays only if it directly holds more than
 50% of its assets in foreign stock and securities at the close of its taxable
year. Foreign securities held indirectly through an underlying Fund do not  
contribute to this 50% threshold.                                           

> SPECIAL RULES FOR MUNICIPAL FUND DISTRIBUTIONS                                

 The following special rules apply to shareholders of Funds whose objective is
to invest primarily in obligations that pay interest that is exempt from    
federal income tax ("Municipal Funds").                                     

Tax-Exempt Distributions -- The portion of a Municipal Fund's distributions 
of net investment income that is attributable to interest from tax-exempt   
securities will be designated by the Fund as an "exempt-interest dividend"  
under the Code and will generally be exempt from federal income tax in the  
hands of shareholders so long as at least 50% of the total value of the     
Fund's assets consists of tax-exempt securities at the close of each quarter
of the Fund's taxable year. Distributions of tax-exempt interest earned from
certain securities may, however, be treated as an item of tax preference for
shareholders under the federal alternative minimum tax, and all             
 exempt-interest dividends will increase a corporate shareholder's alternative
minimum tax. Except when the Fund provides actual monthly percentage        
 breakdowns, the percentage of income designated as tax-exempt will be applied
uniformly to all distributions by the Fund of net investment income made    
during each fiscal year of the Fund and may differ from the percentage of   
distributions consisting of tax-exempt interest in any particular month.    
Shareholders are required to report exempt-interest dividends received from 
the Fund on their federal income tax returns.                               

Taxable Distributions -- A Municipal Fund may also earn some income that is 
 taxable as ordinary income (including interest from any obligations that lose
their federal tax exemption and, subject to a de minimis exception, when a  
bond purchased at a price less than its stated redemption price at maturity 
(a so-called "market discount bond") matures or is disposed of by the       
 Municipal Fund) and may recognize capital gains and losses as a result of the
disposition of securities and from certain options and futures transactions.
Shareholders normally will have to pay federal income tax on the non-exempt 
 interest dividends and capital gain distributions they receive from the Fund,
whether paid in cash or reinvested in additional shares. However, such Funds
 do not expect that the non-tax-exempt portion of their net investment income,
 if any, will be substantial. Because Municipal Funds expect to earn primarily
tax-exempt interest income, it is expected that dividends from such Funds   
will not qualify for the dividends-received deduction for corporations and  
will not be treated as "qualified dividend income" taxable to non-corporate 
shareholders at reduced rates.                                              

Consequences of Distributions by a Municipal Fund: Effect of Accrued        
Tax-Exempt Income -- Shareholders redeeming shares after tax-exempt income  
has been accrued but not yet declared as a dividend should be aware that a  
portion of the proceeds realized upon redemption of the shares will reflect 
the existence of such accrued tax-exempt income and that this portion may be
subject to tax as a capital gain even though it would have been tax-exempt  
had it been declared as a dividend prior to the redemption. For this reason,
if a shareholder wishes to redeem shares of a Municipal Fund that does not  
declare dividends on a daily basis, the shareholder may wish to consider    
whether he or she could obtain a better tax result by redeeming immediately 
 after the Fund declares dividends representing substantially all the ordinary
income (including tax-exempt income) accrued for that period.               

 Certain Additional Information for Municipal Fund Shareholders -- Interest on
indebtedness incurred by shareholders to purchase or carry Municipal Fund   
shares will not be deductible for federal income tax purposes.              
 Exempt-interest dividends are taken into account in calculating the amount of
social security and railroad retirement benefits that may be subject to     
federal income tax. You should consult your tax adviser to determine what   
effect, if any, an investment in a Fund may have on the federal taxation of 
your benefits. Entities or persons who are "substantial users" (or persons  
related to "substantial users") of facilities financed by private activity  
bonds should consult their tax advisers before purchasing Fund shares.      

Consequences of Redeeming Shares -- Any loss realized on a redemption of    
Municipal Fund shares held for six months or less will be disallowed to the 
extent of any exempt-interest dividends received with respect to those      
shares. If not disallowed, any such loss will be treated as a long-term     
 capital loss to the extent of any distributions of net capital gain made with
respect to those shares.                                                    

State and Local Income Taxes: Municipal Obligations -- The exemption of     
exempt-interest dividends for federal income tax purposes does not          
necessarily result in exemption under the income tax laws of any state or   
local taxing authority. Some states do exempt from tax that portion of an   
exempt interest dividend that represents interest received by a regulated   
 investment company on its holdings of securities issued by that state and its
 political subdivisions and instrumentalities. Therefore, the Fund will report
annually to its shareholders the percentage of interest income earned by it 
during the preceding year on Municipal Bonds and will indicate, on a        
state-by-state basis only, the source of such income.                       

> SPECIAL CONSIDERATIONS FOR 529 SHARE CLASSES                                  

The following special consideration applies specifically to the ownership of
a Fund' 529 share classes through a tuition program that qualifies under    
Section 529 of the Code.                                                    

The 529 share classes are an investment option under one or more tuition    
programs designed to qualify under Section 529 of the Code so that earnings 
 on investments are not subject to federal income tax (to either a contributor
to the tuition program or a designated beneficiary) until the earnings are  
withdrawn. Withdrawals of earnings that are used to pay "qualified higher   
education expenses" are tax-free for federal income tax purposes. State and 
local taxes may still apply. These tax benefits are not available to 529    
shares that are not owned through a qualifying Section 529 tuition program. 

Withdrawals of earnings that are not used for the designated beneficiary's  
 qualified higher education expenses generally are subject not only to federal
income tax but also to a 10% penalty tax unless such amounts are transferred
within sixty (60) days to another tuition program for the same designated   
beneficiary (only one such transfer may be made in any twelve (12) month    
period) or another designated beneficiary who is a member of the family of  
the designated beneficiary with respect to which the distribution was made  
and certain other conditions are satisfied. The 10% penalty tax will not    
apply to withdrawals made under certain circumstances, including certain    
withdrawals made after the designated beneficiary dies, becomes disabled, or
receives a scholarship or other tax-free payment for educational expenses   
 that does not exceed the amount of the distribution. Withdrawals attributable
to contributions to the tuition program (including the portion of any       
rollover from another tuition program that is attributable to contributions 
to that program) are not subject to tax.                                    

IX. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                        

For the purposes of this section, all references to the "Adviser" shall     
include the Sub-Adviser with respect to that portion of the MFS Diversified 
 Income Fund for which the Sub-Adviser provides day-to-day investment advisory
services.                                                                   

Specific decisions to purchase or sell securities for the Fund are made by  
persons affiliated with the Adviser. Any such person may serve other clients
of the Adviser or any subsidiary of the Adviser in a similar capacity.      

In connection with the selection of broker/dealers and the placing of Fund  
portfolio transactions, the Adviser seeks to achieve for the Fund the best  
 overall price and execution available from brokerage firms, taking account of
all factors it deems relevant, including by way of illustration: price; the 
size of the transaction; the nature of the market for the security; the     
amount of the commission; the timing and impact of the transaction taking   
into account market prices and trends; the reputation, experience and       
financial stability of the broker/dealer involved; and the quality of       
services rendered by the broker/dealer in that and other transactions.      

In the case of securities traded in the over-the-counter market, portfolio  
transactions may be effected either on an agency basis, which involves the  
payment of negotiated brokerage commissions to the broker/dealer, including 
electronic communication networks, or on a principal basis at net prices    
without commissions, but which include compensation to the broker/dealer in 
the form of a mark-up or mark-down, depending on where the Adviser believes 
best execution is available. In the case of securities purchased from       
underwriters, the cost of such securities generally includes a fixed        
underwriting commission or concession. From time to time, soliciting dealer 
fees are available to the Adviser on tender or exchange offers. Such        
soliciting or dealer fees are, in effect, recaptured by the Funds.          

As permitted by Section 28(e) of the Securities Exchange Act of 1934, as    
amended ("Section 28(e)"), the Adviser may cause the Fund to pay a          
 broker/dealer which provides "brokerage and research services" (as defined by
the Securities Exchange Act of 1934, as amended) to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of 
 the amount other broker/dealers would have charged for the transaction if the
 Adviser determines in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
 executing broker/dealer viewed in terms of either a particular transaction or
the Adviser's overall responsibilities to the Fund and its other clients.   
"Commissions," as interpreted by the SEC, include fees paid to brokers for  
trades conducted on an agency basis, and certain mark-ups, markdowns,       
commission equivalents and other fees received by dealers in riskless       
principal transactions placed in the over-the-counter market.               

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

Broker/dealers may be willing to furnish statistical, research and other    
factual information or services ("Research"), for example, investment       
research reports; access to analysts; execution systems and trading         
analytics; reports or databases containing corporate, fundamental, and      
technical analyses; portfolio modeling strategies; and economic research    
services, such as publications, chart services, and advice from economists  
concerning macroeconomics information, and analytical investment information
about particular corporations to the Adviser for no consideration other than
brokerage or underwriting commissions. Securities may be bought or sold from
time to time through such broker/dealers on behalf of the Fund. The Adviser 
may use brokerage commissions from the Fund's portfolio transactions to     
 acquire Research, subject to the procedures and limitations described in this
discussion.                                                                 

The advisory fee paid by the Fund to the Adviser is not reduced as a        
consequence of the Adviser's receipt of Research. To the extent the Fund's  
 portfolio transactions are used to obtain Research, the brokerage commissions
paid by the Fund might exceed those that might otherwise be paid for        
execution only. The Research received may be useful and of value to the     
Adviser in serving both the Fund and other clients of the Adviser;          
accordingly, not all of the Research provided by brokers through which the  
 Fund effects securities transactions may be used by the Adviser in connection
with the Fund. While the Research is not expected to reduce the expenses of 
the Adviser, the Adviser would, through the use of the Research, avoid the  
additional expenses that would be incurred if it attempted to develop       
comparable information through its own staff.                               

From time to time, the Adviser prepares a list of broker/dealer firms that  
have been deemed by the Adviser to provide valuable Research as determined  
periodically by the investment staff ("Research Firms"), together with a    
suggested non-binding amount of brokerage commissions ("non-binding target")
to be allocated to each Research Firm, subject to certain requirements. All 
trades with Research Firms will be executed in accordance with the Adviser's
obligation to seek best execution for its client accounts. Neither the      
Adviser nor the Fund has an obligation to any Research Firm if the amount of
brokerage commissions paid to the Research Firm is less than the applicable 
non-binding target. The Adviser reserves the right to pay cash to the       
Research Firm from its own resources in an amount the Adviser determines in 
its discretion.                                                             

If the Adviser determines that any service or product has a mixed use (i.e.,
 it also serves functions that do not assist the investment decision-making or
trading process), the Adviser will allocate the costs of such service or    
product accordingly in its reasonable discretion. The Adviser will allocate 
brokerage commissions to Research Firms only for the portion of the service 
or product that the Adviser determines assists it in the investment         
decision-making or trading process and will pay for the remaining value of  
the product or service in cash.                                             

In effecting portfolio transactions on behalf of the Fund and the Adviser's 
other clients, the Adviser from time to time may instruct the broker/dealer 
that executes a transaction to allocate, or "step out," a portion of such   
transaction to another broker/dealer. The broker/dealer to which the Adviser
has "stepped out" would then settle and complete the designated portion of  
the transaction, and the executing broker/dealer would settle and complete  
the remaining portion of the transaction that has not been "stepped out."   
Each broker/dealer may receive a commission or brokerage fee with respect to
that portion of the transaction that it settles and completes.              

 In certain instances there may be securities that are suitable for the Fund's
portfolio as well as for one or more of the other clients of the Adviser or 
any subsidiary of the Adviser. It may develop that a particular security is 
 bought or sold for only one client even though it might be held by, or bought
 or sold for, other clients. Likewise, a particular security may be bought for
one or more clients when one or more other clients are selling that same    
security. Some simultaneous transactions are inevitable when several clients
 receive investment advice from the same investment adviser, particularly when
the same security is suitable for the investment objectives of more than one
client. Transactions for each client are generally effected independently   
unless the Advisor determines to purchase or sell the same securities for   
several clients at approximately the same time. The Advisor may, but is not 
required to, aggregate together purchases and sales for several clients and 
allocate the trades in a fair and equitable manner, across participating    
clients. The Adviser has adopted policies that are reasonably designed to   
ensure that when two or more clients are simultaneously engaged in the      
purchase or sale of the same security, the securities are allocated among   
 clients in a manner believed by the Adviser to be fair and equitable to each.
Among other things, these policies prohibit allocations of equity initial   
public offerings, equity limited offerings or fixed income new issues to,   
among others: (1) Private Portfolio Services accounts; (2) funds or accounts
the beneficial owners of which are principally the Adviser's officers and   
 employees of the Trust or Trustees which are not being offered to the public;
and (3) any accounts owned beneficially solely by the Adviser or any direct 
or indirect subsidiary of the Adviser. However, these policies do not       
prohibit allocations to Funds or accounts owned beneficially by Sun Life of 
 Canada (U.S.) Financial Services Holdings, Inc., or Sun Life Financial, Inc.,
or their affiliates other than the Adviser and its direct and indirect      
subsidiaries.                                                               

It is recognized that in some cases this system could have a detrimental    
effect on the price or volume of the security as far as the Fund is         
concerned. In other cases, however, the Adviser believes that the Fund's    
ability to participate in volume transactions will produce better executions
for the Fund.                                                               

X. DISCLOSURE OF PORTFOLIO HOLDINGS                                         

The Fund has established a policy governing the disclosure of its portfolio 
holdings that is reasonably designed to protect the confidentiality of the  
Fund's non-public portfolio holdings and prevent inappropriate selective    
disclosure of such holdings. The Fund's Board of Trustees has approved this 
policy and will be asked to approve any material amendments to this policy. 
Exceptions to this policy may be authorized by MFS' general counsel or a    
senior member of the MFS legal department acting under the supervision of   
MFS' general counsel (an "Authorized Person").                              

Neither MFS nor the Fund nor, if applicable, a sub-adviser, will receive any
 compensation or other consideration in connection with its disclosure of Fund
portfolio holdings.                                                         

> PUBLIC DISCLOSURE OF PORTFOLIO HOLDINGS                                       

In addition to the public disclosure of Fund portfolio holdings through     
required SEC quarterly filings, a Fund may make its portfolio holdings      
publicly available on the MFS Web site in such scope and form and with such 
frequency as MFS may reasonably determine.                                  

The following information is generally available to you on the MFS Web site 
(mfs.com):                                                                  

 Information                           Approximate Date of Posting to Web Site
 -----------                           ---------------------------------------
Fund's top 10 securities holdings     14 days after month end               
as of each month's end                                
Fund's full securities holdings       29 days after month end               
as of each month's end                                    

Note that the Fund or MFS may suspend the posting of this information or    
modify the elements of this Web posting policy without notice to            
 shareholders. Once posted, the above information will remain available on the
 Web site until at least the date on which the Fund files a Form N-CSR or Form
N-Q for the period that includes the date as of which the Web site          
information is current.                                                     

Not all registered investment companies that are advised by MFS publicly    
disclose portfolio holdings in the form or on the schedule described above, 
and registered investment companies that are sub-advised by MFS or its      
 affiliates may be subject to different portfolio holdings disclosure policies
that may permit public disclosure of portfolio holdings information in      
different forms and at different times. In addition, separate account and   
unregistered product clients of MFS or its affiliates have access to their  
portfolio holdings, and prospective clients have access to representative   
portfolio holdings. These clients and prospective clients are not subject to
the Fund's portfolio holdings disclosure policies. Some of these registered 
investment companies, sub-advised Funds, separate accounts, and unregistered
products, all advised or sub-advised by MFS or its affiliates, have         
substantially similar or identical investment objectives and strategies to  
certain Funds. They therefore have potentially substantially similar, and in
certain cases nearly identical, portfolio holdings as those Funds.          

 A Fund's portfolio holdings are considered to be publicly disclosed: (a) upon
the disclosure of the portfolio holdings in a publicly available, routine   
filing with the SEC that is required to include the information, (b) the day
after the Fund makes such information available on its Web site (assuming   
 that it discloses in its prospectus that such information is available on its
Web site), or (c) at such additional times and on such additional basis as  
determined by the SEC or its staff.                                         

> DISCLOSURE OF NON-PUBLIC PORTFOLIO HOLDINGS                                   

A Fund may, in certain cases, disclose to third parties its portfolio       
holdings which have not been made publicly available. Disclosure of         
non-public portfolio holdings to third parties may only be made if an       
Authorized Person determines that such disclosure is not impermissible under
applicable law or regulation. In the case of sub-advisers, as applicable,   
this determination may be made by a senior member of the sub-adviser's legal
or compliance departments (a "Sub-Adviser Authorized Person"). In addition, 
the third party receiving the non-public portfolio holdings may, at the     
discretion of an Authorized Person, be required to agree in writing to keep 
 the information confidential and/or agree not to trade directly or indirectly
based on the information. Such agreements may not be required in            
circumstances such as where portfolio securities are disclosed to brokers to
obtain bids/prices or in interviews with the media. MFS will seek to monitor
a recipient's use of non-public portfolio holdings provided under these     
agreements and, when appropriate, use its best efforts to enforce the terms 
of these agreements. The restrictions and obligations described in this     
paragraph do not apply to non-public portfolio holdings provided to MFS or  
its affiliates.                                                             

 In addition, to the extent that an Authorized Person determines that there is
a potential conflict with respect to the disclosure of information that is  
 not publicly available between the interests of a Fund's shareholders, on the
one hand, and MFS, MFD or an affiliated person of MFS, MFD, or the Fund, on 
the other hand, the Authorized Person must inform MFS' conflicts officer of 
such potential conflict, and MFS' conflicts officer shall determine whether,
in light of the potential conflict, disclosure is reasonable under the      
circumstances, and shall report such potential conflict of interest         
determinations to the Fund's Independent Chief Compliance Officer and the   
Board of Trustees of the Fund. MFS also reports to the Board of Trustees of 
the Fund regarding the disclosure of information regarding the Fund that is 
not publicly available.                                                     

Subject to compliance with the standards set forth in the previous two      
paragraphs, non-public portfolio holdings may be disclosed in the following 
circumstances:                                                              

 Employees of MFS or MFD or, if applicable, a sub-adviser, (collectively "Fund
representatives") disclose non-public portfolio holdings in connection with 
 the day-to-day operations and management of the Fund. Full portfolio holdings
 are disclosed to a Fund's custodians, independent registered accounting firm,
financial printers, regulatory authorities, and stock exchanges and other   
listing organizations. Portfolio holdings are disclosed to a Fund's pricing 
service vendors and broker/dealers when requesting bids for, or price       
quotations on, securities, and to other persons (including independent      
contractors) who provide systems or software support in connection with Fund
operations, including accounting, compliance support, and pricing. Portfolio
holdings may also be disclosed to persons assisting a Fund in the voting of 
 proxies or in connection with litigation relating to Fund portfolio holdings.
In connection with managing the Funds, MFS or, if applicable, a sub-adviser,
may use analytical systems provided by third parties who may have access to 
Fund portfolio holdings.                                                    

Non-public portfolio holdings may be disclosed in connection with other     
activities, such as to participants in in-kind purchases and redemptions of 
Fund shares, to service providers facilitating the distribution or analysis 
of portfolio holdings, once the information is public, and in other         
circumstances not described above. All such disclosures are subject to      
compliance with the applicable disclosure standards.                        

In addition, subject to such disclosure not being impermissible under       
applicable law or regulation, Fund representatives may disclose Fund        
portfolio holdings and related information, which may be based on non-public
portfolio holdings, under the following circumstances (among others):       

Fund representatives may provide oral or written information ("portfolio    
commentary") about a Fund, including, but not limited to, how the Fund's    
investments are divided among various sectors, industries, countries, value 
and growth stocks, small, mid, and large-cap stocks, among stocks, bonds,   
currencies and cash, types of bonds, bond maturities, bond coupons, and bond
credit quality ratings. This portfolio commentary may also include          
information on how these various weightings and factors contributed to Fund 
performance. Fund representatives may also express their views orally or in 
writing on one or more of a Fund's portfolio holdings or may state that a   
Fund has recently purchased or sold one or more holdings.                   

Fund representatives may also provide oral or written information           
 ("statistical information") about various financial characteristics of a Fund
or its underlying portfolio securities including, but not limited to, alpha,
beta, coefficient of determination, duration, maturity, information ratio,  
Sharpe ratio, earnings growth, payout ratio, price/book value, projected    
earnings growth, return on equity, standard deviation, tracking error,      
weighted average quality, market capitalization, percent debt to equity,    
price to cash flow, dividend yield or growth, default rate, portfolio       
turnover, and risk and style characteristics.                               

The portfolio commentary and statistical information may be provided to     
 members of the press, shareholders in the Fund, persons considering investing
in the Fund, or representatives of such shareholders or potential           
shareholders, such as fiduciaries of a 401(k) plan or a trust and their     
advisers, and the content and nature of the information provided to each of 
these persons may differ.                                                   

> ONGOING ARRANGEMENTS TO MAKE NON-PUBLIC PORTFOLIO HOLDINGS AVAILABLE          

 With authorization from an Authorized Person or, as applicable, a Sub-Adviser
Authorized Person, consistent with "Disclosure of Non-Public Portfolio      
Holdings" above, Fund representatives may disclose non-public Fund portfolio
holdings to the recipients identified on Appendix G to this SAI Part II, or 
permit the recipients identified in Appendix G to this SAI Part II to have  
access to non-public Fund portfolio holdings, on an on-going basis.         

This list of recipients in Appendix G to this SAI Part II is current as of  
June 30, 2006, and any additions, modifications, or deletions to this list  
that have occurred since June 30, 2006, are not reflected. The portfolio    
holdings of the Fund which are provided to these recipients, or to which    
these recipients have access, may be the Fund's current portfolio holdings. 
As a condition to receiving or being provided access to non-public Fund     
portfolio holdings, the recipients listed in Appendix G to this SAI Part II 
must agree, or otherwise have an independent duty, to maintain this         
information in confidence.                                                  

XI. DETERMINATION OF NET ASSET VALUE                                        

The net asset value per share of each class of the Fund is determined each  
day during which the New York Stock Exchange (the "Exchange") is open for   
trading. (As of the date of this SAI, the Exchange is open for trading every
 weekday except in an emergency and for the following holidays (or the days on
 which they are observed): New Year's Day; Martin Luther King Day; Presidents'
Day; Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving   
Day, and Christmas Day.) This determination is made once each day as of the 
close of regular trading on the Exchange (generally, 4 p.m., Eastern time)  
(the "valuation time") by deducting the amount of the liabilities           
attributable to the class from the value of the assets attributable to the  
class and dividing the difference by the number of Fund shares outstanding  
for that class. In accordance with regulations for regulated investment     
companies and except for money market funds, changes in portfolio holdings  
and number of shares outstanding are generally reflected in a Fund's net    
asset value the next business day after such change.                        

> MONEY MARKET FUNDS                                                            

Money market instruments are valued at amortized cost, which approximates   
market value. Amortized cost involves valuing an instrument at its cost as  
 adjusted for amortization of premium or accretion of discount rather than its
current market value. Each money market fund's use of amortized cost is     
subject to the Fund's compliance with Rule 2a-7 under the Investment Company
Act of 1940. The amortized cost value of an instrument can be different from
the market value of an instrument.                                          

The Board of Trustees for each money market fund has established procedures 
designed to stabilize its net asset value per share at $1.00 and has        
delegated to the Adviser the responsibility for the implementation and      
administration of such procedures. Under the procedures, the adviser is     
responsible for monitoring and notifying the Board of Trustees of           
 circumstances where the net asset value calculated by using market valuations
may deviate from the $1.00 per share calculated using amortized cost and    
might result in a material dilution or other unfair result to investors or  
existing shareholders. Under such circumstances, the Board may take such    
 corrective action, if any, as it deems appropriate to eliminate or reduce, to
the extent reasonably practicable, any such dilution or unfair results. Such
corrective action could include selling portfolio instruments prior to      
maturity to realize capital gains or losses; shortening average portfolio   
maturity; withholding dividends; calculating net asset value by using       
 available market quotations; and such other measures as the Trustees may deem
appropriate.                                                                

> NON-MONEY MARKET FUNDS                                                        

Open-end investment companies are generally valued at their net asset value 
per share. The underlying investments of open-end investment companies      
managed by the Adviser are valued as described below.                       

Equity securities, including restricted equity securities, are generally    
valued at the last sale or official closing price as reported by an         
independent pricing service on the market or exchange on which they are     
primarily traded. For securities for which there were no sales reported that
day, equity securities are generally valued at the last quoted daily bid    
quotation as reported by an independent pricing service on the market or    
exchange on which they are primarily traded.                                

Debt instruments (other than short-term instruments), including restricted  
debt instruments, are generally valued at an evaluated or composite bid as  
reported by an independent pricing service. Values of debt instruments      
obtained from pricing services can utilize both dealer-supplied valuations  
and electronic data processing techniques, which take into account factors  
such as institutional-size trading in similar groups of securities, yield,  
quality, coupon rate, maturity, type of issue, trading characteristics, and 
other market data.                                                          

Short-term instruments with a maturity at issuance of 60 days or less may be
valued at amortized cost, which approximates market value.                  

Exchange-traded options are generally valued at the last sale or official   
closing price as reported by an independent pricing service on the exchange 
on which they are primarily traded. Exchange-traded options for which there 
were no sales reported that day are generally valued at the last daily bid  
quotation as reported by an independent pricing service on the exchange on  
which they are primarily traded. Options not traded on an exchange are      
generally valued at a broker/dealer bid quotation. Foreign currency options 
are generally valued using an external pricing model that uses market data  
from an independent source.                                                 

Futures contracts are generally valued at last posted settlement price as   
reported by an independent pricing service on the market on which they are  
primarily traded. Futures contracts for which there were no trades that day 
for a particular position are generally valued at the closing bid quotation 
 as reported by an independent pricing service on the market on which they are
primarily traded.                                                           

Forward foreign currency contracts are generally valued at the mean of bid  
and asked prices for the time period interpolated from rates reported by an 
independent pricing service for proximate time periods.                     

Swaps are generally valued at a broker-dealer bid quotation.                

 Securities and other assets generally valued on the basis of information from
an independent pricing service may also be valued at a broker/dealer bid    
quotation.                                                                  

The values of foreign securities and other assets and liabilities expressed 
 in foreign currencies are converted to U.S. dollars using the mean of bid and
asked prices for rates reported by an independent pricing service.          

XII. SHAREHOLDER SERVICES                                                   

> INVESTMENT AND WITHDRAWAL PROGRAMS                                            

The Fund makes available certain programs designed to enable shareholders to
add to or withdraw from their investment with applicable sales charges      
reduced or waived. These programs are generally described in the prospectus 
and additional details regarding certain of these programs are set forth    
below. These programs or waivers may be changed or discontinued by the Fund 
at any time without notice. Some of these programs and waivers may not be   
available to you if your shares are held through certain types of accounts, 
such as certain retirement accounts and 529 plans, or certain accounts that 
you maintain with your financial intermediary. You or your financial        
intermediary must inform MFSC of your intention to invest in the Fund under 
one of the programs below upon purchasing Fund shares. You can provide this 
information in your account application or through a separate document      
provided by your financial intermediary.                                    

LETTER OF INTENT. Out of the shareholder's initial purchase (or subsequent  
purchases if necessary), 5% of the dollar amount specified in the Letter of 
Intent application shall be held in escrow by MFSC in the form of shares    
registered in the shareholder's name. All distributions on escrowed shares  
will be paid to the shareholder or to the shareholder's order. When the     
minimum investment so specified is completed (either prior to or by the end 
of the 13-month period or 36-month period, as applicable), the shareholder  
will be notified and the escrowed shares will be released.                  

If the intended minimum investment amount is not completed, MFSC will redeem
 an appropriate number of the escrowed shares in order to pay the higher sales
charge level for the amount actually purchased. Shares remaining after any  
such redemption will be released by MFSC. By completing and signing the     
 Account Application or separate Letter of Intent application, the shareholder
 irrevocably appoints MFSC his or her attorney to surrender for redemption any
or all escrowed shares with full power of substitution in the premises.     

SYSTEMATIC WITHDRAWAL PLAN ("SWP"). To initiate this service, shares having 
an aggregate value of at least $5,000 either must be held on deposit by, or 
certificates for such shares must be deposited with, MFSC. MFSC may charge  
 the account for services rendered and expenses incurred beyond those normally
assumed by the Fund with respect to the redemption of shares. No charge is  
currently assessed against the account, but one could be instituted by MFSC 
on 60 days' notice in writing to the shareholder in the event that the Fund 
ceases to assume the cost of these services. The Fund may terminate any SWP 
for an account if the value of the account falls below $5,000 as a result of
share redemptions (other than as a result of a SWP). Any SWP may be         
terminated at any time by either the shareholder or the Fund.               

GROUP PURCHASES. A bona fide group and all its members may be treated at    
MFD's discretion as a single purchaser and, under the Right of Accumulation 
 (but not the Letter of Intent), obtain quantity sales charge discounts on the
purchase of Class A or 529A shares if the group (1) gives its endorsement or
authorization to the investment program so that it may be used by the       
financial intermediary to facilitate solicitation of the membership, thus   
effecting economies of sales effort; (2) has been in existence for at least 
six months and has a legitimate purpose other than to purchase mutual fund  
shares at a discount; (3) is not a group of individuals whose sole          
organizational nexus is as credit cardholders of a company, policyholders of
an insurance company, customers of a bank or financial intermediary, clients
of an investment adviser, or other similar groups; and (4) agrees to provide
 certification of membership of those members investing money in the MFS Funds
upon the request of MFD.                                                    

> EXCHANGE PRIVILEGE                                                            

MONEY MARKET FUNDS                                                          

If you exchange your shares out of MFS Cash Reserve Fund, MFS Government    
 Money Market Fund, or MFS Money Market Fund into Class A or Class 529A shares
of any other MFS Fund, you will pay the initial sales charge, if applicable,
if you have not already paid this charge on these shares. You will not pay  
the charge if:                                                              

 o the shares exchanged from either Fund were acquired by an exchange from any
other MFS Fund;                                                         

 o the shares exchanged from either Fund were acquired by automatic investment
of dividends from any other MFS Fund; or                                

o the shares being exchanged would have, at the time of purchase, been      
 eligible for purchase at net asset value had you invested directly in the
MFS Fund into which the exchange is being made.                         

MFS FIXED FUND. Class A, Class C, Class R, Class R1, Class R2, Class R3,    
Class R4, and Class R5 shares of any MFS Fund held by certain qualified     
 retirement plans may be exchanged for units of participation of the MFS Fixed
 Fund (the "Units"), and Units may be exchanged for Class A, Class C, Class R,
Class R1, Class R2, Class R3, Class R4, and Class R5 shares of any MFS Fund 
(if the share purchase eligibility for these share classes is met). With    
respect to exchanges between Class C shares subject to a CDSC and Units, a  
 shareholder will only be eligible to make the exchange if the CDSC would have
been waived had the Class C shares been redeemed. With respect to exchanges 
 between Class A shares and Units, shares otherwise subject to a CDSC will not
be charged a CDSC in an exchange. Shares or Units will retain the CDSC      
 schedule in effect based upon a pro rata share of the CDSC from the exchanged
 Fund and the original purchase date of the shares subject to the CDSC. In the
event that a shareholder initially purchases Units and then exchanges into  
Class A shares subject to an initial sales charge of a MFS Fund, the initial
sales charge shall be due upon such exchange, but will not be imposed with  
respect to any subsequent exchanges between such Class A shares and Units   
with respect to shares on which the initial sales charge has already been   
paid.                                                                       

TELEPHONE EXCHANGES. No more than ten exchanges may be made in any one      
exchange request by telephone.                                              

XIII. DESCRIPTION OF SHARES, VOTING RIGHTS, AND LIABILITIES                 

The Trust's Declaration of Trust, as amended or amended and restated from   
time to time, permits the Trust's Board of Trustees to issue an unlimited   
number of full and fractional shares of beneficial interest (without par    
value) of each series, to divide or combine the shares of any series into a 
 greater or lesser number of shares without thereby changing the proportionate
beneficial interests in that series, and to divide such shares into classes.
The Board of Trustees has reserved the right to create and issue additional 
series and classes of shares and to classify or reclassify outstanding      
shares.                                                                     

Each shareholder of the Fund is entitled to one vote for each dollar of net 
asset value (number of shares of the Fund owned times net asset value per   
share) of the Fund, on each matter on which the shareholder is entitled to  
 vote. Each fractional dollar amount is entitled to a proportionate fractional
vote. Except when a larger vote is required by applicable law, a majority of
the voting power of the shares voted in person or by proxy on a matter will 
 decide that matter and a plurality of the voting power of the shares voted in
person or by proxy will elect a Trustee. Shareholders of all series of the  
Trust generally will vote together on all matters except when a particular  
matter affects only shareholders of a particular class or series or when    
applicable law requires shareholders to vote separately by series or class. 

Except in limited circumstances, the Trustees may, without any shareholder  
vote, amend or otherwise supplement the Trust's Declaration of Trust. Each  
Trust except MFS Series Trust XII, or any series or class thereof, may merge
or consolidate or may sell, lease, or exchange all or substantially all of  
its assets if authorized (either at a meeting or by written consent) by a   
Majority Shareholder Vote of the class, series, or trust, as applicable. MFS
Series Trust XII, or any series or class of MFS Series Trust XII, may merge 
or consolidate or may sell, lease, or exchange all or substantially all of  
its assets without any shareholder vote to the extent permitted by law. Each
Trust, or any series or class, may reincorporate or reorganize (but not with
 another operating entity) without any shareholder vote. The Trust, any series
of the Trust, or any class of any series, may be terminated at any time by a
vote of 1) a Majority Shareholder Vote, or 2) by the Trustees by written    
notice to the shareholders of that series or class.                         

The Trustees may cause a shareholder's shares to be redeemed for any reason 
 under terms set by the Trustees, including, but not limited to, 1) to protect
the tax status of a Fund, 2) the failure of a shareholder to provide a tax  
identification number if required to do so, 3) the failure of a shareholder 
to pay when due for the purchase of shares issued to the shareholder, 4) in 
order to eliminate accounts whose values are less than a minimum amount     
established by the Trustees, 5) the failure of a shareholder to meet or     
maintain the qualifications for ownership of a particular class of shares,  
and 6) to eliminate ownership of shares by a particular shareholder when the
Trustees determine that the particular shareholder's ownership is not in the
 best interests of the other shareholders of the applicable Fund (for example,
in the case of an alleged market timer). The exercise of the above powers is
subject to any applicable provisions under the 1940 Act or the rules adopted
thereunder.                                                                 

Under the Declaration of Trust, the Fund may convert to a master/feeder     
structure or a fund of funds structure without shareholder approval. In a   
master/feeder structure, a Fund invests all of its assets in another        
 investment company with similar investment objectives and policies. In a Fund
 of Funds structure, a Fund invests all or a portion of its assets in multiple
investment companies.                                                       

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

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

The Trust's Declaration of Trust provides that shareholders may not bring   
suit on behalf of the fund without first requesting that the Trustees bring 
such suit unless there would be irreparable injury to the Fund or if a      
majority of the Trustees (or a majority of Trustees on any committee        
established to consider the merits of such action) have a personal financial
interest in the action. Trustees are not considered to have a personal      
financial interest by virtue of being compensated for their services as     
Trustees or as trustees of Funds with the same or an affiliated investment  
adviser or distributor.                                                     

The Trust's Declaration of Trust provides that by becoming a shareholder of 
the Fund, each shareholder shall be expressly held to have assented to and  
agreed to be bound by the provisions of the Declaration of Trust.           

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                                                                    APPENDIX A

TRUSTEES AND OFFICERS - IDENTIFICATION AND BACKGROUND 

The Trustees and officers of the Trust, as of September 1, 2006, are listed     
below, together with their principal occupations during the past five years.    
(Their titles may have varied during that period.) The address of each Trustee  
and officer is 500 Boylston Street, Boston, Massachusetts 02116.                

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

                                                     PRINCIPAL OCCUPATIONS
                POSITION(S)                         DURING THE PAST FIVE
NAME, DATE OF      HELD WITH     TRUSTEE/OFFICER          YEARS & OTHER     
 BIRTH             FUND           SINCE(1)            DIRECTORSHIPS(2)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INTERESTED                                                                      
TRUSTEES                                                                        
--------------------------------------------------------------------------------
Robert J.           Trustee       April 2005;        Massachusetts Financial    
Manning(3)                        December 2004 -    Services Company, Chief    
(born 10/20/63)                   March 2005         Executive Officer,         
                                  (Advisory          President, Chief Investment
                            Trustee);          Officer  and Director
February -  
 December 2004
(Trustee)   
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert C. Pozen(3)  Trustee       April 2005;        Massachusetts Financial    
(born 8/8/46)                     December 2004      Services Company, Chairman 
                             -March 2005        (since February 2004);
                            (Advisory          Secretary of Economic
                                Trustee);          Affairs, The Commonwealth
                               February -         December 2002); Fidelity
                                December 2004      of Massachusetts (January
                                (Trustee)          2002 to Investments, Vice
                                                Chairman (June 2000 to
                                                  December 2001); Fidelity
                                               Management & Research
                                             Company (investment
                                                    adviser), President (March
                                                  1997 to July 2001); Bell
                                            Canada Enterprises
                                               (telecommunications),
                                                   Director; Medtronic, Inc.
                                               (medical technology),
                                           Director; Telesat
                                    (satellite
                                                   communications), Director
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INDEPENDENT                                                                     
TRUSTEES                                                                        
--------------------------------------------------------------------------------
J. Atwood Ives      Trustee and   February 1992      Private investor; Eastern  
(born 5/1/36)       Chair of                         Enterprises (diversified   
           Trustees                         services company),
                                               Chairman, Trustee and
                                                 Chief Executive Officer
                                               (until November 2000)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert E.           Trustee       January 2006       Consultant - regulatory    
Butler(4)                                            and compliance matters     
(born 11/29/41)                                      (since July 2002);         
                                                    PricewaterhouseCoopers LLP
                                                (professional services
                                                  firm), Partner (November
                                               2000 until June 2002)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Lawrence H. Cohn,   Trustee       August 1993        Brigham and Women's        
M.D.                                                 Hospital, Chief of Cardiac 
(born 3/11/37)                                       Surgery (until 2005);      
                                                 Harvard Medical School,
                                               Professor of Surgery;
                                             Brigham and Women's
                                              Hospital Physician's
                                                  Organization Chair (2000
                                  to 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
David H. Gunning    Trustee       January 2004       Cleveland-Cliffs Inc.      
(born 5/30/42)                                       (mining products and       
                                                 service provider), Vice
                                                  Chairman/Director (since
                                                April 2001); Encinitos
                                           Ventures (private
                                              investment company),
                                                  Principal (1997 to April
                                                 2001); Lincoln Electric
                                                 Holdings, Inc. (welding
                                                  equipment manufacturer),
                                  Director

--------------------------------------------------------------------------------
William R. Gutow    Trustee       December 1993      Private investor and real  
(born 9/27/41)                                       estate consultant; Capitol 
                                                  Entertainment Management
                                                    Company (video franchise),
                                       Vice Chairman
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Michael Hegarty     Trustee       December 2004      Retired; AXA Financial     
(born 12/21/44)                                      (financial services and    
                                                   insurance), Vice Chairman
                                             and Chief Operating
                                                   Officer (until May 2001);
                                            The Equitable Life
                                           Assurance Society
                                                    (insurance), President and
                                                 Chief Operating Officer
                                          (until May 2001)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Lawrence T.         Trustee       July 1981          Hemenway & Barnes          
Perera                                               (attorneys), Partner       
(born 6/23/35)                                                                  
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
J. Dale Sherratt    Trustee       August 1993        Insight Resources, Inc.    
(born 9/23/38)                                       (acquisition planning      
                                                  specialists), President;
                                               Wellfleet Investments
                                                  (investor in health care
                                              companies), Managing
                                                General Partner (since
                                          1993); Cambridge
                                        Nutraceuticals
                                                   (professional nutritional
                                                    products), Chief Executive
                                                  Officer (until May 2001)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Laurie J. Thomsen   Trustee       March 2005         Private investor; Prism    
(born 8/5/57)                                        Venture Partners (venture  
                                                  capital), Co-founder and
                                                General Partner (until
                                              June 2004); St. Paul
                                             Travelers Companies
                                              (commercial property
                                               liability insurance),
                                  Director
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert W. Uek       Trustee       January 2006       Retired (since 1999);      
(born 5/18/41)                                       PricewaterhouseCoopers LLP 
                                                (professional services
                                               firm), Partner (until
                                              1999); Consultant to
                                            investment company
                                                   industry (since 2000); TT
                                             International Funds
                                                (mutual fund complex),
                                             Trustee (2000 until
                                         2005); Hillview
                                                   Investment Trust II Funds
                                                (mutual fund complex),
                                                   Trustee (2000 until 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
OFFICERS                                                                        
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Maria F. Dwyer(3)   President     November 2005      Massachusetts Financial    
(born 12/1/58)                                       Company, Executive Vice    
                                             President and Chief
                                                   Regulatory Officer (since
                                               March 2004); Fidelity
                                               Management & Research
                                                 Company, Vice President
                                                (prior to March 2004);
                                                  Fidelity Group of Funds,
                                                 President and Treasurer
                                               (prior to March 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Tracy Atkinson(3)   Treasurer     September 2005     Massachusetts Financial    
(born 12/30/64)                                      Services Company, Senior   
                                               Vice President (since
                                          September 2004);
                                                PricewaterhouseCoopers
                                                LLP, Partner (prior to
                                         September 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Christopher R.      Assistant     July 2005          Massachusetts Financial    
Bohane(3)           Secretary                        Services Company, Vice     
(born 1/18/74)      and                              President and Senior       
                    Assistant                        Counsel (since April 2003);
                    Clerk                             Kirkpatrick & Lockhart LLP
                                               (law firm), Associate
                                               (prior to April 2003)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Ethan D.            Assistant     July 2005          Massachusetts Financial    
Corey(3)            Secretary                        Services Company, Special  
(born 11/21/63)     and                              Counsel (since December    
                Assistant                        2004); Dechert LLP (law
                 Clerk                            firm), Counsel (prior to
                                        December 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
David L.            Assistant     July 2005          Massachusetts Financial    
DiLorenzo(3)        Treasurer                        Services Company, Vice     
(born 8/10/68)                                       President (since June      
                                                   2005); JP Morgan Investor
                                                  Services, Vice President
                                              (prior to June 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Timothy M.          Assistant     September 2005     Massachusetts Financial    
Fagan(3)            Secretary                        Services Company, Vice     
(born 7/10/68)      and                              President and Senior       
                 Assistant                        Counsel (since September
            Clerk                            2005); John Hancock
                                             Advisers, LLC, Vice
                                             President and Chief
                                            Compliance Officer
                                                   (September 2004 to August
                                                2005), Senior Attorney
                                                    (prior to September 2004);
                                               John Hancock Group of
                                                   Funds, Vice President and
                                                  Chief Compliance Officer
                                            (September 2004 to
                                        December 2004)

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

--------------------------------------------------------------------------------
Mark D.             Assistant     July 2005          Massachusetts Financial    
Fischer(3)          Treasurer                        Services Company, Vice     
(born 10/27/70)                                      President (since May 2005);
                                              JP Morgan Investment
                                                  Management Company, Vice
                                                 President (prior to May
                               2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Brian E.            Assistant     May 2006           Massachusetts Financial    
Langenfeld(3)       Secretary                        Services Company, Assistant
(born 3/7/73)       and                              Vice President and Counsel 
               Assistant                        (since May 2006); John
               Clerk                            Hancock Advisers, LLC,
                                                  Assistant Vice President
                                                  and Counsel (May 2005 to
                                                   April 2006); John Hancock
                                                 Advisers, LLC, Attorney
                                                 and Assistant Secretary
                                             (prior to May 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Ellen Moynihan(3)   Assistant     April 1997         Massachusetts Financial    
(born 11/13/57)     Treasurer                        Services Company, Senior   
                                        Vice President

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

--------------------------------------------------------------------------------
Susan S. Newton(3)  Assistant     May 2005           Massachusetts Financial    
(born 3/7/50)       Secretary                        Services Company, Senior   
           and                              Vice President and
                  Assistant                        Associate General Counsel
                 Clerk                            (since April 2005); John
                                                Hancock Advisers, LLC,
                                                Senior Vice President,
                                                   Secretary and Chief Legal
                                                 Officer (prior to April
                                                   2005); John Hancock Group
                                               of Funds, Senior Vice
                                                  President, Secretary and
                                                    Chief Legal Officer (prior
                                        to April 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Susan A.            Assistant     July 2005          Massachusetts Financial    
Pereira(3)          Secretary                        Services Company, Vice     
(born 11/5/70)      and                              President and Senior       
                   Assistant                        Counsel (since June 2004);
                   Clerk                            Bingham McCutchen LLP (law
                                                    firm), Associate (prior to
                                    June 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Mark N.             Secretary     January 2006       Massachusetts Financial    
Polebaum(3)         and Clerk                        Services Company, Executive
(born 5/1/52)                                         Vice President, General   
                                               Counsel and Secretary
                                               (since January 2006);
                                                 Wilmer Cutler Pickering
                                                Hale and Dorr LLP (law
                                                  firm), Partner (prior to
                                       January 2006)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Frank L. Tarantino  Independent   June 2004          Tarantino LLC (provider of 
(born 3/7/44)       Chief                            compliance services),      
              Compliance                       Principal (since June
            Officer                          2004); CRA Business
                                          Strategies Group
                                                (consulting services),
                                                  Executive Vice President
                                                    (April 2003 to June 2004);
                                               David L. Babson & Co.
                                               (investment adviser),
                                                  Managing Director, Chief
                                                    Administrative Officer and
                                                  Director (prior to March
                               2003)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
James O. Yost(3)    Assistant     September 1990     Massachusetts Financial    
(born 06/12/60)     Treasurer                        Services Company, Senior   
                                        Vice President
--------------------------------------------------------------------------------

------------------                                                              
(1) Date first appointed to serve as Trustee/officer of an MFS fund. Each       
Trustee has served continuously since appointment unless indicated      
otherwise.                                                              
(2) Directorships or trusteeships of companies required to report to the        
Securities and Exchange Commission (i.e., "public companies").          
(3) "Interested person" of the trust within the meaning of the Investment       
 Company Act of 1940 (referred to as the 1940 Act), which is the principal
federal law governing investment companies like the fund, as a result of
position with MFS. The address of MFS is 500 Boylston Street, Boston,   
Massachusetts 02116.                                                    
(4) In 2004 and 2005, Mr. Butler provided consulting services to the            
independent compliance consultant retained by MFS pursuant to its       
 settlement with the SEC concerning market timing and related matters. The
   terms of that settlement required that compensation and expenses related to
the independent compliance consultant be borne exclusively by MFS and,  
therefore, MFS paid Mr. Butler for the services he rendered to the      
  independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a
total of $351,119.29.                                                   

The Trust held a shareholders' meeting in 2005 to elect Trustees, and will hold 
a shareholders' meeting at least once every five years thereafter, to elect     
Trustees. Each Trustee (except Messrs. Butler and Uek) has been elected by      
shareholders and each Trustee and officer holds office until his or her         
successor is chosen and qualified or until his or her earlier death,            
resignation, retirement or removal.                                             

Messrs. Butler, Sherratt and Uek and Ms. Thomsen are members of the Trust's     
Audit Committee.                                                                

Each of the Trust's Trustees and officers holds comparable positions with       
certain other funds of which MFS or a subsidiary is the investment adviser or   
distributor, and, in the case of the officers, with certain affiliates of MFS.  
As of January 1, 2006, the Trustees served as board members of 98 funds within  
the MFS Family of Funds.                                                        

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                                                                    APPENDIX B

PROXY VOTING POLICIES AND PROCEDURES

MASSACHUSETTS FINANCIAL SERVICES COMPANY

PROXY VOTING POLICIES AND PROCEDURES

SEPTEMBER 17, 2003, AS REVISED ON SEPTEMBER 20, 2004, 
MARCH 15, 2005 AND MARCH 1, 2006  

Massachusetts Financial Services Company, MFS Institutional Advisors, Inc. and  
MFS' other investment adviser subsidiaries (collectively, "MFS") have adopted   
proxy voting policies and procedures, as set forth below ("MFS Proxy Voting     
Policies and Procedures"), with respect to securities owned by the clients for  
which MFS serves as investment adviser and has the power to vote proxies,       
including the registered investment companies sponsored by MFS, other than the  
MFS Union Standard Equity Fund (the "MFS Funds"). References to "clients" in    
these policies and procedures include the MFS Funds and other clients of MFS,   
such as funds organized offshore, sub-advised funds and separate account        
clients, to the extent these clients have delegated to MFS the responsibility   
to vote proxies on their behalf under the MFS Proxy Voting Policies and         
Procedures.                                                                     

The MFS Proxy Voting Policies and Procedures include:                           

A. Voting Guidelines;                                                           

B. Administrative Procedures;                                                   

C. Monitoring System;                                                           

D. Records Retention; and                                                       

E. Reports.                                                                     

A. VOTING GUIDELINES                                                            

1. GENERAL POLICY; POTENTIAL CONFLICTS OF INTEREST                              

MFS' policy is that proxy voting decisions are made in what MFS believes to be  
the best long-term economic interests of MFS' clients, and not in the interests 
of any other party or in MFS' corporate interests, including interests such as  
the distribution of MFS Fund shares, administration of 401(k) plans, and        
institutional relationships.                                                    

MFS has carefully reviewed matters that in recent years have been presented for 
shareholder vote by either management or shareholders of public companies.      
Based on the overall principle that all votes cast by MFS on behalf of its      
clients must be in what MFS believes to be the best long-term economic          
interests of such clients, MFS has adopted proxy voting guidelines, set forth   
below, that govern how MFS generally will vote on specific matters presented    
for shareholder vote. In all cases, MFS will exercise its discretion in voting  
on these matters in accordance with this overall principle. In other words, the 
underlying guidelines are simply that - guidelines. Proxy items of significance 
are often considered on a case-by-case basis, in light of all relevant facts    
and circumstances, and in certain cases MFS may vote proxies in a manner        
different from these guidelines.                                                

As a general matter, MFS maintains a consistent voting position on similar      
proxy proposals with respect to various issuers. In addition, MFS generally     
votes consistently on the same matter when securities of an issuer are held by  
multiple client accounts. However, MFS recognizes that there are gradations in  
certain types of proposals that might result in different voting positions      
being taken with respect to different proxy statements. There also may be       
situations involving matters presented for shareholder vote that are not        
clearly governed by the guidelines, such as proposed mergers and acquisitions.  
Some items that otherwise would be acceptable will be voted against the         
proponent when it is seeking extremely broad flexibility without offering a     
valid explanation. MFS reserves the right to override the guidelines with       
respect to a particular shareholder vote when such an override is, in MFS' best 
judgment, consistent with the overall principle of voting proxies in the best   
long-term economic interests of MFS' clients.                                   

From time to time, MFS receives comments on these guidelines as well as         
regarding particular voting issues from its clients and corporate issuers.      
These comments are carefully considered by MFS, when it reviews these           
guidelines each year and revises them as appropriate.                           

These policies and procedures are intended to address any potential material    
conflicts of interest on the part of MFS or its affiliates that are likely to   
arise in connection with the voting of proxies on behalf of MFS' clients. If    
such potential material conflicts of interest do arise, MFS will analyze,       
document and report on such potential material conflicts of interest (see       
Sections B.2 and E below), and shall ultimately vote the relevant proxies in    
what MFS believes to be the best long-term economic interests of its clients.   
The MFS Proxy Review Group is responsible for monitoring and reporting with     
respect to such potential material conflicts of interest.                       

2. MFS' POLICY ON SPECIFIC ISSUES                                               

ELECTION OF DIRECTORS                                                           

MFS believes that good governance should be based on a board with a majority of 
directors who are "independent" of management, and whose key committees (e.g.,  
compensation, nominating, and audit committees) are comprised entirely of       
"independent" directors. While MFS generally supports the board's nominees in   
uncontested elections, we will withhold our vote for a nominee for a board of a 
U.S. issuer if, as a result of such nominee being elected to the board, the     
board would be comprised of a majority of members who are not "independent" or, 
alternatively, the compensation, nominating or audit committees would include   
members who are not "independent." MFS will also withhold its vote for a        
nominee to the board if we can determine that he or she failed to attend at     
least 75% of the board and/or relevant committee meetings in the previous year  
without a valid reason. In addition, MFS will withhold its vote for all         
nominees standing for election to a board of a U.S. issuer if we can determine: 
(1) if, since the last annual meeting of shareholders and without shareholder   
approval, the board or its compensation committee has repriced underwater       
options; or (2) if, within the last year, shareholders approved by majority     
vote a resolution recommending that the board rescind a "poison pill" and the   
board has failed to take responsive action to that resolution. Responsive       
action would include the rescission of the "poison pill"(without a broad        
reservation to reinstate the "poison pill" in the event of a hostile tender     
offer), or public assurances that the terms of the "poison pill" would be put   
to a binding shareholder vote within the next five to seven years.              

MFS evaluates a contested election of directors on a case-by-case basis         
considering the long-term financial performance of the company relative to its  
industry, management's track record, the qualifications of the nominees for     
both slates and an evaluation of what each side is offering shareholders.       

MFS votes for reasonably crafted proposals calling for directors to be elected  
with an affirmative majority of votes cast and/or the elimination of the        
plurality standard for electing directors (including binding resolutions        
requesting that the board amend the company's bylaws), provided the proposal    
includes a carve-out for a plurality voting standard when there are more        
director nominees than board seats (e.g., contested elections) ("Majority Vote  
Proposals").                                                                    

MFS considers voting against Majority Vote Proposals if the company has         
adopted, or has proposed to adopt in the proxy statement, formal corporate      
governance principles that present a meaningful alternative to the majority     
voting standard and provide an adequate response to both new nominees as well   
as incumbent nominees who fail to receive a majority of votes cast.             

MFS believes that a company's election policy should address the specific       
circumstances at that company. MFS considers whether a company's election       
policy articulates the following elements to address each director nominee who  
fails to receive an affirmative majority of votes cast in an election:          

Establish guidelines for the process by which the company determines the status 
of nominees who fail to receive an affirmative majority of votes cast and       
disclose the guidelines in the annual proxy statement;                          

Guidelines should include a reasonable timetable for resolution of the          
nominee's status and a requirement that the resolution be disclosed together    
with the reasons for the resolution;                                            

Vest management of the process in the company's independent directors, other    
than the nominee in question; and                                               

Outline the range of remedies that the independent directors may consider       
concerning the nominee.                                                         

CLASSIFIED BOARDS                                                               

MFS opposes proposals to classify a board (e.g., a board in which only          
one-third of board members are elected each year). MFS supports proposals to    
declassify a board.                                                             

NON-SALARY COMPENSATION PROGRAMS                                                

Restricted stock plans should reward results rather than tenure. In some cases, 
restricted stock is granted to the recipient at deep discounts to fair market   
value, sometimes at par value. The holder cannot sell for a period of years,    
but in the meantime the holder is able to vote and receive dividends.           
Eventually the restrictions lapse and the stock can be sold by the holder.      

MFS votes against stock option programs for officers, employees or non-employee 
directors that do not require an investment by the optionee, that give "free    
rides" on the stock price, or that permit grants of stock options with an       
exercise price below fair market value on the date the options are granted.     

MFS opposes stock option programs that allow the board or the compensation      
committee, without shareholder approval, to reprice underwater options or to    
automatically replenish shares (i.e., evergreen plans). MFS will consider on a  
case-by-case basis proposals to exchange existing options for newly issued      
options (taking into account such factors as whether there is a reasonable      
value-for-value exchange).                                                      

MFS opposes stock option and restricted stock plans that provide unduly         
generous compensation for officers, directors or employees, or could result in  
excessive dilution to other shareholders. As a general guideline, MFS votes     
against stock option and restricted stock plans if all such plans for a         
particular company involve potential dilution, in the aggregate, of more than   
15%. However, MFS may accept a higher percentage (up to 20%) in the case of     
startup or small companies which cannot afford to pay large salaries to         
executives, or in the case where MFS, based upon the issuer's public            
disclosures, believes that the issuer has been responsible with respect to its  
recent compensation practices, including the mix of the issuance of restricted  
stock and options.                                                              

MFS votes in favor of stock option or restricted stock plans for non-employee   
directors as long as they satisfy the requirements set forth above with respect 
to stock option and restricted stock plans for company executives.              

EXPENSING OF STOCK OPTIONS                                                      

While we acknowledge that there is no agreement on a uniform methodology for    
expensing stock options, MFS supports shareholder proposals to expense stock    
options because we believe that the expensing of options presents a more        
accurate picture of the company's financial results to investors. We also       
believe that companies are likely to be more disciplined when granting options  
if the value of stock options were treated as an expense item on the company's  
income statements.                                                              

EXECUTIVE COMPENSATION                                                          

MFS believes that competitive compensation packages are necessary to attract,   
motivate and retain executives. Therefore, MFS opposes shareholder proposals    
that seek to set limits on executive compensation. Shareholder proposals        
seeking to set limits on executive compensation tend to specify arbitrary       
compensation criteria. MFS also opposes shareholder requests for disclosure on  
executive compensation beyond regulatory requirements because we believe that   
current regulatory requirements for disclosure of executive compensation are    
appropriate and that additional disclosure is often unwarranted and costly.     
Although we support linking executive stock option grants to a company's stock  
performance, MFS opposes shareholder proposals that mandate a link of           
performance-based options to a specific industry or peer group index. MFS       
believes that compensation committees should retain the flexibility to propose  
the appropriate index or other criteria by which performance-based options      
should be measured. MFS evaluates other executive compensation restrictions     
(e.g., terminating the company's stock option or restricted stock programs,     
freezing executive pay during periods of large layoffs, and establishing a      
maximum ratio between the highest paid executive and lowest paid employee)      
based on whether such proposals are in the best long-term economic interests of 
our clients.                                                                    

EMPLOYEE STOCK PURCHASE PLANS                                                   

MFS supports the use of a broad-based employee stock purchase plans to increase 
company stock ownership by employees, provided that shares purchased under the  
plan are acquired for no less than 85% of their market value and do not result  
in excessive dilution.                                                          

"GOLDEN PARACHUTES"                                                             

From time to time, shareholders of companies have submitted proxy proposals     
that would require shareholder approval of severance packages for executive     
officers that exceed certain predetermined thresholds. MFS votes in favor of    
such shareholder proposals when they would require shareholder approval of any  
severance package for an executive officer that exceeds a certain multiple of   
such officer's annual compensation that is not determined in MFS' judgment to   
be excessive.                                                                   

ANTI-TAKEOVER MEASURES                                                          

In general, MFS votes against any measure that inhibits capital appreciation in 
a stock, including proposals that protect management from action by             
shareholders. These types of proposals take many forms, ranging from "poison    
pills" and "shark repellents" to super-majority requirements.                   

MFS will vote for proposals to rescind existing "poison pills" and proposals    
that would require shareholder approval to adopt prospective "poison pills."    
Nevertheless, MFS will consider supporting the adoption of a prospective        
"poison pill" or the continuation of an existing "poison pill" if the following 
two conditions are met: (1) the "poison pill" allows MFS clients to hold an     
aggregate position of up to 15% of a company's total voting securities (and of  
any class of voting securities); and (2) either (a) the "poison pill" has a     
term of not longer than five years, provided that MFS will consider voting in   
favor of the "poison pill" if the term does not exceed seven years and the      
"poison pill" is linked to a business strategy or purpose that MFS believes is  
likely to result in greater value for shareholders; or (b) the terms of the     
"poison pill" allow MFS clients the opportunity to accept a fairly structured   
and attractively priced tender offer (e.g., a "chewable poison pill" that       
automatically dissolves in the event of an all cash, all shares tender offer at 
a premium price).                                                               

MFS will consider on a case-by-case basis proposals designed to prevent tenders 
which are disadvantageous to shareholders such as tenders at below market       
prices and tenders for substantially less than all shares of an issuer.         

REINCORPORATION AND REORGANIZATION PROPOSALS                                    

When presented with a proposal to reincorporate a company under the laws of a   
different state, or to effect some other type of corporate reorganization, MFS  
considers the underlying purpose and ultimate effect of such a proposal in      
determining whether or not to support such a measure. While MFS generally votes 
in favor of management proposals that it believes are in the best long-term     
economic interests of its clients, MFS may oppose such a measure if, for        
example, the intent or effect would be to create additional inappropriate       
impediments to possible acquisitions or takeovers.                              

ISSUANCE OF STOCK                                                               

There are many legitimate reasons for issuance of stock. Nevertheless, as noted 
above under "Non-Salary Compensation Programs", when a stock option plan        
(either individually or when aggregated with other plans of the same company)   
would substantially dilute the existing equity (e.g., by approximately 15% or   
more), MFS generally votes against the plan. In addition, MFS votes against     
proposals where management is asking for authorization to issue common or       
preferred stock with no reason stated (a "blank check") because the unexplained 
authorization could work as a potential anti-takeover device.                   

REPURCHASE PROGRAMS                                                             

MFS supports proposals to institute share repurchase plans in which all         
shareholders have the opportunity to participate on an equal basis. Such plans  
may include a company acquiring its own shares on the open market, or a company 
making a tender offer to its own shareholders.                                  

CONFIDENTIAL VOTING                                                             

MFS votes in favor of proposals to ensure that shareholder voting results are   
kept confidential. For example, MFS supports proposals that would prevent       
management from having access to shareholder voting information that is         
compiled by an independent proxy tabulation firm.                               

CUMULATIVE VOTING                                                               

MFS opposes proposals that seek to introduce cumulative voting and for          
proposals that seek to eliminate cumulative voting. In either case, MFS will    
consider whether cumulative voting is likely to enhance the interests of MFS'   
clients as minority shareholders. In our view, shareholders should provide      
names of qualified candidates to a company's nominating committee, which now    
for the first time (for U.S. listed companies) must be comprised solely of      
"independent" directors.                                                        

WRITTEN CONSENT AND SPECIAL MEETINGS                                            

Because the shareholder right to act by written consent (without calling a      
formal meeting of shareholders) can be a powerful tool for shareholders, MFS    
generally opposes proposals that would prevent shareholders from taking action  
without a formal meeting or would take away a shareholder's right to call a     
special meeting of company shareholders.                                        

INDEPENDENT AUDITORS                                                            

MFS believes that the appointment of auditors is best left to the board of      
directors of the company and therefore supports the ratification of the board's 
selection of an auditor for the company. Recently, some shareholder groups have 
submitted proposals to limit the non-audit activities of a company's audit      
firm. Some proposals would prohibit the provision of any non-audit services by  
a company's auditors to that company. MFS opposes proposals recommending the    
prohibition or limitation of the performance of non-audit services by an        
auditor, and proposals recommending the removal of a company's auditor due to   
the performance of non-audit work for the company by its auditor. MFS believes  
that the board, or its audit committee, should have the discretion to hire the  
company's auditor for specific pieces of non-audit work in the limited          
situations permitted under current law.                                         

BEST PRACTICES STANDARDS                                                        

Best practices standards are rapidly developing in the corporate governance     
areas as a result of recent corporate scandals, the Sarbanes-Oxley Act of 2002  
and revised listing standards on major stock exchanges. MFS generally supports  
these developments. However, many issuers are not publicly registered, are not  
subject to these enhanced listing standards, or are not operating in an         
environment that is comparable to that in the United States. In reviewing proxy 
proposals under these circumstances, MFS votes for proposals that enhance       
standards of corporate governance so long as we believe that - given the        
circumstances or the environment within which the issuers operate - the         
proposal is consistent with the best long-term economic interests of our        
clients.                                                                        

SOCIAL ISSUES                                                                   

There are many groups advocating social change, and many have chosen the        
publicly-held corporation as a vehicle for advancing their agenda. Common among 
these are resolutions requiring the corporation to refrain from investing or    
conducting business in certain countries, to adhere to some list of goals or    
principles (e.g., environmental standards) or to promulgate special reports on  
various activities. MFS votes against such proposals unless their               
shareholder-oriented benefits will outweigh any costs or disruptions to the     
business, including those that use corporate resources to further a particular  
social objective outside the business of the company or when no discernible     
shareholder economic advantage is evident.                                      

The laws of various states may regulate how the interests of certain clients    
subject to those laws (e.g., state pension plans) are voted with respect to     
social issues. Thus, it may be necessary to cast ballots differently for        
certain clients than MFS might normally do for other clients.                   

FOREIGN ISSUERS                                                                 

MFS will evaluate items on proxies for foreign companies in the context of the  
guidelines described above, as well as local market standards and best          
practices. Proxies for foreign companies often contain significantly more       
voting items than those of U.S. companies. Many of these items on foreign       
proxies involve repetitive, non-controversial matters that are mandated by      
local law. Accordingly, the items that are generally deemed routine and which   
do not require the exercise of judgment under these guidelines (and therefore   
voted in favor) for foreign issuers include the following: (i) receiving        
financial statements or other reports from the board; (ii) approval of          
declarations of dividends; (iii) appointment of shareholders to sign board      
meeting minutes; (iv) discharge of management and supervisory boards; (v)       
approval of share repurchase programs; (vi) election of directors in            
uncontested elections and (vii) appointment of auditors.                        

In accordance with local law or business practices, many foreign companies      
prevent the sales of shares that have been voted for a certain period beginning 
prior to the shareholder meeting and ending on the day following the meeting    
("share blocking"). Depending on the country in which a company is domiciled,   
the blocking period may begin a stated number of days prior to the meeting      
(e.g., one, three or five days) or on a date established by the company. While  
practices vary, in many countries the block period can be continued for a       
longer period if the shareholder meeting is adjourned and postponed to a later  
date. Similarly, practices vary widely as to the ability of a shareholder to    
have the "block" restriction lifted early (e.g., in some countries shares       
generally can be "unblocked" up to two days prior to the meeting whereas in     
other countries the removal of the block appears to be discretionary with the   
issuer's transfer agent). Due to these restrictions, MFS must balance the       
benefits to its clients of voting proxies against the potentially serious       
portfolio management consequences of a reduced flexibility to sell the          
underlying shares at the most advantageous time. For companies in countries     
with share blocking periods, the disadvantage of being unable to sell the stock 
regardless of changing conditions generally outweighs the advantages of voting  
at the shareholder meeting for routine items. Accordingly, MFS will not vote    
those proxies in the absence of an unusual, significant vote.                   

B. ADMINISTRATIVE PROCEDURES                                                    

1. MFS PROXY REVIEW GROUP                                                       

The administration of these MFS Proxy Voting Policies and Procedures is         
overseen by the MFS Proxy Voting Committee, which includes senior personnel     
from the MFS Legal and Global Investment Support Departments. The MFS Proxy     
Voting Committee:                                                               

Reviews these MFS Proxy Voting Policies and Procedures at least annually and    
recommends any amendments considered to be necessary or advisable;              

Determines whether any potential material conflicts of interest exist with      
respect to instances in which (i) MFS seeks to override these MFS Proxy Voting  
Policies and Procedures and (ii) votes on ballot items not clearly governed by  
these MFS Proxy Voting Policies and Procedures; and                             

Considers special proxy issues as they may arise from time to time.             

2. POTENTIAL CONFLICTS OF INTEREST                                              

The MFS Proxy Voting Committee is responsible for monitoring potential material 
conflicts of interest on the part of MFS or its affiliates that could arise in  
connection with the voting of proxies on behalf of MFS' clients. Any            
significant attempt to influence MFS' voting on a particular proxy matter       
should be reported to the MFS Proxy Voting Committee.                           

In cases where proxies are voted in accordance with these MFS Proxy Voting      
Policies and Procedures, no material conflict of interest will be deemed to     
exist. In cases where (i) MFS is considering overriding these MFS Proxy Voting  
Policies and Procedures, or (ii) matters presented for vote are not clearly     
governed by these MFS Proxy Voting Policies and Procedures, the MFS Proxy       
Voting Committee, or delegees, will follow these procedures:                    

Compare the name of the issuer of such proxy against a list of significant      
current and potential (i) distributors of MFS Fund shares, (ii) retirement      
plans administered by MFS, and (iii) MFS institutional clients (the "MFS        
Significant Client List");                                                      

If the name of the issuer does not appear on the MFS Significant Client List,   
then no material conflict of interest will be deemed to exist, and the proxy    
will be voted as otherwise determined by the MFS Proxy Voting Committee;        

If the name of the issuer appears on the MFS Significant Client List, then at   
least one member of the MFS Proxy Voting Committee will carefully evaluate the  
proposed vote in order to ensure that the proxy ultimately is voted in what MFS 
believes to be the best long-term economic interests of MFS' clients, and not   
in MFS' corporate interests; and                                                

For all potential material conflicts of interest identified under clause (c)    
above, the MFS Proxy Voting Committee will document: the name of the issuer,    
the issuer's relationship to MFS, the analysis of the matters submitted for     
proxy vote, and the basis for the determination that the votes ultimately were  
cast in what MFS believes to be the best long-term economic interests of MFS'   
clients, and not in MFS' corporate interests. A copy of the foregoing           
documentation will be provided to the MFS' Conflicts Officer.                   

The members of the MFS Proxy Voting Committee are responsible for creating and  
maintaining the MFS Significant Client List, in consultation with MFS'          
distribution, retirement plan administration and institutional business units.  
The MFS Significant Client List will be reviewed and updated periodically, as   
appropriate.                                                                    

3. GATHERING PROXIES                                                            

Most proxies received by MFS and its clients originate at Automatic Data        
Processing Corp. ("ADP") although a few proxies are transmitted to investors by 
corporate issuers through their custodians or depositories. ADP and issuers     
send proxies and related material directly to the record holders of the shares  
beneficially owned by MFS' clients, usually to the client's custodian or, less  
commonly, to the client itself. This material will include proxy cards,         
reflecting the proper shareholdings of Funds and of clients on the record dates 
for such shareholder meetings, as well as proxy statements with the issuer's    
explanation of the items to be voted upon.                                      

MFS, on behalf of itself and the Funds, has entered into an agreement with an   
independent proxy administration firm, Institutional Shareholder Services, Inc. 
(the "Proxy Administrator"), pursuant to which the Proxy Administrator performs 
various proxy vote related services, such as vote processing and recordkeeping  
functions for MFS' Funds and institutional client accounts. The Proxy           
Administrator receives proxy statements and proxy cards directly or indirectly  
from various custodians, logs these materials into its database and matches     
upcoming meetings with MFS Fund and client portfolio holdings, which are input  
into the Proxy Administrator's system by an MFS holdings datafeed. Through the  
use of the Proxy Administrator system, ballots and proxy material summaries for 
the upcoming shareholders' meetings of over 10,000 corporations are available   
on-line to certain MFS employees and the MFS Proxy Voting Committee.            

4. ANALYZING PROXIES                                                            

Proxies are voted in accordance with these MFS Proxy Voting Policies and        
Procedures. The Proxy Administrator at the prior direction of MFS automatically 
votes all proxy matters that do not require the particular exercise of          
discretion or judgment with respect to these MFS Proxy Voting Policies and      
Procedures as determined by the MFS Proxy Voting Committee. With respect to     
proxy matters that require the particular exercise of discretion or judgment,   
MFS considers and votes on those proxy matters. Representatives of the MFS      
Proxy Voting Committee review, as appropriate, votes cast to ensure conformity  
with these MFS Proxy Voting Policies and Procedures.                            

As a general matter, portfolio managers and investment analysts have little or  
no involvement in specific votes taken by MFS. This is designed to promote      
consistency in the application of MFS' voting guidelines, to promote            
consistency in voting on the same or similar issues (for the same or for        
multiple issuers) across all client accounts, and to minimize the potential     
that proxy solicitors, issuers, or third parties might attempt to exert         
inappropriate influence on the vote. In limited types of votes (e.g., corporate 
actions, such as mergers and acquisitions), a representative of the MFS Proxy   
Voting Committee may consult with or seek recommendations from portfolio        
managers or analysts.(1) However, the MFS Proxy Voting Committee would          
ultimately determine the manner in which all proxies are voted.                 

-----------------                                                               
(1) From time to time, due to travel schedules and other commitments, an        
appropriate portfolio manager or research analyst is not available to   
provide a recommendation on a merger or acquisition proposal. If such a 
 recommendation cannot be obtained within a few business days prior to the
 shareholder meeting, the MFS Proxy Review Group may determine to vote the
proxy in what it believes to be the best long-term economic interests of
MFS' clients.                                                           

As noted above, MFS reserves the right to override the guidelines when such an  
override is, in MFS' best judgment, consistent with the overall principle of    
voting proxies in the best long-term economic interests of MFS' clients. Any    
such override of the guidelines shall be analyzed, documented and reported in   
accordance with the procedures set forth in these policies.                     

5. VOTING PROXIES                                                               

In accordance with its contract with MFS, the Proxy Administrator also          
generates a variety of reports for the MFS Proxy Voting Committee, and makes    
available on-line various other types of information so that the MFS Proxy      
Voting Committee may review and monitor the votes cast by the Proxy             
Administrator on behalf of MFS' clients.                                        

C. MONITORING SYSTEM                                                            

It is the responsibility of the Proxy Administrator and MFS' Proxy Voting       
Committee to monitor the proxy voting process. When proxy materials for clients 
are received, they are forwarded to the Proxy Administrator and are input into  
the Proxy Administrator's system. Through an interface with the portfolio       
holdings database of MFS, the Proxy Administrator matches a list of all MFS     
Funds and clients who hold shares of a company's stock and the number of shares 
held on the record date with the Proxy Administrator's listing of any upcoming  
shareholder's meeting of that company.                                          

When the Proxy Administrator's system "tickler" shows that the voting cut-off   
date of a shareholders' meeting is approaching, a Proxy Administrator           
representative checks that the vote for MFS Funds and clients holding that      
security has been recorded in the computer system. If a proxy card has not been 
received from the client's custodian, the Proxy Administrator calls the         
custodian requesting that the materials be forwarded immediately. If it is not  
possible to receive the proxy card from the custodian in time to be voted at    
the meeting, MFS may instruct the custodian to cast the vote in the manner      
specified and to mail the proxy directly to the issuer.                         

D. RECORDS RETENTION                                                            

MFS will retain copies of these MFS Proxy Voting Policies and Procedures in     
effect from time to time and will retain all proxy voting reports submitted to  
the Board of Trustees, Board of Directors and Board of Managers of the MFS      
Funds for the period required by applicable law. Proxy solicitation materials,  
including electronic versions of the proxy cards completed by representatives   
of the MFS Proxy Voting Committee, together with their respective notes and     
comments, are maintained in an electronic format by the Proxy Administrator and 
are accessible on-line by the MFS Proxy Voting Committee. All proxy voting      
materials and supporting documentation, including records generated by the      
Proxy Administrator's system as to proxies processed, including the dates when  
proxy ballots were received and submitted, and the votes on each company's      
proxy issues, are retained as required by applicable law.                       

E. REPORTS                                                                      

MFS FUNDS                                                                       

MFS will report the results of its voting to the Board of Trustees, Board of    
Directors and Board of Managers of the MFS Funds. These reports will include:   
(i) a summary of how votes were cast; (ii) a review of situations where MFS did 
not vote in accordance with the guidelines and the rationale therefor; (iii) a  
review of the procedures used by MFS to identify material conflicts of          
interest; and (iv) a review of these policies and the guidelines and, as        
necessary or appropriate, any proposed modifications thereto to reflect new     
developments in corporate governance and other issues. Based on these reviews,  
the Trustees, Directors and Managers of the MFS Funds will consider possible    
modifications to these policies to the extent necessary or advisable.           

ALL MFS ADVISORY CLIENTS                                                        

At any time, a report can be printed by MFS for each client who has requested   
that MFS furnish a record of votes cast. The report specifies the proxy issues  
which have been voted for the client during the year and the position taken     
with respect to each issue.                                                     

Generally, MFS will not divulge actual voting practices to any party other than 
the client or its representatives (unless required by applicable law) because   
we consider that information to be confidential and proprietary to the client.  

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MFS UNION STANDARD EQUITY FUND

PROXY VOTING GUIDELINES 

INTRODUCTION                                                                    

The following Proxy Voting Guidelines set forth the policies and practices      
behind individual proxy votes. The policies described here address the major    
corporate governance issues raised by shareholders and management.              

The Guidelines that follow each policy describe voting practices and standard   
voting responses to specific corporate conditions. For those issues not         
described in these Guidelines, JMR Financial, Inc. ("JMR") will use reasonable  
judgment, in accordance with U.S. Department of Labor Interpretative Bulletin   
94-2, and vote those issues on a case-by-case basis.                            

1. BOARD OF DIRECTORS                                                           

1.1. Election of Directors                                                      

Corporate Directors have the fiduciary duties to hire, monitor, compensate and, 
if necessary, terminate senior management. In order to effectively discharge    
these duties, Directors must have the necessary qualifications, a commitment to 
performing their duties, high ethical standards, and independence from the      
company management that they oversee. A corporate Board's effectiveness is      
enhanced when the Board is composed of at least two-thirds Independent          
Directors and when an Independent Director serves as its Chairperson.           

The election of Directors occurs in two contexts, uncontested elections or      
contested elections, and at two levels, for the entire Board or for individual  
Directors.                                                                      

1.1.1. Uncontested Elections                                                    

In the case of an uncontested election, we consider the following factors in    
voting on the entire Board:                                                     

o The long-term financial and economic performance of the company in comparison 
with its peers as well as with a broader market such as the S&P 500;        

o The degree of independence of the Board in its entirety;                      

o Whether or not the Board takes actions which are value-enhancing. Actions in  
opposition to this might include: awarding excessive compensation to        
 executives or to the Directors themselves, approving corporate restructurings
or downsizings that are not in the company's best long-term interest,       
adopting take-over provisions without shareholder approval, or refusing to  
provide information to which the shareholders are entitled;                 

o Whether or not the Board has implemented the proposals which were approved by 
a majority of the shareholders during the previous fiscal year; and         

o The concerns of other important company stakeholders such as their employees  
and the communities in which they operate. Should these stakeholders make   
their concerns known, this might expose situations which are or could affect
 the company's performance. We give these concerns consideration in evaluating
Board performance.                                                          

In the case of an uncontested election, we consider the following additional    
factors in voting on individual Directors:                                      

o The independence of the audit, compensation, and nominating committees. These 
committees maintain important roles in the process of management oversight  
and therefore should be composed entirely of Independent Directors (as is   
more fully described in the Guidelines, below);                             

o The performance of the audit, compensation, and nominating committees.        
Factors to consider include the quality of committee disclosure as well as  
the actions taken by the committees;                                        

o The attendance of incumbent Directors. The Securities and Exchange Commission 
(SEC) requires companies to disclose any incumbent Director who attended    
fewer that 75% of the aggregate Board and applicable committee meetings     
 during the last fiscal year. A failure to include this information is assumed
to mean that all Directors attended 75% of the meetings;                    

o The ability of the nominee to devote sufficient time and energy to carrying   
out the fiduciary duties of a Director. Director nominees who are employed, 
or self-employed, on a full-time basis and who serve on Boards at fewer than
three other public companies, as well as nominees who are retired and who   
serve on Boards at fewer than five other public companies are generally     
believed to have this ability;                                              

o Chapter 7 bankruptcy, SEC violations, and criminal offenses by an individual  
director; and                                                               

o Whether or not the performance of the Director on other Boards has been       
acceptable.                                                                 

1.1.2. Contested Election of Directors                                          

Greater scrutiny should be paid in those situations where a change of control   
is occurring in the context of a contested election for the Board of Directors. 
Contested elections generally occur when a Board candidate or slate runs for    
the purpose of seeking significant change in corporate policy or control of the 
Board. Competing slates should be evaluated based upon all of the factors       
described in the Guidelines' Section 1.1.1. Uncontested Elections as well as    
the following:                                                                  

o The background of the proxy contest;                                          

o The qualifications of the slate's individual candidates;                      

o The quality of the strategies the slate plans to implement to overcome the    
company's current inefficiencies as well as to enhance the company's        
long-term value; and                                                        

o The slate's expressed and demonstrated commitment to the interests of company 
shareholders and other important stakeholders.                              

1.2. Independent Directors                                                      

Independence is critical to ensure that Directors carry out their fiduciary     
duties to hire, monitor, compensate and, if necessary, terminate senior         
management select. Weighed against this is the fact that, in a change of        
control situation, inside Directors may be more responsive to the interests of  
employees and the communities in which they operate.                            

An Independent Director is one who either maintains only one non-trivial        
relationship with the company, that of being a Director, or is a rank-and-file  
employee. A Director is considered NOT INDEPENDENT if he or she:                

o Is, or was, employed by the company or by an affiliate in an executive        
capacity;                                                                   

o Is, or is affiliated with a company that is, an adviser or consultant to the  
company or a member of the company's senior management;                     

o Is, or within the past five years was, employed by a present or former        
auditor of the company;                                                     

o Is employed by a customer or supplier with a nontrivial business              
relationship;                                                               

o Is employed by, or is affiliated with, a foundation or university that        
receives grants or endowments from the company;                             

o Has a personal services contract with the company;                            

o Is an officer of a firm on which the company's chief executive officer or     
chairman is also a Board member;                                            

o Is employed by a public company at which an executive officer of the Company  
serves as a director; or                                                    

o Is related to of any person described above.                                  

1.3. Equal Access to the Proxy                                                  

Proposals that give long-term shareholders the same ability as management to    
cost-effectively nominate Directors to represent their interests, as long as    
these efforts do not provide a tool that can be used to facilitate hostile      
takeovers by short-term investors.                                              

1.4. Separate Offices of Chairman & CEO                                         

One of the principal functions of the Board of Directors is to protect          
shareholders' interests by monitoring and evaluating the performance of company 
management, including its Chief Executive Officer (CEO). When the Chairman of   
the Board is also the CEO of the company, his or her duty to oversee management 
is obviously compromised when he or she is required to monitor him or herself.  
In addition, the CEO normally determines the agenda for Board meetings,         
controls what information the Directors receive, and often dominates the        
selection of who sits on the Board and who is a member of the Board's           
committees. This unity of power has caused concern in governance commissions    
and activist pension funds about whether or not having a CEO who is also the    
Chairman of the Board best serves the company's shareholders. The principal     
arguments in favor of a separate or non-executive chair have to do with         
enhancing the ability of the Board to monitor the CEO's performance. It is      
assumed that Directors will feel more at ease about raising challenges to the   
CEO and executing their legal responsibilities for oversight if the Board is    
led by a fellow Director. In addition, fund managers seek to guard against      
cases where a CEO seeks first to serve himself or herself and only secondarily  
the shareholders.                                                               

Generally proposals seeking to separate the positions of Chairman and CEO       
should be supported. However, under certain circumstances, such as a small-cap  
company with a limited group of leaders, it may be appropriate for these        
positions to be combined for some period of time.                               

1.5. Lead Independent Director                                                  

At companies that have not adopted an Independent Board Chairperson, we support 
the establishment of a Lead Independent Director. In addition to serving as the 
presiding director at meetings of the Board's Independent Directors, a Lead     
Independent Director is responsible for coordinating the activities of the      
Independent Directors. At a minimum, a Lead Independent Director helps to help  
set the schedule and agenda for Board meetings, monitors the quality, quantity  
and timeliness of the flow of information from management, and has the ability  
to hire independent consultants necessary for the Independent Directors to      
effectively and responsibly perform their duties.                               

1.6. Board and Committee Size                                                   

A Board that is too large may function inefficiently; conversely, a Board that  
is too small may allow the CEO to exert excessive control. It is generally      
believed that the most effective Board size lies within a range of five to      
fifteen Directors.                                                              

1.7. Cumulative Voting                                                          

Most corporations provide that shareholders are entitled to cast one vote for   
each share owned. Under a cumulative voting scheme the shareholder is permitted 
to have one vote per share for each Director to be elected. Shareholders are    
permitted to apportion those votes in any manner they wish among the Director   
candidates. Shareholders have the opportunity to elect a minority shareholder   
to a Board not controlled by a majority shareholder through cumulative voting,  
thereby ensuring representation for all sizes of shareholders. Shareholders     
need to have flexibility in supporting candidates for a company's Board of      
Directors. This is the only mechanism that minority shareholders can use to be  
represented on a company's Board.                                               

Cumulative voting is a method for obtaining minority shareholder representation 
on a Board of Directors and is a way of obtaining Board independence from       
management and thus, is generally supported.                                    

1.8. Term Limits                                                                

Proposals to limit Director terms may prohibit the service by Directors who are 
otherwise qualified to serve the company. Since other Guidelines serve to hold  
Directors to high standards, the best way to ensure a Directors' qualification  
to elect him or her annually.                                                   

1.9. Director Liability                                                         

According to United States' state incorporation laws, corporate Boards have a   
legal responsibility for the management of a company. The downside of this is   
that Directors may potentially face a wide range of liability claims. State     
jurisdictions generally agree that Directors must uphold and adhere to three    
basic duties vis-a-vis the companies they serve:                                

o The DUTY OF DILIGENCE requires that Directors make business decisions on an   
informed basis, and act in good faith and with an honest belief that their  
actions were taken to serve the best interests of the corporation;          

o The DUTY OF OBEDIENCE is the requirement that Directors themselves must obey  
the law and that they must ensure that the corporation itself obeys the law.
They must not commit what are called ultra vires acts - acts that are       
performed without the authority to commit them. In essence, Directors must  
confine their activities within the powers conferred by the company's       
 corporate charter and its articles of incorporation, regulations, and bylaws;
and                                                                         

o The DUTY OF LOYALTY requires Directors to avoid conflicts of interest. They   
 must refrain from personal activities that either take advantage of or injure
the corporation.                                                            

Although these three duties set general legal parameters for Directors'         
obligations, the courts at the same time recognize that not all actions taken   
by Directors will benefit the corporation or in hindsight appear to have been   
the best course. States have therefore established what is called the business  
judgment rule, which can be invoked in liability cases as a defense when        
Directors are presented with claims of mismanagement or breach of care. This    
rule focuses on the duty of diligence surrounding the actual process of         
decision making and de-emphasizes the decision outcome: "the business judgment  
rule provides that courts should not examine the quality of the Directors'      
business decisions, but only the procedures followed in reaching that decision, 
when determining director liability."                                           

Management proposals occasionally seek to amend a company's charter to limit or 
eliminate the personal liability of Directors for monetary damages for any      
breach of fiduciary duty to the fullest extent permitted by law. However, the   
great responsibility and authority of Directors justifies holding them          
accountable for their actions.                                                  

In determining whether or not to support such proposals, we consider the        
following factors:                                                              

o The performance of the Board;                                                 

o The independence of the Board and its audit, compensation and nominating      
committees; and                                                             

o Whether or not the company has anti-takeover devices in place.                

We may support liability-limiting proposals when the company satisfactorily     
argues that such action is necessary to attract and retain Directors.           
Liability-limiting proposals are generally opposed for:                         

o Breach of the duty of loyalty;                                                

o Omissions not done in good faith or acts done intentionally or in violation   
of the law;                                                                 

o Acts involving unlawful purchase or redemption of stock;                      

o Payment of unlawful dividends;                                                

o Receipt of improper personal benefits;                                        

In addition, limiting liability for Directors when litigation is pending        
against the company is generally opposed.                                       

1.10. Indemnification                                                           

Indemnification is the payment by a company of the expenses of Directors who    
become involved in litigation as a result of their service to a company.        
Proposals to indemnify a company's Directors differ from those to eliminate or  
reduce their liability because with indemnification Directors may still be      
liable for his or her acts or omissions, but the company will bear the costs    
for the director's conduct.                                                     

We may support such indemnification proposals if the company can demonstrate    
the need to retain qualified Directors and not compromise their Independence.   
We may oppose indemnification when it is being proposed to insulate Directors   
from actions they have already taken. Generally, we:                            

o Vote AGAINST indemnification proposals that would expand coverage beyond just 
legal expenses to acts, such as negligence that are more serious violations 
of fiduciary obligations than mere carelessness.                            

o Vote AGAINST indemnification proposals that insulate Directors from actions   
that they have already taken.                                               

o Vote FOR only those proposals that provide such expanded coverage in cases    
 when a Director's legal defense was unsuccessful if the director was found to
have acted in good faith and in a manner that he reasonably believed was in 
the best interests of the company.                                          

1.11. Outside Director Compensation & Benefits                                  

Shareholder evaluation of Director compensation is especially important since   
Directors are responsible for compensating themselves. We support compensating  
Directors in a fashion that rewards excellent service and in a manner that does 
not compromise the independence of Directors. To enhance Directors'             
independence from management, Director compensation plans should be separate    
from executive compensation plans and should be voted on separately by          
shareholders. Excessively large compensation packages may also make Directors   
less willing to challenge management out of fear of not being re-nominated.     
Directors who receive pensions based upon years of service as Directors are     
less likely to challenge management if they perceive that such action might     
reduce the possibility of vesting. Direct stock ownership is the best way to    
align the interests of outside Directors and shareholders. Accordingly, a       
significant proportion of Director compensation should be in the form of stock. 
Directors should be subject to reasonable equity holding requirements. In       
addition to these conditions, Director compensation plans should be evaluated   
using the same standards as apply to executive compensation plans.              

1.12. Broader Participation on the Board                                        

A more diverse Board of qualified Directors benefits the company and            
shareholders. Gender and ethnic diversity bring different perspectives to       
Boards which can lead to improved corporate performance. Another example of     
such diversity would be employee shareholders, and we generally support         
proposals that would allow for such representations.                            

1.13. Business Development                                                      

Shareholders have introduced proposals asking for further disclosures on the    
role that the Board of Directors plays in developing business. We generally     
support proposals asking for such additional disclosure.                        

2. CORPORATE GOVERNANCE & CHANGES IN CONTROL                                    

Issues in this section have the potential to significantly impact the value of  
the plan investments. We review each issue in this section on a case-by-case    
basis and take a decision based upon what is in the long-term economic best     
interests of plan participants and beneficiaries.                               

Some of the proposals involving the issues in this section occur in the context 
of an impending or ongoing contest for company control. Other proposals can     
have a direct effect on the likelihood of material transactions such as tender  
offers, leveraged buyouts, mergers, acquisitions, restructurings, and           
spin-offs. In determining how to vote, we undertake an analysis of the          
long-term business plans of the competing parties as well as a cost/benefit     
analysis of the likely economic result of a change of control or material       
transaction.                                                                    

With regard to corporate governance proposals not in the context of an          
impending or ongoing contest for corporate control, we consider the impact of   
the vote on plan assets as well as the ability of shareholders to hold          
management accountable for corporate performance.                               

2.1. Increasing Authorized Common Stock                                         

We may support management proposals requesting shareholder approval to an       
increase in the number of shares of authorized common stock when management     
provides persuasive justification for the increase and the amount of this       
increase is reasonable. Providing adequate shares for a stock split is          
justification for an increase whereas additional shares to implement a poison   
pill or other takeover defense probably do not justify such an increase. Stock  
authorizations that increase the existing authorization by more than 50% are    
generally opposed unless very specific criteria and/or extenuating              
circumstances are involved.                                                     

2.2. Reverse Stock Splits                                                       

We may support a reverse stock split if management provides a reasonable        
justification for the reduced split and reduces authorized shares accordingly.  
Reverse stock splits exchange multiple shares for a lesser amount to increase   
the share price. Increasing share price is sometimes necessary to restore a     
company's stock price to a level that will allow it to be traded on the         
national stock exchanges, and can thus help to maintain stock liquidity.        

Failure to reduce authorized share as part of a reverse split, however,         
effectively results in an increase in authorized shares.                        

2.3. Blank-Check Preferred Stock                                                

Blank-check preferred stock is preferred stock that includes broad powers       
granted to Directors to establish voting, dividend and other rights without     
shareholder review. We may generally oppose requests that authorize Blank-check 
preferred stock especially when it may be used as an anti-takeover device.      

2.4. Tracking Stock                                                             

We may oppose management proposals to issue tracking stocks designed to reflect 
the performance of a particular business segment. Tracking stocks can be        
problematic in that they bring the likelihood of creating conflicts of interest 
between shareholders, Directors, and management as the Board is placed in the   
position of having to balance competing sets of interests under a single        
fiduciary authority.                                                            

2.5. Reincorporation                                                            

We may vote in favor of reincorporation to another jurisdiction as long as      
there is a sound justification for doing so and there is no significant         
diminution of corporate governance, management accountability, or workers'      
rights. We may also vote for proposals which block or prohibit companies from   
reincorporating in tax havens and support proposals which urge companies to     
reincorporate to the US.                                                        

We may oppose reincorporation when it may be used as a takeover defense or as a 
method to limit Director liability.                                             

2.6. Shareholder Rights Plans                                                   

We may support the legitimate use of shareholder rights plans, typically known  
as poison pills. The evaluation of these plans should focus on whether or not   
management puts the plan to a periodic vote of the shareholders, preferably     
every three years, as well as whether or not the acquisition attempts thwarted  
by the pill could be detrimental to the long term interests of plan             
participants and beneficiaries. In addition, we consider the threshold for      
triggering a poison pill, and may oppose any plan with a threshold of less than 
20% of a company's shares.                                                      

2.7. Supermajority Voting Requirements                                          

We review supermajority proposals on a case-by-case basis, weighing the         
consideration that supermajority voting requirements may be used to undermine   
voting rights and entrench management against the potential benefit, in some    
circumstances, of protecting the interests of minority or outside shareholders. 
Generally, management proposals to require a supermajority vote and support     
shareholder proposals to lower supermajority voting requirements may be         
opposed.                                                                        

2.8. Dual Class Voting                                                          

Dual Class Voting is the issuance of new classes of stock with unequal voting   
rights. This voting system is often designed to enhance the voting rights of    
company insiders and is common in family controlled companies. Dual Class       
Voting may entrench management at the expense of shareholders. We consider the  
impact on share value, the impact of creating unequal voting rights, as well as 
the principle of one share -- one vote when voting on such a proposal.          

2.9. Confidential Voting & Independent Tabulation of Voting                     

The purpose of confidential voting is to protect shareholders from management   
pressure to change their votes before the shareholder meeting at which those    
votes are cast. Proxy voting must be protected from management coercion and use 
of corporate funds to lobby shareholders to change their votes.                 

2.10. Shareholders' Right to Call Special Meetings                              

In evaluating this issue, we weigh the importance of shareholders' need to      
raise important issues against the potential for facilitating changes in        
control at the company. Generally, we may oppose any attempts to limit and      
eliminate such rights if they already exist in a company's by-laws, and may     
support resolutions that seek to restore these rights.                          

2.11. Mergers and Acquisitions                                                  

In determining its votes on mergers and acquisitions, we consider the following 
factors:                                                                        

o The potential impact of the merger on long -term corporate value;             

o The anticipated financial benefits of the merger;                             

o The offer price;                                                              

o How was the deal negotiated;                                                  

o Any changes in corporate governance and their impact on shareholder rights;   
and                                                                         

o The impact on important stakeholders of both companies, including employees   
and communities.                                                            

2.12. Fair-Price Provisions                                                     

Fair price provisions help to guard against two-tiered tender offers, in which  
a raider offers a substantially higher cash bid for an initial and often        
controlling stake in a company and then offers a lower price for the remaining  
shares. The coercive pressures associated with two-tiered offers may force      
shareholders to tender their holdings before they have considered all relevant  
facts. These provisions guarantee an equal price for all shareholders and are   
generally supported. However, we also consider the provision's potential for    
minimizing the company's debt and the resulting impact on the long-term value   
of holdings in the event the shareholders do not tender.                        

2.13. Greenmail Payments                                                        

Greenmail is the name given to certain discriminatory share repurchases.        
Typically, it refers to the payments that a raider receives from a company in   
exchange for the raider's shares in addition to a guarantee that he or she will 
terminate his or her takeover bid. These payments are usually a premium above   
the market price, so while greenmail may ensure the continued independence of a 
company, it discriminates against other shareholders. Buying out the shares of  
one shareholder at a price not available to others is unfair. The payment of    
greenmail may also have an adverse effect on the company's image. Economic      
studies show that greenmail devalues a company's stock price. When voting on    
this issue, we take into account whether or not the greenmail payments          
discriminate against some shareholders and whether or not the payments reduce   
shareholders' value. If the greenmail payments fail to serve the long-term      
economic interests of plan participants and beneficiaries, such payments may be 
opposed.                                                                        

2.14. Approving Other Business                                                  

Granting management the authority to approve other business gives management    
broad authority to act without prior shareholder approval. We generally oppose  
such unmonitored authority.                                                     

3. EMPLOYEE RELATED PROPOSALS                                                   

3.1. Employee Stock Purchase Plans                                              

Employee Stock Purchase Plans promote a linkage between a company's employees   
and its shareholders. We generally support such proposals when the plan covers  
a large number of employees.                                                    

3.2. High-Performance Workplaces                                                

High-performance workplace practices can contribute to a company's productivity 
as well as to its long-term financial performance. These practices include:     
employee training, direct employee involvement in decision-making, compensation 
linked to performance, employee security, and a supportive work environment.    
Additionally, these practices may include other measures of performance, such   
as the extent to which a company uses part-time or contract employees to the    
exclusion of full-time paid employees. We may generally support proposals       
encouraging high-performance workplace practices. However, we review these      
proposals to ensure that they are in the shareholders' best interests and do    
not unduly interfere with the company's operations.                             

3.3. Pension Choice                                                             

A number of companies have recently faced controversy as they converted         
traditional defined benefit plans into cash-balance plans. Traditional plan     
benefits accrue based on a percentage of base salary multiplied by the number   
of years of service, multiplied by the final five-year average base pay.        
Cash-balance plans reserve a fixed percentage of base salary plus interest and  
are portable. Conversions to cash-balance plans often hurt older workers and    
may be motivated by a company's desire to inflate its book profits by boosting  
surpluses in its pension trust funds. We may generally support proposals        
seeking to restore employee choice in this manner.                              

4. EXECUTIVE AND DIRECTOR COMPENSATION                                          

Executive compensation should reward executives for superior performance while  
ensuring that the long-term interests of the company and its shareholders are   
being best served. To this end, executive compensation plans should be          
structured with consideration for the company's goals for growth and            
development; the individual executive's performance; the various compensation   
plan features; and the potential dilution of shareholders' voting power and     
economic value which would occur if the compensation plan were implemented. It  
is the structure of an executive's compensation package which most influences   
whether he or she will focus on boosting the corporation's day-to-day share     
price or will concentrate on building long-term corporate value.                

Many experts agree that pay-for-performance should be the central theme of      
every executive compensation plan. Pay-for-performance rewards executives for   
meeting explicit and demanding performance goals, as determined by the Board of 
Directors, and penalizes them for failing to meet those goals.                  

In determining an executive's performance goals, the Board should focus on the  
ways in which the executive might individually contribute to the growth and     
development of the company as well as how the executive might be instrumental   
in maximizing shareholder wealth. Measures of growth and development of the     
company may include financial performance, such as revenue growth and           
profitability; stock price increases; social corporate performance, such as the 
company's efforts to promote basic human rights within its operations;          
compliance with environmental, health, and safety standards; labor standards;   
and downsizing and layoffs standards.                                           

The best measures of shareholder wealth maximization are Market Value Added     
(MVA) and Economic Value Added (EVA). Shareholder wealth is maximized by        
maximizing the difference between the market value of the firm's stock and the  
amount of equity capital that is supplied by shareholders. This difference is   
MVA. Whereas MVA measures the effects of managerial efforts since the very      
inception of a company, EVA focuses on managerial effectiveness in a given year 
and is therefore the more appropriate measure to use to evaluate the            
executive's contributions to maximizing shareholder wealth. A firm adds value - 
that is, has a positive EVA - if its return on invested capital is greater than 
its weighted average cost of capital. If an executive's compensation plan is    
structured so that the executive focuses on creating positive EVA in all of the 
projects under his or her control, this will help to ensure that he or she will 
operate in a manner which is consistent with maximizing shareholder wealth.     

Executive compensation packages are generally composed of annual salary, annual 
incentive awards, long-term incentive awards, stock options, and other forms of 
equity compensation.                                                            

4.1. Stock Option Plans                                                         

Proponents of including stock options in executive compensation plans argue     
that options serve to attract, retain, and motivate qualified executives. These 
individuals take the position that options align management and shareholder     
interests and encourage executives to maximize shareholder value. In addition,  
these individuals maintain that when stock options are performance-based they   
generally are not subject to the limits contained in Section 162(m) of the      
Internal Revenue Code of 1986, as amended (the Code), which caps income tax     
deductions for executive salaries at $1 million.                                

However, stock options are sometimes abused and often have unintended and       
unacknowledged consequences. Opponents of stock options argue that most         
executives are adequately paid through salaries and cash incentive plans. In    
addition, these individuals maintain that stock options have an unlimited       
upside potential and no downside risk for executives. Whereas, shareholders     
bear all of the risk of stock options in terms of both economic value and       
voting power dilution. Furthermore, these individuals hold that stock options   
may harm long-term shareholder interests by motivating executives to focus on   
short-term expense-reduction strategies, such as cutting important research and 
development plans, or on undertaking overly risky projects all in an attempt to 
temporarily inflate stock prices and the net value of their options. Lastly,    
these individuals assert that stock options do not necessarily align executive  
interests with those of shareholders. For these reasons, stock options are      
often not believed to be an appropriate form of compensation for executives.    

If companies choose to use stock options for executive compensation, certain    
safeguards should be in place. These features include stock option expensing,   
performance-based stock options, share holding requirements, acceptable         
dilution levels, and a prohibition on retroactively repricing stock options.    

When voting on management proposals relating to stock options, we consider the  
criteria defined below.                                                         

4.1.1. Performance-Based                                                        

Performance-based stock options tie compensation to company performance more    
closely than they tie compensation to the stock market, which standard stock    
options do. As a result, participants in performance-based stock option plans   
are rewarded only when company shareholders also benefit.                       

Performance-based stock options are defined as one of the following:            

o PERFORMANCE VESTING STOCK OPTIONS - grants which do not vest or become        
exercisable unless specific price or business performance goals are met;    

o PREMIUM PRICED STOCK OPTIONS - grants with an option exercise price higher    
than fair market value on date of grant;                                    

o INDEX OPTIONS - grants with a variable option exercise price geared to a      
relative external measure such as a comparable peer group or S&P industry   
index; or                                                                   

o PERFORMANCE ACCELERATED STOCK OPTIONS - grants whose vesting is accelerated   
upon achievement of specific stock price or business performance goals.     

There is a lot of support for compensation policies which provide challenging   
performance objectives and which motivate executives and Directors to maximize  
long-term shareholder value. As a result, institutional investors are           
increasingly urging that, in order to align the interests of executives with    
those of shareholders, some portion of the stock option grants to executives    
and Directors should be performance-based.                                      

Premium-priced and performance-vesting options encourage executives and         
Directors to set and meet ambitious but realistic performance targets. Indexed  
options may have the added benefit of discouraging repricing in the event of an 
industry downturn. In addition, when stock options are performance-based they   
generally are not subject to the limits contained in Section 162(m) of the      
Code, which caps income tax deductions for executive salaries at $1 million. To 
ensure the full-tax deductibility of executive pay, companies now tend to pay   
amounts in excess of $1 million to executives in the form of incentive-based    
pay such as stock or stock options.                                             

4.1.2. Expensing                                                                

A failure to properly account for stock options as a compensation expense has   
promoted the excessive use of stock options for executive compensation at some  
companies. This practice also obscures and understates the cost of excessive    
executive compensation. We generally only support the use of stock options if   
the stock options are fully expensed.                                           

4.1.3. Dilution                                                                 

Stock option plans dilute company earnings, as well as shareholders' voting     
power and economic value. The amount of acceptable dilution varies, but any     
proposal which could potentially cause a total dilution of either outstanding   
voting power or outstanding shareholders' equity greater than 10% may be        
opposed. Higher levels of dilution may be acceptable for plans that are         
particularly broad-based or have especially challenging performance-based       
objectives.                                                                     

4.1.4. Grant Rates                                                              

In determining how to vote on a stock option plan, we consider whether or not   
past equity compensation grants to senior executives were within reason and     
prudent. Repeatedly providing large grants may lessen the options' incentive    
value and may needlessly dilute the company's shares. Equity compensation plans 
generally should not exceed an annual stock option grant rate of one percent of 
shares outstanding to senior executives. Higher grant rates may be acceptable   
for plans that are particularly broad-based or have especially challenging      
performance-based objectives. We may also oppose plans that reserve a specified 
percentage of outstanding shares for award each year (known as an evergreen     
plan) instead of having a termination date.                                     

4.1.5. Repricing                                                                

We generally may oppose any stock option plan that does not explicitly prohibit 
repricing, unless the company has adopted a policy against repricing. Similarly 
we may oppose the replacement of underwater stock options with new option       
grants at a lower exercise price. In both circumstances executives would be     
rewarded for the poor performance of the company's stock, undermining the       
intention of stock option awards.                                               

4.1.6. Reloads                                                                  

Reload grants give stock option recipients additional stock options to replace  
the options that have been exercised. Reloading options make it possible for    
the recipient to lock-in increases in stock price with no attendant risk, a     
benefit not available to other shareholders. Stock option reloads also          
contribute to excessively large compensation packages and increase stock option 
dilution. Lastly, reload features transfer responsibility for new option grants 
from Directors to the executives who are exercising their options.              

4.1.7. Broad-based                                                              

In determining how to vote on a stock option plan, we consider whether or not a 
proposed plan is available to a broad base of employees. Plans which are        
targeted to only the top executives of a company create disparities in the      
workplace which may adversely affect employee productivity and morale. We       
generally oppose plans if a significant proportion of option shares granted the 
previous year were issued to the top five executives.                           

4.1.8. Holding Period                                                           

Equity compensation awards are intended to align management interests with      
those of shareholders. Allowing executives to sell their shares while they are  
employed by the company undermines this purpose. Executives should be required  
to hold a substantial portion of their equity compensation awards, including    
any shares received from option exercise, while they remain employed by the     
company.                                                                        

4.1.9. Complexity                                                               

Some plans are needlessly complex, inconsistent, and complicated, or weaken     
performance criteria by providing Directors with excessive discretionary power. 
We may oppose plans that allow pyramiding (using shares obtained from the       
exercise of each option to purchase additional shares covered under the plan),  
gross-ups (in which the company provides cash or additional options to cover    
the tax-liability of options), or acceleration of the vesting requirements of   
outstanding awards. We may also oppose plans which bundle several kinds of      
awards into one plan or which do not provide clear guidelines for the           
allocation of awards to executives.                                             

4.2. Restricted Stock                                                           

Many agree that the best way to align the interests of executives with          
shareholders is through direct stock holdings, coupled with at-risk variable    
compensation that is tied to explicit and challenging performance benchmarks.   
Performance-vesting restricted stock is a compensation plan feature which not   
only increases executives' direct share holdings, but also incorporates at-risk 
features. In an effort to reward performance and not job tenure, restricted     
stock vesting requirements should be performance-based. Such plans should       
explicitly define the performance criteria for awards to executives and may     
include a variety of corporate performance measures in addition to the use of   
stock price targets. In addition, executives should be required to hold their   
vested restricted stock as long as they remain employees of the company.        

We may support the use of performance-vesting restricted stock as long as the   
absolute amount of restricted stock being granted is a reasonable proportion of 
an executive's overall compensation.                                            

4.3. Proposals on Base Compensation                                             

Annual salaries and other forms of guaranteed pay should be reasonable for the  
recruitment and retention of executives. Section 162(m) of the Code limits the  
tax deductibility of executive compensation in excess of $1 million unless it   
is performance-based. We may support proposals which address this limitation as 
well as those which establish reasonable levels of executive base compensation. 

4.4. Proposals on Variable Compensation                                         

We support enhanced disclosure and shareholder oversight of executive benefits  
and other perquisites. In addition, we may oppose the provisions of any         
perquisite or benefit to executives which exceeds what is generally offered to  
other company employees.                                                        

4.5. Golden Parachutes                                                          

Golden parachutes, which are severance packages contingent upon a change in     
control, may be detrimental to shareholder interests. Proponents argue that     
golden parachutes ensure that executives will continue to devote their time and 
attention to the business, despite the threat of potential job loss due to a    
change in control. Golden parachutes ensure that executives will not oppose a   
merger that might be in the shareholders' best interests but may cost the       
executives their jobs.                                                          

However, since parachutes assure covered executives of specified benefits, they 
may reduce management accountability to shareholders and reduce their           
incentives to maximize shareholder value during merger negotiations. Golden     
parachutes may also be unnecessary and a waste of corporate assets. In light of 
these negatives, companies should ban or put to shareholder approval all future 
golden parachutes.                                                              

Any severance plan or stock option "change in control" vesting feature should   
be contingent upon the completion of a merger, rather than the lesser standard  
of shareholder approval of a merger.                                            

4.6. Proposals Seeking Greater Transparency and Oversight                       

Shareholders benefit from full disclosure of all forms of compensation received 
by senior executives. Requiring shareholder approval of important compensation  
matters also provides an important safeguard against excessive executive pay.   

4.7. Proposals Seeking Alternative Performance Measure                          

These shareholder proposals seek to link executive compensation to the          
company's achievement of objectives to improve the company's long-term          
performance and sustainability. We may support such proposals provided that the 
objectives are evaluated in addition to the traditional financial measures of   
company performance in determining executive compensation.                      

4.8. Outside Director Compensation & Benefits                                   

The evaluation of outside Director compensation and benefits is important       
because Directors compensate themselves. We support compensating Directors in a 
manner which rewards excellent service and at the same time does not compromise 
the independence of Directors. Excessively large compensation packages may make 
Directors less willing to challenge management out of fear of not being         
re-nominated. Direct stock ownership is the best way to align the interests of  
outside Directors and shareholders. Accordingly, a significant proportion of    
Director compensation should be in the form of stock. The voting fiduciary may  
support the elimination of Director pensions. Directors who receive pensions    
based upon years of service as Directors and not upon their performance as      
Directors are less likely to challenge management if they perceive that such    
action might reduce the possibility of vesting. In addition to these            
conditions, we evaluate Director compensation plans using the same standards as 
those which apply to executive compensation plans.                              

4.9. Disclosing or Restricting Executive Compensation                           

Proposals which link executive compensation, benefits, and perquisites to the   
long-term goals of the company should be supported. In addition, proposals that 
seek to expand disclosure of executive compensation, benefits, and perquisites  
are of value to shareholders as long as such disclosure is not unduly           
burdensome on the company. In general, we may oppose the provision of any       
perquisite or benefit to executives that exceeds what is generally offered to   
other company employees.                                                        

5. CORPORATE RESPONSIBILITY                                                     

Corporate Responsibility shareholder proposals are based on the premise that,   
in order to succeed over the long-term, companies need to treat employees,      
suppliers, and customers well; need to be environmentally responsible; and need 
to be responsive to the communities in which they operate. In general, we may   
support such proposals as long as they contribute to or have no adverse effect  
upon the long-term economic interests of plan participants and beneficiaries.   

5.1. Special Policy Review & Shareholder Advisory Committees                    

Such policy committees are usually established by Boards of Directors to        
address broad corporate policy and to address issues on matters including       
shareholder relations, the environment and health & safety issues. We generally 
support proposals calling for the formation of such committees given the fact   
that this creates a method for effecting shareholder influence on companies.    

5.2. Corporate Conduct, International Labor Standards, and Human Rights         

We generally support shareholder proposals which address corporate              
responsibility relating to environmental, labor and human rights standards as   
long as the proposals contribute to or have no adverse impact upon the          
long-term interests of plan participants and beneficiaries.                     

5.3. Adoption of "MacBride Principles"                                          

The MacBride Principles call on companies operating in Northern Ireland to      
treat workers in those facilities in the same manner that the companies treat   
their employees domestically. We consider whether or not it is in the best      
long-term interests of plan participants and beneficiaries for a company to     
conduct its business in accordance with such principles.                        

5.4. Adoption of "CERES Principles"                                             

CERES Principles call for the companies to protect the environment and the      
health and safety of the companies' employees. We generally support proposals   
of this kind since the corporate conduct created by implementing them enhances  
business operations, improves companies' image, and enhances shareholder value. 

5.5. Legal & Regulatory Compliance                                              

Legal and regulatory compliance proposals call upon companies to comply with,   
and report on, government mandates relating to non-discrimination; health and   
safety; affirmative action; environmental issues; labor protections; and other  
policies and practices that affect long-term company performance. In general we 
may support such proposals because reporting on affirmative action keeps the    
issue high on a company's agenda, reaffirms a commitment to equal employment    
opportunity, and bolsters its standing with employees and the public and thus   
its economic well-being.                                                        

5.6. Supplier Standards                                                         

Supplier standards proposals call on companies to institute a review process to 
ensure that they do not do business with suppliers that fail to comply with all 
applicable laws and standards relating to labor and human rights. In general,   
we may support such proposals.                                                  

5.7. Fair Lending                                                               

Fair lending proposals call for financial institutions to affirmatively comply  
with fair-lending regulations and statutes, institute or report on overall fair 
lending policies or goals by the parent and financial subsidiaries of the       
corporation, or disclose lending data to shareholders and the public. It is     
important for financial institutions to examine the risks inherent to their     
fair lending compliance practices, to institute corrective steps and            
safeguards, if necessary, and to report to shareholders on their findings and   
activities in this regard. We may generally support proposals seeking such      
actions.                                                                        

5.8. Political Reporting                                                        

Management is unaccountable in making political contributions and in funding    
Political Action Committees (PACs) unless such donations are a matter of public 
information easily available to shareholders. While information on PAC          
contributions is available, direct contributions by the company at the state    
and local levels generally are not available, and few companies have reported   
on their expenses for PAC administration and solicitation. Aside from the right 
of shareholders to know about corporate political activities, knowledge that    
information on political contributions is readily available will lessen the     
chance that officers will make contributions that could be embarrassing to the  
corporation. We generally support such proposals as long as the cost of         
preparing reports on political contributions is minimal, and the request for    
them is reasonable.                                                             

5.9. Tobacco lndustry                                                           

The regulation of marketing practices is a responsibility of national or local  
governments. However, individual companies still have an undiminished duty to   
market their products responsibly within government-established boundaries.     
Tobacco ads continue to cause significant controversy for tobacco companies     
because they are said to affect those who may not be able to make an informed   
decision about the health risks of smoking. Companies that engage in such       
marketing should make sure that they fully comply with the letter and spirit of 
any government guidelines as well as any industry codes that address the topic. 
Reports on the marketing of tobacco products are a relatively inexpensive way   
for a company to let its shareholders gauge whether the company is marketing    
responsibly. Therefore, we may generally support proposals that ask management  
to report on or change tobacco product marketing practices.                     

5.10. Business Strategy                                                         

Shareholders have introduced proposals asking Boards to examine the impact of   
particular business strategies on long-term corporate value in light of         
changing market conditions, and to report back to shareholders. We generally    
support enhanced disclosure to shareholders on how the company addresses issues 
that may present significant risk to long-term corporate value. We also         
generally support proposals which seek Board review of business strategies that 
may not contribute to building long-term corporate value, so long as these      
proposals do not impose undue costs on the corporation.                         

5.11. Analyst Independence                                                      

Recent investigations by the SEC and the New York State Attorney General        
exposed widespread conflicts of interest involving investment banking practices 
at many financial services companies. We believe that these conflicts have      
helped to undermine investor confidence in the capital markets in general and   
investor confidence in the financial services industry in particular. Several   
recent shareholder proposals have urged financial service companies to          
effectively manage investment banking related conflicts of interest by formally 
separating the company's investment banking business from the company's         
sell-side analyst research and Initial Public Offering (IPO) allocation         
process, or by taking other measures. We generally support such proposals.      

6. AUDITORS                                                                     

Independent auditors play the important role in the capital markets of helping  
to protect the integrity and reliability of corporate financial reporting. The  
independent audit and resulting opinion letter are intended to enhance          
investors' confidence that the financial statements on which they rely provide  
an accurate picture of a company's financial condition. Recent accounting       
scandals illustrate the consequences for investors when this audit process      
breaks down.                                                                    

When a company engages its audit firm to perform non-audit services, this may   
compromise the independence of the audit firm, and may give rise to questions   
and concerns about the integrity and reliability of the auditor's work. Both    
the type and the amount of work performed for a company by its outside audit    
firm must be scrutinized. Real and perceived auditor conflicts are most serious 
when non-audit services constitute a significant percentage of the total fees   
paid by the company to the auditor, or when the nature of these non-audit       
services places the auditor in the role of advocate for the company, or its     
executives.                                                                     

We might consider that companies should only engage their auditors to perform   
audit services. However, the performance of certain non-audit services might    
not necessarily compromise the independence of the audit process.               

6.1. Auditor Ratification                                                       

We may vote against ratification of the auditors when:                          

o There is reason to believe that the company's auditors have become complacent 
in the performance of their auditing duties;                                

o There has been a change in auditors from the prior years and it is determined 
that the cause is a disagreement between the company and the terminated     
auditor on a matter of accounting principles or practices, financial        
statement disclosure or auditing scope or practice;                         

o The auditor provides advice on tax avoidance strategies, as disclosed in the  
qualitative discussion of tax services, or any other tax or other service   
 that the voting fiduciary believes places the auditor in the role of advocate
for the company or its executives;                                          

o The fees for non-audit services account for a significant percentage of total 
fees. When fees for non-audit services are more than 20% of total fees there
 should be concern, and when non-audit services exceed 50% of total fees it is
inappropriate and a serious threat to auditor independence. In determining  
the appropriate threshold at a particular company, the voting fiduciary     
should consider the nature of the non-audit services provided and the level 
of detail provided in the qualitative descriptions of non-audit fees; and   

o A company has had the same audit firm for more than seven years.              

We recognize that a vote against ratification of the auditor based upon the     
above standards may raise concerns about the performance of the audit           
committee. When these concerns are serious, we may also consider withholding    
votes for Directors serving on the audit committee.                             

6.2. Shareholder Proposals Relating to Auditors                                 

We may support shareholder proposals to enhance auditor independence, including 
those that complement or strengthen the minimum acceptable standards            
established above.                                                              

485APOS
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                                                          PART II - APPENDIX C

WAIVERS OF SALES CHARGES

This Appendix sets forth the various circumstances in which the initial sales   
charge (ISC) and/or the CDSC is waived for the MFS funds' share classes. Some   
of the following information will not apply to certain funds, depending on      
which classes of shares are offered by the funds. In order to qualify for a     
sales charge waiver, you must advise MFS that you are eligible for the waiver   
at the time of purchase and/or redemption. The funds, MFS, and their affiliates 
reserve the right to eliminate, modify, and add waivers at any time at their    
discretion.                                                                     

In addition, transfers, rollovers or other transactions from one account to the 
same class of the same fund of another account otherwise subject to a CDSC or   
an ISC will not be charged a CDSC or ISC so long as each account is held in     
your name or for your benefit (either individually or collectively) by MFSC or  
an affiliate. Shares will retain the CDSC schedule in effect based upon a pro   
rata share of the CDSC from the fund in the first account and the original      
purchase date of the shares subject to the CDSC.                                

As used in this Appendix C, the term "ESP" includes employer sponsored plans,   
the term "SRO" includes salary reduction only plans, and the term "ERISA"       
refers to the Employment Retirement Income Security Act of 1974, as amended.    

                                                        [Enlarge/Download Table]
RETIREMENT PLANS:                                                                                       


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                                                            SALES CHARGE WAIVED                         
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WAIVER CATEGORY                                                CLASS      CLASS       CLASS       CLASS 
                                                               A ISC      A CDSC      B CDSC      C CDSC
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1. WAIVERS FOR MFS SERVICED PLANS                                                                       
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o To the extent that redemption proceeds are used to pay                    V            V          V   
  expenses (or certain participant expenses) of the 401(a)                                              
  or ESP Plan (e.g., participant account fees).                                                         
--------------------------------------------------------------------------------------------------------
o Shares purchased or redeemed representing transfers from,      V          V            V          V   
  or transfers to, plan investments other than the MFS                                                  
  funds.                                                                                                
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o Shares acquired pursuant to repayments by retirement plan      V          V            V          V   
  participants of loans from 401(a) or ESP Plans.                                                       
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o By a retirement plan which established an account with                                 V              
  MFSC between July 1, 1996 and December 31, 1998.                                                      
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o By a retirement plan which established its account with                                V              
  MFSC on or after January 1, 1999 (provided that the plan                                              
  establishment paperwork is received by MFSC in good order                                             
  on or after November 15, 1998 and before December 31,                                                 
  2002).                                                                                                
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o Transfers from a single account maintained for a 401(a)                   V            V          V   
  Plan to multiple accounts maintained by MFSC on behalf of                                             
  individual participants of such Plan.                                                                 
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o All MFS Serviced Plans.                                        V                                  V   
--------------------------------------------------------------------------------------------------------
o Transfers due to the eligibility of a MFS Serviced Plan        V          V            V          V   
  to move its investment into a new share class under                                                   
  certain eligibility criteria established from time to                                                 
  time by MFD (sales charges waived may vary depending upon                                             
  the criteria established by MFD).                                                                     
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o Transfer or rollover to MFS Prototype IRA from a MFS           V          V            V          V   
  Serviced Plan.                                                                                        
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Reinvestment of Redemption Proceeds from Class B Shares          V          V                           

Shares acquired by a retirement plan whose account                                                      
application was received by MFD on or prior to March 30,                                                
2001 where the purchase represents the immediate                                                        
reinvestment of proceeds from the plan's redemption of                                                  
its Class B shares of the MFS funds and is equal to or                                                  
exceeds $500,000, either alone or in aggregate with the                                                 
current market value of the plan's existing Class A                                                     
shares; or                                                                                              
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Shares acquired by a retirement plan whose account                                                      
application was received by MFD on or after April 2, 2001                                               
and before December 31, 2002 where the purchase                                                         
represents the immediate reinvestment of proceeds from                                                  
the plan's redemption of its Class B shares of the MFS                                                  
funds and is equal to or exceeds $1,000,000, either alone                                               
or in aggregate with current market value of the plan's                                                 
existing Class A shares.                                                                                
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2. WAIVERS FOR NON-MFS SERVICED PLANS ("TA PLANS")                                                      
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A. 401(A) PLANS AND ESP PLANS                                                                           
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o Where the retirement plan and/or sponsoring organization       V          V                           
  demonstrates to the satisfaction of, and certifies to,                                                
  MFSC that the retirement plan (or multiple plans                                                      
  maintained by the same plan sponsor) has, at the time of                                              
  certification or will have pursuant to a purchase order                                               
  placed with the certification, a market value of $500,000                                             
  or more (applies only when the certification was received                                             
  by MFSC on or prior to March 30, 2001) or $1,000,000 or                                               
  more (applies only when the certification is received by                                              
  MFSC on or after April 2, 2001), invested in shares of                                                
  any class or classes of the MFS funds and aggregate                                                   
  assets of at least $10 million; provided, however, that                                               
  the CDSC will not be waived (i.e., it will be imposed)                                                
  (a) with respect to plans which establish an account with                                             
  MFSC on or after November 1, 1997, in the event that the                                              
  plan makes a complete redemption of all of its shares in                                              
  the MFS Family of funds, or (b) with respect to plans                                                 
  which establish an account with MFSC prior to November 1,                                             
  1997, in the event that there is a change in law or                                                   
  regulations which result in a material adverse change to                                              
  the tax advantaged nature of the plan, or in the event                                                
  that the plan and/or sponsoring organization: (i) becomes                                             
  insolvent or bankrupt; (ii) is terminated under ERISA or                                              
  is liquidated or dissolved; or (iii) is acquired by,                                                  
  merged into, or consolidated with any other entity.                                                   
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Investment in Class A shares by certain retirement plans         V(1)                                   
subject to ERISA, if                                                                                    

The plan established an account with MFSC between July 1,                                               
1997 and December 31, 1999;                                                                             

The plan records are maintained on a pooled basis by                                                    
MFSC; and                                                                                               

The sponsoring organization demonstrates to the                                                         
satisfaction of MFD that, at the time of purchase, the                                                  
employer has at least 200 eligible employees and the plan                                               
has aggregate assets of at least $2,000,000.                                                            
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3. WAIVERS FOR BOTH MFS SERVICED PLANS AND TA PLANS                                                     
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A. BENEFIT RESPONSIVE WAIVERS                                                                           
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o Death, disability or retirement of 401(a) or ESP Plan                     V            V          V   
  participant, or death or disability of IRA owner, SRO                                                 
  Plan Participant or SAR-SEP Plan Participant.                                                         
--------------------------------------------------------------------------------------------------------
o Eligible participant distributions, such as distributions                 V            V          V   
  due to death, disability, financial hardship, retirement                                              
  and termination of employment from MFS Serviced Plans and                                             
  nonqualified deferred compensation plans (excluding,                                                  
  however, a termination of a plan).                                                                    
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o Loan from 401(a) or ESP Plan.                                             V            V          V   
--------------------------------------------------------------------------------------------------------
o Financial hardship (as defined in Treasury Regulation                     V            V          V   
  Section 1.401(k)-l(d)(2), as amended from time to time)                                               
  for 401(a) Plans and ESP Plans.                                                                       
--------------------------------------------------------------------------------------------------------
o Termination of employment of 401(a) or ESP Plan                           V            V          V   
  participant (excluding, however, a termination of the                                                 
  Plan).                                                                                                
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o Tax-free return of excess 401(a) Plan, ESP Plan or IRA                    V            V          V   
  contributions.                                                                                        
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o Distributions from a 401(a) or ESP Plan that has invested                 V            V          V   
  its assets in one or more of the MFS funds for more than                                              
  10 years from the later to occur of (i) January 1, 1993                                               
  or (ii) the date such 401(a) or ESP Plan first invests                                                
  its assets in one or more of the MFS funds. The sales                                                 
  charges will be waived in the case of a redemption of all                                             
  of the 401(a) or ESP Plan's shares in all MFS funds                                                   
  (i.e., all the assets of the 401(a) or ESP Plan invested                                              
  in the MFS funds are withdrawn), unless immediately prior                                             
  to the redemption, the aggregate amount invested by the                                               
  401(a) or ESP Plan in shares of the MFS funds (excluding                                              
  the reinvestment of distributions) during the prior four                                              
  years equals 50% or more of the total value of the 401(a)                                             
  or ESP Plan's assets in the MFS funds, in which case the                                              
  sales charges will not be waived.                                                                     
--------------------------------------------------------------------------------------------------------
o Distributions made on or after the IRA owner, ESP                         V                           
  participant, SRO Plan participant or 401(a) Plan                                                      
  participant has attained the age of 59 1/2 years old.                                                 
--------------------------------------------------------------------------------------------------------
o Certain involuntary redemptions and redemptions in                        V            V          V   
  connection with certain automatic withdrawals from a                                                  
  401(a) Plan.                                                                                          
--------------------------------------------------------------------------------------------------------
o Distributions made on or after the IRA owner or the                       V            V          V   
  401(a), ESP, SRO or SAR-SEP Plan participant, as                                                      
  applicable, has attained the age of 70 1/2 years old, but                                             
  only with respect to the minimum distribution under Code                                              
  rules.                                                                                                
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Investments in Class A shares by certain retirement plans        V(1)                                   
(1) subject to ERISA, if, prior to July 1, 1996,                                                        

The plan had established an account with MFSC; and                                                      

The sponsoring organization had demonstrated to the                                                     
satisfaction of MFD that either:                                                                        

The employer had at least 25 employees; or                                                              

The total purchases by the retirement plan of Class A shares                                            
of the MFS funds would be in the amount of at least $250,000                                            
within a reasonable period of time, as determined by MFD in                                             
its sole discretion.                                                                                    

--------------------------------------------------------------------------------------------------------
Investments in Class A shares by certain retirement plans        v(1)                                   
subject to ERISA, if                                                                                    

The plan established an account with MFSC between July 1,                                               
1996 and March 30, 2001;                                                                                

The plan has, at the time of purchase, either alone or in                                               
aggregate with other plans maintained by the same plan                                                  
sponsor, a market value of $500,000 or more invested in                                                 
shares of any class or classes of the MFS funds; and                                                    

THE RETIREMENT PLANS WILL QUALIFY UNDER THIS CATEGORY ONLY                                              
IF THE PLANS OR THEIR SPONSORING ORGANIZATION INFORMS MFSC                                              
PRIOR TO THE PURCHASES THAT THE PLANS HAVE A MARKET VALUE                                               
OF $500,000 OR MORE INVESTED IN SHARES OF ANY CLASS OR                                                  
CLASSES OF THE MFS FUNDS; MFSC HAS NO OBLIGATION                                                        
INDEPENDENTLY TO DETERMINE WHETHER SUCH PLANS QUALIFY UNDER                                             
THIS CATEGORY.                                                                                          
--------------------------------------------------------------------------------------------------------
B. CERTAIN TRANSFERS OF REGISTRATION                                                                    
--------------------------------------------------------------------------------------------------------
o Transfers to an IRA rollover account where any sales                      V            V          V   
  charges with respect to the shares being reregistered                                                 
  would have been waived had they been redeemed.                                                        
--------------------------------------------------------------------------------------------------------
C. ADMINISTRATIVE SERVICE ARRANGEMENTS                                                                  
--------------------------------------------------------------------------------------------------------
o Where the retirement plan is, at that time, a party to a       V          V                           
  retirement plan recordkeeping or administrative services                                              
  agreement with MFD or one of its affiliates pursuant to                                               
  which certain of those services are provided by Benefit                                               
  Services Corporation or any successor service provider                                                
  designated by MFD.                                                                                    
--------------------------------------------------------------------------------------------------------
o Where the retirement plan has established an account with      V          V                           
  MFSC on or after January 1, 2000, and is, at that time, a                                             
  party to a retirement plan recordkeeping or                                                           
  administrative services agreement with MFD or one of its                                              
  affiliates pursuant to which such services are provided                                               
  with respect to at least $10 million in plan assets.                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by retirement plans or trust accounts          V          V                           
  whose financial intermediaries have entered into an                                                   
  administrative services agreement with MFD or one of its                                              
  affiliates to perform certain administrative services,                                                
  subject to certain operational and minimum size                                                       
  requirements specified from time to time by MFD or one or                                             
  more of its affiliates.                                                                               
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(1) Purchases of Class A shares are not subject to an initial sales charge; however, a CDSC of 1% will  
    be deducted from redemption proceeds if the redemption is made within 12 months of purchase.        

WAIVERS FOR 529 TUITION PROGRAMS:                                                                       


                                                                  SALES CHARGE WAIVED                   

WAIVER CATEGORY                                                           CLASS       CLASS      CLASS  
                                                                          529A        529B       529C   
                                                                          ISC         CDSC       CDSC   
--------------------------------------------------------------------------------------------------------
                                                                                                        

A. CERTAIN SPONSORED PLANS                                                                              
--------------------------------------------------------------------------------------------------------
o Shares acquired on behalf of a group, association or                      V            V          V   
  employer sponsored plan, pursuant to guidelines created                                               
  by MFD from time to time.                                                                             
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B. INVESTMENT PROCEEDS FROM CERTAIN REDEMPTIONS OF CLASS A,                                             
CLASS B AND CLASS C SHARES                                                                              
--------------------------------------------------------------------------------------------------------
o The initial sales charge imposed on purchases of Class                    V            V          V   
  529A shares, and the CDSC imposed on certain redemptions                                              
  of Class A, Class B and Class C shares, are waived where                                              
  Class 529A, Class 529B and Class 529C shares are acquired                                             
  following the reinvestment of the proceeds of a                                                       
  redemption of Class A, Class B and Class C shares,                                                    
  respectively, of the same fund; provided however, that                                                
  any applicable CDSC liability on the Class B or Class C                                               
  shares redeemed will carry over to the Class 529B or                                                  
  Class 529C shares acquired and for purposes of                                                        
  calculating the CDSC, the length of time you have owned                                               
  your Class 529B or Class 529C shares will be measured                                                 
  from the date of original purchase of the Class B or                                                  
  Class C shares redeemed.                                                                              
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C. ADMINISTRATIVE SERVICE ARRANGEMENTS                                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by 529 tuition programs whose sponsors or                 V                           
  administrators have entered into an administrative                                                    
  services agreement with MFD or one of its affiliates to                                               
  perform certain administrative or investment advisory                                                 
  services subject to certain operational and minimum size                                              
  requirements specified from time to time by MFD or one or                                             
  more of its affiliates.                                                                               
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D. QUALIFIED HIGHER EDUCATION EXPENSES                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed where the redemption proceeds are used to                              V          V   
  pay for qualified higher education expenses, which may                                                
  include tuition, fees, books, supplies, equipment and                                                 
  room and board (see the program description for further                                               
  information on qualified higher education expenses);                                                  
  however the CDSC will not be waived for redemptions where                                             
  the proceeds are transferred or rolled over to another                                                
  tuition program.                                                                                      
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E. SCHOLARSHIP                                                                                          
--------------------------------------------------------------------------------------------------------
o Shares redeemed where the account beneficiary has                                      V          V   
  received a scholarship, up to the amount of the                                                       
  scholarship.                                                                                          
--------------------------------------------------------------------------------------------------------
F. DEATH OF 529 PLAN BENEFICIARY                                                                        
--------------------------------------------------------------------------------------------------------
o Shares redeemed on account of the death of the 529 plan                                V          V   
  account beneficiary if the shares were held solely for                                                
  the benefit of the deceased individual.                                                               
--------------------------------------------------------------------------------------------------------
G. USA COLLEGECONNECT 529 PLAN                                                                          
--------------------------------------------------------------------------------------------------------
o Shares acquired as a result of the conversion of the USA                  V                           
  CollegeConnect 529 Plan to the MFS 529 Savings Plan                                                   
  (shares acquired after the conversion are not entitled to                                             
  a waiver under this category).                                                                        

GENERAL WAIVERS:                                                                                        


                                                        SALES CHARGE WAIVED                             

WAIVER CATEGORY                                              CLASS       CLASS        CLASS      CLASS  
                                                             A/529A      A CDSC       B/529B     C/529C 
                                                             ISC                      CDSC       CDSC   
                                                                                                        
--------------------------------------------------------------------------------------------------------
A. DIVIDEND REINVESTMENT                                                                                
--------------------------------------------------------------------------------------------------------
o Shares acquired through dividend or capital gain               V          V            V          V   
  reinvestment.                                                                                         
--------------------------------------------------------------------------------------------------------
o Shares acquired by automatic reinvestment of                   V          V            V          V   
  distributions of dividends and capital gains of any fund                                              
  in the MFS funds pursuant to the Distribution Investment                                              
  Program.                                                                                              
--------------------------------------------------------------------------------------------------------
B. AFFILIATES OF A MFS FUND/CERTAIN FINANCIAL ADVISERS                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by officers, eligible directors,               V          V            V          V   
  employees (including former employees) and agents of MFS,                                             
  Sun Life, or any of their subsidiary companies.                                                       
--------------------------------------------------------------------------------------------------------
o Shares acquired by trustees and retired trustees of any        V          V            V          V   
  investment company for which MFD serves as distributor.                                               
--------------------------------------------------------------------------------------------------------
o Shares acquired by employees, directors, partners,             V          V            V          V   
  officers and trustees of any subadviser to any MFS fund.                                              
--------------------------------------------------------------------------------------------------------
o Shares acquired by certain family members of any such          V          V            V          V   
  individual identified above and their spouses (or legal                                               
  equivalent under applicable state law), and certain                                                   
  trusts, pension, profit-sharing or other retirement plans                                             
  for the sole benefit of such persons, provided the shares                                             
  are not resold except to the MFS fund which issued the                                                
  shares.                                                                                               
--------------------------------------------------------------------------------------------------------
o Shares acquired by employees or registered                     V          V            V          V   
  representatives (including former employees) of financial                                             
  intermediaries or an employee's spouse (or legal                                                      
  equivalent under applicable state law) or employee's                                                  
  children under the age of 21. For employees or registered                                             
  representatives of financial intermediaries who                                                       
  established an account with MFS prior to May 1, 2006,                                                 
  shares acquired by certain family members of employees or                                             
  registered representatives of financial intermediaries                                                
  and their spouses (or legal equivalent under applicable                                               
  state law), and certain trusts, pension, profit-sharing                                               
  or other retirement plans for the sole benefit of such                                                
  persons, provided the shares are not resold except to the                                             
  MFS Fund which issued the shares.                                                                     
--------------------------------------------------------------------------------------------------------
o Shares acquired by institutional clients of MFS or             V          V            V          V   
  MFS Institutional Advisors, Inc.                                                                      
--------------------------------------------------------------------------------------------------------
C. INVOLUNTARY REDEMPTIONS                                                                              
--------------------------------------------------------------------------------------------------------
o Shares redeemed at a MFS fund's direction due to the                      V            V          V   
  small size of a shareholder's account.                                                                
--------------------------------------------------------------------------------------------------------
D. BANK TRUST DEPARTMENTS AND LAW FIRMS                                                                 
--------------------------------------------------------------------------------------------------------
o Shares acquired by certain bank trust departments  or          V          V                           
  law firms acting as trustee or manager for trust accounts                                             
  which have entered into an administrative services                                                    
  agreement with MFD and are acquiring such shares for the                                              
  benefit of their trust account clients.                                                               
--------------------------------------------------------------------------------------------------------
E. INVESTMENT OF PROCEEDS FROM CERTAIN REDEMPTIONS OF                                                   
CLASS I SHARES                                                                                          
--------------------------------------------------------------------------------------------------------
o The initial sales charge imposed on purchases of Class A       V          V                           
  or Class 529A shares and the contingent deferred sales                                                
  charge imposed on certain redemptions of Class A shares,                                              
  are waived with respect to Class A or Class 529A shares                                               
  acquired of any of the MFS funds through the immediate                                                
  reinvestment of the proceeds of a redemption of Class I                                               
  shares of any of the MFS funds.                                                                       
--------------------------------------------------------------------------------------------------------
F. SYSTEMATIC WITHDRAWALS                                                                               
--------------------------------------------------------------------------------------------------------
o Systematic withdrawals with respect to up to 10% per year                              V          V   
  (or 15% per year, in the case of accounts registered as                                               
  IRAs where the redemption is made pursuant to Section                                                 
  72(t) of the Internal Revenue Code of 1986, as amended)                                               
  of the account value at the time of establishment.                                                    
--------------------------------------------------------------------------------------------------------
G. DEATH OF OWNER                                                                                       
--------------------------------------------------------------------------------------------------------
o Shares redeemed on the account of the death of the                                     V          V   
  account owner (e.g., shares redeemed by the estate or any                                             
  transferee of the shares from the estate) if the shares                                               
  were held solely in the deceased individual's name, or                                                
  for the benefit of the deceased individual.                                                           
--------------------------------------------------------------------------------------------------------
H. DISABILITY OF OWNER                                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed on account of the disability of the                                    V          V   
  account owner if shares are held either solely or jointly                                             
  in the disabled individual's name in a living trust for                                               
  the benefit of the disabled individual (in which case a                                               
  disability certification form is required to be submitted                                             
  to MFSC), or shares redeemed on account of the disability                                             
  of the 529 account beneficiary.                                                                       
--------------------------------------------------------------------------------------------------------
I. WRAP ACCOUNT AND FUND "SUPERMARKET" INVESTMENTS                                                      
--------------------------------------------------------------------------------------------------------
o Shares acquired by investments through certain dealers         V          V                           
  (including registered investment advisers and financial                                               
  planners) which have established certain operational                                                  
  arrangements with MFD which include a requirement that                                                
  such shares be sold for the sole benefit of clients                                                   
  participating in a "wrap" account, mutual fund                                                        
  "supermarket" account or a similar program under which                                                
  such clients pay a fee to such dealer.                                                                
--------------------------------------------------------------------------------------------------------
J. INSURANCE COMPANY SEPARATE ACCOUNTS                                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by insurance company separate accounts.        V          V                           
--------------------------------------------------------------------------------------------------------
K. NO COMMISSIONS PAID                                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed where MFD has not paid an up front                        V            V          V   
  commission with respect to the sale of the shares,                                                    
  provided that such arrangement meets certain conditions                                               
  established by MFD from time to time.                                                                 
--------------------------------------------------------------------------------------------------------
L. MISCELLANEOUS                                                                                        
--------------------------------------------------------------------------------------------------------
o In connection with settlements reached between certain         V                                      
  broker/dealers and the NASD, SEC, and/or other regulatory                                             
  bodies regarding sales of Class B and Class C shares in                                               
  excess of certain dollar thresholds, the funds will, at                                               
  times, permit shareholders who are clients of these firms                                             
  to redeem Class B and Class C shares of the fund and                                                  
  concurrently purchase Class A shares without paying an                                                
  initial sales charge.                                                                                 

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

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                                                      SAI PART II - APPENDIX D

FINANCIAL INTERMEDIARY COMPENSATION 

Financial intermediaries receive various forms of compensation in connection    
with the sale of shares of a fund and/or the servicing of shareholder accounts. 
Financial intermediaries may receive such compensation (i) in the form of       
upfront commissions and ongoing asset-based compensation paid by MFD based on   
sales charges received and expected to be received by MFD from shareholders,    
and Rule 12b-1 ("Distribution Plan") distribution and service payments received 
by MFD from the fund, (ii) in the form of 529 administrative services payments, 
retirement plan administrative and service payments, and shareholder servicing  
payments paid by MFD and/or one or more of its affiliates (for purposes of this 
section only, collectively, "MFD") based on the receipt of such payments by MFD 
from the fund, and (iii) in the form of retail marketing support, program       
support, processing support, and/or other payments paid from MFD's own          
additional resources. In addition, financial intermediaries may benefit from    
payments made to other entities for consulting, research, or analytical         
services.                                                                       

The types of payments described above are not exclusive. Accordingly, financial 
intermediaries may receive payments under all or any combination of the         
above-referenced categories. In addition, the compensation that financial       
intermediaries receive may vary by class of shares sold and among financial     
intermediaries. Depending upon the arrangements in place at any particular      
time, financial intermediaries may have a financial incentive to recommend a    
particular fund or share class.                                                 

Financial intermediaries may charge you additional fees and/or commissions. You 
can ask your financial intermediary for information about any payments it       
receives from MFD and any services it provides, as well as about fees and/or    
commissions it charges. Financial intermediaries may categorize and disclose    
these arrangements differently than MFD does. Financial intermediaries that     
sell fund shares may also act as a broker or dealer in connection with a MFS    
fund's purchase or sale of portfolio securities. However, the fund and MFS do   
not consider financial intermediaries' sale of shares of a MFS fund as a factor 
when choosing brokers or dealers to effect portfolio transactions for the MFS   
funds.                                                                          

COMMISSIONS AND DISTRIBUTION PLAN PAYMENTS                                      

Class A, Class 529A, and Class J Shares                                         

For purchases of Class A, Class 529A and Class J shares subject to an initial   
sales charge, MFD generally pays a portion of the initial sales charge to       
financial intermediaries as an upfront commission of up to the following        
amounts:                                                                        

Equity/Asset Allocation/Total Return Funds                                      

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          5.00%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             4.00%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            3.00%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            2.25%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.75%                                
--------------------------------------------------------------------------------

Bond Funds                                                                      

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          4.00%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             3.50%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            3.00%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            2.25%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.75%                                
------------------------------------------ -------------------------------------

Short-Term Bond Funds                                                           

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          2.25%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             2.00%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            1.75%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            1.50%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.25%                                
--------------------------------------------------------------------------------

The difference between the total amount invested and the sum of (a) the net     
proceeds to the fund and (b) the financial intermediary commission, is the      
amount of the initial sales charge retained by MFD. Because of rounding in the  
computation of offering price, the portion of the sales charge retained by MFD  
may vary and the total sales charge may be more or less than the sales charge   
calculated using the sales charge expressed as a percentage of the offering     
price or as a percentage of the net amount invested as listed in the            
Prospectus. From time to time, MFD may pay financial intermediaries up to 100%  
of the applicable initial sales charge of Class A, Class 529A and Class J       
shares of certain specified funds sold by financial intermediaries during a     
specified sales period. In addition, financial intermediaries are generally     
eligible to receive some or all of the Distribution Plan service fee payments   
of up to 0.25% annually of the average daily net assets of the class with       
respect to such shares.                                                         

For purchases of Class A and Class 529A shares not subject to an initial sales  
charge other than by MFS Serviced Plans, MFD may pay financial intermediaries   
an upfront commission of up to 1% annually of the amount purchased through such 
financial intermediary. In addition, financial intermediaries will generally    
become eligible to receive some or all of the Distribution Plan service fee     
payments of up to 0.25% annually of the average daily net assets of the class   
with respect to such shares commencing in the 13th month following purchase.    

For purchases of Class 529A shares by employer sponsored or payroll deduction   
529 plans for which there is no initial sales charge or the Class 529A initial  
sales charge is waived, MFD will generally pay financial intermediaries an      
upfront commission of up to the following:                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $25,000,000 plus              0.50%                                
--------------------------------------------------------------------------------
Over $25,000,000                           0.25%                                
--------------------------------------------------------------------------------

At the discretion of MFD, MFD may pay certain financial intermediaries an       
upfront commission of up to 1% of the amount of Class 529A shares purchased     
through such financial intermediary instead of the upfront commission described 
above. In addition, such financial intermediaries will generally become         
eligible to receive some or all of the Distribution Plan service fee payments   
of up to 0.25% annually of the average daily net assets of the class with       
respect to such shares commencing in the 13th month following purchase.         

For purchases of Class A shares by MFS Serviced Plans prior to April 2, 2001    
(including sales to plans for which account establishment paperwork was         
received in good order by MFD on or prior to March 30, 2001), for which the     
initial sales charge is waived, MFD will generally pay financial intermediaries 
an upfront commission of up to the following:                                   

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

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

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

In the case of MFS Serviced Plans whose account establishment paperwork was     
received in good order after December 31, 1999, purchases will be aggregated as 
described above but the cumulative purchase amount will not be re-set after the 
date of the first such purchase.                                                

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares.                                                                         

For purchases of Class A shares by MFS Serviced Plans on or after April 2, 2001 
(including, sales to plans for which account establishment paperwork was        
received in good order by MFD on or after April 2, 2001), for which the initial 
sales charge is waived, MFD will generally pay financial intermediaries an      
upfront commission of up to the following:                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $4,000,000 plus                   1.00%                            
--------------------------------------------------------------------------------
Over $4,000,000 to $25,000,000 plus            0.50%                            
--------------------------------------------------------------------------------
Over $25,000,000                               0.25%                            
--------------------------------------------------------------------------------

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

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

Class B and Class 529B Shares                                                   

Except as noted below, for purchases of Class B and Class 529B shares, MFD will 
generally pay an upfront commission to financial intermediaries of up to 3.75%  
of the amount purchased through such financial intermediaries. MFD will also    
generally advance to financial intermediaries some or all of the first year     
Distribution Plan service fee payments of up to 0.25% of the amount of Class B  
and Class 529B shares purchased through such financial intermediary. In         
addition, financial intermediaries will generally become eligible to receive    
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

For purchases of Class B shares by a MFS Serviced Plan for which account        
establishment paperwork was received in good order by MFD between July 1, 1996  
and December 31, 1998, MFD will generally pay an upfront commission to          
financial intermediaries equal to 2.75% of the amount of Class B shares         
purchased through such financial intermediary. MFD will also generally advance  
to financial intermediaries some or all of the first year Distribution Plan     
service fee payments of up to 0.25% of the amount of Class B shares purchased   
through such financial intermediary. In addition, financial intermediaries will 
generally become eligible to receive some or all of the Distribution Plan       
service fee payments of up to 0.25% annually of the average daily net assets of 
the class with respect to such shares commencing in the 13th month following    
purchase.                                                                       

For purchases of Class B shares by a MFS Serviced Plan which established its    
account with MFSC between January 1, 1999, and December 31, 2002 (i.e., plan    
establishment paperwork is received by MFSC in good order by December 31, 2002) 
and certain other retirement plans as determined by MFD from time to time, MFD  
pays no upfront commission to financial intermediaries, but, instead, generally 
pays asset-based compensation to financial intermediaries of up to 1% annually  
of the average daily net assets of the class attributable to plan assets (of    
which 0.25% consists of the Distribution Plan service fee). This commission     
structure is not available with respect to a plan with a pre-existing           
account(s) with any MFS fund which seeks to switch to the MFS Recordkeeper Plus 
product.                                                                        

Class C and Class 529C Shares                                                   

Except as noted below, for purchases of Class C and Class 529C shares, MFD will 
generally pay an upfront commission to financial intermediaries of up to 1% of  
the amount of Class C and Class 529C shares purchased through such financial    
intermediary. In addition, financial intermediaries will generally become       
eligible to receive some or all of the Distribution Plan distribution fee       
payment of up to 0.75% and some or all of the Distribution Plan service fee     
payment of up to 0.25% annually of the average daily net assets of the class    
with respect to such shares commencing in the 13th month following purchase.    

For purchases of Class C shares by MFS Serviced Plans established on or after   
January 1, 2003 (i.e., plan establishment paperwork is received by MFSC in good 
order on or after January 1, 2003), MFD pays no upfront commission to financial 
intermediaries, but, instead, generally pays asset-based compensation to        
financial intermediaries of up to 1% annually of the average daily net assets   
of the class attributable to plan assets (of which 0.25% consists of the        
Distribution Plan service fee).                                                 

For purchases of Class C shares by an Alliance Plan, MFD will pay upfront       
commissions or asset-based compensation to financial intermediaries under       
either option discussed above, at the financial intermediary's discretion.      

Class R, Class R1, Class R2, Class R3 and Class R4 Shares                       

Except as noted below, for purchases of the following R share classes, MFD pays 
no upfront commission to financial intermediaries, but, instead, generally pays 
asset-based compensation to financial intermediaries of up to the following     
rates annually of the average daily net assets of the fund attributable to plan 
assets (of which up to 0.25% consists of the Distribution Plan service fee), as 
follows:                                                                        

------------------------------------------------------------                    
Class                                 Annual Rate                               
------------------------------------------------------------                    

------------------------------------------------------------                    
Class R1                              0.75%                                     
------------------------------------------------------------                    
Class R, Class R2, Class R3           0.50%                                     
------------------------------------------------------------                    
Class R4                              0.25%                                     
------------------------------------------------------------                    

In addition, MFD may pay financial intermediaries who sell Class R4 shares an   
upfront commission of up to 0.25% of up to $25 million of a MFS Serviced Plan's 
initial investment. MFD generally will not pay financial intermediaries         
receiving this upfront commission an upfront commission with respect to any     
subsequent sale of Class R4 shares (subject to MFD waiving this limitation from 
time to time).                                                                  

For purchases of Class R shares by a MFS Serviced Plan whose account            
establishment paperwork was received in good order after December 31, 2002, MFD 
will generally pay financial intermediaries an upfront commission of up to the  
following:                                                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $4,000,000 plus               1.00%                                
--------------------------------------------------------------------------------
Over $4,000,000 to $25,000,000 plus        0.50%                                
--------------------------------------------------------------------------------
Over $25,000,000                           0.25%                                
--------------------------------------------------------------------------------

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

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

For purchases of Class R shares by an Alliance Plan whose account establishment 
paperwork was received in good order after December 31, 2002, MFD will          
generally pay financial intermediaries an upfront commission of up to 0.60% of  
the amount of Class R shares purchased through such financial intermediary.     

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

529 ADMINISTRATIVE SERVICES FEES, RETIREMENT PLAN ADMINISTRATIVE AND SERVICES   
FEES, AND SHAREHOLDER SERVICING PAYMENTS                                        

Financial intermediaries may receive all or a portion of the following          
payments: 529 administrative services fees as described in "Management of the   
Fund - Program Manager"; retirement plan administrative and service fees as     
described in "Management of the Fund - Administrator"; and shareholder          
servicing payments as described in "Management of the Fund - Shareholder        
Servicing Agent."                                                               

OTHER MFD PAYMENTS                                                              

Financial intermediaries may receive payments from MFD from MFD's own           
additional resources that fall within one or more of the following categories,  
each of which is described in greater detail below, as incentives to market the 
MFS funds, to cooperate with MFD's promotional efforts, and/or in recognition   
of their marketing, administrative services, and/or processing support:         

o Retail Marketing Support Payments;                                        

o Program Support Payments;                                                 

o Processing Support Payments; and                                          

o Other Payments.                                                           

In determining what types of payments MFD may make to financial intermediaries, 
MFD distinguishes between Retail Assets and Program Assets. "Retail Assets" are 
shares (or the value of shares as determined from time to time) of a fund sold  
or held through a financial intermediary's retail distribution channel.         
"Program Assets" are shares (or the value of shares as determined from time to  
time) of a fund sold or held through programs, such as retirement programs,     
qualified tuition programs, fund supermarkets, fee-based advisory or wrap fee   
programs, bank trust programs, and insurance (e.g., individual or group         
annuity) programs. A single financial intermediary may receive payments from    
MFD with respect to both Retail Assets ("retail marketing support payments")    
and Program Assets ("program support payments").                                

Retail Marketing Support Payments                                               

MFD may make retail marketing support and/or administrative services payments   
to financial intermediaries that sell fund shares or provide services to MFD,   
the fund or shareholders of the fund through the financial intermediary's       
retail distribution channel. In addition to the opportunity to participate in a 
financial intermediary's retail distribution channel, retail marketing support  
payments may include one or more of the following: business planning            
assistance; educating financial intermediary personnel about the fund;          
assistance with fund shareholder financial planning; placement on the financial 
intermediary's preferred or recommended fund list; access to sales              
representatives and management representatives of the financial intermediary;   
and administrative and account maintenance services.                            

MFD compensates financial intermediaries differently depending upon, among      
other factors, the level, and/or type of marketing and administrative support   
provided by the financial intermediary and the level of assets attributable to  
and/or sales by the financial intermediary. MFD generally does not make retail  
marketing support payments to a financial intermediary in an amount that        
exceeds, at the end of each calendar year, the sum of 0.10% of that financial   
intermediary's total sales of the fund (with respect to each of the Retail      
Assets and the Program Assets), and 0.05% of the average net assets of the fund 
attributable to that financial intermediary (with respect to the aggregate of   
both the Retail Assets and the Program Assets). Since this restriction on       
retail marketing support payments is based upon both Retail Assets and Program  
Assets, the retail marketing support payments may be greater than if such       
payments were calculated only on the basis of Retail Assets attributable to the 
financial intermediary. This restriction is subject to certain limited          
exceptions and may be increased or otherwise modified by MFD from time to time. 
Retail marketing support payments made under an existing agreement with         
Linsco/Private Ledger Corp. ("LPL") are not subject to the above restrictions,  
but payments to LPL on Retail Assets will not exceed, at the end of each        
calendar year, 0.15% of the average net assets of the fund (Retail Assets and   
Program Assets) attributable to LPL.                                            

Program Support Payments                                                        

MFD may make marketing support and/or administrative services payments to       
financial intermediaries that sell fund shares or provide services to MFD, the  
fund, or shareholders of the fund, through programs such as retirement          
programs, qualified tuition programs, fund supermarkets, fee-based advisory or  
wrap fee programs, bank trust programs, and insurance (e.g., individual or      
group annuity) programs. In addition to the opportunity to participate in a     
financial intermediary's program, program support payments may include one or   
more of the following, which will vary depending upon the nature of the         
program: participant or shareholder record-keeping; reporting or transaction    
processing; program administration; fund/investment selection and monitoring;   
enrollment; and education. A financial intermediary may perform the services    
itself or may arrange with a third party to perform the services.               

MFD compensates financial intermediaries differently depending upon, among      
other factors, the level and/or type of marketing and administrative support    
provided by the financial intermediary and the level of assets attributable to  
and/or sales by the financial intermediary. Program support payments to a       
financial intermediary generally will not exceed, at the end of each calendar   
year, 0.25% of the average net assets in the program attributable to that       
financial intermediary. This limitation is subject to certain limited           
exceptions and may be increased or otherwise modified by MFD from time to time. 

Processing Support Payments                                                     

MFD may make payments to certain financial intermediaries that sell fund shares 
(Retail Assets and/or Program Assets) to help offset the financial              
intermediaries' costs associated with client account maintenance support,       
statement preparation, and transaction processing. The types of payments that   
MFD may make under this category include, among others, payment of ticket       
charges of up to $20 per purchase or exchange order placed by a financial       
intermediary, payment of networking fees of up to $6 per shareholder account    
maintained on certain mutual fund trading systems, or one-time payments for     
ancillary services such as setting up funds on a financial intermediary's       
mutual fund trading system.                                                     

Other Payments                                                                  

From time to time, MFD, from MFD's own additional resources, may make           
additional payments to financial intermediaries that sell or provide services   
in connection with the sale of MFS fund shares (Retail Assets and/or Program    
Assets) or the servicing of shareholder accounts. Such payments by MFD may      
include payment or reimbursement to, or on behalf of, financial intermediaries  
for costs associated with the purchase of products or services used in          
connection with sales and marketing, participation in and/or presentation at    
conferences or seminars, sales or training programs, client and investor        
entertainment and events, and other sponsored events, and travel expenses,      
including lodging incurred by registered representatives and other employees in 
connection with training and educational meetings, client prospecting,          
retention, and due diligence trips. Other compensation may be offered,          
including goodwill payments relating to servicing, to the extent not prohibited 
by federal or state laws or any self-regulatory agency, such as the NASD. MFD   
makes payments for entertainment events it deems appropriate, subject to MFD's  
policies and applicable law. These payments may vary depending upon the nature  
of the event.                                                                   

NASD Member Broker/Dealers Receiving Marketing Support, Program Support and/or  
Processing Support Payments                                                     

Set forth below is a list of the member firms of the NASD to which MFD expects  
as of July 1, 2006 to make Retail Marketing Support, Program Support and/or     
Processing Support Payments with respect to the funds. Payments may also be     
made to affiliates of these firms. Any additions, modifications, or deletions   
to the broker/dealers identified in this list that have occurred since July 1,  
2006, are not reflected. In addition to member firms of the NASD, MFD also      
makes Retail Marketing Support, Program Support and/or Processing Support       
Payments to other financial intermediaries that sell or provide services to the 
funds and shareholders, such as banks, insurance companies, and plan            
administrators. These firms are not included in this list and may include       
affiliates of MFD. You should ask your financial intermediary if it receives    
Retail Marketing Support, Program Support or Processing Support Payments from   
MFD.                                                                            

401(K) Investment Services, Inc.                                                

A.G. Edwards & Sons, Inc.                                                       

ADP Broker-Dealer, Inc.                                                         

AIG Financial Advisors, Inc.                                                    

Ameriprise Financial Services, Inc.                                             

American General Securities Incorporated                                        

Bear, Stearns Securities Corp.                                                  

Becker & Suffern, LTD.                                                          

Charles Schwab & Co., Inc.                                                      

Chase Investment Services Corp.                                                 
Citigroup Global Markets Inc.                                                   

Commonwealth Financial Network                                                  

CUNA Brokerage Services, Inc.                                                   

Fidelity Brokerage Services LLC                                                 

Financial Network Investment Corp.                                              

H.D. Vest Investment Services                                                   

Hewitt Financial Services LLC                                                   

ICMA - RC Services, LLC                                                         

IFMG Securities, Inc.                                                           

ING Financial Partners, Inc.                                                    

Legg Mason Investor Services, LLC                                               

Linsco/Private Ledger Corp.                                                     

Merrill Lynch, Pierce, Fenner & Smith Incorporated                              

Metlife Securities Inc.                                                         

Mid-Atlantic Securities, Inc.                                                   

Morgan Stanley DW Inc.                                                          

MSCS Financial Services, LLC                                                    

Multi Financial Services, Inc.                                                  

Paychex Securities Corporation                                                  

Piper Jaffray & Co.                                                             

Primevest Financial Services, Inc.                                              

Princor Financial Services Corporation                                          

Prudential Investment Management Services LLC                                   

Raymond James & Associates, Inc.                                                

Raymond James Financial Services, Inc.                                          

RBC Dain Rauscher Inc.                                                          

State Street Global Markets, LLC                                                

SunTrust Investment Services, Inc.                                              

UBS Financial Services Inc.                                                     

U.S. Bancorp Investments, Inc.                                                  

UVest Financial Services Group, Inc.                                            

Wachovia Securities, LLC                                                        

Wells Fargo Investments LLC                                                     

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                                                                    APPENDIX E

INVESTMENT STRATEGIES AND RISKS 

In addition to the principal investment strategies and the principal risks      
described in the prospectus, your fund may employ other investment practices    
and may be subject to other risks, which are described below. Because the       
following is a combined description of the investment strategies and risks for  
all MFS Funds, certain matters described herein may not apply to your fund.     

ASSET-BACKED SECURITIES. Asset-backed securities are securities that represent  
a participation in, or are secured by and payable from, pools of underlying     
assets such as debt securities, bank loans, motor vehicle installment sales     
contracts, installment loan contracts, leases of various types of real and      
personal property, receivables from revolving credit (i.e., credit card)        
agreements and other receivables. These underlying assets are securitized       
through the use of trusts and special purpose entities. Payment of interest and 
repayment of principal on asset-backed securities may be largely dependent upon 
the cash flows generated by the underlying assets backing the securities and,   
in certain cases, may be supported by letters of credit, surety bonds, or other 
credit enhancements.                                                            

Asset-backed securities are often subject to more rapid repayment than their    
stated maturity date would indicate, as a result of the pass-through of         
prepayments of principal on the underlying assets. The rate of principal        
payments on asset-backed securities is related to the rate of principal         
payments on the underlying asset pool and related to the priority of payment of 
the security with respect to the asset pool. The occurrence of prepayments is a 
function of several factors, such as the level of interest rates, general       
economic conditions, the location, and age of the underlying obligations, asset 
default and recovery rates, and other social and demographic conditions.        
Because prepayments of principal generally occur when interest rates are        
declining, an investor generally has to reinvest the proceeds of such           
prepayments at lower interest rates than those at which its assets were         
previously invested. Therefore, asset-backed securities may have less potential 
for capital appreciation in periods of falling interest rates than other        
income-bearing securities of comparable maturity.                               

The credit quality of asset-backed securities depends primarily on the quality  
of the underlying assets, the level of credit enhancement, if any, provided for 
the securities, and the credit quality of the credit-support provider, if any.  
The value of asset-backed securities may be affected by the various factors     
described above and other factors, such as changes in interest rates, the       
availability of information concerning the pool and its structure, the          
creditworthiness of the servicing agent for the pool, the originator of the     
underlying assets, or the entities providing the credit enhancement. Because    
asset-backed securities may not have the benefit of a security interest in the  
underlying assets that is comparable to a mortgage, asset-backed securities     
present certain additional risks that are not present with mortgage-backed      
securities.                                                                     

BORROWING. If the fund borrows money, its share price may be subject to greater 
fluctuation until the borrowing is paid off. If the fund makes additional       
investments while borrowings are outstanding, this may be considered a form of  
leverage and may cause a fund to liquidate investments when it would not        
otherwise do so. Money borrowed will be subject to interest charges and may be  
subject to other fees or requirements which would increase the cost of          
borrowing above the stated interest rate.                                       

COMMON STOCK. Common stock represents an equity or ownership interest in an     
issuer. In the event an issuer is liquidated or declares bankruptcy, the claims 
of owners of bonds and preferred stock take precedence over the claims of those 
who own common stock.                                                           

CONVERTIBLE SECURITIES. Convertible securities are bonds, debentures, notes, or 
other securities that may be converted into or exchanged for (by the holder or  
by the issuer) shares of stock (or cash or other securities of equivalent       
value) of the same or a different issuer at a stated exchange ratio. A          
convertible security may also be called for redemption or conversion by the     
issuer after a particular date and under certain circumstances (including a     
specified price) established upon issue.                                        

Convertible securities generally have less potential for gain or loss than      
common stocks. Convertible securities generally provide yields higher than the  
underlying common stocks, but generally lower than comparable non-convertible   
securities. Because of this higher yield, convertible securities generally sell 
at prices above their "conversion value," which is the current market value of  
the stock to be received upon conversion. The difference between this           
conversion value and the price of convertible securities will vary over time    
depending on changes in the value of the underlying common stocks and interest  
rates. When the underlying common stocks decline in value, convertible          
securities will tend not to decline to the same extent because of the interest  
or dividend payments and the repayment of principal at maturity for certain     
types of convertible securities. However, securities that are convertible other 
than at the option of the holder generally do not limit the potential for loss  
to the same extent as securities convertible at the option of the holder. When  
the underlying common stocks rise in value, the value of convertible securities 
may also be expected to increase. At the same time, however, the difference     
between the market value of convertible securities and their conversion value   
will narrow, which means that the value of convertible securities will          
generally not increase to the same extent as the value of the underlying common 
stocks. Because convertible securities may also be interest-rate sensitive,     
their value may increase as interest rates fall and decrease as interest rates  
rise. Convertible securities are also subject to credit risk, and are often     
lower-quality securities.                                                       

COUNTRY LOCATION. The issuer of a security or other investment is generally     
deemed to be economically tied to a particular country if: (a) the security or  
other investment 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; (e) the issuer has 50% or more of its       
assets in that country; (f) the issuer is included in an index which is         
representative of that country; or (g) the issuer is exposed to the economic    
fortunes and risks of that country.                                             

DEPOSITARY RECEIPTS. Depositary receipts are securities that evidence ownership 
interests in a security or a pool of securities that have been deposited with a 
"depository." Depositary receipts may be sponsored or unsponsored and include   
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and    
Global Depositary Receipts (GDRs). In sponsored programs, an issuer has made    
arrangements to have its securities trade in the form of ADRs, EDRs, or GDRs.   
In unsponsored programs, the issuer may not be directly involved in the         
creation of the program. For ADRs, the depository is typically a U.S. financial 
institution and the underlying securities are issued by a foreign issuer. For   
other depositary receipts, the depository may be a foreign or a U.S. entity,    
and the underlying securities may have a foreign or a U.S. issuer. Depositary   
receipts will not necessarily be denominated in the same currency as their      
underlying securities. Generally, ADRs are issued in registered form,           
denominated in U.S. dollars, and designed for use in the U.S. securities        
markets. Other depositary receipts, such as GDRs and EDRs, may be issued in     
bearer form and denominated in other currencies, and may be offered privately   
in the United States and are generally designed for use in securities markets   
outside the U.S. The deposit agreement sets out the rights and responsibilities 
of the underlying issuer, the depository, and the depositary receipt holders.   

With sponsored facilities, the underlying issuer typically bears some of the    
costs of the depositary receipts (such as dividend payment fees of the          
depository), although most sponsored depositary receipts holders may bear costs 
such as deposit and withdrawal fees. Depositories of most sponsored depositary  
receipts agree to distribute notices of shareholder meetings, voting            
instructions, and other shareholder communications and financial information to 
the depositary receipt holders at the underlying issuer's request.              

Holders of unsponsored depositary receipts generally bear all the costs of the  
facility. The depository usually charges fees upon the deposit and withdrawal   
of the underlying securities, the conversion of dividends into U.S. dollars or  
other currency, the disposition of non-cash distributions, and the performance  
of other services. The depository of an unsponsored facility frequently is      
under no obligation to distribute shareholder communications received from the  
underlying issuer or to pass through voting rights to depositary receipt        
holders with respect to the underlying securities.                              

EMERGING MARKETS. Investing in emerging market countries involves certain risks 
not typically associated with investing in the United States, and imposes risks 
greater than, or in addition to, risks of investing in more developed foreign   
markets. These risks include, but are not limited to, the following: greater    
risks of nationalization or expropriation of assets or confiscatory taxation;   
currency devaluations and other currency exchange rate fluctuations; greater    
social, economic, and political uncertainty and instability (including          
amplified risk of war and terrorism); more substantial government involvement   
in the economy; less government supervision and regulation of the securities    
markets and participants in those markets; controls on foreign investment and   
limitations on repatriation of invested capital and on the fund's ability to    
exchange local currencies for U.S. dollars; unavailability of currency hedging  
techniques in certain emerging market countries; the fact that companies in     
emerging market countries may be smaller, less seasoned, and newly organized;   
the difference in, or lack of, auditing and financial reporting standards,      
which may result in unavailability of material information about issuers; the   
risk that it may be more difficult to obtain and/or enforce a judgment in a     
court outside the United States; the risk that a judgment against a foreign     
government may be unenforceable; and greater price volatility, less liquidity,  
and significantly smaller market capitalization of securities markets. Also,    
any change in the leadership or politics of emerging market countries, or the   
countries that exercise a significant influence over those countries, may halt  
the expansion of or reverse the liberalization of foreign investment policies   
now occurring and adversely affect existing investment opportunities.           
Furthermore, high rates of inflation and rapid fluctuations in inflation rates  
have had, and may continue to have, negative effects on the economies and       
securities markets of certain emerging market countries.                        

FOREIGN CURRENCIES. Foreign securities may be denominated in foreign currencies 
and international currency units and foreign currencies may be purchased        
directly. Accordingly, the weakening of these currencies and units against the  
U.S. dollar would result in a decline in the value of securities denominated in 
that currency or the value of the currency itself.                              

While holding currencies permits an investor to take advantage of favorable     
movements in the applicable exchange rate, this strategy also exposes the       
investor to risk of loss if exchange rates move in a direction adverse to the   
investor's position. Such losses could reduce any profits or increase any       
losses sustained by the investor from the sale or redemption of securities and  
could reduce the dollar value of interest or dividend payments received.        

Some foreign countries have managed currencies, which are not free floating     
against the U.S. dollar. Managed currencies can experience a steep devaluation  
relative to the U.S. dollar.                                                    

In addition, there is risk that certain foreign countries may restrict the free 
conversion of their currencies into other currencies. Further, certain          
currencies may not be internationally traded.                                   

Foreign currency transactions can be made on a spot (i.e., cash) or forward     
basis (i.e., by entering into forward contracts to purchase or sell foreign     
currencies). Although foreign exchange dealers generally do not charge a fee    
for such conversions, they do realize a profit based on the difference between  
the prices at which they are buying and selling various currencies. Thus, a     
dealer may offer to sell a foreign currency at one rate, while offering a       
lesser rate of exchange should the counterparty desire to resell that currency  
to the dealer. Forward contracts are customized transactions that require a     
specific amount of a currency to be delivered at a specific exchange rate on a  
specific date or range of dates in the future. Forward contracts are generally  
traded in an interbank market directly between currency traders (usually large  
commercial banks) and their customers. The parties to a forward contract may    
agree to offset or terminate the contract before its maturity, or may hold the  
contract to maturity and complete the contemplated currency exchange.           

A "settlement hedge" or "transaction hedge" attempts to protect against an      
adverse change in foreign currency values between the date a security is        
purchased or sold and the date on which payment is made or received. Entering   
into a forward contract for the purchase or sale of the amount of foreign       
currency involved in an underlying security transaction for a fixed amount of   
U.S. dollars "locks in" the U.S. dollar price of the security. Forward          
contracts to purchase or sell a foreign currency may also be used in            
anticipation of future purchases or sales of securities denominated in foreign  
currency, even if the specific investments have not yet been selected.          

Forward contracts can be used to hedge against a decline in the value of        
existing investments denominated in foreign currency. For example, if an        
investor owned securities denominated in pounds sterling, the investor could    
enter into a forward contract to sell pounds sterling in return for U.S.        
dollars to hedge against possible declines in the pound's value. Such a hedge,  
sometimes referred to as a "position hedge," would tend to offset both positive 
and negative currency fluctuations, but would not offset changes in security    
values caused by other factors. An investor could also hedge the position by    
selling another currency expected to perform similarly to the pound sterling.   
This type of hedge, sometimes referred to as a "proxy hedge," could offer       
advantages in terms of cost, yield, or efficiency, but generally would not      
hedge currency exposure as effectively as a direct hedge into U.S. dollars.     
Proxy hedges may result in losses if the currency used to hedge does not        
perform similarly to the currency in which the hedged securities are            
denominated.                                                                    

Forward contracts can also be used to shift investment exposure from one        
currency into another. This may include shifting exposure from U.S. dollars to  
a foreign currency or from one foreign currency to another foreign currency.    
This type of strategy, sometimes known as a "cross-hedge," will tend to reduce  
or eliminate exposure to the currency that is sold, and increase exposure to    
the currency that is purchased, much as if a fund had sold a security           
denominated in one currency and purchased an equivalent security denominated in 
another. Cross-hedges protect against losses resulting from a decline in the    
hedged currency, but will cause a fund to assume the risk of fluctuations in    
the value of the currency it purchases.                                         

Swap agreements, indexed securities, hybrid securities and options and futures  
contracts relating to foreign currencies can be used for the same purposes.     

Successful use of currency management strategies will depend on MFS' skill in   
analyzing currency values. Currency management strategies may increase the      
volatility of a fund's returns and could result in significant losses to a fund 
if currencies do not perform as MFS anticipates. For example, if a currency's   
value rose at a time when MFS had hedged a fund by selling that currency in     
exchange for dollars, a fund would not participate in the currency's            
appreciation. If MFS hedges currency exposure through proxy hedges, a fund      
could realize currency losses from both the hedge and the security position if  
the two currencies do not move in tandem. Similarly, if MFS increases a fund's  
exposure to a foreign currency and that currency's value declines, a fund will  
realize a loss. There is no assurance that MFS' use of currency management      
strategies will be advantageous to a fund or that it will hedge at appropriate  
times.                                                                          

FOREIGN MARKETS. Foreign securities and foreign currencies, as well as any      
securities issued by U.S. entities with substantial foreign operations, may     
involve significant risks in addition to the risks inherent in U.S.             
investments. Foreign investments involve risks relating to local political,     
economic, regulatory, or social instability, military action or unrest, or      
adverse diplomatic developments, and may be affected by actions of foreign      
governments adverse to the interests of U.S. investors. Such actions may        
include expropriation or nationalization of assets, confiscatory taxation,      
restrictions on U.S. investment or on the ability to repatriate assets or       
convert currency into U.S. dollars, or other government intervention. The debt  
instruments of foreign governments and their agencies and instrumentalities may 
or may not be supported by the full faith and credit of the foreign government. 
Additionally, governmental issuers of foreign debt securities may be unwilling  
to pay interest and repay principal when due and may require that the           
conditions for payment be renegotiated. In addition, the value of securities    
denominated in foreign currencies and of dividends and interest paid with       
respect to such securities will fluctuate based on the relative strength of the 
U.S. dollar.                                                                    

Foreign stock markets, while growing in volume and sophistication, are          
generally not as developed as those in the United States, and securities of     
some foreign issuers may be less liquid and more volatile than securities of    
comparable U.S. issuers. Foreign security trading, settlement and custodial     
practices (including those involving securities settlement where fund assets    
may be released prior to receipt of payment) are often less developed than      
those in U.S. markets, and may result in increased risk or substantial delays   
in the event of a failed trade or the insolvency of, or breach of duty by, a    
foreign broker-dealer, securities depository, or foreign subcustodian. In       
addition, the costs associated with foreign investments, including withholding  
taxes, brokerage commissions, and custodial costs, are generally higher than    
with U.S. investments.                                                          

Foreign markets may offer less protection to investors than U.S. markets.       
Foreign issuers are generally not bound by uniform accounting, auditing, and    
financial reporting requirements and standards of practice comparable to those  
applicable to U.S. issuers. Adequate public information on foreign issuers may  
not be available, and it may be difficult to secure dividends and information   
regarding corporate actions on a timely basis. In general, there is less        
overall governmental supervision and regulation of securities exchanges,        
brokers, and listed companies than in the United States. OTC markets tend to be 
less regulated than stock exchange markets and, in certain countries, may be    
totally unregulated. Regulatory enforcement may be influenced by economic or    
political concerns, and investors may have difficulty enforcing their legal     
rights in foreign countries.                                                    

Some foreign securities impose restrictions on transfer within the United       
States or to U.S. persons. Although securities subject to such transfer         
restrictions may be marketable abroad, they may be less liquid than foreign     
securities of the same class that are not subject to such restrictions.         

FUTURES CONTRACTS. A futures contract is a standardized agreement between two   
parties to buy or sell in the future a specific quantity of an asset, currency, 
interest rate, index, instrument or other indicator at a specific price and     
time. The value of a futures contract typically fluctuates in correlation with  
the increase or decrease in the value of the underlying indicator. The buyer of 
a futures contract enters into an agreement to purchase the underlying          
indicator on the settlement date and is said to be "long" the contract. The     
seller of a futures contract enters into an agreement to sell the underlying    
indicator on the settlement date and is said to be "short" the contract. The    
price at which a futures contract is entered into is established either in the  
electronic marketplace or by open outcry on the floor of an exchange between    
exchange members acting as traders or brokers. Open futures contracts can be    
liquidated or closed out by physical delivery of the underlying indicator or    
payment of the cash settlement amount on the settlement date, depending on the  
terms of the particular contract. Some financial futures contracts (such as     
security futures) provide for physical settlement at maturity. Other financial  
futures contracts (such as those relating to interest rates, foreign currencies 
and securities indexes) generally provide for cash settlement at maturity. In   
the case of cash settled futures contracts, the cash settlement amount is equal 
to the difference between the final settlement price on the last trading day of 
the contract and the price at which the contract was entered into. Most futures 
contracts, however, are not held until maturity but instead are "offset" before 
the settlement date through the establishment of an opposite and equal futures  
position.                                                                       

The purchaser or seller of a futures contract is not required to deliver or pay 
for the underlying indicator unless the contract is held until the settlement   
date. However, both the purchaser and seller are required to deposit "initial   
margin" with a futures commission merchant (FCM) when the futures contract is   
entered into. Initial margin deposits are typically calculated as a percentage  
of the contract's market value. If the value of either party's position         
declines, that party will be required to make additional "variation margin"     
payments to settle the change in value on a daily basis. This process is known  
as "marking-to-market."                                                         

The risk of loss in trading futures contracts can be substantial, because of    
the low margin deposits required, the extremely high degree of leverage         
involved in futures pricing, and the potential high volatility of the futures   
markets. As a result, a relatively small price movement in a futures position   
may result in immediate and substantial loss (or gain) to the investor. Thus, a 
purchase or sale of a futures contract may result in unlimited losses. In the   
event of adverse price movements, an investor would continue to be required to  
make daily cash payments to maintain its required margin. In addition, on the   
settlement date, an investor may be required to make delivery of the indicators 
underlying the futures positions it holds.                                      

An investor could suffer losses if it is unable to close out a futures contract 
because of an illiquid secondary market. Futures contracts may be closed out    
only on an exchange which provides a secondary market for such products.        
However, there can be no assurance that a liquid secondary market will exist    
for any particular futures product at any specific time. Thus, it may not be    
possible to close a futures position, and an investor would remain obligated to 
meet margin requirements until the position is closed. Moreover, most futures   
exchanges limit the amount of fluctuation permitted in futures contract prices  
during a single trading day. The daily limit establishes the maximum amount     
that the price of a futures contract may vary either up or down from the        
previous day's settlement price at the end of a trading session. Once the daily 
limit has been reached in a particular type of contract, no trades may be made  
on that day at a price beyond that limit. The daily limit governs only price    
movement during a particular trading day and therefore does not limit potential 
losses, because the limit may prevent the liquidation of unfavorable positions. 
Futures contract prices have occasionally moved to the daily limit for several  
consecutive trading days with little or no trading, thereby preventing prompt   
liquidation of future positions and subjecting some futures traders to          
substantial losses. The inability to close futures positions also could have an 
adverse impact on the ability to hedge a portfolio investment or to establish a 
substitute for a portfolio investment.                                          

An investor could lose margin payments it has deposited with its futures        
commission merchant (FCM), if, for example, the FCM breaches its agreement with 
the investor or becomes insolvent or goes into bankruptcy. In that event, the   
investor may be entitled to return of margin owed to it only in proportion to   
the amount received by the FCM's other customers, potentially resulting in      
losses to the investor.                                                         

If MFS attempts to use a futures contract as a hedge against, or as a           
substitute for, a portfolio investment, the futures position may not correlate  
as expected with the portfolio investment, resulting in losses to the fund.     
While hedging strategies involving futures products can reduce the risk of      
loss, they can also reduce the opportunity for gain or even result in losses by 
offsetting favorable price movements in other fund investments.                 

Pursuant to a claim of exemption filed with the Commodity Futures Trading       
Commission (CFTC) on behalf of the MFS Funds that are permitted by their        
investment objectives and policies to use futures and options on futures        
contracts, each such MFS Fund is not deemed to be a "commodity pool" or         
"commodity pool operator" under the Commodity Exchange Act and is not subject   
to registration or regulation as such under the Commodity Exchange Act.         

HYBRID INSTRUMENTS. Hybrid instruments are generally considered derivatives and 
combine the elements of swaps, futures contracts, or options with those of      
debt, preferred equity or a depository instrument. A hybrid instrument may be a 
debt instrument, preferred stock, warrant, convertible security, certificate of 
deposit or other evidence of indebtedness on which a portion of or all interest 
payments, and/or the principal or stated amount payable at maturity, redemption 
or retirement, is determined by reference to prices, changes in prices, or      
differences between prices, of securities, currencies, intangibles, goods,      
commodities, indexes, economic factors or other measures, including interest    
rates, currency exchange rates, or commodities or securities indices, or other  
indicators (collectively, "indicators").                                        

The risks of investing in hybrid instruments reflect a combination of the risks 
of investing in securities, swaps, options, futures and currencies. An          
investment in a hybrid instrument may entail significant risks that are not     
associated with a similar investment in a traditional debt instrument that has  
a fixed principal amount, is denominated in U.S. dollars or bears interest      
either at a fixed rate or a floating rate determined by reference to a common,  
nationally published benchmark. The risks of a particular hybrid instrument     
will depend upon the terms of the instrument, but may include the possibility   
of significant changes in the benchmark(s) or the prices of the underlying      
indicators to which the instrument is linked. Such risks generally depend upon  
factors unrelated to the operations or credit quality of the issuer of the      
hybrid instrument, which may not be foreseen by the purchaser, such as economic 
and political events, the supply and demand of the underlying indicators and    
interest rate movements. Hybrid instruments may be highly volatile.             

Hybrid instruments are potentially more volatile and carry greater market risks 
than traditional debt instruments. Depending on the structure of the particular 
hybrid instrument, changes in a benchmark, underlying asset or indicator may be 
magnified by the terms of the hybrid instrument and have an even more dramatic  
and substantial effect upon the value of the hybrid instrument. Also, the       
prices of the hybrid instrument and the benchmark, underlying asset or          
indicator may not move in the same direction or at the same time.               

Hybrid instruments may bear interest or pay preferred dividends at below market 
(or even relatively nominal) rates. Alternatively, hybrid instruments may bear  
interest at above market rates but bear an increased risk of principal loss (or 
gain). The latter scenario may result if "leverage" is used to structure the    
hybrid instrument. Leverage risk occurs when the hybrid instrument is           
structured so that a given change in a benchmark or underlying indicator is     
multiplied to produce a greater value change in the hybrid instrument, thereby  
magnifying the risk of loss as well as the potential for gain.                  

If MFS attempts to use a hybrid instrument as a hedge against, or as a          
substitute for, a portfolio investment, the hybrid instrument may not correlate 
as expected with the portfolio investment, resulting in losses to the fund.     
While hedging strategies involving hybrid instruments can reduce the risk of    
loss, they can also reduce the opportunity for gain or even result in losses by 
offsetting favorable price movements in other fund investments.                 

Hybrid instruments may also carry liquidity risk since the instruments are      
often "customized" to meet the portfolio needs of a particular investor, and    
therefore, the number of investors that are willing and able to buy such        
instruments in the secondary market may be smaller than that for more           
traditional debt instruments. Under certain conditions, the redemption value of 
such an investment could be zero. In addition, because the purchase and sale of 
hybrid investments could take place in an over-the-counter market without the   
guarantee of a central clearing organization, or in a transaction between the   
fund and the issuer of the hybrid instrument, hybrid instruments are subject to 
the creditworthiness of the issuer of the hybrid instrument, and their values   
may decline substantially if the issuer's creditworthiness deteriorates. Hybrid 
instruments also may not be subject to regulation by the CFTC, which generally  
regulates the trading of commodity futures by U.S. persons, the SEC, which      
regulates the offer and sale of securities by and to U.S. persons, or any other 
governmental regulatory authority.                                              

INFLATION-INDEXED BONDS. Inflation-indexed bonds are debt instruments whose     
principal value is adjusted periodically according to a rate of inflation       
(usually a consumer price index). Two structures are most common. The U.S.      
Treasury and some other issuers use a structure that accrues inflation into the 
principal value of the bond. Most other issuers pay out the inflation accruals  
as part of a semiannual coupon.                                                 

U.S. Treasury Inflation Protected Securities (TIPS) currently are issued with   
maturities of five, ten, or thirty years, although it is possible that          
securities with other maturities will be issued in the future. The principal    
amount of TIPS adjusts for inflation, although the inflation-adjusted principal 
is not paid until maturity. Semi-annual coupon payments are determined as a     
fixed percentage of the inflation-adjusted principal at the time the payment is 
made.                                                                           

If the rate measuring inflation falls, the principal value of inflation-indexed 
bonds will be adjusted downward, and consequently the interest payable on these 
securities (calculated with respect to a smaller principal amount) will be      
reduced. At maturity, TIPS are redeemed at the greater of their                 
inflation-adjusted principal or at the par amount at original issue. If an      
inflation-indexed bond does not provide a guarantee of principal at maturity,   
the adjusted principal value of the bond repaid at maturity may be less than    
the original principal.                                                         

The value of inflation-indexed bonds is expected to change in response to       
changes in real interest rates. Real interest rates in turn are tied to the     
relationship between nominal interest rates and the rate of inflation. For      
example, if inflation were to rise at a faster rate than nominal interest       
rates, real interest rates would likely decline, leading to an increase in      
value of inflation-indexed bonds. In contrast, if nominal interest rates        
increase at a faster rate than inflation, real interest rates would likely      
rise, leading to a decrease in value of inflation-indexed bonds.                

While these securities, if held to maturity, are expected to be protected from  
long-term inflationary trends, short-term increases in inflation may lead to a  
decline in value. If nominal interest rates rise due to reasons other than      
inflation (for example, due to an expansion of non-inflationary economic        
activity), investors in these securities may not be protected to the extent     
that the increase in rates is not reflected in the bond's inflation measure.    

The inflation adjustment of TIPS is tied to the Consumer Price Index for Urban  
Consumers ("CPI-U"), which is calculated monthly by the U.S. Bureau of Labor    
Statistics. The CPI-U is a measurement of price changes in the cost of living,  
made up of components such as housing, food, transportation, and energy. There  
can be no assurance that the CPI-U will accurately measure the real rate of     
inflation in the prices of goods and services.                                  

INVERSE FLOATING RATE OBLIGATIONS. Inverse floating rate obligations have       
variable interest rates that typically move in the opposite direction from      
movements in prevailing interest rates, most often short-term rates.            
Accordingly, the value of inverse floating rate obligations or other            
obligations or certificates structured to have similar features generally moves 
in the opposite direction as interest rates. The value of an inverse floating   
rate instrument can be considerably more volatile than the value of other debt  
instruments of comparable maturity and quality. Inverse floating rate           
obligations incorporate varying degrees of leverage. Generally, greater         
leverage results in greater price volatility for any given change in interest   
rates. Inverse floating rate obligations may be subject to legal or contractual 
restrictions on resale and therefore may be less liquid than other types of     
securities.                                                                     

LENDING OF PORTFOLIO SECURITIES. Lending of portfolio securities will usually   
be made only to member firms of the New York Stock Exchange (the "Exchange")    
(and subsidiaries thereof) and member banks of the Federal Reserve System, and  
would be required to be secured by collateral in cash, an irrevocable letter of 
credit, or U.S. Treasury securities maintained on a current basis at an amount  
at least equal to the market value of the securities loaned. When one party     
lends portfolio securities to another party, the lender has the right to call   
the loan and obtain the securities loaned at any time on customary industry     
settlement notice (which will not usually exceed five business days). For the   
duration of a loan, the borrower pays the lender an amount equal to any         
interest or dividends received on the securities loaned. The lender also        
receives a fee from the borrower or compensation from the investment of the     
collateral, less a fee paid to the borrower (if the collateral is in the form   
of cash). The lender does not, however, have the right to vote any securities   
having voting rights during the existence of the loan, but it can call the loan 
in anticipation of an important vote to be taken among holders of the           
securities or of the giving or withholding of their consent on a material       
matter affecting the investment. A fund's performance will continue to reflect  
changes in the value of the securities loaned and will also reflect the receipt 
of interest, through investment of cash collateral by the fund or a fee. If the 
borrower defaults on its obligation to return the securities loaned because of  
insolvency or other reasons, the lender could experience delays and costs in    
recovering the securities loaned or in gaining access to the collateral. These  
delays and costs could be greater for foreign securities. If the lender is not  
able to recover the securities loaned, the lender may sell the collateral and   
purchase a replacement investment in the market. The value of the collateral    
could decrease below the value of the replacement investment by the time the    
replacement investment is purchased.                                            

LOANS AND OTHER DIRECT INDEBTEDNESS. Loans and other direct indebtedness are    
interests in amounts owed by corporations, governmental or other borrowers to   
lenders or lending syndicates (loans and loan participations), to suppliers of  
goods and services (trade claims and other receivables), or to other parties.   
Some loans may be unsecured in part or in full. Loans may be in default at the  
time of purchase. Loans that are fully secured should protect the purchaser to  
a greater extent than unsecured loans in the event of nonpayment of scheduled   
interest or principal. However, there can be no assurance that the liquidation  
of collateral acquired in connection with the default of a secured loan would   
satisfy the borrower's obligation, or that such collateral could be liquidated. 

Loans generally are made to finance internal growth, mergers, acquisitions,     
stock repurchases, leveraged buy-outs or other corporate activities. Such loans 
typically are originated, negotiated and structured by a syndicate of lenders   
represented by an agent lender that has negotiated and structured the loan and  
that is responsible for collecting interest and principal payments and other    
amounts due on behalf of all of the lenders in the syndicate, and for enforcing 
the lenders' rights against the borrower. Typically, the agent is given broad   
discretion in monitoring the borrower's performance and is obligated to use the 
same care it would use in the management of its own property. Upon an event of  
default, the agent typically will enforce the loan agreement after instruction  
from the lenders. The borrower compensates the agent for these services. This   
compensation may include special fees paid when the loan is structured or       
funded and other fees paid on a continuing basis. The typical practice of an    
agent or a lender to rely exclusively or primarily on reports from the borrower 
involves a risk of fraud by the borrower.                                       

If an agent becomes insolvent, or has a receiver, conservator or similar        
official appointed for it by an appropriate authority, or if it becomes a       
debtor in a bankruptcy proceeding, the agent's appointment may be terminated,   
and a successor agent typically may be appointed by the lenders. If an          
appropriate authority determines that assets held by the agent for the benefit  
of lenders or purchasers of loans are subject to the claims of the agent's      
general or secured creditors, then such lenders or purchasers might incur       
certain costs and delays in realizing payment on a loan or suffer a loss of     
principal and/or interest. Furthermore, in the event of the borrower's          
bankruptcy or insolvency, the borrower's obligation to repay a loan may be      
subject to certain defenses that the borrower can assert as a result of         
improper conduct by the agent.                                                  

Loans may be acquired by participating directly in a lending syndicate as a     
lender. Alternatively, loans or an interest in loans may be acquired by         
novation, by assignment or by participation from members of the lending         
syndicate or from other participants. In a novation or an assignment, the       
acquirer assumes all of the rights of the lender in the loan or of the          
participant in the participants' portion of the loan and, in the case of a      
novation or an assignment from a member of the lending syndicate, becomes a     
party of record with respect to the loan. In a participation, the acquirer      
purchases a portion of the lender's or the participants' interest in the loan,  
but has no direct contractual relationship with the borrower. An investment in  
a loan by participation gives rise to several risks. The acquirer must rely on  
another party not only for the enforcement of the acquirer's rights against the 
borrower, but also for the receipt and processing of principal, interest or     
other payments due under the loan and may be subject to the credit risk of the  
other party in addition to the borrower. The acquirer may be subject to delays, 
expenses, and risks that are greater than those that would be involved if the   
acquirer could enforce its rights directly against the borrower. In addition,   
under the terms of a participation agreement, the acquirer may be regarded as a 
creditor of the seller of the participation interest (rather than of the        
borrower), so that the acquirer also may be subject to the risk that such       
seller could become insolvent. A participation agreement also may limit the     
rights of the acquirer to vote on changes that may be made to the underlying    
loan agreement, such as waiving a breach of a covenant.                         

Direct indebtedness includes trade or other claims against companies, which     
generally represent monies owed by such companies to suppliers of goods or      
services. Such claims may be purchased when such companies are in default.      

The ability to receive payments of principal and interest on loans and other    
direct indebtedness will depend primarily on the financial condition of the     
borrower. Because an acquirer may be required to rely on another party to       
collect and to pass on to it amounts payable with respect to the loan or other  
direct indebtedness and to enforce the acquirer's rights under the loan or      
other direct indebtedness, an insolvency, bankruptcy or reorganization of such  
other party may delay or prevent the acquirer from receiving such amounts. The  
highly leveraged nature of many loans and other direct indebtedness may make    
such loans and other direct indebtedness especially vulnerable to adverse       
changes in economic or market conditions.                                       

Revolving credit facilities and other standby financing commitments obligate    
the purchaser to fund additional cash on a certain date or on demand. A         
revolving credit facility differs from other types of financing commitments in  
that as the borrower repays the loan, an amount equal to the repayment may be   
borrowed again during the term of the revolving credit facility. These          
commitments may have the effect of requiring a purchaser to increase its        
investment in a company at a time when the purchaser might not otherwise decide 
to do so (including at a time when the company's financial condition makes it   
unlikely that such amounts will be repaid).                                     

Floating rate loans generally are subject to legal or contractual restrictions  
on resale. Floating rate loans currently are not listed on any securities       
exchange or automatic quotation system. As a result, no active market may exist 
for some floating rate loans, and to the extent a secondary market exists for   
other floating rate loans, such market may be subject to irregular trading      
activity, wide bid/ask spreads and extended trade settlement periods.           
Additionally, the supply of floating rate loans may be limited from time to     
time due to a lack of sellers in the market for existing floating rate loans or 
to the number of new floating rate loans currently being issued. As a result,   
the floating rate loans available for purchase may be of lower quality or may   
have a higher price.                                                            

With respect to its management of investments in bank loans, MFS will normally  
seek to avoid receiving material, non-public information ("MNPI") about the     
issuers of bank loans being considered for acquisition by the fund or held in   
the fund's portfolio. In many instances, borrowers may offer to furnish MNPI to 
prospective investors, and to holders, of the issuer's loans. MFS' decision not 
to receive MNPI may place MFS at a disadvantage relative to other investors in  
loans (which could have an adverse effect on the price the fund pays or         
receives when buying or selling loans). Also, in instances where holders of     
loans are asked to grant amendments, waivers or consent, MFS' ability to assess 
their significance or desirability may be adversely affected. For these and     
other reasons, it is possible that MFS' decision not to receive MNPI under      
normal circumstances could adversely affect the fund's investment performance.  

Notwithstanding its intention generally not to receive MNPI with respect to its 
management of investments in loans, MFS may from time to time come into         
possession of MNPI about the issuers of loans that may be held in the fund's    
portfolio. Possession of such information may in some instances occur despite   
MFS' efforts to avoid such possession, but in other instances MFS may choose to 
receive such information (for example, in connection with participation in a    
creditors' committee with respect to a financially distressed issuer). As, and  
to the extent, required by applicable law, MFS' ability to trade in these loans 
for the account of the fund could potentially be limited by its possession of   
such information. Such limitations on MFS' ability to trade could have an       
adverse effect on the fund by, for example, preventing the fund from selling a  
loan that is experiencing a material decline in value. In some instances, these 
trading restrictions could continue in effect for a substantial period of time. 

LOWER QUALITY DEBT INSTRUMENTS. Lower quality debt instruments are considered   
speculative with respect to the issuer's continuing ability to meet principal   
and interest payments and, while generally expected to provide greater income   
than investments in higher quality debt instruments, will involve greater risk  
of principal and income (including the possibility of default or bankruptcy of  
the issuers of such instruments) and may involve greater volatility of price    
(especially during periods of economic uncertainty or change) than higher       
quality debt instruments. In addition, because yields vary over time, no        
specific level of income can ever be assured. These lower quality debt          
instruments generally tend to reflect economic changes (and the outlook for     
economic growth), short-term corporate and industry developments and the        
market's perception of their credit quality to a greater extent than higher     
quality debt instruments, which react primarily to fluctuations in the general  
level of interest rates (although these lower quality debt instruments are also 
affected by changes in interest rates). In the past, economic downturns or an   
increase in interest rates have, under certain circumstances, resulted in a     
higher incidence of default by the issuers of these instruments and may do so   
in the future, especially in the case of highly leveraged issuers. The prices   
for these instruments may be affected by legislative and regulatory             
developments. The market for these lower quality debt instruments may be less   
liquid than the market for investment grade debt instruments. Furthermore, the  
liquidity of these lower quality debt instruments may be affected by the        
market's perception of their credit quality.                                    

Instruments in the lowest tier of investment-grade debt instruments, 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.                           

See Appendix H for a description of bond ratings.                               

MONEY MARKET INSTRUMENTS. Money market instruments, or short-term debt          
instruments, consist of obligations such as commercial paper, bank obligations  
(e.g., certificates of deposit and bankers' acceptances), repurchase            
agreements, and various government obligations, such as Treasury bills. Money   
market instruments may be structured to be, or may employ a trust or other form 
so that they are, eligible investments for money market funds. For example, put 
features can be used to modify the maturity of a security or interest rate      
adjustment features can be used to enhance price stability. If a structure      
fails to function as intended, adverse tax or investment consequences may       
result. Neither the Internal Revenue Service (IRS) nor any other regulatory     
authority has ruled definitively on certain legal issues presented by certain   
structured securities. Future tax or other regulatory determinations could      
adversely affect the value, liquidity, or tax treatment of the income received  
from these securities. Commercial paper is a money market instrument issued by  
banks or companies to raise money for short-term purposes. Unlike some other    
debt obligations, commercial paper is typically unsecured. Commercial paper may 
be issued as an asset-backed security.                                          

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities that      
represent direct or indirect participation in, or are collateralized by and     
payable from, mortgage loans secured by real property or instruments derived    
from such loans. Mortgage-backed securities include various types of securities 
such as pass-throughs, stripped mortgage-backed securities, and collateralized  
mortgage obligations. There are a wide variety of mortgage types underlying     
these securities, including mortgage instruments whose principal or interest    
payments may vary or whose terms to maturity may be shorter than customary.     

Generally, mortgage-backed securities represent interests in pools of mortgage  
loans assembled for sale to investors by various governmental agencies, such as 
the Government National Mortgage Association (GNMA), by government-related      
organizations, such as the Federal National Mortgage Association (FNMA) and the 
Federal Home Loan Mortgage Corporation (FHLMC), as well as by private issuers,  
such as commercial banks, savings and loan institutions and mortgage bankers.   
Government mortgage-backed securities are backed by the full faith and credit   
of the United States as to payment of principal and interest. GNMA, the         
principal U.S. guarantor of these securities, is a wholly-owned U.S. government 
corporation within the Department of Housing and Urban Development.             
Government-related mortgage-backed securities are not backed by the full faith  
and credit of the United States. Issuers of government-related mortgage-backed  
securities include FNMA and FHLMC. FNMA is a congressionally chartered          
corporation owned entirely by private stockholders, and is subject to general   
regulation by the Secretary of Housing and Urban Development. Private           
mortgage-backed securities may be less liquid than government or                
government-related mortgage-backed securities.                                  

Pass-through securities issued by FNMA are guaranteed as to timely payment of   
principal and interest by FNMA. FHLMC is a stockholder-owned                    
government-sponsored enterprise established by Congress. Participation          
certificates representing interests in mortgages from FHLMC's national          
portfolio are guaranteed as to the timely payment of interest and principal by  
FHLMC. Private mortgage-backed securities represent interest in pass-through    
pools consisting principally of conventional residential mortgage loans created 
by non-government issuers, such as commercial banks and savings and loan        
associations and private mortgage insurance companies. Private, government, or  
government-related entities may create mortgage loan pools offering             
pass-through investments in addition to those described above. Interests in     
pools of mortgage-related securities differ from other forms of debt            
instruments, which normally provide for periodic payment of interest in fixed   
amounts with principal payments at maturity or specified call dates. Instead,   
these securities typically provide a monthly payment which consists of both     
interest and principal payments. In effect, these payments generally are a      
"pass-through" of the monthly payments made by the individual borrowers on      
their residential or commercial loans, net of any fees paid to the issuer or    
guarantor of such securities. Additional payments are caused by repayments of   
principal resulting from the sale of the underlying property, refinancing or    
foreclosure, net of fees or costs incurred.                                     

Mortgage-backed securities are often subject to more rapid repayment than their 
stated maturity date would indicate as a result of the pass-through of          
prepayments of principal on the underlying loans. Prepayments of principal by   
mortgagors or mortgage foreclosures shorten the term of the mortgage pool       
underlying the mortgage-backed security. The occurrence of prepayments is a     
function of several factors, including interest rates, general economic         
conditions, the location of the mortgaged property, the age of the mortgage or  
other underlying obligations, and other social and demographic conditions.      
Because prepayment rates of individual mortgage pools vary widely, the average  
life of a particular pool is difficult to predict. A fund's ability to maintain 
positions in mortgage-backed securities is affected by the reductions in the    
principal amount of such securities resulting from prepayments. The values of   
mortgage-backed securities vary with changes in market interest rates generally 
and the differentials in yields among various kinds of U.S. government          
securities, mortgage-backed securities, and asset-backed securities. In periods 
of rising interest rates, the rate of prepayment tends to decrease, thereby     
lengthening the average life of a pool of mortgages supporting a                
mortgage-backed security. Conversely, in periods of falling interest rates, the 
rate of prepayment tends to increase thereby shortening the average life of     
such a pool. Because prepayments of principal generally occur when interest     
rates are declining, an investor generally has to reinvest the proceeds of such 
prepayments at lower interest rates than those at which its assets were         
previously invested. Therefore, mortgage-backed securities typically have less  
potential for capital appreciation in periods of falling interest rates than    
other income-bearing securities of comparable maturity.                         

Collateralized mortgage obligations (CMOs) are mortgage-backed securities that  
are collateralized by whole loan mortgages or mortgage pass-through securities. 
The bonds issued in a CMO transaction are divided into groups, and each group   
of bonds is referred to as a "tranche." Under the traditional CMO structure,    
the cash flows generated by the mortgages or mortgage pass-through securities   
in the collateral pool are used to first pay interest and then pay principal to 
the CMO bondholders. The bonds issued under a traditional CMO structure are     
retired sequentially as opposed to the pro-rata return of principal found in    
traditional pass-through obligations. Subject to the various provisions of      
individual CMO issues, the cash flow generated by the underlying collateral (to 
the extent it exceeds the amount required to pay the stated interest) is used   
to retire the bonds. Under a CMO structure, the repayment of principal among    
the different tranches is prioritized in accordance with the terms of the       
particular CMO issuance. The "fastest-pay" tranches of bonds, as specified in   
the prospectus for the issuance, would initially receive all principal          
payments. When those tranches of bonds are retired, the next tranche, or        
tranches, in the sequence, as specified in the prospectus, receive all of the   
principal payments until they are retired. The sequential retirement of bond    
groups continues until the last tranche is retired. Accordingly, the CMO        
structure allows the issuer to use cash flows of long maturity, monthly-pay     
collateral to formulate securities with short, intermediate, and long final     
maturities, as well as varied expected average lives and risk characteristics.  
In recent years, new types of CMO tranches have evolved. These include floating 
rate CMOs, parallel pay CMOs planned amortization classes, accrual bonds and    
CMO residuals. These newer structures affect the amount and timing of principal 
and interest received by each tranche from the underlying collateral. Under     
certain of these new structures, given 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 fund invests, the investment may be    
subject to a greater or lesser risk of prepayment than other types of           
mortgage-backed securities.                                                     

The primary risk of CMOs is the uncertainty of the timing of cash flows that    
results from the rate of prepayments on the underlying mortgages serving as     
collateral and from the structure of the particular CMO transaction (that is,   
the priority of the individual tranches). An increase or decrease in prepayment 
rates (resulting from a decrease or increase in mortgage interest rates) will   
affect the yield, average life, and price of CMOs. The prices of certain CMOs,  
depending on their structure and the rate of prepayments, can be volatile. Some 
CMOs may also not be as liquid as other securities.                             

Stripped mortgage-backed securities (SMBSs) are derivative multi-class          
mortgage-backed securities. SMBSs may be issued by agencies 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 entities formed  
or sponsored by any of the foregoing. SMBSs may be less liquid than other types 
of mortgage-backed securities.                                                  

SMBSs are usually structured with two classes that receive different            
proportions of the interest and principal distributions on a pool of mortgage   
assets. A common type of SMBS will have one class receiving some of the         
interest and most of the principal from the mortgage assets, while the other    
class will receive most of the interest and the remainder of the principal. In  
the most extreme case, one class will receive all of the interest (the          
interest-only or "IO" class), while the other class will receive all of the     
principal (the principal-only or "PO" class). The price and yield-to-maturity   
on an IO class is extremely sensitive to the rate of principal payments         
(including prepayments) on the related underlying mortgage assets, and a rapid  
rate of principal payments may have a material adverse effect on a fund's yield 
to maturity from these securities. If the underlying mortgage assets experience 
greater than anticipated prepayments of principal, a fund may fail to recoup    
some or all of its initial investment in these securities, even if the security 
is in one of the highest rating categories. The mortgages underlying these      
securities may be alternative mortgage instruments, that is, mortgage           
instruments whose principal or interest payments may vary or whose terms to     
maturity may be shorter than customary.                                         

MORTGAGE "DOLLAR ROLL" TRANSACTIONS. In mortgage "dollar roll" transactions,    
the investor sells mortgage-backed securities for delivery in the future and    
simultaneously contracts to repurchase substantially similar securities on a    
specified future date. During the roll period, the investor foregoes principal  
and interest paid on the mortgage-backed securities. The lost interest is       
compensated by the difference between the current sales price and the lower     
price for the future purchase (often referred to as the "drop") as well as by   
the interest earned on, and gains from, the investment of the cash proceeds of  
the initial sale. A commitment fee may also be received for participation in    
such transaction.                                                               

If the income and capital gains from the investment of the cash from the        
initial sale do not exceed the income, capital appreciation and gain or loss    
that would have been realized on the securities sold as part of the dollar      
roll, the use of this technique will result in a lower return than would have   
been realized without the use of the dollar rolls. Dollar roll transactions     
involve the risk that the market value of the securities that are required to   
be purchased in the future may decline below the agreed upon repurchase price   
of those securities. If the party to whom the securities are sold becomes       
insolvent, the right to purchase or repurchase securities may be restricted.    
Successful use of mortgage dollar rolls may depend upon the investor's ability  
to correctly predict interest rates and prepayments.                            

A dollar roll can be viewed as a borrowing. If a fund makes additional          
investments while a dollar roll is outstanding, this may be considered a form   
of leverage.                                                                    

MUNICIPAL INSTRUMENTS. Debt instruments issued by or on behalf of states,       
territories and possessions of the United States and the District of Columbia   
and their political subdivisions, agencies or instrumentalities, are known as   
"municipal instruments." Generally, interest received on municipal instruments  
is exempt from federal income tax. The tax-exempt nature of the interest on a   
municipal instrument is generally the subject of a bond counsel opinion         
delivered in connection with the issuance of the instrument. There is no        
assurance that the IRS will agree with bond counsel's opinion that such         
interest is tax-exempt or that the interest payments on such municipal          
instruments will continue to be tax exempt for the life of the municipal        
instrument. Issuers or other parties generally enter into covenants requiring   
continuing compliance with federal tax requirements to preserve the tax-free    
status of interest payments over the life of the municipal instrument. If at    
any time the covenants are not complied with, or if the IRS otherwise           
determines that the issuer did not comply with relevant tax requirements,       
interest payments from a municipal instrument could become federally taxable,   
possibly retroactively to the date the municipal instrument was issued and an   
investor may need to file an amended income tax return. Certain types of        
structured securities are designed so that tax exempt interest from municipal   
instruments held by the underlying entity will pass through to the holders of   
the structured security. There is no assurance that the IRS will agree that     
such interest is tax exempt.                                                    

The value of municipal instruments can be affected by changes in their actual   
or perceived credit quality. The credit quality of municipal instruments can be 
affected by, among other things, the financial condition of the issuer or       
guarantor, the issuer's future borrowing plans and sources of revenue, the      
economic feasibility of the revenue bond project or general borrowing purpose,  
political or economic developments in the region where the instrument is issued 
and the liquidity of the security. Municipal instruments generally trade in the 
over-the-counter market.                                                        

General obligation bonds are backed by the issuer's pledge of its full faith    
and credit and taxing power for the repayment of principal and the payment of   
interest. Issuers of general obligation bonds include states, counties, cities, 
towns, and regional districts. The proceeds of these obligations are used to    
fund a wide range of public projects, including construction or improvement of  
schools, highways and roads, and water and sewer systems. The rate of taxes     
that can be levied for the payment of debt service on these bonds may be        
limited. Additionally, there may be limits as to the rate or amount of special  
assessments or taxes that can be levied to meet these obligations.              

Some general obligation bonds are backed by both a pledge of a specific revenue 
source, such as a special assessment or tax and an issuer's pledge of its full  
faith and credit and taxing power. Debt service from these general obligation   
bonds is typically paid first from the specific revenue source and second, if   
the specific revenue source is insufficient, from the general taxing power.     

Revenue bonds are generally backed by the net revenues derived from a           
particular facility, group of facilities, or, in some cases, the proceeds of a  
special excise tax or other specific revenue source, such as a state's or local 
government's proportionate share of the payments from the Tobacco Master        
Settlement Agreement. Revenue bonds are issued to finance a wide variety of     
capital projects. Examples include electric, gas, water and sewer systems;      
highways, bridges, and tunnels; port and airport facilities; colleges and       
universities; and hospitals. Industrial development bonds, a type of revenue    
bond, are issued by or on behalf of public authorities to raise money to        
finance various privately operated facilities for a variety of purposes,        
including economic development, solid waste disposal, transportation, and       
pollution control. Although the principal security for revenue bonds is         
typically the revenues of the specific facility, project, company or system,    
many revenue bonds are secured by additional collateral in the form of a        
mortgage on the real estate comprising a specific facility, project or system,  
a lien on receivables and personal property, as well as the pledge of various   
reserve funds available to fund debt service, working capital, capital          
expenditures or other needs. Net revenues and other security pledged may be     
insufficient to pay principal and interest due which will cause the price of    
the bonds to decline. In some cases, revenue bonds issued by an authority are   
backed by a revenue stream unrelated to the issuer, such as a hotel occupancy   
tax, a sales tax, or a special assessment. In these cases, the ability of the   
authority to pay debt service is solely dependent on the revenue stream         
generated by the special tax. Furthermore, the taxes supporting such issues may 
be subject to legal limitations as to rate or amount.                           

Municipal insurance policies typically insure, subject to the satisfaction of   
the policy conditions, timely and scheduled payment of all principal and        
interest due on the underlying municipal instruments. The insurance may be      
obtained by either (i) the issuer at the time the municipal instrument is       
issued, commonly referred to as primary market insurance or (ii) another party  
after the municipal instrument has been issued, commonly referred to as         
secondary market insurance. The financial strength of the companies issuing the 
bond insurance can vary.                                                        

In general, municipal insurance does not insure any risk other than nonpayment. 
Municipal insurance does not insure against market fluctuations which affect    
the price of a security. In addition, a municipal insurance policy will not     
insure (i) the payment of regularly scheduled debt service payments until       
maturity if an issuer redeems the municipal bonds prior to maturity in          
accordance with the call provisions of the municipal instrument; (ii) over the  
loss of prepayment or other acceleration payment which at any time may become   
due in respect of any instrument, (except for a mandatory sinking fund          
redemption; (iii) the payment of a prepayment or acceleration premium; or (iv)  
nonpayment of principal or interest caused by negligence or bankruptcy of the   
paying agent. A municipal insurance policy often reserves to the insurer the    
exclusive right to accelerate the instruments upon a payment default.           

Because a significant portion of the municipal instruments issued and           
outstanding are insured by a small number of insurance companies, an event      
involving one or more of these insurance companies could have a significant     
adverse effect on the value of the securities insured by that insurance company 
and on the municipal market as a whole.                                         

Education. In general, there are two types of education-related bonds: (i)      
those issued to finance projects for public and private colleges and            
universities, charter schools and private schools, and (ii) those representing  
pooled interests in student loans. Bonds issued to supply educational           
institutions with funding are subject to many risks, including the risks of     
unanticipated revenue decline, primarily the result of decreasing student       
enrollment, decreasing state and federal funding, or a change in general        
economic conditions. Additionally, higher than anticipated costs associated     
with salaries, utilities, insurance or other general expenses could impair the  
ability of a borrower to make annual debt service payments. Student loan        
revenue bonds are generally offered by state (or substate) authorities or       
commissions and are backed by pools of student loans. Underlying student loans  
may be guaranteed by state guarantee agencies and may be subject to             
reimbursement by the United States Department of Education through its          
guaranteed student loan program. Others may be private, uninsured loans made to 
parents or students which may be supported by reserves or other forms of credit 
enhancement. Recoveries of principal due to loan defaults may be applied to     
redemption of bonds or may be used to re-lend, depending on program latitude    
and demand for loans. Cash flows supporting student loan revenue bonds are      
impacted by numerous factors, including the rate of student loan defaults,      
seasoning of the loan portfolio, and student repayment deferral periods of      
forbearance. Other risks associated with student loan revenue bonds include     
potential changes in federal legislation regarding student loan revenue bonds,  
state guarantee agency reimbursement and continued federal interest and other   
program subsidies currently in effect.                                          

Electric Utilities. The electric utilities industry has been experiencing       
increased competitive pressures. Federal and state legislation in recent years  
has been moving the industry toward opening transmission access to any          
electricity supplier, although it is not presently known to what extent         
competition will evolve. Other risks include: (a) the availability and cost of  
fuel, (b) the availability and cost of capital, (c) the effects of conservation 
on energy demand, (d) the effects of rapidly changing environmental, safety,    
and licensing requirements, and other federal, state, and local regulations,    
(e) timely and sufficient rate increases thereby assisting utilities in         
recovering increasing energy costs, and (f) opposition to nuclear power.        

Health Care. The health care industry is subject to regulatory action by a      
number of governmental agencies, including federal, state, and local            
governmental agencies. A major source of revenues for the health care industry  
is payments from the Medicare and Medicaid programs. As a result, the industry  
is sensitive to legislative changes and reductions in governmental spending for 
such programs. A second major source of revenues for the health care industry   
is payments from private insurance companies and health maintenance             
organizations. As such, any changes to and reductions in reimbursement rates    
from these entities for services provided could be detrimental to the revenues  
of the providers. Numerous other factors may affect the industry, such as       
general and local economic conditions; demand for services; expenses (including 
for example, labor, malpractice insurance premiums and pharmaceutical           
products); and competition among health care providers. In the future, the      
following factors may adversely affect health care facility operations:         
adoption of legislation proposing a national health insurance program; other    
state or local health care reform measures; medical and technological advances  
which dramatically alter the need for health services or the way in which such  
services are delivered; changes in medical coverage which alter the traditional 
fee-for-service revenue stream; and efforts by employers, insurers, and         
governmental agencies to reduce the costs of health insurance and health care   
services.                                                                       

Housing. Housing revenue bonds typically are issued by a state, county, or      
local housing authority and are secured by the revenues of mortgages originated 
by the authority using the proceeds of the bond issue. These bonds may be used  
to make mortgage loans for single-family housing, multi-family housing, or a    
combination of the two. Because of the impossibility of precisely predicting    
demand for mortgages from the proceeds of such an issue, there is a risk that   
the proceeds of the issue will be in excess of demand, which would result in    
early retirement of the bonds by the issuer. Moreover, such housing revenue     
bonds depend for their repayment upon the cash flow from the underlying         
mortgages, which cannot be precisely predicted when the bonds are issued. Any   
difference in the actual cash flow from such mortgages from the assumed cash    
flow could have an adverse impact upon the ability of the issuer to make        
scheduled payments of principal and interest on the bonds, or could result in   
early retirement of the bonds. Additionally, such bonds depend in part for      
scheduled payments of principal and interest upon reserve funds established     
from the proceeds of the bonds, assuming certain rates of return on investment  
of such reserve funds. If the assumed rates of return are not realized because  
of changes in interest rate levels or for other reasons, the actual cash flow   
for scheduled payments of principal and interest on the bonds may be            
inadequate. The financing of multi-family housing projects is affected by a     
variety of factors which may impact the borrower's ability to pay debt service  
and may impair the value of the collateral securing the bonds, if any. These    
factors include satisfactory completion of construction within cost             
constraints, the achievement and maintenance of a sufficient level of           
occupancy, sound management of the developments, timely and adequate increases  
in rents to cover increases in operating expenses, including taxes, utility     
rates and maintenance costs, changes in applicable laws and governmental        
regulations and social and economic trends. Some authorities provide additional 
security for the bonds in the form of insurance, subsidies, additional          
collateral, or state pledges (without obligation) to make up deficiencies.      

Transportation. Transportation debt may be issued to finance the construction   
of airports, toll roads, highways, or other transit facilities. Airport bonds   
are dependent on the economic conditions of the airport's service area and may  
be affected by the business strategies and fortunes of specific airlines. They  
may also be subject to competition from other airports and modes of             
transportation. Air traffic generally follows broader economic trends and is    
also affected by the price and availability of fuel. Toll road bonds are also   
affected by the cost and availability of fuel as well as toll levels, the       
presence of competing roads and the general economic health of an area. Fuel    
costs, transportation taxes and fees, and availability of fuel also affect      
other transportation-related securities, as do the presence of alternate forms  
of transportation, such as public transportation.                               

Tobacco Settlement Revenue Bonds. Tobacco settlement revenue bonds are secured  
by a single source of revenue --a state or jurisdiction's proportionate share   
of periodic payments made by tobacco companies under the Master Settlement      
Agreement (the "MSA") entered into by participating cigarette manufacturers, 46 
states, and other jurisdictions in November of 1998 in settlement of certain    
smoking-related litigation. Annual payments on the bonds are dependent on the   
receipt by the issuer of future settlement payments under the MSA. These annual 
payments are subject to numerous adjustments. The actual amount of future       
settlement payments depends on annual domestic cigarette shipments, inflation,  
market share gains by non-participating cigarette manufacturers, and other      
factors. MSA adjustments may cause bonds to be repaid faster or slower than     
originally projected. Tobacco bonds are subject to additional risks, including  
the risk that cigarette consumption declines, that a tobacco company defaults   
on its obligation to make payments to the state or that the MSA or state        
legislation enacted pursuant to the MSA is void or unenforceable.               

Water and Sewer. Water and sewer revenue bonds are generally secured by the     
fees charged to each user of the service. The issuers of water and sewer        
revenue bonds generally enjoy a monopoly status and latitude in their ability   
to raise rates. However, lack of water supply due to insufficient rain,         
run-off, or snow pack can be a concern and has led to past defaults. Further,   
public resistance to rate increases, declining numbers of customers in a        
particular locale, costly environmental litigation, and Federal environmental   
mandates are challenges faced by issuers of water and sewer bonds.              

MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations and participations in  
municipal leases are undivided interests in a portion of an obligation in the   
form of a lease or installment purchase or conditional sales contract which is  
issued by a state, local government, or a municipal financing corporation to    
acquire land, equipment, and/or facilities (collectively hereinafter referred   
to as "lease obligations"). Generally lease obligations do not constitute       
general obligations of the municipality for which the municipality's taxing     
power is pledged. Instead, a lease obligation is ordinarily backed by the       
municipality's covenant to budget for, appropriate, and make the payments due   
under the lease obligation. As a result of this structure, municipal lease      
obligations are generally not subject to state constitutional debt limitations  
or other statutory requirements that may apply to other municipal securities.   

Lease obligations may contain "non-appropriation" clauses which provide that    
the municipality has no obligation to make lease or installment purchase        
payments in future years unless money is appropriated for that purpose on a     
yearly basis. If the municipality does not appropriate in its budget enough to  
cover the payments on the lease obligation, the lessor may have the right to    
repossess and relet the property to another party. Depending on the property    
subject to the lease, the value of the property may not be sufficient to cover  
the debt.                                                                       

In addition to the risk of "non-appropriation," municipal lease securities may  
not have as highly liquid a market as conventional municipal bonds.             
Furthermore, municipal lease obligations have the same risk characteristics as  
Municipal Instruments do generally.                                             

OPTIONS. An option is a contract which conveys the right, but not the           
obligation, to purchase (in the case of a call option) or sell (in the case of  
a put option) a specific amount or value of a particular underlying interest at 
a specific price (called the "exercise" or "strike" price) at one or more       
specific times before the option expires. The underlying interest of an option  
contract can be a security, currency, index, future, swap or other type of      
financial instrument. The seller of an option is called an option writer. The   
purchase price of an option is called the premium. The potential loss to an     
option purchaser is limited to the amount of the premium plus transaction       
costs. This will be the case, for example, if the option is held and not        
exercised prior to its expiration date.                                         

Options can be traded either through established exchanges ("exchange traded    
options") or privately negotiated transactions (over-the-counter or "OTC        
options"). Exchange traded options are standardized with respect to, among      
other things, the underlying interest, expiration date, contract size and       
strike price. The terms of OTC options are generally negotiated by the parties  
to the option contract which allows the parties greater flexibility in          
customizing the agreement, but OTC options are generally less liquid than       
exchange traded options.                                                        

All option contracts involve credit risk if the counterparty to the option      
contract fails to perform. Credit risk is low in exchange traded options        
because the performance of the contract by the counterparty is backed by the    
clearing agency for the exchange on which the options are traded. The credit    
risk in OTC options is dependent on the credit worthiness of the individual     
counterparty to the contract and may be greater than the credit risk associated 
with exchange traded options.                                                   

When purchasing a put option, the purchaser obtains the right (but not the      
obligation) to sell a specific amount or value of a particular interest to the  
option writer at a fixed strike price. In return for this right, the purchaser  
pays the option premium. The purchaser of a typical put option can expect to    
realize a gain if the price of the underlying interest falls. However, if the   
underlying interest's price does not fall enough to offset the cost of          
purchasing the option, the purchaser of a put option can expect to suffer a     
loss (limited to the amount of the premium, plus related transaction costs).    

The purchaser of a put option may terminate its position by allowing the option 
to expire, exercising the option or closing out its position in the secondary   
market at the option's current price, if a liquid secondary markets exists. If  
the option is allowed to expire, the purchaser will lose the entire premium. If 
the option is exercised, the purchaser would complete the sale of the           
underlying interest to the option writer at the strike price.                   

When purchasing a call option, the purchaser obtains the right (but not the     
obligation) to purchase a specified amount or value of a particular interest    
from the option writer at a fixed strike price. In return for this right, the   
purchaser pays the option premium. The purchaser of a typical call option can   
expect to realize a gain if the price of the underlying interest rises.         
However, if the underlying interest's price does not rise enough to offset the  
cost of purchasing the option, the buyer of a call option can expect to suffer  
a loss (limited to the amount of the premium, plus related transaction costs).  

The writer of a put or call option takes the opposite side of the transaction   
from the option's purchaser. In return for receipt of the premium, the writer   
assumes the obligation to buy or sell (depending on whether the option is a put 
or a call) a specified amount or value of a particular interest at the strike   
price if the purchaser of the option chooses to exercise it.                    

Generally, an option writer sells options with the goal of obtaining the        
premium paid by the option purchaser. If an option sold by an option writer     
expires without being exercised, the writer retains the full amount of the      
premium. The option writer, however, has unlimited economic risk because its    
potential loss, except to the extent offset by the premium received when the    
option was written, is equal to the amount the option is "in-the-money" when    
the option is exercised. A call option is in-the-money if the value of the      
underlying interest exceeds the strike price of the option. A put option is     
in-the-money if the strike price of the option exceeds the value of the         
underlying interest. Generally, any profit realized by an option purchaser      
represents a loss for the option writer. The writer of a futures option is      
required to deposit and maintain initial and variation margin with respect to   
the option in the same manner as if the writer were entering into a futures     
contract.                                                                       

The writer of a put option may seek to terminate a position in the put option   
before exercise by closing out the option in the secondary market at its        
current price. If the secondary market is not liquid for a put option, however, 
the writer must continue to be prepared to pay the strike price while the       
option is outstanding, regardless of price changes.                             

A physical delivery option gives its owner the right to receive physical        
delivery (if it is a call), or to make physical delivery (if it is a put) of    
the underlying interest when the option is exercised. A cash-settled option     
gives its owner the right to receive a cash payment based on the difference     
between a determined value of the underlying interest at the time the option is 
exercised and the fixed exercise price of the option. A cash-settled call       
conveys the right to receive a cash payment if the determined value of the      
underlying interest at exercise exceeds the exercise price of the option, and a 
cash-settled put conveys the right to receive a cash payment if the determined  
value of the underlying interest at exercise is less than the exercise price of 
the option.                                                                     

Combination option positions are positions in more than one option at the same  
time. A spread involves being both the buyer and writer of the same type of     
option on the same underlying interest but different exercise prices and/or     
expiration dates. A straddle consists of purchasing or writing both a put and a 
call on the same underlying interest with the same exercise price and           
expiration date.                                                                

The principal factors affecting the market value of a put or call option        
include supply and demand, interest rates, the current market price of the      
underlying interest in relation to the exercise price of the option, the        
volatility of the underlying interest and the remaining period to the           
expiration date.                                                                

If a trading market in particular options were to become unavailable, investors 
in those options would be unable to close out their positions until trading     
resumes, and option writers may be faced with substantial losses if the value   
of the underlying interest moves adversely during that time. Lack of investor   
interest, changes in volatility, or other factors or conditions might adversely 
affect the liquidity, efficiency, continuity, or even the orderliness of the    
market for particular options. Exchanges or other facilities on which options   
are traded may establish limitations on options trading, may order the          
liquidation of positions in excess of these limitations, or may impose other    
sanctions that could adversely affect parties to an options transaction.        

Many options, in particular OTC options, are complex and often valued based on  
subjective factors. Improper valuations can result in increased cash payment    
requirements to counterparties or a loss of value to a fund.                    

PREFERRED STOCK. Preferred stock represents an equity or ownership interest in  
an issuer and is therefore subject to the same risks as other equity            
securities. Preferred stock has precedence over common stock in the event the   
issuer is liquidated or declares bankruptcy, but is junior to the interests of  
the debt instruments of the issuer. Preferred stock, unlike common stock, often 
has a stated dividend rate payable from the corporation's earnings. Preferred   
stock dividends may be cumulative or non-cumulative, participating, or auction  
rate. "Cumulative" dividend provisions require all or a portion of prior unpaid 
dividends to be paid before dividends can be paid to the issuer's common stock. 
"Participating" preferred stock may be entitled to a dividend exceeding the     
stated dividend in certain cases. If interest rates rise, the fixed dividend on 
preferred stocks may be less attractive, causing the price of such stocks to    
decline. Preferred stock may have mandatory sinking fund provisions, as well as 
provisions allowing the stock to be called or redeemed, which can limit the     
benefit of a decline in interest rates. The value of preferred stock is         
sensitive to changes in interest rates and to changes in the issuer's credit    
quality.                                                                        

REAL ESTATE RELATED INVESTMENTS. Investment in real estate related investments  
are subject to similar risks to those associated with the direct ownership of   
real estate and with the real estate industry in general. These risks include,  
among others: possible declines in the value of real estate; risks related to   
general and local economic conditions; possible lack of availability of         
mortgage funds; overbuilding; extended vacancies of properties; increases in    
competition, property taxes and operating expenses; changes in zoning or        
applicable tax law; costs resulting from the clean-up of, and liability to      
third parties for damages resulting from, environmental problems; casualty or   
condemnation losses; uninsured damages from floods, earthquakes or other        
natural disasters; limitations on and variations in rents; and changes in       
interest rates.                                                                 

Real estate investment trusts ("REITs") are pooled investment vehicles that     
invest primarily in income producing real estate or real estate related loans   
or interests. REITs are generally classified as equity REITs, mortgage REITs,   
or a combination of equity and mortgage REITs. Equity REITs invest most of      
their assets directly in real property and derive income primarily from the     
collection of rents. Equity REITs can also realize capital gains by selling     
properties that have appreciated in value. Mortgage REITs invest most of their  
assets in real estate mortgages and derive income from interest payments. An    
investor will indirectly bear its proportionate share of any expenses (such as  
operating expenses and advisory fees) paid by REITs in which it invests in      
addition to the expenses paid by the investor.                                  

Equity REITs may be affected by changes in the value of the underlying property 
owned by the trusts, while mortgage REITs may be affected by the quality of any 
credit extended. Further, equity and mortgage REITs are dependent upon          
management skills of the REIT's manager and generally are not diversified.      
Equity and mortgage REITs are also subject to heavy cash flow dependency,       
borrower default, and self-liquidation.                                         

Mortgage REITs are also subject to different combinations of prepayment,        
extension, interest rate and other market risks. The real estate mortgages      
underlying mortgage REITs are generally subject to a faster rate of principal   
repayments in a declining interest rate environment and to a slower rate of     
principal repayments in an increasing interest rate environment.                

In addition, a REIT may be unable to obtain financing to satisfy income and     
gain distributions required by federal tax law, may fail to qualify for the     
federal tax exemption for distributed income, or may be adversely affected by   
changes in federal tax law, for example, by limiting their permissible          
businesses or investments.                                                      

REPURCHASE AGREEMENTS. A repurchase agreement is an agreement under which a     
buyer would acquire a security for a relatively short period of time (usually   
not more than a week) subject to the obligation of the seller to repurchase and 
the buyer to resell such security at a fixed time and price (representing the   
buyer's cost plus interest). The buyer bears the risk of loss in the event that 
the other party to a repurchase agreement defaults on its obligations and the   
buyer is delayed or prevented from exercising its rights to dispose of the      
collateral. This risk includes the risk of procedural costs or delays in        
addition to a loss on the securities if their value should fall below their     
repurchase price.                                                               

RESTRICTED SECURITIES. Restricted securities are securities that are subject to 
legal restrictions on their re-sale. Difficulty in selling securities may       
result in a loss or be costly to an investor. Restricted securities generally   
can be sold in privately negotiated transactions, pursuant to an exemption from 
registration under the Securities Act of 1933, or in a registered public        
offering. Where registration is required, the holder of a registered security   
may be obligated to pay all or part of the registration expense and a           
considerable period may elapse between the time it decides to seek registration 
and the time it may be permitted to sell a security under an effective          
registration statement. If, during such a period, adverse market conditions     
were to develop, the holder might obtain a less favorable price than prevailed  
when it decided to seek registration of the security.                           

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, an investor   
sells securities and receives cash proceeds, subject to its agreement to        
repurchase the securities at a later date for a fixed price reflecting a market 
rate of interest. There is a risk that the counter party to a reverse           
repurchase agreement will be unable or unwilling to complete the transaction as 
scheduled, which may result in losses to the investor. Unless the appreciation  
and income on assets purchased with proceeds from reverse repurchase agreements 
exceed the costs associated with them, the investor's performance is lower than 
it otherwise would have been. A reverse repurchase agreement can be viewed as a 
borrowing. If a fund makes additional investments while a reverse repurchase    
agreement is outstanding, this may be considered a form of leverage.            

SECURITIES OF OTHER INVESTMENT COMPANIES. Securities of other investment        
companies include shares of closed-end investment companies, unit investment    
trusts, and open-end investment companies, represent interests in               
professionally managed portfolios that may invest in any type of interest.      
Investing in other investment companies involves substantially the same risks   
as investing directly in the underlying interests, but may involve additional   
expenses at the investment company-level, such as a proportionate share of      
portfolio management fees and operating expenses. Certain types of investment   
companies, such as closed-end investment companies, issue a fixed number of     
shares that trade on a stock exchange or over-the-counter at a premium or a     
discount to their net asset value (NAV) per share. Others are continuously      
offered at NAV, but may also be traded in the secondary market. The extent to   
which a fund can invest in securities of other investment companies is limited  
by the Investment Company Act of 1940.                                          

SHORT SALES. A seller may make short sales that are made "against the box" and  
also those that are not made "against the box." A short sale that is not made   
"against the box" is a transaction in which a party sells a security it does    
not own, in anticipation of a decline in the market value of that security. To  
complete such a transaction, the seller must borrow the security to make        
delivery to the buyer. The seller then is obligated to replace the security     
borrowed by purchasing it at the market price at the time of replacement. The   
price at such time may be more or less than the price at which the security was 
sold by the seller. Until the security is replaced, the seller is required to   
repay the lender any dividends or interest which accrue during the period of    
the loan. To borrow the security, the seller also may be required to pay a      
premium, which would increase the cost of the security sold. The net proceeds   
of the short sale will be retained by the broker, to the extent necessary to    
meet margin requirements, until the short position is closed out. The seller    
also will incur transaction costs in effecting short sales.                     

The seller will incur a loss as a result of the short sale if the price of the  
security or index increases between the date of the short sale and the date on  
which the seller replaces the borrowed security. Such loss may be unlimited.    
The seller will realize a gain if the price of the security declines between    
those dates. The amount of any gain will be decreased, and the amount of any    
loss increased, by the amount of the premium, dividends or interest the seller  
may be required to pay in connection with a short sale.                         

A seller may also make short sales "against the box," i.e., when a security     
identical to one owned by the seller is borrowed and sold short. If the seller  
enters into a short sale against the box, it is required to hold securities     
equivalent in kind and amount to the securities sold short (or securities       
convertible or exchangeable into such securities) while the short sale is       
outstanding. The seller will incur transaction costs, including interest, in    
connection with opening, maintaining, and closing short sales against the box   
and will forgo an opportunity for capital appreciation in the security.         

SOVEREIGN DEBT OBLIGATIONS. Sovereign debt obligations are issued or guaranteed 
by foreign governments or their agencies, including debt of developing          
countries. Sovereign debt may be in the form of conventional securities or      
other types of debt instruments such as loans or loan participations. Sovereign 
debt of developing countries may involve a high degree of risk, and may be in   
default or present the risk of default. Governmental entities responsible for   
repayment of the debt may be unable or unwilling to repay principal and pay     
interest when due, and may require renegotiation or rescheduling of debt        
payments. In addition, prospects for repayment of principal and payment of      
interest may depend on political as well as economic factors. Although some     
sovereign debt, such as Brady Bonds, is collateralized by U.S. Government       
securities, repayment of principal and payment of interest is not guaranteed by 
the U.S. Government.                                                            

SWAPS AND RELATED DERIVATIVES. A swap is an agreement between two parties       
pursuant to which each party agrees to make one or more payments to the other,  
based on different interest rates, currency exchange rates, security or         
commodity prices, the prices or rates of other types of financial instruments,  
assets, the levels of specified indices, or other indicators. For example, in a 
typical interest rate swap, one party agrees to pay a fixed rate of interest    
determined by reference to a specified interest rate or index multiplied by a   
specified amount (the "notional amount"), while the other party agrees to pay   
an amount equal to a floating rate of interest determined by reference to an    
interest rate or index which is reset periodically and multiplied by the same   
notional amount. On each payment date, the obligations of parties are netted    
against each other, with only the net amount paid by one party to the other.    

Swap agreements are typically individually negotiated and structured to provide 
exposure to a variety of different types of investments or market factors. Swap 
agreements may be entered into for hedging or non-hedging purposes. Swap        
agreements can take many different forms and are known by a variety of names    
and other types of swap agreements may be available.                            

Other types of over-the-counter derivatives, such as "caps," "floors,"          
"collars" and options on swaps, or "swaptions," may be entered into for the     
same types of hedging or non-hedging purposes as swaps. A "cap" transaction is  
one in which one party pays a single or periodic fixed amount and the other     
party pays a floating amount equal to the amount by which a specified fixed or  
floating rate or other indicator exceeds another rate or indicator (multiplied  
by a notional amount). A "floor" transaction is one in which one party pays a   
single or periodic fixed amount and the other party pays a floating amount      
equal to the excess, if any, of a specified rate or other indicator over a      
different rate or indicator (multiplied by a notional amount). A "collar"       
transaction is a combination of a cap and a floor in which one party pays the   
floating amount on the cap and the other party pays the floating amount on the  
floor. A swaption is an option to enter into a swap agreement. Like other types 
of options, the buyer of a swaption pays a non-refundable premium for the       
option and obtains the right, but not the obligation, to enter into the         
underlying swap on the agreed-upon terms.                                       

The most significant factor in the performance of swaps, caps, floors, and      
collars is the change in the underlying price, rate, index level or other       
indicator that determines the amount of payments to be made under the           
arrangement.                                                                    

If MFS attempts to use a swap or related investment as a hedge against, or as a 
substitute for, a portfolio investment, the swap or related derivative may not  
correlate as expected with the portfolio investment, resulting in losses to the 
fund. While hedging strategies involving swaps and related derivatives can      
reduce the risk of loss, they can also reduce the opportunity for gain or even  
result in losses by offsetting favorable price movements in other fund          
investments.                                                                    

Swaps and related derivatives may also be subject to liquidity risk since the   
derivatives are often "customized" to meet the portfolio needs of a particular  
investor, and therefore, the number of investors that are willing and able to   
buy such derivatives in the secondary market may be smaller than that for more  
traditional debt instruments. The swaps market is largely unregulated. It is    
possible that developments in the swaps market, including potential government  
regulations, could adversely affect an investor's ability to terminate its      
existing swap agreements or to realize amounts received under such agreements.  

In addition, because the purchase and sale of swap and related derivatives      
takes place in an over-the-counter market, swaps and related derivatives are    
subject to the creditworthiness of the counterparty to the swap or related      
derivative, and their values may decline substantially if the counterparty's    
creditworthiness deteriorates. If the counterparty defaults, the other party's  
risk of loss consists of the net amount of payments that the non-defaulting     
party is contractually entitled to receive. The counterparties may be able to   
eliminate or reduce their exposure under these arrangements by assignment or    
other disposition or by entering into an offsetting agreement with the same or  
another counterparty.                                                           

TEMPORARY DEFENSIVE POSITIONS. In response to market, economic, political, or   
other conditions, MFS may depart from its investment strategies for a fund by   
temporarily investing for defensive purposes. MFS may invest a large portion or 
all of a fund's assets 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.                                                  

TENDER OPTION BONDS. Tender option bonds, also known as put bonds or puttable   
securities, give the bondholder the right to require the issuer or a specified  
third party acting as agent for the issuer to purchase the bonds, usually at    
par, at a certain time or times prior to maturity or upon the occurrence of     
specified events or conditions. These securities may be floating or variable    
rate securities. The issuer or third party agent may be unable to purchase the  
bonds on the purchase date due to a variety of circumstances, which may result  
in a loss of value of the bonds.                                                

WARRANTS. Warrants are instruments which entitle the holder to buy an equity    
security at a specific price for a specific period of time. Changes in the      
value of a warrant do not necessarily correspond to changes in the value of its 
underlying security. The price of a warrant may be more volatile than the price 
of its underlying security, and a warrant may offer greater potential for       
capital appreciation as well as capital loss. Warrants do not entitle a holder  
to dividends or voting rights with respect to the underlying security and do    
not represent any rights in the assets of the issuing company. A warrant ceases 
to have value if it is not exercised prior to its expiration date. These        
factors can make warrants more speculative than other types of investments.     

WHEN-ISSUED, DELAYED-DELIVERY, AND FORWARD-COMMITMENT TRANSACTIONS.             
When-issued, delayed-delivery, and forward-commitment transactions involve a    
commitment to purchase or sell specific securities at a predetermined price or  
yield in which payment and delivery take place after the customary settlement   
period for that type of security. Typically, no interest accrues to the         
purchaser until the security is delivered. When purchasing securities pursuant  
to one of these transactions, payment for the securities is not required until  
the delivery date. However, the purchaser assumes the rights and risks of       
ownership, including the risks of price and yield fluctuations and the risk     
that the security will not be issued or delivered as anticipated. If a fund     
makes additional investments while a delayed delivery purchase is outstanding,  
this may result in a form of leverage.                                          

VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate securities    
are debt instruments that provide for periodic adjustments in the interest rate 
paid on the security. Variable rate securities provide for a specified periodic 
adjustment in the interest rate, while floating rate securities have interest   
rates that may change with changes to the level of prevailing interest rates or 
the issuer's credit quality. There is a risk that the current interest rate on  
variable and floating rate securities may not accurately reflect current market 
interest rates or adequately compensate the holder for the current              
creditworthiness of the issuer. Some variable or floating rate securities are   
structured with liquidity features such as (1) put options or tender options    
that permit holders (sometimes subject to conditions) to demand payment of the  
unpaid principal balance plus accrued interest from the issuers or certain      
financial intermediaries or (2) auction rate features, remarketing provisions,  
or other maturity-shortening devices designed to enable the issuer to refinance 
or redeem outstanding debt securities (market-dependent liquidity features).    
The market-dependent liquidity features may not operate as intended as a result 
of the issuer's declining creditworthiness, adverse market conditions, or other 
factors or the inability or unwillingness of a participating broker-dealer to   
make a secondary market for such securities. As a result, variable or floating  
rate securities that include market-dependent liquidity features may lose value 
and the holders of such securities may be required to retain them for an        
extended period of time or until maturity.                                      

ZERO COUPON BONDS, DEFERRED INTEREST BONDS, AND PIK BONDS. Zero coupon and      
deferred interest bonds are debt instruments which are issued at a discount     
from face value. The discount approximates the total amount of interest the     
instruments 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 instrument 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. Bonds on which the      
interest is payable in kind are known as "PIK bonds." PIK bonds are debt        
instruments which provide that the issuer may, at its option, pay interest on   
such instruments in cash or in the form of additional debt instruments. Such    
instruments 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 instruments may experience greater  
volatility in market value than debt instruments which make regular payments of 
interest.                                                                       

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                                                          PART II - APPENDIX F

INVESTMENT RESTRICTIONS 

The Fund has adopted the following restrictions which cannot be changed without 
the approval of a Majority Shareholder Vote.                                    

As fundamental investment restrictions, the Fund may not:                       

(1) borrow money except to the extent such borrowing is not prohibited by the   
 Investment Company Act of 1940, as amended (the "1940 Act") and exemptive
orders granted under such Act;                                          

(2) underwrite securities issued by other persons, except that all or any       
   portion of the assets of the Fund may be invested in one or more investment
companies, to the extent not prohibited by the 1940 Act and exemptive   
orders granted under such Act, and except insofar as the Fund may       
 technically be deemed an underwriter under the Securities Act of 1933, as
amended, in selling a portfolio security;                               

(3) issue any senior securities except to the extent not prohibited by the 1940 
Act and exemptive orders granted under such Act; for purposes of this   
restriction, collateral arrangements with respect to any type of swap,  
   option, Forward Contracts and Futures Contracts and collateral arrangements
with respect to initial and variation margin are not deemed to be the   
issuance of a senior security;                                          

(4) make loans except to the extent not prohibited by the 1940 Act and          
exemptive orders granted under such Act; and                            

(5) purchase or sell real estate (excluding securities secured by real estate   
or interests therein and securities of companies, such as real estate   
investment trusts, which deal in real estate or interests therein),     
   interests in oil, gas or mineral leases, commodities or commodity contracts
   (excluding currencies and any type of option, Futures Contracts and Forward
Contracts) in the ordinary course of its business; the Fund reserves the
freedom of action to hold and to sell real estate, mineral leases,      
commodities or commodity contracts (including currencies and any type of
option, Futures Contracts and Forward Contracts) acquired as a result of
the ownership of securities.                                            

     * * * * * *

FOR THE MFS CASH RESERVE FUND, MFS GOVERNMENT MONEY MARKET FUND AND THE MFS     
MONEY MARKET FUND:                                                              

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
 business activities are in the same industry, provided however, that this
restriction shall not apply to securities or obligations issued or      
   guaranteed by banks or bank holding companies, finance companies or utility
companies.                                                              

FOR THE MFS FLOATING RATE HIGH INCOME FUND:                                     

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry. For purposes of this      
restriction, loan participations will be considered investments in the  
  industry of the underlying borrower, rather than that of the seller of the
loan participation.                                                     

FOR THE MFS HIGH INCOME FUND:                                                   

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry, provided however, that the
Fund may invest up to 40% of the value of its assets in each of the     
electric utility and telephone industries.                              

FOR THE MFS UTILITIES FUND:                                                     

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry, provided however, that the
Fund will invest at least 25% of its total assets in the utilities      
industry.                                                               

FOR ALL OTHER FUNDS:                                                            

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry.                           

     * * * * * *

In addition, the Funds have adopted the following non-fundamental policies,     
which may be changed without shareholder approval.                              

FOR THE MFS CASH RESERVE FUND, MFS GOVERNMENT MONEY MARKET FUND AND THE MFS     
MONEY MARKET FUND:                                                              

The Fund will not:                                                              

(1) invest in illiquid investments, including securities subject to legal or    
contractual restrictions on resale or for which there is no readily     
available market (e.g., trading in the security is suspended, or, in the
 case of unlisted securities, where no market exists), if more than 10% of
the Fund's net assets (taken at market value) would be invested in such 
  securities; repurchase agreements maturing in more than seven days will be
 deemed to be illiquid for purposes of the Fund's limitation on investment
in illiquid securities; securities that are not registered under the    
   Securities Act of 1933 but are determined to be liquid by the Trust's Board
of Trustees (or its delegee) will not be subject to this 10% limitation.

FOR ALL OTHER FUNDS:                                                            

The Fund will not:                                                              

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

     * * * * * *

FOR ALL FUNDS:                                                                  

Except for investment restriction no. 1 and the Fund's non-fundamental policy   
on investing in illiquid securities, these investment restrictions are adhered  
to at the time of purchase or utilization of assets; a subsequent change in     
circumstances will not be considered to result in a violation of policy. In the 
event the investments exceed the percentage specified in the Fund's             
non-fundamental policy on illiquid investments, the Fund will reduce the        
percentage of its assets invested in illiquid investments in due course, taking 
into account the best interests of shareholders.                                

For purposes of investment restriction no. 6, investments in securities issued  
or guaranteed by the U.S. Government or its agencies or instrumentalities and   
tax-exempt obligations issued or guaranteed by a U.S. territory or possession,  
a state or local government, or a political subdivision of any of the           
foregoing, are not considered an investment in any particular industry.         

For purposes of investment restriction no. 6, investments in other investment   
companies are not considered an investment in any particular industry and       
portfolio securities held by an underlying fund in which the Fund may invest    
are not considered to be securities purchased by the Fund.                      

FOR MFS LIFETIME RETIREMENT INCOME FUND, MFS LIFETIME 2010 FUND, MFS LIFETIME   
2020 FUND, MFS LIFETIME 2030 FUND, MFS LIFETIME 2040 FUND, MFS INTERNATIONAL    
DIVERSIFICATION FUND, MFS AGGRESSIVE GROWTH ALLOCATION FUND, MFS CONSERVATIVE   
ALLOCATION FUND, MFS GROWTH ALLOCATION FUND AND MFS MODERATE ALLOCATION FUND:   

In accordance with the Fund's investment program as set forth in its            
Prospectus, the Fund may invest more than 25% of its assets in any one          
underlying fund. Although the Fund does not have a policy to concentrate its    
investments in a particular industry, 25% or more of the Fund's total assets    
may be indirectly exposed to a particular industry or group of related          
industries through its investment in one or more underlying funds.              

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                                                          PART II - APPENDIX G

RECIPIENTS OF NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS 

NAME OF RECIPIENT                              PURPOSE OF DISCLOSURE            
-----------------                              ---------------------            

MSCI BARRA, Inc.                               Analytical Tool                  

Bloomberg L.P.                                 Analytical Tool                  

Board of Trustees                              Fund Governance                  

Bowne                                          Typesetting and Printing Services

CDS/Computer                                   Software Vendor                  

Checkfree                                      Software Vendor                  

eA Data Automation Services, LLC               Data Formatting and Organization 
                     Service

Eagle Investment Systems Corp.                 Accounting System                

Ernst & Young LLP                              Independent Registered Public    
                             Accounting Firm

FactSet Research Systems Inc.                  Analytical Tool                  

GainsKeeper, Inc.                              Accounting System                

GFP Acquisition Company, Inc. D.B.A.                                            
GCom2 Solutions                                Software Vendor                  

G.H. Dean Co.                                  Typesetting and Printing Services

Institutional Shareholder Services Inc.        Proxy Service Provider           

Investor Tools Perform                         Analytical Tool                  

ITG, Inc.                                      Analytical Tool                  

JP Morgan Chase Bank                           Fund Custodian                   

Lipper Inc.                                    Publication Preparation          

The MacGregor Group                            Software Vendor                  

Massachusetts Financial Services Co.           Fund Management                  

MFS Fund Distributors, Inc.                    Fund Distribution                

OMGEO LLC                                      Software Vendor                  

Plexus                                         Analytical Tool                  

Radianz                                        Software Vendor                  

Ropes & Gray LLP                               Legal Counsel                    

Saloman Analytics Inc.                         Analytical Tool                  

Standard & Poor's Securities Evaluations       Fund Pricing                     
Services                                                                        

State Street Bank and Trust Company            Custodian                        

Sun Capital Advisers LLC*                      Fund Management                  

Wilshire Analytics/Axiom                       Analytical Tool                  

* Sun Capital Advisers LLC receives non-public portfolio holdings disclosure    
regarding the portion of the MFS Diversified Income Fund for which it serves
as sub-adviser.                                                             

This list is current as of June 30, 2006, and any additions, modifications or   
deletions to the list that have occurred since June 30, 2006 are not reflected. 

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                                                                    APPENDIX H

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                                                       

Moody's long-term obligation ratings are opinions of the relative credit risk   
of fixed income obligations with an original maturity of one year or more. They 
address the possibility that a financial obligation will not be honored as      
promised. Such ratings reflect both the likelihood of default and any financial 
loss suffered in the event of default.                                          

AAA: Obligations rated "Aaa" are judged to be of the highest quality, with      
minimal credit risk.                                                            

AA: Obligations rated "Aa" are judged to be of high quality and are subject to  
very low credit risk.                                                           

A: Obligations rated "A" are considered upper-medium grade and are subject to   
low credit risk.                                                                

BAA: Obligations rated "Baa" are subject to moderate credit risk. They are      
considered medium-grade and as such may possess certain speculative             
characteristics.                                                                

BA: Obligations rated "Ba" are judged to have speculative elements and are      
subject to substantial credit risk.                                             

B: Obligations rated "B" are considered speculative and are subject to high     
credit risk.                                                                    

CAA: Obligations rated "Caa" are judged to be of poor standing and are subject  
to very high credit risk.                                                       

CA: Obligations rated "Ca" are highly speculative and are likely in, or very    
near, default, with some prospect of recovery of principal and interest.        

C: Obligations rated "C" are the lowest rated class of bonds and are typically  
in default, with little prospect for recovery of principal or interest.         

Note: Moody's applies numerical modifiers "1", "2" and "3" to each generic      
rating classification from "Aa" through "Caa." The modifier "1" indicates that  
the obligation ranks in the higher end of its generic rating category; the      
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a    
ranking in the lower end of that generic rating category.                       

STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC.                

Issue credit ratings are based, in varying degrees, on the following            
considerations: (1) likelihood of payment capacity and willingness of the       
obligor to meet its financial commitment on an obligation in accordance with    
the terms of the obligation; (2) nature of and provisions of the obligation;    
and (3) protection afforded by, and relative position of, the obligation in the 
event of bankruptcy, reorganization, or other arrangement under the laws of     
bankruptcy and other laws affecting creditors' rights.                          

The issue ratings definitions are expressed in terms of default risk. As such,  
they pertain to senior obligations of an entity. Junior obligations are         
typically rated lower than senior obligations, to reflect the lower priority in 
bankruptcy, as noted above.                                                     

AAA: An obligation rated "AAA" has the highest rating assigned by Standard &    
Poor's. The obligor's capacity to meet its financial commitment on the          
obligation is extremely strong.                                                 

AA: An obligation rated "AA" differs from the highest-rated obligations only to 
a small degree. The obligor's capacity to meet its financial commitment on the  
obligation is very strong.                                                      

A: An obligation rated "A" is somewhat more susceptible to the adverse effects  
of changes in circumstances and economic conditions than obligations in higher  
rated categories. However, the obligor's capacity to meet its financial         
commitment on the obligation is still strong.                                   

BBB: An obligation rated "BBB" exhibits adequate protection parameters.         
However, adverse economic conditions or changing circumstances are more likely  
to lead to a weakened capacity of the obligor to meet its financial commitment  
on the obligation.                                                              

BB, B, CCC, CC, AND C: Obligations rated "BB", "B", "CCC", "CC", and "C" are    
regarded as having significant speculative characteristics. "BB" indicates the  
least degree of speculation and "C" the highest. While such obligations will    
likely have some quality and protective characteristics, these may be           
outweighed by large uncertainties or major exposures to adverse conditions.     

BB: An obligation rated "BB" is less vulnerable to nonpayment than other        
speculative issues. However, it faces major ongoing uncertainties or exposure   
to adverse business, financial, or economic conditions, which could lead to the 
obligor's inadequate capacity to meet its financial commitment on the           
obligation.                                                                     

B: An obligation rated "B" is more vulnerable to nonpayment than obligations    
rated "BB", but the obligor currently has the capacity to meet its financial    
commitment on the obligation. Adverse business, financial, or economic          
conditions will likely impair the obligor's capacity or willingness to meet its 
financial commitment on the obligation.                                         

CCC: An obligation rated "CCC" is currently vulnerable to nonpayment and is     
dependent upon favorable business, financial, and economic conditions for the   
obligor to meet its financial commitment on the obligation. In the event of     
adverse business, financial, or economic conditions, the obligor is not likely  
to have the capacity to meet its financial commitment on the obligation.        

CC: An obligation rated "CC" is currently highly vulnerable to nonpayment.      

C: The "C" rating may be used to cover a situation where a bankruptcy petition  
has been filed or similar action has been taken, but payments on this           
obligation are being continued.                                                 

D: An obligation rated "D" is in payment default. The "D" rating category is    
used when payments on an obligation are not made on the date due even if the    
applicable grace period has not expired, unless Standard & Poor's 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 or the taking of a similar     
action if payments on an obligation 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   
applicable rating category.                                                     

N.R.: Not rated.                                                                

FITCH RATINGS                                                                   

International Long-Term Credit Ratings (LTCR) may also be referred to as        
Long-Term Ratings. When assigned to most issuers, it is used as a benchmark     
measure of probability of default and is formally described as an Issuer        
Default Rating (IDR).                                                           

Investment Grade                                                                

AAA: Highest credit quality. "AAA" ratings denote the lowest expectation of     
credit risk. They are assigned only in case of exceptionally strong capacity    
for payment of financial commitments. This capacity is highly unlikely to be    
adversely affected by foreseeable events.                                       

AA: Very high credit quality. "AA" ratings denote expectations of very low      
credit risk. They indicate very strong capacity for payment of financial        
commitments. This capacity is not significantly vulnerable to foreseeable       
events.                                                                         

A: High credit quality. "A" ratings denote expectations of low credit risk. The 
capacity for payment of financial commitments is considered strong. This        
capacity may, nevertheless, be more vulnerable to changes in circumstances or   
in economic conditions than is the case for higher ratings.                     

BBB: Good credit quality. "BBB" ratings indicate that there is currently        
expectations of low credit risk. The capacity for payment of financial          
commitments is considered adequate, but adverse changes in circumstances and    
economic conditions are more likely to impair this capacity. This is the lowest 
investment-grade category.                                                      

Speculative Grade                                                               

BB: Speculative. "BB" ratings indicate that there is a possibility of credit    
risk developing, particularly as the result of adverse economic change over     
time; however, business or financial alternatives may be available to allow     
financial commitments to be met. Securities rated in this category are not      
investment grade.                                                               

B: Highly speculative. "B" ratings indicate that significant credit risk is     
present, but a limited margin of safety remains. Financial commitments are      
currently being met; however, capacity for continued payment is contingent upon 
a sustained, favorable business and economic environment.                       

CCC: Default is a real possibility. Capacity for meeting financial commitments  
is solely reliant upon sustained, favorable business or economic conditions.    

CC: Default of some kind appears probable.                                      

C: Default is imminent.                                                         

RD: Indicates an entity that has failed to make due payments (within the        
applicable grace period) on some but not all material financial obligations,    
but continues to honor other classes of obligations.                            

D: Indicates an entity or sovereign that has defaulted on all of its financial  
obligations. Default generally is defined as one of the following:              

   o Failure of an obligor to make timely payment of principal and/or interest
under the contractual terms of any financial obligation;            

o The bankruptcy filings, administration, receivership, liquidation, or 
other winding-up or cessation of business of an obligor; or         

o The distressed or other coercive exchange of an obligation, where     
    creditors were offered securities with diminished structural or economic
terms compared with the existing obligation.                        

Default ratings are not assigned prospectively; within this context,            
non-payment on an instrument that contains a deferral feature or grace period   
will not be considered a default until after the expiration of the deferral or  
grace period.                                                                   

Issuers will be rated "D" upon a default. Defaulted and distressed obligations  
typically are rated along the continuum of "C" to "B" ratings categories,       
depending upon their recovery prospects and other relevant characteristics.     

Default is determined by reference to the terms of the obligations'             
documentation. Fitch will assign default ratings where it has reasonably        
determined that payment has not been made on a material obligation in           
accordance with the requirements of the obligation's documentation, or where it 
believes that default ratings consistent with Fitch's published definition of   
default are the most appropriate ratings to assign.                             

The modifiers "+" or "-`' may be appended to a rating to denote relative status 
within major ratings categories. Such suffixes are not added to the "AAA"       
Long-term ratings category, to categories below "CCC," or to Short-term ratings 
other than "F1." (The +/- modifiers are only used to denote issues within the   
"CCC" category, whereas issuers are only rated "CCC" without the use of         
modifiers.)                                                                     

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INVESTMENT ADVISER                                                              

MFS Investment Management                                                       

500 Boylston Street, Boston, MA 02116                                           

(617) 954-5000                                                                  

DISTRIBUTOR                                                                     

MFS Fund Distributors, Inc.                                                     

500 Boylston Street, Boston, MA 02116                                           

(617) 954-5000                                                                  

CUSTODIANS                                                                      

State Street Bank and Trust Company                                             

225 Franklin Street, Boston, MA 02110                                           

JP Morgan Chase Bank                                                            

One Chase Manhattan Plaza                                                       

New York, NY 10081                                                              

SHAREHOLDER SERVICING AGENT                                                     

MFS Service Center, Inc.                                                        

500 Boylston Street, Boston, MA 02116                                           

Toll free: (800) 225-2606                                                       

Mailing Address:                                                                

P.O. Box 55824, Boston, MA 02205-5824                                           

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Class A Shares                                                                  
Class B Shares                                                                  
Class C Shares                                                                  
Class I Shares                                                                  

MFS HIGH YIELD OPPORTUNITIES FUND                                               

PROSPECTUS JUNE 1, 2007                                                         

This Prospectus describes the MFS High Yield Opportunities Fund. The investment 
objective of the fund is to seek total return with an emphasis on high current  
income, but also considering capital appreciation.                              

RISK RETURN SUMMARY..........................................   XX              
EXPENSE SUMMARY..............................................   XX              
CERTAIN INVESTMENT POLICIES AND RISKS........................   XX              
MANAGEMENT OF THE FUND.......................................   XX              
DESCRIPTION OF SHARE CLASSES.................................   XX              
HOW TO PURCHASE, REDEEM, AND EXCHANGE SHARES.................   XX              
OTHER INFORMATION............................................   XX              
FINANCIAL HIGHLIGHTS.........................................   XX              

The Securities and Exchange Commission has not approved or disapproved the      
fund's shares or determined whether this prospectus is accurate or complete.    
Anyone who tells you otherwise is committing a crime.                           

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RISK RETURN SUMMARY                                                             

INVESTMENT OBJECTIVE                                                            

The fund's investment objective is to seek total return with an emphasis on     
high current income, but also considering capital appreciation. The fund's      
objective may be changed without shareholder approval.                          

PRINCIPAL INVESTMENT STRATEGIES                                                 

MFS (Massachusetts Financial Services Company, the fund's investment adviser)   
normally invests at least 80% of the fund's net assets in high income debt      
instruments.                                                                    

MFS may invest the fund's assets in other types of debt instruments and equity  
securities.                                                                     

MFS may invest up to 100% of the fund's assets in lower quality debt            
instruments.                                                                    

MFS may invest the fund's assets in foreign securities, including emerging      
market securities.                                                              

MFS may also invest the fund's assets in derivatives.                           

MFS may also enter into short sales for the fund.                               

MFS uses a bottom-up investment approach in buying and selling investments for  
the fund. Investments are selected primarily based on fundamental analysis of   
instruments and their issuers in light of current market, economic, political,  
and regulatory conditions. Factors considered may include the instrument's      
credit quality, collateral characteristics, and indenture provisions, and the   
issuer's management ability, capital structure, leverage, and ability to meet   
its current obligations. Quantitative analysis of the structure of the          
instrument and its features may also be considered.                             

PRINCIPAL INVESTMENT TYPES                                                      

DEBT INSTRUMENTS: Debt instruments represent obligations of corporations,       
governments, and other entities to repay money borrowed. The issuer or borrower 
usually pays a fixed, variable, or floating rate of interest, and must repay    
the amount borrowed, usually at the maturity of the instrument. Some debt       
instruments, such as zero coupon bonds, do not pay current interest but are     
sold at a discount from their face values. Other debt instruments, such as      
certain mortgage-backed and other asset-backed securities, make periodic        
payments of interest and/or principal. Some debt instruments are partially or   
fully secured by collateral supporting the payment of interest and principal.   

LOWER QUALITY DEBT INSTRUMENTS: Lower quality debt instruments, commonly        
referred to as "high yield securities" or "junk bonds" are debt instruments of  
less than investment grade quality.                                             

CORPORATE BONDS: Corporate bonds are debt instruments issued by domestic or     
foreign corporations or similar entities.                                       

FOREIGN GOVERNMENT SECURITIES: Foreign government securities are debt           
instruments issued, guaranteed, or supported, as to the payment of principal    
and interest, by foreign governments, foreign government agencies, foreign      
semi-governmental entities or supranational entities, or debt instruments       
issued by entities organized and operated for the purpose of restructuring the  
outstanding foreign government securities. Foreign government securities may    
not be supported as to the payment of principal and interest by the full faith  
and credit of the foreign government.                                           

FLOATING RATE LOANS: Floating rate loans are debt instruments issued by         
companies or other entities, with interest rates that reset periodically        
(typically daily, monthly, quarterly, or semiannually, based on a base lending  
rate such as the London Interbank Bank Offered Rate (LIBOR), plus a premium).   
Floating rate loans are typically structured and administered by a third party  
that acts as agent for the lenders participating in the floating rate loan.     
Floating rate loans can be acquired directly through the agent, by assignment   
from a third party holder of the loan, or as a participation interest in a      
third party holder's portion of the loan. Senior floating rate loans are        
secured by specific collateral of the borrower, and are senior to most other    
securities of the borrower (e.g., common stocks or other debt instruments) in   
the event of bankruptcy. Floating rate loans can be subject to restrictions on  
resale and can be less liquid than other types of securities.                   

EQUITY SECURITIES: Equity securities represent an ownership interest, or the    
right to acquire an ownership interest, in a company or other issuer. Different 
types of equity securities provide different voting and dividend rights and     
priorities in the event of bankruptcy of the issuer. Equity securities include  
common stocks, preferred stocks, securities convertible into stocks, and        
depository receipts for those securities.                                       

DERIVATIVES: Derivatives are financial instruments whose value is based on the  
value of one or more indicators, such as a security, asset, currency, interest  
rate, credit rating or index. Derivatives often involve a counterparty to the   
transaction. Derivatives include futures, forward contracts, options,           
structured notes, indexed securities, inverse floating rate instruments, swaps, 
caps, floors, and collars.                                                      

SHORT SALES: Short sales are transactions to sell a security that one does not  
own to a third party by borrowing the security in anticipation of purchasing    
the same security on a later date, for a lower price. The security borrowed     
must be purchased to close out the short position.                              

PRINCIPAL RISKS                                                                 

As with any mutual fund, you could lose money on your investment in the fund.   
An investment in the fund is not a bank deposit and is not insured or           
guaranteed by the Federal Deposit Insurance Corporation or any other            
governmental agency.                                                            

The principal risks of investing in the fund are:                               

INTEREST RATE RISK: The price of a debt instrument changes in response to       
interest rate changes. In general, the price of a debt instrument falls when    
interest rates rise and rises when interest rates fall. Instruments with longer 
maturities, or that do not pay current interest, are more sensitive to interest 
rate changes. In addition, short-term and long-term interest rates do not       
necessarily move in the same direction or by the same amount. An instrument's   
reaction to interest rate changes depends on the timing of its interest and     
principal payments and the current interest rate for each of those time         
periods. Instruments with floating interest rates can be less sensitive to      
interest rate changes. In response to an interest rate decline, instruments     
that provide the issuer with the right to call or redeem the instrument prior   
to maturity may be called or redeemed, resulting in the reinvestment of         
proceeds in other investments at a lower interest rate.                         

CREDIT RISK: The value of a debt instrument depends, in part, on the issuer's   
or borrower's credit quality or ability to pay principal and interest when due. 
The value of a debt instrument is likely to fall if an issuer or borrower       
defaults on its obligation to pay principal or interest or if the instrument's  
credit rating is downgraded by a credit rating agency. The value of a debt      
instrument can also decline in response to changes in the financial condition   
of the issuer or borrower, changes in specific market, economic, industry,      
political, and regulatory conditions that affect a particular type of           
instrument, issuer, or borrower, and changes in general market, economic,       
political, and regulatory conditions. Certain unanticipated events, such as     
natural disasters, terrorist attacks, war, and other geopolitical events can    
have a dramatic effect on the value of a debt instrument. For certain types of  
instruments, including derivatives, the value of the instrument depends in part 
on the credit quality of the counterparty to the transaction. For other types   
of debt instruments, including collateralized instruments, the price of the     
debt instrument also depends on the credit quality and adequacy of the          
underlying assets or collateral. Enforcing rights against the underlying assets 
or collateral may be difficult, or the underlying assets or collateral may be   
insufficient, if the issuer defaults.                                           

Lower quality debt instruments and certain unrated debt instruments can involve 
a substantially greater risk of default, and their values can decline           
significantly over short periods of time. Lower quality debt instruments are    
regarded as having predominantly speculative characteristics with respect to    
capacity to pay interest and principal. Lower quality debt instruments tend to  
be more sensitive to adverse news about the issuer, or the market or economy in 
general, than higher quality debt instruments. The market for lower quality     
debt instruments and certain unrated debt instruments can be less liquid,       
especially during periods of recession or general market decline.               

FOREIGN RISK: Investments in securities of foreign companies, securities of     
companies with significant foreign exposure, and foreign currencies can involve 
additional risks relating to market, economic, political, or regulatory         
conditions and developments. Political, social, and economic instability, the   
imposition of currency or capital controls, or the expropriation or             
nationalization of assets in a particular country can cause dramatic declines   
in that country's economy. Less stringent regulatory, accounting, and           
disclosure requirements for issuers and markets are more common in certain      
foreign countries. Enforcing legal rights can be difficult, costly, and slow in 
certain foreign countries, and can be particularly difficult against foreign    
governments. Additional risks of foreign investments include trading,           
settlement, custodial, and other operational risks, and withholding and other   
taxes. These factors can make foreign investments, especially those in emerging 
markets, more volatile and less liquid than U.S. investments. In addition,      
foreign markets can react differently to market, economic, political, or        
regulatory developments than the U.S. market.                                   

EMERGING MARKETS RISK: Emerging markets investments can involve additional and  
greater risks than the risks associated with investments in developed foreign   
markets securities. Emerging markets typically have less economic development,  
market structure and depth and regulatory oversight than developed countries.   
Emerging markets can also be subject to greater political, social, and economic 
instability. These factors can make emerging market investments more volatile   
and less liquid than investments in developed markets.                          

CURRENCY RISK: A decline in the value of a foreign currency relative to the     
U.S. dollar reduces the value of the foreign currency and investments           
denominated in that currency. In addition, the use of foreign exchange          
contracts to reduce foreign currency exposure can eliminate some or all of the  
benefit of an increase in the value of a foreign currency versus the U.S.       
dollar. The value of foreign currencies relative to the U.S. dollar fluctuates  
in response to, among other factors, interest rate changes, intervention (or    
failure to intervene) by U.S. or foreign governments, central banks, or         
supranational entities such as the International Monetary Fund, the imposition  
of currency controls, and other political or regulatory developments in the     
U.S. or abroad. Foreign currency values can decrease significantly both in the  
short term and over the long term in response to these and other developments.  

STOCK MARKET RISK: The price of an equity security fluctuates in response to    
issuer, market, economic, industry, political, and regulatory developments. In  
the short term, prices can decrease significantly in response to these          
developments, and these developments can affect a single issuer, issuers within 
a broad market sector, industry or geographic region, or the market in general. 
Different parts of the market and different types of securities can react       
differently to these developments. For example, the stocks of growth companies  
can react differently from the stocks of value companies, and the stocks of     
large cap companies can react differently from the stocks of small cap          
companies. Certain unanticipated events, such as natural disasters, terrorist   
attacks, war, and other geopolitical events, can have a dramatic effect on      
stock markets.                                                                  

COMPANY RISK: Changes in the financial condition of a company or other issuer,  
changes in specific market, economic, political, and regulatory conditions that 
affect a particular type of investment or issuer, and changes in general        
market, economic, political, and regulatory conditions can affect the price of  
an investment. The price of securities of smaller, less well-known companies    
can be more volatile than the price of securities of larger companies or the    
market in general.                                                              

DERIVATIVES RISK: Derivatives can be used to take both long and short positions 
(i.e., the value of a derivative can be positively or negatively related to the 
value of the underlying indicator(s) on which the derivative is based).         
Derivatives involve risks different from, and potentially greater than, those   
of the underlying indicator(s). The value of a derivative can move in           
unexpected ways, which may result in unanticipated losses and increased         
volatility if the relationship between the value of the derivative and the      
value of the indicator(s) is different than expected, or if the value of the    
underlying indicator(s) does not move in the direction or to the extent         
anticipated. Gains or losses from derivatives can be substantially greater than 
the derivatives' original cost. Derivatives can be less liquid than other types 
of investments.                                                                 

SHORT SALE RISK: Potential losses from a short sale are unlimited if the short  
sale cannot be closed out.                                                      

MANAGEMENT RISK: MFS' analysis of an investment can be incorrect and its        
selection of investments can lead to an investment focus that results in the    
fund underperforming other funds with similar investment strategies.            

COUNTERPARTY AND THIRD PARTY RISK: Transactions involving a counterparty other  
than the issuer of the instrument, or a third party responsible for servicing   
the instrument, are subject to the credit risk of the counterparty or third     
party, and to the counterparty's or third party's ability to perform in         
accordance with the terms of the transaction.                                   

LIQUIDITY RISK: Certain investments and types of investments are subject to     
restrictions on resale, may trade in the over-the-counter market or in limited  
volume, or may not have an active trading market, each of which can make it     
more difficult to purchase and sell them at an acceptable price.                

LEVERAGING RISK: Certain transactions, including when-issued, delayed-delivery, 
and forward commitment purchases, and some derivatives, can result in leverage. 
Leverage can cause increased volatility by magnifying gains or losses on        
underlying investments.                                                         

BAR CHART AND PERFORMANCE TABLE                                                 

The bar chart and performance table below are intended to indicate some of the  
risks of investing in the fund by showing changes in the fund's performance     
over time. The performance table also shows:                                    

o how the fund's performance over time compares with that of a broad measure
of market performance, and                                              

o returns before the deduction of taxes and returns after the deduction of  
certain taxes for Class A shares.                                       

The chart and table provide past performance information. The fund's past       
performance (before and after taxes) does not necessarily indicate how the fund 
will perform in the future. The performance information in the chart and table  
is based upon calendar year periods, while the performance information          
presented under the caption "Financial Highlights" and in the fund's            
shareholder reports is based upon the fund's fiscal year. Therefore, these      
performance results may differ.                                                 

BAR CHART. The bar chart shows changes over time in the annual total returns of 
Class A shares for each calendar year for the past ten years, assuming the      
reinvestment of distributions. Previously, the annual total returns for Class B 
were shown. Class A annual total returns are now being shown to be consistent   
with the presentation in prospectuses for other MFS funds. The chart and        
related notes do not take into account any sales charges (loads) that you may   
be required to pay upon purchase or redemption of the fund's shares. If these   
sales charges were included, they would reduce these returns. The return of the 
fund's other classes of shares will differ from the Class A share returns shown 
in the bar chart, depending upon the expenses of those classes.                 

CALENDAR YEAR                         

1999                    15.60%  
2000                    (4.25)% 
2001                     6.94%  
2002                     3.06%  
2003                    25.37%  
2004                    10.58%  
2005                     4.06%  
2006                    12.21%  

During the periods shown in the bar chart, the highest quarterly return was     
8.85% (for the calendar quarter ended December 31, 2001) and the lowest         
quarterly return was (6.45)% (for the calendar quarter ended December 31,       
2000).                                                                          

PERFORMANCE TABLE. This table shows how the average annual total returns of     
each class of the fund, before the deduction of taxes ("Returns Before Taxes"), 
compare to a broad measure of market performance, and assumes the deduction of  
the maximum applicable sales loads (initial sales charge and/or contingent      
deferred sales charge (CDSC), as applicable), and the reinvestment of           
distributions. In addition, for Class A shares, this table shows Class A        
average annual total returns:                                                   

o after the deduction of taxes on distributions made on Class A shares, such
as capital gains and income distributions ("Class A Shares' Return After
Taxes on Distributions"), and                                           

o after the deduction of taxes on both distributions made on Class A shares 
  and on redemption of Class A shares, assuming that the shares are redeemed
at the end of the periods for which returns are shown ("Class A Shares' 
Return After Taxes on Distributions and Sale of Class A Shares").       

Average Annual Total Returns (for the Periods Ended December 31, 2006)          

------------------------------------------------------------------------------- 
RETURNS BEFORE TAXES                                1 YEAR   5 YEARS      LIFE# 
------------------------------------------------------------------------------- 
SHARE CLASS                                                                     
------------------------------------------------------------------------------- 
B, with CDSC (Declining over Six Years from 4%                                  
to 0%)                                              7.48%     9.78%       6.19% 
------------------------------------------------------------------------------- 
C, with CDSC (1% for 12 Months)                     10.51%    10.04%      6.15% 
------------------------------------------------------------------------------- 
I, at Net Asset Value                               12.59%    11.12%      7.23% 
------------------------------------------------------------------------------- 
A, with Initial Sales Charge (4.75%)                6.88%     9.70%       6.25% 
------------------------------------------------------------------------------- 
RETURNS AFTER TAXES (CLASS A SHARES ONLY)                                       
------------------------------------------------------------------------------- 
A Shares' Return After Taxes on Distributions,                                  
with Initial Sales Charge (4.75%)                   4.02%     6.36%       2.42% 
------------------------------------------------------------------------------- 
A Shares' Return After Taxes on Distributions                                   
and Sale of Class A Shares, with Initial Sales                                  
Charge (4.75%)                                      4.37%     6.25%       2.82% 
------------------------------------------------------------------------------- 
BENCHMARK COMPARISON (RETURNS BEFORE TAXES)                                     
------------------------------------------------------------------------------- 
Lehman Brothers U.S. High-Yield Corporate Bond                                  
Index*+                                             11.87%    10.19%      5.74% 
------------------------------------------------------------------------------- 

# Life refers to the period from the commencement of the fund's investment      
operations, July 1, 1998, through December 31, 2006.                        
* Lehman Brothers U.S. High-Yield Corporate Bond Index measures the universe of 
non-investment grade, fixed rate debt. Eurobonds, and debt issues from      
 countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela,
etc.) are excluded.                                                         
+ Source: FactSet Research Systems Inc.                                         

All performance results reflect any applicable fee and expense waivers in       
effect during the periods shown; without these, the results would have been     
lower.                                                                          

After-tax returns are calculated using the historical highest individual        
federal marginal income tax rates, and do not reflect the impact of state and   
local taxes. Your actual after-tax returns will depend on your own tax          
situation, and may differ from those shown. The after-tax returns shown are not 
relevant to investors who hold their shares through tax-deferred arrangements,  
such as 401(k) plans or individual retirement accounts. The after-tax returns   
are shown for only one of the fund's classes of shares, and after-tax returns   
for the fund's other classes of shares will vary from the returns shown.        

The fund commenced investment operations July 1, 1998, with the offering of     
Class A, Class B, Class C, and Class I shares.                                  

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EXPENSE SUMMARY                                                                 

EXPENSE TABLE                                                                   

This table describes the fees and expenses that you may pay when you buy,       
redeem, and hold shares of the fund. The annual fund operating expenses are     
based on expenses incurred during the fund's most recently completed fiscal     
year. The fund's annual operating expenses may vary in future years.            

Shareholder Fees (fees paid directly from your investment):                     
--------------------------------------------------------------------------------
SHARE CLASS                               CLASS A    CLASS B   CLASS C   CLASS I
--------------------------------------------------------------------------------
Maximum Sales Charge (Load)                                                     
Imposed on Purchases (as a percentage                                           
of offering price)                         4.75%       N/A       N/A       N/A  
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)                                            
(as a percentage of original purchase                                           
price or redemption proceeds, whichever                                         
is less)                                See Below(#)   4.00%     1.00%      N/A 
--------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are deducted from fund assets):   
--------------------------------------------------------------------------------
SHARE CLASS                               CLASS A    CLASS B   CLASS C   CLASS I
--------------------------------------------------------------------------------
Management Fees                            0.65%      0.65%     0.65%     0.65% 
Distribution and Service (12b-1) Fees(1)   0.35%      1.00%     1.00%      N/A  
Other Expenses(2)                          0.27%      0.27%     0.27%     0.27% 
                                          -----      -----     -----     -----
Total Annual Fund Operating Expenses(2)    1.27%      1.92%     1.92%     0.92% 
    Fee Reductions(3)                     (0.42)%    (0.42)%   (0.42)%   (0.42)%
                                          -----      -----     -----     -----
Net Expenses (2)                           0.85%      1.50%     1.50%     0.50% 

# A contingent deferred sales charge (referred to as a CDSC) of 1% may be   
deducted from your redemption proceeds if you buy $1 million or more of 
 Class A shares or if you are investing through a retirement plan and your
  Class A purchase meets certain requirements and you redeem your investment
within 12 months of your purchase.                                      
(1) The fund's Rule 12b-1 plan permits it to pay distribution and/or service    
 fees to support the sale and distribution of the fund's Class A, Class B,
 and Class C shares and the services provided by financial intermediaries.
The maximum rates that may be charged under the plan, together with     
details of any fee reduction arrangements, are set forth under          
"Distribution and Service Fees."                                        
(2) The fund has entered into an expense offset arrangement that reduces the    
 fund's custodian fee based upon the amount of cash maintained by the fund
with its custodian and dividend disbursing agent. Such fee reduction is 
not reflected in the table. Had this fee reduction been taken into      
account, "Total Annual Fund Operating Expenses" would have been lower.  
(3) MFS has agreed in writing to reduce its management fee to 0.50% annually    
until at least February, 28, 2009. See "Management of the Fund -        
Investment Adviser." In addition, MFS has agreed in writing to bear the 
fund's expenses such that "Other Expenses," determined without giving   
effect to the expense offset arrangement described above, do not exceed 
 0.00% annually for each of Class A, Class B, Class C, and Class I shares.
 This written agreement excludes management fees, distribution and service
fees, taxes, extraordinary expenses, brokerage and transaction costs and
investment-related expenses, and will continue until at least May 31,   
2008.                                                                   

EXAMPLE OF EXPENSES                                                             

These examples are intended to help you compare the cost of investing in the    
fund with the cost of investing in other mutual funds.                          

The examples assume that:                                                       

o You invest $10,000 in the fund for the time periods indicated and you     
redeem your shares at the end of the time periods (unless otherwise     
indicated);                                                             

o Your investment has a 5% return each year and dividends and other         
distributions are reinvested; and                                       

 o The fund's operating expenses remain the same, except that the fund's total
operating expenses are assumed to be the fund's "Net Expenses" for the  
  period during which any written fee reductions are in effect (see "Expense
Summary - Expense Table" above).                                        

Although your actual costs may be higher or lower, under these assumptions your 
costs would be:                                                                 

--------------------------------------------------------------------------------
SHARE CLASS                               YEAR 1    YEAR 3    YEAR 5     YEAR 10
--------------------------------------------------------------------------------
A shares                                   $558      $808     $1,090     $1,891 
--------------------------------------------------------------------------------
B shares(1)                                                                     
--------------------------------------------------------------------------------
 Assuming redemption at end of period     $553      $851     $1,187     $2,030
--------------------------------------------------------------------------------
 Assuming no redemption                   $153      $551     $  987     $2,030
--------------------------------------------------------------------------------
C shares                                                                        
--------------------------------------------------------------------------------
 Assuming redemption at end of period     $253      $551     $  987     $2,200
--------------------------------------------------------------------------------
 Assuming no redemption                   $153      $551     $  987     $2,200
--------------------------------------------------------------------------------
I shares                                   $ 51      $240     $  457     $1,082 
--------------------------------------------------------------------------------

(1) Class B shares convert to class A shares approximately eight years after    
purchase; therefore, years nine and ten reflect class A expenses.       

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CERTAIN INVESTMENT POLICIES AND RISKS                                           

TURNOVER                                                                        

MFS may engage in active and frequent trading in pursuing the fund's principal  
investment strategies. Frequent trading can result in the realization of a      
higher percentage of short-term capital gains and a lower percentage of         
long-term capital gains as compared to a fund that trades less frequently.      
Because short-term capital gains are distributed as ordinary income, this would 
generally increase your tax liability unless you hold your shares through a     
tax-deferred or exempt vehicle. Frequent trading also increases transaction     
costs, which may reduce the fund's return.                                      

TEMPORARY DEFENSIVE POLICY                                                      

In response to market, economic, political, or other conditions, MFS may depart 
from the fund's principal investment strategies by temporarily investing for    
defensive purposes. When MFS invests defensively, different factors could       
affect the fund's performance and the fund may not achieve its investment       
objective. In addition, the defensive strategy may not work as intended.        

FURTHER INFORMATION ON INVESTMENT STRATEGIES AND RISKS                          

Information about investment strategies and investment types not described in   
the Prospectus and the risks associated with those investment strategies and    
investment types are described in the fund's Statement of Additional            
Information ("SAI").                                                            

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MANAGEMENT OF THE FUND                                                          

INVESTMENT ADVISER                                                              

Massachusetts Financial Services Company ("MFS"), located at 500 Boylston       
Street, Boston, Massachusetts, serves as the investment adviser for the fund.   
Subject to the supervision of the Board of Trustees, MFS is responsible for     
managing the fund's investments, executing transactions and providing related   
administrative services and facilities under an Investment Advisory Agreement   
between the fund and MFS.                                                       

For the fiscal year ended January 31, 2007, the fund paid MFS an effective      
management fee equal to 0.50% of the fund's average daily net assets.           

The management fee set forth in the Investment Advisory Agreement is 0.65% of   
the fund's average daily net assets. MFS has agreed in writing to reduce its    
management fee to 0.50% annually of the fund's average daily net assets. MFS    
has agreed in writing to maintain this management fee reduction until February  
28, 2009, as part of its settlement with the New York Attorney General          
concerning market timing and related matters.                                   

A discussion regarding the basis for the Board of Trustees' approval of the     
Investment Advisory Agreement is available in the fund's most recent            
semi-annual report for the six-month period that ends July 31.                  

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, Massachusetts Investors Trust. Net assets    
under the management of the MFS organization were approximately $187 billion as 
of December 31, 2006.                                                           

Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,      
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various    
MFS funds, certain current and/or former Trustees of the MFS funds, and certain 
officers of MFS have been named as defendants in multiple lawsuits filed in     
federal and state courts. The various lawsuits generally allege that some or    
all of the defendants (i) permitted or acquiesced in market timing and/or late  
trading in some of the MFS funds, and inadequately disclosed MFS' internal      
policies concerning market timing and such matters, (ii) received excessive     
compensation as fiduciaries with respect to the MFS funds, or (iii) permitted   
or acquiesced in the improper use of fund assets by MFS to support the          
distribution of MFS fund shares and inadequately disclosed MFS' use of fund     
assets in this manner. The lawsuits assert that some or all of the defendants   
violated the federal securities laws, including the Securities Act of 1933 and  
the Securities Exchange Act of 1934, the Investment Company Act of 1940, and    
the Investment Advisers Act of 1940, the Employee Retirement Income Security    
Act of 1974 (ERISA), as well as fiduciary duties and other violations of common 
law. The lawsuits variously have been commenced as class actions or individual  
actions on behalf of investors who purchased, held, or redeemed shares of the   
MFS funds during specified periods, as ERISA actions by participants in certain 
retirement plan accounts on behalf of those accounts, or as derivative actions  
on behalf of the MFS funds.                                                     

The lawsuits relating to market timing and related matters have been            
transferred to, and consolidated before, the United States District Court for   
the District of Maryland, as part of a multi-district litigation of market      
timing and related claims involving several other fund complexes (In re Mutual  
Funds Investment Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam,    
Allianz Dresdner), No. 1:04-md-15863 (transfer began March 19, 2004)). The      
market timing cases related to the MFS funds include Riggs v. MFS et al., Case  
No. 04-CV-01162-JFM (direct), Hammerslough v. MFS et al., Case No. 04-MD-01620  
(derivative), Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA), and   
Reaves v. MFS Series Trust I, et al., Case No. 1:05-CV-02220-JFM (Class B       
Shares). The plaintiffs in these consolidated lawsuits generally seek           
injunctive relief including removal of the named Trustees, adviser and          
distributor, rescission of contracts and 12b-1 Plans, disgorgement of fees and  
profits, monetary damages, punitive damages, attorney's fees and costs and      
other equitable and declaratory relief. Two lawsuits alleging improper          
brokerage allocation practices and excessive compensation are pending in the    
United States District Court for the District of Massachusetts (Forsythe v. Sun 
Life Financial Inc., et al., No. 04cv10584 (GAO) (a consolidated action, first  
filed on March 25, 2004) and Marcus Dumond, et al. v. Massachusetts Financial   
Servs. Co., et al., No. 04cv11458 (GAO) (filed on May 4, 2004)). The plaintiffs 
in these lawsuits generally seek compensatory damages, punitive damages,        
recovery of fees, rescission of contracts, an accounting, restitution,          
declaratory relief, equitable and/or injunctive relief and attorney's fees and  
costs. Insofar as any of the actions is appropriately brought derivatively on   
behalf of any of the MFS funds, any recovery will inure to the benefit of the   
MFS funds. Several claims of the various lawsuits have been dismissed; MFS and  
the other named defendants continue to defend the various lawsuits.             

DISCLOSURE OF PORTFOLIO HOLDINGS. The MFS funds have established a policy with  
respect to the disclosure of fund portfolio holdings. A description of this     
policy is provided in the SAI. In addition, by clicking on a fund name under    
"Select a fund" on the MFS Web site (MFS.COM), the following information is     
generally available to you:                                                     

------------------------------------------------------------------- 
                                       APPROXIMATE DATE OF POSTING
INFORMATION                             TO WEB SITE                 
------------------------------------------------------------------- 
Fund's full securities holdings as                                  
of each month's end                       24 days after month end   
------------------------------------------------------------------- 
Fund's top 10 securities holdings                                   
as of each month's end                    14 days after month end   
------------------------------------------------------------------- 

If a fund has substantial investments in both equity and debt instruments, the  
fund's top 10 equity holdings and top 10 debt holdings will be made available.  
In addition, for funds that primarily invest in shares of the other MFS funds,  
all securities holdings in shares of MFS funds, the top 10 aggregated equity    
holdings within the underlying MFS funds, and the top 10 aggregated debt        
holdings within the underlying MFS funds will be made available.                

Note that the funds or MFS may suspend the posting of this information or       
modify the elements of this web posting policy without notice to shareholders.  
Once posted, the above information will remain available on the Web site until  
at least the date on which the fund files a Form N-CSR or Form N-Q for the      
period that includes the date as of which the Web site information is current.  

PORTFOLIO MANAGER(S)                                                            

Information regarding the portfolio manager(s) of the fund is set forth below.  
Further information regarding the portfolio manager(s), including other         
accounts managed, compensation, ownership of fund shares, and possible          
conflicts of interest, is available in the fund's SAI. The portfolio manager is 
primarily responsible for the day-to-day management of the fund.                

--------------------------------------------------------------------------------
PORTFOLIO MANAGER    PRIMARY ROLE       SINCE    TITLE AND FIVE YEAR HISTORY    
--------------------------------------------------------------------------------
                                                 Vice President of MFS; employed
                  Portfolio                   in the investment management
John Addeo           Manager            2000     area of MFS since 1998.        
--------------------------------------------------------------------------------
                                                 Vice President of MFS; employed
                                              in the investment management
                                               area of MFS since 2004.  High
                                           Yield Analyst at Franklin
                Portfolio          October  Templeton Investments from
David P. Cole        Manager            2006     1999 to 2004.                  
--------------------------------------------------------------------------------
                   Emerging                    Senior Vice President of MFS;
                Market Debt                 employed in the investment
                  Securities                  management area of MFS since
Matthew W. Ryan      Portfolio Manager  2005     1997.                          
--------------------------------------------------------------------------------

ADMINISTRATOR                                                                   

MFS provides the fund with certain financial, legal, and other administrative   
services under a Master Administrative Services Agreement between the fund and  
MFS. Under the Agreement, MFS is paid an annual fee for providing these         
services.                                                                       

DISTRIBUTOR                                                                     

MFS Fund Distributors, Inc. (referred to as MFD), a wholly owned subsidiary of  
MFS, is the distributor of shares of the fund.                                  

SHAREHOLDER SERVICING AGENT                                                     

MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS, provides   
transfer agent and recordkeeping functions in connection with the issuance,     
transfer, and redemption of each class of shares of the fund under a            
Shareholder Servicing Agent Agreement. Under the Agreement, MFSC may receive a  
fee based on the costs it incurs in providing these services, including         
payments made to affiliated and unaffiliated service providers that provide     
certain accounting, network, subtransfer agent and other shareholder services   
(shareholder servicing payments) and out-of-pocket expenses, plus a target      
profit margin.                                                                  

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DESCRIPTION OF SHARE CLASSES                                                    

The fund offers Class A, Class B, Class C, and Class I shares through this      
prospectus.                                                                     

Class I shares generally are available only to the following eligible           
investors:                                                                      

o certain retirement plans established for the benefit of employees and     
former employees of MFS or its affiliates;                              

o funds distributed by MFD that invest primarily in shares of MFS funds;    

o retirement plans, endowments or foundations that: (i) have, at the time of
  purchase of Class I shares, aggregate assets of at least $100 million; and
(ii) invest at least $10 million in Class I shares of the fund and other
MFS funds;                                                              

o bank trust departments or law firms acting as trustee or manager for trust
accounts which, on behalf of their clients (i) initially invest at least
$100,000 in Class I shares of the fund, or (ii) have, at the time of    
purchase of Class I shares, aggregate assets of at least $10 million    
invested in Class I shares of the fund and other MFS funds; and         

o certain retirement plans offered, administered, or sponsored by insurance 
companies, as permitted by MFD based on their overall relationship with 
MFS.                                                                    

In addition, MFD may accept, in its sole discretion, investments in Class I     
shares from purchasers not listed above or that do not meet these qualification 
requirements.                                                                   

SALES CHARGES AND WAIVERS OR REDUCTIONS                                         

You may be subject to an initial sales charge when you purchase Class A, or a   
CDSC when you redeem Class A, Class B, or Class C shares. These sales charges   
are paid to MFD.                                                                

In the circumstances described below, you may qualify for a sales charge waiver 
or reduction for purchases or redemptions of Class A, Class B, or Class C       
shares. In addition, other sales charge waivers or reductions may apply to      
certain transactions by retirement plans, section 529 tuition programs, and     
certain other groups (e.g., affiliated persons of MFS) and with respect to      
certain types of investment programs (e.g., certain wrap accounts or fund       
supermarket investments). Details regarding the types of investment programs    
and categories of investors eligible for these waivers or reductions are        
provided in the SAI, which is available to you free of charge, and on the       
fund's Web site at MFS.COM. Some of these programs and waivers or reductions    
may not be available to you if your shares are held through certain types of    
accounts, such as retirement accounts and 529s plans, or certain accounts that  
you may have with your financial intermediary. Waivers or reductions may be     
eliminated, modified, and added at any time without providing advance notice.   

CLASS A SHARES. You may purchase Class A shares at the offering price (which    
includes the applicable initial sales charge). In some cases, you may purchase  
Class A shares without an initial sales charge; in these cases, you will        
generally be subject to a 1% CDSC upon redemption within 12 months of your      
purchase.                                                                       

The amount of the initial sales charge you pay when you buy Class A shares      
differs depending upon the amount you invest, as follows:                       

--------------------------------------------------------------------------------
                                 INITIAL SALES CHARGE* AS PERCENTAGE OF:
                                 ---------------------------------------
                                 GROSS PURCHASE AMOUNT       NET AMOUNT INVESTED
AMOUNT OF PURCHASE                 (OFFERING PRICE*)                            
--------------------------------------------------------------------------------
Less than $50,000                        4.75%                      4.99%       
--------------------------------------------------------------------------------
$50,000 but less than $100,000           4.25%                      4.44%       
--------------------------------------------------------------------------------
$100,000 but less than $250,000          3.75%                      3.90%       
--------------------------------------------------------------------------------
$250,000 but less than $500,000          2.75%                      2.83%       
--------------------------------------------------------------------------------
$500,000 but less than                                                          
$1,000,000                               2.00%                      2.04%       
--------------------------------------------------------------------------------
$1,000,000 or more                       None**                    None**       
--------------------------------------------------------------------------------

* Offering price is calculated by dividing the net asset value of a share by  
the difference between 1 and the initial sales charge percentage. Because 
the offering price is rounded to two decimal places, actual sales charges 
you pay may be more or less than those calculated using these percentages.
** A 1% CDSC will generally apply to such purchases.                            

You pay no initial sales charge when you invest $1 million or more in Class A   
shares (or, with respect to certain retirement plans, if MFD determines in its  
sole discretion that the total purchases by the retirement plan (or by multiple 
plans maintained by the same plan sponsor) will equal or exceed within a        
reasonable period of time a specified threshold determined by MFD). However, a  
CDSC of 1% will generally be deducted from your redemption proceeds if you      
redeem within 12 months of your purchase.                                       

CLASS B SHARES. You may purchase Class B shares at net asset value without an   
initial sales charge, but if you redeem your shares within the first six years  
after purchase, you may be subject to a CDSC (declining from 4% during the      
first year to 0% after six years).                                              

The CDSC is imposed according to the following schedule:                        

------------------------------------------------------------------------------- 
YEAR OF REDEMPTION AFTER PURCHASE         1st   2nd   3rd   4th  5th   6th  7th 
------------------------------------------------------------------------------- 
CONTINGENT DEFERRED SALES CHARGE           4%    4%    3%   3%    2%   1%    0% 
------------------------------------------------------------------------------- 

If you hold Class B shares for approximately eight years, they will convert to  
Class A shares of the fund. All Class B shares you acquire through the          
reinvestment of dividends and distributions will be held in a separate          
sub-account. Each time any Class B shares in your account convert to Class A    
shares, a proportionate number of the Class B shares in the sub-account will    
also convert to Class A shares.                                                 

CLASS C SHARES. You may purchase Class C shares at net asset value without an   
initial sales charge. However, a CDSC of 1% will generally be deducted from     
your redemption proceeds if you redeem within 12 months of your purchase.       

CLASS I SHARES. Eligible investors may purchase Class I shares at net asset     
value without an initial sales charge or a CDSC upon redemption.                

SALES CHARGE WAIVERS OR REDUCTIONS. Below is a summary of certain investor      
programs whereby the applicable sales charge may be waived or reduced. You or   
your financial intermediary must inform MFSC upon purchasing fund shares of     
your intention to invest in a fund under one of the programs below. You can     
provide this information in your account application or through a separate      
document provided by your financial intermediary.                               

------------------------------------------------------------------------------- 
                                   INVESTMENTS ELIGIBLE FOR:
                                   -------------------------
                              WAIVED INITIAL   REDUCED INITIAL        WAIVED
PROGRAM                          SALES CHARGE      SALES CHARGE          CDSC   
------------------------------------------------------------------------------- 
Letter of Intent                                        X                       
------------------------------------------------------------------------------- 
Right of Accumulation                                   X                       
------------------------------------------------------------------------------- 
Automatic Exchange Plan               X*                                        
------------------------------------------------------------------------------- 
Exchange Privilege                    X*                                        
------------------------------------------------------------------------------- 
Systematic Withdrawal Plan                                               X**    
------------------------------------------------------------------------------- 
Distribution Reinvestment              X                                        
------------------------------------------------------------------------------- 
Distribution Investment Program        X                                        
------------------------------------------------------------------------------- 
Other Sales Charge Waivers             X                                  X     
------------------------------------------------------------------------------- 

* Investments under the Automatic Exchange Plan or certain other exchanges    
under the Exchange Privilege may be subject to a sales charge in certain  
cases.                                                                    
** Not available for Class A shares and limited for Class B and Class C shares. 

 o LETTER OF INTENT (LOI). You may pay a reduced or no initial sales charge on
purchases of Class A shares if you intend to invest a specific dollar   
  amount, based on the gross amount of your investment (including the amount
of any sales charge paid), including investments through any linked     
accounts in any class of any MFS fund (and the MFS Fixed Fund, a bank   
 collective investment trust) within a 13-month period (36 months for a $1
 million commitment). Distributions reinvested in additional shares of the
   fund or distributions from other MFS funds automatically invested in shares
of the fund will not apply toward the satisfaction of the LOI.          

For each purchase you make under the LOI you will pay the initial sales 
charge rate applicable to the total amount you intended to purchase. If,
 however, you do not purchase the intended amount within the relevant time
   period, your account will be adjusted by redemption of the amount of shares
   needed to pay the higher initial sales charge level for the amount actually
purchased.                                                              

 To establish a LOI, you may complete the Letter of Intent section of your
account application or service application. In order to benefit from the
   LOI, you or your financial intermediary must inform MFSC that the LOI is in
effect each time shares of a fund are purchased.                        

o RIGHT OF ACCUMULATION (ROA). Under the ROA, you may pay a reduced or no   
initial sales charge on purchases of Class A shares by aggregating the  
total dollar amount of your investment with your existing investments or
  any linked accounts in any class of any MFS fund (and the MFS Fixed Fund),
based on the current maximum public offering price of the funds. For    
 example, you will pay a sales charge on your current purchase at the rate
 applicable to the total value of all eligible accounts based on the sales
charge schedule above.                                                  

o LINKING ACCOUNTS FOR LOI AND ROA. For purposes of obtaining reduced sales 
charges under the LOI and ROA, you may combine the value of your current
  purchase of shares of an MFS fund with the value of existing accounts held
with the MFS funds (or the MFS Fixed Fund) by you, your spouse (or legal
  equivalent under applicable state law), and your children under the age of
21.                                                                     

Eligible accounts that you may link under a LOI and ROA may include:    

o Individual accounts;                                                  

o Joint accounts;                                                       

o Trust accounts of which you, your spouse (or legal equivalent under   
applicable state law), or child under the age of 21 is the grantor; 

o MFS 529 College Savings Plan accounts;                                

o Certain single-participant retirement plan accounts;                  

o Certain Individual Retirement Accounts;                               

o Uniform Gifts/Transfers to Minor Acts accounts; and                   

  o Accounts held in the name of your financial intermediary on your behalf,
except accounts investing in Class W shares of certain MFS funds.   

   In order to link such accounts under a LOI or ROA, the broker/dealer at the
  time of your current purchase must be the broker/dealer for any additional
 accounts to be linked. MFS fund shares held as follows cannot be combined
with your current purchase for purposes of a LOI or ROA:                

o Shares held indirectly through financial intermediaries other than the
     broker/dealer for your current purchase (or the clearing broker/dealer of
   your broker/dealer so long as the clearing broker/dealer has a separate
account with MFSC for your account) (for example, shares held in a  
    different broker/dealer's brokerage account or with a bank, an insurance
company separate account or an investment adviser); or              

  o Shares held directly in a MFS fund account on which the broker/dealer is
different than the broker/dealer for your current purchase.         

It is your responsibility to inform the broker/dealer for each current  
purchase of any accounts held with the MFS funds that you believe are   
eligible to be linked under a LOI or a ROA. If you have not designated a
broker/dealer, you should inform MFSC directly of any accounts held with
 the MFS funds that you believe are eligible to be linked under a LOI or a
  ROA. You should provide your financial intermediary (including MFSC if you
   have not designated a broker/dealer) with certain supporting information at
 the time of each purchase regarding accounts held with the MFS funds that
  are eligible to be combined for purposes of a LOI or ROA. Such information
may include shareholder identification numbers or applicable account    
numbers or account statements. You should request that your financial   
intermediary provide this information to the funds or their agents when 
placing each purchase order.                                            

  SPECIAL NOTE FOR LOI OR ROA ELIGIBLE ACCOUNTS LINKED PRIOR TO MAY 1, 2006.
 Any LOI or ROA eligible accounts linked prior to May 1, 2006, will remain
   linked to the extent the broker/dealer information for such accounts is not
 modified. In the event you change the broker/dealer for any such account,
 your accounts will no longer be eligible to be linked under a LOI or ROA.
   In addition, you will not be able to link additional accounts to the extent
they do not meet the criteria discussed above.                          

o AUTOMATIC EXCHANGE PLAN. If you have an account balance of at least $2,000
in the fund, you may participate in the automatic exchange plan, a      
dollar-cost averaging program. This plan permits you to make automatic  
periodic exchanges from your account in the fund for shares of the same 
class of other MFS funds. Exchanges will generally be made at net asset 
value without any sales charges. If you exchange shares out of the MFS  
 Money Market Fund or MFS Government Money Market Fund, or if you exchange
  Class A shares out of the MFS Cash Reserve Fund into Class A shares of any
other MFS fund, you will pay an initial sales charge if you have not    
already paid this charge on these shares.                               

o SYSTEMATIC WITHDRAWAL PLAN. If you have an account balance of at least    
  $5,000 in your account in the fund, you may elect to receive (or designate
 someone else to receive) regular periodic payments (of at least $50 if by
check) through an automatic redemption of Class A, Class B, Class C, or 
  Class I. For Class B and Class C shares, you may incur a CDSC when Class B
or Class C shares are redeemed under the plan (or plans if more than one
plan is established) if amounts greater than 10% of the value of your   
account are withdrawn under the plan(s) in any one year (with respect to
 Class B shares, determined at the time of your first withdrawal under the
plan(s) or January 1, 2007, whichever is later and reset annually       
 thereafter and with respect to Class C shares, determined at the time the
   plan is established). For Class A shares, you may incur a CDSC when Class A
shares are redeemed under this plan.                                    

o DISTRIBUTION REINVESTMENT. You may automatically reinvest dividend and    
   capital gain distributions in the same fund without paying an initial sales
charge.                                                                 

o DISTRIBUTION INVESTMENT PROGRAM. You may automatically reinvest dividend  
and capital gain distributions into the same class of another MFS fund  
without paying a CDSC or an initial sales charge.                       

CALCULATION OF CDSC. As discussed above, certain investments in Class A, Class  
B, and Class C shares are subject to a CDSC. For purposes of calculating the    
CDSC, purchases made on any day during a calendar month will age one month on   
the last day of that month, and on the last day of each subsequent month. For   
example, a 1% CDSC on Class A shares purchased on August 10 will expire at the  
close of business on July 31 of the following calendar year, and a redemption   
of those shares made on or after August 1 of the following calendar year will   
not be subject to the CDSC.                                                     

Shares acquired through reinvestment of distributions are not subject to a      
CDSC. The CDSC is based on the original purchase cost or the current market     
value of the shares being sold, whichever is less. For purposes of determining  
the CDSC, if you sell only some of your shares, shares not subject to a CDSC    
are sold first, followed by shares held the longest.                            

DISTRIBUTION AND SERVICE FEES                                                   

The fund has adopted a plan in accordance with Rule 12b-1 under the Investment  
Company Act of 1940, as amended (the "Distribution Plan"). Under the            
Distribution Plan, the fund pays distribution and service fees to MFD to        
support the sale and distribution of Class A, Class B, and Class C shares, as   
well as shareholder servicing and account maintenance activities. The fund has  
not adopted a Rule 12b-1 plan with respect to its Class I shares. These         
distribution and service fees equal on an annual basis up to the following      
maximum percentages of average daily net assets of the class:                   

--------------------------------------------------------------------------------
                                                                 MAXIMUM TOTAL
                       MAXIMUM                                  DISTRIBUTION AND
CLASS             DISTRIBUTION FEE      MAXIMUM SERVICE FEE        SERVICE FEE  
--------------------------------------------------------------------------------
Class A                 0.10%                  0.25%                  0.35%     
--------------------------------------------------------------------------------
Class B                 0.75%                  0.25%                  1.00%     
--------------------------------------------------------------------------------
Class C                 0.75%                  0.25%                  1.00%     
--------------------------------------------------------------------------------

These fees are paid out of fund assets of the applicable class of shares.       
Because these fees are an ongoing expense of the fund, they increase the cost   
of your investment over time and may cost you more than other types of sales    
charges.                                                                        

FINANCIAL INTERMEDIARY COMPENSATION                                             

The term "financial intermediary" includes any broker/dealer, bank (including   
bank trust departments), registered investment adviser, financial planner,      
retirement plan administrator, third-party administrator, insurance company,    
and any other institutions having a selling, administration, or any similar     
agreement with MFD, MFS, or one of its affiliates.                              

Financial intermediaries receive various forms of compensation in connection    
with the sale of shares of a fund and/or the servicing of shareholder accounts. 
Financial intermediaries may receive such compensation (i) in the form of up    
front commissions and ongoing asset-based compensation paid by MFD based on     
sales charges received and expected to be received by MFD from shareholders and 
Distribution Plan distribution and service payments received by MFD from the    
fund, (ii) in the form of shareholder servicing payments paid by MFD and/or one 
or more of its affiliates (for purposes of this section only, collectively,     
"MFD") based on the receipt of such payments by MFD from the fund, and (iii) in 
the form of payments paid by MFD from MFD's own additional resources.           

The types of payments described above are not exclusive. Accordingly, financial 
intermediaries may receive payments under all or any combination of the         
above-referenced categories and such payments can be significant to the         
financial intermediary. In addition, the compensation that financial            
intermediaries receive may vary by class of shares sold and among financial     
intermediaries. Depending upon the arrangements in place at any particular      
time, financial intermediaries may have a financial incentive to recommend a    
particular fund or share class.                                                 

Financial intermediaries may receive up front commissions of up to the          
following percentage amounts for sales of the following share classes:          

------------------------------------------------------------------------------- 
                                          UP FRONT COMMISSION AS A
        SHARE CLASS                       PERCENTAGE OF OFFERING PRICE
------------------------------------------------------------------------------- 
Class A                                    4.75%  
------------------------------------------------------------------------------- 
Class B                                    3.75%  
------------------------------------------------------------------------------- 
Class C                                    1.00%  
------------------------------------------------------------------------------- 

Financial intermediaries may also receive all or a portion of the following     
payments: Distribution Plan distribution and service fees as described in       
"Description of Share Classes - Distribution and Service Fees"; and shareholder 
servicing payments as described in "Management of the Fund - Shareholder        
Servicing Agent."                                                               

In addition, financial intermediaries may receive payments from MFD from MFD's  
own additional resources as incentives to market the MFS funds, to cooperate    
with MFD's promotional efforts and/or in recognition of their marketing,        
administrative services, and/or processing support. This compensation from MFD  
is not reflected in the fees and expenses listed in the fee table section of    
the fund's prospectus. MFD compensates financial intermediaries based on        
criteria established by MFD from time to time that consider, among other        
factors, the level and/or type of marketing and administrative support provided 
by the financial intermediary, the level of assets attributable to and/or sales 
by the financial intermediary and the quality of the overall relationship with  
the financial intermediary.                                                     

These additional payments by MFD may take the form of payments to financial     
intermediaries that provide marketing support and administrative services to    
MFD with respect to fund shares sold or held through the financial              
intermediary's retail distribution network and/or through programs such as      
retirement programs, qualified tuition programs, fund supermarkets, fee-based   
advisory or wrap fee programs, bank trust programs, and insurance (e.g.,        
individual or group annuity) programs. MFD may also make payments to financial  
intermediaries to help offset the cost associated with client account           
maintenance support, statement preparation, and transaction processing. To the  
extent permitted by SEC and NASD rules and other applicable laws and            
regulations, MFD may make other payments or allow other promotional incentives  
or payments to financial intermediaries.                                        

You can find further details in the SAI about the payments made by MFD and the  
services provided by financial intermediaries. Financial intermediaries may     
charge you additional fees and/or commissions other than those disclosed in     
this prospectus. You can ask your financial intermediary for information about  
any payments it receives from MFD and any services it provides, as well as      
about fees and/or commissions it charges. Financial intermediaries that sell    
fund shares may also act as a broker/dealer in connection with a MFS fund's     
purchase or sale of portfolio securities. However, the fund and MFS do not      
consider financial intermediaries' sales of shares of a MFS fund as a factor    
when choosing broker/dealers to effect portfolio transactions for the MFS       
funds.                                                                          

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HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES                                     

You may purchase, redeem, and exchange shares of the fund in the manner         
described below. If you buy or sell shares of a fund through a retirement       
account, 529 plan, or financial intermediary, the procedures for buying,        
selling, and exchanging shares of the fund and the features, policies and fees  
may differ from those discussed in this prospectus.                             

HOW TO PURCHASE SHARES                                                          

Your shares will be bought at the offering price (the net asset value per share 
plus any applicable initial sales charge) next calculated after your purchase   
order is received in proper form. MFSC reserves the right to reject any         
purchase order that is not in proper form. The specific requirements for proper 
form vary among account types and transactions. Certain restrictions apply to   
the use of a transfer on death registration. You or your financial intermediary 
should contact MFSC to obtain a Transfer on Death registration form and for     
information regarding MFSC's other requirements for transfer on death           
registrations.                                                                  

The fund may reject for any reason, or cancel as permitted or required by law,  
any purchase orders, including exchanges. The fund may stop offering shares     
completely, or may offer shares only on a limited basis, for a period of time   
or permanently.                                                                 

The fund is required by law to obtain from you certain personal information     
that will be used to verify your identify. If you do not provide the            
information, the fund may not be able to open your account. The fund must also  
take certain steps to verify that the account information you provide is        
correct.                                                                        

CLASS A, CLASS B, AND CLASS C SHARES. With respect to Class A, Class B, and     
Class C shares, you can establish an account by having your financial           
intermediary process your purchase. The minimum initial investment is generally 
$1,000, except for: fee-based and wrap accounts offered through certain         
financial intermediaries, for which there is no minimum initial investment; and 
IRAs, for which the minimum initial investment is generally $250 ($200 for      
rollovers from certain Serviced Plans). In addition, the minimum initial        
investment is $50 for automatic investment or exchange plans. MFSC waives or    
lowers the initial investment minimum for certain types of investors and        
investments.                                                                    

Purchases of Class B shares are subject to a total account value limitation at  
the time of purchase of $99,999, and purchases of Class C shares are subject to 
a total account value limitation at the time of purchase of $999,999. If your   
existing accounts for all share classes held with the MFS funds have a total    
value equal to $99,999 for Class B share purchases or $999,999 for Class C      
share purchases, you will not be able to purchase Class B or Class C shares, as 
applicable. For the purpose of determining your total account value, existing   
accounts for all share classes held with the MFS funds that are linked under a  
LOI or ROA will be included.                                                    

The fund or its agents may at their discretion accept a purchase request for    
Class B shares or Class C shares that would otherwise exceed the total account  
value limitation of $99,999 and $999,999, respectively, under certain           
circumstances, including, but not limited to, purchases by certain types of     
group retirement plans sponsored or serviced by MFS or an affiliate.            

You may have your financial intermediary process your subsequent purchases or   
you may contact MFS directly. Generally, there is no minimum for subsequent     
investments except there is generally a $50 minimum for subsequent investments  
by check and through automatic exchange plans.                                  

o ADDITIONAL PURCHASES DIRECTLY THROUGH MFSC.                               

 o BY MAIL. You may purchase additional shares by mailing a check with the
returnable portion of your statement to MFSC.                       

   o BY TELEPHONE. You may purchase additional shares by transferring money by
phone from your pre-designated bank account. You must elect this    
privilege on your account application or service application.       

  o ELECTRONICALLY. You may purchase additional shares from a pre-designated
 bank account via the Internet at mfs.com (MFS Access). You must elect
 this privilege on your account application or service application and
 establish a personal identification number (PIN) on MFS Access to use
this service.                                                       

o BY WIRE. To purchase additional shares by wire, call MFSC for         
instructions.                                                       

o AUTOMATIC INVESTMENT PLAN. You may purchase additional shares by      
     automatically investing a designated amount from your checking or savings
  account on any day of the month. You must elect this privilege on your
account application or service application.                         

 o ADDITIONAL PURCHASES THROUGH YOUR FINANCIAL INTERMEDIARY. You can have your
financial intermediary purchase shares on your behalf. Your financial   
  intermediary will be responsible for furnishing all necessary documents to
MFSC and may charge you for this service.                               

CLASS I SHARES. With respect to Class I shares, you can establish an account    
through your MFD representative, by contacting MFSC directly, or by having your 
financial intermediary process your purchase. Generally, there are no initial   
or subsequent investment minimums except as may be required to be an eligible   
purchaser of Class I shares.                                                    

HOW TO REDEEM SHARES                                                            

Your shares will be sold at the net asset value per share next calculated after 
your redemption order is received in proper form, minus any applicable CDSC.    
MFSC reserves the right to reject any redemption request that is not in proper  
form. The specific requirements for proper form vary among types of accounts    
and transactions. In certain circumstances, you may need to have your signature 
guaranteed and/or submit additional documentation to redeem your shares. In     
general, no signature guarantee is required for a redemption order for up to    
$100,000 that is signed by all owners or fiduciaries identified in the account  
registration, paid as registered, and mailed to the address of record.          

The fund normally sends out your redemption proceeds within seven days after    
your request is received in proper form. Under unusual circumstances, such as   
when the New York Stock Exchange is closed, trading on the Exchange is          
restricted, or as permitted by the SEC, the fund may suspend redemptions or     
postpone payment for more than seven days. Redemption proceeds (other than      
exchanges) may be delayed until money from prior purchases sufficient to cover  
your redemption has been received and collected. This can take up to seven days 
after a purchase.                                                               

You may redeem your shares either by having your financial intermediary process 
your redemption or by contacting MFSC directly.                                 

REDEEMING DIRECTLY THROUGH MFSC.                                                

o BY MAIL. To redeem shares by mail, you can send a letter to MFSC with the 
 name of the fund, your account number, and the number of shares or dollar
amount to be redeemed.                                                  

o BY TELEPHONE. If a signature guarantee is not required, you can call MFSC 
to have shares redeemed from your account and proceeds mailed to the    
address of record on the account. You can also call MFSC to have shares 
redeemed from your account and the proceeds wired directly to a         
  pre-designated bank account. You must elect this privilege on your account
application or service application if you wish to have proceeds wired to
your bank account.                                                      

o ELECTRONICALLY. You can have shares redeemed from your account and the    
 proceeds wired directly to a pre-designated bank account via the Internet
at mfs.com (MFS Access). You must elect this privilege on your account  
  application or service application and establish a personal identification
number (PIN) on MFS Access to use this service.                         

o SYSTEMATIC WITHDRAWAL PLAN. For Class A, Class B, Class C, or Class I     
 shares, you may elect to automatically receive (or designate someone else
to receive) regular periodic payments through an automatic redemption of
such classes. Please contact MFSC for details.                          

REDEEMING THROUGH YOUR FINANCIAL INTERMEDIARY. You can have your financial      
intermediary process a redemption on your behalf. Your financial intermediary   
will be responsible for furnishing all necessary documents to MFSC and may      
charge you for this service.                                                    

SIGNATURE GUARANTEE/ADDITIONAL DOCUMENTATION. If a signature guarantee is       
required, your signature may be guaranteed by an eligible bank, broker/dealer,  
credit union, national securities exchange, registered securities association,  
clearing agency, or savings association. MFSC may require additional            
documentation for certain types of registrations and transactions. Signature    
guarantees and this additional documentation shall be accepted in accordance    
with policies established by MFSC, and MFSC may, at its discretion, make        
certain exceptions to these requirements. Please contact MFSC with any          
questions and for the requirements for your particular situation.               

SHARE CERTIFICATES. If certificates are outstanding for your shares, you may    
only redeem such shares by mailing the certificates to MFSC. Telephone,         
electronic, and systematic withdrawal plan redemptions and checkwriting are not 
available if certificates are outstanding for your shares.                      

REDEMPTIONS IN KIND. If, during any 90-day period, you redeem shares in an      
amount greater than the lesser of $250,000 or 1% of fund net assets, the fund   
has the right to pay the redemption amount above such threshold by a            
distribution in-kind of portfolio securities (redemption in kind). In the event 
that the fund makes a redemption in kind, you should expect to incur brokerage  
and other transaction charges when converting the securities to cash, and the   
securities may increase or decrease in value before you sell them.              

INVOLUNTARY REDEMPTIONS. Because it is costly to maintain small accounts, the   
MFS funds have reserved the right to redeem your shares without your permission 
when your account contains less than $500 due to your redemptions or exchanges. 
Any applicable CDSC will be assessed. Before the fund makes such a redemption,  
you will be notified and given 60 days to increase your investment to at least  
$500.                                                                           

In addition, the MFS funds have reserved the right to redeem your shares        
without your permission in cases of threatening conduct or suspicious,          
fraudulent, or illegal activity. Any applicable CDSC will be assessed upon      
redemption of your shares.                                                      

HOW TO EXCHANGE SHARES                                                          

An exchange involves the redemption of shares of one fund and the purchase of   
shares of another fund.                                                         

EXCHANGE PRIVILEGE. You can exchange your shares for shares of the same class   
of most other MFS funds by having your financial intermediary process your      
exchange request or by contacting MFSC directly. Your shares will be bought at  
the net asset value next calculated after your exchange order is received in    
proper form.                                                                    

You can exchange your Class A shares and your Class I shares for shares of the  
MFS Money Market Fund or the MFS Government Money Market Fund.                  

Certain qualified retirement plans may make certain exchanges between the MFS   
funds and the MFS Fixed Fund. With respect to Class C shares subject to a CDSC, 
you will only be eligible to make the exchange to the MFS Fixed Fund if the     
CDSC would have been waived had the Class C shares been redeemed. Contact MFSC  
for information concerning transactions involving the MFS Fixed Fund.           

The MFS funds allow certain financial intermediaries to place exchange orders   
on behalf of a group of their discretionary investment advisory clients ("group 
exchange orders"). As with any exchange request, the funds and their agents     
reserve the right to reject any group exchange order, and the funds' agents     
will generally reject any group exchange order received by the funds or their   
agents after 1 p.m., Eastern time. In addition, MFD has agreements with certain 
financial intermediaries which set forth the terms and conditions under which   
group exchange orders may be placed by these financial intermediaries. These    
conditions may be more restrictive than those applicable to individual exchange 
orders, and may include the requirement to provide the funds or their agents    
with advance notice of group exchange orders.                                   

The minimum exchange amount is generally $1,000 (generally $50 for exchanges    
made under the automatic exchange plan) or all the shares in an account. MFSC   
waives or lowers the minimum exchange amount for certain types of investors and 
investments.                                                                    

Shares otherwise subject to a CDSC will not be charged a CDSC in an exchange.   
Shares will retain the CDSC schedule in effect based upon a pro rata share of   
the CDSC from the exchanged fund and the original purchase date of the shares   
subject to the CDSC.                                                            

Other funds may have different exchange restrictions. You should read the       
prospectus of the MFS fund into which you are exchanging and consider the       
differences in objectives, policies, and risks before making any exchange. The  
exchange privilege may be changed or discontinued at any time, and all          
exchanges are subject to certain limitations and MFS funds' policies concerning 
excessive trading practices, which are designed to protect the funds and their  
shareholders from the harmful effects of frequent trading.                      

OTHER CONSIDERATIONS                                                            

FREQUENT TRADING                                                                

o RIGHT TO REJECT OR RESTRICT PURCHASE AND EXCHANGE ORDERS. The Board of    
  Trustees of the MFS funds has adopted the purchase and exchange limitation
policies described below, which it believes are reasonably designed to  
discourage frequent fund share transactions. MFSC seeks to monitor and  
enforce these policies, subject to oversight by the Board of Trustees,  
   pursuant to procedures approved by the Board of Trustees. The MFS funds may
alter their policies at any time without notice to shareholders.        

o GENERAL PURCHASE AND EXCHANGE LIMITATION POLICIES. The MFS funds reserve  
the right to restrict, reject, or cancel (with respect to cancellations,
within one business day of the order), without any prior notice, any    
purchase or exchange order, including transactions believed to represent
frequent trading activity. For example, MFSC may in its discretion      
restrict, reject, or cancel a purchase or exchange order even if the    
transaction is not subject to specific exchange or other limitations    
described in this prospectus if MFSC determines that accepting the order
could interfere with the efficient management of a fund's portfolio,    
 increase costs to the fund, dilute the value of an investment in the fund
to long-term shareholders, or otherwise not be in the fund's best       
 interests. In the event that MFSC rejects or cancels an exchange request,
neither the redemption nor the purchase side of the exchange will be    
 processed. Each MFS fund reserves the right to delay for one business day
  the processing of exchange requests in the event that, in MFSC's judgment,
such delay would be in the fund's best interest, in which case both the 
redemption and purchase side of the exchange will receive the fund's net
asset values at the conclusion of the delay period.                     

o SPECIFIC EXCHANGE AND PURCHASE LIMITATION POLICIES. Under the MFS Funds'  
purchase and exchange limitation policy, MFSC will generally restrict,  
reject or cancel purchase and exchange orders if MFSC determines that an
  accountholder has made two exchanges, each in an amount of $5,000 or more,
 out of an account in an MFS fund during a calendar quarter ("two exchange
limit"). This policy does not apply to exchanges:                       

o out of the MFS money market funds; or                                 

 o initiated by a retirement plan trustee or sponsor rather than by a plan
participant, and other similar non-discretionary exchanges (e.g., in
connection with fund mergers/ acquisitions/liquidations).           

In circumstances where shareholders hold shares through financial       
intermediaries, the MFS funds may rely upon the financial intermediary's
policy to restrict frequent trading and its monitoring of such policy in
lieu of the MFS funds' two-exchange limit if MFSC believes that the     
financial intermediary's policy is reasonably designed to identify and  
curtail trading activity that is not in the best interest of the fund.  

 In addition, MFSC may make exceptions to this policy if, in its judgment,
the transaction does not represent frequent trading activity, such as   
  purchases made through systematic purchase plans or payroll contributions.
  In applying this policy, MFSC considers the information available to it at
   the time and reserves the right to consider trading multiple accounts under
common ownership, control, or influence to be trading out of a single   
account.                                                                

Exchanges made on the same day in the same account are aggregated for   
  purposes of counting the number and dollar amount of exchanges made by the
accountholder (e.g., a shareholder who on the same day exchanges $6,000 
  from one MFS fund into two other MFS funds, by exchanging $3,000 into each
of the two MFS funds, will be viewed as having made one exchange        
transaction exceeding $5,000 in value).                                 

o LIMITATIONS ON THE ABILITY TO DETECT AND CURTAIL FREQUENT TRADING         
   PRACTICES. Shareholders seeking to engage in frequent trading practices may
   deploy a variety of strategies to avoid detection, and, despite the efforts
 of MFSC to prevent frequent trading, there is no assurance that MFSC will
 be able to identify such shareholders or curtail their trading practices.
The ability of MFSC to detect and curtail frequent trading practices may
also be limited by operational systems and technological limitations.   

MFSC receives purchase, exchange, and redemption orders through certain 
financial intermediaries that hold omnibus accounts with an MFS fund.   
Omnibus account arrangements are common forms of holding shares of MFS  
   funds, particularly among certain financial intermediaries such as brokers,
retirement and 529 plans, investment advisors, and variable insurance   
products. A financial intermediary's policy restricting frequent trading
may be more or less restrictive than the MFS funds' policies, may permit
  certain transactions not permitted by the MFS funds' policies, or prohibit
transactions not subject to the MFS funds' policies.                    

 MFSC is generally not able to identify trading by a particular underlying
shareholder within an omnibus account, which makes it difficult or      
   impossible to determine if a particular underlying shareholder has violated
the two exchange limit or is otherwise engaged in frequent trading.     
However, MFSC reviews trading activity at the omnibus level to detect   
   suspicious trading activity. If MFSC detects suspicious trading activity at
the omnibus level it will contact the financial intermediary to request 
underlying shareholder level activity to determine whether there is     
underlying shareholder level frequent trading. In certain instances, a  
financial intermediary may be unwilling or unable to provide MFSC with  
information about underlying shareholder level activity.                

If frequent trading is identified, MFSC will take appropriate action.   
   MFSC's ability to monitor and deter frequent trading in omnibus accounts at
the underlying shareholder level is dependent upon the capability and   
  cooperation of the financial intermediary. Accordingly, depending upon the
composition of a fund's shareholder accounts, the level of cooperation  
provided by the financial intermediary and in light of efforts made by  
certain shareholders to evade these limitations, MFSC may not be in a   
position to monitor and deter frequent trading with respect to a        
significant percentage of a fund's shareholders. You should consult your
 financial intermediary regarding the application of these limitations and
whether your financial intermediary imposes any additional or different 
limitations.                                                            

o FREQUENT TRADING RISKS. To the extent that the MFS funds or their agents  
are unable to curtail excessive trading practices in a fund, these      
practices may interfere with the efficient management of the fund's     
portfolio, may result in increased transaction and administrative costs,
and may adversely impact the fund's performance.                        

   In addition, to the extent that the fund invests in foreign securities, the
   interests of long-term shareholders may be diluted as a result of time-zone
 arbitrage, a short-term trading practice that seeks to exploit changes in
   the value of the fund's investments that result from events occurring after
  the close of the foreign markets on which the investments trade, but prior
   to the time the fund determines its net asset value. The fund's use of fair
valuation can serve to reduce arbitrage opportunities available to      
short-term traders, but there is no assurance that the fund's fair      
 valuation policies and procedures will prevent dilution of the fund's net
asset value by short-term traders.                                      

 To the extent that the fund invests in securities that trade infrequently
or are difficult to value, such as the securities of smaller companies, 
high yield debt instruments, and floating rate loans, the interests of  
long-term shareholders may be diluted as a result of price arbitrage, a 
short-term trading strategy that seeks to exploit perceived pricing     
inefficiencies in the fund's investments. Such short-term trading       
  strategies may interfere with efficient management of the fund's portfolio
to a greater degree than funds that invest in more frequently traded or 
liquid securities, in part because the fund may have difficulty selling 
   these portfolio securities at advantageous times or prices to satisfy large
and/or frequent redemption requests. Any successful price arbitrage may 
   also cause dilution in the value of fund shares held by other shareholders.

UNAUTHORIZED TRANSACTIONS. MFS will not be responsible for losses that result   
from unauthorized transactions unless MFSC does not follow procedures           
reasonably designed to verify your identity. If an account has more than one    
owner or authorized person, MFSC will accept telephone and online instructions  
from any one owner or authorized person. It is important that you contact MFSC  
immediately about any transactions you believe to be unauthorized.              

ABILITY TO CONTACT MFSC. Certain methods of contacting MFSC, such as by mail,   
telephone, or electronically, may be unavailable or delayed (for example, after 
natural disasters or during periods of significant/major political, social, or  
economic instability).                                                          

RESERVATION OF OTHER RIGHTS. In addition to the rights expressly stated         
elsewhere in this prospectus, MFSC reserves the right to: 1) alter, add, or     
discontinue any conditions of purchase, service, or privilege at any time       
without notice; and 2) freeze any account or suspend account services when MFSC 
has received reasonable notice (written or otherwise) of a dispute between      
registered or beneficial account owners or when MFSC believes a fraudulent      
transaction may occur or has occurred.                                          

ANTI-MONEY LAUNDERING RESTRICTIONS. Federal law requires the fund to implement  
policies and procedures reasonably designed to prevent, detect and report money 
laundering and other illegal activity. The fund may redeem your shares and      
close your account; suspend, restrict or cancel purchase and redemption orders; 
process redemption requests and withhold your proceeds; and take other action   
if it is unable to verify your identity within a reasonable time or conduct     
required due diligence on your account or as otherwise permitted by its         
anti-money laundering policies and procedures. Any applicable CDSC will be      
assessed upon redemption of your shares.                                        

CONFIRMATIONS IN QUARTERLY STATEMENTS. Transactions made under certain periodic 
investment and withdrawal programs (including reinvestment plans) will be       
confirmed on quarterly account statements.                                      

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OTHER INFORMATION                                                               

VALUATION                                                                       

The price of each class of the fund's shares is based on its net asset value.   
The net asset value of each class of shares is determined each day the New York 
Stock Exchange (the Exchange) is open for trading as of the close of regular    
trading on the Exchange (generally 4:00 p.m. Eastern time). However, net asset  
value may be calculated earlier as permitted by the SEC. Net asset value per    
share is computed by dividing the net assets allocated to each share class by   
the number of shares outstanding for that class. On days when the Exchange is   
closed (such as week-ends and holidays), net asset value is not calculated, and 
the fund does not transact purchase and redemption orders. To the extent the    
fund's assets are traded in other markets on days when the fund does not price  
its shares, the value of the fund's assets may change when you will not be able 
to purchase or redeem shares.                                                   

To determine net asset value, the fund's investments for which reliable market  
quotations are readily available are valued at market value. Certain short term 
debt instruments are valued at amortized cost.                                  

The Board of Trustees has delegated primary responsibility for determining or   
causing to be determined the value of the fund's investments (including any     
fair valuation) to the adviser pursuant to valuation policies and procedures    
approved by the Board. If the adviser determines that reliable market           
quotations are not readily available, investments are valued at fair value as   
determined in good faith by the adviser in accordance with such procedures      
under the oversight of the Board of Trustees.                                   

Under the fund's valuation policies and procedures, market quotations are not   
considered to be readily available for many types of debt instruments and       
certain types of derivatives. These investments are generally valued at fair    
value based on information from independent pricing services. These valuations  
can be based on both dealer-supplied valuations and electronic data processing  
techniques, which take into account factors such as institutional-size trading  
in similar groups of securities, yield, quality, coupon rate, maturity, type of 
issue, trading characteristics, and other market data.                          

In addition, investments may be valued at fair value if the adviser determines  
that an investment's value has been materially affected by events occurring     
after the close of the exchange or market on which the investment is            
principally traded (such as a foreign exchange or market) and prior to the      
determination of the fund's net asset value, or after the halting of trading of 
a specific security where trading does not resume prior to the close of the     
exchange or market on which the security is principally traded. The adviser may 
rely on independent pricing services or other information (such as the          
correlation with price movements of similar securities in the same or other     
markets; the type, cost and investment characteristics of the security; the     
business and financial condition of the issuer; and trading and other market    
data) to assist in determining whether to fair value and at what value to fair  
value an investment. The value of an investment for purposes of calculating the 
fund's net asset value can differ depending on the source and method used to    
determine value. When fair valuation is used, the value of investments used to  
determine the fund's net asset value may differ from quoted or published prices 
for the same investments.                                                       

DISTRIBUTIONS                                                                   

The fund intends to declare a dividend daily and to pay these dividends to      
shareholders at least monthly.                                                  

Any capital gains are distributed at least annually.                            

DISTRIBUTION OPTIONS                                                            

The following distribution options are generally available:                     

o Dividend and capital gain distributions reinvested in additional shares   
(this option will be assigned if no other option is specified);         

o Dividend distributions in cash; capital gain distributions reinvested in  
additional shares;                                                      

o Dividend and capital gain distributions in cash; or                       

o Dividend and capital gain distributions reinvested into the same class of 
shares of another MFS Fund.                                             

The distribution option for accounts with dividend distributions of less than   
$10 will generally be changed to reinvestment in additional shares of the fund. 
If you have elected to receive distributions in cash, and the postal service is 
unable to deliver checks to your address of record, or you do not respond to    
mailings from MFSC with regard to uncashed distribution checks, your            
distribution option may be converted to having all distributions reinvested in  
additional shares. You should contact MFSC to change your distribution option,  
and your request to do so must be received by MFSC before the record date for a 
distribution in order to be effective for that distribution. No interest will   
accrue on amounts represented by uncashed distribution checks.                  

TAX CONSIDERATIONS                                                              

The following discussion is very general. You are urged to consult your tax     
adviser regarding the effect that an investment in the fund may have on your    
particular tax situation, including possible foreign, state, and local taxes.   
Also, this discussion does not apply to shares of the fund held through         
tax-exempt retirement plans.                                                    

The fund expects to distribute substantially all of its income and gains        
annually. Distributions from the fund are taxable whether you receive them in   
cash or reinvest them in additional shares. If you buy shares when a fund has   
realized but not yet distributed ordinary income or capital gains, you will pay 
full price for the shares and then receive a portion back as a taxable          
distribution.                                                                   

Any gain resulting from the sale or exchange of your shares will generally also 
be subject to tax.                                                              

For federal income tax purposes, distributions of investment income are         
generally taxable as ordinary income. Taxes on distributions of capital gains   
are determined by how long the fund owned the investments that generated them,  
rather than how long you have owned your shares. Distributions of net capital   
gains from the sale of investments that the fund owned for more than one year   
and that are properly designated by the fund as capital gain dividends will be  
taxable as long-term capital gains. Distributions of gains from the sale of     
investments that the fund owned for one year or less will be taxable as         
ordinary income. For taxable years beginning before January 1, 2011, if some or 
all of the fund's income derives from "qualified dividend income" and if you    
are an individual who meets holding period and other requirements with respect  
to the fund's shares, those distributions that are properly designated by the   
fund as derived from "qualified dividend income" are taxed at the rates         
applicable to long-term capital gains. The fund does not expect a significant   
portion of fund distributions to be derived from qualified dividend income.     

The fund's investments in certain debt instruments may cause the fund to        
recognize income in excess of the cash generated by such instruments. Thus, the 
fund could be required at times to liquidate other investments in order to      
satisfy its distribution requirements.                                          

Long-term capital gain rates applicable to most individuals have been           
temporarily reduced for taxable years beginning before January 1, 2011.         

The Form 1099 that is mailed to you every January details your distributions    
and how they are treated for federal tax purposes.                              

PROVISION OF ANNUAL AND SEMIANNUAL REPORTS AND PROSPECTUSES                     

The fund produces financial reports every six months and updates its prospectus 
annually. To avoid sending duplicate copies of materials to households, only    
one copy of the fund's annual and semiannual report and prospectus will be      
mailed to shareholders having the same residential address on the fund's        
records. However, any shareholder may contact MFSC (please see back cover for   
address and telephone number) to request that copies of these reports and       
prospectuses be sent personally to that shareholder.                            

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FINANCIAL HIGHLIGHTS                                                                                             

The financial highlights tables are intended to help you understand a fund's financial performance for the       
past five years (or, if shorter, the period of the fund's operation). Certain information reflects financial     
results for a single fund share. The total returns in the table represent the rate by which an investor would    
have earned (or lost) on an investment in a fund (assuming reinvestment of all distributions) held for the       
entire period. This information has been audited by the fund's independent registered public accounting firm,    
whose report, together with the fund's financial statements, are included in the fund's Annual Report to         
shareholders. The fund's Annual Report is available upon request by contacting MFS Service Center, Inc.          
(please see back cover for address and telephone number). The financial statements contained in the Annual       
Report are incorporated by reference into the SAI. The fund's independent registered public accounting firm is   
Deloitte & Touche LLP.                                                                                           


                                                                         YEARS ENDED 1/31                        
                                                 --------------------------------------------------------------  
                                                 2007           2006          2005          2004          2003   
                                                                                                                 
CLASS A                                                                                                          

Net asset value, beginning of period           $   7.40       $   7.63      $   7.65      $   6.61      $   7.08 
                                               --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                         
Net investment income (d)                      $   0.56       $   0.56      $   0.57      $   0.60      $   0.62 
Net realized and unrealized gain (loss) on                                                                       
investments and foreign currency                   0.28          (0.16)         0.08          1.05         (0.43)
                                               --------       --------      --------      --------      -------- 
Total from investment operations               $   0.84       $   0.40      $   0.65      $   1.65      $   0.19 
                                               --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                      
From net investment income                     $  (0.58)      $  (0.59)     $  (0.59)     $  (0.61)     $  (0.66)
From net realized gain on investments and                                                                        
foreign currency transactions                        --          (0.04)        (0.08)           --            -- 
                                               --------       --------      --------      --------      -------- 
Total distributions declared to shareholders   $  (0.58)      $  (0.63)     $  (0.67)     $  (0.61)     $  (0.66)
                                               --------       --------      --------      --------      -------- 
Redemption fees added to paid-in capital (d)   $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                               --------       --------      --------      --------      -------- 
Net asset value, end of period                 $   7.66       $   7.40      $   7.63      $   7.65      $   6.61 
                                               ========       ========      ========      ========      ======== 
Total return (%) (r)(s)(t)                        11.89           5.55          8.98         26.04          2.95 
                                               --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                           
Supplemental data:                                                                                               
Expenses before expense reductions (f)             1.27           1.29          1.29          1.34          1.37 
Expenses after expense reductions (f)              0.85           0.85          0.87          1.01          1.01 
Net investment income                              7.53           7.51          7.62          8.21          9.35 
Portfolio turnover                                   85             66            69            98           104 
Net assets at end of period (000 omitted)      $488,673       $338,568      $278,886      $150,334      $ 70,892 

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                                                                      YEARS ENDED 1/31                          
                                              ---------------------------------------------------------------   
                                                2007           2006          2005          2004          2003   
                                                                                                                
CLASS B                                                                                                         

Net asset value, beginning of period          $   7.42       $   7.65      $   7.67      $   6.63      $   7.09 
                                              --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                        
Net investment income (d)                     $   0.52       $   0.51      $   0.53      $   0.55      $   0.58 
Net realized and unrealized gain                                                                                
(loss) on investments and foreign currency        0.28          (0.16)         0.07          1.06         (0.43)
                                              --------       --------      --------      --------      -------- 
Total from investment operations              $   0.80       $   0.35      $   0.60      $   1.61      $   0.15 
                                              --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                     
From net investment income                    $  (0.54)      $  (0.54)     $  (0.54)     $  (0.57)     $  (0.61)
From net realized gain on investments and                                                                       
foreign currency transactions                       --          (0.04)        (0.08)           --            -- 
                                              --------       --------      --------      --------      -------- 
Total distributions declared to shareholders  $  (0.54)      $  (0.58)     $  (0.62)     $  (0.57)     $  (0.61)
                                              --------       --------      --------      --------      -------- 
Redemption fees added to paid-in capital (d)  $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                              --------       --------      --------      --------      -------- 
Net asset value, end of period                $   7.68       $   7.42      $   7.65      $   7.67      $   6.63 
                                              ========       ========      ========      ========      ======== 
Total return (%) (r)(s)(t)                       11.17           4.87          8.28         25.19          2.43 
                                              --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)            1.92           1.94          1.94          1.99          2.02 
Expenses after expense reductions (f)             1.50           1.50          1.52          1.66          1.66 
Net investment income                             6.91           6.88          7.03          7.61          8.75 
Portfolio turnover                                  85             66            69            98           104 
Net assets at end of period (000 omitted)     $124,393       $125,667      $151,711      $140,348      $ 72,321 

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                                                                       YEARS ENDED 1/31                         
                                              ----------------------------------------------------------------- 
                                                2007           2006          2005          2004          2003   
                                                                                                                
CLASS C                                                                                                         

Net asset value, beginning of period          $   7.38       $   7.61      $   7.63      $   6.60      $   7.07 
                                              --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                        
Net investment income (d)                     $   0.51       $   0.51      $   0.52      $   0.54      $   0.57 
Net realized and unrealized gain (loss) on                                                                      
investments and foreign currency                  0.28          (0.16)         0.08          1.06         (0.43)
                                              --------       --------      --------      --------      -------- 
Total from investment operations              $   0.79       $   0.35      $   0.60      $   1.60      $   0.14 
                                              --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                     
From net investment income                    $  (0.53)      $  (0.54)     $  (0.54)     $  (0.57)     $  (0.61)
From net realized gain on investments                                                                           
and foreign currency transactions                   --          (0.04)        (0.08)           --            -- 
                                              --------       --------      --------      --------      -------- 
Total distributions declared to shareholders  $  (0.53)      $  (0.58)     $  (0.62)     $  (0.57)     $  (0.61)
                                              --------       --------      --------      --------      -------- 
Redemption fees added to paid-in capital (d)  $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                              --------       --------      --------      --------      -------- 
Net asset value, end of period                $   7.64       $   7.38      $   7.61      $   7.63      $   6.60 
                                              ========       ========      ========      ========      ======== 
Total return (%) (r)(s)(t)                       11.19           4.86          8.28         25.10          2.29 
                                              --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)            1.92           1.94          1.94          1.99          2.02 
Expenses after expense reductions (f)             1.50           1.50          1.52          1.66          1.66 
Net investment income                             6.90           6.88          7.01          7.56          8.67 
Portfolio turnover                                  85             66            69            98           104 
Net assets at end of period (000 omitted)     $103,873       $ 92,613      $101,113      $ 84,643      $ 38,130 

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                                                                       YEARS ENDED 1/31                          
                                               ----------------------------------------------------------------  
                                                 2007           2006          2005          2004          2003   
                                                                                                                 
CLASS I                                                                                                          
Net asset value, beginning of period           $   7.42       $   7.65      $   7.68      $   6.64      $   7.10 
                                               --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                         
Net investment income (d)                      $   0.59       $   0.59      $   0.55      $   0.63      $   0.64 
Net realized and unrealized gain (loss) on                                                                       
investments and foreign currency                   0.28          (0.16)         0.12          1.05         (0.42)
                                               --------       --------      --------      --------      -------- 
Total from investment operations               $   0.87       $   0.43      $   0.67      $   1.68      $   0.22 
                                               --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                      
From net investment income                     $  (0.61)      $  (0.62)     $  (0.62)     $  (0.64)     $  (0.68)
From net realized gain on investments and                                                                        
foreign currency transactions                        --          (0.04)        (0.08)           --            -- 
                                               --------       --------      --------      --------      -------- 
Total distributions declared to shareholders   $  (0.61)      $  (0.66)     $  (0.70)     $  (0.64)     $  (0.68)
                                               --------       --------      --------      --------      -------- 
Redemption fees added to paid-in capital (d)   $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                               --------       --------      --------      --------      -------- 
Net asset value, end of period                 $   7.68       $   7.42      $   7.65      $   7.68      $   6.64 
                                               ========       ========      ========      ========      ======== 
Total return (%) (r)(s)                           12.27           5.92          9.23         26.41          3.45 
                                               --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                           
Supplemental data:                                                                                               
Expenses before expense reductions (f)             0.92           0.94          0.93          0.99          1.02 
Expenses after expense reductions (f)              0.50           0.50          0.51          0.66          0.66 
Net investment income                              7.89           7.86          7.75          8.66          9.76 
Portfolio turnover                                   85             66            69            98           104 
Net assets at end of period (000 omitted)      $ 56,243       $ 46,871      $ 33,556      $  3,434      $  2,508 

(d) Per share data are based on average shares outstanding.                                                      
(f) Ratios do not reflect reductions from fees paid indirectly.                                                  
(r) Certain expenses have been reduced without which performance would have been lower.                          
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance       
    would be lower.                                                                                              
(t) Total returns do not include any applicable sales charges.                                                   
(w) Per share amount was less than $0.01.                                                                        

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MFS HIGH YIELD OPPORTUNITIES FUND                                               

SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF TRUSTEES. The Board of Trustees of 
the MFS funds has adopted procedures by which shareholders may send             
communications to the Board. Shareholders may mail written communications to    
the Board to the attention of the Board of Trustees, [fund name], Massachusetts 
Financial Services Company, 500 Boylston Street, Boston, MA 02116-3741,         
Attention: Frank Tarantino, Independent Chief Compliance Officer of the Fund.   
Shareholder communications must (i) be in writing and be signed by the          
shareholder, (ii) identify the MFS fund to which they relate and (iii) identify 
the class and number of shares held by the shareholder.                         

IF YOU WANT MORE INFORMATION ABOUT MFS HIGH YIELD OPPORTUNITIES FUND, THE       
FOLLOWING DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:                            

ANNUAL/SEMIANNUAL REPORTS. These reports contain information about the fund's   
actual investments. Annual reports discuss the effect of recent market          
conditions and investment strategies on the fund's performance during its last  
fiscal year.                                                                    

STATEMENT OF ADDITIONAL INFORMATION (SAI). The SAI, dated June 1, 2007,         
provides more detailed information about the fund and is incorporated into this 
prospectus by reference.                                                        

You can get free copies of the annual/semiannual reports, the SAI and other     
information about the fund, and make inquiries about the fund, by contacting:   

MFS Service Center, Inc.                                      
500 Boylston Street                                           
Boston, MA 02116-3741                                         
Telephone: 1-800-225-2606                                     
Internet: MFS.COM                                             

Information about the fund (including its prospectus, SAI and shareholder       
reports) can be reviewed and copied at the:                                     

Public Reference Room                                         
Securities and Exchange Commission                            
100 F Street, N.E., Room 1580                                 
Washington, D.C., 20549                                       

Information on the operation of the Public Reference Room may be obtained by    
calling the Commission at 202-551-5850. Reports and other information about the 
fund are available on the Edgar Database on the Commission's Internet Web site  
at HTTP://WWW.SEC.GOV, and copies of this information may be obtained, upon     
payment of a duplicating fee, by electronic request at the following e-mail     
address: PUBLICINFO@SEC.GOV or by writing the Public Reference Section at the   
above address.                                                                  

              The fund's Investment Company Act file number is 811-2794.

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M F S(R)                                 STATEMENT OF ADDITIONAL INFORMATION    
INVESTMENT MANAGEMENT                    JUNE 1, 2007                           

MFS HIGH YIELD OPPORTUNITIES FUND                                               
A SERIES OF MFS SERIES TRUST III                                                
500 BOYLSTON STREET, BOSTON, MA 02116                                           

This Statement of Additional Information ("SAI") contains additional            
information about the Fund and should be read in conjunction with the Fund's    
Prospectus dated June 1, 2007. The Fund's financial statements are incorporated 
into this SAI by reference to the Fund's most recent Annual Report to           
shareholders. A copy of the Annual Report accompanies this SAI. You may obtain  
a copy of the Fund's Prospectus and Annual Report without charge by contacting  
the Fund's transfer agent, MFS Service Center, Inc. (please see the back cover  
of Part II of this SAI for address and telephone number).                       

This SAI is divided into two Parts -- Part I and Part II. Part I contains       
information that is particular to the Fund, while Part II contains information  
that generally applies to all of the funds in the MFS Family of Funds (the "MFS 
Funds"). Each part of this SAI has a variety of appendices which can be found   
at the end of Part I and Part II, respectively.                                 

THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE  
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.              

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STATEMENT OF ADDITIONAL INFORMATION (SAI) - PART I                              

Part I of this SAI contains information that is particular to the Fund.         

DEFINITIONS ............................................................  XX    
MANAGEMENT OF THE FUND..................................................  XX    
SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS............................  XX    
INVESTMENT STRATEGIES, RISKS, AND RESTRICTIONS..........................  XX    
TAX CONSIDERATIONS......................................................  XX    
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS........................  XX    
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS..  XX    
APPENDIX A - TRUSTEE COMPENSATION AND COMMITTEES........................  XX    
APPENDIX B - SHARE OWNERSHIP............................................  XX    
APPENDIX C - PORTFOLIO MANAGER(S).......................................  XX    
APPENDIX D - CERTAIN SERVICE PROVIDER COMPENSATION......................  XX    
APPENDIX E - SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS...............  XX    
APPENDIX F - PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS...........  XX    

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DEFINITIONS                                                                     

"Fund" - MFS High Yield Opportunities Fund, a series of the Trust.              

"Trust" - MFS Series Trust III, a Massachusetts business trust organized on     
December 15, 1977. The Trust was previously known as "Massachusetts Financial   
High Income Trust" prior to August 20, 1993.                                    

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

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

"MFSC" - MFS Service Center, Inc., a Delaware corporation.                      

"Prospectus" - The Prospectus of the Fund, dated June 1, 2007, as amended or    
supplemented from time to time.                                                 

MANAGEMENT OF THE FUND                                                          

THE FUND                                                                        

The Fund is a diversified open-end management investment company.               

TRUSTEES AND OFFICERS - IDENTIFICATION AND BACKGROUND                           

The identification and background of the Trustees and officers of the Trust are 
set forth in Appendix A to Part II of this SAI.                                 

TRUSTEE COMPENSATION AND COMMITTEES                                             

Compensation paid to the non-interested Trustees for certain specified periods, 
as well as information regarding committees of the Board of Trustees, is set    
forth in Appendix A to this Part I.                                             

SHARE OWNERSHIP                                                                 

Information concerning the ownership of Fund shares by Trustees and officers of 
the Trust as a group, as well as the dollar value range of each Trustee's share 
ownership in the Fund and, on an aggregate basis, in all MFS Funds overseen by  
the Trustee, by investors who are deemed to "control" the Fund, if any, and by  
investors who own 5% or more of any class of Fund shares, if any, is set forth  
in Appendix B to this Part I.                                                   

PORTFOLIO MANAGER(S)                                                            

Information regarding the Fund's portfolio manager(s), including other accounts 
managed, compensation, ownership of Fund shares, and possible conflicts of      
interest, is set forth in Appendix C to this Part I.                            

CERTAIN SERVICE PROVIDER COMPENSATION                                           

Compensation paid by the Fund to certain of its service providers -- for        
advisory services, administrative services, and transfer agency services -- for 
certain specified periods, is set forth in Appendix D to this Part I.           

CUSTODIAN                                                                       

JPMorgan Chase Bank, with a place of business at One Chase Manhattan Plaza, New 
York, NY 10081, serves as a custodian of the assets of the Fund (the            
"Custodian"). The Custodian is responsible for safekeeping and controlling the  
Fund's cash and securities, handling the receipt and delivery of securities,    
collecting interest and dividends on the Fund's investments, serving as the     
Fund's foreign custody manager, and providing reports on foreign securities     
depositaries. An affiliate of the Custodian, J. P. Morgan Investor Services     
Co., with a place of business at 73 Tremont Street, Boston, MA 02108, is        
responsible for maintaining books of original entry and other required books    
and accounts for the Fund and calculating the daily net asset value of each     
class of shares of the Fund. The Fund may invest in securities of the Custodian 
and its affiliates and may deal with the Custodian and its affiliates as        
principal in securities transactions.                                           

The Fund has an expense offset arrangement that reduces the Fund's custodian    
fees based upon the amount of cash maintained by the Fund with its custodian.   

SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS                                    

SALES CHARGES                                                                   

Sales charges paid for certain specified periods in connection with the         
purchase and sale of the Fund's shares are set forth in Appendix E to this      
Part I.                                                                         

DISTRIBUTION PLAN PAYMENTS                                                      

Payments made by the Fund under the Fund's plan in accordance with Rule 12b-1   
under the Investment Company Act of 1940, as amended (the "Distribution Plan"), 
for the Fund's most recent fiscal year, are set forth in Appendix E to this     
Part I.                                                                         

INVESTMENT STRATEGIES, RISKS, AND RESTRICTIONS                                  

INVESTMENT STRATEGIES AND RISKS                                                 

Certain investment strategies and risks are described in Appendix E to Part II  
of this SAI.                                                                    

INVESTMENT RESTRICTIONS                                                         

The Fund has adopted certain investment restrictions which are described in     
Appendix F of Part II of this SAI.                                              

TAX CONSIDERATIONS                                                              

For a discussion of tax considerations, see Part II of this SAI.                

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                                

Brokerage commissions paid by the Fund for certain specified periods,           
information concerning purchases by the Fund of securities issued by its        
regular broker/dealers for its most recent fiscal year, and information         
concerning the amount of transactions and related commissions to broker/dealer  
firms that MFS has determined provide valuable research for the Fund's most     
recent fiscal year, are set forth in Appendix F to this Part I. Portfolio       
transactions and brokerage commissions are more fully described in Part II of   
this SAI under the heading "Portfolio Transactions and Brokerage Commissions."  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS          

Deloitte & Touche LLP is the Independent Registered Public Accounting Firm,     
providing audit services, tax return review, and other related services and     
assistance in connection with the review of various Securities and Exchange     
Commission filings.                                                             

The Fund's Financial Statements and Financial Highlights for the fiscal year    
ended January 31, 2007, are incorporated by reference into this SAI from the    
Fund's Annual Report to shareholders and have been audited by Deloitte & Touche 
LLP, independent registered public accounting firm, as stated in their report,  
which is incorporated herein by reference, and have been so incorporated in     
reliance upon reports of such firm, given upon their authority as experts in    
accounting and auditing. A copy of the Fund's Annual Report accompanies this    
SAI.                                                                            

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                                                           PART I - APPENDIX A

TRUSTEE COMPENSATION AND COMMITTEES                                             
The Fund pays the non-interested Trustees an annual fee plus a fee for each     
meeting attended. In addition, the non-interested Trustees are reimbursed for   
their out-of-pocket expenses.                                                   

TRUSTEE COMPENSATION TABLE                                                      

------------------------------------------------------------------------------- 
                          TRUSTEE    RETIREMENT BENEFITS    TOTAL TRUSTEE FEES
                         FEES FROM    ACCRUED AS PART OF    FROM FUND AND FUND
TRUSTEE NAME               FUND(1)        FUND EXPENSE           COMPLEX(2)     
------------------------------------------------------------------------------- 
INTERESTED TRUSTEES                                                             
------------------------------------------------------------------------------- 
Robert J. Manning            N/A              N/A                   N/A         
------------------------------------------------------------------------------- 
Robert C. Pozen              N/A              N/A                   N/A         
------------------------------------------------------------------------------- 

------------------------------------------------------------------------------- 
NON-INTERESTED TRUSTEES                                                         
------------------------------------------------------------------------------- 
Robert E. Butler(3)         $1,804            N/A                 $210,289      
------------------------------------------------------------------------------- 
Lawrence H. Cohn, M.D.      $1,791            $  0                $208,289      
------------------------------------------------------------------------------- 
David H. Gunning            $1,840            N/A                 $219,642      
------------------------------------------------------------------------------- 
William R. Gutow            $1,791            N/A                 $208,289      
------------------------------------------------------------------------------- 
Michael Hegarty             $1,798            N/A                 $209,289      
------------------------------------------------------------------------------- 
J. Atwood Ives              $2,273            $292                $285,289      
------------------------------------------------------------------------------- 
Amy B. Lane(4)              $  423            N/A                 $ 50,423      
------------------------------------------------------------------------------- 
Lawrence T. Perera          $1,914            $326                $228,289      
------------------------------------------------------------------------------- 
J. Dale Sherratt            $2,049            $  0                $250,289      
------------------------------------------------------------------------------- 
Laurie J. Thomsen           $1,798            N/A                 $209,289      
------------------------------------------------------------------------------- 
Robert W. Uek(3)            $1,911            N/A                 $227,789      
------------------------------------------------------------------------------- 

(1) For the fiscal year ended January 31, 2007.                                 
(2) Information provided is for calendar year 2006. Each Trustee receiving      
compensation served as Trustee of 97 funds within the MFS Fund complex  
(having aggregate net assets at December 31, 2006 of approximately $102 
billion).                                                               
(3) Messrs. Butler and Uek became Trustees of the Fund on January 1, 2006.      
(4) Ms. Lane retired as a Trustee of the Fund on February 22, 2006.             

Retirement Benefit Deferral Plan-- Under a Retirement Benefit Deferral Plan,    
certain Trustees have deferred benefits from a prior retirement plan. The value 
of the benefits is periodically readjusted as though the Trustee had invested   
an equivalent amount in Class A shares of the Fund(s) designated by such        
Trustee. The value of the deferred benefits will be paid to the Trustees upon   
retirement or thereafter. The plan does not obligate a Fund to retain the       
services of any Trustee or pay any particular level of compensation to any      
Trustee. The plan is not funded and a Fund's obligation to pay the Trustee's    
deferred compensation is a general unsecured obligation.                        

COMMITTEES                                                                      

The Board has established the following Committees:                             

--------------------------------------------------------------------------------
NUMBER OF                           
MEETINGS                          
             IN LAST                                 CURRENT
NAME OF COMMITTEE    FISCAL YEAR  FUNCTIONS                    MEMBERS(1)       
--------------------------------------------------------------------------------
AUDIT COMMITTEE           9       Oversees the accounting      Butler*, Gutow*, 
                           and auditing procedures of   Sherratt*,
                              the Fund and, among other    Thomsen*, and
                     duties, considers the        Uek*
    selection of the
           independent accountants
              for the Fund and the scope
     of the audit, and
           considers the effect on
             the independence of those
      accountants of any
           non-audit services such
              accountants provide to the
         Fund and any audit or
           non-audit services such
          accountants provide to
        other MFS Funds, MFS
              and/or certain affiliates.
         The Committee is also
   responsible for
           establishing procedures
    for the receipt,
            retention, and treatment
             of complaints received by
      the Fund regarding
        accounting, internal
           accounting controls, or
            auditing matters and the
           confidential, anonymous
          submission of concerns
          regarding questionable
              fund accounting matters by
            officers of the Fund and
           employees of the Fund's
       investment adviser,
            administrator, principal
             underwriter, or any other
provider of 
      accounting-related
         services to the Fund.
--------------------------------------------------------------------------------
COMPLIANCE AND            8       Oversees the development     Butler*, Cohn*,  
GOVERNANCE COMMITTEE              and implementation of the    Gunning*,        
                            Fund's regulatory and        Gutow*, and
                          fiduciary compliance         Sherratt*
             policies, procedures, and
            practices under the 1940
             Act, and other applicable
              laws, as well as oversight
             of compliance policies of
         the Fund's investment
             adviser and certain other
             service providers as they
              relate to Fund activities.
          The Fund's Independent
            Chief Compliance Officer
           reports directly to the
             Committee and assists the
             Committee in carrying out
            its responsibilities. In
           addition, the Committee
     advises and makes
          recommendations to the
    Board on matters
      concerning Trustee
 practices and
              recommendations concerning
            the functions and duties
            of the committees of the
Board.      
--------------------------------------------------------------------------------
CONTRACTS REVIEW          5       Requests, reviews, and       All              
COMMITTEE                         considers the information    non-interested   
                                deemed reasonably            Trustees of the
                               necessary to evaluate the    Board (Butler,
                               terms of the investment      Cohn, Gunning,
                                advisory and principal       Gutow, Hegarty,
                              underwriting agreements      Ives, Perera,
                          and the Plan of              Sherratt,
                         Distribution under Rule      Thomsen,
                         12b-1 that the Fund          and Uek)
        proposes to renew or
             continue, and to make its
          recommendations to the
             full Board of Trustees on
  these matters.
--------------------------------------------------------------------------------
NOMINATION AND            1       Recommends qualified         All              
COMPENSATION                      candidates to the Board in   non-interested   
COMMITTEE                         the event that a position    Trustees of the  
                               is vacated or created. The   Board (Butler,
                               Committee will consider      Cohn, Gunning,
                                recommendations by           Gutow, Hegarty,
                              shareholders when a          Ives, Perera,
                          vacancy exists.              Sherratt,
                         Shareholders wishing to      Thomsen,
                         recommend candidates for     and Uek)
             Trustee for consideration
              by the Committee may do so
            by writing to the Fund's
              Secretary at the principal
           executive office of the
              Fund. Such recommendations
          must be accompanied by
    biographical and
            occupational data on the
        candidate (including
         whether the candidate
           would be an "interested
           person" of the Fund), a
          written consent by the
              candidate to be named as a
           nominee and to serve as
              Trustee if elected, record
             and ownership information
        for the recommending
            shareholder with respect
      to the Fund, and a
      description of any
   arrangements or
            understandings regarding
         recommendation of the
 candidate for
      consideration. The
     Committee is also
          responsible for making
          recommendations to the
       Board regarding any
          necessary standards or
              qualifications for service
     on the Board. The
              Committee also reviews and
            makes recommendations to
       the Board regarding
        compensation for the
            non-interested Trustees.
--------------------------------------------------------------------------------
PORTFOLIO TRADING         8       Oversees the policies,       Cohn*, Gunning*, 
AND MARKET REVIEW                 procedures, and practices    Hegarty*, and    
COMMITTEE                         of the Fund with respect     Perera*          
             to brokerage transactions
       involving portfolio
       securities as those
             policies, procedures, and
             practices are carried out
              by MFS and its affiliates.
      The Committee also
oversees the
         administration of the
       Fund's proxy voting
              policies and procedures by
         MFS. In addition, the
              Committee receives reports
          from MFS regarding the
             policies, procedures, and
            practices of MFS and its
            affiliates in connection
            with their marketing and
             distribution of shares of
the Fund.   
--------------------------------------------------------------------------------
PRICING COMMITTEE         8       Oversees the determination   Hegarty*,        
                         of the value of the          Perera*,
                          portfolio securities and     Thomsen*,
                         other assets held by the     and Uek*
          Fund and determines or
           causes to be determined
     the fair value of
             securities and assets for
           which market quotations
    are not "readily
            available" in accordance
          with the 1940 Act. The
       Committee delegates
              primary responsibility for
      carrying out these
             functions to MFS and MFS'
      internal valuation
         committee pursuant to
        pricing policies and
              procedures approved by the
            Committee and adopted by
         the full Board. These
    policies include
       methodologies to be
      followed by MFS in
        determining the fair
       values of portfolio
        securities and other
           assets held by the Fund
    for which market
              quotations are not readily
            available. The Committee
           meets periodically with
       the members of MFS'
      internal valuation
           committee to review and
              assess the quality of fair
       valuation and other
          pricing determinations
        made pursuant to the
           Fund's pricing policies
          and procedures, and to
         review and assess the
           policies and procedures
             themselves. The Committee
      also exercises the
           responsibilities of the
             Board under the Amortized
             Cost Valuation Procedures
            approved by the Board on
             behalf of each Fund which
         holds itself out as a
          "money market fund" in
             accordance with Rule 2a-7
       under the 1940 Act.
--------------------------------------------------------------------------------
SERVICES CONTRACTS        8       Reviews and evaluates the    Gunning*,        
COMMITTEE                         contractual arrangements     Sherratt*,       
                          of the Fund relating to      Thomsen*,
                         transfer agency,             and Uek*
            administrative services,
        custody, pricing and
             bookkeeping services, and
        lending of portfolio
         securities, and makes
          recommendations to the
             full Board of Trustees on
  these matters.
--------------------------------------------------------------------------------
(1) The Trustees' identification and background are set forth in Appendix A to  
Part II.                                                                
* Non-interested or independent Trustees. Although Mr. Ives is not a member 
of all Committees of the Board, he is invited to and attends many of the
Committees' meetings in his capacity as Chair of the Trustees.          

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                                                           PART I - APPENDIX B

SHARE OWNERSHIP                                                                 

OWNERSHIP BY TRUSTEES AND OFFICERS                                              

As of February 28, 2007, the current Trustees and officers of the Trust as a    
group owned less than 1% of any class of the Fund's shares. The following table 
shows the dollar range of equity securities beneficially owned by each current  
Trustee in the Fund and, on an aggregate basis, in all MFS Funds overseen by    
each current Trustee, as of December 31, 2006.                                  

The following dollar ranges apply:                                              

N. None                                                                         
A. $1 - $10,000                                                                 
B. $10,001 - $50,000                                                            
C. $50,001 - $100,000                                                           
D. Over $100,000                                                                

------------------------------------------------------------------------------  
                                                   AGGREGATE DOLLAR RANGE OF
                                                    EQUITY SECURITIES IN ALL
                       DOLLAR RANGE OF EQUITY      MFS FUNDS OVERSEEN BY
NAME OF TRUSTEE            SECURITIES IN THE FUND             TRUSTEE           
------------------------------------------------------------------------------  
INTERESTED TRUSTEES                                                             
------------------------------------------------------------------------------  
Robert J. Manning                    N                           D              
------------------------------------------------------------------------------  
Robert C. Pozen                      N                           D              
------------------------------------------------------------------------------  
NON-INTERESTED TRUSTEES                                                         
------------------------------------------------------------------------------  
Robert E. Butler                     N                           D              
------------------------------------------------------------------------------  
Lawrence H. Cohn, M.D.               N                           D              
------------------------------------------------------------------------------  
David H. Gunning                     N                           D              
------------------------------------------------------------------------------  
William R. Gutow                     N                           D              
------------------------------------------------------------------------------  
Michael Hegarty                      N                           D              
------------------------------------------------------------------------------  
J. Atwood Ives                       A                           D              
------------------------------------------------------------------------------  
Lawrence T. Perera                   A                           D              
------------------------------------------------------------------------------  
J. Dale Sherratt                     N                           D              
------------------------------------------------------------------------------  
Laurie J. Thomsen                    N                           D              
------------------------------------------------------------------------------  
Robert W. Uek                        N                           D              
------------------------------------------------------------------------------  

25% OR GREATER OWNERSHIP OF THE FUND                                            

The following table identifies those investors who own 25% or more of the       
Fund's shares (all share classes taken together) as of February 28, 2007, and   
are therefore presumed to control the Fund. All holdings are of record unless   
otherwise indicated.                                                            

------------------------------------------------------------------------------  
NAME AND ADDRESS OF INVESTOR               PERCENTAGE OWNERSHIP                 
------------------------------------------------------------------------------  
N/A                                        N/A                                  
------------------------------------------------------------------------------  

5% OR GREATER OWNERSHIP OF SHARE CLASS                                          

The following table identifies those investors who own 5% or more of any class  
of the Fund's shares as of February 28, 2007. All holdings are of record unless 
otherwise indicated.                                                            
------------------------------------------------------------------------------- 
NAME AND ADDRESS OF INVESTOR                   PERCENTAGE OWNERSHIP             
------------------------------------------------------------------------------- 
Charles Schwab & Co. Inc.                      29.99% of Class A Shares         
FBO Clearing Customers                                                          
101 Montgomery St.                                                              
San Francisco, CA 94104                                                         
------------------------------------------------------------------------------- 
Citigroup Global Markets Inc.                  7.50% of Class B Shares          
SURPAS House Account                           7.68% of Class C Shares          
Attn: Cindy Tempesta, 7th Floor                                                 
333 W 34th Street                                                               
New York, NY 10001                                                              
------------------------------------------------------------------------------- 
Merrill Lynch Pierce Fenner & Smith, Inc.      6.98% of Class B Shares          
For the Sole Benefit of its Customers          18.96% of Class C Shares         
4800 Deer Lake Drive E                                                          
Jacksonville, FL 32246                                                          
------------------------------------------------------------------------------- 
SEI Private Trust Co.                          36.41% of Class I Shares         
Attn: Mutual Fund Administrator                                                 
c/o First Tennessee                                                             
One Freedom Valley Drive                                                        
Oaks, PA 19456                                                                  
------------------------------------------------------------------------------- 
NFS LLC FEBO                                   19.11% of Class I Shares         
Bremer Trust                                                                    
PO Box 986                                                                      
Saint Cloud, MN 56302                                                           
------------------------------------------------------------------------------- 
SEI Private Trust Co.                          12.61% of Class I Shares         
c/o Rockland Trust Company                                                      
Attn: Mutual Fund Administrator                                                 
One Freedom Valley Drive                                                        
Oaks, PA 19456                                                                  
------------------------------------------------------------------------------- 
Dengel & Co.                                   6.19% of Class I Shares          
c/o Fiduciary Trust Company                                                     
Church Street Station                                                           
PO Box 3199                                                                     
New York, NY 10008                                                              
------------------------------------------------------------------------------- 
DCGT Trustee & OR Custodian                    5.21% of Class I Shares          
FBO Principal Financial Group                                                   
Qualified Omnibus                                                               
Attn: NPIO Trade Desk                                                           
711 High Street                                                                 
Des Moines, IA 50309                                                            
------------------------------------------------------------------------------- 

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                                                           PART I - APPENDIX C

PORTFOLIO MANAGER(S)                                                            

COMPENSATION                                                                    

Portfolio manager total cash compensation is a combination of base salary and   
performance bonus:                                                              

Base Salary - Base salary represents a smaller percentage of portfolio manager  
total cash compensation (generally below 33%) than incentive compensation.      

Performance Bonus - Generally, incentive compensation represents a majority of  
portfolio manager total cash compensation.                                      

The performance bonus is based on a combination of quantitative and qualitative 
factors, with more weight given to the former (generally over 60%) and less     
weight given to the latter.                                                     

The quantitative portion is based on pre-tax performance of all of the accounts 
managed by the portfolio manager (which includes the Fund and any other         
accounts managed by the portfolio manager) over a one-, three-, and five-year   
period relative to the appropriate Lipper peer group universe and/or one or     
more benchmark indices with respect to each account. Primary weight is given to 
portfolio performance over a three-year time period with lesser consideration   
given to portfolio performance over one- and five-year periods (adjusted as     
appropriate if the portfolio manager has served for shorter periods).           

The qualitative portion is based on the results of an annual internal peer      
review process (conducted by other portfolio managers, analysts, and traders)   
and management's assessment of overall portfolio manager contributions to       
investor relations and the investment process (distinct from fund and other     
account performance).                                                           

Portfolio managers also typically benefit from the opportunity to participate   
in the MFS Equity Plan. Equity interests and/or options to acquire equity       
interests in MFS or its parent company are awarded by management, on a          
discretionary basis, taking into account tenure at MFS, contribution to the     
investment process, and other factors.                                          

Finally, portfolio managers are provided with a benefits package including a    
defined contribution plan, health coverage and other insurance, which are       
available to other employees of MFS on substantially similar terms. The         
percentage such benefits represent of any portfolio manager's compensation      
depends upon the length of the individual's tenure at MFS and salary level, as  
well as other factors.                                                          

OWNERSHIP OF FUND SHARES                                                        

The following table shows the dollar range of equity securities of the Fund     
beneficially owned by the Fund's portfolio manager(s) as of the Fund's fiscal   
year ended January 31, 2007. The following dollar ranges apply:                 

N. None                                                                         
A. $1 - $10,000                                                                 
B. $10,001 - $50,000                                                            
C. $50,001 - $100,000                                                           
D. $100,001 - $500,000                                                          
E. $500,001 - $1,000,000                                                        
F. Over $1,000,000                                                              

------------------------------------------------------------------------------- 
NAME OF PORTFOLIO MANAGER            DOLLAR RANGE OF EQUITY SECURITIES IN FUND  
------------------------------------------------------------------------------- 
John F. Addeo                                            D                      
------------------------------------------------------------------------------- 
David P. Cole                                            N                      
------------------------------------------------------------------------------- 
Matthew W. Ryan                                          B                      
------------------------------------------------------------------------------- 

OTHER ACCOUNTS                                                                  

In addition to the Fund, the Fund's portfolio manager is responsible (either    
individually or jointly) for the day-to-day management of certain other         
accounts, the number and total assets of which, as of the Fund's fiscal year    
ended January 31, 2007, were as follows:                                        

                                                        [Enlarge/Download Table]

---------------------------------------------------------------------------------------
                 REGISTERED INVESTMENT      OTHER POOLED                               
                      COMPANIES*         INVESTMENT VEHICLES      OTHER ACCOUNTS       
---------------------------------------------------------------------------------------
                NUMBER                   NUMBER                 NUMBER                 
                  OF          TOTAL        OF        TOTAL       OF         TOTAL      
NAME           ACCOUNTS       ASSETS    ACCOUNTS    ASSETS     ACCOUNTS     ASSETS     
---------------------------------------------------------------------------------------
                                                                                       
John F. Addeo     14    $4,897,876,974.8    3    $538,590,617.8    2    $549.7 million 
---------------------------------------------------------------------------------------
David P. Cole     11    $4,477,452,544.9    2    $266,065,580.8    0         N/A       
---------------------------------------------------------------------------------------
Matthew W. Ryan   13    $3,944,621,199.7    3    $2,137,082,278.7  9     $1.7 billion  
---------------------------------------------------------------------------------------
*  Includes the Fund.                                                                  

Advisory fees are not based upon performance of any of the accounts identified  
in the table above.                                                             

POTENTIAL CONFLICTS OF INTEREST                                                 

MFS seeks to identify potential conflicts of interest resulting from a          
portfolio manager's management of both the Fund and other accounts, and has     
adopted policies and procedures designed to address such potential conflicts.   

The management of multiple funds and accounts (including proprietary accounts)  
may give rise to potential conflicts of interest if the funds and accounts have 
different objectives and strategies, benchmarks, time horizons and fees as a    
portfolio manager must allocate his or her time and investment ideas across     
multiple funds and accounts. In certain instances there may be securities which 
are suitable for the Fund's portfolio as well as for accounts of MFS or its     
subsidiaries with similar investment objectives. A Fund's trade allocation      
policies may give rise to conflicts of interest if the Fund's orders do not get 
fully executed or are delayed in getting executed due to being aggregated with  
those of other accounts of MFS or its subsidiaries. A portfolio manager may     
execute transactions for another fund or account that may adversely impact the  
value of the Fund's investments. Investments selected for funds or accounts     
other than the Fund may outperform investments selected for the Fund.           

When two or more clients are simultaneously engaged in the purchase or sale of  
the same security, the securities are allocated among clients in a manner       
believed by MFS to be fair and equitable to each. It is recognized that in some 
cases this system could have a detrimental effect on the price or volume of the 
security as far as the Fund is concerned. In most cases, however, MFS believes  
that the Fund's ability to participate in volume transactions will produce      
better executions for the Fund.                                                 

MFS does not receive a performance fee for its management of the Fund. As a     
result, MFS and/or a portfolio manager may have a financial incentive to        
allocate favorable or limited opportunity investments or structure the timing   
of investments to favor accounts other than the Fund - for instance, those that 
pay a higher advisory fee and/or have a performance fee.                        

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                                                           PART I - APPENDIX D

CERTAIN SERVICE PROVIDER COMPENSATION                                           

The Fund paid compensation for advisory services, administrative services, and  
transfer agency services, over the specified periods as follows. For            
information regarding sales charges and distribution payments paid to MFD, see  
Appendix E to this Part I.                                                      

--------------------------------------------------------------------------------
                                                 NET AMOUNT      NET AMOUNT PAID
                  NET AMOUNT                 PAID TO MFSC       TO MFS FOR
                 PAID TO MFS    AMOUNT      FOR TRANSFER         GENERAL
                   FOR ADVISORY   WAIVED BY       AGENCY        ADMINISTRATIVE
FISCAL YEAR ENDED     SERVICES        MFS        SERVICES(1)        SERVICES    
--------------------------------------------------------------------------------
January 31, 2007     $3,291,342     $987,365      $591,381          $120,403    
--------------------------------------------------------------------------------
January 31, 2006     $2,833,130     $854,354      $601,477          $      0    
--------------------------------------------------------------------------------
January 31, 2005     $2,264,252     $618,308      $412,756          $      0    
--------------------------------------------------------------------------------

(1) In addition to the fees disclosed, the Fund reimbursed MFSC for certain     
out-of-pocket expenses and for payments made under agreements with      
 affiliated and unaffiliated entities that provide shareholder services in
an amount equal to $179,977 for the fiscal year ended January 31, 2007. 

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                                                           PART I - APPENDIX E

SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS                                    

SALES CHARGES                                                                   

The following sales charges were paid during the specified periods:             

                                                        [Enlarge/Download Table]
---------------------------------------------------------------------------------------

                     CLASS A INITIAL SALES CHARGES:           CDSC PAID TO MFD ON:     
---------------------------------------------------------------------------------------
                                           REALLOWED TO                                
                               RETAINED      FINANCIAL     CLASS A   CLASS B   CLASS C 
FISCAL YEAR END     TOTAL       BY MFD    INTERMEDIARIES    SHARES    SHARES    SHARES 
---------------------------------------------------------------------------------------
                                                                                       
January 31, 2007  $1,074,167   $175,741     $  898,426      $  582   $239,678  $14,820 
---------------------------------------------------------------------------------------
January 31, 2006  $1,148,999   $190,907     $  958,092      $  399   $364,535  $20,001 
---------------------------------------------------------------------------------------
January 31, 2005  $1,568,815   $253,973     $1,314,842      $7,169   $352,062  $38,503 
---------------------------------------------------------------------------------------

DISTRIBUTION PLAN PAYMENTS                                                             

During the fiscal year ended January 31, 2007, the Fund made the following Distribution
Plan payments:                                                                         

-------------------------------------------------------------------------------------  
                             AMOUNT OF DISTRIBUTION AND/OR SERVICE FEES:               
-------------------------------------------------------------------------------------  
CLASS OF SHARES    PAID BY FUND   RETAINED BY MFD          PAID TO FINANCIAL           
                                                              INTERMEDIARIES(1)        
-------------------------------------------------------------------------------------  
Class A Shares      $1,375,625        $452,291                 $923,334                
-------------------------------------------------------------------------------------  
Class B Shares      $1,220,231        $944,621                 $275,610                
-------------------------------------------------------------------------------------  
Class C Shares      $  961,266        $191,549                 $769,717                
-------------------------------------------------------------------------------------  
Class I Shares          N/A             N/A                       N/A                  
-------------------------------------------------------------------------------------  

(1) May include amounts paid to financial intermediaries affiliated with MFD.          

Amounts retained by MFD may represent fees paid to MFD but not yet reallowed to 
intermediaries as of the close of the period, compensation to MFD for           
commissions advanced by MFD to financial intermediaries upon sale of Fund       
shares, and/or compensation for MFD's distribution and shareholder servicing    
costs.                                                                          

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                                                           PART I - APPENDIX F

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                                

BROKERAGE COMMISSIONS                                                           

The following brokerage commissions were paid by the Fund during the specified  
time periods:                                                                   

------------------------------------------------------------------------------- 
FISCAL YEAR END                           BROKERAGE COMMISSIONS PAID BY FUND    
------------------------------------------------------------------------------- 
January 31, 2007                                       $74,201                  
------------------------------------------------------------------------------- 
January 31, 2006                                       $31,353                  
------------------------------------------------------------------------------- 
January 31, 2005                                       $40,297                  
------------------------------------------------------------------------------- 

SECURITIES ISSUED BY REGULAR BROKER/DEALERS                                     

During the fiscal year ended January 31, 2007, the Fund purchased securities    
issued by the following regular broker/dealers of the Fund, which had the       
following values as of January 31, 2007:                                        

------------------------------------------------------------------------------- 
BROKER/DEALER                                   VALUE OF SECURITIES             
------------------------------------------------------------------------------- 
Lehman Brothers Holdings, Inc.                      $   113,396                 
------------------------------------------------------------------------------- 
Merrill Lynch & Co., Inc.                           $53,573,000                 
------------------------------------------------------------------------------- 
Morgan Stanley                                      $   286,882                 
------------------------------------------------------------------------------- 

TRANSACTIONS WITH RESEARCH FIRMS                                                

During the fiscal year ended January 31, 2007, the Fund allocated the following 
amount of transactions, and related commissions, to broker/dealer firms that    
have been deemed by MFS to provide valuable Research ("Research Firms"). The    
provision of Research was not necessarily a factor in the placement of this     
business with such Research Firms. (1)                                          

------------------------------------------------------------------------------- 
DOLLAR AMOUNT OF TRANSACTIONS WITH   COMMISSIONS PAID ON TRANSACTIONS WITH
RESEARCH FIRMS                        RESEARCH FIRMS  
------------------------------------------------------------------------------- 
$32,298,660                             $46,339   
------------------------------------------------------------------------------- 
(1) The amounts shown do not include transactions directed to electronic        
communication networks (ECNs) owned by the Research Firms.              

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STATEMENT OF ADDITIONAL INFORMATION                                             

PART II                                                                         

Part II of this SAI, updated through September 1, 2006, as amended or           
supplemented from time to time, describes policies and practices that apply to  
the Funds in the MFS Family of Funds. References in this Part II to a "Fund"    
mean each Fund in the MFS Family of Funds, unless noted otherwise. References   
in this Part II to a "Trust" mean the Massachusetts business trust of which the 
Fund is a series, or, if the Fund is itself a Massachusetts business trust,     
references to a "Trust" shall mean the Fund.                                    

TABLE OF CONTENTS                                                               

I.    Definitions........................................................     2 

II.   Management of the Fund.............................................     2 

III.  Sales Charge Waivers...............................................     7 

IV.   Distribution Plan..................................................     7 

V.    Financial Intermediary Compensation................................     9 

VI.   Investment Techniques, Practices, Risks and Restrictions...........    10 

VII.  Net Income and Distributions.......................................    10 

VIII. Tax Considerations.................................................    11 

IX.   Portfolio Transactions and Brokerage Commissions...................    22 

X.    Disclosure of Portfolio Holdings...................................    24 

XI.   Determination of Net Asset Value...................................    28 

XII.  Shareholder Services...............................................    30 

XIII. Description of Shares, Voting Rights and Liabilities ..............    32 

Appendix A. Trustees and Officers - Identification and Background .......    34 

Appendix B. Proxy Voting Policies and Procedures.........................    39 

Appendix C. Waivers of Sales Charges.....................................    69 

Appendix D. Financial Intermediary Compensation..........................    77 

Appendix E. Investment Strategies and Risks..............................    88 

Appendix F. Investment Restrictions......................................   117 

Appendix G. Recipients of Non-Public Portfolio Holdings on an Ongoing           
           Basis.........................................................  120

Appendix H. Description of Bond Ratings..................................   122 

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I. DEFINITIONS                                                              

 "Alliance Plans" - include retirement plans with respect to which MFS (or one
of its affiliates) has entered into an administrative arrangement with a    
third party to provide certain recordkeeping and/or administrative services.

"Financial intermediary" - includes any broker, dealer, bank (including bank
trust departments), registered investment adviser, financial planner,       
retirement plan administrator, third-party administration, and any other    
 institutions having a selling, administration or other similar agreement with
MFD, MFS or one of its affiliates.                                          

"Majority Shareholder Vote" - as defined currently in the 1940 Act to be the
lesser of (i) 67% or more of the voting securities present at a meeting at  
which holders of voting securities representing more than 50% of the        
outstanding voting securities are present or represented by proxy, or (ii)  
more than 50% of the outstanding voting securities.                         

"MFS Serviced Plans" - include retirement plans for which MFS (or one of its
affiliates) is responsible for providing participant recordkeeping services.

"1940 Act"- the Investment Company Act of 1940 and the rules and regulations
thereunder, as amended from time to time, and as such Act, rules or         
regulations are interpreted by the Securities and Exchange Commission.      

II. MANAGEMENT OF THE FUND                                                  
> TRUSTEES/OFFICERS                                                             

Board Oversight -- The Board of Trustees which oversees the Fund provides   
broad supervision over the business and operations of the Fund.             

Trustees and Officers -- Identification and Background -- The identification
and background of the Trustees and Officers of the Trust are set forth in   
Appendix A of this Part II.                                                 

> INVESTMENT ADVISER                                                            

MFS provides the Fund with investment advisory services. MFS and its        
predecessor organizations have a history of money management dating from    
1924. MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services   
 Holdings, Inc., which in turn is an indirect majority-owned subsidiary of Sun
Life Financial, Inc. (a diversified financial services company).            

Unless otherwise noted, MFS votes proxies on behalf of the Funds pursuant to
 the proxy voting policies described in Appendix B to this SAI Part II (except
for the MFS Union Standard Equity Fund, for which JMR Financial, Inc., votes
proxies as described in Appendix B to this SAI Part II). Information        
 regarding how each Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, 2006 is available without    
 charge by visiting MFS.COM and clicking on "Proxy Voting" and by visiting the
SEC's Web site at http://www.sec.gov.                                       

INVESTMENT SUB-ADVISER - MFS has engaged Sun Capital Advisers LLC (referred 
to as Sun Capital or the Sub-Adviser) to act as sub-adviser with respect to 
the real estate related portion of the MFS Diversified Income Fund's        
portfolio. Sun Capital is located at One Sun Life Executive Park, Wellesley 
Hills, Massachusetts 02481. Sun Capital is an indirect wholly-owned         
subsidiary of Sun Life Financial Inc. ("Sun Life Financial"), a corporation 
organized in Canada as well as an affiliate of MFS. Sun Life Financial and  
its affiliates currently transact business in Canada, the United States and 
Asia Pacific region. Sun Life Financial is a reporting company under the    
 Securities Exchange Act of 1934 with common shares listed on the Toronto, New
York, and Philippine stock exchanges. Sun Life Financial Inc. is located at 
150 King Street West, Toronto, Canada, M5H 1J9.                             

The Sub-Adviser is a Delaware limited liability company and a registered    
investment adviser. The Sub-Adviser provides investment management and      
supervisory services to mutual funds and institutional accounts.            

INVESTMENT ADVISORY AGREEMENT -- MFS manages the Fund pursuant to an        
Investment Advisory Agreement (the "Advisory Agreement"). Under the Advisory
Agreement, MFS provides the Fund with investment advisory services. Subject 
to such policies as the Trustees may determine, MFS makes investment        
 decisions for the Fund. For these services, MFS receives an annual investment
 advisory fee, computed and paid monthly, as disclosed in the Prospectus under
the heading "Management of the Fund(s)."                                    

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

 The Trust pays the compensation of the Trustees who are "not affiliated" with
MFS and all expenses of the Fund incurred in its operation and offering of  
 shares (other than those assumed by MFS in writing) including but not limited
to: management fees; Rule 12b-1 fees; administrative services fees;         
retirement plan administration services fees; program management services   
fees; governmental fees; interest charges; taxes; membership dues in the    
Investment Company Institute allocable to the Fund; fees and expenses of    
 independent auditors, of legal counsel, and of any transfer agent, registrar,
or dividend disbursing agent of the Fund; expenses of repurchasing and      
redeeming shares and servicing shareholder accounts; expenses of preparing, 
printing and mailing stock certificates, shareholder reports, notices, proxy
statements, confirmations, periodic investment statements and reports to    
 governmental officers and commissions; brokerage and other expenses connected
with the execution, recording, and settlement of portfolio security         
transactions; insurance premiums; fees and expenses of the Fund's custodian,
for all services to the Fund, including safekeeping of funds and securities 
and maintaining required books and accounts; expenses of calculating the net
asset value of shares of the Fund; organizational and start up costs; and   
such non-recurring or extraordinary expenses as may arise, including those  
relating to actions, suits, or proceedings to which the Fund is a party or  
otherwise may have an exposure, and the legal obligation which the Fund may 
have to indemnify the Trust's Trustees and officers with respect thereto.   
Expenses relating to the issuance, registration and qualification of shares 
of the Fund and the preparation, printing and mailing of prospectuses for   
such purposes are borne by the Fund except to the extent that the           
Distribution Agreement with MFS Fund Distributors, Inc. ("MFD"), provides   
that MFD is to pay all of such expenses. 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.        

The Advisory Agreement has an initial two-year term and continues in effect 
thereafter only if such continuance is specifically approved at least       
annually by the Board of Trustees or by Majority Shareholder Vote and, in   
either case, by a majority of the Trustees who are not "interested persons" 
of the Fund or MFS as defined by the 1940 Act. The Advisory Agreement       
terminates automatically if it is assigned and may be terminated without    
penalty by a Majority Shareholder Vote, or by either party on not more than 
 60 days' nor less than 30 days' written notice. The Advisory Agreement may be
approved, renewed, amended, or terminated as to one Fund in the Trust, even 
though the Agreement is not approved, renewed, amended, or terminated as to 
any other Fund in the Trust.                                                

 The Advisory Agreement also provides that neither MFS nor its personnel shall
 be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and       
management of the Fund, except for willful misfeasance, bad faith, gross    
negligence, or reckless disregard of its or their duties and obligations    
under the Advisory Agreement.                                               

SUB-ADVISORY AGREEMENT - Sun Capital serves as the MFS Diversified Income   
Fund's Sub-Adviser pursuant to a Sub-Investment Advisory Agreement between  
the Adviser and Sun Capital (the "Sub-Advisory Agreement"). The Sub-Advisory
Agreement provides that the Adviser delegate to Sun Capital the authority to
make investment decisions for a portion of the MFS Diversified Income Fund  
(for the purposes of this paragraph, the "Fund"). Sun Capital will provide  
portfolio management services for the Fund for the portion of the portfolio 
invested in REITs ("real estate investment trust") and other real estate    
related investments. For these services, the Adviser pays the Sub-Adviser an
investment advisory fee, computed daily and paid monthly in arrears, at the 
annual rate of 0.30% of the Fund's average daily net assets managed by the  
Sub-Adviser. The Sub-Advisory Agreement will continue in effect after its   
initial two year period provided that such continuance is specifically      
approved at least annually by a majority of the Independent Trustees. The   
Sub-Advisory Agreement terminates automatically if it is assigned and may be
terminated without penalty by a majority of the Independent Trustees, by a  
Majority Shareholder Vote, or by the Adviser or Sub-Adviser on not less than
60 days' written notice. The Sub-Advisory Agreement specifically provides   
that neither the Sub-Adviser nor its personnel shall be liable for any error
of judgment or mistake of law or for any loss arising out of any investment 
or for any act or omission in the execution and management of the Fund,     
except for willful misconduct, bad faith, reckless disregard, or gross      
negligence in the performance of its duties or by reason of reckless        
disregard of its obligations and duties under the Sub-Advisory Agreement.   

> ADMINISTRATOR                                                                 

MFS provides the Fund with certain financial, legal and other administrative
services under a Master Administrative Services Agreement between the Fund  
and MFS. Under the Agreement, the fund pays an annual fee to MFS for        
providing these services.                                                   

Effective August 1, 2006, the maximum annual fee payable by each Fund is    
$17,500 plus an amount equal to the following percentage of the Fund's      
average daily net assets (except for Funds investing primarily in shares of 
MFS Funds):                                                                 

-----------------------------------------------------------------------     
On the first $50,000,000 in assets                              0.0000%     
-----------------------------------------------------------------------     
$50,000,000 - $750,000,000 in assets                            0.0175%     
-----------------------------------------------------------------------     
$750,000,000 - $1,500,000,000 in assets                         0.0170%     
-----------------------------------------------------------------------     
$1,500,000,000 - $2,500,000,000 in assets                       0.0165%     
-----------------------------------------------------------------------     
$2,500,000,000 - $4,000,000,000 in assets                       0.0120%     
-----------------------------------------------------------------------     
Over $4,000,000,000                                             0.0000%     

 The fees are subject to minimum and maximum fees, based on the asset level of
the MFS Funds.                                                              

In addition, MFS provides, either directly or through affiliated and/or     
unaffiliated entities, certain administrative, recordkeeping, and           
communication/educational services to the retirement plans and retirement   
plan participants which invest in Class R1, Class R2, Class R3, Class R4 and
 Class R5 shares under a Master Class R Administration and Services Agreement.
 Under the Agreement, the Fund pays an annual fee to MFS for these services at
the following percentages of the average daily net assets attributable to   
 that class of shares: 0.45% for Class R1; 0.40% for Class R2; 0.25% for Class
R3; 0.15% for Class R4; and 0.10% for Class R5 shares. In addition, MFS has 
agreed in writing to waive the fee to 0.35% for Class R1, 0.25% for Class R2
and 0.15% for Class R3, until at least September 30, 2007.                  

> SHAREHOLDER SERVICING AGENT                                                   

 MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS, provides
transfer agent and recordkeeping functions in connection with the issuance, 
transfer, and redemption of each class of shares of the Fund under a        
Shareholder Servicing Agent Agreement. Under the Agreement, MFSC may receive
 a fee based on the costs it incurs in providing these services, plus a target
profit margin. MFSC may also contract with other third party service        
providers to provide some or all of the services described above. MFSC has  
contracted with State Street Bank and Trust Company to perform dividend     
disbursing agent functions for the Fund.                                    

 Under the Agreement, MFSC may receive a fee from the Fund designed to achieve
a target pre-tax annual profit margin. Taking into account this goal,       
effective April 1, 2006, the Fund (except Funds investing primarily in other
MFS Funds) pays MFSC a fee based on its average daily net assets equal to   
 0.0964%. Such fee rate shall continue until modified by agreement between the
Fund and MFSC, taking into account MFSC's pre-tax profit margin target.     

In addition, MFSC is reimbursed by the Fund for certain expenses incurred by
 MFSC on behalf of the Fund. These reimbursements include payments for certain
out-of-pocket expenses, such as costs related to mailing shareholder        
 statements and the use of third party recordkeeping systems, incurred by MFSC
in performing the services described above. MFSC is also reimbursed for     
payments made under agreements with third parties that provide omnibus      
accounting, network, subtransfer agency and other shareholder services,     
including without limitation recordkeeping, reporting and transaction       
 processing services. Payments made under these agreements are based either on
the Fund's average daily net assets or the Fund accounts serviced by the    
third party.                                                                

> DISTRIBUTOR                                                                   

MFS Fund Distributors, Inc. ("MFD" or the "Distributor"), a wholly owned    
subsidiary of MFS, serves as distributor for the continuous offering of     
shares of the Fund pursuant to a Distribution Agreement. The Agreement      
obligates MFD to use best efforts to find purchasers for shares of the Fund.

See Appendix D to this Part II for information regarding sales charges and  
Rule 12b-1 distribution and service payments paid to MFD.                   

> PROGRAM MANAGER(S)                                                            

MFD serves as program manager for a qualified tuition program under Section 
529 of the Internal Revenue Code through which 529 share classes are        
 available as investment options to program participants. The Fund's 529 share
classes may also be offered through qualified tuition programs for which MFD
does not serve as program manager. MFD provides, either directly or through 
 third parties, recordkeeping, tax reporting, and account services, as well as
services designed to maintain the programs' compliance with the Internal    
Revenue Code and other regulatory requirements under a Master 529           
Administrative Services Agreement.                                          

Under the Agreement, the Fund pays MFD a fee for these services of up to    
0.35% annually of the assets attributable to the 529 share classes. The     
current annual fee has been established at 0.25% of the average daily net   
assets attributable to each 529 share class up to $10 billion in assets,    
 0.225% from $10 billion in assets up to $20 billion in assets, and 0.20% from
$20 billion in assets and above. The fee may only be increased with the     
approval of the Fund's Board of Trustees. MFD pays a portion of this fee to 
third parties who provide these services.                                   

Please consult the program description for your particular qualified tuition
program for a discussion of the fees paid to and services received from the 
program manager.                                                            

> CODE OF ETHICS                                                                

The Fund, its Adviser, its sub-adviser (if applicable) and Distributor have 
 adopted separate codes of ethics as required under the Investment Company Act
of 1940 ("the 1940 Act"). Subject to certain conditions and restrictions,   
each code permits personnel subject to the code to invest in securities for 
their own accounts, including securities that may be purchased, held or sold
by the Fund. Securities transactions by some of these persons may be subject
to prior approval of the Adviser's or sub-adviser's Compliance Departments, 
and securities transactions of certain personnel are subject to quarterly   
reporting and review requirements.                                          

III.      SALES CHARGE WAIVERS                                              

In certain circumstances, the initial sales charge paid to MFD and imposed  
 upon purchases of Class A and Class 529A shares, and the CDSC paid to MFD and
imposed upon redemptions of Class A, Class B, Class C, Class 529B, and Class
529C shares, are waived. These circumstances are described in Appendix C of 
this Part II. The Fund, MFS, and their affiliates reserve the right to      
eliminate, modify, and add waivers at any time in their discretion.         

IV. DISTRIBUTION PLAN                                                       

The Trustees have approved a plan in accordance with Rule 12b-1 under the   
1940 Act for Class A, Class B, Class C, Class 529A, Class 529B, Class 529C, 
Class R, Class R1, Class R2, Class R3, Class R4, Class W and Class J shares 
(the "Distribution Plan"). The Fund has not adopted a Distribution Plan with
respect to its Class I or Class R5 shares. In approving the Distribution    
Plan, the Trustees, including a majority of the Trustees who are not        
"interested persons" of the Trust as defined in the 1940 Act and have no    
direct or indirect financial interest in the operation of the Distribution  
Plan or any agreements relating to the Distribution Plan ("Distribution Plan
Qualified Trustees"), concluded that there is a reasonable likelihood that  
the Distribution Plan would benefit the Fund and each respective class of   
shareholders.                                                               

The Distribution Plan is designed to promote sales of shares and minimize   
redemptions, as well as to assist in the servicing and maintenance of       
 shareholder accounts. Increasing a Fund's net assets through sales of shares,
or minimizing reductions in net assets by minimizing redemptions, may help  
reduce a Fund's expense ratio by spreading the Fund's fixed costs over a    
larger base and may reduce the potential adverse effect of selling a Fund's 
portfolio securities to meet redemptions. There is, however, no assurance   
that the net assets of the Fund will increase or not be reduced, or that    
other benefits will be realized as a result of the Distribution Plan.       

The Distribution Plan remains in effect from year to year only if its       
continuance is specifically approved at least annually by vote of both the  
Trustees and a majority of the Distribution Plan Qualified Trustees. The    
Distribution Plan also requires that the Fund and MFD each provide the      
Trustees, and that the Trustees review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Distribution Plan.
The Distribution Plan may be terminated at any time by vote of a majority of
 the Distribution Plan Qualified Trustees or by a Majority Shareholder Vote of
the shares of the class to which the Distribution Plan relates ("Designated 
Class"). The Distribution Plan may not be amended to increase materially the
amount of permitted distribution expenses without the approval of a majority
of the shares of the Designated Class of the Fund, or may not be materially 
amended in any case without a vote of the Trustees and a majority of the    
Distribution Plan Qualified Trustees.                                       

The distribution and service fees paid to MFD equal on an annual basis up to
the following maximum percentages of average daily net assets of the class: 

 -----------------------------------------------------------------------------
                                                                 MAXIMUM TOTAL
                        MAXIMUM             MAXIMUM               DISTRIBUTION
                    DISTRIBUTION           SERVICE               AND SERVICE
    CLASS           FEE                 FEE                      FEE
 -----------------------------------------------------------------------------
Class A                0.10%                0.25%                    0.35%  
 -----------------------------------------------------------------------------
Class 529A             0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class B                0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class 529B             0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class C                0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class 529C             0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class R                0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R1               0.50%                0.25%                    0.75%  
 -----------------------------------------------------------------------------
Class R2               0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R3               0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R4               0.00%                0.25%                    0.25%  
 -----------------------------------------------------------------------------
Class W                0.10%                0.00%                    0.10%  
 -----------------------------------------------------------------------------
 Class J                0.25%                0.70%/0.75%           0.95%/1.00%
 -----------------------------------------------------------------------------
Service Class          0.25%                0.00%                    0.25%  
 -----------------------------------------------------------------------------

In certain circumstances, the fees described below may not be implemented,  
are being waived, or do not apply to certain MFS Funds. Current distribution
and service fees for each Fund are reflected under the captions "Expense    
Summary" and "Description of Share Classes -- Distribution and Service Fees"
in the Prospectus.                                                          

> SERVICE FEES                                                                  

The Distribution Plan provides that the Fund may pay MFD a service fee based
on the average daily net assets attributable to the Designated Class, (i.e.,
 Class A, Class B, Class C, Class 529A, Class 529B, Class 529C, Class R, Class
R1, Class R2, Class R3, Class R4, or Class J shares, as appropriate)        
annually. Class W shares do not pay a service fee. MFD may, at its          
discretion, retain all or a portion of such payments or pay all or a portion
of such payments to financial intermediaries. Service fees compensate MFD   
and/or financial intermediaries for shareholder servicing and account       
maintenance activities, including, but not limited to, shareholder          
recordkeeping (including assisting in establishing and maintaining customer 
accounts and records), transaction processing (including assisting with     
 purchase, redemption and exchange requests), shareholder reporting, arranging
for bank wires, monitoring dividend payments from the Funds on behalf of    
customers, forwarding certain shareholder communications from the Funds to  
customers, corresponding with shareholders and customers regarding the Funds
(including receiving and responding to inquiries and answering questions    
regarding the Funds), and aiding in maintaining the investment of their     
respective customers in the Funds. Financial intermediaries may from time to
time be required to meet certain criteria in order to receive service fees. 

> DISTRIBUTION FEES                                                             

The Distribution Plan provides that the Fund may pay MFD a distribution fee 
 based on the average daily net assets attributable to the Designated Class as
partial consideration for distribution services performed and expenses      
incurred in the performance of MFD's obligations under its distribution     
agreement with the Fund. Distribution fees compensate MFD and/or financial  
 intermediaries for their expenses in connection with the distribution of Fund
shares, including, but not limited to, commissions to financial             
intermediaries, printing prospectuses and reports used for sales purposes,  
the preparation and printing of sales literature, personnel, travel, office 
expense and equipment, payments made to wholesalers employed by MFD         
(employees may receive additional compensation if they meet certain targets 
 for sales of one or more MFS Funds), and other distribution-related expenses.
The amount of the distribution fee paid by the Fund with respect to each    
class differs under the Distribution Plan, as does the use by MFD of such   
distribution fees. While the amount of compensation received by MFD in the  
form of distribution fees during any year may be more or less than the      
expenses incurred by MFD under its distribution agreement with the Fund, the
 Fund is not liable to MFD for any losses MFD may incur in performing services
under its Distribution Agreement with the Fund.                             

In addition, with respect to Massachusetts Investors Trust, Massachusetts   
Investors Growth Stock Fund, MFS Growth Opportunities Fund, MFS Emerging    
Growth Fund, MFS High Income Fund, MFS Total Return Fund, MFS Research Fund,
 MFS Capital Opportunities Fund, MFS Strategic Income Fund, and MFS Bond Fund,
to the extent that the annualized aggregate service and distribution fees   
paid under the Distribution Plan do not exceed 0.35% of Class A shares'     
average daily net assets, the Fund is permitted to pay such                 
distribution-related expenses or other distribution-related expenses.       

V. FINANCIAL INTERMEDIARY COMPENSATION                                      

MFD and/or its affiliates may pay commissions, Rule 12b-1 distribution and  
service fees, 529 administrative services fees, retirement plan             
administrative and service fees, shareholder servicing fees, and other      
payments to financial intermediaries that sell Fund shares as described in  
Appendix D of this Part II.                                                 

VI. INVESTMENT TECHNIQUES, PRACTICES, RISKS AND RESTRICTIONS                

Set forth in Appendix E of this Part II is a description of investment      
techniques and practices which the MFS Funds may generally use in pursuing  
their investment objectives and investment policies to the extent such      
techniques and practices are consistent with their investment objectives and
investment policies, and a description of the risks associated with these   
investment techniques and practices. Set forth in Appendix F of this Part II
is a description of investment restrictions to which the Fund is subject.   

VII. NET INCOME AND DISTRIBUTIONS                                           

> MONEY MARKET FUNDS                                                            

The net income attributable to each MFS Fund that is a money market fund is 
determined each day during which the New York Stock Exchange is open for    
 trading (see "Determination of Net Asset Value" below for a list of days that
the Exchange is closed).                                                    

For this purpose, the net income attributable to shares of a money market   
 fund (from the time of the immediately preceding determination thereof) shall
consist of (i) all interest income accrued on the portfolio assets of the   
money market fund less (ii) all actual and accrued expenses of the money    
market fund determined in accordance with generally accepted accounting     
principles. Interest income shall include discount earned (including both   
original issue and market discount) on discount paper accrued ratably to the
date of maturity.                                                           

Since the net income is declared as a dividend each time the net income is  
determined, the net asset value per share (i.e., the value of the net assets
of the money market fund divided by the number of shares outstanding) is    
expected to remain at $1.00 per share immediately after each such           
determination and dividend declaration. Any increase in the value of a      
shareholder's investment, representing the reinvestment of dividend income, 
is reflected by an increase in the number of shares in the shareholder's    
account.                                                                    

It is expected that the shares of the money market fund will have a positive
net income at the time of each determination thereof. If for any reason the 
net income determined at any time is a negative amount, which could occur,  
for instance, upon default by an issuer of a portfolio security, the money  
market fund would first offset the negative amount with respect to each     
 shareholder account from the dividends declared during the month with respect
to each such account. If and to the extent that such negative amount exceeds
such declared dividends at the end of the month (or during the month in the 
case of an account liquidated in its entirety), the money market fund could 
reduce the number of its outstanding shares by treating each shareholder of 
the money market fund as having contributed to its capital that number of   
full and fractional shares of the money market fund in the account of such  
shareholder which represents its proportion of such excess. Each shareholder
of the money market fund will be deemed to have agreed to such contribution 
in these circumstances by his or her investment in the money market fund.   
 This procedure would permit the net asset value per share of the money market
fund to be maintained at a constant $1.00 per share.                        

In addition, the money market funds intend to distribute net realized short-
and long-term capital gains, if any, at least annually.                     

> OTHER FUNDS                                                                   

Each MFS Fund other than the MFS money market funds intends to distribute to
 its shareholders all or substantially all of its net investment income. These
Funds' net investment income consists of non-capital gain income less       
expenses. In addition, these Funds intend to distribute net realized short- 
and long-term capital gains, if any, at least annually. Shareholders will be
 informed of the tax consequences of such distributions, including whether any
portion represents a return of capital, after the end of each calendar year.

VIII. TAX CONSIDERATIONS                                                    

The following discussion is a brief summary of some of the important federal
(and, where noted, state) income tax consequences affecting the Fund and its
shareholders. The discussion is very general, and therefore prospective     
investors are urged to consult their tax advisers about the impact an       
investment in the Fund may have on their own tax situations.                

> TAX TREATMENT OF THE FUND                                                     

Federal Taxes -- The Fund (even if it is a Fund in a Trust with multiple    
 series) is treated as a separate entity for federal income tax purposes under
the Internal Revenue Code of 1986, as amended (the "Code"). The Fund has    
elected (or in the case of a new Fund, intends to elect) to be, and intends 
 to qualify to be treated each year as, a "regulated investment company" under
Subchapter M of the Code.                                                   

In order to qualify for the special tax treatment accorded regulated        
investment companies and their shareholders, the Fund must, among other     
things:                                                                     

  (a) derive at least 90% of its gross income for each taxable year from (i)
   dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including but not limited to gains from    
options, futures, or forward contracts) derived with respect to its     
   business of investing in such stock, securities, or currencies and (ii) net
 income derived from interests in "qualified publicly traded partnerships"
(as defined below);                                                     

   (b) distribute with respect to each taxable year at least 90% of the sum of
  its investment company taxable income (as that term is defined in the Code
without regard to the deduction for dividends paid-generally, taxable   
   ordinary income and the excess, if any, of the net short-term capital gains
  over net long-term capital losses) and net tax-exempt interest income, for
such year; and                                                          

(c) diversify its holdings so that, at the end of each quarter of the   
Fund's taxable year, (i) at least 50% of the market value of the Fund's 
total assets is represented by cash and cash items, U.S. Government     
 securities, securities of other regulated investment companies, and other
   securities limited in respect of any one issuer to a value not greater than
5% of the value of the Fund's total assets and not more than 10% of the 
   outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of the Fund's total assets is invested (x) in the securities  
(other than those of the U.S. Government or other regulated investment  
companies) of any one issuer or of two or more issuers which the Fund   
 controls and which are engaged in the same, similar, or related trades or
businesses or (y) in the securities of one or more qualified publicly   
traded partnerships (as defined below).                                 

In the case of the Fund's investment in loan participations, the Fund shall 
treat a financial intermediary as an issuer for the purposes of meeting the 
diversification requirement described in paragraph (c).                     

 In general, for purposes of the 90% income requirement described in paragraph
(a) above, income derived from a partnership will be treated as qualifying  
income only to the extent such income is attributable to items of income of 
 the partnership which would be qualifying income if realized by the regulated
investment company. However, 100% of the net income derived from an interest
in a "qualified publicly traded partnership" (which is defined as any       
partnership (i) whose interests are traded on an established securities     
market or whose interests are readily traded on a secondary market or the   
substantial equivalent thereof and (ii) that derives less than 90% of its   
income from the qualifying income described in paragraph (a)(i) above) will 
 be treated as qualifying income. In addition, although in general the passive
loss rules of the Code do not apply to regulated investment companies, such 
rules do apply to a regulated investment company with respect to items      
attributable to an interest in a qualified publicly traded partnership.     
Finally, for purposes of paragraph (c) above, the term "outstanding voting  
securities of such issuer" will include the equity securities of a qualified
publicly traded partnership.                                                

As a regulated investment company, the Fund will not be subject to any      
federal income or excise taxes on its net investment income and net realized
capital gains that it distributes to shareholders in accordance with the    
 timing requirements imposed by the Code. The Fund's foreign-source income, if
any, may be subject to foreign withholding taxes. If the Fund failed to     
qualify as a "regulated investment company" in any year, it would incur a   
 regular federal corporate income tax on all of its taxable income, whether or
not distributed, and Fund distributions would generally be taxable as       
dividend income to the shareholders.                                        

If the Fund fails to distribute in a calendar year substantially all of its 
ordinary income for such year and substantially all of its capital gain net 
income for the one-year period ending October 31 (or later if the Fund is   
 permitted so to elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the undistributed      
amounts. A dividend paid to shareholders by the Fund in January of a year   
generally is deemed to have been paid by the Fund on December 31 of the     
preceding year, if the dividend was declared and payable to shareholders of 
record on a date in October, November, or December of that preceding year.  
The Fund intends generally to make distributions sufficient to avoid        
imposition of the 4% excise tax.                                            

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

> TAXATION OF SHAREHOLDERS                                                      

Tax Treatment of Distributions -- Subject to the special rules discussed    
 below for Municipal Funds, shareholders of the Fund normally will have to pay
federal income tax and any state or local income taxes on the dividends and 
"Capital Gain Dividends" (as defined below) they receive from the Fund.     
 Except as described below, any distributions from ordinary income or from net
short-term capital gains are taxable to shareholders as ordinary income for 
federal income tax purposes whether paid in cash or reinvested in additional
shares.                                                                     

For taxable years beginning before January 1, 2011, "qualified dividend     
income" received by an individual will be taxed at the rates applicable to  
long-term capital gains. In order for some portion of the dividends received
by a Fund shareholder to be qualified dividend income, the Fund must meet   
holding period and other requirements with respect to some portion of the   
 dividend-paying stocks in its portfolio and the shareholder must meet holding
period and other requirements with respect to the Fund's shares. A dividend 
will not be treated as qualified dividend income (at either the Fund or     
shareholder level) (1) if the dividend is received with respect to any share
of stock held for fewer than 61 days during the 121-day period beginning on 
the date which is 60 days before the date on which such share becomes       
ex-dividend with respect to such dividend (or, in the case of certain       
preferred stock, 91 days during the 181-day period beginning 90 days before 
such date), (2) to the extent that the recipient is under an obligation     
 (whether pursuant to a short sale or otherwise) to make related payments with
 respect to positions in substantially similar or related property, (3) if the
recipient elects to have the dividend income treated as investment interest,
 or (4) if the dividend is received from a foreign corporation that is (a) not
eligible for the benefits of a comprehensive income tax treaty with the     
United States (with the exception of dividends paid on stock of such a      
foreign corporation readily tradable on an established securities market in 
the United States) or (b) treated as a passive foreign investment company.  
Payments in lieu of dividends, such as payments pursuant to securities      
 lending arrangements, also do not qualify to be treated as qualified dividend
income.                                                                     

In general, a distribution of investment income designated by the Fund as   
derived from qualified dividend income will be treated as qualified dividend
 income by a shareholder taxed as an individual provided the shareholder meets
 the holding period and other requirements described above with respect to the
 Fund's shares. In any event, if the qualified dividend income received by the
Fund during any taxable year is 95% or more of its gross income for that    
taxable year, then 100% of the Fund's dividends (other than Capital Gain    
Dividends), will be eligible to be treated as qualified dividend income. For
 this purpose, in the case of a sale or other disposition of the Fund of stock
or securities, the only gain included in the term "gross income" is the     
excess of net short-term capital gain from such sales or dispositions over  
the net long-term capital loss from such sales or dispositions.             

Properly designated distributions of net capital gain (i.e., the excess of  
net long-term capital gain over the net short-term capital loss) ("Capital  
Gains Dividends"), whether paid in cash or reinvested in additional shares, 
 are taxable to shareholders as long-term capital gains for federal income tax
purposes without regard to the length of time the shareholders have held    
their shares.                                                               

Long-term capital gain rates applicable to individuals have been temporarily
reduced for taxable years beginning before January 1, 2011.                 

Any Fund dividend that is declared in October, November, or December of any 
calendar year, payable to shareholders of record in such a month and paid   
during the following January, will be treated as if received by the         
shareholders on December 31 of the year in which the dividend is declared.  
The Fund will notify shareholders regarding the federal tax status of its   
distributions after the end of each calendar year.                          

Any Fund distribution, other than dividends that are declared by the Fund on
 a daily basis, will have the effect of reducing the per share net asset value
of Fund shares by the amount of the distribution. If you buy shares when a  
fund has realized but not yet distributed ordinary income or capital gains, 
you will pay full price for the shares and then receive a portion back as a 
taxable distribution.                                                       

 Capital Loss Carryovers-- Distributions from capital gains are generally made
after applying any available capital loss carryovers. The amounts and       
expiration dates of any capital loss carryovers available to the Fund are   
shown in the notes to the financial statements for the Fund.                

 Dividends-Received Deduction-- If the Fund receives dividend income from U.S.
corporations, a portion of the Fund's ordinary income dividends is normally 
eligible for the dividends-received deduction for corporations if the       
recipient otherwise qualifies for that deduction with respect to its holding
of Fund shares. Availability of the deduction for particular corporate      
shareholders is subject to certain limitations, and deducted amounts may be 
subject to the alternative minimum tax or result in certain basis           
adjustments.                                                                

Disposition of Shares-- In general, any gain or loss realized upon a        
disposition of Fund shares by a shareholder that holds such shares as a     
capital asset will be treated as a long-term capital gain or loss if the    
shares have been held for more than 12 months and otherwise as a short-term 
capital gain or loss. However, any loss realized upon a disposition of Fund 
shares held for six months or less will be treated as a long-term capital   
loss to the extent of any Capital Gain Dividends made with respect to those 
shares.                                                                     

Shares Purchased Through Tax-Qualified Plans -- Distributions by the Fund to
retirement plans that qualify for tax-exempt treatment under federal income 
tax laws will not be taxable. Special tax rules apply to investments through
such plans. You should consult your tax adviser to determine the suitability
of the Fund as an investment through such a plan and the tax treatment of   
distributions (including distributions of amounts attributable to an        
investment in the Fund) from such a plan.                                   

U.S. Taxation of Non-U.S. Persons -- Capital Gain Dividends and             
exempt-interest dividends, if any, will not be subject to withholding of    
federal income tax. However, distributions properly designated as           
exempt-interest dividends may be subject to backup withholding, as discussed
below. In general, dividends other than Capital Gain Dividends and          
exempt-interest dividends, if any, paid by the Fund to a shareholder that is
not a "U.S. person" within the meaning of the Code (such shareholder, a     
"Non-U.S. Person") are subject to withholding of U.S federal income tax at a
rate of 30% (or lower applicable treaty rate) even if they are funded by    
income or gains (such as portfolio interest, short-term capital gains, or   
foreign-source dividend and interest income) that, if paid to a Non-U.S.    
Person directly, would not be subject to withholding. However, effective for
taxable years of the Fund beginning after December 31, 2004, and before     
January 1, 2008, the Fund will not be required to withhold any amounts with 
respect to (i) distributions (other than distributions to a Non-U.S. Person 
(w) that has not provided a satisfactory statement that the beneficial owner
is not a U.S. person, (x) to the extent that the dividend is attributable to
certain interest on an obligation if the Non-U.S. Person is the issuer or is
 a 10% shareholder of the issuer, (y) that is within certain foreign countries
that have inadequate information exchange with the United States, or (z) to 
the extent the dividend is attributable to interest paid by a person that is
a related person of the Non-U.S. Person and the Non-U.S. Person is a        
controlled foreign corporation) from U.S.-source interest income that would 
 not be subject to U.S. federal income tax if earned directly by an individual
Non-U.S. Person (an "interest-related dividend"), and (ii) distributions    
(other than distributions to an individual Non-U.S. Person who is present in
 the United States for a period or periods aggregating 183 days or more during
the year of the distribution) of net short-term capital gains in excess of  
net long-term capital losses (a "short-term capital gain dividend"), in each
such case to the extent such distributions are properly designated by the   
Fund. This provision will first apply to the Fund (1) with respect to its   
direct portfolio investments (if any) in its taxable year beginning after   
December 31, 2004, and, (2) with respect to its investments in underlying   
 Funds (if any), with respect to designated distributions from such underlying
Funds in their taxable years beginning after December 31, 2004, that are    
received by the Fund in its taxable year beginning after December 31, 2004. 
Depending on the circumstances, the Fund may make such designations with    
respect to all, some or none of its potentially eligible dividends and/or   
treat such dividends, in whole or in part, as ineligible for this exemption 
for withholding. The Fund does not currently intend to designate            
distributions as interest-related dividends or as short-term capital gain   
dividends except with respect to Research Bond Fund J shares. In order to   
qualify for this exemption from withholding, a foreign person will need to  
comply with applicable certification requirements relating to its non-U.S.  
status (including, in general, furnishing an IRS Form W-8BEN or substitute  
Form). In the case of shares held through an intermediary, the intermediary 
may withhold even if the Fund makes a designation with respect to a payment.
Foreign persons should contact their intermediaries with respect to the     
application of these rules to their accounts.                               

If a beneficial holder who is a Non-U.S. Person has a trade or business in  
the United States, and the dividends are effectively connected with the     
 conduct by the beneficial holder of a trade or business in the United States,
the dividend will be subject to U.S. federal net income taxation at regular 
income tax rates.                                                           

In general, special tax rules apply to distributions that a "qualified      
investment entity" (a "QIE") pays to foreign shareholders that are          
attributable to gain from the Fund's sale or exchange of "U.S. real property
 interests" (a "USRPI Distribution"). A Fund will be a QIE if it is both (i) a
regulated investment company and (ii) a "U.S. real property holding         
corporation" (determined without regard to certain exceptions, described    
below, for 5% holders of publicly traded classes of stock and for interests 
in domestically-controlled regulated investment companies and real estate   
investment trusts ("REITs")). Under the Code, a "U.S. real property holding 
corporation" is any corporation that holds (or held during the previous     
five-year period) "U.S. real property interests" ("USRPIs") (defined as U.S.
real property and interests (other than solely as a creditor) in "U.S. real 
property holding corporations") with an aggregate fair market value equal to
50% or more of the fair market value of the corporation's real property     
assets and other trade-or-business assets. A USRPI does not include (i) any 
class of stock of a corporation that is traded on an established securities 
market with respect to a person who holds 5% or less of such class of stock 
at all times during the previous five-year period and (ii) a regulated      
investment company's interests in domestically controlled REITs and other   
regulated investment companies.                                             

For taxable years beginning on or after January 1, 2006, where a foreign    
shareholder has owned more than 5% of a class of shares of a Fund that is a 
QIE during the one-year period preceding the date of the USRPI Distribution,
the Fund will be required to withhold 35% of any USRPI Distribution and the 
 foreign shareholder will have an obligation to file a U.S. tax return and pay
tax. For all other foreign shareholders of a Fund that is a QIE, a USRPI    
Distribution will be treated as ordinary income (notwithstanding any        
designation by the Fund that such distribution is a Capital Gain Dividend)  
and the Fund will be required to withhold 30% (or lower applicable treaty   
rate) of such distribution. If a Fund that is a QIE makes a distribution to 
its foreign shareholders that is attributable to a USRPI Distribution       
 received by the Fund from a "lower-tier" REIT or regulated investment company
that is a QIE, that distribution will retain its character as a USRPI       
 Distribution when passed through to the foreign shareholder regardless of the
Fund's percentage ownership of the "lower-tier" REIT or regulated investment
company.                                                                    

Under U.S. federal tax law, a beneficial holder of shares who is a foreign  
shareholder is not, in general, subject to U.S. federal income tax on gains 
 (and is not allowed a deduction for losses) realized on the sale of shares of
the Fund or on Capital Gain Dividends unless (i) such gain or Capital Gain  
Dividend is effectively connected with the conduct of a trade or business   
carried on by such holder within the United States, (ii) in the case of an  
 individual holder, the holder is present in the United States for a period or
periods aggregating 183 days or more during the year of the sale or Capital 
Gain Dividend and certain other conditions are met, or (iii) the shares are 
USRPIs or the Capital Gain Dividends are USRPI Distributions.               

Foreign shareholders in the Fund should consult their tax advisers with     
respect to the potential application of the above rules.                    

Backup Withholding -- The Fund is also required in certain circumstances to 
apply backup withholding at the rate of 28% on taxable dividends, including 
Capital Gain Dividends, redemption proceeds (except for redemptions by money
market funds), and certain other payments that are paid to any non-corporate
shareholder (including a Non-U.S. Person) who does not furnish to the Fund  
certain information and certifications or who is otherwise subject to backup
withholding. Backup withholding will not, however, be applied to payments   
that have been subject to the 30% withholding tax on shareholders who are   
neither citizens nor residents of the United States. The back-up withholding
rules also apply to distributions that are properly designated as           
exempt-interest dividends.                                                  

Foreign Income Taxation of a Non-U.S. Person -- Distributions received from 
the Fund by a Non-U.S. Person may also be subject to tax under the laws of  
their own jurisdictions.                                                    

 State and Local Income Taxes: U.S. Government Securities -- Dividends paid by
 the Fund that are derived from interest on obligations of the U.S. Government
and certain of its agencies and instrumentalities (but generally not        
distributions of capital gains realized upon the disposition of such        
obligations) may be exempt from state and local income taxes. The Fund      
generally intends to advise shareholders of the extent, if any, to which its
dividends consist of such interest. Shareholders are urged to consult their 
tax advisers regarding the possible exclusion of such portion of their      
dividends for state and local income tax purposes.                          

 Certain Investments -- Any investment in zero coupon bonds, deferred interest
bonds, payment-in-kind bonds, certain stripped securities, and certain      
securities purchased at a market discount (including certain high yield debt
obligations) will cause the Fund to recognize income prior to the receipt of
 cash payments with respect to those securities. To distribute this income and
avoid a tax on the Fund, the Fund may be required to liquidate portfolio    
securities that it might otherwise have continued to hold, potentially      
resulting in additional taxable gain or loss to the Fund. The Fund's        
 investments in REIT equity securities may also require the Fund to accrue and
distribute income not yet received and may at other times result in the     
Fund's receipt of cash in excess of the REIT's earnings. If the Fund        
distributes such amounts, such distribution could constitute a return of    
capital to Fund shareholders for federal income tax purposes. Income from   
REIT securities generally will not be eligible for treatment as qualified   
dividend income. Any investment in residual interests of a Collateralized   
 Mortgage Obligation (a "CMO") that has elected to be treated as a real estate
mortgage investment conduit (a "REMIC") can create complex tax problems,    
especially if the Fund has state or local governments or other tax-exempt   
organizations as shareholders. Under current law, the Fund serves to block  
unrelated business taxable income ("UBTI") from being realized by its       
tax-exempt shareholders. Notwithstanding the foregoing, a tax-exempt        
shareholder could realize UBTI by virtue of its investment in the Fund if   
 either: (1) the Fund invests in REITs that hold residual interests in REMICs;
or (2) shares in the Fund constitute debt-financed property in the hands of 
the tax-exempt shareholder within the meaning of Code Section 514(b). If a  
 charitable remainder trust (as defined in Code Section 664) realizes any UBTI
for a taxable year, it will lose its tax-exempt status for the year.        

Options, Futures Contracts, and Forward Contracts -- The Fund's transactions
in options, futures contracts, forward contracts, short sales "against the  
 box," and swaps and related transactions will be subject to special tax rules
that may affect the amount, timing, and character of Fund income and        
distributions to shareholders. For example, certain positions held by the   
Fund on the last business day of each taxable year will be marked to market 
 (i.e., treated as if closed out on that day), and any gain or loss associated
with the positions will be treated as 60% long-term and 40% short-term      
capital gain or loss. Certain positions held by the Fund that substantially 
diminish its risk of loss with respect to other positions in its portfolio  
may constitute "straddles," and may be subject to special tax rules that    
would cause deferral of Fund losses, adjustments in the holding periods of  
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects with   
respect to those investments; in order to distribute this income and avoid a
tax on the Fund, the Fund may be required to liquidate portfolio securities 
that it might otherwise have continued to hold, potentially resulting in    
additional taxable gain or loss to the Fund. The Fund will limit its        
activities in options, futures contracts, forward contracts, short sales    
"against the box" and swaps and related transactions to the extent necessary
to meet the diversification requirements of Subchapter M of the Code.       

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

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

If more than 50% of the total assets of a Fund are represented by direct    
 investments in foreign stock and securities at the close of its taxable year,
 the Fund may elect to "pass through" to its shareholders foreign income taxes
paid by it. If the Fund so elects, shareholders will be required to treat   
their pro rata portions of the foreign income taxes paid by the Fund as part
of the amounts distributed to them by it and thus includable in their gross 
income for federal income tax purposes. Shareholders who do not itemize     
deductions would (subject to such limitations) be able to claim a credit but
not a deduction. No deduction will be permitted to individuals in computing 
 their alternative minimum tax liability. If the Fund is not eligible, or does
not elect, to "pass through" to its shareholders foreign income taxes it has
paid, shareholders will not be able to claim any deduction or credit for any
part of the foreign taxes paid by the Fund. In addition, the Fund's         
investments in certain foreign securities (including fixed income securities
 and derivatives) denominated in foreign currencies may increase or accelerate
the Fund's recognition of ordinary income and may affect the timing, amount,
or character of the Fund's distributions.                                   

Tax Shelter Reporting -- Under Treasury regulations, if a shareholder       
 recognizes a loss with respect to the Fund's shares of $2 million or more for
 an individual shareholder or $10 million or more for a corporate shareholder,
the shareholder must file with the Internal Revenue Service a disclosure    
statement on Form 8886. Shareholders should consult their tax advisers to   
 determine the applicability of these regulations in light of their individual
circumstances.                                                              

Underlying Funds -- If the Fund invests all of its assets in shares of      
underlying Funds, its distributable income and gains will normally consist  
entirely of distributions from underlying Funds' income and gains and gains 
and losses on the dispositions of shares of underlying Funds. To the extent 
that an underlying Fund realizes net losses on its investments for a given  
taxable year, the Fund will not be able to recognize its share of those     
losses (so as to offset distributions of net income or capital gains from   
other underlying Funds) until it disposes of shares of the underlying Fund. 
Moreover, even when the Fund does make such a disposition, a portion of its 
 loss may be recognized as a long-term capital loss, which will not be treated
as favorably for federal income tax purposes as a short-term capital loss or
 an ordinary deduction. In particular, the Fund will not be able to offset any
capital losses from its dispositions of underlying Fund shares against its  
ordinary income, which includes distributions of any net short-term capital 
 gains realized by an underlying Fund. As a result of the foregoing rules, and
certain other special rules, it is possible that the amounts of net         
investment income and net capital gains that the Fund will be required to   
distribute to shareholders will be greater than such amounts would have been
had the Fund invested directly in the securities held by the underlying     
Funds, rather than investing in shares of the underlying Funds. For similar 
reasons, the character of distributions from a Fund (i.e., long-term capital
gains, eligibility for dividends-received deduction, etc.) will not         
necessarily be the same as it would have been had the Fund invested directly
in the securities held by the underlying Funds.                             

If the Fund received dividends from an underlying Fund that qualifies as a  
regulated investment company, and the underlying Fund designates such       
dividends as "qualified dividend income," then the Fund is permitted in turn
 to designate a portion of its distributions as "qualified dividend income" as
well, provided the Fund meets holding period and other requirements with    
respect to shares of the underlying Fund.                                   

 Depending on the Fund's percentage ownership in an underlying Fund before and
after a redemption of shares of such underlying Fund, such a redemption may 
cause the Fund to be treated as receiving a dividend on the full amount of  
the distribution instead of receiving capital gain income on the shares of  
the underlying Fund. This would be the case where the Fund holds a          
significant interest in an underlying Fund and redeems only a small portion 
of such interest. It is possible that such a dividend will qualify as       
"qualified dividend income;" otherwise, it will be taxable as ordinary      
income.                                                                     

The fact that a Fund achieves its investment objectives by investing in     
underlying Funds will generally not adversely affect the Fund's ability to  
pass on to foreign shareholders the full benefit of the interest-related    
dividends and short-term capital gain dividends that it receives from its   
underlying investments in the Funds, except possibly to the extent that (1) 
interest-related dividends received by the Fund are offset by deductions    
allocable to the Fund's qualified interest income or (2) short-term capital 
gain dividends received by the Fund are offset by the Fund's net short- or  
 long-term capital losses, in which case the amount of a distribution from the
Fund to a foreign shareholder that is properly designated as either an      
interest-related dividend or a short-term capital gain dividend,            
respectively, may be less than the amount that such shareholder would have  
received had they invested directly in the underlying Funds. Furthermore, if
the Fund is a QIE and invests in an underlying Fund that is a QIE, a        
distribution to a foreign shareholder that is attributable to a USRPI       
Distribution received by the Fund will retain its character as a USRPI      
 Distribution when passed through to the foreign shareholder regardless of the
Fund's percentage ownership of the underlying Fund.                         

Under the current law, a Fund of Funds cannot pass through to shareholders  
foreign tax credits borne in respect of foreign securities income earned by 
an underlying Fund. A Fund is permitted to elect to pass through to its     
 shareholders foreign income taxes it pays only if it directly holds more than
 50% of its assets in foreign stock and securities at the close of its taxable
year. Foreign securities held indirectly through an underlying Fund do not  
contribute to this 50% threshold.                                           

> SPECIAL RULES FOR MUNICIPAL FUND DISTRIBUTIONS                                

 The following special rules apply to shareholders of Funds whose objective is
to invest primarily in obligations that pay interest that is exempt from    
federal income tax ("Municipal Funds").                                     

Tax-Exempt Distributions -- The portion of a Municipal Fund's distributions 
of net investment income that is attributable to interest from tax-exempt   
securities will be designated by the Fund as an "exempt-interest dividend"  
under the Code and will generally be exempt from federal income tax in the  
hands of shareholders so long as at least 50% of the total value of the     
Fund's assets consists of tax-exempt securities at the close of each quarter
of the Fund's taxable year. Distributions of tax-exempt interest earned from
certain securities may, however, be treated as an item of tax preference for
shareholders under the federal alternative minimum tax, and all             
 exempt-interest dividends will increase a corporate shareholder's alternative
minimum tax. Except when the Fund provides actual monthly percentage        
 breakdowns, the percentage of income designated as tax-exempt will be applied
uniformly to all distributions by the Fund of net investment income made    
during each fiscal year of the Fund and may differ from the percentage of   
distributions consisting of tax-exempt interest in any particular month.    
Shareholders are required to report exempt-interest dividends received from 
the Fund on their federal income tax returns.                               

Taxable Distributions -- A Municipal Fund may also earn some income that is 
 taxable as ordinary income (including interest from any obligations that lose
their federal tax exemption and, subject to a de minimis exception, when a  
bond purchased at a price less than its stated redemption price at maturity 
(a so-called "market discount bond") matures or is disposed of by the       
 Municipal Fund) and may recognize capital gains and losses as a result of the
disposition of securities and from certain options and futures transactions.
Shareholders normally will have to pay federal income tax on the non-exempt 
 interest dividends and capital gain distributions they receive from the Fund,
whether paid in cash or reinvested in additional shares. However, such Funds
 do not expect that the non-tax-exempt portion of their net investment income,
 if any, will be substantial. Because Municipal Funds expect to earn primarily
tax-exempt interest income, it is expected that dividends from such Funds   
will not qualify for the dividends-received deduction for corporations and  
will not be treated as "qualified dividend income" taxable to non-corporate 
shareholders at reduced rates.                                              

Consequences of Distributions by a Municipal Fund: Effect of Accrued        
Tax-Exempt Income -- Shareholders redeeming shares after tax-exempt income  
has been accrued but not yet declared as a dividend should be aware that a  
portion of the proceeds realized upon redemption of the shares will reflect 
the existence of such accrued tax-exempt income and that this portion may be
subject to tax as a capital gain even though it would have been tax-exempt  
had it been declared as a dividend prior to the redemption. For this reason,
if a shareholder wishes to redeem shares of a Municipal Fund that does not  
declare dividends on a daily basis, the shareholder may wish to consider    
whether he or she could obtain a better tax result by redeeming immediately 
 after the Fund declares dividends representing substantially all the ordinary
income (including tax-exempt income) accrued for that period.               

 Certain Additional Information for Municipal Fund Shareholders -- Interest on
indebtedness incurred by shareholders to purchase or carry Municipal Fund   
shares will not be deductible for federal income tax purposes.              
 Exempt-interest dividends are taken into account in calculating the amount of
social security and railroad retirement benefits that may be subject to     
federal income tax. You should consult your tax adviser to determine what   
effect, if any, an investment in a Fund may have on the federal taxation of 
your benefits. Entities or persons who are "substantial users" (or persons  
related to "substantial users") of facilities financed by private activity  
bonds should consult their tax advisers before purchasing Fund shares.      

Consequences of Redeeming Shares -- Any loss realized on a redemption of    
Municipal Fund shares held for six months or less will be disallowed to the 
extent of any exempt-interest dividends received with respect to those      
shares. If not disallowed, any such loss will be treated as a long-term     
 capital loss to the extent of any distributions of net capital gain made with
respect to those shares.                                                    

State and Local Income Taxes: Municipal Obligations -- The exemption of     
exempt-interest dividends for federal income tax purposes does not          
necessarily result in exemption under the income tax laws of any state or   
local taxing authority. Some states do exempt from tax that portion of an   
exempt interest dividend that represents interest received by a regulated   
 investment company on its holdings of securities issued by that state and its
 political subdivisions and instrumentalities. Therefore, the Fund will report
annually to its shareholders the percentage of interest income earned by it 
during the preceding year on Municipal Bonds and will indicate, on a        
state-by-state basis only, the source of such income.                       

> SPECIAL CONSIDERATIONS FOR 529 SHARE CLASSES                                  

The following special consideration applies specifically to the ownership of
a Fund' 529 share classes through a tuition program that qualifies under    
Section 529 of the Code.                                                    

The 529 share classes are an investment option under one or more tuition    
programs designed to qualify under Section 529 of the Code so that earnings 
 on investments are not subject to federal income tax (to either a contributor
to the tuition program or a designated beneficiary) until the earnings are  
withdrawn. Withdrawals of earnings that are used to pay "qualified higher   
education expenses" are tax-free for federal income tax purposes. State and 
local taxes may still apply. These tax benefits are not available to 529    
shares that are not owned through a qualifying Section 529 tuition program. 

Withdrawals of earnings that are not used for the designated beneficiary's  
 qualified higher education expenses generally are subject not only to federal
income tax but also to a 10% penalty tax unless such amounts are transferred
within sixty (60) days to another tuition program for the same designated   
beneficiary (only one such transfer may be made in any twelve (12) month    
period) or another designated beneficiary who is a member of the family of  
the designated beneficiary with respect to which the distribution was made  
and certain other conditions are satisfied. The 10% penalty tax will not    
apply to withdrawals made under certain circumstances, including certain    
withdrawals made after the designated beneficiary dies, becomes disabled, or
receives a scholarship or other tax-free payment for educational expenses   
 that does not exceed the amount of the distribution. Withdrawals attributable
to contributions to the tuition program (including the portion of any       
rollover from another tuition program that is attributable to contributions 
to that program) are not subject to tax.                                    

IX. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                        

For the purposes of this section, all references to the "Adviser" shall     
include the Sub-Adviser with respect to that portion of the MFS Diversified 
 Income Fund for which the Sub-Adviser provides day-to-day investment advisory
services.                                                                   

Specific decisions to purchase or sell securities for the Fund are made by  
persons affiliated with the Adviser. Any such person may serve other clients
of the Adviser or any subsidiary of the Adviser in a similar capacity.      

In connection with the selection of broker/dealers and the placing of Fund  
portfolio transactions, the Adviser seeks to achieve for the Fund the best  
 overall price and execution available from brokerage firms, taking account of
all factors it deems relevant, including by way of illustration: price; the 
size of the transaction; the nature of the market for the security; the     
amount of the commission; the timing and impact of the transaction taking   
into account market prices and trends; the reputation, experience and       
financial stability of the broker/dealer involved; and the quality of       
services rendered by the broker/dealer in that and other transactions.      

In the case of securities traded in the over-the-counter market, portfolio  
transactions may be effected either on an agency basis, which involves the  
payment of negotiated brokerage commissions to the broker/dealer, including 
electronic communication networks, or on a principal basis at net prices    
without commissions, but which include compensation to the broker/dealer in 
the form of a mark-up or mark-down, depending on where the Adviser believes 
best execution is available. In the case of securities purchased from       
underwriters, the cost of such securities generally includes a fixed        
underwriting commission or concession. From time to time, soliciting dealer 
fees are available to the Adviser on tender or exchange offers. Such        
soliciting or dealer fees are, in effect, recaptured by the Funds.          

As permitted by Section 28(e) of the Securities Exchange Act of 1934, as    
amended ("Section 28(e)"), the Adviser may cause the Fund to pay a          
 broker/dealer which provides "brokerage and research services" (as defined by
the Securities Exchange Act of 1934, as amended) to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of 
 the amount other broker/dealers would have charged for the transaction if the
 Adviser determines in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
 executing broker/dealer viewed in terms of either a particular transaction or
the Adviser's overall responsibilities to the Fund and its other clients.   
"Commissions," as interpreted by the SEC, include fees paid to brokers for  
trades conducted on an agency basis, and certain mark-ups, markdowns,       
commission equivalents and other fees received by dealers in riskless       
principal transactions placed in the over-the-counter market.               

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

Broker/dealers may be willing to furnish statistical, research and other    
factual information or services ("Research"), for example, investment       
research reports; access to analysts; execution systems and trading         
analytics; reports or databases containing corporate, fundamental, and      
technical analyses; portfolio modeling strategies; and economic research    
services, such as publications, chart services, and advice from economists  
concerning macroeconomics information, and analytical investment information
about particular corporations to the Adviser for no consideration other than
brokerage or underwriting commissions. Securities may be bought or sold from
time to time through such broker/dealers on behalf of the Fund. The Adviser 
may use brokerage commissions from the Fund's portfolio transactions to     
 acquire Research, subject to the procedures and limitations described in this
discussion.                                                                 

The advisory fee paid by the Fund to the Adviser is not reduced as a        
consequence of the Adviser's receipt of Research. To the extent the Fund's  
 portfolio transactions are used to obtain Research, the brokerage commissions
paid by the Fund might exceed those that might otherwise be paid for        
execution only. The Research received may be useful and of value to the     
Adviser in serving both the Fund and other clients of the Adviser;          
accordingly, not all of the Research provided by brokers through which the  
 Fund effects securities transactions may be used by the Adviser in connection
with the Fund. While the Research is not expected to reduce the expenses of 
the Adviser, the Adviser would, through the use of the Research, avoid the  
additional expenses that would be incurred if it attempted to develop       
comparable information through its own staff.                               

From time to time, the Adviser prepares a list of broker/dealer firms that  
have been deemed by the Adviser to provide valuable Research as determined  
periodically by the investment staff ("Research Firms"), together with a    
suggested non-binding amount of brokerage commissions ("non-binding target")
to be allocated to each Research Firm, subject to certain requirements. All 
trades with Research Firms will be executed in accordance with the Adviser's
obligation to seek best execution for its client accounts. Neither the      
Adviser nor the Fund has an obligation to any Research Firm if the amount of
brokerage commissions paid to the Research Firm is less than the applicable 
non-binding target. The Adviser reserves the right to pay cash to the       
Research Firm from its own resources in an amount the Adviser determines in 
its discretion.                                                             

If the Adviser determines that any service or product has a mixed use (i.e.,
 it also serves functions that do not assist the investment decision-making or
trading process), the Adviser will allocate the costs of such service or    
product accordingly in its reasonable discretion. The Adviser will allocate 
brokerage commissions to Research Firms only for the portion of the service 
or product that the Adviser determines assists it in the investment         
decision-making or trading process and will pay for the remaining value of  
the product or service in cash.                                             

In effecting portfolio transactions on behalf of the Fund and the Adviser's 
other clients, the Adviser from time to time may instruct the broker/dealer 
that executes a transaction to allocate, or "step out," a portion of such   
transaction to another broker/dealer. The broker/dealer to which the Adviser
has "stepped out" would then settle and complete the designated portion of  
the transaction, and the executing broker/dealer would settle and complete  
the remaining portion of the transaction that has not been "stepped out."   
Each broker/dealer may receive a commission or brokerage fee with respect to
that portion of the transaction that it settles and completes.              

 In certain instances there may be securities that are suitable for the Fund's
portfolio as well as for one or more of the other clients of the Adviser or 
any subsidiary of the Adviser. It may develop that a particular security is 
 bought or sold for only one client even though it might be held by, or bought
 or sold for, other clients. Likewise, a particular security may be bought for
one or more clients when one or more other clients are selling that same    
security. Some simultaneous transactions are inevitable when several clients
 receive investment advice from the same investment adviser, particularly when
the same security is suitable for the investment objectives of more than one
client. Transactions for each client are generally effected independently   
unless the Advisor determines to purchase or sell the same securities for   
several clients at approximately the same time. The Advisor may, but is not 
required to, aggregate together purchases and sales for several clients and 
allocate the trades in a fair and equitable manner, across participating    
clients. The Adviser has adopted policies that are reasonably designed to   
ensure that when two or more clients are simultaneously engaged in the      
purchase or sale of the same security, the securities are allocated among   
 clients in a manner believed by the Adviser to be fair and equitable to each.
Among other things, these policies prohibit allocations of equity initial   
public offerings, equity limited offerings or fixed income new issues to,   
among others: (1) Private Portfolio Services accounts; (2) funds or accounts
the beneficial owners of which are principally the Adviser's officers and   
 employees of the Trust or Trustees which are not being offered to the public;
and (3) any accounts owned beneficially solely by the Adviser or any direct 
or indirect subsidiary of the Adviser. However, these policies do not       
prohibit allocations to Funds or accounts owned beneficially by Sun Life of 
 Canada (U.S.) Financial Services Holdings, Inc., or Sun Life Financial, Inc.,
or their affiliates other than the Adviser and its direct and indirect      
subsidiaries.                                                               

It is recognized that in some cases this system could have a detrimental    
effect on the price or volume of the security as far as the Fund is         
concerned. In other cases, however, the Adviser believes that the Fund's    
ability to participate in volume transactions will produce better executions
for the Fund.                                                               

X. DISCLOSURE OF PORTFOLIO HOLDINGS                                         

The Fund has established a policy governing the disclosure of its portfolio 
holdings that is reasonably designed to protect the confidentiality of the  
Fund's non-public portfolio holdings and prevent inappropriate selective    
disclosure of such holdings. The Fund's Board of Trustees has approved this 
policy and will be asked to approve any material amendments to this policy. 
Exceptions to this policy may be authorized by MFS' general counsel or a    
senior member of the MFS legal department acting under the supervision of   
MFS' general counsel (an "Authorized Person").                              

Neither MFS nor the Fund nor, if applicable, a sub-adviser, will receive any
 compensation or other consideration in connection with its disclosure of Fund
portfolio holdings.                                                         

> PUBLIC DISCLOSURE OF PORTFOLIO HOLDINGS                                       

In addition to the public disclosure of Fund portfolio holdings through     
required SEC quarterly filings, a Fund may make its portfolio holdings      
publicly available on the MFS Web site in such scope and form and with such 
frequency as MFS may reasonably determine.                                  

The following information is generally available to you on the MFS Web site 
(mfs.com):                                                                  

 Information                           Approximate Date of Posting to Web Site
 -----------                           ---------------------------------------
Fund's top 10 securities holdings     14 days after month end               
as of each month's end                                
Fund's full securities holdings       29 days after month end               
as of each month's end                                    

Note that the Fund or MFS may suspend the posting of this information or    
modify the elements of this Web posting policy without notice to            
 shareholders. Once posted, the above information will remain available on the
 Web site until at least the date on which the Fund files a Form N-CSR or Form
N-Q for the period that includes the date as of which the Web site          
information is current.                                                     

Not all registered investment companies that are advised by MFS publicly    
disclose portfolio holdings in the form or on the schedule described above, 
and registered investment companies that are sub-advised by MFS or its      
 affiliates may be subject to different portfolio holdings disclosure policies
that may permit public disclosure of portfolio holdings information in      
different forms and at different times. In addition, separate account and   
unregistered product clients of MFS or its affiliates have access to their  
portfolio holdings, and prospective clients have access to representative   
portfolio holdings. These clients and prospective clients are not subject to
the Fund's portfolio holdings disclosure policies. Some of these registered 
investment companies, sub-advised Funds, separate accounts, and unregistered
products, all advised or sub-advised by MFS or its affiliates, have         
substantially similar or identical investment objectives and strategies to  
certain Funds. They therefore have potentially substantially similar, and in
certain cases nearly identical, portfolio holdings as those Funds.          

 A Fund's portfolio holdings are considered to be publicly disclosed: (a) upon
the disclosure of the portfolio holdings in a publicly available, routine   
filing with the SEC that is required to include the information, (b) the day
after the Fund makes such information available on its Web site (assuming   
 that it discloses in its prospectus that such information is available on its
Web site), or (c) at such additional times and on such additional basis as  
determined by the SEC or its staff.                                         

> DISCLOSURE OF NON-PUBLIC PORTFOLIO HOLDINGS                                   

A Fund may, in certain cases, disclose to third parties its portfolio       
holdings which have not been made publicly available. Disclosure of         
non-public portfolio holdings to third parties may only be made if an       
Authorized Person determines that such disclosure is not impermissible under
applicable law or regulation. In the case of sub-advisers, as applicable,   
this determination may be made by a senior member of the sub-adviser's legal
or compliance departments (a "Sub-Adviser Authorized Person"). In addition, 
the third party receiving the non-public portfolio holdings may, at the     
discretion of an Authorized Person, be required to agree in writing to keep 
 the information confidential and/or agree not to trade directly or indirectly
based on the information. Such agreements may not be required in            
circumstances such as where portfolio securities are disclosed to brokers to
obtain bids/prices or in interviews with the media. MFS will seek to monitor
a recipient's use of non-public portfolio holdings provided under these     
agreements and, when appropriate, use its best efforts to enforce the terms 
of these agreements. The restrictions and obligations described in this     
paragraph do not apply to non-public portfolio holdings provided to MFS or  
its affiliates.                                                             

 In addition, to the extent that an Authorized Person determines that there is
a potential conflict with respect to the disclosure of information that is  
 not publicly available between the interests of a Fund's shareholders, on the
one hand, and MFS, MFD or an affiliated person of MFS, MFD, or the Fund, on 
the other hand, the Authorized Person must inform MFS' conflicts officer of 
such potential conflict, and MFS' conflicts officer shall determine whether,
in light of the potential conflict, disclosure is reasonable under the      
circumstances, and shall report such potential conflict of interest         
determinations to the Fund's Independent Chief Compliance Officer and the   
Board of Trustees of the Fund. MFS also reports to the Board of Trustees of 
the Fund regarding the disclosure of information regarding the Fund that is 
not publicly available.                                                     

Subject to compliance with the standards set forth in the previous two      
paragraphs, non-public portfolio holdings may be disclosed in the following 
circumstances:                                                              

 Employees of MFS or MFD or, if applicable, a sub-adviser, (collectively "Fund
representatives") disclose non-public portfolio holdings in connection with 
 the day-to-day operations and management of the Fund. Full portfolio holdings
 are disclosed to a Fund's custodians, independent registered accounting firm,
financial printers, regulatory authorities, and stock exchanges and other   
listing organizations. Portfolio holdings are disclosed to a Fund's pricing 
service vendors and broker/dealers when requesting bids for, or price       
quotations on, securities, and to other persons (including independent      
contractors) who provide systems or software support in connection with Fund
operations, including accounting, compliance support, and pricing. Portfolio
holdings may also be disclosed to persons assisting a Fund in the voting of 
 proxies or in connection with litigation relating to Fund portfolio holdings.
In connection with managing the Funds, MFS or, if applicable, a sub-adviser,
may use analytical systems provided by third parties who may have access to 
Fund portfolio holdings.                                                    

Non-public portfolio holdings may be disclosed in connection with other     
activities, such as to participants in in-kind purchases and redemptions of 
Fund shares, to service providers facilitating the distribution or analysis 
of portfolio holdings, once the information is public, and in other         
circumstances not described above. All such disclosures are subject to      
compliance with the applicable disclosure standards.                        

In addition, subject to such disclosure not being impermissible under       
applicable law or regulation, Fund representatives may disclose Fund        
portfolio holdings and related information, which may be based on non-public
portfolio holdings, under the following circumstances (among others):       

Fund representatives may provide oral or written information ("portfolio    
commentary") about a Fund, including, but not limited to, how the Fund's    
investments are divided among various sectors, industries, countries, value 
and growth stocks, small, mid, and large-cap stocks, among stocks, bonds,   
currencies and cash, types of bonds, bond maturities, bond coupons, and bond
credit quality ratings. This portfolio commentary may also include          
information on how these various weightings and factors contributed to Fund 
performance. Fund representatives may also express their views orally or in 
writing on one or more of a Fund's portfolio holdings or may state that a   
Fund has recently purchased or sold one or more holdings.                   

Fund representatives may also provide oral or written information           
 ("statistical information") about various financial characteristics of a Fund
or its underlying portfolio securities including, but not limited to, alpha,
beta, coefficient of determination, duration, maturity, information ratio,  
Sharpe ratio, earnings growth, payout ratio, price/book value, projected    
earnings growth, return on equity, standard deviation, tracking error,      
weighted average quality, market capitalization, percent debt to equity,    
price to cash flow, dividend yield or growth, default rate, portfolio       
turnover, and risk and style characteristics.                               

The portfolio commentary and statistical information may be provided to     
 members of the press, shareholders in the Fund, persons considering investing
in the Fund, or representatives of such shareholders or potential           
shareholders, such as fiduciaries of a 401(k) plan or a trust and their     
advisers, and the content and nature of the information provided to each of 
these persons may differ.                                                   

> ONGOING ARRANGEMENTS TO MAKE NON-PUBLIC PORTFOLIO HOLDINGS AVAILABLE          

 With authorization from an Authorized Person or, as applicable, a Sub-Adviser
Authorized Person, consistent with "Disclosure of Non-Public Portfolio      
Holdings" above, Fund representatives may disclose non-public Fund portfolio
holdings to the recipients identified on Appendix G to this SAI Part II, or 
permit the recipients identified in Appendix G to this SAI Part II to have  
access to non-public Fund portfolio holdings, on an on-going basis.         

This list of recipients in Appendix G to this SAI Part II is current as of  
June 30, 2006, and any additions, modifications, or deletions to this list  
that have occurred since June 30, 2006, are not reflected. The portfolio    
holdings of the Fund which are provided to these recipients, or to which    
these recipients have access, may be the Fund's current portfolio holdings. 
As a condition to receiving or being provided access to non-public Fund     
portfolio holdings, the recipients listed in Appendix G to this SAI Part II 
must agree, or otherwise have an independent duty, to maintain this         
information in confidence.                                                  

XI. DETERMINATION OF NET ASSET VALUE                                        

The net asset value per share of each class of the Fund is determined each  
day during which the New York Stock Exchange (the "Exchange") is open for   
trading. (As of the date of this SAI, the Exchange is open for trading every
 weekday except in an emergency and for the following holidays (or the days on
 which they are observed): New Year's Day; Martin Luther King Day; Presidents'
Day; Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving   
Day, and Christmas Day.) This determination is made once each day as of the 
close of regular trading on the Exchange (generally, 4 p.m., Eastern time)  
(the "valuation time") by deducting the amount of the liabilities           
attributable to the class from the value of the assets attributable to the  
class and dividing the difference by the number of Fund shares outstanding  
for that class. In accordance with regulations for regulated investment     
companies and except for money market funds, changes in portfolio holdings  
and number of shares outstanding are generally reflected in a Fund's net    
asset value the next business day after such change.                        

> MONEY MARKET FUNDS                                                            

Money market instruments are valued at amortized cost, which approximates   
market value. Amortized cost involves valuing an instrument at its cost as  
 adjusted for amortization of premium or accretion of discount rather than its
current market value. Each money market fund's use of amortized cost is     
subject to the Fund's compliance with Rule 2a-7 under the Investment Company
Act of 1940. The amortized cost value of an instrument can be different from
the market value of an instrument.                                          

The Board of Trustees for each money market fund has established procedures 
designed to stabilize its net asset value per share at $1.00 and has        
delegated to the Adviser the responsibility for the implementation and      
administration of such procedures. Under the procedures, the adviser is     
responsible for monitoring and notifying the Board of Trustees of           
 circumstances where the net asset value calculated by using market valuations
may deviate from the $1.00 per share calculated using amortized cost and    
might result in a material dilution or other unfair result to investors or  
existing shareholders. Under such circumstances, the Board may take such    
 corrective action, if any, as it deems appropriate to eliminate or reduce, to
the extent reasonably practicable, any such dilution or unfair results. Such
corrective action could include selling portfolio instruments prior to      
maturity to realize capital gains or losses; shortening average portfolio   
maturity; withholding dividends; calculating net asset value by using       
 available market quotations; and such other measures as the Trustees may deem
appropriate.                                                                

> NON-MONEY MARKET FUNDS                                                        

Open-end investment companies are generally valued at their net asset value 
per share. The underlying investments of open-end investment companies      
managed by the Adviser are valued as described below.                       

Equity securities, including restricted equity securities, are generally    
valued at the last sale or official closing price as reported by an         
independent pricing service on the market or exchange on which they are     
primarily traded. For securities for which there were no sales reported that
day, equity securities are generally valued at the last quoted daily bid    
quotation as reported by an independent pricing service on the market or    
exchange on which they are primarily traded.                                

Debt instruments (other than short-term instruments), including restricted  
debt instruments, are generally valued at an evaluated or composite bid as  
reported by an independent pricing service. Values of debt instruments      
obtained from pricing services can utilize both dealer-supplied valuations  
and electronic data processing techniques, which take into account factors  
such as institutional-size trading in similar groups of securities, yield,  
quality, coupon rate, maturity, type of issue, trading characteristics, and 
other market data.                                                          

Short-term instruments with a maturity at issuance of 60 days or less may be
valued at amortized cost, which approximates market value.                  

Exchange-traded options are generally valued at the last sale or official   
closing price as reported by an independent pricing service on the exchange 
on which they are primarily traded. Exchange-traded options for which there 
were no sales reported that day are generally valued at the last daily bid  
quotation as reported by an independent pricing service on the exchange on  
which they are primarily traded. Options not traded on an exchange are      
generally valued at a broker/dealer bid quotation. Foreign currency options 
are generally valued using an external pricing model that uses market data  
from an independent source.                                                 

Futures contracts are generally valued at last posted settlement price as   
reported by an independent pricing service on the market on which they are  
primarily traded. Futures contracts for which there were no trades that day 
for a particular position are generally valued at the closing bid quotation 
 as reported by an independent pricing service on the market on which they are
primarily traded.                                                           

Forward foreign currency contracts are generally valued at the mean of bid  
and asked prices for the time period interpolated from rates reported by an 
independent pricing service for proximate time periods.                     

Swaps are generally valued at a broker-dealer bid quotation.                

 Securities and other assets generally valued on the basis of information from
an independent pricing service may also be valued at a broker/dealer bid    
quotation.                                                                  

The values of foreign securities and other assets and liabilities expressed 
 in foreign currencies are converted to U.S. dollars using the mean of bid and
asked prices for rates reported by an independent pricing service.          

XII. SHAREHOLDER SERVICES                                                   

> INVESTMENT AND WITHDRAWAL PROGRAMS                                            

The Fund makes available certain programs designed to enable shareholders to
add to or withdraw from their investment with applicable sales charges      
reduced or waived. These programs are generally described in the prospectus 
and additional details regarding certain of these programs are set forth    
below. These programs or waivers may be changed or discontinued by the Fund 
at any time without notice. Some of these programs and waivers may not be   
available to you if your shares are held through certain types of accounts, 
such as certain retirement accounts and 529 plans, or certain accounts that 
you maintain with your financial intermediary. You or your financial        
intermediary must inform MFSC of your intention to invest in the Fund under 
one of the programs below upon purchasing Fund shares. You can provide this 
information in your account application or through a separate document      
provided by your financial intermediary.                                    

LETTER OF INTENT. Out of the shareholder's initial purchase (or subsequent  
purchases if necessary), 5% of the dollar amount specified in the Letter of 
Intent application shall be held in escrow by MFSC in the form of shares    
registered in the shareholder's name. All distributions on escrowed shares  
will be paid to the shareholder or to the shareholder's order. When the     
minimum investment so specified is completed (either prior to or by the end 
of the 13-month period or 36-month period, as applicable), the shareholder  
will be notified and the escrowed shares will be released.                  

If the intended minimum investment amount is not completed, MFSC will redeem
 an appropriate number of the escrowed shares in order to pay the higher sales
charge level for the amount actually purchased. Shares remaining after any  
such redemption will be released by MFSC. By completing and signing the     
 Account Application or separate Letter of Intent application, the shareholder
 irrevocably appoints MFSC his or her attorney to surrender for redemption any
or all escrowed shares with full power of substitution in the premises.     

SYSTEMATIC WITHDRAWAL PLAN ("SWP"). To initiate this service, shares having 
an aggregate value of at least $5,000 either must be held on deposit by, or 
certificates for such shares must be deposited with, MFSC. MFSC may charge  
 the account for services rendered and expenses incurred beyond those normally
assumed by the Fund with respect to the redemption of shares. No charge is  
currently assessed against the account, but one could be instituted by MFSC 
on 60 days' notice in writing to the shareholder in the event that the Fund 
ceases to assume the cost of these services. The Fund may terminate any SWP 
for an account if the value of the account falls below $5,000 as a result of
share redemptions (other than as a result of a SWP). Any SWP may be         
terminated at any time by either the shareholder or the Fund.               

GROUP PURCHASES. A bona fide group and all its members may be treated at    
MFD's discretion as a single purchaser and, under the Right of Accumulation 
 (but not the Letter of Intent), obtain quantity sales charge discounts on the
purchase of Class A or 529A shares if the group (1) gives its endorsement or
authorization to the investment program so that it may be used by the       
financial intermediary to facilitate solicitation of the membership, thus   
effecting economies of sales effort; (2) has been in existence for at least 
six months and has a legitimate purpose other than to purchase mutual fund  
shares at a discount; (3) is not a group of individuals whose sole          
organizational nexus is as credit cardholders of a company, policyholders of
an insurance company, customers of a bank or financial intermediary, clients
of an investment adviser, or other similar groups; and (4) agrees to provide
 certification of membership of those members investing money in the MFS Funds
upon the request of MFD.                                                    

> EXCHANGE PRIVILEGE                                                            

MONEY MARKET FUNDS                                                          

If you exchange your shares out of MFS Cash Reserve Fund, MFS Government    
 Money Market Fund, or MFS Money Market Fund into Class A or Class 529A shares
of any other MFS Fund, you will pay the initial sales charge, if applicable,
if you have not already paid this charge on these shares. You will not pay  
the charge if:                                                              

 o the shares exchanged from either Fund were acquired by an exchange from any
other MFS Fund;                                                         

 o the shares exchanged from either Fund were acquired by automatic investment
of dividends from any other MFS Fund; or                                

o the shares being exchanged would have, at the time of purchase, been      
 eligible for purchase at net asset value had you invested directly in the
MFS Fund into which the exchange is being made.                         

MFS FIXED FUND. Class A, Class C, Class R, Class R1, Class R2, Class R3,    
Class R4, and Class R5 shares of any MFS Fund held by certain qualified     
 retirement plans may be exchanged for units of participation of the MFS Fixed
 Fund (the "Units"), and Units may be exchanged for Class A, Class C, Class R,
Class R1, Class R2, Class R3, Class R4, and Class R5 shares of any MFS Fund 
(if the share purchase eligibility for these share classes is met). With    
respect to exchanges between Class C shares subject to a CDSC and Units, a  
 shareholder will only be eligible to make the exchange if the CDSC would have
been waived had the Class C shares been redeemed. With respect to exchanges 
 between Class A shares and Units, shares otherwise subject to a CDSC will not
be charged a CDSC in an exchange. Shares or Units will retain the CDSC      
 schedule in effect based upon a pro rata share of the CDSC from the exchanged
 Fund and the original purchase date of the shares subject to the CDSC. In the
event that a shareholder initially purchases Units and then exchanges into  
Class A shares subject to an initial sales charge of a MFS Fund, the initial
sales charge shall be due upon such exchange, but will not be imposed with  
respect to any subsequent exchanges between such Class A shares and Units   
with respect to shares on which the initial sales charge has already been   
paid.                                                                       

TELEPHONE EXCHANGES. No more than ten exchanges may be made in any one      
exchange request by telephone.                                              

XIII. DESCRIPTION OF SHARES, VOTING RIGHTS, AND LIABILITIES                 

The Trust's Declaration of Trust, as amended or amended and restated from   
time to time, permits the Trust's Board of Trustees to issue an unlimited   
number of full and fractional shares of beneficial interest (without par    
value) of each series, to divide or combine the shares of any series into a 
 greater or lesser number of shares without thereby changing the proportionate
beneficial interests in that series, and to divide such shares into classes.
The Board of Trustees has reserved the right to create and issue additional 
series and classes of shares and to classify or reclassify outstanding      
shares.                                                                     

Each shareholder of the Fund is entitled to one vote for each dollar of net 
asset value (number of shares of the Fund owned times net asset value per   
share) of the Fund, on each matter on which the shareholder is entitled to  
 vote. Each fractional dollar amount is entitled to a proportionate fractional
vote. Except when a larger vote is required by applicable law, a majority of
the voting power of the shares voted in person or by proxy on a matter will 
 decide that matter and a plurality of the voting power of the shares voted in
person or by proxy will elect a Trustee. Shareholders of all series of the  
Trust generally will vote together on all matters except when a particular  
matter affects only shareholders of a particular class or series or when    
applicable law requires shareholders to vote separately by series or class. 

Except in limited circumstances, the Trustees may, without any shareholder  
vote, amend or otherwise supplement the Trust's Declaration of Trust. Each  
Trust except MFS Series Trust XII, or any series or class thereof, may merge
or consolidate or may sell, lease, or exchange all or substantially all of  
its assets if authorized (either at a meeting or by written consent) by a   
Majority Shareholder Vote of the class, series, or trust, as applicable. MFS
Series Trust XII, or any series or class of MFS Series Trust XII, may merge 
or consolidate or may sell, lease, or exchange all or substantially all of  
its assets without any shareholder vote to the extent permitted by law. Each
Trust, or any series or class, may reincorporate or reorganize (but not with
 another operating entity) without any shareholder vote. The Trust, any series
of the Trust, or any class of any series, may be terminated at any time by a
vote of 1) a Majority Shareholder Vote, or 2) by the Trustees by written    
notice to the shareholders of that series or class.                         

The Trustees may cause a shareholder's shares to be redeemed for any reason 
 under terms set by the Trustees, including, but not limited to, 1) to protect
the tax status of a Fund, 2) the failure of a shareholder to provide a tax  
identification number if required to do so, 3) the failure of a shareholder 
to pay when due for the purchase of shares issued to the shareholder, 4) in 
order to eliminate accounts whose values are less than a minimum amount     
established by the Trustees, 5) the failure of a shareholder to meet or     
maintain the qualifications for ownership of a particular class of shares,  
and 6) to eliminate ownership of shares by a particular shareholder when the
Trustees determine that the particular shareholder's ownership is not in the
 best interests of the other shareholders of the applicable Fund (for example,
in the case of an alleged market timer). The exercise of the above powers is
subject to any applicable provisions under the 1940 Act or the rules adopted
thereunder.                                                                 

Under the Declaration of Trust, the Fund may convert to a master/feeder     
structure or a fund of funds structure without shareholder approval. In a   
master/feeder structure, a Fund invests all of its assets in another        
 investment company with similar investment objectives and policies. In a Fund
 of Funds structure, a Fund invests all or a portion of its assets in multiple
investment companies.                                                       

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

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

The Trust's Declaration of Trust provides that shareholders may not bring   
suit on behalf of the fund without first requesting that the Trustees bring 
such suit unless there would be irreparable injury to the Fund or if a      
majority of the Trustees (or a majority of Trustees on any committee        
established to consider the merits of such action) have a personal financial
interest in the action. Trustees are not considered to have a personal      
financial interest by virtue of being compensated for their services as     
Trustees or as trustees of Funds with the same or an affiliated investment  
adviser or distributor.                                                     

The Trust's Declaration of Trust provides that by becoming a shareholder of 
the Fund, each shareholder shall be expressly held to have assented to and  
agreed to be bound by the provisions of the Declaration of Trust.           

485APOS
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                                                                    APPENDIX A

TRUSTEES AND OFFICERS - IDENTIFICATION AND BACKGROUND 

The Trustees and officers of the Trust, as of September 1, 2006, are listed     
below, together with their principal occupations during the past five years.    
(Their titles may have varied during that period.) The address of each Trustee  
and officer is 500 Boylston Street, Boston, Massachusetts 02116.                

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

                                                     PRINCIPAL OCCUPATIONS
                POSITION(S)                         DURING THE PAST FIVE
NAME, DATE OF      HELD WITH     TRUSTEE/OFFICER          YEARS & OTHER     
 BIRTH             FUND           SINCE(1)            DIRECTORSHIPS(2)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INTERESTED                                                                      
TRUSTEES                                                                        
--------------------------------------------------------------------------------
Robert J.           Trustee       April 2005;        Massachusetts Financial    
Manning(3)                        December 2004 -    Services Company, Chief    
(born 10/20/63)                   March 2005         Executive Officer,         
                                  (Advisory          President, Chief Investment
                            Trustee);          Officer  and Director
February -  
 December 2004
(Trustee)   
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert C. Pozen(3)  Trustee       April 2005;        Massachusetts Financial    
(born 8/8/46)                     December 2004      Services Company, Chairman 
                             -March 2005        (since February 2004);
                            (Advisory          Secretary of Economic
                                Trustee);          Affairs, The Commonwealth
                               February -         December 2002); Fidelity
                                December 2004      of Massachusetts (January
                                (Trustee)          2002 to Investments, Vice
                                                Chairman (June 2000 to
                                                  December 2001); Fidelity
                                               Management & Research
                                             Company (investment
                                                    adviser), President (March
                                                  1997 to July 2001); Bell
                                            Canada Enterprises
                                               (telecommunications),
                                                   Director; Medtronic, Inc.
                                               (medical technology),
                                           Director; Telesat
                                    (satellite
                                                   communications), Director
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INDEPENDENT                                                                     
TRUSTEES                                                                        
--------------------------------------------------------------------------------
J. Atwood Ives      Trustee and   February 1992      Private investor; Eastern  
(born 5/1/36)       Chair of                         Enterprises (diversified   
           Trustees                         services company),
                                               Chairman, Trustee and
                                                 Chief Executive Officer
                                               (until November 2000)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert E.           Trustee       January 2006       Consultant - regulatory    
Butler(4)                                            and compliance matters     
(born 11/29/41)                                      (since July 2002);         
                                                    PricewaterhouseCoopers LLP
                                                (professional services
                                                  firm), Partner (November
                                               2000 until June 2002)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Lawrence H. Cohn,   Trustee       August 1993        Brigham and Women's        
M.D.                                                 Hospital, Chief of Cardiac 
(born 3/11/37)                                       Surgery (until 2005);      
                                                 Harvard Medical School,
                                               Professor of Surgery;
                                             Brigham and Women's
                                              Hospital Physician's
                                                  Organization Chair (2000
                                  to 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
David H. Gunning    Trustee       January 2004       Cleveland-Cliffs Inc.      
(born 5/30/42)                                       (mining products and       
                                                 service provider), Vice
                                                  Chairman/Director (since
                                                April 2001); Encinitos
                                           Ventures (private
                                              investment company),
                                                  Principal (1997 to April
                                                 2001); Lincoln Electric
                                                 Holdings, Inc. (welding
                                                  equipment manufacturer),
                                  Director

--------------------------------------------------------------------------------
William R. Gutow    Trustee       December 1993      Private investor and real  
(born 9/27/41)                                       estate consultant; Capitol 
                                                  Entertainment Management
                                                    Company (video franchise),
                                       Vice Chairman
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Michael Hegarty     Trustee       December 2004      Retired; AXA Financial     
(born 12/21/44)                                      (financial services and    
                                                   insurance), Vice Chairman
                                             and Chief Operating
                                                   Officer (until May 2001);
                                            The Equitable Life
                                           Assurance Society
                                                    (insurance), President and
                                                 Chief Operating Officer
                                          (until May 2001)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Lawrence T.         Trustee       July 1981          Hemenway & Barnes          
Perera                                               (attorneys), Partner       
(born 6/23/35)                                                                  
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
J. Dale Sherratt    Trustee       August 1993        Insight Resources, Inc.    
(born 9/23/38)                                       (acquisition planning      
                                                  specialists), President;
                                               Wellfleet Investments
                                                  (investor in health care
                                              companies), Managing
                                                General Partner (since
                                          1993); Cambridge
                                        Nutraceuticals
                                                   (professional nutritional
                                                    products), Chief Executive
                                                  Officer (until May 2001)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Laurie J. Thomsen   Trustee       March 2005         Private investor; Prism    
(born 8/5/57)                                        Venture Partners (venture  
                                                  capital), Co-founder and
                                                General Partner (until
                                              June 2004); St. Paul
                                             Travelers Companies
                                              (commercial property
                                               liability insurance),
                                  Director
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert W. Uek       Trustee       January 2006       Retired (since 1999);      
(born 5/18/41)                                       PricewaterhouseCoopers LLP 
                                                (professional services
                                               firm), Partner (until
                                              1999); Consultant to
                                            investment company
                                                   industry (since 2000); TT
                                             International Funds
                                                (mutual fund complex),
                                             Trustee (2000 until
                                         2005); Hillview
                                                   Investment Trust II Funds
                                                (mutual fund complex),
                                                   Trustee (2000 until 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
OFFICERS                                                                        
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Maria F. Dwyer(3)   President     November 2005      Massachusetts Financial    
(born 12/1/58)                                       Company, Executive Vice    
                                             President and Chief
                                                   Regulatory Officer (since
                                               March 2004); Fidelity
                                               Management & Research
                                                 Company, Vice President
                                                (prior to March 2004);
                                                  Fidelity Group of Funds,
                                                 President and Treasurer
                                               (prior to March 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Tracy Atkinson(3)   Treasurer     September 2005     Massachusetts Financial    
(born 12/30/64)                                      Services Company, Senior   
                                               Vice President (since
                                          September 2004);
                                                PricewaterhouseCoopers
                                                LLP, Partner (prior to
                                         September 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Christopher R.      Assistant     July 2005          Massachusetts Financial    
Bohane(3)           Secretary                        Services Company, Vice     
(born 1/18/74)      and                              President and Senior       
                    Assistant                        Counsel (since April 2003);
                    Clerk                             Kirkpatrick & Lockhart LLP
                                               (law firm), Associate
                                               (prior to April 2003)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Ethan D.            Assistant     July 2005          Massachusetts Financial    
Corey(3)            Secretary                        Services Company, Special  
(born 11/21/63)     and                              Counsel (since December    
                Assistant                        2004); Dechert LLP (law
                 Clerk                            firm), Counsel (prior to
                                        December 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
David L.            Assistant     July 2005          Massachusetts Financial    
DiLorenzo(3)        Treasurer                        Services Company, Vice     
(born 8/10/68)                                       President (since June      
                                                   2005); JP Morgan Investor
                                                  Services, Vice President
                                              (prior to June 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Timothy M.          Assistant     September 2005     Massachusetts Financial    
Fagan(3)            Secretary                        Services Company, Vice     
(born 7/10/68)      and                              President and Senior       
                 Assistant                        Counsel (since September
            Clerk                            2005); John Hancock
                                             Advisers, LLC, Vice
                                             President and Chief
                                            Compliance Officer
                                                   (September 2004 to August
                                                2005), Senior Attorney
                                                    (prior to September 2004);
                                               John Hancock Group of
                                                   Funds, Vice President and
                                                  Chief Compliance Officer
                                            (September 2004 to
                                        December 2004)

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

--------------------------------------------------------------------------------
Mark D.             Assistant     July 2005          Massachusetts Financial    
Fischer(3)          Treasurer                        Services Company, Vice     
(born 10/27/70)                                      President (since May 2005);
                                              JP Morgan Investment
                                                  Management Company, Vice
                                                 President (prior to May
                               2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Brian E.            Assistant     May 2006           Massachusetts Financial    
Langenfeld(3)       Secretary                        Services Company, Assistant
(born 3/7/73)       and                              Vice President and Counsel 
               Assistant                        (since May 2006); John
               Clerk                            Hancock Advisers, LLC,
                                                  Assistant Vice President
                                                  and Counsel (May 2005 to
                                                   April 2006); John Hancock
                                                 Advisers, LLC, Attorney
                                                 and Assistant Secretary
                                             (prior to May 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Ellen Moynihan(3)   Assistant     April 1997         Massachusetts Financial    
(born 11/13/57)     Treasurer                        Services Company, Senior   
                                        Vice President

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

--------------------------------------------------------------------------------
Susan S. Newton(3)  Assistant     May 2005           Massachusetts Financial    
(born 3/7/50)       Secretary                        Services Company, Senior   
           and                              Vice President and
                  Assistant                        Associate General Counsel
                 Clerk                            (since April 2005); John
                                                Hancock Advisers, LLC,
                                                Senior Vice President,
                                                   Secretary and Chief Legal
                                                 Officer (prior to April
                                                   2005); John Hancock Group
                                               of Funds, Senior Vice
                                                  President, Secretary and
                                                    Chief Legal Officer (prior
                                        to April 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Susan A.            Assistant     July 2005          Massachusetts Financial    
Pereira(3)          Secretary                        Services Company, Vice     
(born 11/5/70)      and                              President and Senior       
                   Assistant                        Counsel (since June 2004);
                   Clerk                            Bingham McCutchen LLP (law
                                                    firm), Associate (prior to
                                    June 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Mark N.             Secretary     January 2006       Massachusetts Financial    
Polebaum(3)         and Clerk                        Services Company, Executive
(born 5/1/52)                                         Vice President, General   
                                               Counsel and Secretary
                                               (since January 2006);
                                                 Wilmer Cutler Pickering
                                                Hale and Dorr LLP (law
                                                  firm), Partner (prior to
                                       January 2006)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Frank L. Tarantino  Independent   June 2004          Tarantino LLC (provider of 
(born 3/7/44)       Chief                            compliance services),      
              Compliance                       Principal (since June
            Officer                          2004); CRA Business
                                          Strategies Group
                                                (consulting services),
                                                  Executive Vice President
                                                    (April 2003 to June 2004);
                                               David L. Babson & Co.
                                               (investment adviser),
                                                  Managing Director, Chief
                                                    Administrative Officer and
                                                  Director (prior to March
                               2003)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
James O. Yost(3)    Assistant     September 1990     Massachusetts Financial    
(born 06/12/60)     Treasurer                        Services Company, Senior   
                                        Vice President
--------------------------------------------------------------------------------

------------------                                                              
(1) Date first appointed to serve as Trustee/officer of an MFS fund. Each       
Trustee has served continuously since appointment unless indicated      
otherwise.                                                              
(2) Directorships or trusteeships of companies required to report to the        
Securities and Exchange Commission (i.e., "public companies").          
(3) "Interested person" of the trust within the meaning of the Investment       
 Company Act of 1940 (referred to as the 1940 Act), which is the principal
federal law governing investment companies like the fund, as a result of
position with MFS. The address of MFS is 500 Boylston Street, Boston,   
Massachusetts 02116.                                                    
(4) In 2004 and 2005, Mr. Butler provided consulting services to the            
independent compliance consultant retained by MFS pursuant to its       
 settlement with the SEC concerning market timing and related matters. The
   terms of that settlement required that compensation and expenses related to
the independent compliance consultant be borne exclusively by MFS and,  
therefore, MFS paid Mr. Butler for the services he rendered to the      
  independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a
total of $351,119.29.                                                   

The Trust held a shareholders' meeting in 2005 to elect Trustees, and will hold 
a shareholders' meeting at least once every five years thereafter, to elect     
Trustees. Each Trustee (except Messrs. Butler and Uek) has been elected by      
shareholders and each Trustee and officer holds office until his or her         
successor is chosen and qualified or until his or her earlier death,            
resignation, retirement or removal.                                             

Messrs. Butler, Sherratt and Uek and Ms. Thomsen are members of the Trust's     
Audit Committee.                                                                

Each of the Trust's Trustees and officers holds comparable positions with       
certain other funds of which MFS or a subsidiary is the investment adviser or   
distributor, and, in the case of the officers, with certain affiliates of MFS.  
As of January 1, 2006, the Trustees served as board members of 98 funds within  
the MFS Family of Funds.                                                        

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                                                                    APPENDIX B

PROXY VOTING POLICIES AND PROCEDURES

MASSACHUSETTS FINANCIAL SERVICES COMPANY

PROXY VOTING POLICIES AND PROCEDURES

SEPTEMBER 17, 2003, AS REVISED ON SEPTEMBER 20, 2004, 
MARCH 15, 2005 AND MARCH 1, 2006  

Massachusetts Financial Services Company, MFS Institutional Advisors, Inc. and  
MFS' other investment adviser subsidiaries (collectively, "MFS") have adopted   
proxy voting policies and procedures, as set forth below ("MFS Proxy Voting     
Policies and Procedures"), with respect to securities owned by the clients for  
which MFS serves as investment adviser and has the power to vote proxies,       
including the registered investment companies sponsored by MFS, other than the  
MFS Union Standard Equity Fund (the "MFS Funds"). References to "clients" in    
these policies and procedures include the MFS Funds and other clients of MFS,   
such as funds organized offshore, sub-advised funds and separate account        
clients, to the extent these clients have delegated to MFS the responsibility   
to vote proxies on their behalf under the MFS Proxy Voting Policies and         
Procedures.                                                                     

The MFS Proxy Voting Policies and Procedures include:                           

A. Voting Guidelines;                                                           

B. Administrative Procedures;                                                   

C. Monitoring System;                                                           

D. Records Retention; and                                                       

E. Reports.                                                                     

A. VOTING GUIDELINES                                                            

1. GENERAL POLICY; POTENTIAL CONFLICTS OF INTEREST                              

MFS' policy is that proxy voting decisions are made in what MFS believes to be  
the best long-term economic interests of MFS' clients, and not in the interests 
of any other party or in MFS' corporate interests, including interests such as  
the distribution of MFS Fund shares, administration of 401(k) plans, and        
institutional relationships.                                                    

MFS has carefully reviewed matters that in recent years have been presented for 
shareholder vote by either management or shareholders of public companies.      
Based on the overall principle that all votes cast by MFS on behalf of its      
clients must be in what MFS believes to be the best long-term economic          
interests of such clients, MFS has adopted proxy voting guidelines, set forth   
below, that govern how MFS generally will vote on specific matters presented    
for shareholder vote. In all cases, MFS will exercise its discretion in voting  
on these matters in accordance with this overall principle. In other words, the 
underlying guidelines are simply that - guidelines. Proxy items of significance 
are often considered on a case-by-case basis, in light of all relevant facts    
and circumstances, and in certain cases MFS may vote proxies in a manner        
different from these guidelines.                                                

As a general matter, MFS maintains a consistent voting position on similar      
proxy proposals with respect to various issuers. In addition, MFS generally     
votes consistently on the same matter when securities of an issuer are held by  
multiple client accounts. However, MFS recognizes that there are gradations in  
certain types of proposals that might result in different voting positions      
being taken with respect to different proxy statements. There also may be       
situations involving matters presented for shareholder vote that are not        
clearly governed by the guidelines, such as proposed mergers and acquisitions.  
Some items that otherwise would be acceptable will be voted against the         
proponent when it is seeking extremely broad flexibility without offering a     
valid explanation. MFS reserves the right to override the guidelines with       
respect to a particular shareholder vote when such an override is, in MFS' best 
judgment, consistent with the overall principle of voting proxies in the best   
long-term economic interests of MFS' clients.                                   

From time to time, MFS receives comments on these guidelines as well as         
regarding particular voting issues from its clients and corporate issuers.      
These comments are carefully considered by MFS, when it reviews these           
guidelines each year and revises them as appropriate.                           

These policies and procedures are intended to address any potential material    
conflicts of interest on the part of MFS or its affiliates that are likely to   
arise in connection with the voting of proxies on behalf of MFS' clients. If    
such potential material conflicts of interest do arise, MFS will analyze,       
document and report on such potential material conflicts of interest (see       
Sections B.2 and E below), and shall ultimately vote the relevant proxies in    
what MFS believes to be the best long-term economic interests of its clients.   
The MFS Proxy Review Group is responsible for monitoring and reporting with     
respect to such potential material conflicts of interest.                       

2. MFS' POLICY ON SPECIFIC ISSUES                                               

ELECTION OF DIRECTORS                                                           

MFS believes that good governance should be based on a board with a majority of 
directors who are "independent" of management, and whose key committees (e.g.,  
compensation, nominating, and audit committees) are comprised entirely of       
"independent" directors. While MFS generally supports the board's nominees in   
uncontested elections, we will withhold our vote for a nominee for a board of a 
U.S. issuer if, as a result of such nominee being elected to the board, the     
board would be comprised of a majority of members who are not "independent" or, 
alternatively, the compensation, nominating or audit committees would include   
members who are not "independent." MFS will also withhold its vote for a        
nominee to the board if we can determine that he or she failed to attend at     
least 75% of the board and/or relevant committee meetings in the previous year  
without a valid reason. In addition, MFS will withhold its vote for all         
nominees standing for election to a board of a U.S. issuer if we can determine: 
(1) if, since the last annual meeting of shareholders and without shareholder   
approval, the board or its compensation committee has repriced underwater       
options; or (2) if, within the last year, shareholders approved by majority     
vote a resolution recommending that the board rescind a "poison pill" and the   
board has failed to take responsive action to that resolution. Responsive       
action would include the rescission of the "poison pill"(without a broad        
reservation to reinstate the "poison pill" in the event of a hostile tender     
offer), or public assurances that the terms of the "poison pill" would be put   
to a binding shareholder vote within the next five to seven years.              

MFS evaluates a contested election of directors on a case-by-case basis         
considering the long-term financial performance of the company relative to its  
industry, management's track record, the qualifications of the nominees for     
both slates and an evaluation of what each side is offering shareholders.       

MFS votes for reasonably crafted proposals calling for directors to be elected  
with an affirmative majority of votes cast and/or the elimination of the        
plurality standard for electing directors (including binding resolutions        
requesting that the board amend the company's bylaws), provided the proposal    
includes a carve-out for a plurality voting standard when there are more        
director nominees than board seats (e.g., contested elections) ("Majority Vote  
Proposals").                                                                    

MFS considers voting against Majority Vote Proposals if the company has         
adopted, or has proposed to adopt in the proxy statement, formal corporate      
governance principles that present a meaningful alternative to the majority     
voting standard and provide an adequate response to both new nominees as well   
as incumbent nominees who fail to receive a majority of votes cast.             

MFS believes that a company's election policy should address the specific       
circumstances at that company. MFS considers whether a company's election       
policy articulates the following elements to address each director nominee who  
fails to receive an affirmative majority of votes cast in an election:          

Establish guidelines for the process by which the company determines the status 
of nominees who fail to receive an affirmative majority of votes cast and       
disclose the guidelines in the annual proxy statement;                          

Guidelines should include a reasonable timetable for resolution of the          
nominee's status and a requirement that the resolution be disclosed together    
with the reasons for the resolution;                                            

Vest management of the process in the company's independent directors, other    
than the nominee in question; and                                               

Outline the range of remedies that the independent directors may consider       
concerning the nominee.                                                         

CLASSIFIED BOARDS                                                               

MFS opposes proposals to classify a board (e.g., a board in which only          
one-third of board members are elected each year). MFS supports proposals to    
declassify a board.                                                             

NON-SALARY COMPENSATION PROGRAMS                                                

Restricted stock plans should reward results rather than tenure. In some cases, 
restricted stock is granted to the recipient at deep discounts to fair market   
value, sometimes at par value. The holder cannot sell for a period of years,    
but in the meantime the holder is able to vote and receive dividends.           
Eventually the restrictions lapse and the stock can be sold by the holder.      

MFS votes against stock option programs for officers, employees or non-employee 
directors that do not require an investment by the optionee, that give "free    
rides" on the stock price, or that permit grants of stock options with an       
exercise price below fair market value on the date the options are granted.     

MFS opposes stock option programs that allow the board or the compensation      
committee, without shareholder approval, to reprice underwater options or to    
automatically replenish shares (i.e., evergreen plans). MFS will consider on a  
case-by-case basis proposals to exchange existing options for newly issued      
options (taking into account such factors as whether there is a reasonable      
value-for-value exchange).                                                      

MFS opposes stock option and restricted stock plans that provide unduly         
generous compensation for officers, directors or employees, or could result in  
excessive dilution to other shareholders. As a general guideline, MFS votes     
against stock option and restricted stock plans if all such plans for a         
particular company involve potential dilution, in the aggregate, of more than   
15%. However, MFS may accept a higher percentage (up to 20%) in the case of     
startup or small companies which cannot afford to pay large salaries to         
executives, or in the case where MFS, based upon the issuer's public            
disclosures, believes that the issuer has been responsible with respect to its  
recent compensation practices, including the mix of the issuance of restricted  
stock and options.                                                              

MFS votes in favor of stock option or restricted stock plans for non-employee   
directors as long as they satisfy the requirements set forth above with respect 
to stock option and restricted stock plans for company executives.              

EXPENSING OF STOCK OPTIONS                                                      

While we acknowledge that there is no agreement on a uniform methodology for    
expensing stock options, MFS supports shareholder proposals to expense stock    
options because we believe that the expensing of options presents a more        
accurate picture of the company's financial results to investors. We also       
believe that companies are likely to be more disciplined when granting options  
if the value of stock options were treated as an expense item on the company's  
income statements.                                                              

EXECUTIVE COMPENSATION                                                          

MFS believes that competitive compensation packages are necessary to attract,   
motivate and retain executives. Therefore, MFS opposes shareholder proposals    
that seek to set limits on executive compensation. Shareholder proposals        
seeking to set limits on executive compensation tend to specify arbitrary       
compensation criteria. MFS also opposes shareholder requests for disclosure on  
executive compensation beyond regulatory requirements because we believe that   
current regulatory requirements for disclosure of executive compensation are    
appropriate and that additional disclosure is often unwarranted and costly.     
Although we support linking executive stock option grants to a company's stock  
performance, MFS opposes shareholder proposals that mandate a link of           
performance-based options to a specific industry or peer group index. MFS       
believes that compensation committees should retain the flexibility to propose  
the appropriate index or other criteria by which performance-based options      
should be measured. MFS evaluates other executive compensation restrictions     
(e.g., terminating the company's stock option or restricted stock programs,     
freezing executive pay during periods of large layoffs, and establishing a      
maximum ratio between the highest paid executive and lowest paid employee)      
based on whether such proposals are in the best long-term economic interests of 
our clients.                                                                    

EMPLOYEE STOCK PURCHASE PLANS                                                   

MFS supports the use of a broad-based employee stock purchase plans to increase 
company stock ownership by employees, provided that shares purchased under the  
plan are acquired for no less than 85% of their market value and do not result  
in excessive dilution.                                                          

"GOLDEN PARACHUTES"                                                             

From time to time, shareholders of companies have submitted proxy proposals     
that would require shareholder approval of severance packages for executive     
officers that exceed certain predetermined thresholds. MFS votes in favor of    
such shareholder proposals when they would require shareholder approval of any  
severance package for an executive officer that exceeds a certain multiple of   
such officer's annual compensation that is not determined in MFS' judgment to   
be excessive.                                                                   

ANTI-TAKEOVER MEASURES                                                          

In general, MFS votes against any measure that inhibits capital appreciation in 
a stock, including proposals that protect management from action by             
shareholders. These types of proposals take many forms, ranging from "poison    
pills" and "shark repellents" to super-majority requirements.                   

MFS will vote for proposals to rescind existing "poison pills" and proposals    
that would require shareholder approval to adopt prospective "poison pills."    
Nevertheless, MFS will consider supporting the adoption of a prospective        
"poison pill" or the continuation of an existing "poison pill" if the following 
two conditions are met: (1) the "poison pill" allows MFS clients to hold an     
aggregate position of up to 15% of a company's total voting securities (and of  
any class of voting securities); and (2) either (a) the "poison pill" has a     
term of not longer than five years, provided that MFS will consider voting in   
favor of the "poison pill" if the term does not exceed seven years and the      
"poison pill" is linked to a business strategy or purpose that MFS believes is  
likely to result in greater value for shareholders; or (b) the terms of the     
"poison pill" allow MFS clients the opportunity to accept a fairly structured   
and attractively priced tender offer (e.g., a "chewable poison pill" that       
automatically dissolves in the event of an all cash, all shares tender offer at 
a premium price).                                                               

MFS will consider on a case-by-case basis proposals designed to prevent tenders 
which are disadvantageous to shareholders such as tenders at below market       
prices and tenders for substantially less than all shares of an issuer.         

REINCORPORATION AND REORGANIZATION PROPOSALS                                    

When presented with a proposal to reincorporate a company under the laws of a   
different state, or to effect some other type of corporate reorganization, MFS  
considers the underlying purpose and ultimate effect of such a proposal in      
determining whether or not to support such a measure. While MFS generally votes 
in favor of management proposals that it believes are in the best long-term     
economic interests of its clients, MFS may oppose such a measure if, for        
example, the intent or effect would be to create additional inappropriate       
impediments to possible acquisitions or takeovers.                              

ISSUANCE OF STOCK                                                               

There are many legitimate reasons for issuance of stock. Nevertheless, as noted 
above under "Non-Salary Compensation Programs", when a stock option plan        
(either individually or when aggregated with other plans of the same company)   
would substantially dilute the existing equity (e.g., by approximately 15% or   
more), MFS generally votes against the plan. In addition, MFS votes against     
proposals where management is asking for authorization to issue common or       
preferred stock with no reason stated (a "blank check") because the unexplained 
authorization could work as a potential anti-takeover device.                   

REPURCHASE PROGRAMS                                                             

MFS supports proposals to institute share repurchase plans in which all         
shareholders have the opportunity to participate on an equal basis. Such plans  
may include a company acquiring its own shares on the open market, or a company 
making a tender offer to its own shareholders.                                  

CONFIDENTIAL VOTING                                                             

MFS votes in favor of proposals to ensure that shareholder voting results are   
kept confidential. For example, MFS supports proposals that would prevent       
management from having access to shareholder voting information that is         
compiled by an independent proxy tabulation firm.                               

CUMULATIVE VOTING                                                               

MFS opposes proposals that seek to introduce cumulative voting and for          
proposals that seek to eliminate cumulative voting. In either case, MFS will    
consider whether cumulative voting is likely to enhance the interests of MFS'   
clients as minority shareholders. In our view, shareholders should provide      
names of qualified candidates to a company's nominating committee, which now    
for the first time (for U.S. listed companies) must be comprised solely of      
"independent" directors.                                                        

WRITTEN CONSENT AND SPECIAL MEETINGS                                            

Because the shareholder right to act by written consent (without calling a      
formal meeting of shareholders) can be a powerful tool for shareholders, MFS    
generally opposes proposals that would prevent shareholders from taking action  
without a formal meeting or would take away a shareholder's right to call a     
special meeting of company shareholders.                                        

INDEPENDENT AUDITORS                                                            

MFS believes that the appointment of auditors is best left to the board of      
directors of the company and therefore supports the ratification of the board's 
selection of an auditor for the company. Recently, some shareholder groups have 
submitted proposals to limit the non-audit activities of a company's audit      
firm. Some proposals would prohibit the provision of any non-audit services by  
a company's auditors to that company. MFS opposes proposals recommending the    
prohibition or limitation of the performance of non-audit services by an        
auditor, and proposals recommending the removal of a company's auditor due to   
the performance of non-audit work for the company by its auditor. MFS believes  
that the board, or its audit committee, should have the discretion to hire the  
company's auditor for specific pieces of non-audit work in the limited          
situations permitted under current law.                                         

BEST PRACTICES STANDARDS                                                        

Best practices standards are rapidly developing in the corporate governance     
areas as a result of recent corporate scandals, the Sarbanes-Oxley Act of 2002  
and revised listing standards on major stock exchanges. MFS generally supports  
these developments. However, many issuers are not publicly registered, are not  
subject to these enhanced listing standards, or are not operating in an         
environment that is comparable to that in the United States. In reviewing proxy 
proposals under these circumstances, MFS votes for proposals that enhance       
standards of corporate governance so long as we believe that - given the        
circumstances or the environment within which the issuers operate - the         
proposal is consistent with the best long-term economic interests of our        
clients.                                                                        

SOCIAL ISSUES                                                                   

There are many groups advocating social change, and many have chosen the        
publicly-held corporation as a vehicle for advancing their agenda. Common among 
these are resolutions requiring the corporation to refrain from investing or    
conducting business in certain countries, to adhere to some list of goals or    
principles (e.g., environmental standards) or to promulgate special reports on  
various activities. MFS votes against such proposals unless their               
shareholder-oriented benefits will outweigh any costs or disruptions to the     
business, including those that use corporate resources to further a particular  
social objective outside the business of the company or when no discernible     
shareholder economic advantage is evident.                                      

The laws of various states may regulate how the interests of certain clients    
subject to those laws (e.g., state pension plans) are voted with respect to     
social issues. Thus, it may be necessary to cast ballots differently for        
certain clients than MFS might normally do for other clients.                   

FOREIGN ISSUERS                                                                 

MFS will evaluate items on proxies for foreign companies in the context of the  
guidelines described above, as well as local market standards and best          
practices. Proxies for foreign companies often contain significantly more       
voting items than those of U.S. companies. Many of these items on foreign       
proxies involve repetitive, non-controversial matters that are mandated by      
local law. Accordingly, the items that are generally deemed routine and which   
do not require the exercise of judgment under these guidelines (and therefore   
voted in favor) for foreign issuers include the following: (i) receiving        
financial statements or other reports from the board; (ii) approval of          
declarations of dividends; (iii) appointment of shareholders to sign board      
meeting minutes; (iv) discharge of management and supervisory boards; (v)       
approval of share repurchase programs; (vi) election of directors in            
uncontested elections and (vii) appointment of auditors.                        

In accordance with local law or business practices, many foreign companies      
prevent the sales of shares that have been voted for a certain period beginning 
prior to the shareholder meeting and ending on the day following the meeting    
("share blocking"). Depending on the country in which a company is domiciled,   
the blocking period may begin a stated number of days prior to the meeting      
(e.g., one, three or five days) or on a date established by the company. While  
practices vary, in many countries the block period can be continued for a       
longer period if the shareholder meeting is adjourned and postponed to a later  
date. Similarly, practices vary widely as to the ability of a shareholder to    
have the "block" restriction lifted early (e.g., in some countries shares       
generally can be "unblocked" up to two days prior to the meeting whereas in     
other countries the removal of the block appears to be discretionary with the   
issuer's transfer agent). Due to these restrictions, MFS must balance the       
benefits to its clients of voting proxies against the potentially serious       
portfolio management consequences of a reduced flexibility to sell the          
underlying shares at the most advantageous time. For companies in countries     
with share blocking periods, the disadvantage of being unable to sell the stock 
regardless of changing conditions generally outweighs the advantages of voting  
at the shareholder meeting for routine items. Accordingly, MFS will not vote    
those proxies in the absence of an unusual, significant vote.                   

B. ADMINISTRATIVE PROCEDURES                                                    

1. MFS PROXY REVIEW GROUP                                                       

The administration of these MFS Proxy Voting Policies and Procedures is         
overseen by the MFS Proxy Voting Committee, which includes senior personnel     
from the MFS Legal and Global Investment Support Departments. The MFS Proxy     
Voting Committee:                                                               

Reviews these MFS Proxy Voting Policies and Procedures at least annually and    
recommends any amendments considered to be necessary or advisable;              

Determines whether any potential material conflicts of interest exist with      
respect to instances in which (i) MFS seeks to override these MFS Proxy Voting  
Policies and Procedures and (ii) votes on ballot items not clearly governed by  
these MFS Proxy Voting Policies and Procedures; and                             

Considers special proxy issues as they may arise from time to time.             

2. POTENTIAL CONFLICTS OF INTEREST                                              

The MFS Proxy Voting Committee is responsible for monitoring potential material 
conflicts of interest on the part of MFS or its affiliates that could arise in  
connection with the voting of proxies on behalf of MFS' clients. Any            
significant attempt to influence MFS' voting on a particular proxy matter       
should be reported to the MFS Proxy Voting Committee.                           

In cases where proxies are voted in accordance with these MFS Proxy Voting      
Policies and Procedures, no material conflict of interest will be deemed to     
exist. In cases where (i) MFS is considering overriding these MFS Proxy Voting  
Policies and Procedures, or (ii) matters presented for vote are not clearly     
governed by these MFS Proxy Voting Policies and Procedures, the MFS Proxy       
Voting Committee, or delegees, will follow these procedures:                    

Compare the name of the issuer of such proxy against a list of significant      
current and potential (i) distributors of MFS Fund shares, (ii) retirement      
plans administered by MFS, and (iii) MFS institutional clients (the "MFS        
Significant Client List");                                                      

If the name of the issuer does not appear on the MFS Significant Client List,   
then no material conflict of interest will be deemed to exist, and the proxy    
will be voted as otherwise determined by the MFS Proxy Voting Committee;        

If the name of the issuer appears on the MFS Significant Client List, then at   
least one member of the MFS Proxy Voting Committee will carefully evaluate the  
proposed vote in order to ensure that the proxy ultimately is voted in what MFS 
believes to be the best long-term economic interests of MFS' clients, and not   
in MFS' corporate interests; and                                                

For all potential material conflicts of interest identified under clause (c)    
above, the MFS Proxy Voting Committee will document: the name of the issuer,    
the issuer's relationship to MFS, the analysis of the matters submitted for     
proxy vote, and the basis for the determination that the votes ultimately were  
cast in what MFS believes to be the best long-term economic interests of MFS'   
clients, and not in MFS' corporate interests. A copy of the foregoing           
documentation will be provided to the MFS' Conflicts Officer.                   

The members of the MFS Proxy Voting Committee are responsible for creating and  
maintaining the MFS Significant Client List, in consultation with MFS'          
distribution, retirement plan administration and institutional business units.  
The MFS Significant Client List will be reviewed and updated periodically, as   
appropriate.                                                                    

3. GATHERING PROXIES                                                            

Most proxies received by MFS and its clients originate at Automatic Data        
Processing Corp. ("ADP") although a few proxies are transmitted to investors by 
corporate issuers through their custodians or depositories. ADP and issuers     
send proxies and related material directly to the record holders of the shares  
beneficially owned by MFS' clients, usually to the client's custodian or, less  
commonly, to the client itself. This material will include proxy cards,         
reflecting the proper shareholdings of Funds and of clients on the record dates 
for such shareholder meetings, as well as proxy statements with the issuer's    
explanation of the items to be voted upon.                                      

MFS, on behalf of itself and the Funds, has entered into an agreement with an   
independent proxy administration firm, Institutional Shareholder Services, Inc. 
(the "Proxy Administrator"), pursuant to which the Proxy Administrator performs 
various proxy vote related services, such as vote processing and recordkeeping  
functions for MFS' Funds and institutional client accounts. The Proxy           
Administrator receives proxy statements and proxy cards directly or indirectly  
from various custodians, logs these materials into its database and matches     
upcoming meetings with MFS Fund and client portfolio holdings, which are input  
into the Proxy Administrator's system by an MFS holdings datafeed. Through the  
use of the Proxy Administrator system, ballots and proxy material summaries for 
the upcoming shareholders' meetings of over 10,000 corporations are available   
on-line to certain MFS employees and the MFS Proxy Voting Committee.            

4. ANALYZING PROXIES                                                            

Proxies are voted in accordance with these MFS Proxy Voting Policies and        
Procedures. The Proxy Administrator at the prior direction of MFS automatically 
votes all proxy matters that do not require the particular exercise of          
discretion or judgment with respect to these MFS Proxy Voting Policies and      
Procedures as determined by the MFS Proxy Voting Committee. With respect to     
proxy matters that require the particular exercise of discretion or judgment,   
MFS considers and votes on those proxy matters. Representatives of the MFS      
Proxy Voting Committee review, as appropriate, votes cast to ensure conformity  
with these MFS Proxy Voting Policies and Procedures.                            

As a general matter, portfolio managers and investment analysts have little or  
no involvement in specific votes taken by MFS. This is designed to promote      
consistency in the application of MFS' voting guidelines, to promote            
consistency in voting on the same or similar issues (for the same or for        
multiple issuers) across all client accounts, and to minimize the potential     
that proxy solicitors, issuers, or third parties might attempt to exert         
inappropriate influence on the vote. In limited types of votes (e.g., corporate 
actions, such as mergers and acquisitions), a representative of the MFS Proxy   
Voting Committee may consult with or seek recommendations from portfolio        
managers or analysts.(1) However, the MFS Proxy Voting Committee would          
ultimately determine the manner in which all proxies are voted.                 

-----------------                                                               
(1) From time to time, due to travel schedules and other commitments, an        
appropriate portfolio manager or research analyst is not available to   
provide a recommendation on a merger or acquisition proposal. If such a 
 recommendation cannot be obtained within a few business days prior to the
 shareholder meeting, the MFS Proxy Review Group may determine to vote the
proxy in what it believes to be the best long-term economic interests of
MFS' clients.                                                           

As noted above, MFS reserves the right to override the guidelines when such an  
override is, in MFS' best judgment, consistent with the overall principle of    
voting proxies in the best long-term economic interests of MFS' clients. Any    
such override of the guidelines shall be analyzed, documented and reported in   
accordance with the procedures set forth in these policies.                     

5. VOTING PROXIES                                                               

In accordance with its contract with MFS, the Proxy Administrator also          
generates a variety of reports for the MFS Proxy Voting Committee, and makes    
available on-line various other types of information so that the MFS Proxy      
Voting Committee may review and monitor the votes cast by the Proxy             
Administrator on behalf of MFS' clients.                                        

C. MONITORING SYSTEM                                                            

It is the responsibility of the Proxy Administrator and MFS' Proxy Voting       
Committee to monitor the proxy voting process. When proxy materials for clients 
are received, they are forwarded to the Proxy Administrator and are input into  
the Proxy Administrator's system. Through an interface with the portfolio       
holdings database of MFS, the Proxy Administrator matches a list of all MFS     
Funds and clients who hold shares of a company's stock and the number of shares 
held on the record date with the Proxy Administrator's listing of any upcoming  
shareholder's meeting of that company.                                          

When the Proxy Administrator's system "tickler" shows that the voting cut-off   
date of a shareholders' meeting is approaching, a Proxy Administrator           
representative checks that the vote for MFS Funds and clients holding that      
security has been recorded in the computer system. If a proxy card has not been 
received from the client's custodian, the Proxy Administrator calls the         
custodian requesting that the materials be forwarded immediately. If it is not  
possible to receive the proxy card from the custodian in time to be voted at    
the meeting, MFS may instruct the custodian to cast the vote in the manner      
specified and to mail the proxy directly to the issuer.                         

D. RECORDS RETENTION                                                            

MFS will retain copies of these MFS Proxy Voting Policies and Procedures in     
effect from time to time and will retain all proxy voting reports submitted to  
the Board of Trustees, Board of Directors and Board of Managers of the MFS      
Funds for the period required by applicable law. Proxy solicitation materials,  
including electronic versions of the proxy cards completed by representatives   
of the MFS Proxy Voting Committee, together with their respective notes and     
comments, are maintained in an electronic format by the Proxy Administrator and 
are accessible on-line by the MFS Proxy Voting Committee. All proxy voting      
materials and supporting documentation, including records generated by the      
Proxy Administrator's system as to proxies processed, including the dates when  
proxy ballots were received and submitted, and the votes on each company's      
proxy issues, are retained as required by applicable law.                       

E. REPORTS                                                                      

MFS FUNDS                                                                       

MFS will report the results of its voting to the Board of Trustees, Board of    
Directors and Board of Managers of the MFS Funds. These reports will include:   
(i) a summary of how votes were cast; (ii) a review of situations where MFS did 
not vote in accordance with the guidelines and the rationale therefor; (iii) a  
review of the procedures used by MFS to identify material conflicts of          
interest; and (iv) a review of these policies and the guidelines and, as        
necessary or appropriate, any proposed modifications thereto to reflect new     
developments in corporate governance and other issues. Based on these reviews,  
the Trustees, Directors and Managers of the MFS Funds will consider possible    
modifications to these policies to the extent necessary or advisable.           

ALL MFS ADVISORY CLIENTS                                                        

At any time, a report can be printed by MFS for each client who has requested   
that MFS furnish a record of votes cast. The report specifies the proxy issues  
which have been voted for the client during the year and the position taken     
with respect to each issue.                                                     

Generally, MFS will not divulge actual voting practices to any party other than 
the client or its representatives (unless required by applicable law) because   
we consider that information to be confidential and proprietary to the client.  

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MFS UNION STANDARD EQUITY FUND

PROXY VOTING GUIDELINES 

INTRODUCTION                                                                    

The following Proxy Voting Guidelines set forth the policies and practices      
behind individual proxy votes. The policies described here address the major    
corporate governance issues raised by shareholders and management.              

The Guidelines that follow each policy describe voting practices and standard   
voting responses to specific corporate conditions. For those issues not         
described in these Guidelines, JMR Financial, Inc. ("JMR") will use reasonable  
judgment, in accordance with U.S. Department of Labor Interpretative Bulletin   
94-2, and vote those issues on a case-by-case basis.                            

1. BOARD OF DIRECTORS                                                           

1.1. Election of Directors                                                      

Corporate Directors have the fiduciary duties to hire, monitor, compensate and, 
if necessary, terminate senior management. In order to effectively discharge    
these duties, Directors must have the necessary qualifications, a commitment to 
performing their duties, high ethical standards, and independence from the      
company management that they oversee. A corporate Board's effectiveness is      
enhanced when the Board is composed of at least two-thirds Independent          
Directors and when an Independent Director serves as its Chairperson.           

The election of Directors occurs in two contexts, uncontested elections or      
contested elections, and at two levels, for the entire Board or for individual  
Directors.                                                                      

1.1.1. Uncontested Elections                                                    

In the case of an uncontested election, we consider the following factors in    
voting on the entire Board:                                                     

o The long-term financial and economic performance of the company in comparison 
with its peers as well as with a broader market such as the S&P 500;        

o The degree of independence of the Board in its entirety;                      

o Whether or not the Board takes actions which are value-enhancing. Actions in  
opposition to this might include: awarding excessive compensation to        
 executives or to the Directors themselves, approving corporate restructurings
or downsizings that are not in the company's best long-term interest,       
adopting take-over provisions without shareholder approval, or refusing to  
provide information to which the shareholders are entitled;                 

o Whether or not the Board has implemented the proposals which were approved by 
a majority of the shareholders during the previous fiscal year; and         

o The concerns of other important company stakeholders such as their employees  
and the communities in which they operate. Should these stakeholders make   
their concerns known, this might expose situations which are or could affect
 the company's performance. We give these concerns consideration in evaluating
Board performance.                                                          

In the case of an uncontested election, we consider the following additional    
factors in voting on individual Directors:                                      

o The independence of the audit, compensation, and nominating committees. These 
committees maintain important roles in the process of management oversight  
and therefore should be composed entirely of Independent Directors (as is   
more fully described in the Guidelines, below);                             

o The performance of the audit, compensation, and nominating committees.        
Factors to consider include the quality of committee disclosure as well as  
the actions taken by the committees;                                        

o The attendance of incumbent Directors. The Securities and Exchange Commission 
(SEC) requires companies to disclose any incumbent Director who attended    
fewer that 75% of the aggregate Board and applicable committee meetings     
 during the last fiscal year. A failure to include this information is assumed
to mean that all Directors attended 75% of the meetings;                    

o The ability of the nominee to devote sufficient time and energy to carrying   
out the fiduciary duties of a Director. Director nominees who are employed, 
or self-employed, on a full-time basis and who serve on Boards at fewer than
three other public companies, as well as nominees who are retired and who   
serve on Boards at fewer than five other public companies are generally     
believed to have this ability;                                              

o Chapter 7 bankruptcy, SEC violations, and criminal offenses by an individual  
director; and                                                               

o Whether or not the performance of the Director on other Boards has been       
acceptable.                                                                 

1.1.2. Contested Election of Directors                                          

Greater scrutiny should be paid in those situations where a change of control   
is occurring in the context of a contested election for the Board of Directors. 
Contested elections generally occur when a Board candidate or slate runs for    
the purpose of seeking significant change in corporate policy or control of the 
Board. Competing slates should be evaluated based upon all of the factors       
described in the Guidelines' Section 1.1.1. Uncontested Elections as well as    
the following:                                                                  

o The background of the proxy contest;                                          

o The qualifications of the slate's individual candidates;                      

o The quality of the strategies the slate plans to implement to overcome the    
company's current inefficiencies as well as to enhance the company's        
long-term value; and                                                        

o The slate's expressed and demonstrated commitment to the interests of company 
shareholders and other important stakeholders.                              

1.2. Independent Directors                                                      

Independence is critical to ensure that Directors carry out their fiduciary     
duties to hire, monitor, compensate and, if necessary, terminate senior         
management select. Weighed against this is the fact that, in a change of        
control situation, inside Directors may be more responsive to the interests of  
employees and the communities in which they operate.                            

An Independent Director is one who either maintains only one non-trivial        
relationship with the company, that of being a Director, or is a rank-and-file  
employee. A Director is considered NOT INDEPENDENT if he or she:                

o Is, or was, employed by the company or by an affiliate in an executive        
capacity;                                                                   

o Is, or is affiliated with a company that is, an adviser or consultant to the  
company or a member of the company's senior management;                     

o Is, or within the past five years was, employed by a present or former        
auditor of the company;                                                     

o Is employed by a customer or supplier with a nontrivial business              
relationship;                                                               

o Is employed by, or is affiliated with, a foundation or university that        
receives grants or endowments from the company;                             

o Has a personal services contract with the company;                            

o Is an officer of a firm on which the company's chief executive officer or     
chairman is also a Board member;                                            

o Is employed by a public company at which an executive officer of the Company  
serves as a director; or                                                    

o Is related to of any person described above.                                  

1.3. Equal Access to the Proxy                                                  

Proposals that give long-term shareholders the same ability as management to    
cost-effectively nominate Directors to represent their interests, as long as    
these efforts do not provide a tool that can be used to facilitate hostile      
takeovers by short-term investors.                                              

1.4. Separate Offices of Chairman & CEO                                         

One of the principal functions of the Board of Directors is to protect          
shareholders' interests by monitoring and evaluating the performance of company 
management, including its Chief Executive Officer (CEO). When the Chairman of   
the Board is also the CEO of the company, his or her duty to oversee management 
is obviously compromised when he or she is required to monitor him or herself.  
In addition, the CEO normally determines the agenda for Board meetings,         
controls what information the Directors receive, and often dominates the        
selection of who sits on the Board and who is a member of the Board's           
committees. This unity of power has caused concern in governance commissions    
and activist pension funds about whether or not having a CEO who is also the    
Chairman of the Board best serves the company's shareholders. The principal     
arguments in favor of a separate or non-executive chair have to do with         
enhancing the ability of the Board to monitor the CEO's performance. It is      
assumed that Directors will feel more at ease about raising challenges to the   
CEO and executing their legal responsibilities for oversight if the Board is    
led by a fellow Director. In addition, fund managers seek to guard against      
cases where a CEO seeks first to serve himself or herself and only secondarily  
the shareholders.                                                               

Generally proposals seeking to separate the positions of Chairman and CEO       
should be supported. However, under certain circumstances, such as a small-cap  
company with a limited group of leaders, it may be appropriate for these        
positions to be combined for some period of time.                               

1.5. Lead Independent Director                                                  

At companies that have not adopted an Independent Board Chairperson, we support 
the establishment of a Lead Independent Director. In addition to serving as the 
presiding director at meetings of the Board's Independent Directors, a Lead     
Independent Director is responsible for coordinating the activities of the      
Independent Directors. At a minimum, a Lead Independent Director helps to help  
set the schedule and agenda for Board meetings, monitors the quality, quantity  
and timeliness of the flow of information from management, and has the ability  
to hire independent consultants necessary for the Independent Directors to      
effectively and responsibly perform their duties.                               

1.6. Board and Committee Size                                                   

A Board that is too large may function inefficiently; conversely, a Board that  
is too small may allow the CEO to exert excessive control. It is generally      
believed that the most effective Board size lies within a range of five to      
fifteen Directors.                                                              

1.7. Cumulative Voting                                                          

Most corporations provide that shareholders are entitled to cast one vote for   
each share owned. Under a cumulative voting scheme the shareholder is permitted 
to have one vote per share for each Director to be elected. Shareholders are    
permitted to apportion those votes in any manner they wish among the Director   
candidates. Shareholders have the opportunity to elect a minority shareholder   
to a Board not controlled by a majority shareholder through cumulative voting,  
thereby ensuring representation for all sizes of shareholders. Shareholders     
need to have flexibility in supporting candidates for a company's Board of      
Directors. This is the only mechanism that minority shareholders can use to be  
represented on a company's Board.                                               

Cumulative voting is a method for obtaining minority shareholder representation 
on a Board of Directors and is a way of obtaining Board independence from       
management and thus, is generally supported.                                    

1.8. Term Limits                                                                

Proposals to limit Director terms may prohibit the service by Directors who are 
otherwise qualified to serve the company. Since other Guidelines serve to hold  
Directors to high standards, the best way to ensure a Directors' qualification  
to elect him or her annually.                                                   

1.9. Director Liability                                                         

According to United States' state incorporation laws, corporate Boards have a   
legal responsibility for the management of a company. The downside of this is   
that Directors may potentially face a wide range of liability claims. State     
jurisdictions generally agree that Directors must uphold and adhere to three    
basic duties vis-a-vis the companies they serve:                                

o The DUTY OF DILIGENCE requires that Directors make business decisions on an   
informed basis, and act in good faith and with an honest belief that their  
actions were taken to serve the best interests of the corporation;          

o The DUTY OF OBEDIENCE is the requirement that Directors themselves must obey  
the law and that they must ensure that the corporation itself obeys the law.
They must not commit what are called ultra vires acts - acts that are       
performed without the authority to commit them. In essence, Directors must  
confine their activities within the powers conferred by the company's       
 corporate charter and its articles of incorporation, regulations, and bylaws;
and                                                                         

o The DUTY OF LOYALTY requires Directors to avoid conflicts of interest. They   
 must refrain from personal activities that either take advantage of or injure
the corporation.                                                            

Although these three duties set general legal parameters for Directors'         
obligations, the courts at the same time recognize that not all actions taken   
by Directors will benefit the corporation or in hindsight appear to have been   
the best course. States have therefore established what is called the business  
judgment rule, which can be invoked in liability cases as a defense when        
Directors are presented with claims of mismanagement or breach of care. This    
rule focuses on the duty of diligence surrounding the actual process of         
decision making and de-emphasizes the decision outcome: "the business judgment  
rule provides that courts should not examine the quality of the Directors'      
business decisions, but only the procedures followed in reaching that decision, 
when determining director liability."                                           

Management proposals occasionally seek to amend a company's charter to limit or 
eliminate the personal liability of Directors for monetary damages for any      
breach of fiduciary duty to the fullest extent permitted by law. However, the   
great responsibility and authority of Directors justifies holding them          
accountable for their actions.                                                  

In determining whether or not to support such proposals, we consider the        
following factors:                                                              

o The performance of the Board;                                                 

o The independence of the Board and its audit, compensation and nominating      
committees; and                                                             

o Whether or not the company has anti-takeover devices in place.                

We may support liability-limiting proposals when the company satisfactorily     
argues that such action is necessary to attract and retain Directors.           
Liability-limiting proposals are generally opposed for:                         

o Breach of the duty of loyalty;                                                

o Omissions not done in good faith or acts done intentionally or in violation   
of the law;                                                                 

o Acts involving unlawful purchase or redemption of stock;                      

o Payment of unlawful dividends;                                                

o Receipt of improper personal benefits;                                        

In addition, limiting liability for Directors when litigation is pending        
against the company is generally opposed.                                       

1.10. Indemnification                                                           

Indemnification is the payment by a company of the expenses of Directors who    
become involved in litigation as a result of their service to a company.        
Proposals to indemnify a company's Directors differ from those to eliminate or  
reduce their liability because with indemnification Directors may still be      
liable for his or her acts or omissions, but the company will bear the costs    
for the director's conduct.                                                     

We may support such indemnification proposals if the company can demonstrate    
the need to retain qualified Directors and not compromise their Independence.   
We may oppose indemnification when it is being proposed to insulate Directors   
from actions they have already taken. Generally, we:                            

o Vote AGAINST indemnification proposals that would expand coverage beyond just 
legal expenses to acts, such as negligence that are more serious violations 
of fiduciary obligations than mere carelessness.                            

o Vote AGAINST indemnification proposals that insulate Directors from actions   
that they have already taken.                                               

o Vote FOR only those proposals that provide such expanded coverage in cases    
 when a Director's legal defense was unsuccessful if the director was found to
have acted in good faith and in a manner that he reasonably believed was in 
the best interests of the company.                                          

1.11. Outside Director Compensation & Benefits                                  

Shareholder evaluation of Director compensation is especially important since   
Directors are responsible for compensating themselves. We support compensating  
Directors in a fashion that rewards excellent service and in a manner that does 
not compromise the independence of Directors. To enhance Directors'             
independence from management, Director compensation plans should be separate    
from executive compensation plans and should be voted on separately by          
shareholders. Excessively large compensation packages may also make Directors   
less willing to challenge management out of fear of not being re-nominated.     
Directors who receive pensions based upon years of service as Directors are     
less likely to challenge management if they perceive that such action might     
reduce the possibility of vesting. Direct stock ownership is the best way to    
align the interests of outside Directors and shareholders. Accordingly, a       
significant proportion of Director compensation should be in the form of stock. 
Directors should be subject to reasonable equity holding requirements. In       
addition to these conditions, Director compensation plans should be evaluated   
using the same standards as apply to executive compensation plans.              

1.12. Broader Participation on the Board                                        

A more diverse Board of qualified Directors benefits the company and            
shareholders. Gender and ethnic diversity bring different perspectives to       
Boards which can lead to improved corporate performance. Another example of     
such diversity would be employee shareholders, and we generally support         
proposals that would allow for such representations.                            

1.13. Business Development                                                      

Shareholders have introduced proposals asking for further disclosures on the    
role that the Board of Directors plays in developing business. We generally     
support proposals asking for such additional disclosure.                        

2. CORPORATE GOVERNANCE & CHANGES IN CONTROL                                    

Issues in this section have the potential to significantly impact the value of  
the plan investments. We review each issue in this section on a case-by-case    
basis and take a decision based upon what is in the long-term economic best     
interests of plan participants and beneficiaries.                               

Some of the proposals involving the issues in this section occur in the context 
of an impending or ongoing contest for company control. Other proposals can     
have a direct effect on the likelihood of material transactions such as tender  
offers, leveraged buyouts, mergers, acquisitions, restructurings, and           
spin-offs. In determining how to vote, we undertake an analysis of the          
long-term business plans of the competing parties as well as a cost/benefit     
analysis of the likely economic result of a change of control or material       
transaction.                                                                    

With regard to corporate governance proposals not in the context of an          
impending or ongoing contest for corporate control, we consider the impact of   
the vote on plan assets as well as the ability of shareholders to hold          
management accountable for corporate performance.                               

2.1. Increasing Authorized Common Stock                                         

We may support management proposals requesting shareholder approval to an       
increase in the number of shares of authorized common stock when management     
provides persuasive justification for the increase and the amount of this       
increase is reasonable. Providing adequate shares for a stock split is          
justification for an increase whereas additional shares to implement a poison   
pill or other takeover defense probably do not justify such an increase. Stock  
authorizations that increase the existing authorization by more than 50% are    
generally opposed unless very specific criteria and/or extenuating              
circumstances are involved.                                                     

2.2. Reverse Stock Splits                                                       

We may support a reverse stock split if management provides a reasonable        
justification for the reduced split and reduces authorized shares accordingly.  
Reverse stock splits exchange multiple shares for a lesser amount to increase   
the share price. Increasing share price is sometimes necessary to restore a     
company's stock price to a level that will allow it to be traded on the         
national stock exchanges, and can thus help to maintain stock liquidity.        

Failure to reduce authorized share as part of a reverse split, however,         
effectively results in an increase in authorized shares.                        

2.3. Blank-Check Preferred Stock                                                

Blank-check preferred stock is preferred stock that includes broad powers       
granted to Directors to establish voting, dividend and other rights without     
shareholder review. We may generally oppose requests that authorize Blank-check 
preferred stock especially when it may be used as an anti-takeover device.      

2.4. Tracking Stock                                                             

We may oppose management proposals to issue tracking stocks designed to reflect 
the performance of a particular business segment. Tracking stocks can be        
problematic in that they bring the likelihood of creating conflicts of interest 
between shareholders, Directors, and management as the Board is placed in the   
position of having to balance competing sets of interests under a single        
fiduciary authority.                                                            

2.5. Reincorporation                                                            

We may vote in favor of reincorporation to another jurisdiction as long as      
there is a sound justification for doing so and there is no significant         
diminution of corporate governance, management accountability, or workers'      
rights. We may also vote for proposals which block or prohibit companies from   
reincorporating in tax havens and support proposals which urge companies to     
reincorporate to the US.                                                        

We may oppose reincorporation when it may be used as a takeover defense or as a 
method to limit Director liability.                                             

2.6. Shareholder Rights Plans                                                   

We may support the legitimate use of shareholder rights plans, typically known  
as poison pills. The evaluation of these plans should focus on whether or not   
management puts the plan to a periodic vote of the shareholders, preferably     
every three years, as well as whether or not the acquisition attempts thwarted  
by the pill could be detrimental to the long term interests of plan             
participants and beneficiaries. In addition, we consider the threshold for      
triggering a poison pill, and may oppose any plan with a threshold of less than 
20% of a company's shares.                                                      

2.7. Supermajority Voting Requirements                                          

We review supermajority proposals on a case-by-case basis, weighing the         
consideration that supermajority voting requirements may be used to undermine   
voting rights and entrench management against the potential benefit, in some    
circumstances, of protecting the interests of minority or outside shareholders. 
Generally, management proposals to require a supermajority vote and support     
shareholder proposals to lower supermajority voting requirements may be         
opposed.                                                                        

2.8. Dual Class Voting                                                          

Dual Class Voting is the issuance of new classes of stock with unequal voting   
rights. This voting system is often designed to enhance the voting rights of    
company insiders and is common in family controlled companies. Dual Class       
Voting may entrench management at the expense of shareholders. We consider the  
impact on share value, the impact of creating unequal voting rights, as well as 
the principle of one share -- one vote when voting on such a proposal.          

2.9. Confidential Voting & Independent Tabulation of Voting                     

The purpose of confidential voting is to protect shareholders from management   
pressure to change their votes before the shareholder meeting at which those    
votes are cast. Proxy voting must be protected from management coercion and use 
of corporate funds to lobby shareholders to change their votes.                 

2.10. Shareholders' Right to Call Special Meetings                              

In evaluating this issue, we weigh the importance of shareholders' need to      
raise important issues against the potential for facilitating changes in        
control at the company. Generally, we may oppose any attempts to limit and      
eliminate such rights if they already exist in a company's by-laws, and may     
support resolutions that seek to restore these rights.                          

2.11. Mergers and Acquisitions                                                  

In determining its votes on mergers and acquisitions, we consider the following 
factors:                                                                        

o The potential impact of the merger on long -term corporate value;             

o The anticipated financial benefits of the merger;                             

o The offer price;                                                              

o How was the deal negotiated;                                                  

o Any changes in corporate governance and their impact on shareholder rights;   
and                                                                         

o The impact on important stakeholders of both companies, including employees   
and communities.                                                            

2.12. Fair-Price Provisions                                                     

Fair price provisions help to guard against two-tiered tender offers, in which  
a raider offers a substantially higher cash bid for an initial and often        
controlling stake in a company and then offers a lower price for the remaining  
shares. The coercive pressures associated with two-tiered offers may force      
shareholders to tender their holdings before they have considered all relevant  
facts. These provisions guarantee an equal price for all shareholders and are   
generally supported. However, we also consider the provision's potential for    
minimizing the company's debt and the resulting impact on the long-term value   
of holdings in the event the shareholders do not tender.                        

2.13. Greenmail Payments                                                        

Greenmail is the name given to certain discriminatory share repurchases.        
Typically, it refers to the payments that a raider receives from a company in   
exchange for the raider's shares in addition to a guarantee that he or she will 
terminate his or her takeover bid. These payments are usually a premium above   
the market price, so while greenmail may ensure the continued independence of a 
company, it discriminates against other shareholders. Buying out the shares of  
one shareholder at a price not available to others is unfair. The payment of    
greenmail may also have an adverse effect on the company's image. Economic      
studies show that greenmail devalues a company's stock price. When voting on    
this issue, we take into account whether or not the greenmail payments          
discriminate against some shareholders and whether or not the payments reduce   
shareholders' value. If the greenmail payments fail to serve the long-term      
economic interests of plan participants and beneficiaries, such payments may be 
opposed.                                                                        

2.14. Approving Other Business                                                  

Granting management the authority to approve other business gives management    
broad authority to act without prior shareholder approval. We generally oppose  
such unmonitored authority.                                                     

3. EMPLOYEE RELATED PROPOSALS                                                   

3.1. Employee Stock Purchase Plans                                              

Employee Stock Purchase Plans promote a linkage between a company's employees   
and its shareholders. We generally support such proposals when the plan covers  
a large number of employees.                                                    

3.2. High-Performance Workplaces                                                

High-performance workplace practices can contribute to a company's productivity 
as well as to its long-term financial performance. These practices include:     
employee training, direct employee involvement in decision-making, compensation 
linked to performance, employee security, and a supportive work environment.    
Additionally, these practices may include other measures of performance, such   
as the extent to which a company uses part-time or contract employees to the    
exclusion of full-time paid employees. We may generally support proposals       
encouraging high-performance workplace practices. However, we review these      
proposals to ensure that they are in the shareholders' best interests and do    
not unduly interfere with the company's operations.                             

3.3. Pension Choice                                                             

A number of companies have recently faced controversy as they converted         
traditional defined benefit plans into cash-balance plans. Traditional plan     
benefits accrue based on a percentage of base salary multiplied by the number   
of years of service, multiplied by the final five-year average base pay.        
Cash-balance plans reserve a fixed percentage of base salary plus interest and  
are portable. Conversions to cash-balance plans often hurt older workers and    
may be motivated by a company's desire to inflate its book profits by boosting  
surpluses in its pension trust funds. We may generally support proposals        
seeking to restore employee choice in this manner.                              

4. EXECUTIVE AND DIRECTOR COMPENSATION                                          

Executive compensation should reward executives for superior performance while  
ensuring that the long-term interests of the company and its shareholders are   
being best served. To this end, executive compensation plans should be          
structured with consideration for the company's goals for growth and            
development; the individual executive's performance; the various compensation   
plan features; and the potential dilution of shareholders' voting power and     
economic value which would occur if the compensation plan were implemented. It  
is the structure of an executive's compensation package which most influences   
whether he or she will focus on boosting the corporation's day-to-day share     
price or will concentrate on building long-term corporate value.                

Many experts agree that pay-for-performance should be the central theme of      
every executive compensation plan. Pay-for-performance rewards executives for   
meeting explicit and demanding performance goals, as determined by the Board of 
Directors, and penalizes them for failing to meet those goals.                  

In determining an executive's performance goals, the Board should focus on the  
ways in which the executive might individually contribute to the growth and     
development of the company as well as how the executive might be instrumental   
in maximizing shareholder wealth. Measures of growth and development of the     
company may include financial performance, such as revenue growth and           
profitability; stock price increases; social corporate performance, such as the 
company's efforts to promote basic human rights within its operations;          
compliance with environmental, health, and safety standards; labor standards;   
and downsizing and layoffs standards.                                           

The best measures of shareholder wealth maximization are Market Value Added     
(MVA) and Economic Value Added (EVA). Shareholder wealth is maximized by        
maximizing the difference between the market value of the firm's stock and the  
amount of equity capital that is supplied by shareholders. This difference is   
MVA. Whereas MVA measures the effects of managerial efforts since the very      
inception of a company, EVA focuses on managerial effectiveness in a given year 
and is therefore the more appropriate measure to use to evaluate the            
executive's contributions to maximizing shareholder wealth. A firm adds value - 
that is, has a positive EVA - if its return on invested capital is greater than 
its weighted average cost of capital. If an executive's compensation plan is    
structured so that the executive focuses on creating positive EVA in all of the 
projects under his or her control, this will help to ensure that he or she will 
operate in a manner which is consistent with maximizing shareholder wealth.     

Executive compensation packages are generally composed of annual salary, annual 
incentive awards, long-term incentive awards, stock options, and other forms of 
equity compensation.                                                            

4.1. Stock Option Plans                                                         

Proponents of including stock options in executive compensation plans argue     
that options serve to attract, retain, and motivate qualified executives. These 
individuals take the position that options align management and shareholder     
interests and encourage executives to maximize shareholder value. In addition,  
these individuals maintain that when stock options are performance-based they   
generally are not subject to the limits contained in Section 162(m) of the      
Internal Revenue Code of 1986, as amended (the Code), which caps income tax     
deductions for executive salaries at $1 million.                                

However, stock options are sometimes abused and often have unintended and       
unacknowledged consequences. Opponents of stock options argue that most         
executives are adequately paid through salaries and cash incentive plans. In    
addition, these individuals maintain that stock options have an unlimited       
upside potential and no downside risk for executives. Whereas, shareholders     
bear all of the risk of stock options in terms of both economic value and       
voting power dilution. Furthermore, these individuals hold that stock options   
may harm long-term shareholder interests by motivating executives to focus on   
short-term expense-reduction strategies, such as cutting important research and 
development plans, or on undertaking overly risky projects all in an attempt to 
temporarily inflate stock prices and the net value of their options. Lastly,    
these individuals assert that stock options do not necessarily align executive  
interests with those of shareholders. For these reasons, stock options are      
often not believed to be an appropriate form of compensation for executives.    

If companies choose to use stock options for executive compensation, certain    
safeguards should be in place. These features include stock option expensing,   
performance-based stock options, share holding requirements, acceptable         
dilution levels, and a prohibition on retroactively repricing stock options.    

When voting on management proposals relating to stock options, we consider the  
criteria defined below.                                                         

4.1.1. Performance-Based                                                        

Performance-based stock options tie compensation to company performance more    
closely than they tie compensation to the stock market, which standard stock    
options do. As a result, participants in performance-based stock option plans   
are rewarded only when company shareholders also benefit.                       

Performance-based stock options are defined as one of the following:            

o PERFORMANCE VESTING STOCK OPTIONS - grants which do not vest or become        
exercisable unless specific price or business performance goals are met;    

o PREMIUM PRICED STOCK OPTIONS - grants with an option exercise price higher    
than fair market value on date of grant;                                    

o INDEX OPTIONS - grants with a variable option exercise price geared to a      
relative external measure such as a comparable peer group or S&P industry   
index; or                                                                   

o PERFORMANCE ACCELERATED STOCK OPTIONS - grants whose vesting is accelerated   
upon achievement of specific stock price or business performance goals.     

There is a lot of support for compensation policies which provide challenging   
performance objectives and which motivate executives and Directors to maximize  
long-term shareholder value. As a result, institutional investors are           
increasingly urging that, in order to align the interests of executives with    
those of shareholders, some portion of the stock option grants to executives    
and Directors should be performance-based.                                      

Premium-priced and performance-vesting options encourage executives and         
Directors to set and meet ambitious but realistic performance targets. Indexed  
options may have the added benefit of discouraging repricing in the event of an 
industry downturn. In addition, when stock options are performance-based they   
generally are not subject to the limits contained in Section 162(m) of the      
Code, which caps income tax deductions for executive salaries at $1 million. To 
ensure the full-tax deductibility of executive pay, companies now tend to pay   
amounts in excess of $1 million to executives in the form of incentive-based    
pay such as stock or stock options.                                             

4.1.2. Expensing                                                                

A failure to properly account for stock options as a compensation expense has   
promoted the excessive use of stock options for executive compensation at some  
companies. This practice also obscures and understates the cost of excessive    
executive compensation. We generally only support the use of stock options if   
the stock options are fully expensed.                                           

4.1.3. Dilution                                                                 

Stock option plans dilute company earnings, as well as shareholders' voting     
power and economic value. The amount of acceptable dilution varies, but any     
proposal which could potentially cause a total dilution of either outstanding   
voting power or outstanding shareholders' equity greater than 10% may be        
opposed. Higher levels of dilution may be acceptable for plans that are         
particularly broad-based or have especially challenging performance-based       
objectives.                                                                     

4.1.4. Grant Rates                                                              

In determining how to vote on a stock option plan, we consider whether or not   
past equity compensation grants to senior executives were within reason and     
prudent. Repeatedly providing large grants may lessen the options' incentive    
value and may needlessly dilute the company's shares. Equity compensation plans 
generally should not exceed an annual stock option grant rate of one percent of 
shares outstanding to senior executives. Higher grant rates may be acceptable   
for plans that are particularly broad-based or have especially challenging      
performance-based objectives. We may also oppose plans that reserve a specified 
percentage of outstanding shares for award each year (known as an evergreen     
plan) instead of having a termination date.                                     

4.1.5. Repricing                                                                

We generally may oppose any stock option plan that does not explicitly prohibit 
repricing, unless the company has adopted a policy against repricing. Similarly 
we may oppose the replacement of underwater stock options with new option       
grants at a lower exercise price. In both circumstances executives would be     
rewarded for the poor performance of the company's stock, undermining the       
intention of stock option awards.                                               

4.1.6. Reloads                                                                  

Reload grants give stock option recipients additional stock options to replace  
the options that have been exercised. Reloading options make it possible for    
the recipient to lock-in increases in stock price with no attendant risk, a     
benefit not available to other shareholders. Stock option reloads also          
contribute to excessively large compensation packages and increase stock option 
dilution. Lastly, reload features transfer responsibility for new option grants 
from Directors to the executives who are exercising their options.              

4.1.7. Broad-based                                                              

In determining how to vote on a stock option plan, we consider whether or not a 
proposed plan is available to a broad base of employees. Plans which are        
targeted to only the top executives of a company create disparities in the      
workplace which may adversely affect employee productivity and morale. We       
generally oppose plans if a significant proportion of option shares granted the 
previous year were issued to the top five executives.                           

4.1.8. Holding Period                                                           

Equity compensation awards are intended to align management interests with      
those of shareholders. Allowing executives to sell their shares while they are  
employed by the company undermines this purpose. Executives should be required  
to hold a substantial portion of their equity compensation awards, including    
any shares received from option exercise, while they remain employed by the     
company.                                                                        

4.1.9. Complexity                                                               

Some plans are needlessly complex, inconsistent, and complicated, or weaken     
performance criteria by providing Directors with excessive discretionary power. 
We may oppose plans that allow pyramiding (using shares obtained from the       
exercise of each option to purchase additional shares covered under the plan),  
gross-ups (in which the company provides cash or additional options to cover    
the tax-liability of options), or acceleration of the vesting requirements of   
outstanding awards. We may also oppose plans which bundle several kinds of      
awards into one plan or which do not provide clear guidelines for the           
allocation of awards to executives.                                             

4.2. Restricted Stock                                                           

Many agree that the best way to align the interests of executives with          
shareholders is through direct stock holdings, coupled with at-risk variable    
compensation that is tied to explicit and challenging performance benchmarks.   
Performance-vesting restricted stock is a compensation plan feature which not   
only increases executives' direct share holdings, but also incorporates at-risk 
features. In an effort to reward performance and not job tenure, restricted     
stock vesting requirements should be performance-based. Such plans should       
explicitly define the performance criteria for awards to executives and may     
include a variety of corporate performance measures in addition to the use of   
stock price targets. In addition, executives should be required to hold their   
vested restricted stock as long as they remain employees of the company.        

We may support the use of performance-vesting restricted stock as long as the   
absolute amount of restricted stock being granted is a reasonable proportion of 
an executive's overall compensation.                                            

4.3. Proposals on Base Compensation                                             

Annual salaries and other forms of guaranteed pay should be reasonable for the  
recruitment and retention of executives. Section 162(m) of the Code limits the  
tax deductibility of executive compensation in excess of $1 million unless it   
is performance-based. We may support proposals which address this limitation as 
well as those which establish reasonable levels of executive base compensation. 

4.4. Proposals on Variable Compensation                                         

We support enhanced disclosure and shareholder oversight of executive benefits  
and other perquisites. In addition, we may oppose the provisions of any         
perquisite or benefit to executives which exceeds what is generally offered to  
other company employees.                                                        

4.5. Golden Parachutes                                                          

Golden parachutes, which are severance packages contingent upon a change in     
control, may be detrimental to shareholder interests. Proponents argue that     
golden parachutes ensure that executives will continue to devote their time and 
attention to the business, despite the threat of potential job loss due to a    
change in control. Golden parachutes ensure that executives will not oppose a   
merger that might be in the shareholders' best interests but may cost the       
executives their jobs.                                                          

However, since parachutes assure covered executives of specified benefits, they 
may reduce management accountability to shareholders and reduce their           
incentives to maximize shareholder value during merger negotiations. Golden     
parachutes may also be unnecessary and a waste of corporate assets. In light of 
these negatives, companies should ban or put to shareholder approval all future 
golden parachutes.                                                              

Any severance plan or stock option "change in control" vesting feature should   
be contingent upon the completion of a merger, rather than the lesser standard  
of shareholder approval of a merger.                                            

4.6. Proposals Seeking Greater Transparency and Oversight                       

Shareholders benefit from full disclosure of all forms of compensation received 
by senior executives. Requiring shareholder approval of important compensation  
matters also provides an important safeguard against excessive executive pay.   

4.7. Proposals Seeking Alternative Performance Measure                          

These shareholder proposals seek to link executive compensation to the          
company's achievement of objectives to improve the company's long-term          
performance and sustainability. We may support such proposals provided that the 
objectives are evaluated in addition to the traditional financial measures of   
company performance in determining executive compensation.                      

4.8. Outside Director Compensation & Benefits                                   

The evaluation of outside Director compensation and benefits is important       
because Directors compensate themselves. We support compensating Directors in a 
manner which rewards excellent service and at the same time does not compromise 
the independence of Directors. Excessively large compensation packages may make 
Directors less willing to challenge management out of fear of not being         
re-nominated. Direct stock ownership is the best way to align the interests of  
outside Directors and shareholders. Accordingly, a significant proportion of    
Director compensation should be in the form of stock. The voting fiduciary may  
support the elimination of Director pensions. Directors who receive pensions    
based upon years of service as Directors and not upon their performance as      
Directors are less likely to challenge management if they perceive that such    
action might reduce the possibility of vesting. In addition to these            
conditions, we evaluate Director compensation plans using the same standards as 
those which apply to executive compensation plans.                              

4.9. Disclosing or Restricting Executive Compensation                           

Proposals which link executive compensation, benefits, and perquisites to the   
long-term goals of the company should be supported. In addition, proposals that 
seek to expand disclosure of executive compensation, benefits, and perquisites  
are of value to shareholders as long as such disclosure is not unduly           
burdensome on the company. In general, we may oppose the provision of any       
perquisite or benefit to executives that exceeds what is generally offered to   
other company employees.                                                        

5. CORPORATE RESPONSIBILITY                                                     

Corporate Responsibility shareholder proposals are based on the premise that,   
in order to succeed over the long-term, companies need to treat employees,      
suppliers, and customers well; need to be environmentally responsible; and need 
to be responsive to the communities in which they operate. In general, we may   
support such proposals as long as they contribute to or have no adverse effect  
upon the long-term economic interests of plan participants and beneficiaries.   

5.1. Special Policy Review & Shareholder Advisory Committees                    

Such policy committees are usually established by Boards of Directors to        
address broad corporate policy and to address issues on matters including       
shareholder relations, the environment and health & safety issues. We generally 
support proposals calling for the formation of such committees given the fact   
that this creates a method for effecting shareholder influence on companies.    

5.2. Corporate Conduct, International Labor Standards, and Human Rights         

We generally support shareholder proposals which address corporate              
responsibility relating to environmental, labor and human rights standards as   
long as the proposals contribute to or have no adverse impact upon the          
long-term interests of plan participants and beneficiaries.                     

5.3. Adoption of "MacBride Principles"                                          

The MacBride Principles call on companies operating in Northern Ireland to      
treat workers in those facilities in the same manner that the companies treat   
their employees domestically. We consider whether or not it is in the best      
long-term interests of plan participants and beneficiaries for a company to     
conduct its business in accordance with such principles.                        

5.4. Adoption of "CERES Principles"                                             

CERES Principles call for the companies to protect the environment and the      
health and safety of the companies' employees. We generally support proposals   
of this kind since the corporate conduct created by implementing them enhances  
business operations, improves companies' image, and enhances shareholder value. 

5.5. Legal & Regulatory Compliance                                              

Legal and regulatory compliance proposals call upon companies to comply with,   
and report on, government mandates relating to non-discrimination; health and   
safety; affirmative action; environmental issues; labor protections; and other  
policies and practices that affect long-term company performance. In general we 
may support such proposals because reporting on affirmative action keeps the    
issue high on a company's agenda, reaffirms a commitment to equal employment    
opportunity, and bolsters its standing with employees and the public and thus   
its economic well-being.                                                        

5.6. Supplier Standards                                                         

Supplier standards proposals call on companies to institute a review process to 
ensure that they do not do business with suppliers that fail to comply with all 
applicable laws and standards relating to labor and human rights. In general,   
we may support such proposals.                                                  

5.7. Fair Lending                                                               

Fair lending proposals call for financial institutions to affirmatively comply  
with fair-lending regulations and statutes, institute or report on overall fair 
lending policies or goals by the parent and financial subsidiaries of the       
corporation, or disclose lending data to shareholders and the public. It is     
important for financial institutions to examine the risks inherent to their     
fair lending compliance practices, to institute corrective steps and            
safeguards, if necessary, and to report to shareholders on their findings and   
activities in this regard. We may generally support proposals seeking such      
actions.                                                                        

5.8. Political Reporting                                                        

Management is unaccountable in making political contributions and in funding    
Political Action Committees (PACs) unless such donations are a matter of public 
information easily available to shareholders. While information on PAC          
contributions is available, direct contributions by the company at the state    
and local levels generally are not available, and few companies have reported   
on their expenses for PAC administration and solicitation. Aside from the right 
of shareholders to know about corporate political activities, knowledge that    
information on political contributions is readily available will lessen the     
chance that officers will make contributions that could be embarrassing to the  
corporation. We generally support such proposals as long as the cost of         
preparing reports on political contributions is minimal, and the request for    
them is reasonable.                                                             

5.9. Tobacco lndustry                                                           

The regulation of marketing practices is a responsibility of national or local  
governments. However, individual companies still have an undiminished duty to   
market their products responsibly within government-established boundaries.     
Tobacco ads continue to cause significant controversy for tobacco companies     
because they are said to affect those who may not be able to make an informed   
decision about the health risks of smoking. Companies that engage in such       
marketing should make sure that they fully comply with the letter and spirit of 
any government guidelines as well as any industry codes that address the topic. 
Reports on the marketing of tobacco products are a relatively inexpensive way   
for a company to let its shareholders gauge whether the company is marketing    
responsibly. Therefore, we may generally support proposals that ask management  
to report on or change tobacco product marketing practices.                     

5.10. Business Strategy                                                         

Shareholders have introduced proposals asking Boards to examine the impact of   
particular business strategies on long-term corporate value in light of         
changing market conditions, and to report back to shareholders. We generally    
support enhanced disclosure to shareholders on how the company addresses issues 
that may present significant risk to long-term corporate value. We also         
generally support proposals which seek Board review of business strategies that 
may not contribute to building long-term corporate value, so long as these      
proposals do not impose undue costs on the corporation.                         

5.11. Analyst Independence                                                      

Recent investigations by the SEC and the New York State Attorney General        
exposed widespread conflicts of interest involving investment banking practices 
at many financial services companies. We believe that these conflicts have      
helped to undermine investor confidence in the capital markets in general and   
investor confidence in the financial services industry in particular. Several   
recent shareholder proposals have urged financial service companies to          
effectively manage investment banking related conflicts of interest by formally 
separating the company's investment banking business from the company's         
sell-side analyst research and Initial Public Offering (IPO) allocation         
process, or by taking other measures. We generally support such proposals.      

6. AUDITORS                                                                     

Independent auditors play the important role in the capital markets of helping  
to protect the integrity and reliability of corporate financial reporting. The  
independent audit and resulting opinion letter are intended to enhance          
investors' confidence that the financial statements on which they rely provide  
an accurate picture of a company's financial condition. Recent accounting       
scandals illustrate the consequences for investors when this audit process      
breaks down.                                                                    

When a company engages its audit firm to perform non-audit services, this may   
compromise the independence of the audit firm, and may give rise to questions   
and concerns about the integrity and reliability of the auditor's work. Both    
the type and the amount of work performed for a company by its outside audit    
firm must be scrutinized. Real and perceived auditor conflicts are most serious 
when non-audit services constitute a significant percentage of the total fees   
paid by the company to the auditor, or when the nature of these non-audit       
services places the auditor in the role of advocate for the company, or its     
executives.                                                                     

We might consider that companies should only engage their auditors to perform   
audit services. However, the performance of certain non-audit services might    
not necessarily compromise the independence of the audit process.               

6.1. Auditor Ratification                                                       

We may vote against ratification of the auditors when:                          

o There is reason to believe that the company's auditors have become complacent 
in the performance of their auditing duties;                                

o There has been a change in auditors from the prior years and it is determined 
that the cause is a disagreement between the company and the terminated     
auditor on a matter of accounting principles or practices, financial        
statement disclosure or auditing scope or practice;                         

o The auditor provides advice on tax avoidance strategies, as disclosed in the  
qualitative discussion of tax services, or any other tax or other service   
 that the voting fiduciary believes places the auditor in the role of advocate
for the company or its executives;                                          

o The fees for non-audit services account for a significant percentage of total 
fees. When fees for non-audit services are more than 20% of total fees there
 should be concern, and when non-audit services exceed 50% of total fees it is
inappropriate and a serious threat to auditor independence. In determining  
the appropriate threshold at a particular company, the voting fiduciary     
should consider the nature of the non-audit services provided and the level 
of detail provided in the qualitative descriptions of non-audit fees; and   

o A company has had the same audit firm for more than seven years.              

We recognize that a vote against ratification of the auditor based upon the     
above standards may raise concerns about the performance of the audit           
committee. When these concerns are serious, we may also consider withholding    
votes for Directors serving on the audit committee.                             

6.2. Shareholder Proposals Relating to Auditors                                 

We may support shareholder proposals to enhance auditor independence, including 
those that complement or strengthen the minimum acceptable standards            
established above.                                                              

485APOS
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                                                          PART II - APPENDIX C

WAIVERS OF SALES CHARGES

This Appendix sets forth the various circumstances in which the initial sales   
charge (ISC) and/or the CDSC is waived for the MFS funds' share classes. Some   
of the following information will not apply to certain funds, depending on      
which classes of shares are offered by the funds. In order to qualify for a     
sales charge waiver, you must advise MFS that you are eligible for the waiver   
at the time of purchase and/or redemption. The funds, MFS, and their affiliates 
reserve the right to eliminate, modify, and add waivers at any time at their    
discretion.                                                                     

In addition, transfers, rollovers or other transactions from one account to the 
same class of the same fund of another account otherwise subject to a CDSC or   
an ISC will not be charged a CDSC or ISC so long as each account is held in     
your name or for your benefit (either individually or collectively) by MFSC or  
an affiliate. Shares will retain the CDSC schedule in effect based upon a pro   
rata share of the CDSC from the fund in the first account and the original      
purchase date of the shares subject to the CDSC.                                

As used in this Appendix C, the term "ESP" includes employer sponsored plans,   
the term "SRO" includes salary reduction only plans, and the term "ERISA"       
refers to the Employment Retirement Income Security Act of 1974, as amended.    

                                                        [Enlarge/Download Table]
RETIREMENT PLANS:                                                                                       


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                                                            SALES CHARGE WAIVED                         
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WAIVER CATEGORY                                                CLASS      CLASS       CLASS       CLASS 
                                                               A ISC      A CDSC      B CDSC      C CDSC
--------------------------------------------------------------------------------------------------------
1. WAIVERS FOR MFS SERVICED PLANS                                                                       
--------------------------------------------------------------------------------------------------------
                                                                                                        
o To the extent that redemption proceeds are used to pay                    V            V          V   
  expenses (or certain participant expenses) of the 401(a)                                              
  or ESP Plan (e.g., participant account fees).                                                         
--------------------------------------------------------------------------------------------------------
o Shares purchased or redeemed representing transfers from,      V          V            V          V   
  or transfers to, plan investments other than the MFS                                                  
  funds.                                                                                                
--------------------------------------------------------------------------------------------------------
o Shares acquired pursuant to repayments by retirement plan      V          V            V          V   
  participants of loans from 401(a) or ESP Plans.                                                       
--------------------------------------------------------------------------------------------------------
o By a retirement plan which established an account with                                 V              
  MFSC between July 1, 1996 and December 31, 1998.                                                      
--------------------------------------------------------------------------------------------------------
o By a retirement plan which established its account with                                V              
  MFSC on or after January 1, 1999 (provided that the plan                                              
  establishment paperwork is received by MFSC in good order                                             
  on or after November 15, 1998 and before December 31,                                                 
  2002).                                                                                                
--------------------------------------------------------------------------------------------------------
o Transfers from a single account maintained for a 401(a)                   V            V          V   
  Plan to multiple accounts maintained by MFSC on behalf of                                             
  individual participants of such Plan.                                                                 
--------------------------------------------------------------------------------------------------------
o All MFS Serviced Plans.                                        V                                  V   
--------------------------------------------------------------------------------------------------------
o Transfers due to the eligibility of a MFS Serviced Plan        V          V            V          V   
  to move its investment into a new share class under                                                   
  certain eligibility criteria established from time to                                                 
  time by MFD (sales charges waived may vary depending upon                                             
  the criteria established by MFD).                                                                     
--------------------------------------------------------------------------------------------------------
o Transfer or rollover to MFS Prototype IRA from a MFS           V          V            V          V   
  Serviced Plan.                                                                                        
--------------------------------------------------------------------------------------------------------
Reinvestment of Redemption Proceeds from Class B Shares          V          V                           

Shares acquired by a retirement plan whose account                                                      
application was received by MFD on or prior to March 30,                                                
2001 where the purchase represents the immediate                                                        
reinvestment of proceeds from the plan's redemption of                                                  
its Class B shares of the MFS funds and is equal to or                                                  
exceeds $500,000, either alone or in aggregate with the                                                 
current market value of the plan's existing Class A                                                     
shares; or                                                                                              
--------------------------------------------------------------------------------------------------------
Shares acquired by a retirement plan whose account                                                      
application was received by MFD on or after April 2, 2001                                               
and before December 31, 2002 where the purchase                                                         
represents the immediate reinvestment of proceeds from                                                  
the plan's redemption of its Class B shares of the MFS                                                  
funds and is equal to or exceeds $1,000,000, either alone                                               
or in aggregate with current market value of the plan's                                                 
existing Class A shares.                                                                                
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2. WAIVERS FOR NON-MFS SERVICED PLANS ("TA PLANS")                                                      
--------------------------------------------------------------------------------------------------------
A. 401(A) PLANS AND ESP PLANS                                                                           
--------------------------------------------------------------------------------------------------------
o Where the retirement plan and/or sponsoring organization       V          V                           
  demonstrates to the satisfaction of, and certifies to,                                                
  MFSC that the retirement plan (or multiple plans                                                      
  maintained by the same plan sponsor) has, at the time of                                              
  certification or will have pursuant to a purchase order                                               
  placed with the certification, a market value of $500,000                                             
  or more (applies only when the certification was received                                             
  by MFSC on or prior to March 30, 2001) or $1,000,000 or                                               
  more (applies only when the certification is received by                                              
  MFSC on or after April 2, 2001), invested in shares of                                                
  any class or classes of the MFS funds and aggregate                                                   
  assets of at least $10 million; provided, however, that                                               
  the CDSC will not be waived (i.e., it will be imposed)                                                
  (a) with respect to plans which establish an account with                                             
  MFSC on or after November 1, 1997, in the event that the                                              
  plan makes a complete redemption of all of its shares in                                              
  the MFS Family of funds, or (b) with respect to plans                                                 
  which establish an account with MFSC prior to November 1,                                             
  1997, in the event that there is a change in law or                                                   
  regulations which result in a material adverse change to                                              
  the tax advantaged nature of the plan, or in the event                                                
  that the plan and/or sponsoring organization: (i) becomes                                             
  insolvent or bankrupt; (ii) is terminated under ERISA or                                              
  is liquidated or dissolved; or (iii) is acquired by,                                                  
  merged into, or consolidated with any other entity.                                                   
--------------------------------------------------------------------------------------------------------
Investment in Class A shares by certain retirement plans         V(1)                                   
subject to ERISA, if                                                                                    

The plan established an account with MFSC between July 1,                                               
1997 and December 31, 1999;                                                                             

The plan records are maintained on a pooled basis by                                                    
MFSC; and                                                                                               

The sponsoring organization demonstrates to the                                                         
satisfaction of MFD that, at the time of purchase, the                                                  
employer has at least 200 eligible employees and the plan                                               
has aggregate assets of at least $2,000,000.                                                            
--------------------------------------------------------------------------------------------------------
3. WAIVERS FOR BOTH MFS SERVICED PLANS AND TA PLANS                                                     
--------------------------------------------------------------------------------------------------------
A. BENEFIT RESPONSIVE WAIVERS                                                                           
--------------------------------------------------------------------------------------------------------
o Death, disability or retirement of 401(a) or ESP Plan                     V            V          V   
  participant, or death or disability of IRA owner, SRO                                                 
  Plan Participant or SAR-SEP Plan Participant.                                                         
--------------------------------------------------------------------------------------------------------
o Eligible participant distributions, such as distributions                 V            V          V   
  due to death, disability, financial hardship, retirement                                              
  and termination of employment from MFS Serviced Plans and                                             
  nonqualified deferred compensation plans (excluding,                                                  
  however, a termination of a plan).                                                                    
--------------------------------------------------------------------------------------------------------
o Loan from 401(a) or ESP Plan.                                             V            V          V   
--------------------------------------------------------------------------------------------------------
o Financial hardship (as defined in Treasury Regulation                     V            V          V   
  Section 1.401(k)-l(d)(2), as amended from time to time)                                               
  for 401(a) Plans and ESP Plans.                                                                       
--------------------------------------------------------------------------------------------------------
o Termination of employment of 401(a) or ESP Plan                           V            V          V   
  participant (excluding, however, a termination of the                                                 
  Plan).                                                                                                
--------------------------------------------------------------------------------------------------------
o Tax-free return of excess 401(a) Plan, ESP Plan or IRA                    V            V          V   
  contributions.                                                                                        
--------------------------------------------------------------------------------------------------------
o Distributions from a 401(a) or ESP Plan that has invested                 V            V          V   
  its assets in one or more of the MFS funds for more than                                              
  10 years from the later to occur of (i) January 1, 1993                                               
  or (ii) the date such 401(a) or ESP Plan first invests                                                
  its assets in one or more of the MFS funds. The sales                                                 
  charges will be waived in the case of a redemption of all                                             
  of the 401(a) or ESP Plan's shares in all MFS funds                                                   
  (i.e., all the assets of the 401(a) or ESP Plan invested                                              
  in the MFS funds are withdrawn), unless immediately prior                                             
  to the redemption, the aggregate amount invested by the                                               
  401(a) or ESP Plan in shares of the MFS funds (excluding                                              
  the reinvestment of distributions) during the prior four                                              
  years equals 50% or more of the total value of the 401(a)                                             
  or ESP Plan's assets in the MFS funds, in which case the                                              
  sales charges will not be waived.                                                                     
--------------------------------------------------------------------------------------------------------
o Distributions made on or after the IRA owner, ESP                         V                           
  participant, SRO Plan participant or 401(a) Plan                                                      
  participant has attained the age of 59 1/2 years old.                                                 
--------------------------------------------------------------------------------------------------------
o Certain involuntary redemptions and redemptions in                        V            V          V   
  connection with certain automatic withdrawals from a                                                  
  401(a) Plan.                                                                                          
--------------------------------------------------------------------------------------------------------
o Distributions made on or after the IRA owner or the                       V            V          V   
  401(a), ESP, SRO or SAR-SEP Plan participant, as                                                      
  applicable, has attained the age of 70 1/2 years old, but                                             
  only with respect to the minimum distribution under Code                                              
  rules.                                                                                                
--------------------------------------------------------------------------------------------------------

Investments in Class A shares by certain retirement plans        V(1)                                   
(1) subject to ERISA, if, prior to July 1, 1996,                                                        

The plan had established an account with MFSC; and                                                      

The sponsoring organization had demonstrated to the                                                     
satisfaction of MFD that either:                                                                        

The employer had at least 25 employees; or                                                              

The total purchases by the retirement plan of Class A shares                                            
of the MFS funds would be in the amount of at least $250,000                                            
within a reasonable period of time, as determined by MFD in                                             
its sole discretion.                                                                                    

--------------------------------------------------------------------------------------------------------
Investments in Class A shares by certain retirement plans        v(1)                                   
subject to ERISA, if                                                                                    

The plan established an account with MFSC between July 1,                                               
1996 and March 30, 2001;                                                                                

The plan has, at the time of purchase, either alone or in                                               
aggregate with other plans maintained by the same plan                                                  
sponsor, a market value of $500,000 or more invested in                                                 
shares of any class or classes of the MFS funds; and                                                    

THE RETIREMENT PLANS WILL QUALIFY UNDER THIS CATEGORY ONLY                                              
IF THE PLANS OR THEIR SPONSORING ORGANIZATION INFORMS MFSC                                              
PRIOR TO THE PURCHASES THAT THE PLANS HAVE A MARKET VALUE                                               
OF $500,000 OR MORE INVESTED IN SHARES OF ANY CLASS OR                                                  
CLASSES OF THE MFS FUNDS; MFSC HAS NO OBLIGATION                                                        
INDEPENDENTLY TO DETERMINE WHETHER SUCH PLANS QUALIFY UNDER                                             
THIS CATEGORY.                                                                                          
--------------------------------------------------------------------------------------------------------
B. CERTAIN TRANSFERS OF REGISTRATION                                                                    
--------------------------------------------------------------------------------------------------------
o Transfers to an IRA rollover account where any sales                      V            V          V   
  charges with respect to the shares being reregistered                                                 
  would have been waived had they been redeemed.                                                        
--------------------------------------------------------------------------------------------------------
C. ADMINISTRATIVE SERVICE ARRANGEMENTS                                                                  
--------------------------------------------------------------------------------------------------------
o Where the retirement plan is, at that time, a party to a       V          V                           
  retirement plan recordkeeping or administrative services                                              
  agreement with MFD or one of its affiliates pursuant to                                               
  which certain of those services are provided by Benefit                                               
  Services Corporation or any successor service provider                                                
  designated by MFD.                                                                                    
--------------------------------------------------------------------------------------------------------
o Where the retirement plan has established an account with      V          V                           
  MFSC on or after January 1, 2000, and is, at that time, a                                             
  party to a retirement plan recordkeeping or                                                           
  administrative services agreement with MFD or one of its                                              
  affiliates pursuant to which such services are provided                                               
  with respect to at least $10 million in plan assets.                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by retirement plans or trust accounts          V          V                           
  whose financial intermediaries have entered into an                                                   
  administrative services agreement with MFD or one of its                                              
  affiliates to perform certain administrative services,                                                
  subject to certain operational and minimum size                                                       
  requirements specified from time to time by MFD or one or                                             
  more of its affiliates.                                                                               
--------------------------------------------------------------------------------------------------------

(1) Purchases of Class A shares are not subject to an initial sales charge; however, a CDSC of 1% will  
    be deducted from redemption proceeds if the redemption is made within 12 months of purchase.        

WAIVERS FOR 529 TUITION PROGRAMS:                                                                       


                                                                  SALES CHARGE WAIVED                   

WAIVER CATEGORY                                                           CLASS       CLASS      CLASS  
                                                                          529A        529B       529C   
                                                                          ISC         CDSC       CDSC   
--------------------------------------------------------------------------------------------------------
                                                                                                        

A. CERTAIN SPONSORED PLANS                                                                              
--------------------------------------------------------------------------------------------------------
o Shares acquired on behalf of a group, association or                      V            V          V   
  employer sponsored plan, pursuant to guidelines created                                               
  by MFD from time to time.                                                                             
--------------------------------------------------------------------------------------------------------
B. INVESTMENT PROCEEDS FROM CERTAIN REDEMPTIONS OF CLASS A,                                             
CLASS B AND CLASS C SHARES                                                                              
--------------------------------------------------------------------------------------------------------
o The initial sales charge imposed on purchases of Class                    V            V          V   
  529A shares, and the CDSC imposed on certain redemptions                                              
  of Class A, Class B and Class C shares, are waived where                                              
  Class 529A, Class 529B and Class 529C shares are acquired                                             
  following the reinvestment of the proceeds of a                                                       
  redemption of Class A, Class B and Class C shares,                                                    
  respectively, of the same fund; provided however, that                                                
  any applicable CDSC liability on the Class B or Class C                                               
  shares redeemed will carry over to the Class 529B or                                                  
  Class 529C shares acquired and for purposes of                                                        
  calculating the CDSC, the length of time you have owned                                               
  your Class 529B or Class 529C shares will be measured                                                 
  from the date of original purchase of the Class B or                                                  
  Class C shares redeemed.                                                                              
--------------------------------------------------------------------------------------------------------
C. ADMINISTRATIVE SERVICE ARRANGEMENTS                                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by 529 tuition programs whose sponsors or                 V                           
  administrators have entered into an administrative                                                    
  services agreement with MFD or one of its affiliates to                                               
  perform certain administrative or investment advisory                                                 
  services subject to certain operational and minimum size                                              
  requirements specified from time to time by MFD or one or                                             
  more of its affiliates.                                                                               
--------------------------------------------------------------------------------------------------------
D. QUALIFIED HIGHER EDUCATION EXPENSES                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed where the redemption proceeds are used to                              V          V   
  pay for qualified higher education expenses, which may                                                
  include tuition, fees, books, supplies, equipment and                                                 
  room and board (see the program description for further                                               
  information on qualified higher education expenses);                                                  
  however the CDSC will not be waived for redemptions where                                             
  the proceeds are transferred or rolled over to another                                                
  tuition program.                                                                                      
--------------------------------------------------------------------------------------------------------
E. SCHOLARSHIP                                                                                          
--------------------------------------------------------------------------------------------------------
o Shares redeemed where the account beneficiary has                                      V          V   
  received a scholarship, up to the amount of the                                                       
  scholarship.                                                                                          
--------------------------------------------------------------------------------------------------------
F. DEATH OF 529 PLAN BENEFICIARY                                                                        
--------------------------------------------------------------------------------------------------------
o Shares redeemed on account of the death of the 529 plan                                V          V   
  account beneficiary if the shares were held solely for                                                
  the benefit of the deceased individual.                                                               
--------------------------------------------------------------------------------------------------------
G. USA COLLEGECONNECT 529 PLAN                                                                          
--------------------------------------------------------------------------------------------------------
o Shares acquired as a result of the conversion of the USA                  V                           
  CollegeConnect 529 Plan to the MFS 529 Savings Plan                                                   
  (shares acquired after the conversion are not entitled to                                             
  a waiver under this category).                                                                        

GENERAL WAIVERS:                                                                                        


                                                        SALES CHARGE WAIVED                             

WAIVER CATEGORY                                              CLASS       CLASS        CLASS      CLASS  
                                                             A/529A      A CDSC       B/529B     C/529C 
                                                             ISC                      CDSC       CDSC   
                                                                                                        
--------------------------------------------------------------------------------------------------------
A. DIVIDEND REINVESTMENT                                                                                
--------------------------------------------------------------------------------------------------------
o Shares acquired through dividend or capital gain               V          V            V          V   
  reinvestment.                                                                                         
--------------------------------------------------------------------------------------------------------
o Shares acquired by automatic reinvestment of                   V          V            V          V   
  distributions of dividends and capital gains of any fund                                              
  in the MFS funds pursuant to the Distribution Investment                                              
  Program.                                                                                              
--------------------------------------------------------------------------------------------------------
B. AFFILIATES OF A MFS FUND/CERTAIN FINANCIAL ADVISERS                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by officers, eligible directors,               V          V            V          V   
  employees (including former employees) and agents of MFS,                                             
  Sun Life, or any of their subsidiary companies.                                                       
--------------------------------------------------------------------------------------------------------
o Shares acquired by trustees and retired trustees of any        V          V            V          V   
  investment company for which MFD serves as distributor.                                               
--------------------------------------------------------------------------------------------------------
o Shares acquired by employees, directors, partners,             V          V            V          V   
  officers and trustees of any subadviser to any MFS fund.                                              
--------------------------------------------------------------------------------------------------------
o Shares acquired by certain family members of any such          V          V            V          V   
  individual identified above and their spouses (or legal                                               
  equivalent under applicable state law), and certain                                                   
  trusts, pension, profit-sharing or other retirement plans                                             
  for the sole benefit of such persons, provided the shares                                             
  are not resold except to the MFS fund which issued the                                                
  shares.                                                                                               
--------------------------------------------------------------------------------------------------------
o Shares acquired by employees or registered                     V          V            V          V   
  representatives (including former employees) of financial                                             
  intermediaries or an employee's spouse (or legal                                                      
  equivalent under applicable state law) or employee's                                                  
  children under the age of 21. For employees or registered                                             
  representatives of financial intermediaries who                                                       
  established an account with MFS prior to May 1, 2006,                                                 
  shares acquired by certain family members of employees or                                             
  registered representatives of financial intermediaries                                                
  and their spouses (or legal equivalent under applicable                                               
  state law), and certain trusts, pension, profit-sharing                                               
  or other retirement plans for the sole benefit of such                                                
  persons, provided the shares are not resold except to the                                             
  MFS Fund which issued the shares.                                                                     
--------------------------------------------------------------------------------------------------------
o Shares acquired by institutional clients of MFS or             V          V            V          V   
  MFS Institutional Advisors, Inc.                                                                      
--------------------------------------------------------------------------------------------------------
C. INVOLUNTARY REDEMPTIONS                                                                              
--------------------------------------------------------------------------------------------------------
o Shares redeemed at a MFS fund's direction due to the                      V            V          V   
  small size of a shareholder's account.                                                                
--------------------------------------------------------------------------------------------------------
D. BANK TRUST DEPARTMENTS AND LAW FIRMS                                                                 
--------------------------------------------------------------------------------------------------------
o Shares acquired by certain bank trust departments  or          V          V                           
  law firms acting as trustee or manager for trust accounts                                             
  which have entered into an administrative services                                                    
  agreement with MFD and are acquiring such shares for the                                              
  benefit of their trust account clients.                                                               
--------------------------------------------------------------------------------------------------------
E. INVESTMENT OF PROCEEDS FROM CERTAIN REDEMPTIONS OF                                                   
CLASS I SHARES                                                                                          
--------------------------------------------------------------------------------------------------------
o The initial sales charge imposed on purchases of Class A       V          V                           
  or Class 529A shares and the contingent deferred sales                                                
  charge imposed on certain redemptions of Class A shares,                                              
  are waived with respect to Class A or Class 529A shares                                               
  acquired of any of the MFS funds through the immediate                                                
  reinvestment of the proceeds of a redemption of Class I                                               
  shares of any of the MFS funds.                                                                       
--------------------------------------------------------------------------------------------------------
F. SYSTEMATIC WITHDRAWALS                                                                               
--------------------------------------------------------------------------------------------------------
o Systematic withdrawals with respect to up to 10% per year                              V          V   
  (or 15% per year, in the case of accounts registered as                                               
  IRAs where the redemption is made pursuant to Section                                                 
  72(t) of the Internal Revenue Code of 1986, as amended)                                               
  of the account value at the time of establishment.                                                    
--------------------------------------------------------------------------------------------------------
G. DEATH OF OWNER                                                                                       
--------------------------------------------------------------------------------------------------------
o Shares redeemed on the account of the death of the                                     V          V   
  account owner (e.g., shares redeemed by the estate or any                                             
  transferee of the shares from the estate) if the shares                                               
  were held solely in the deceased individual's name, or                                                
  for the benefit of the deceased individual.                                                           
--------------------------------------------------------------------------------------------------------
H. DISABILITY OF OWNER                                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed on account of the disability of the                                    V          V   
  account owner if shares are held either solely or jointly                                             
  in the disabled individual's name in a living trust for                                               
  the benefit of the disabled individual (in which case a                                               
  disability certification form is required to be submitted                                             
  to MFSC), or shares redeemed on account of the disability                                             
  of the 529 account beneficiary.                                                                       
--------------------------------------------------------------------------------------------------------
I. WRAP ACCOUNT AND FUND "SUPERMARKET" INVESTMENTS                                                      
--------------------------------------------------------------------------------------------------------
o Shares acquired by investments through certain dealers         V          V                           
  (including registered investment advisers and financial                                               
  planners) which have established certain operational                                                  
  arrangements with MFD which include a requirement that                                                
  such shares be sold for the sole benefit of clients                                                   
  participating in a "wrap" account, mutual fund                                                        
  "supermarket" account or a similar program under which                                                
  such clients pay a fee to such dealer.                                                                
--------------------------------------------------------------------------------------------------------
J. INSURANCE COMPANY SEPARATE ACCOUNTS                                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by insurance company separate accounts.        V          V                           
--------------------------------------------------------------------------------------------------------
K. NO COMMISSIONS PAID                                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed where MFD has not paid an up front                        V            V          V   
  commission with respect to the sale of the shares,                                                    
  provided that such arrangement meets certain conditions                                               
  established by MFD from time to time.                                                                 
--------------------------------------------------------------------------------------------------------
L. MISCELLANEOUS                                                                                        
--------------------------------------------------------------------------------------------------------
o In connection with settlements reached between certain         V                                      
  broker/dealers and the NASD, SEC, and/or other regulatory                                             
  bodies regarding sales of Class B and Class C shares in                                               
  excess of certain dollar thresholds, the funds will, at                                               
  times, permit shareholders who are clients of these firms                                             
  to redeem Class B and Class C shares of the fund and                                                  
  concurrently purchase Class A shares without paying an                                                
  initial sales charge.                                                                                 

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

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                                                      SAI PART II - APPENDIX D

FINANCIAL INTERMEDIARY COMPENSATION 

Financial intermediaries receive various forms of compensation in connection    
with the sale of shares of a fund and/or the servicing of shareholder accounts. 
Financial intermediaries may receive such compensation (i) in the form of       
upfront commissions and ongoing asset-based compensation paid by MFD based on   
sales charges received and expected to be received by MFD from shareholders,    
and Rule 12b-1 ("Distribution Plan") distribution and service payments received 
by MFD from the fund, (ii) in the form of 529 administrative services payments, 
retirement plan administrative and service payments, and shareholder servicing  
payments paid by MFD and/or one or more of its affiliates (for purposes of this 
section only, collectively, "MFD") based on the receipt of such payments by MFD 
from the fund, and (iii) in the form of retail marketing support, program       
support, processing support, and/or other payments paid from MFD's own          
additional resources. In addition, financial intermediaries may benefit from    
payments made to other entities for consulting, research, or analytical         
services.                                                                       

The types of payments described above are not exclusive. Accordingly, financial 
intermediaries may receive payments under all or any combination of the         
above-referenced categories. In addition, the compensation that financial       
intermediaries receive may vary by class of shares sold and among financial     
intermediaries. Depending upon the arrangements in place at any particular      
time, financial intermediaries may have a financial incentive to recommend a    
particular fund or share class.                                                 

Financial intermediaries may charge you additional fees and/or commissions. You 
can ask your financial intermediary for information about any payments it       
receives from MFD and any services it provides, as well as about fees and/or    
commissions it charges. Financial intermediaries may categorize and disclose    
these arrangements differently than MFD does. Financial intermediaries that     
sell fund shares may also act as a broker or dealer in connection with a MFS    
fund's purchase or sale of portfolio securities. However, the fund and MFS do   
not consider financial intermediaries' sale of shares of a MFS fund as a factor 
when choosing brokers or dealers to effect portfolio transactions for the MFS   
funds.                                                                          

COMMISSIONS AND DISTRIBUTION PLAN PAYMENTS                                      

Class A, Class 529A, and Class J Shares                                         

For purchases of Class A, Class 529A and Class J shares subject to an initial   
sales charge, MFD generally pays a portion of the initial sales charge to       
financial intermediaries as an upfront commission of up to the following        
amounts:                                                                        

Equity/Asset Allocation/Total Return Funds                                      

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          5.00%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             4.00%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            3.00%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            2.25%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.75%                                
--------------------------------------------------------------------------------

Bond Funds                                                                      

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          4.00%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             3.50%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            3.00%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            2.25%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.75%                                
------------------------------------------ -------------------------------------

Short-Term Bond Funds                                                           

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          2.25%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             2.00%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            1.75%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            1.50%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.25%                                
--------------------------------------------------------------------------------

The difference between the total amount invested and the sum of (a) the net     
proceeds to the fund and (b) the financial intermediary commission, is the      
amount of the initial sales charge retained by MFD. Because of rounding in the  
computation of offering price, the portion of the sales charge retained by MFD  
may vary and the total sales charge may be more or less than the sales charge   
calculated using the sales charge expressed as a percentage of the offering     
price or as a percentage of the net amount invested as listed in the            
Prospectus. From time to time, MFD may pay financial intermediaries up to 100%  
of the applicable initial sales charge of Class A, Class 529A and Class J       
shares of certain specified funds sold by financial intermediaries during a     
specified sales period. In addition, financial intermediaries are generally     
eligible to receive some or all of the Distribution Plan service fee payments   
of up to 0.25% annually of the average daily net assets of the class with       
respect to such shares.                                                         

For purchases of Class A and Class 529A shares not subject to an initial sales  
charge other than by MFS Serviced Plans, MFD may pay financial intermediaries   
an upfront commission of up to 1% annually of the amount purchased through such 
financial intermediary. In addition, financial intermediaries will generally    
become eligible to receive some or all of the Distribution Plan service fee     
payments of up to 0.25% annually of the average daily net assets of the class   
with respect to such shares commencing in the 13th month following purchase.    

For purchases of Class 529A shares by employer sponsored or payroll deduction   
529 plans for which there is no initial sales charge or the Class 529A initial  
sales charge is waived, MFD will generally pay financial intermediaries an      
upfront commission of up to the following:                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $25,000,000 plus              0.50%                                
--------------------------------------------------------------------------------
Over $25,000,000                           0.25%                                
--------------------------------------------------------------------------------

At the discretion of MFD, MFD may pay certain financial intermediaries an       
upfront commission of up to 1% of the amount of Class 529A shares purchased     
through such financial intermediary instead of the upfront commission described 
above. In addition, such financial intermediaries will generally become         
eligible to receive some or all of the Distribution Plan service fee payments   
of up to 0.25% annually of the average daily net assets of the class with       
respect to such shares commencing in the 13th month following purchase.         

For purchases of Class A shares by MFS Serviced Plans prior to April 2, 2001    
(including sales to plans for which account establishment paperwork was         
received in good order by MFD on or prior to March 30, 2001), for which the     
initial sales charge is waived, MFD will generally pay financial intermediaries 
an upfront commission of up to the following:                                   

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

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

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

In the case of MFS Serviced Plans whose account establishment paperwork was     
received in good order after December 31, 1999, purchases will be aggregated as 
described above but the cumulative purchase amount will not be re-set after the 
date of the first such purchase.                                                

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares.                                                                         

For purchases of Class A shares by MFS Serviced Plans on or after April 2, 2001 
(including, sales to plans for which account establishment paperwork was        
received in good order by MFD on or after April 2, 2001), for which the initial 
sales charge is waived, MFD will generally pay financial intermediaries an      
upfront commission of up to the following:                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $4,000,000 plus                   1.00%                            
--------------------------------------------------------------------------------
Over $4,000,000 to $25,000,000 plus            0.50%                            
--------------------------------------------------------------------------------
Over $25,000,000                               0.25%                            
--------------------------------------------------------------------------------

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

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

Class B and Class 529B Shares                                                   

Except as noted below, for purchases of Class B and Class 529B shares, MFD will 
generally pay an upfront commission to financial intermediaries of up to 3.75%  
of the amount purchased through such financial intermediaries. MFD will also    
generally advance to financial intermediaries some or all of the first year     
Distribution Plan service fee payments of up to 0.25% of the amount of Class B  
and Class 529B shares purchased through such financial intermediary. In         
addition, financial intermediaries will generally become eligible to receive    
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

For purchases of Class B shares by a MFS Serviced Plan for which account        
establishment paperwork was received in good order by MFD between July 1, 1996  
and December 31, 1998, MFD will generally pay an upfront commission to          
financial intermediaries equal to 2.75% of the amount of Class B shares         
purchased through such financial intermediary. MFD will also generally advance  
to financial intermediaries some or all of the first year Distribution Plan     
service fee payments of up to 0.25% of the amount of Class B shares purchased   
through such financial intermediary. In addition, financial intermediaries will 
generally become eligible to receive some or all of the Distribution Plan       
service fee payments of up to 0.25% annually of the average daily net assets of 
the class with respect to such shares commencing in the 13th month following    
purchase.                                                                       

For purchases of Class B shares by a MFS Serviced Plan which established its    
account with MFSC between January 1, 1999, and December 31, 2002 (i.e., plan    
establishment paperwork is received by MFSC in good order by December 31, 2002) 
and certain other retirement plans as determined by MFD from time to time, MFD  
pays no upfront commission to financial intermediaries, but, instead, generally 
pays asset-based compensation to financial intermediaries of up to 1% annually  
of the average daily net assets of the class attributable to plan assets (of    
which 0.25% consists of the Distribution Plan service fee). This commission     
structure is not available with respect to a plan with a pre-existing           
account(s) with any MFS fund which seeks to switch to the MFS Recordkeeper Plus 
product.                                                                        

Class C and Class 529C Shares                                                   

Except as noted below, for purchases of Class C and Class 529C shares, MFD will 
generally pay an upfront commission to financial intermediaries of up to 1% of  
the amount of Class C and Class 529C shares purchased through such financial    
intermediary. In addition, financial intermediaries will generally become       
eligible to receive some or all of the Distribution Plan distribution fee       
payment of up to 0.75% and some or all of the Distribution Plan service fee     
payment of up to 0.25% annually of the average daily net assets of the class    
with respect to such shares commencing in the 13th month following purchase.    

For purchases of Class C shares by MFS Serviced Plans established on or after   
January 1, 2003 (i.e., plan establishment paperwork is received by MFSC in good 
order on or after January 1, 2003), MFD pays no upfront commission to financial 
intermediaries, but, instead, generally pays asset-based compensation to        
financial intermediaries of up to 1% annually of the average daily net assets   
of the class attributable to plan assets (of which 0.25% consists of the        
Distribution Plan service fee).                                                 

For purchases of Class C shares by an Alliance Plan, MFD will pay upfront       
commissions or asset-based compensation to financial intermediaries under       
either option discussed above, at the financial intermediary's discretion.      

Class R, Class R1, Class R2, Class R3 and Class R4 Shares                       

Except as noted below, for purchases of the following R share classes, MFD pays 
no upfront commission to financial intermediaries, but, instead, generally pays 
asset-based compensation to financial intermediaries of up to the following     
rates annually of the average daily net assets of the fund attributable to plan 
assets (of which up to 0.25% consists of the Distribution Plan service fee), as 
follows:                                                                        

------------------------------------------------------------                    
Class                                 Annual Rate                               
------------------------------------------------------------                    

------------------------------------------------------------                    
Class R1                              0.75%                                     
------------------------------------------------------------                    
Class R, Class R2, Class R3           0.50%                                     
------------------------------------------------------------                    
Class R4                              0.25%                                     
------------------------------------------------------------                    

In addition, MFD may pay financial intermediaries who sell Class R4 shares an   
upfront commission of up to 0.25% of up to $25 million of a MFS Serviced Plan's 
initial investment. MFD generally will not pay financial intermediaries         
receiving this upfront commission an upfront commission with respect to any     
subsequent sale of Class R4 shares (subject to MFD waiving this limitation from 
time to time).                                                                  

For purchases of Class R shares by a MFS Serviced Plan whose account            
establishment paperwork was received in good order after December 31, 2002, MFD 
will generally pay financial intermediaries an upfront commission of up to the  
following:                                                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $4,000,000 plus               1.00%                                
--------------------------------------------------------------------------------
Over $4,000,000 to $25,000,000 plus        0.50%                                
--------------------------------------------------------------------------------
Over $25,000,000                           0.25%                                
--------------------------------------------------------------------------------

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

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

For purchases of Class R shares by an Alliance Plan whose account establishment 
paperwork was received in good order after December 31, 2002, MFD will          
generally pay financial intermediaries an upfront commission of up to 0.60% of  
the amount of Class R shares purchased through such financial intermediary.     

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

529 ADMINISTRATIVE SERVICES FEES, RETIREMENT PLAN ADMINISTRATIVE AND SERVICES   
FEES, AND SHAREHOLDER SERVICING PAYMENTS                                        

Financial intermediaries may receive all or a portion of the following          
payments: 529 administrative services fees as described in "Management of the   
Fund - Program Manager"; retirement plan administrative and service fees as     
described in "Management of the Fund - Administrator"; and shareholder          
servicing payments as described in "Management of the Fund - Shareholder        
Servicing Agent."                                                               

OTHER MFD PAYMENTS                                                              

Financial intermediaries may receive payments from MFD from MFD's own           
additional resources that fall within one or more of the following categories,  
each of which is described in greater detail below, as incentives to market the 
MFS funds, to cooperate with MFD's promotional efforts, and/or in recognition   
of their marketing, administrative services, and/or processing support:         

o Retail Marketing Support Payments;                                        

o Program Support Payments;                                                 

o Processing Support Payments; and                                          

o Other Payments.                                                           

In determining what types of payments MFD may make to financial intermediaries, 
MFD distinguishes between Retail Assets and Program Assets. "Retail Assets" are 
shares (or the value of shares as determined from time to time) of a fund sold  
or held through a financial intermediary's retail distribution channel.         
"Program Assets" are shares (or the value of shares as determined from time to  
time) of a fund sold or held through programs, such as retirement programs,     
qualified tuition programs, fund supermarkets, fee-based advisory or wrap fee   
programs, bank trust programs, and insurance (e.g., individual or group         
annuity) programs. A single financial intermediary may receive payments from    
MFD with respect to both Retail Assets ("retail marketing support payments")    
and Program Assets ("program support payments").                                

Retail Marketing Support Payments                                               

MFD may make retail marketing support and/or administrative services payments   
to financial intermediaries that sell fund shares or provide services to MFD,   
the fund or shareholders of the fund through the financial intermediary's       
retail distribution channel. In addition to the opportunity to participate in a 
financial intermediary's retail distribution channel, retail marketing support  
payments may include one or more of the following: business planning            
assistance; educating financial intermediary personnel about the fund;          
assistance with fund shareholder financial planning; placement on the financial 
intermediary's preferred or recommended fund list; access to sales              
representatives and management representatives of the financial intermediary;   
and administrative and account maintenance services.                            

MFD compensates financial intermediaries differently depending upon, among      
other factors, the level, and/or type of marketing and administrative support   
provided by the financial intermediary and the level of assets attributable to  
and/or sales by the financial intermediary. MFD generally does not make retail  
marketing support payments to a financial intermediary in an amount that        
exceeds, at the end of each calendar year, the sum of 0.10% of that financial   
intermediary's total sales of the fund (with respect to each of the Retail      
Assets and the Program Assets), and 0.05% of the average net assets of the fund 
attributable to that financial intermediary (with respect to the aggregate of   
both the Retail Assets and the Program Assets). Since this restriction on       
retail marketing support payments is based upon both Retail Assets and Program  
Assets, the retail marketing support payments may be greater than if such       
payments were calculated only on the basis of Retail Assets attributable to the 
financial intermediary. This restriction is subject to certain limited          
exceptions and may be increased or otherwise modified by MFD from time to time. 
Retail marketing support payments made under an existing agreement with         
Linsco/Private Ledger Corp. ("LPL") are not subject to the above restrictions,  
but payments to LPL on Retail Assets will not exceed, at the end of each        
calendar year, 0.15% of the average net assets of the fund (Retail Assets and   
Program Assets) attributable to LPL.                                            

Program Support Payments                                                        

MFD may make marketing support and/or administrative services payments to       
financial intermediaries that sell fund shares or provide services to MFD, the  
fund, or shareholders of the fund, through programs such as retirement          
programs, qualified tuition programs, fund supermarkets, fee-based advisory or  
wrap fee programs, bank trust programs, and insurance (e.g., individual or      
group annuity) programs. In addition to the opportunity to participate in a     
financial intermediary's program, program support payments may include one or   
more of the following, which will vary depending upon the nature of the         
program: participant or shareholder record-keeping; reporting or transaction    
processing; program administration; fund/investment selection and monitoring;   
enrollment; and education. A financial intermediary may perform the services    
itself or may arrange with a third party to perform the services.               

MFD compensates financial intermediaries differently depending upon, among      
other factors, the level and/or type of marketing and administrative support    
provided by the financial intermediary and the level of assets attributable to  
and/or sales by the financial intermediary. Program support payments to a       
financial intermediary generally will not exceed, at the end of each calendar   
year, 0.25% of the average net assets in the program attributable to that       
financial intermediary. This limitation is subject to certain limited           
exceptions and may be increased or otherwise modified by MFD from time to time. 

Processing Support Payments                                                     

MFD may make payments to certain financial intermediaries that sell fund shares 
(Retail Assets and/or Program Assets) to help offset the financial              
intermediaries' costs associated with client account maintenance support,       
statement preparation, and transaction processing. The types of payments that   
MFD may make under this category include, among others, payment of ticket       
charges of up to $20 per purchase or exchange order placed by a financial       
intermediary, payment of networking fees of up to $6 per shareholder account    
maintained on certain mutual fund trading systems, or one-time payments for     
ancillary services such as setting up funds on a financial intermediary's       
mutual fund trading system.                                                     

Other Payments                                                                  

From time to time, MFD, from MFD's own additional resources, may make           
additional payments to financial intermediaries that sell or provide services   
in connection with the sale of MFS fund shares (Retail Assets and/or Program    
Assets) or the servicing of shareholder accounts. Such payments by MFD may      
include payment or reimbursement to, or on behalf of, financial intermediaries  
for costs associated with the purchase of products or services used in          
connection with sales and marketing, participation in and/or presentation at    
conferences or seminars, sales or training programs, client and investor        
entertainment and events, and other sponsored events, and travel expenses,      
including lodging incurred by registered representatives and other employees in 
connection with training and educational meetings, client prospecting,          
retention, and due diligence trips. Other compensation may be offered,          
including goodwill payments relating to servicing, to the extent not prohibited 
by federal or state laws or any self-regulatory agency, such as the NASD. MFD   
makes payments for entertainment events it deems appropriate, subject to MFD's  
policies and applicable law. These payments may vary depending upon the nature  
of the event.                                                                   

NASD Member Broker/Dealers Receiving Marketing Support, Program Support and/or  
Processing Support Payments                                                     

Set forth below is a list of the member firms of the NASD to which MFD expects  
as of July 1, 2006 to make Retail Marketing Support, Program Support and/or     
Processing Support Payments with respect to the funds. Payments may also be     
made to affiliates of these firms. Any additions, modifications, or deletions   
to the broker/dealers identified in this list that have occurred since July 1,  
2006, are not reflected. In addition to member firms of the NASD, MFD also      
makes Retail Marketing Support, Program Support and/or Processing Support       
Payments to other financial intermediaries that sell or provide services to the 
funds and shareholders, such as banks, insurance companies, and plan            
administrators. These firms are not included in this list and may include       
affiliates of MFD. You should ask your financial intermediary if it receives    
Retail Marketing Support, Program Support or Processing Support Payments from   
MFD.                                                                            

401(K) Investment Services, Inc.                                                

A.G. Edwards & Sons, Inc.                                                       

ADP Broker-Dealer, Inc.                                                         

AIG Financial Advisors, Inc.                                                    

Ameriprise Financial Services, Inc.                                             

American General Securities Incorporated                                        

Bear, Stearns Securities Corp.                                                  

Becker & Suffern, LTD.                                                          

Charles Schwab & Co., Inc.                                                      

Chase Investment Services Corp.                                                 
Citigroup Global Markets Inc.                                                   

Commonwealth Financial Network                                                  

CUNA Brokerage Services, Inc.                                                   

Fidelity Brokerage Services LLC                                                 

Financial Network Investment Corp.                                              

H.D. Vest Investment Services                                                   

Hewitt Financial Services LLC                                                   

ICMA - RC Services, LLC                                                         

IFMG Securities, Inc.                                                           

ING Financial Partners, Inc.                                                    

Legg Mason Investor Services, LLC                                               

Linsco/Private Ledger Corp.                                                     

Merrill Lynch, Pierce, Fenner & Smith Incorporated                              

Metlife Securities Inc.                                                         

Mid-Atlantic Securities, Inc.                                                   

Morgan Stanley DW Inc.                                                          

MSCS Financial Services, LLC                                                    

Multi Financial Services, Inc.                                                  

Paychex Securities Corporation                                                  

Piper Jaffray & Co.                                                             

Primevest Financial Services, Inc.                                              

Princor Financial Services Corporation                                          

Prudential Investment Management Services LLC                                   

Raymond James & Associates, Inc.                                                

Raymond James Financial Services, Inc.                                          

RBC Dain Rauscher Inc.                                                          

State Street Global Markets, LLC                                                

SunTrust Investment Services, Inc.                                              

UBS Financial Services Inc.                                                     

U.S. Bancorp Investments, Inc.                                                  

UVest Financial Services Group, Inc.                                            

Wachovia Securities, LLC                                                        

Wells Fargo Investments LLC                                                     

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                                                                    APPENDIX E

INVESTMENT STRATEGIES AND RISKS 

In addition to the principal investment strategies and the principal risks      
described in the prospectus, your fund may employ other investment practices    
and may be subject to other risks, which are described below. Because the       
following is a combined description of the investment strategies and risks for  
all MFS Funds, certain matters described herein may not apply to your fund.     

ASSET-BACKED SECURITIES. Asset-backed securities are securities that represent  
a participation in, or are secured by and payable from, pools of underlying     
assets such as debt securities, bank loans, motor vehicle installment sales     
contracts, installment loan contracts, leases of various types of real and      
personal property, receivables from revolving credit (i.e., credit card)        
agreements and other receivables. These underlying assets are securitized       
through the use of trusts and special purpose entities. Payment of interest and 
repayment of principal on asset-backed securities may be largely dependent upon 
the cash flows generated by the underlying assets backing the securities and,   
in certain cases, may be supported by letters of credit, surety bonds, or other 
credit enhancements.                                                            

Asset-backed securities are often subject to more rapid repayment than their    
stated maturity date would indicate, as a result of the pass-through of         
prepayments of principal on the underlying assets. The rate of principal        
payments on asset-backed securities is related to the rate of principal         
payments on the underlying asset pool and related to the priority of payment of 
the security with respect to the asset pool. The occurrence of prepayments is a 
function of several factors, such as the level of interest rates, general       
economic conditions, the location, and age of the underlying obligations, asset 
default and recovery rates, and other social and demographic conditions.        
Because prepayments of principal generally occur when interest rates are        
declining, an investor generally has to reinvest the proceeds of such           
prepayments at lower interest rates than those at which its assets were         
previously invested. Therefore, asset-backed securities may have less potential 
for capital appreciation in periods of falling interest rates than other        
income-bearing securities of comparable maturity.                               

The credit quality of asset-backed securities depends primarily on the quality  
of the underlying assets, the level of credit enhancement, if any, provided for 
the securities, and the credit quality of the credit-support provider, if any.  
The value of asset-backed securities may be affected by the various factors     
described above and other factors, such as changes in interest rates, the       
availability of information concerning the pool and its structure, the          
creditworthiness of the servicing agent for the pool, the originator of the     
underlying assets, or the entities providing the credit enhancement. Because    
asset-backed securities may not have the benefit of a security interest in the  
underlying assets that is comparable to a mortgage, asset-backed securities     
present certain additional risks that are not present with mortgage-backed      
securities.                                                                     

BORROWING. If the fund borrows money, its share price may be subject to greater 
fluctuation until the borrowing is paid off. If the fund makes additional       
investments while borrowings are outstanding, this may be considered a form of  
leverage and may cause a fund to liquidate investments when it would not        
otherwise do so. Money borrowed will be subject to interest charges and may be  
subject to other fees or requirements which would increase the cost of          
borrowing above the stated interest rate.                                       

COMMON STOCK. Common stock represents an equity or ownership interest in an     
issuer. In the event an issuer is liquidated or declares bankruptcy, the claims 
of owners of bonds and preferred stock take precedence over the claims of those 
who own common stock.                                                           

CONVERTIBLE SECURITIES. Convertible securities are bonds, debentures, notes, or 
other securities that may be converted into or exchanged for (by the holder or  
by the issuer) shares of stock (or cash or other securities of equivalent       
value) of the same or a different issuer at a stated exchange ratio. A          
convertible security may also be called for redemption or conversion by the     
issuer after a particular date and under certain circumstances (including a     
specified price) established upon issue.                                        

Convertible securities generally have less potential for gain or loss than      
common stocks. Convertible securities generally provide yields higher than the  
underlying common stocks, but generally lower than comparable non-convertible   
securities. Because of this higher yield, convertible securities generally sell 
at prices above their "conversion value," which is the current market value of  
the stock to be received upon conversion. The difference between this           
conversion value and the price of convertible securities will vary over time    
depending on changes in the value of the underlying common stocks and interest  
rates. When the underlying common stocks decline in value, convertible          
securities will tend not to decline to the same extent because of the interest  
or dividend payments and the repayment of principal at maturity for certain     
types of convertible securities. However, securities that are convertible other 
than at the option of the holder generally do not limit the potential for loss  
to the same extent as securities convertible at the option of the holder. When  
the underlying common stocks rise in value, the value of convertible securities 
may also be expected to increase. At the same time, however, the difference     
between the market value of convertible securities and their conversion value   
will narrow, which means that the value of convertible securities will          
generally not increase to the same extent as the value of the underlying common 
stocks. Because convertible securities may also be interest-rate sensitive,     
their value may increase as interest rates fall and decrease as interest rates  
rise. Convertible securities are also subject to credit risk, and are often     
lower-quality securities.                                                       

COUNTRY LOCATION. The issuer of a security or other investment is generally     
deemed to be economically tied to a particular country if: (a) the security or  
other investment 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; (e) the issuer has 50% or more of its       
assets in that country; (f) the issuer is included in an index which is         
representative of that country; or (g) the issuer is exposed to the economic    
fortunes and risks of that country.                                             

DEPOSITARY RECEIPTS. Depositary receipts are securities that evidence ownership 
interests in a security or a pool of securities that have been deposited with a 
"depository." Depositary receipts may be sponsored or unsponsored and include   
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and    
Global Depositary Receipts (GDRs). In sponsored programs, an issuer has made    
arrangements to have its securities trade in the form of ADRs, EDRs, or GDRs.   
In unsponsored programs, the issuer may not be directly involved in the         
creation of the program. For ADRs, the depository is typically a U.S. financial 
institution and the underlying securities are issued by a foreign issuer. For   
other depositary receipts, the depository may be a foreign or a U.S. entity,    
and the underlying securities may have a foreign or a U.S. issuer. Depositary   
receipts will not necessarily be denominated in the same currency as their      
underlying securities. Generally, ADRs are issued in registered form,           
denominated in U.S. dollars, and designed for use in the U.S. securities        
markets. Other depositary receipts, such as GDRs and EDRs, may be issued in     
bearer form and denominated in other currencies, and may be offered privately   
in the United States and are generally designed for use in securities markets   
outside the U.S. The deposit agreement sets out the rights and responsibilities 
of the underlying issuer, the depository, and the depositary receipt holders.   

With sponsored facilities, the underlying issuer typically bears some of the    
costs of the depositary receipts (such as dividend payment fees of the          
depository), although most sponsored depositary receipts holders may bear costs 
such as deposit and withdrawal fees. Depositories of most sponsored depositary  
receipts agree to distribute notices of shareholder meetings, voting            
instructions, and other shareholder communications and financial information to 
the depositary receipt holders at the underlying issuer's request.              

Holders of unsponsored depositary receipts generally bear all the costs of the  
facility. The depository usually charges fees upon the deposit and withdrawal   
of the underlying securities, the conversion of dividends into U.S. dollars or  
other currency, the disposition of non-cash distributions, and the performance  
of other services. The depository of an unsponsored facility frequently is      
under no obligation to distribute shareholder communications received from the  
underlying issuer or to pass through voting rights to depositary receipt        
holders with respect to the underlying securities.                              

EMERGING MARKETS. Investing in emerging market countries involves certain risks 
not typically associated with investing in the United States, and imposes risks 
greater than, or in addition to, risks of investing in more developed foreign   
markets. These risks include, but are not limited to, the following: greater    
risks of nationalization or expropriation of assets or confiscatory taxation;   
currency devaluations and other currency exchange rate fluctuations; greater    
social, economic, and political uncertainty and instability (including          
amplified risk of war and terrorism); more substantial government involvement   
in the economy; less government supervision and regulation of the securities    
markets and participants in those markets; controls on foreign investment and   
limitations on repatriation of invested capital and on the fund's ability to    
exchange local currencies for U.S. dollars; unavailability of currency hedging  
techniques in certain emerging market countries; the fact that companies in     
emerging market countries may be smaller, less seasoned, and newly organized;   
the difference in, or lack of, auditing and financial reporting standards,      
which may result in unavailability of material information about issuers; the   
risk that it may be more difficult to obtain and/or enforce a judgment in a     
court outside the United States; the risk that a judgment against a foreign     
government may be unenforceable; and greater price volatility, less liquidity,  
and significantly smaller market capitalization of securities markets. Also,    
any change in the leadership or politics of emerging market countries, or the   
countries that exercise a significant influence over those countries, may halt  
the expansion of or reverse the liberalization of foreign investment policies   
now occurring and adversely affect existing investment opportunities.           
Furthermore, high rates of inflation and rapid fluctuations in inflation rates  
have had, and may continue to have, negative effects on the economies and       
securities markets of certain emerging market countries.                        

FOREIGN CURRENCIES. Foreign securities may be denominated in foreign currencies 
and international currency units and foreign currencies may be purchased        
directly. Accordingly, the weakening of these currencies and units against the  
U.S. dollar would result in a decline in the value of securities denominated in 
that currency or the value of the currency itself.                              

While holding currencies permits an investor to take advantage of favorable     
movements in the applicable exchange rate, this strategy also exposes the       
investor to risk of loss if exchange rates move in a direction adverse to the   
investor's position. Such losses could reduce any profits or increase any       
losses sustained by the investor from the sale or redemption of securities and  
could reduce the dollar value of interest or dividend payments received.        

Some foreign countries have managed currencies, which are not free floating     
against the U.S. dollar. Managed currencies can experience a steep devaluation  
relative to the U.S. dollar.                                                    

In addition, there is risk that certain foreign countries may restrict the free 
conversion of their currencies into other currencies. Further, certain          
currencies may not be internationally traded.                                   

Foreign currency transactions can be made on a spot (i.e., cash) or forward     
basis (i.e., by entering into forward contracts to purchase or sell foreign     
currencies). Although foreign exchange dealers generally do not charge a fee    
for such conversions, they do realize a profit based on the difference between  
the prices at which they are buying and selling various currencies. Thus, a     
dealer may offer to sell a foreign currency at one rate, while offering a       
lesser rate of exchange should the counterparty desire to resell that currency  
to the dealer. Forward contracts are customized transactions that require a     
specific amount of a currency to be delivered at a specific exchange rate on a  
specific date or range of dates in the future. Forward contracts are generally  
traded in an interbank market directly between currency traders (usually large  
commercial banks) and their customers. The parties to a forward contract may    
agree to offset or terminate the contract before its maturity, or may hold the  
contract to maturity and complete the contemplated currency exchange.           

A "settlement hedge" or "transaction hedge" attempts to protect against an      
adverse change in foreign currency values between the date a security is        
purchased or sold and the date on which payment is made or received. Entering   
into a forward contract for the purchase or sale of the amount of foreign       
currency involved in an underlying security transaction for a fixed amount of   
U.S. dollars "locks in" the U.S. dollar price of the security. Forward          
contracts to purchase or sell a foreign currency may also be used in            
anticipation of future purchases or sales of securities denominated in foreign  
currency, even if the specific investments have not yet been selected.          

Forward contracts can be used to hedge against a decline in the value of        
existing investments denominated in foreign currency. For example, if an        
investor owned securities denominated in pounds sterling, the investor could    
enter into a forward contract to sell pounds sterling in return for U.S.        
dollars to hedge against possible declines in the pound's value. Such a hedge,  
sometimes referred to as a "position hedge," would tend to offset both positive 
and negative currency fluctuations, but would not offset changes in security    
values caused by other factors. An investor could also hedge the position by    
selling another currency expected to perform similarly to the pound sterling.   
This type of hedge, sometimes referred to as a "proxy hedge," could offer       
advantages in terms of cost, yield, or efficiency, but generally would not      
hedge currency exposure as effectively as a direct hedge into U.S. dollars.     
Proxy hedges may result in losses if the currency used to hedge does not        
perform similarly to the currency in which the hedged securities are            
denominated.                                                                    

Forward contracts can also be used to shift investment exposure from one        
currency into another. This may include shifting exposure from U.S. dollars to  
a foreign currency or from one foreign currency to another foreign currency.    
This type of strategy, sometimes known as a "cross-hedge," will tend to reduce  
or eliminate exposure to the currency that is sold, and increase exposure to    
the currency that is purchased, much as if a fund had sold a security           
denominated in one currency and purchased an equivalent security denominated in 
another. Cross-hedges protect against losses resulting from a decline in the    
hedged currency, but will cause a fund to assume the risk of fluctuations in    
the value of the currency it purchases.                                         

Swap agreements, indexed securities, hybrid securities and options and futures  
contracts relating to foreign currencies can be used for the same purposes.     

Successful use of currency management strategies will depend on MFS' skill in   
analyzing currency values. Currency management strategies may increase the      
volatility of a fund's returns and could result in significant losses to a fund 
if currencies do not perform as MFS anticipates. For example, if a currency's   
value rose at a time when MFS had hedged a fund by selling that currency in     
exchange for dollars, a fund would not participate in the currency's            
appreciation. If MFS hedges currency exposure through proxy hedges, a fund      
could realize currency losses from both the hedge and the security position if  
the two currencies do not move in tandem. Similarly, if MFS increases a fund's  
exposure to a foreign currency and that currency's value declines, a fund will  
realize a loss. There is no assurance that MFS' use of currency management      
strategies will be advantageous to a fund or that it will hedge at appropriate  
times.                                                                          

FOREIGN MARKETS. Foreign securities and foreign currencies, as well as any      
securities issued by U.S. entities with substantial foreign operations, may     
involve significant risks in addition to the risks inherent in U.S.             
investments. Foreign investments involve risks relating to local political,     
economic, regulatory, or social instability, military action or unrest, or      
adverse diplomatic developments, and may be affected by actions of foreign      
governments adverse to the interests of U.S. investors. Such actions may        
include expropriation or nationalization of assets, confiscatory taxation,      
restrictions on U.S. investment or on the ability to repatriate assets or       
convert currency into U.S. dollars, or other government intervention. The debt  
instruments of foreign governments and their agencies and instrumentalities may 
or may not be supported by the full faith and credit of the foreign government. 
Additionally, governmental issuers of foreign debt securities may be unwilling  
to pay interest and repay principal when due and may require that the           
conditions for payment be renegotiated. In addition, the value of securities    
denominated in foreign currencies and of dividends and interest paid with       
respect to such securities will fluctuate based on the relative strength of the 
U.S. dollar.                                                                    

Foreign stock markets, while growing in volume and sophistication, are          
generally not as developed as those in the United States, and securities of     
some foreign issuers may be less liquid and more volatile than securities of    
comparable U.S. issuers. Foreign security trading, settlement and custodial     
practices (including those involving securities settlement where fund assets    
may be released prior to receipt of payment) are often less developed than      
those in U.S. markets, and may result in increased risk or substantial delays   
in the event of a failed trade or the insolvency of, or breach of duty by, a    
foreign broker-dealer, securities depository, or foreign subcustodian. In       
addition, the costs associated with foreign investments, including withholding  
taxes, brokerage commissions, and custodial costs, are generally higher than    
with U.S. investments.                                                          

Foreign markets may offer less protection to investors than U.S. markets.       
Foreign issuers are generally not bound by uniform accounting, auditing, and    
financial reporting requirements and standards of practice comparable to those  
applicable to U.S. issuers. Adequate public information on foreign issuers may  
not be available, and it may be difficult to secure dividends and information   
regarding corporate actions on a timely basis. In general, there is less        
overall governmental supervision and regulation of securities exchanges,        
brokers, and listed companies than in the United States. OTC markets tend to be 
less regulated than stock exchange markets and, in certain countries, may be    
totally unregulated. Regulatory enforcement may be influenced by economic or    
political concerns, and investors may have difficulty enforcing their legal     
rights in foreign countries.                                                    

Some foreign securities impose restrictions on transfer within the United       
States or to U.S. persons. Although securities subject to such transfer         
restrictions may be marketable abroad, they may be less liquid than foreign     
securities of the same class that are not subject to such restrictions.         

FUTURES CONTRACTS. A futures contract is a standardized agreement between two   
parties to buy or sell in the future a specific quantity of an asset, currency, 
interest rate, index, instrument or other indicator at a specific price and     
time. The value of a futures contract typically fluctuates in correlation with  
the increase or decrease in the value of the underlying indicator. The buyer of 
a futures contract enters into an agreement to purchase the underlying          
indicator on the settlement date and is said to be "long" the contract. The     
seller of a futures contract enters into an agreement to sell the underlying    
indicator on the settlement date and is said to be "short" the contract. The    
price at which a futures contract is entered into is established either in the  
electronic marketplace or by open outcry on the floor of an exchange between    
exchange members acting as traders or brokers. Open futures contracts can be    
liquidated or closed out by physical delivery of the underlying indicator or    
payment of the cash settlement amount on the settlement date, depending on the  
terms of the particular contract. Some financial futures contracts (such as     
security futures) provide for physical settlement at maturity. Other financial  
futures contracts (such as those relating to interest rates, foreign currencies 
and securities indexes) generally provide for cash settlement at maturity. In   
the case of cash settled futures contracts, the cash settlement amount is equal 
to the difference between the final settlement price on the last trading day of 
the contract and the price at which the contract was entered into. Most futures 
contracts, however, are not held until maturity but instead are "offset" before 
the settlement date through the establishment of an opposite and equal futures  
position.                                                                       

The purchaser or seller of a futures contract is not required to deliver or pay 
for the underlying indicator unless the contract is held until the settlement   
date. However, both the purchaser and seller are required to deposit "initial   
margin" with a futures commission merchant (FCM) when the futures contract is   
entered into. Initial margin deposits are typically calculated as a percentage  
of the contract's market value. If the value of either party's position         
declines, that party will be required to make additional "variation margin"     
payments to settle the change in value on a daily basis. This process is known  
as "marking-to-market."                                                         

The risk of loss in trading futures contracts can be substantial, because of    
the low margin deposits required, the extremely high degree of leverage         
involved in futures pricing, and the potential high volatility of the futures   
markets. As a result, a relatively small price movement in a futures position   
may result in immediate and substantial loss (or gain) to the investor. Thus, a 
purchase or sale of a futures contract may result in unlimited losses. In the   
event of adverse price movements, an investor would continue to be required to  
make daily cash payments to maintain its required margin. In addition, on the   
settlement date, an investor may be required to make delivery of the indicators 
underlying the futures positions it holds.                                      

An investor could suffer losses if it is unable to close out a futures contract 
because of an illiquid secondary market. Futures contracts may be closed out    
only on an exchange which provides a secondary market for such products.        
However, there can be no assurance that a liquid secondary market will exist    
for any particular futures product at any specific time. Thus, it may not be    
possible to close a futures position, and an investor would remain obligated to 
meet margin requirements until the position is closed. Moreover, most futures   
exchanges limit the amount of fluctuation permitted in futures contract prices  
during a single trading day. The daily limit establishes the maximum amount     
that the price of a futures contract may vary either up or down from the        
previous day's settlement price at the end of a trading session. Once the daily 
limit has been reached in a particular type of contract, no trades may be made  
on that day at a price beyond that limit. The daily limit governs only price    
movement during a particular trading day and therefore does not limit potential 
losses, because the limit may prevent the liquidation of unfavorable positions. 
Futures contract prices have occasionally moved to the daily limit for several  
consecutive trading days with little or no trading, thereby preventing prompt   
liquidation of future positions and subjecting some futures traders to          
substantial losses. The inability to close futures positions also could have an 
adverse impact on the ability to hedge a portfolio investment or to establish a 
substitute for a portfolio investment.                                          

An investor could lose margin payments it has deposited with its futures        
commission merchant (FCM), if, for example, the FCM breaches its agreement with 
the investor or becomes insolvent or goes into bankruptcy. In that event, the   
investor may be entitled to return of margin owed to it only in proportion to   
the amount received by the FCM's other customers, potentially resulting in      
losses to the investor.                                                         

If MFS attempts to use a futures contract as a hedge against, or as a           
substitute for, a portfolio investment, the futures position may not correlate  
as expected with the portfolio investment, resulting in losses to the fund.     
While hedging strategies involving futures products can reduce the risk of      
loss, they can also reduce the opportunity for gain or even result in losses by 
offsetting favorable price movements in other fund investments.                 

Pursuant to a claim of exemption filed with the Commodity Futures Trading       
Commission (CFTC) on behalf of the MFS Funds that are permitted by their        
investment objectives and policies to use futures and options on futures        
contracts, each such MFS Fund is not deemed to be a "commodity pool" or         
"commodity pool operator" under the Commodity Exchange Act and is not subject   
to registration or regulation as such under the Commodity Exchange Act.         

HYBRID INSTRUMENTS. Hybrid instruments are generally considered derivatives and 
combine the elements of swaps, futures contracts, or options with those of      
debt, preferred equity or a depository instrument. A hybrid instrument may be a 
debt instrument, preferred stock, warrant, convertible security, certificate of 
deposit or other evidence of indebtedness on which a portion of or all interest 
payments, and/or the principal or stated amount payable at maturity, redemption 
or retirement, is determined by reference to prices, changes in prices, or      
differences between prices, of securities, currencies, intangibles, goods,      
commodities, indexes, economic factors or other measures, including interest    
rates, currency exchange rates, or commodities or securities indices, or other  
indicators (collectively, "indicators").                                        

The risks of investing in hybrid instruments reflect a combination of the risks 
of investing in securities, swaps, options, futures and currencies. An          
investment in a hybrid instrument may entail significant risks that are not     
associated with a similar investment in a traditional debt instrument that has  
a fixed principal amount, is denominated in U.S. dollars or bears interest      
either at a fixed rate or a floating rate determined by reference to a common,  
nationally published benchmark. The risks of a particular hybrid instrument     
will depend upon the terms of the instrument, but may include the possibility   
of significant changes in the benchmark(s) or the prices of the underlying      
indicators to which the instrument is linked. Such risks generally depend upon  
factors unrelated to the operations or credit quality of the issuer of the      
hybrid instrument, which may not be foreseen by the purchaser, such as economic 
and political events, the supply and demand of the underlying indicators and    
interest rate movements. Hybrid instruments may be highly volatile.             

Hybrid instruments are potentially more volatile and carry greater market risks 
than traditional debt instruments. Depending on the structure of the particular 
hybrid instrument, changes in a benchmark, underlying asset or indicator may be 
magnified by the terms of the hybrid instrument and have an even more dramatic  
and substantial effect upon the value of the hybrid instrument. Also, the       
prices of the hybrid instrument and the benchmark, underlying asset or          
indicator may not move in the same direction or at the same time.               

Hybrid instruments may bear interest or pay preferred dividends at below market 
(or even relatively nominal) rates. Alternatively, hybrid instruments may bear  
interest at above market rates but bear an increased risk of principal loss (or 
gain). The latter scenario may result if "leverage" is used to structure the    
hybrid instrument. Leverage risk occurs when the hybrid instrument is           
structured so that a given change in a benchmark or underlying indicator is     
multiplied to produce a greater value change in the hybrid instrument, thereby  
magnifying the risk of loss as well as the potential for gain.                  

If MFS attempts to use a hybrid instrument as a hedge against, or as a          
substitute for, a portfolio investment, the hybrid instrument may not correlate 
as expected with the portfolio investment, resulting in losses to the fund.     
While hedging strategies involving hybrid instruments can reduce the risk of    
loss, they can also reduce the opportunity for gain or even result in losses by 
offsetting favorable price movements in other fund investments.                 

Hybrid instruments may also carry liquidity risk since the instruments are      
often "customized" to meet the portfolio needs of a particular investor, and    
therefore, the number of investors that are willing and able to buy such        
instruments in the secondary market may be smaller than that for more           
traditional debt instruments. Under certain conditions, the redemption value of 
such an investment could be zero. In addition, because the purchase and sale of 
hybrid investments could take place in an over-the-counter market without the   
guarantee of a central clearing organization, or in a transaction between the   
fund and the issuer of the hybrid instrument, hybrid instruments are subject to 
the creditworthiness of the issuer of the hybrid instrument, and their values   
may decline substantially if the issuer's creditworthiness deteriorates. Hybrid 
instruments also may not be subject to regulation by the CFTC, which generally  
regulates the trading of commodity futures by U.S. persons, the SEC, which      
regulates the offer and sale of securities by and to U.S. persons, or any other 
governmental regulatory authority.                                              

INFLATION-INDEXED BONDS. Inflation-indexed bonds are debt instruments whose     
principal value is adjusted periodically according to a rate of inflation       
(usually a consumer price index). Two structures are most common. The U.S.      
Treasury and some other issuers use a structure that accrues inflation into the 
principal value of the bond. Most other issuers pay out the inflation accruals  
as part of a semiannual coupon.                                                 

U.S. Treasury Inflation Protected Securities (TIPS) currently are issued with   
maturities of five, ten, or thirty years, although it is possible that          
securities with other maturities will be issued in the future. The principal    
amount of TIPS adjusts for inflation, although the inflation-adjusted principal 
is not paid until maturity. Semi-annual coupon payments are determined as a     
fixed percentage of the inflation-adjusted principal at the time the payment is 
made.                                                                           

If the rate measuring inflation falls, the principal value of inflation-indexed 
bonds will be adjusted downward, and consequently the interest payable on these 
securities (calculated with respect to a smaller principal amount) will be      
reduced. At maturity, TIPS are redeemed at the greater of their                 
inflation-adjusted principal or at the par amount at original issue. If an      
inflation-indexed bond does not provide a guarantee of principal at maturity,   
the adjusted principal value of the bond repaid at maturity may be less than    
the original principal.                                                         

The value of inflation-indexed bonds is expected to change in response to       
changes in real interest rates. Real interest rates in turn are tied to the     
relationship between nominal interest rates and the rate of inflation. For      
example, if inflation were to rise at a faster rate than nominal interest       
rates, real interest rates would likely decline, leading to an increase in      
value of inflation-indexed bonds. In contrast, if nominal interest rates        
increase at a faster rate than inflation, real interest rates would likely      
rise, leading to a decrease in value of inflation-indexed bonds.                

While these securities, if held to maturity, are expected to be protected from  
long-term inflationary trends, short-term increases in inflation may lead to a  
decline in value. If nominal interest rates rise due to reasons other than      
inflation (for example, due to an expansion of non-inflationary economic        
activity), investors in these securities may not be protected to the extent     
that the increase in rates is not reflected in the bond's inflation measure.    

The inflation adjustment of TIPS is tied to the Consumer Price Index for Urban  
Consumers ("CPI-U"), which is calculated monthly by the U.S. Bureau of Labor    
Statistics. The CPI-U is a measurement of price changes in the cost of living,  
made up of components such as housing, food, transportation, and energy. There  
can be no assurance that the CPI-U will accurately measure the real rate of     
inflation in the prices of goods and services.                                  

INVERSE FLOATING RATE OBLIGATIONS. Inverse floating rate obligations have       
variable interest rates that typically move in the opposite direction from      
movements in prevailing interest rates, most often short-term rates.            
Accordingly, the value of inverse floating rate obligations or other            
obligations or certificates structured to have similar features generally moves 
in the opposite direction as interest rates. The value of an inverse floating   
rate instrument can be considerably more volatile than the value of other debt  
instruments of comparable maturity and quality. Inverse floating rate           
obligations incorporate varying degrees of leverage. Generally, greater         
leverage results in greater price volatility for any given change in interest   
rates. Inverse floating rate obligations may be subject to legal or contractual 
restrictions on resale and therefore may be less liquid than other types of     
securities.                                                                     

LENDING OF PORTFOLIO SECURITIES. Lending of portfolio securities will usually   
be made only to member firms of the New York Stock Exchange (the "Exchange")    
(and subsidiaries thereof) and member banks of the Federal Reserve System, and  
would be required to be secured by collateral in cash, an irrevocable letter of 
credit, or U.S. Treasury securities maintained on a current basis at an amount  
at least equal to the market value of the securities loaned. When one party     
lends portfolio securities to another party, the lender has the right to call   
the loan and obtain the securities loaned at any time on customary industry     
settlement notice (which will not usually exceed five business days). For the   
duration of a loan, the borrower pays the lender an amount equal to any         
interest or dividends received on the securities loaned. The lender also        
receives a fee from the borrower or compensation from the investment of the     
collateral, less a fee paid to the borrower (if the collateral is in the form   
of cash). The lender does not, however, have the right to vote any securities   
having voting rights during the existence of the loan, but it can call the loan 
in anticipation of an important vote to be taken among holders of the           
securities or of the giving or withholding of their consent on a material       
matter affecting the investment. A fund's performance will continue to reflect  
changes in the value of the securities loaned and will also reflect the receipt 
of interest, through investment of cash collateral by the fund or a fee. If the 
borrower defaults on its obligation to return the securities loaned because of  
insolvency or other reasons, the lender could experience delays and costs in    
recovering the securities loaned or in gaining access to the collateral. These  
delays and costs could be greater for foreign securities. If the lender is not  
able to recover the securities loaned, the lender may sell the collateral and   
purchase a replacement investment in the market. The value of the collateral    
could decrease below the value of the replacement investment by the time the    
replacement investment is purchased.                                            

LOANS AND OTHER DIRECT INDEBTEDNESS. Loans and other direct indebtedness are    
interests in amounts owed by corporations, governmental or other borrowers to   
lenders or lending syndicates (loans and loan participations), to suppliers of  
goods and services (trade claims and other receivables), or to other parties.   
Some loans may be unsecured in part or in full. Loans may be in default at the  
time of purchase. Loans that are fully secured should protect the purchaser to  
a greater extent than unsecured loans in the event of nonpayment of scheduled   
interest or principal. However, there can be no assurance that the liquidation  
of collateral acquired in connection with the default of a secured loan would   
satisfy the borrower's obligation, or that such collateral could be liquidated. 

Loans generally are made to finance internal growth, mergers, acquisitions,     
stock repurchases, leveraged buy-outs or other corporate activities. Such loans 
typically are originated, negotiated and structured by a syndicate of lenders   
represented by an agent lender that has negotiated and structured the loan and  
that is responsible for collecting interest and principal payments and other    
amounts due on behalf of all of the lenders in the syndicate, and for enforcing 
the lenders' rights against the borrower. Typically, the agent is given broad   
discretion in monitoring the borrower's performance and is obligated to use the 
same care it would use in the management of its own property. Upon an event of  
default, the agent typically will enforce the loan agreement after instruction  
from the lenders. The borrower compensates the agent for these services. This   
compensation may include special fees paid when the loan is structured or       
funded and other fees paid on a continuing basis. The typical practice of an    
agent or a lender to rely exclusively or primarily on reports from the borrower 
involves a risk of fraud by the borrower.                                       

If an agent becomes insolvent, or has a receiver, conservator or similar        
official appointed for it by an appropriate authority, or if it becomes a       
debtor in a bankruptcy proceeding, the agent's appointment may be terminated,   
and a successor agent typically may be appointed by the lenders. If an          
appropriate authority determines that assets held by the agent for the benefit  
of lenders or purchasers of loans are subject to the claims of the agent's      
general or secured creditors, then such lenders or purchasers might incur       
certain costs and delays in realizing payment on a loan or suffer a loss of     
principal and/or interest. Furthermore, in the event of the borrower's          
bankruptcy or insolvency, the borrower's obligation to repay a loan may be      
subject to certain defenses that the borrower can assert as a result of         
improper conduct by the agent.                                                  

Loans may be acquired by participating directly in a lending syndicate as a     
lender. Alternatively, loans or an interest in loans may be acquired by         
novation, by assignment or by participation from members of the lending         
syndicate or from other participants. In a novation or an assignment, the       
acquirer assumes all of the rights of the lender in the loan or of the          
participant in the participants' portion of the loan and, in the case of a      
novation or an assignment from a member of the lending syndicate, becomes a     
party of record with respect to the loan. In a participation, the acquirer      
purchases a portion of the lender's or the participants' interest in the loan,  
but has no direct contractual relationship with the borrower. An investment in  
a loan by participation gives rise to several risks. The acquirer must rely on  
another party not only for the enforcement of the acquirer's rights against the 
borrower, but also for the receipt and processing of principal, interest or     
other payments due under the loan and may be subject to the credit risk of the  
other party in addition to the borrower. The acquirer may be subject to delays, 
expenses, and risks that are greater than those that would be involved if the   
acquirer could enforce its rights directly against the borrower. In addition,   
under the terms of a participation agreement, the acquirer may be regarded as a 
creditor of the seller of the participation interest (rather than of the        
borrower), so that the acquirer also may be subject to the risk that such       
seller could become insolvent. A participation agreement also may limit the     
rights of the acquirer to vote on changes that may be made to the underlying    
loan agreement, such as waiving a breach of a covenant.                         

Direct indebtedness includes trade or other claims against companies, which     
generally represent monies owed by such companies to suppliers of goods or      
services. Such claims may be purchased when such companies are in default.      

The ability to receive payments of principal and interest on loans and other    
direct indebtedness will depend primarily on the financial condition of the     
borrower. Because an acquirer may be required to rely on another party to       
collect and to pass on to it amounts payable with respect to the loan or other  
direct indebtedness and to enforce the acquirer's rights under the loan or      
other direct indebtedness, an insolvency, bankruptcy or reorganization of such  
other party may delay or prevent the acquirer from receiving such amounts. The  
highly leveraged nature of many loans and other direct indebtedness may make    
such loans and other direct indebtedness especially vulnerable to adverse       
changes in economic or market conditions.                                       

Revolving credit facilities and other standby financing commitments obligate    
the purchaser to fund additional cash on a certain date or on demand. A         
revolving credit facility differs from other types of financing commitments in  
that as the borrower repays the loan, an amount equal to the repayment may be   
borrowed again during the term of the revolving credit facility. These          
commitments may have the effect of requiring a purchaser to increase its        
investment in a company at a time when the purchaser might not otherwise decide 
to do so (including at a time when the company's financial condition makes it   
unlikely that such amounts will be repaid).                                     

Floating rate loans generally are subject to legal or contractual restrictions  
on resale. Floating rate loans currently are not listed on any securities       
exchange or automatic quotation system. As a result, no active market may exist 
for some floating rate loans, and to the extent a secondary market exists for   
other floating rate loans, such market may be subject to irregular trading      
activity, wide bid/ask spreads and extended trade settlement periods.           
Additionally, the supply of floating rate loans may be limited from time to     
time due to a lack of sellers in the market for existing floating rate loans or 
to the number of new floating rate loans currently being issued. As a result,   
the floating rate loans available for purchase may be of lower quality or may   
have a higher price.                                                            

With respect to its management of investments in bank loans, MFS will normally  
seek to avoid receiving material, non-public information ("MNPI") about the     
issuers of bank loans being considered for acquisition by the fund or held in   
the fund's portfolio. In many instances, borrowers may offer to furnish MNPI to 
prospective investors, and to holders, of the issuer's loans. MFS' decision not 
to receive MNPI may place MFS at a disadvantage relative to other investors in  
loans (which could have an adverse effect on the price the fund pays or         
receives when buying or selling loans). Also, in instances where holders of     
loans are asked to grant amendments, waivers or consent, MFS' ability to assess 
their significance or desirability may be adversely affected. For these and     
other reasons, it is possible that MFS' decision not to receive MNPI under      
normal circumstances could adversely affect the fund's investment performance.  

Notwithstanding its intention generally not to receive MNPI with respect to its 
management of investments in loans, MFS may from time to time come into         
possession of MNPI about the issuers of loans that may be held in the fund's    
portfolio. Possession of such information may in some instances occur despite   
MFS' efforts to avoid such possession, but in other instances MFS may choose to 
receive such information (for example, in connection with participation in a    
creditors' committee with respect to a financially distressed issuer). As, and  
to the extent, required by applicable law, MFS' ability to trade in these loans 
for the account of the fund could potentially be limited by its possession of   
such information. Such limitations on MFS' ability to trade could have an       
adverse effect on the fund by, for example, preventing the fund from selling a  
loan that is experiencing a material decline in value. In some instances, these 
trading restrictions could continue in effect for a substantial period of time. 

LOWER QUALITY DEBT INSTRUMENTS. Lower quality debt instruments are considered   
speculative with respect to the issuer's continuing ability to meet principal   
and interest payments and, while generally expected to provide greater income   
than investments in higher quality debt instruments, will involve greater risk  
of principal and income (including the possibility of default or bankruptcy of  
the issuers of such instruments) and may involve greater volatility of price    
(especially during periods of economic uncertainty or change) than higher       
quality debt instruments. In addition, because yields vary over time, no        
specific level of income can ever be assured. These lower quality debt          
instruments generally tend to reflect economic changes (and the outlook for     
economic growth), short-term corporate and industry developments and the        
market's perception of their credit quality to a greater extent than higher     
quality debt instruments, which react primarily to fluctuations in the general  
level of interest rates (although these lower quality debt instruments are also 
affected by changes in interest rates). In the past, economic downturns or an   
increase in interest rates have, under certain circumstances, resulted in a     
higher incidence of default by the issuers of these instruments and may do so   
in the future, especially in the case of highly leveraged issuers. The prices   
for these instruments may be affected by legislative and regulatory             
developments. The market for these lower quality debt instruments may be less   
liquid than the market for investment grade debt instruments. Furthermore, the  
liquidity of these lower quality debt instruments may be affected by the        
market's perception of their credit quality.                                    

Instruments in the lowest tier of investment-grade debt instruments, 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.                           

See Appendix H for a description of bond ratings.                               

MONEY MARKET INSTRUMENTS. Money market instruments, or short-term debt          
instruments, consist of obligations such as commercial paper, bank obligations  
(e.g., certificates of deposit and bankers' acceptances), repurchase            
agreements, and various government obligations, such as Treasury bills. Money   
market instruments may be structured to be, or may employ a trust or other form 
so that they are, eligible investments for money market funds. For example, put 
features can be used to modify the maturity of a security or interest rate      
adjustment features can be used to enhance price stability. If a structure      
fails to function as intended, adverse tax or investment consequences may       
result. Neither the Internal Revenue Service (IRS) nor any other regulatory     
authority has ruled definitively on certain legal issues presented by certain   
structured securities. Future tax or other regulatory determinations could      
adversely affect the value, liquidity, or tax treatment of the income received  
from these securities. Commercial paper is a money market instrument issued by  
banks or companies to raise money for short-term purposes. Unlike some other    
debt obligations, commercial paper is typically unsecured. Commercial paper may 
be issued as an asset-backed security.                                          

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities that      
represent direct or indirect participation in, or are collateralized by and     
payable from, mortgage loans secured by real property or instruments derived    
from such loans. Mortgage-backed securities include various types of securities 
such as pass-throughs, stripped mortgage-backed securities, and collateralized  
mortgage obligations. There are a wide variety of mortgage types underlying     
these securities, including mortgage instruments whose principal or interest    
payments may vary or whose terms to maturity may be shorter than customary.     

Generally, mortgage-backed securities represent interests in pools of mortgage  
loans assembled for sale to investors by various governmental agencies, such as 
the Government National Mortgage Association (GNMA), by government-related      
organizations, such as the Federal National Mortgage Association (FNMA) and the 
Federal Home Loan Mortgage Corporation (FHLMC), as well as by private issuers,  
such as commercial banks, savings and loan institutions and mortgage bankers.   
Government mortgage-backed securities are backed by the full faith and credit   
of the United States as to payment of principal and interest. GNMA, the         
principal U.S. guarantor of these securities, is a wholly-owned U.S. government 
corporation within the Department of Housing and Urban Development.             
Government-related mortgage-backed securities are not backed by the full faith  
and credit of the United States. Issuers of government-related mortgage-backed  
securities include FNMA and FHLMC. FNMA is a congressionally chartered          
corporation owned entirely by private stockholders, and is subject to general   
regulation by the Secretary of Housing and Urban Development. Private           
mortgage-backed securities may be less liquid than government or                
government-related mortgage-backed securities.                                  

Pass-through securities issued by FNMA are guaranteed as to timely payment of   
principal and interest by FNMA. FHLMC is a stockholder-owned                    
government-sponsored enterprise established by Congress. Participation          
certificates representing interests in mortgages from FHLMC's national          
portfolio are guaranteed as to the timely payment of interest and principal by  
FHLMC. Private mortgage-backed securities represent interest in pass-through    
pools consisting principally of conventional residential mortgage loans created 
by non-government issuers, such as commercial banks and savings and loan        
associations and private mortgage insurance companies. Private, government, or  
government-related entities may create mortgage loan pools offering             
pass-through investments in addition to those described above. Interests in     
pools of mortgage-related securities differ from other forms of debt            
instruments, which normally provide for periodic payment of interest in fixed   
amounts with principal payments at maturity or specified call dates. Instead,   
these securities typically provide a monthly payment which consists of both     
interest and principal payments. In effect, these payments generally are a      
"pass-through" of the monthly payments made by the individual borrowers on      
their residential or commercial loans, net of any fees paid to the issuer or    
guarantor of such securities. Additional payments are caused by repayments of   
principal resulting from the sale of the underlying property, refinancing or    
foreclosure, net of fees or costs incurred.                                     

Mortgage-backed securities are often subject to more rapid repayment than their 
stated maturity date would indicate as a result of the pass-through of          
prepayments of principal on the underlying loans. Prepayments of principal by   
mortgagors or mortgage foreclosures shorten the term of the mortgage pool       
underlying the mortgage-backed security. The occurrence of prepayments is a     
function of several factors, including interest rates, general economic         
conditions, the location of the mortgaged property, the age of the mortgage or  
other underlying obligations, and other social and demographic conditions.      
Because prepayment rates of individual mortgage pools vary widely, the average  
life of a particular pool is difficult to predict. A fund's ability to maintain 
positions in mortgage-backed securities is affected by the reductions in the    
principal amount of such securities resulting from prepayments. The values of   
mortgage-backed securities vary with changes in market interest rates generally 
and the differentials in yields among various kinds of U.S. government          
securities, mortgage-backed securities, and asset-backed securities. In periods 
of rising interest rates, the rate of prepayment tends to decrease, thereby     
lengthening the average life of a pool of mortgages supporting a                
mortgage-backed security. Conversely, in periods of falling interest rates, the 
rate of prepayment tends to increase thereby shortening the average life of     
such a pool. Because prepayments of principal generally occur when interest     
rates are declining, an investor generally has to reinvest the proceeds of such 
prepayments at lower interest rates than those at which its assets were         
previously invested. Therefore, mortgage-backed securities typically have less  
potential for capital appreciation in periods of falling interest rates than    
other income-bearing securities of comparable maturity.                         

Collateralized mortgage obligations (CMOs) are mortgage-backed securities that  
are collateralized by whole loan mortgages or mortgage pass-through securities. 
The bonds issued in a CMO transaction are divided into groups, and each group   
of bonds is referred to as a "tranche." Under the traditional CMO structure,    
the cash flows generated by the mortgages or mortgage pass-through securities   
in the collateral pool are used to first pay interest and then pay principal to 
the CMO bondholders. The bonds issued under a traditional CMO structure are     
retired sequentially as opposed to the pro-rata return of principal found in    
traditional pass-through obligations. Subject to the various provisions of      
individual CMO issues, the cash flow generated by the underlying collateral (to 
the extent it exceeds the amount required to pay the stated interest) is used   
to retire the bonds. Under a CMO structure, the repayment of principal among    
the different tranches is prioritized in accordance with the terms of the       
particular CMO issuance. The "fastest-pay" tranches of bonds, as specified in   
the prospectus for the issuance, would initially receive all principal          
payments. When those tranches of bonds are retired, the next tranche, or        
tranches, in the sequence, as specified in the prospectus, receive all of the   
principal payments until they are retired. The sequential retirement of bond    
groups continues until the last tranche is retired. Accordingly, the CMO        
structure allows the issuer to use cash flows of long maturity, monthly-pay     
collateral to formulate securities with short, intermediate, and long final     
maturities, as well as varied expected average lives and risk characteristics.  
In recent years, new types of CMO tranches have evolved. These include floating 
rate CMOs, parallel pay CMOs planned amortization classes, accrual bonds and    
CMO residuals. These newer structures affect the amount and timing of principal 
and interest received by each tranche from the underlying collateral. Under     
certain of these new structures, given 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 fund invests, the investment may be    
subject to a greater or lesser risk of prepayment than other types of           
mortgage-backed securities.                                                     

The primary risk of CMOs is the uncertainty of the timing of cash flows that    
results from the rate of prepayments on the underlying mortgages serving as     
collateral and from the structure of the particular CMO transaction (that is,   
the priority of the individual tranches). An increase or decrease in prepayment 
rates (resulting from a decrease or increase in mortgage interest rates) will   
affect the yield, average life, and price of CMOs. The prices of certain CMOs,  
depending on their structure and the rate of prepayments, can be volatile. Some 
CMOs may also not be as liquid as other securities.                             

Stripped mortgage-backed securities (SMBSs) are derivative multi-class          
mortgage-backed securities. SMBSs may be issued by agencies 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 entities formed  
or sponsored by any of the foregoing. SMBSs may be less liquid than other types 
of mortgage-backed securities.                                                  

SMBSs are usually structured with two classes that receive different            
proportions of the interest and principal distributions on a pool of mortgage   
assets. A common type of SMBS will have one class receiving some of the         
interest and most of the principal from the mortgage assets, while the other    
class will receive most of the interest and the remainder of the principal. In  
the most extreme case, one class will receive all of the interest (the          
interest-only or "IO" class), while the other class will receive all of the     
principal (the principal-only or "PO" class). The price and yield-to-maturity   
on an IO class is extremely sensitive to the rate of principal payments         
(including prepayments) on the related underlying mortgage assets, and a rapid  
rate of principal payments may have a material adverse effect on a fund's yield 
to maturity from these securities. If the underlying mortgage assets experience 
greater than anticipated prepayments of principal, a fund may fail to recoup    
some or all of its initial investment in these securities, even if the security 
is in one of the highest rating categories. The mortgages underlying these      
securities may be alternative mortgage instruments, that is, mortgage           
instruments whose principal or interest payments may vary or whose terms to     
maturity may be shorter than customary.                                         

MORTGAGE "DOLLAR ROLL" TRANSACTIONS. In mortgage "dollar roll" transactions,    
the investor sells mortgage-backed securities for delivery in the future and    
simultaneously contracts to repurchase substantially similar securities on a    
specified future date. During the roll period, the investor foregoes principal  
and interest paid on the mortgage-backed securities. The lost interest is       
compensated by the difference between the current sales price and the lower     
price for the future purchase (often referred to as the "drop") as well as by   
the interest earned on, and gains from, the investment of the cash proceeds of  
the initial sale. A commitment fee may also be received for participation in    
such transaction.                                                               

If the income and capital gains from the investment of the cash from the        
initial sale do not exceed the income, capital appreciation and gain or loss    
that would have been realized on the securities sold as part of the dollar      
roll, the use of this technique will result in a lower return than would have   
been realized without the use of the dollar rolls. Dollar roll transactions     
involve the risk that the market value of the securities that are required to   
be purchased in the future may decline below the agreed upon repurchase price   
of those securities. If the party to whom the securities are sold becomes       
insolvent, the right to purchase or repurchase securities may be restricted.    
Successful use of mortgage dollar rolls may depend upon the investor's ability  
to correctly predict interest rates and prepayments.                            

A dollar roll can be viewed as a borrowing. If a fund makes additional          
investments while a dollar roll is outstanding, this may be considered a form   
of leverage.                                                                    

MUNICIPAL INSTRUMENTS. Debt instruments issued by or on behalf of states,       
territories and possessions of the United States and the District of Columbia   
and their political subdivisions, agencies or instrumentalities, are known as   
"municipal instruments." Generally, interest received on municipal instruments  
is exempt from federal income tax. The tax-exempt nature of the interest on a   
municipal instrument is generally the subject of a bond counsel opinion         
delivered in connection with the issuance of the instrument. There is no        
assurance that the IRS will agree with bond counsel's opinion that such         
interest is tax-exempt or that the interest payments on such municipal          
instruments will continue to be tax exempt for the life of the municipal        
instrument. Issuers or other parties generally enter into covenants requiring   
continuing compliance with federal tax requirements to preserve the tax-free    
status of interest payments over the life of the municipal instrument. If at    
any time the covenants are not complied with, or if the IRS otherwise           
determines that the issuer did not comply with relevant tax requirements,       
interest payments from a municipal instrument could become federally taxable,   
possibly retroactively to the date the municipal instrument was issued and an   
investor may need to file an amended income tax return. Certain types of        
structured securities are designed so that tax exempt interest from municipal   
instruments held by the underlying entity will pass through to the holders of   
the structured security. There is no assurance that the IRS will agree that     
such interest is tax exempt.                                                    

The value of municipal instruments can be affected by changes in their actual   
or perceived credit quality. The credit quality of municipal instruments can be 
affected by, among other things, the financial condition of the issuer or       
guarantor, the issuer's future borrowing plans and sources of revenue, the      
economic feasibility of the revenue bond project or general borrowing purpose,  
political or economic developments in the region where the instrument is issued 
and the liquidity of the security. Municipal instruments generally trade in the 
over-the-counter market.                                                        

General obligation bonds are backed by the issuer's pledge of its full faith    
and credit and taxing power for the repayment of principal and the payment of   
interest. Issuers of general obligation bonds include states, counties, cities, 
towns, and regional districts. The proceeds of these obligations are used to    
fund a wide range of public projects, including construction or improvement of  
schools, highways and roads, and water and sewer systems. The rate of taxes     
that can be levied for the payment of debt service on these bonds may be        
limited. Additionally, there may be limits as to the rate or amount of special  
assessments or taxes that can be levied to meet these obligations.              

Some general obligation bonds are backed by both a pledge of a specific revenue 
source, such as a special assessment or tax and an issuer's pledge of its full  
faith and credit and taxing power. Debt service from these general obligation   
bonds is typically paid first from the specific revenue source and second, if   
the specific revenue source is insufficient, from the general taxing power.     

Revenue bonds are generally backed by the net revenues derived from a           
particular facility, group of facilities, or, in some cases, the proceeds of a  
special excise tax or other specific revenue source, such as a state's or local 
government's proportionate share of the payments from the Tobacco Master        
Settlement Agreement. Revenue bonds are issued to finance a wide variety of     
capital projects. Examples include electric, gas, water and sewer systems;      
highways, bridges, and tunnels; port and airport facilities; colleges and       
universities; and hospitals. Industrial development bonds, a type of revenue    
bond, are issued by or on behalf of public authorities to raise money to        
finance various privately operated facilities for a variety of purposes,        
including economic development, solid waste disposal, transportation, and       
pollution control. Although the principal security for revenue bonds is         
typically the revenues of the specific facility, project, company or system,    
many revenue bonds are secured by additional collateral in the form of a        
mortgage on the real estate comprising a specific facility, project or system,  
a lien on receivables and personal property, as well as the pledge of various   
reserve funds available to fund debt service, working capital, capital          
expenditures or other needs. Net revenues and other security pledged may be     
insufficient to pay principal and interest due which will cause the price of    
the bonds to decline. In some cases, revenue bonds issued by an authority are   
backed by a revenue stream unrelated to the issuer, such as a hotel occupancy   
tax, a sales tax, or a special assessment. In these cases, the ability of the   
authority to pay debt service is solely dependent on the revenue stream         
generated by the special tax. Furthermore, the taxes supporting such issues may 
be subject to legal limitations as to rate or amount.                           

Municipal insurance policies typically insure, subject to the satisfaction of   
the policy conditions, timely and scheduled payment of all principal and        
interest due on the underlying municipal instruments. The insurance may be      
obtained by either (i) the issuer at the time the municipal instrument is       
issued, commonly referred to as primary market insurance or (ii) another party  
after the municipal instrument has been issued, commonly referred to as         
secondary market insurance. The financial strength of the companies issuing the 
bond insurance can vary.                                                        

In general, municipal insurance does not insure any risk other than nonpayment. 
Municipal insurance does not insure against market fluctuations which affect    
the price of a security. In addition, a municipal insurance policy will not     
insure (i) the payment of regularly scheduled debt service payments until       
maturity if an issuer redeems the municipal bonds prior to maturity in          
accordance with the call provisions of the municipal instrument; (ii) over the  
loss of prepayment or other acceleration payment which at any time may become   
due in respect of any instrument, (except for a mandatory sinking fund          
redemption; (iii) the payment of a prepayment or acceleration premium; or (iv)  
nonpayment of principal or interest caused by negligence or bankruptcy of the   
paying agent. A municipal insurance policy often reserves to the insurer the    
exclusive right to accelerate the instruments upon a payment default.           

Because a significant portion of the municipal instruments issued and           
outstanding are insured by a small number of insurance companies, an event      
involving one or more of these insurance companies could have a significant     
adverse effect on the value of the securities insured by that insurance company 
and on the municipal market as a whole.                                         

Education. In general, there are two types of education-related bonds: (i)      
those issued to finance projects for public and private colleges and            
universities, charter schools and private schools, and (ii) those representing  
pooled interests in student loans. Bonds issued to supply educational           
institutions with funding are subject to many risks, including the risks of     
unanticipated revenue decline, primarily the result of decreasing student       
enrollment, decreasing state and federal funding, or a change in general        
economic conditions. Additionally, higher than anticipated costs associated     
with salaries, utilities, insurance or other general expenses could impair the  
ability of a borrower to make annual debt service payments. Student loan        
revenue bonds are generally offered by state (or substate) authorities or       
commissions and are backed by pools of student loans. Underlying student loans  
may be guaranteed by state guarantee agencies and may be subject to             
reimbursement by the United States Department of Education through its          
guaranteed student loan program. Others may be private, uninsured loans made to 
parents or students which may be supported by reserves or other forms of credit 
enhancement. Recoveries of principal due to loan defaults may be applied to     
redemption of bonds or may be used to re-lend, depending on program latitude    
and demand for loans. Cash flows supporting student loan revenue bonds are      
impacted by numerous factors, including the rate of student loan defaults,      
seasoning of the loan portfolio, and student repayment deferral periods of      
forbearance. Other risks associated with student loan revenue bonds include     
potential changes in federal legislation regarding student loan revenue bonds,  
state guarantee agency reimbursement and continued federal interest and other   
program subsidies currently in effect.                                          

Electric Utilities. The electric utilities industry has been experiencing       
increased competitive pressures. Federal and state legislation in recent years  
has been moving the industry toward opening transmission access to any          
electricity supplier, although it is not presently known to what extent         
competition will evolve. Other risks include: (a) the availability and cost of  
fuel, (b) the availability and cost of capital, (c) the effects of conservation 
on energy demand, (d) the effects of rapidly changing environmental, safety,    
and licensing requirements, and other federal, state, and local regulations,    
(e) timely and sufficient rate increases thereby assisting utilities in         
recovering increasing energy costs, and (f) opposition to nuclear power.        

Health Care. The health care industry is subject to regulatory action by a      
number of governmental agencies, including federal, state, and local            
governmental agencies. A major source of revenues for the health care industry  
is payments from the Medicare and Medicaid programs. As a result, the industry  
is sensitive to legislative changes and reductions in governmental spending for 
such programs. A second major source of revenues for the health care industry   
is payments from private insurance companies and health maintenance             
organizations. As such, any changes to and reductions in reimbursement rates    
from these entities for services provided could be detrimental to the revenues  
of the providers. Numerous other factors may affect the industry, such as       
general and local economic conditions; demand for services; expenses (including 
for example, labor, malpractice insurance premiums and pharmaceutical           
products); and competition among health care providers. In the future, the      
following factors may adversely affect health care facility operations:         
adoption of legislation proposing a national health insurance program; other    
state or local health care reform measures; medical and technological advances  
which dramatically alter the need for health services or the way in which such  
services are delivered; changes in medical coverage which alter the traditional 
fee-for-service revenue stream; and efforts by employers, insurers, and         
governmental agencies to reduce the costs of health insurance and health care   
services.                                                                       

Housing. Housing revenue bonds typically are issued by a state, county, or      
local housing authority and are secured by the revenues of mortgages originated 
by the authority using the proceeds of the bond issue. These bonds may be used  
to make mortgage loans for single-family housing, multi-family housing, or a    
combination of the two. Because of the impossibility of precisely predicting    
demand for mortgages from the proceeds of such an issue, there is a risk that   
the proceeds of the issue will be in excess of demand, which would result in    
early retirement of the bonds by the issuer. Moreover, such housing revenue     
bonds depend for their repayment upon the cash flow from the underlying         
mortgages, which cannot be precisely predicted when the bonds are issued. Any   
difference in the actual cash flow from such mortgages from the assumed cash    
flow could have an adverse impact upon the ability of the issuer to make        
scheduled payments of principal and interest on the bonds, or could result in   
early retirement of the bonds. Additionally, such bonds depend in part for      
scheduled payments of principal and interest upon reserve funds established     
from the proceeds of the bonds, assuming certain rates of return on investment  
of such reserve funds. If the assumed rates of return are not realized because  
of changes in interest rate levels or for other reasons, the actual cash flow   
for scheduled payments of principal and interest on the bonds may be            
inadequate. The financing of multi-family housing projects is affected by a     
variety of factors which may impact the borrower's ability to pay debt service  
and may impair the value of the collateral securing the bonds, if any. These    
factors include satisfactory completion of construction within cost             
constraints, the achievement and maintenance of a sufficient level of           
occupancy, sound management of the developments, timely and adequate increases  
in rents to cover increases in operating expenses, including taxes, utility     
rates and maintenance costs, changes in applicable laws and governmental        
regulations and social and economic trends. Some authorities provide additional 
security for the bonds in the form of insurance, subsidies, additional          
collateral, or state pledges (without obligation) to make up deficiencies.      

Transportation. Transportation debt may be issued to finance the construction   
of airports, toll roads, highways, or other transit facilities. Airport bonds   
are dependent on the economic conditions of the airport's service area and may  
be affected by the business strategies and fortunes of specific airlines. They  
may also be subject to competition from other airports and modes of             
transportation. Air traffic generally follows broader economic trends and is    
also affected by the price and availability of fuel. Toll road bonds are also   
affected by the cost and availability of fuel as well as toll levels, the       
presence of competing roads and the general economic health of an area. Fuel    
costs, transportation taxes and fees, and availability of fuel also affect      
other transportation-related securities, as do the presence of alternate forms  
of transportation, such as public transportation.                               

Tobacco Settlement Revenue Bonds. Tobacco settlement revenue bonds are secured  
by a single source of revenue --a state or jurisdiction's proportionate share   
of periodic payments made by tobacco companies under the Master Settlement      
Agreement (the "MSA") entered into by participating cigarette manufacturers, 46 
states, and other jurisdictions in November of 1998 in settlement of certain    
smoking-related litigation. Annual payments on the bonds are dependent on the   
receipt by the issuer of future settlement payments under the MSA. These annual 
payments are subject to numerous adjustments. The actual amount of future       
settlement payments depends on annual domestic cigarette shipments, inflation,  
market share gains by non-participating cigarette manufacturers, and other      
factors. MSA adjustments may cause bonds to be repaid faster or slower than     
originally projected. Tobacco bonds are subject to additional risks, including  
the risk that cigarette consumption declines, that a tobacco company defaults   
on its obligation to make payments to the state or that the MSA or state        
legislation enacted pursuant to the MSA is void or unenforceable.               

Water and Sewer. Water and sewer revenue bonds are generally secured by the     
fees charged to each user of the service. The issuers of water and sewer        
revenue bonds generally enjoy a monopoly status and latitude in their ability   
to raise rates. However, lack of water supply due to insufficient rain,         
run-off, or snow pack can be a concern and has led to past defaults. Further,   
public resistance to rate increases, declining numbers of customers in a        
particular locale, costly environmental litigation, and Federal environmental   
mandates are challenges faced by issuers of water and sewer bonds.              

MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations and participations in  
municipal leases are undivided interests in a portion of an obligation in the   
form of a lease or installment purchase or conditional sales contract which is  
issued by a state, local government, or a municipal financing corporation to    
acquire land, equipment, and/or facilities (collectively hereinafter referred   
to as "lease obligations"). Generally lease obligations do not constitute       
general obligations of the municipality for which the municipality's taxing     
power is pledged. Instead, a lease obligation is ordinarily backed by the       
municipality's covenant to budget for, appropriate, and make the payments due   
under the lease obligation. As a result of this structure, municipal lease      
obligations are generally not subject to state constitutional debt limitations  
or other statutory requirements that may apply to other municipal securities.   

Lease obligations may contain "non-appropriation" clauses which provide that    
the municipality has no obligation to make lease or installment purchase        
payments in future years unless money is appropriated for that purpose on a     
yearly basis. If the municipality does not appropriate in its budget enough to  
cover the payments on the lease obligation, the lessor may have the right to    
repossess and relet the property to another party. Depending on the property    
subject to the lease, the value of the property may not be sufficient to cover  
the debt.                                                                       

In addition to the risk of "non-appropriation," municipal lease securities may  
not have as highly liquid a market as conventional municipal bonds.             
Furthermore, municipal lease obligations have the same risk characteristics as  
Municipal Instruments do generally.                                             

OPTIONS. An option is a contract which conveys the right, but not the           
obligation, to purchase (in the case of a call option) or sell (in the case of  
a put option) a specific amount or value of a particular underlying interest at 
a specific price (called the "exercise" or "strike" price) at one or more       
specific times before the option expires. The underlying interest of an option  
contract can be a security, currency, index, future, swap or other type of      
financial instrument. The seller of an option is called an option writer. The   
purchase price of an option is called the premium. The potential loss to an     
option purchaser is limited to the amount of the premium plus transaction       
costs. This will be the case, for example, if the option is held and not        
exercised prior to its expiration date.                                         

Options can be traded either through established exchanges ("exchange traded    
options") or privately negotiated transactions (over-the-counter or "OTC        
options"). Exchange traded options are standardized with respect to, among      
other things, the underlying interest, expiration date, contract size and       
strike price. The terms of OTC options are generally negotiated by the parties  
to the option contract which allows the parties greater flexibility in          
customizing the agreement, but OTC options are generally less liquid than       
exchange traded options.                                                        

All option contracts involve credit risk if the counterparty to the option      
contract fails to perform. Credit risk is low in exchange traded options        
because the performance of the contract by the counterparty is backed by the    
clearing agency for the exchange on which the options are traded. The credit    
risk in OTC options is dependent on the credit worthiness of the individual     
counterparty to the contract and may be greater than the credit risk associated 
with exchange traded options.                                                   

When purchasing a put option, the purchaser obtains the right (but not the      
obligation) to sell a specific amount or value of a particular interest to the  
option writer at a fixed strike price. In return for this right, the purchaser  
pays the option premium. The purchaser of a typical put option can expect to    
realize a gain if the price of the underlying interest falls. However, if the   
underlying interest's price does not fall enough to offset the cost of          
purchasing the option, the purchaser of a put option can expect to suffer a     
loss (limited to the amount of the premium, plus related transaction costs).    

The purchaser of a put option may terminate its position by allowing the option 
to expire, exercising the option or closing out its position in the secondary   
market at the option's current price, if a liquid secondary markets exists. If  
the option is allowed to expire, the purchaser will lose the entire premium. If 
the option is exercised, the purchaser would complete the sale of the           
underlying interest to the option writer at the strike price.                   

When purchasing a call option, the purchaser obtains the right (but not the     
obligation) to purchase a specified amount or value of a particular interest    
from the option writer at a fixed strike price. In return for this right, the   
purchaser pays the option premium. The purchaser of a typical call option can   
expect to realize a gain if the price of the underlying interest rises.         
However, if the underlying interest's price does not rise enough to offset the  
cost of purchasing the option, the buyer of a call option can expect to suffer  
a loss (limited to the amount of the premium, plus related transaction costs).  

The writer of a put or call option takes the opposite side of the transaction   
from the option's purchaser. In return for receipt of the premium, the writer   
assumes the obligation to buy or sell (depending on whether the option is a put 
or a call) a specified amount or value of a particular interest at the strike   
price if the purchaser of the option chooses to exercise it.                    

Generally, an option writer sells options with the goal of obtaining the        
premium paid by the option purchaser. If an option sold by an option writer     
expires without being exercised, the writer retains the full amount of the      
premium. The option writer, however, has unlimited economic risk because its    
potential loss, except to the extent offset by the premium received when the    
option was written, is equal to the amount the option is "in-the-money" when    
the option is exercised. A call option is in-the-money if the value of the      
underlying interest exceeds the strike price of the option. A put option is     
in-the-money if the strike price of the option exceeds the value of the         
underlying interest. Generally, any profit realized by an option purchaser      
represents a loss for the option writer. The writer of a futures option is      
required to deposit and maintain initial and variation margin with respect to   
the option in the same manner as if the writer were entering into a futures     
contract.                                                                       

The writer of a put option may seek to terminate a position in the put option   
before exercise by closing out the option in the secondary market at its        
current price. If the secondary market is not liquid for a put option, however, 
the writer must continue to be prepared to pay the strike price while the       
option is outstanding, regardless of price changes.                             

A physical delivery option gives its owner the right to receive physical        
delivery (if it is a call), or to make physical delivery (if it is a put) of    
the underlying interest when the option is exercised. A cash-settled option     
gives its owner the right to receive a cash payment based on the difference     
between a determined value of the underlying interest at the time the option is 
exercised and the fixed exercise price of the option. A cash-settled call       
conveys the right to receive a cash payment if the determined value of the      
underlying interest at exercise exceeds the exercise price of the option, and a 
cash-settled put conveys the right to receive a cash payment if the determined  
value of the underlying interest at exercise is less than the exercise price of 
the option.                                                                     

Combination option positions are positions in more than one option at the same  
time. A spread involves being both the buyer and writer of the same type of     
option on the same underlying interest but different exercise prices and/or     
expiration dates. A straddle consists of purchasing or writing both a put and a 
call on the same underlying interest with the same exercise price and           
expiration date.                                                                

The principal factors affecting the market value of a put or call option        
include supply and demand, interest rates, the current market price of the      
underlying interest in relation to the exercise price of the option, the        
volatility of the underlying interest and the remaining period to the           
expiration date.                                                                

If a trading market in particular options were to become unavailable, investors 
in those options would be unable to close out their positions until trading     
resumes, and option writers may be faced with substantial losses if the value   
of the underlying interest moves adversely during that time. Lack of investor   
interest, changes in volatility, or other factors or conditions might adversely 
affect the liquidity, efficiency, continuity, or even the orderliness of the    
market for particular options. Exchanges or other facilities on which options   
are traded may establish limitations on options trading, may order the          
liquidation of positions in excess of these limitations, or may impose other    
sanctions that could adversely affect parties to an options transaction.        

Many options, in particular OTC options, are complex and often valued based on  
subjective factors. Improper valuations can result in increased cash payment    
requirements to counterparties or a loss of value to a fund.                    

PREFERRED STOCK. Preferred stock represents an equity or ownership interest in  
an issuer and is therefore subject to the same risks as other equity            
securities. Preferred stock has precedence over common stock in the event the   
issuer is liquidated or declares bankruptcy, but is junior to the interests of  
the debt instruments of the issuer. Preferred stock, unlike common stock, often 
has a stated dividend rate payable from the corporation's earnings. Preferred   
stock dividends may be cumulative or non-cumulative, participating, or auction  
rate. "Cumulative" dividend provisions require all or a portion of prior unpaid 
dividends to be paid before dividends can be paid to the issuer's common stock. 
"Participating" preferred stock may be entitled to a dividend exceeding the     
stated dividend in certain cases. If interest rates rise, the fixed dividend on 
preferred stocks may be less attractive, causing the price of such stocks to    
decline. Preferred stock may have mandatory sinking fund provisions, as well as 
provisions allowing the stock to be called or redeemed, which can limit the     
benefit of a decline in interest rates. The value of preferred stock is         
sensitive to changes in interest rates and to changes in the issuer's credit    
quality.                                                                        

REAL ESTATE RELATED INVESTMENTS. Investment in real estate related investments  
are subject to similar risks to those associated with the direct ownership of   
real estate and with the real estate industry in general. These risks include,  
among others: possible declines in the value of real estate; risks related to   
general and local economic conditions; possible lack of availability of         
mortgage funds; overbuilding; extended vacancies of properties; increases in    
competition, property taxes and operating expenses; changes in zoning or        
applicable tax law; costs resulting from the clean-up of, and liability to      
third parties for damages resulting from, environmental problems; casualty or   
condemnation losses; uninsured damages from floods, earthquakes or other        
natural disasters; limitations on and variations in rents; and changes in       
interest rates.                                                                 

Real estate investment trusts ("REITs") are pooled investment vehicles that     
invest primarily in income producing real estate or real estate related loans   
or interests. REITs are generally classified as equity REITs, mortgage REITs,   
or a combination of equity and mortgage REITs. Equity REITs invest most of      
their assets directly in real property and derive income primarily from the     
collection of rents. Equity REITs can also realize capital gains by selling     
properties that have appreciated in value. Mortgage REITs invest most of their  
assets in real estate mortgages and derive income from interest payments. An    
investor will indirectly bear its proportionate share of any expenses (such as  
operating expenses and advisory fees) paid by REITs in which it invests in      
addition to the expenses paid by the investor.                                  

Equity REITs may be affected by changes in the value of the underlying property 
owned by the trusts, while mortgage REITs may be affected by the quality of any 
credit extended. Further, equity and mortgage REITs are dependent upon          
management skills of the REIT's manager and generally are not diversified.      
Equity and mortgage REITs are also subject to heavy cash flow dependency,       
borrower default, and self-liquidation.                                         

Mortgage REITs are also subject to different combinations of prepayment,        
extension, interest rate and other market risks. The real estate mortgages      
underlying mortgage REITs are generally subject to a faster rate of principal   
repayments in a declining interest rate environment and to a slower rate of     
principal repayments in an increasing interest rate environment.                

In addition, a REIT may be unable to obtain financing to satisfy income and     
gain distributions required by federal tax law, may fail to qualify for the     
federal tax exemption for distributed income, or may be adversely affected by   
changes in federal tax law, for example, by limiting their permissible          
businesses or investments.                                                      

REPURCHASE AGREEMENTS. A repurchase agreement is an agreement under which a     
buyer would acquire a security for a relatively short period of time (usually   
not more than a week) subject to the obligation of the seller to repurchase and 
the buyer to resell such security at a fixed time and price (representing the   
buyer's cost plus interest). The buyer bears the risk of loss in the event that 
the other party to a repurchase agreement defaults on its obligations and the   
buyer is delayed or prevented from exercising its rights to dispose of the      
collateral. This risk includes the risk of procedural costs or delays in        
addition to a loss on the securities if their value should fall below their     
repurchase price.                                                               

RESTRICTED SECURITIES. Restricted securities are securities that are subject to 
legal restrictions on their re-sale. Difficulty in selling securities may       
result in a loss or be costly to an investor. Restricted securities generally   
can be sold in privately negotiated transactions, pursuant to an exemption from 
registration under the Securities Act of 1933, or in a registered public        
offering. Where registration is required, the holder of a registered security   
may be obligated to pay all or part of the registration expense and a           
considerable period may elapse between the time it decides to seek registration 
and the time it may be permitted to sell a security under an effective          
registration statement. If, during such a period, adverse market conditions     
were to develop, the holder might obtain a less favorable price than prevailed  
when it decided to seek registration of the security.                           

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, an investor   
sells securities and receives cash proceeds, subject to its agreement to        
repurchase the securities at a later date for a fixed price reflecting a market 
rate of interest. There is a risk that the counter party to a reverse           
repurchase agreement will be unable or unwilling to complete the transaction as 
scheduled, which may result in losses to the investor. Unless the appreciation  
and income on assets purchased with proceeds from reverse repurchase agreements 
exceed the costs associated with them, the investor's performance is lower than 
it otherwise would have been. A reverse repurchase agreement can be viewed as a 
borrowing. If a fund makes additional investments while a reverse repurchase    
agreement is outstanding, this may be considered a form of leverage.            

SECURITIES OF OTHER INVESTMENT COMPANIES. Securities of other investment        
companies include shares of closed-end investment companies, unit investment    
trusts, and open-end investment companies, represent interests in               
professionally managed portfolios that may invest in any type of interest.      
Investing in other investment companies involves substantially the same risks   
as investing directly in the underlying interests, but may involve additional   
expenses at the investment company-level, such as a proportionate share of      
portfolio management fees and operating expenses. Certain types of investment   
companies, such as closed-end investment companies, issue a fixed number of     
shares that trade on a stock exchange or over-the-counter at a premium or a     
discount to their net asset value (NAV) per share. Others are continuously      
offered at NAV, but may also be traded in the secondary market. The extent to   
which a fund can invest in securities of other investment companies is limited  
by the Investment Company Act of 1940.                                          

SHORT SALES. A seller may make short sales that are made "against the box" and  
also those that are not made "against the box." A short sale that is not made   
"against the box" is a transaction in which a party sells a security it does    
not own, in anticipation of a decline in the market value of that security. To  
complete such a transaction, the seller must borrow the security to make        
delivery to the buyer. The seller then is obligated to replace the security     
borrowed by purchasing it at the market price at the time of replacement. The   
price at such time may be more or less than the price at which the security was 
sold by the seller. Until the security is replaced, the seller is required to   
repay the lender any dividends or interest which accrue during the period of    
the loan. To borrow the security, the seller also may be required to pay a      
premium, which would increase the cost of the security sold. The net proceeds   
of the short sale will be retained by the broker, to the extent necessary to    
meet margin requirements, until the short position is closed out. The seller    
also will incur transaction costs in effecting short sales.                     

The seller will incur a loss as a result of the short sale if the price of the  
security or index increases between the date of the short sale and the date on  
which the seller replaces the borrowed security. Such loss may be unlimited.    
The seller will realize a gain if the price of the security declines between    
those dates. The amount of any gain will be decreased, and the amount of any    
loss increased, by the amount of the premium, dividends or interest the seller  
may be required to pay in connection with a short sale.                         

A seller may also make short sales "against the box," i.e., when a security     
identical to one owned by the seller is borrowed and sold short. If the seller  
enters into a short sale against the box, it is required to hold securities     
equivalent in kind and amount to the securities sold short (or securities       
convertible or exchangeable into such securities) while the short sale is       
outstanding. The seller will incur transaction costs, including interest, in    
connection with opening, maintaining, and closing short sales against the box   
and will forgo an opportunity for capital appreciation in the security.         

SOVEREIGN DEBT OBLIGATIONS. Sovereign debt obligations are issued or guaranteed 
by foreign governments or their agencies, including debt of developing          
countries. Sovereign debt may be in the form of conventional securities or      
other types of debt instruments such as loans or loan participations. Sovereign 
debt of developing countries may involve a high degree of risk, and may be in   
default or present the risk of default. Governmental entities responsible for   
repayment of the debt may be unable or unwilling to repay principal and pay     
interest when due, and may require renegotiation or rescheduling of debt        
payments. In addition, prospects for repayment of principal and payment of      
interest may depend on political as well as economic factors. Although some     
sovereign debt, such as Brady Bonds, is collateralized by U.S. Government       
securities, repayment of principal and payment of interest is not guaranteed by 
the U.S. Government.                                                            

SWAPS AND RELATED DERIVATIVES. A swap is an agreement between two parties       
pursuant to which each party agrees to make one or more payments to the other,  
based on different interest rates, currency exchange rates, security or         
commodity prices, the prices or rates of other types of financial instruments,  
assets, the levels of specified indices, or other indicators. For example, in a 
typical interest rate swap, one party agrees to pay a fixed rate of interest    
determined by reference to a specified interest rate or index multiplied by a   
specified amount (the "notional amount"), while the other party agrees to pay   
an amount equal to a floating rate of interest determined by reference to an    
interest rate or index which is reset periodically and multiplied by the same   
notional amount. On each payment date, the obligations of parties are netted    
against each other, with only the net amount paid by one party to the other.    

Swap agreements are typically individually negotiated and structured to provide 
exposure to a variety of different types of investments or market factors. Swap 
agreements may be entered into for hedging or non-hedging purposes. Swap        
agreements can take many different forms and are known by a variety of names    
and other types of swap agreements may be available.                            

Other types of over-the-counter derivatives, such as "caps," "floors,"          
"collars" and options on swaps, or "swaptions," may be entered into for the     
same types of hedging or non-hedging purposes as swaps. A "cap" transaction is  
one in which one party pays a single or periodic fixed amount and the other     
party pays a floating amount equal to the amount by which a specified fixed or  
floating rate or other indicator exceeds another rate or indicator (multiplied  
by a notional amount). A "floor" transaction is one in which one party pays a   
single or periodic fixed amount and the other party pays a floating amount      
equal to the excess, if any, of a specified rate or other indicator over a      
different rate or indicator (multiplied by a notional amount). A "collar"       
transaction is a combination of a cap and a floor in which one party pays the   
floating amount on the cap and the other party pays the floating amount on the  
floor. A swaption is an option to enter into a swap agreement. Like other types 
of options, the buyer of a swaption pays a non-refundable premium for the       
option and obtains the right, but not the obligation, to enter into the         
underlying swap on the agreed-upon terms.                                       

The most significant factor in the performance of swaps, caps, floors, and      
collars is the change in the underlying price, rate, index level or other       
indicator that determines the amount of payments to be made under the           
arrangement.                                                                    

If MFS attempts to use a swap or related investment as a hedge against, or as a 
substitute for, a portfolio investment, the swap or related derivative may not  
correlate as expected with the portfolio investment, resulting in losses to the 
fund. While hedging strategies involving swaps and related derivatives can      
reduce the risk of loss, they can also reduce the opportunity for gain or even  
result in losses by offsetting favorable price movements in other fund          
investments.                                                                    

Swaps and related derivatives may also be subject to liquidity risk since the   
derivatives are often "customized" to meet the portfolio needs of a particular  
investor, and therefore, the number of investors that are willing and able to   
buy such derivatives in the secondary market may be smaller than that for more  
traditional debt instruments. The swaps market is largely unregulated. It is    
possible that developments in the swaps market, including potential government  
regulations, could adversely affect an investor's ability to terminate its      
existing swap agreements or to realize amounts received under such agreements.  

In addition, because the purchase and sale of swap and related derivatives      
takes place in an over-the-counter market, swaps and related derivatives are    
subject to the creditworthiness of the counterparty to the swap or related      
derivative, and their values may decline substantially if the counterparty's    
creditworthiness deteriorates. If the counterparty defaults, the other party's  
risk of loss consists of the net amount of payments that the non-defaulting     
party is contractually entitled to receive. The counterparties may be able to   
eliminate or reduce their exposure under these arrangements by assignment or    
other disposition or by entering into an offsetting agreement with the same or  
another counterparty.                                                           

TEMPORARY DEFENSIVE POSITIONS. In response to market, economic, political, or   
other conditions, MFS may depart from its investment strategies for a fund by   
temporarily investing for defensive purposes. MFS may invest a large portion or 
all of a fund's assets 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.                                                  

TENDER OPTION BONDS. Tender option bonds, also known as put bonds or puttable   
securities, give the bondholder the right to require the issuer or a specified  
third party acting as agent for the issuer to purchase the bonds, usually at    
par, at a certain time or times prior to maturity or upon the occurrence of     
specified events or conditions. These securities may be floating or variable    
rate securities. The issuer or third party agent may be unable to purchase the  
bonds on the purchase date due to a variety of circumstances, which may result  
in a loss of value of the bonds.                                                

WARRANTS. Warrants are instruments which entitle the holder to buy an equity    
security at a specific price for a specific period of time. Changes in the      
value of a warrant do not necessarily correspond to changes in the value of its 
underlying security. The price of a warrant may be more volatile than the price 
of its underlying security, and a warrant may offer greater potential for       
capital appreciation as well as capital loss. Warrants do not entitle a holder  
to dividends or voting rights with respect to the underlying security and do    
not represent any rights in the assets of the issuing company. A warrant ceases 
to have value if it is not exercised prior to its expiration date. These        
factors can make warrants more speculative than other types of investments.     

WHEN-ISSUED, DELAYED-DELIVERY, AND FORWARD-COMMITMENT TRANSACTIONS.             
When-issued, delayed-delivery, and forward-commitment transactions involve a    
commitment to purchase or sell specific securities at a predetermined price or  
yield in which payment and delivery take place after the customary settlement   
period for that type of security. Typically, no interest accrues to the         
purchaser until the security is delivered. When purchasing securities pursuant  
to one of these transactions, payment for the securities is not required until  
the delivery date. However, the purchaser assumes the rights and risks of       
ownership, including the risks of price and yield fluctuations and the risk     
that the security will not be issued or delivered as anticipated. If a fund     
makes additional investments while a delayed delivery purchase is outstanding,  
this may result in a form of leverage.                                          

VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate securities    
are debt instruments that provide for periodic adjustments in the interest rate 
paid on the security. Variable rate securities provide for a specified periodic 
adjustment in the interest rate, while floating rate securities have interest   
rates that may change with changes to the level of prevailing interest rates or 
the issuer's credit quality. There is a risk that the current interest rate on  
variable and floating rate securities may not accurately reflect current market 
interest rates or adequately compensate the holder for the current              
creditworthiness of the issuer. Some variable or floating rate securities are   
structured with liquidity features such as (1) put options or tender options    
that permit holders (sometimes subject to conditions) to demand payment of the  
unpaid principal balance plus accrued interest from the issuers or certain      
financial intermediaries or (2) auction rate features, remarketing provisions,  
or other maturity-shortening devices designed to enable the issuer to refinance 
or redeem outstanding debt securities (market-dependent liquidity features).    
The market-dependent liquidity features may not operate as intended as a result 
of the issuer's declining creditworthiness, adverse market conditions, or other 
factors or the inability or unwillingness of a participating broker-dealer to   
make a secondary market for such securities. As a result, variable or floating  
rate securities that include market-dependent liquidity features may lose value 
and the holders of such securities may be required to retain them for an        
extended period of time or until maturity.                                      

ZERO COUPON BONDS, DEFERRED INTEREST BONDS, AND PIK BONDS. Zero coupon and      
deferred interest bonds are debt instruments which are issued at a discount     
from face value. The discount approximates the total amount of interest the     
instruments 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 instrument 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. Bonds on which the      
interest is payable in kind are known as "PIK bonds." PIK bonds are debt        
instruments which provide that the issuer may, at its option, pay interest on   
such instruments in cash or in the form of additional debt instruments. Such    
instruments 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 instruments may experience greater  
volatility in market value than debt instruments which make regular payments of 
interest.                                                                       

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                                                          PART II - APPENDIX F

INVESTMENT RESTRICTIONS 

The Fund has adopted the following restrictions which cannot be changed without 
the approval of a Majority Shareholder Vote.                                    

As fundamental investment restrictions, the Fund may not:                       

(1) borrow money except to the extent such borrowing is not prohibited by the   
 Investment Company Act of 1940, as amended (the "1940 Act") and exemptive
orders granted under such Act;                                          

(2) underwrite securities issued by other persons, except that all or any       
   portion of the assets of the Fund may be invested in one or more investment
companies, to the extent not prohibited by the 1940 Act and exemptive   
orders granted under such Act, and except insofar as the Fund may       
 technically be deemed an underwriter under the Securities Act of 1933, as
amended, in selling a portfolio security;                               

(3) issue any senior securities except to the extent not prohibited by the 1940 
Act and exemptive orders granted under such Act; for purposes of this   
restriction, collateral arrangements with respect to any type of swap,  
   option, Forward Contracts and Futures Contracts and collateral arrangements
with respect to initial and variation margin are not deemed to be the   
issuance of a senior security;                                          

(4) make loans except to the extent not prohibited by the 1940 Act and          
exemptive orders granted under such Act; and                            

(5) purchase or sell real estate (excluding securities secured by real estate   
or interests therein and securities of companies, such as real estate   
investment trusts, which deal in real estate or interests therein),     
   interests in oil, gas or mineral leases, commodities or commodity contracts
   (excluding currencies and any type of option, Futures Contracts and Forward
Contracts) in the ordinary course of its business; the Fund reserves the
freedom of action to hold and to sell real estate, mineral leases,      
commodities or commodity contracts (including currencies and any type of
option, Futures Contracts and Forward Contracts) acquired as a result of
the ownership of securities.                                            

     * * * * * *

FOR THE MFS CASH RESERVE FUND, MFS GOVERNMENT MONEY MARKET FUND AND THE MFS     
MONEY MARKET FUND:                                                              

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
 business activities are in the same industry, provided however, that this
restriction shall not apply to securities or obligations issued or      
   guaranteed by banks or bank holding companies, finance companies or utility
companies.                                                              

FOR THE MFS FLOATING RATE HIGH INCOME FUND:                                     

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry. For purposes of this      
restriction, loan participations will be considered investments in the  
  industry of the underlying borrower, rather than that of the seller of the
loan participation.                                                     

FOR THE MFS HIGH INCOME FUND:                                                   

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry, provided however, that the
Fund may invest up to 40% of the value of its assets in each of the     
electric utility and telephone industries.                              

FOR THE MFS UTILITIES FUND:                                                     

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry, provided however, that the
Fund will invest at least 25% of its total assets in the utilities      
industry.                                                               

FOR ALL OTHER FUNDS:                                                            

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry.                           

     * * * * * *

In addition, the Funds have adopted the following non-fundamental policies,     
which may be changed without shareholder approval.                              

FOR THE MFS CASH RESERVE FUND, MFS GOVERNMENT MONEY MARKET FUND AND THE MFS     
MONEY MARKET FUND:                                                              

The Fund will not:                                                              

(1) invest in illiquid investments, including securities subject to legal or    
contractual restrictions on resale or for which there is no readily     
available market (e.g., trading in the security is suspended, or, in the
 case of unlisted securities, where no market exists), if more than 10% of
the Fund's net assets (taken at market value) would be invested in such 
  securities; repurchase agreements maturing in more than seven days will be
 deemed to be illiquid for purposes of the Fund's limitation on investment
in illiquid securities; securities that are not registered under the    
   Securities Act of 1933 but are determined to be liquid by the Trust's Board
of Trustees (or its delegee) will not be subject to this 10% limitation.

FOR ALL OTHER FUNDS:                                                            

The Fund will not:                                                              

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

     * * * * * *

FOR ALL FUNDS:                                                                  

Except for investment restriction no. 1 and the Fund's non-fundamental policy   
on investing in illiquid securities, these investment restrictions are adhered  
to at the time of purchase or utilization of assets; a subsequent change in     
circumstances will not be considered to result in a violation of policy. In the 
event the investments exceed the percentage specified in the Fund's             
non-fundamental policy on illiquid investments, the Fund will reduce the        
percentage of its assets invested in illiquid investments in due course, taking 
into account the best interests of shareholders.                                

For purposes of investment restriction no. 6, investments in securities issued  
or guaranteed by the U.S. Government or its agencies or instrumentalities and   
tax-exempt obligations issued or guaranteed by a U.S. territory or possession,  
a state or local government, or a political subdivision of any of the           
foregoing, are not considered an investment in any particular industry.         

For purposes of investment restriction no. 6, investments in other investment   
companies are not considered an investment in any particular industry and       
portfolio securities held by an underlying fund in which the Fund may invest    
are not considered to be securities purchased by the Fund.                      

FOR MFS LIFETIME RETIREMENT INCOME FUND, MFS LIFETIME 2010 FUND, MFS LIFETIME   
2020 FUND, MFS LIFETIME 2030 FUND, MFS LIFETIME 2040 FUND, MFS INTERNATIONAL    
DIVERSIFICATION FUND, MFS AGGRESSIVE GROWTH ALLOCATION FUND, MFS CONSERVATIVE   
ALLOCATION FUND, MFS GROWTH ALLOCATION FUND AND MFS MODERATE ALLOCATION FUND:   

In accordance with the Fund's investment program as set forth in its            
Prospectus, the Fund may invest more than 25% of its assets in any one          
underlying fund. Although the Fund does not have a policy to concentrate its    
investments in a particular industry, 25% or more of the Fund's total assets    
may be indirectly exposed to a particular industry or group of related          
industries through its investment in one or more underlying funds.              

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                                                          PART II - APPENDIX G

RECIPIENTS OF NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS 

NAME OF RECIPIENT                              PURPOSE OF DISCLOSURE            
-----------------                              ---------------------            

MSCI BARRA, Inc.                               Analytical Tool                  

Bloomberg L.P.                                 Analytical Tool                  

Board of Trustees                              Fund Governance                  

Bowne                                          Typesetting and Printing Services

CDS/Computer                                   Software Vendor                  

Checkfree                                      Software Vendor                  

eA Data Automation Services, LLC               Data Formatting and Organization 
                     Service

Eagle Investment Systems Corp.                 Accounting System                

Ernst & Young LLP                              Independent Registered Public    
                             Accounting Firm

FactSet Research Systems Inc.                  Analytical Tool                  

GainsKeeper, Inc.                              Accounting System                

GFP Acquisition Company, Inc. D.B.A.                                            
GCom2 Solutions                                Software Vendor                  

G.H. Dean Co.                                  Typesetting and Printing Services

Institutional Shareholder Services Inc.        Proxy Service Provider           

Investor Tools Perform                         Analytical Tool                  

ITG, Inc.                                      Analytical Tool                  

JP Morgan Chase Bank                           Fund Custodian                   

Lipper Inc.                                    Publication Preparation          

The MacGregor Group                            Software Vendor                  

Massachusetts Financial Services Co.           Fund Management                  

MFS Fund Distributors, Inc.                    Fund Distribution                

OMGEO LLC                                      Software Vendor                  

Plexus                                         Analytical Tool                  

Radianz                                        Software Vendor                  

Ropes & Gray LLP                               Legal Counsel                    

Saloman Analytics Inc.                         Analytical Tool                  

Standard & Poor's Securities Evaluations       Fund Pricing                     
Services                                                                        

State Street Bank and Trust Company            Custodian                        

Sun Capital Advisers LLC*                      Fund Management                  

Wilshire Analytics/Axiom                       Analytical Tool                  

* Sun Capital Advisers LLC receives non-public portfolio holdings disclosure    
regarding the portion of the MFS Diversified Income Fund for which it serves
as sub-adviser.                                                             

This list is current as of June 30, 2006, and any additions, modifications or   
deletions to the list that have occurred since June 30, 2006 are not reflected. 

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                                                                    APPENDIX H

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                                                       

Moody's long-term obligation ratings are opinions of the relative credit risk   
of fixed income obligations with an original maturity of one year or more. They 
address the possibility that a financial obligation will not be honored as      
promised. Such ratings reflect both the likelihood of default and any financial 
loss suffered in the event of default.                                          

AAA: Obligations rated "Aaa" are judged to be of the highest quality, with      
minimal credit risk.                                                            

AA: Obligations rated "Aa" are judged to be of high quality and are subject to  
very low credit risk.                                                           

A: Obligations rated "A" are considered upper-medium grade and are subject to   
low credit risk.                                                                

BAA: Obligations rated "Baa" are subject to moderate credit risk. They are      
considered medium-grade and as such may possess certain speculative             
characteristics.                                                                

BA: Obligations rated "Ba" are judged to have speculative elements and are      
subject to substantial credit risk.                                             

B: Obligations rated "B" are considered speculative and are subject to high     
credit risk.                                                                    

CAA: Obligations rated "Caa" are judged to be of poor standing and are subject  
to very high credit risk.                                                       

CA: Obligations rated "Ca" are highly speculative and are likely in, or very    
near, default, with some prospect of recovery of principal and interest.        

C: Obligations rated "C" are the lowest rated class of bonds and are typically  
in default, with little prospect for recovery of principal or interest.         

Note: Moody's applies numerical modifiers "1", "2" and "3" to each generic      
rating classification from "Aa" through "Caa." The modifier "1" indicates that  
the obligation ranks in the higher end of its generic rating category; the      
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a    
ranking in the lower end of that generic rating category.                       

STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC.                

Issue credit ratings are based, in varying degrees, on the following            
considerations: (1) likelihood of payment capacity and willingness of the       
obligor to meet its financial commitment on an obligation in accordance with    
the terms of the obligation; (2) nature of and provisions of the obligation;    
and (3) protection afforded by, and relative position of, the obligation in the 
event of bankruptcy, reorganization, or other arrangement under the laws of     
bankruptcy and other laws affecting creditors' rights.                          

The issue ratings definitions are expressed in terms of default risk. As such,  
they pertain to senior obligations of an entity. Junior obligations are         
typically rated lower than senior obligations, to reflect the lower priority in 
bankruptcy, as noted above.                                                     

AAA: An obligation rated "AAA" has the highest rating assigned by Standard &    
Poor's. The obligor's capacity to meet its financial commitment on the          
obligation is extremely strong.                                                 

AA: An obligation rated "AA" differs from the highest-rated obligations only to 
a small degree. The obligor's capacity to meet its financial commitment on the  
obligation is very strong.                                                      

A: An obligation rated "A" is somewhat more susceptible to the adverse effects  
of changes in circumstances and economic conditions than obligations in higher  
rated categories. However, the obligor's capacity to meet its financial         
commitment on the obligation is still strong.                                   

BBB: An obligation rated "BBB" exhibits adequate protection parameters.         
However, adverse economic conditions or changing circumstances are more likely  
to lead to a weakened capacity of the obligor to meet its financial commitment  
on the obligation.                                                              

BB, B, CCC, CC, AND C: Obligations rated "BB", "B", "CCC", "CC", and "C" are    
regarded as having significant speculative characteristics. "BB" indicates the  
least degree of speculation and "C" the highest. While such obligations will    
likely have some quality and protective characteristics, these may be           
outweighed by large uncertainties or major exposures to adverse conditions.     

BB: An obligation rated "BB" is less vulnerable to nonpayment than other        
speculative issues. However, it faces major ongoing uncertainties or exposure   
to adverse business, financial, or economic conditions, which could lead to the 
obligor's inadequate capacity to meet its financial commitment on the           
obligation.                                                                     

B: An obligation rated "B" is more vulnerable to nonpayment than obligations    
rated "BB", but the obligor currently has the capacity to meet its financial    
commitment on the obligation. Adverse business, financial, or economic          
conditions will likely impair the obligor's capacity or willingness to meet its 
financial commitment on the obligation.                                         

CCC: An obligation rated "CCC" is currently vulnerable to nonpayment and is     
dependent upon favorable business, financial, and economic conditions for the   
obligor to meet its financial commitment on the obligation. In the event of     
adverse business, financial, or economic conditions, the obligor is not likely  
to have the capacity to meet its financial commitment on the obligation.        

CC: An obligation rated "CC" is currently highly vulnerable to nonpayment.      

C: The "C" rating may be used to cover a situation where a bankruptcy petition  
has been filed or similar action has been taken, but payments on this           
obligation are being continued.                                                 

D: An obligation rated "D" is in payment default. The "D" rating category is    
used when payments on an obligation are not made on the date due even if the    
applicable grace period has not expired, unless Standard & Poor's 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 or the taking of a similar     
action if payments on an obligation 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   
applicable rating category.                                                     

N.R.: Not rated.                                                                

FITCH RATINGS                                                                   

International Long-Term Credit Ratings (LTCR) may also be referred to as        
Long-Term Ratings. When assigned to most issuers, it is used as a benchmark     
measure of probability of default and is formally described as an Issuer        
Default Rating (IDR).                                                           

Investment Grade                                                                

AAA: Highest credit quality. "AAA" ratings denote the lowest expectation of     
credit risk. They are assigned only in case of exceptionally strong capacity    
for payment of financial commitments. This capacity is highly unlikely to be    
adversely affected by foreseeable events.                                       

AA: Very high credit quality. "AA" ratings denote expectations of very low      
credit risk. They indicate very strong capacity for payment of financial        
commitments. This capacity is not significantly vulnerable to foreseeable       
events.                                                                         

A: High credit quality. "A" ratings denote expectations of low credit risk. The 
capacity for payment of financial commitments is considered strong. This        
capacity may, nevertheless, be more vulnerable to changes in circumstances or   
in economic conditions than is the case for higher ratings.                     

BBB: Good credit quality. "BBB" ratings indicate that there is currently        
expectations of low credit risk. The capacity for payment of financial          
commitments is considered adequate, but adverse changes in circumstances and    
economic conditions are more likely to impair this capacity. This is the lowest 
investment-grade category.                                                      

Speculative Grade                                                               

BB: Speculative. "BB" ratings indicate that there is a possibility of credit    
risk developing, particularly as the result of adverse economic change over     
time; however, business or financial alternatives may be available to allow     
financial commitments to be met. Securities rated in this category are not      
investment grade.                                                               

B: Highly speculative. "B" ratings indicate that significant credit risk is     
present, but a limited margin of safety remains. Financial commitments are      
currently being met; however, capacity for continued payment is contingent upon 
a sustained, favorable business and economic environment.                       

CCC: Default is a real possibility. Capacity for meeting financial commitments  
is solely reliant upon sustained, favorable business or economic conditions.    

CC: Default of some kind appears probable.                                      

C: Default is imminent.                                                         

RD: Indicates an entity that has failed to make due payments (within the        
applicable grace period) on some but not all material financial obligations,    
but continues to honor other classes of obligations.                            

D: Indicates an entity or sovereign that has defaulted on all of its financial  
obligations. Default generally is defined as one of the following:              

   o Failure of an obligor to make timely payment of principal and/or interest
under the contractual terms of any financial obligation;            

o The bankruptcy filings, administration, receivership, liquidation, or 
other winding-up or cessation of business of an obligor; or         

o The distressed or other coercive exchange of an obligation, where     
    creditors were offered securities with diminished structural or economic
terms compared with the existing obligation.                        

Default ratings are not assigned prospectively; within this context,            
non-payment on an instrument that contains a deferral feature or grace period   
will not be considered a default until after the expiration of the deferral or  
grace period.                                                                   

Issuers will be rated "D" upon a default. Defaulted and distressed obligations  
typically are rated along the continuum of "C" to "B" ratings categories,       
depending upon their recovery prospects and other relevant characteristics.     

Default is determined by reference to the terms of the obligations'             
documentation. Fitch will assign default ratings where it has reasonably        
determined that payment has not been made on a material obligation in           
accordance with the requirements of the obligation's documentation, or where it 
believes that default ratings consistent with Fitch's published definition of   
default are the most appropriate ratings to assign.                             

The modifiers "+" or "-`' may be appended to a rating to denote relative status 
within major ratings categories. Such suffixes are not added to the "AAA"       
Long-term ratings category, to categories below "CCC," or to Short-term ratings 
other than "F1." (The +/- modifiers are only used to denote issues within the   
"CCC" category, whereas issuers are only rated "CCC" without the use of         
modifiers.)                                                                     

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INVESTMENT ADVISER                                                              

MFS Investment Management                                                       

500 Boylston Street, Boston, MA 02116                                           

(617) 954-5000                                                                  

DISTRIBUTOR                                                                     

MFS Fund Distributors, Inc.                                                     

500 Boylston Street, Boston, MA 02116                                           

(617) 954-5000                                                                  

CUSTODIANS                                                                      

State Street Bank and Trust Company                                             

225 Franklin Street, Boston, MA 02110                                           

JP Morgan Chase Bank                                                            

One Chase Manhattan Plaza                                                       

New York, NY 10081                                                              

SHAREHOLDER SERVICING AGENT                                                     

MFS Service Center, Inc.                                                        

500 Boylston Street, Boston, MA 02116                                           

Toll free: (800) 225-2606                                                       

Mailing Address:                                                                

P.O. Box 55824, Boston, MA 02205-5824                                           

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Class A Shares                                                                  
Class B Shares                                                                  
Class C Shares                                                                  

MFS MUNICIPAL HIGH INCOME FUND                                                  

PROSPECTUS JUNE 1, 2007                                                         

This Prospectus describes the MFS Municipal High Income Fund. The investment    
objective of the fund is to seek total return with an emphasis on high income   
exempt from federal income tax, but also considering capital appreciation.      

RISK RETURN SUMMARY..........................................   XX              
EXPENSE SUMMARY..............................................   XX              
CERTAIN INVESTMENT POLICIES AND RISKS........................   XX              
MANAGEMENT OF THE FUND.......................................   XX              
DESCRIPTION OF SHARE CLASSES.................................   XX              
HOW TO PURCHASE, REDEEM, AND EXCHANGE SHARES.................   XX              
OTHER INFORMATION............................................   XX              
FINANCIAL HIGHLIGHTS.........................................   XX              

The Securities and Exchange Commission has not approved or disapproved the      
fund's shares or determined whether this prospectus is accurate or complete.    
Anyone who tells you otherwise is committing a crime.                           

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RISK RETURN SUMMARY                                                             

INVESTMENT OBJECTIVE                                                            

The fund's investment objective is to seek total return with an emphasis on     
high income exempt from federal income tax, but also considering capital        
appreciation. The fund's objective may be changed without shareholder approval. 

PRINCIPAL INVESTMENT STRATEGIES                                                 

The fund invests, under normal market conditions, at least 80% of its net       
assets in securities and other investments, the interest on which is exempt     
from federal income tax. This policy may not be changed without shareholder     
approval. Interest from the fund's investments may be subject to the federal    
alternative minimum tax.                                                        

MFS (Massachusetts Financial Services Company, the fund's investment advisor)   
normally invests the fund's assets primarily in municipal instruments.          

MFS may invest 25% or more of the fund's total assets in municipal instruments  
that finance similar projects, such as those relating to education, healthcare, 
housing, utilities, water, or sewers. Interest from the fund's investments may  
be subject to the federal alternative minimum tax.                              

MFS may invest up to 100% of the fund's assets in lower quality debt            
instruments.                                                                    

MFS may also invest the fund's assets in derivatives.                           

MFS uses a bottom-up investment approach in buying and selling investments for  
the fund. Investments are selected primarily based on fundamental analysis of   
instruments and their issuers in light of current market, economic, political,  
and regulatory conditions. Factors considered may include the instrument's      
credit quality, collateral characteristics, and indenture provisions, and the   
issuer's management ability, capital structure, leverage, and ability to meet   
its current obligations. Quantitative analysis of the structure of the          
instrument and its features may also be considered.                             

PRINCIPAL INVESTMENT TYPES                                                      

DEBT INSTRUMENTS: Debt instruments represent obligations of corporations,       
governments, and other entities to repay money borrowed. The issuer or borrower 
usually pays a fixed, variable, or floating rate of interest, and must repay    
the amount borrowed, usually at the maturity of the instrument. Some debt       
instruments, such as zero coupon bonds, do not pay current interest but are     
sold at a discount from their face values. Other debt instruments, such as      
certain mortgage-backed and other asset-backed securities, make periodic        
payments of interest and/or principal. Some debt instruments are partially or   
fully secured by collateral supporting the payment of interest and principal.   

LOWER QUALITY DEBT INSTRUMENTS: Lower quality debt instruments, commonly        
referred to as "high yield securities" or "junk bonds" are debt instruments of  
less than investment grade quality.                                             

MUNICIPAL INSTRUMENTS: Municipal instruments are issued to raise money for a    
variety of public and private purposes, including general financing for state   
and local governments, or financing for a specific project or public facility.  
Municipal instruments include general obligation bonds of municipalities, local 
or state governments, project or revenue-specific bonds, municipal lease        
obligations, and prerefunded or escrowed bonds. Municipal instruments may be    
fully or partially supported by the local government, by the credit of a        
private issuer, by the current or anticipated revenues from a specific project  
or assets, by the issuer's pledge to make annual appropriations for lease       
payments, or by domestic or foreign entities providing credit support, such as  
letters of credit, guarantees, or insurance.                                    

DERIVATIVES: Derivatives are financial instruments whose value is based on the  
value of one or more indicators, such as a security, asset, currency, interest  
rate, credit rating or index. Derivatives often involve a counterparty to the   
transaction. Derivatives include futures, forward contracts, options,           
structured notes, indexed securities, inverse floating rate instruments, swaps, 
caps, floors, and collars.                                                      

PRINCIPAL RISKS                                                                 

As with any mutual fund, you could lose money on your investment in the fund.   
An investment in the fund is not a bank deposit and is not insured or           
guaranteed by the Federal Deposit Insurance Corporation or any other            
governmental agency.                                                            

The principal risks of investing in the fund are:                               

INTEREST RATE RISK: The price of a debt instrument changes in response to       
interest rate changes. In general, the price of a debt instrument falls when    
interest rates rise and rises when interest rates fall. Instruments with longer 
maturities, or that do not pay current interest, are more sensitive to interest 
rate changes. In addition, short-term and long-term interest rates do not       
necessarily move in the same direction or by the same amount. An instrument's   
reaction to interest rate changes depends on the timing of its interest and     
principal payments and the current interest rate for each of those time         
periods. Instruments with floating interest rates can be less sensitive to      
interest rate changes. In response to an interest rate decline, instruments     
that provide the issuer with the right to call or redeem the instrument prior   
to maturity may be called or redeemed, resulting in the reinvestment of         
proceeds in other investments at a lower interest rate.                         

The price of some instruments, such as inverse floating rate instruments, tends 
to move in the same direction as interest rate changes.                         

CREDIT RISK: The value of a debt instrument depends, in part, on the issuer's   
or borrower's credit quality or ability to pay principal and interest when due. 
The value of a debt instrument is likely to fall if an issuer or borrower       
defaults on its obligation to pay principal or interest or if the instrument's  
credit rating is downgraded by a credit rating agency. The value of a debt      
instrument can also decline in response to changes in the financial condition   
of the issuer or borrower, changes in specific market, economic, industry,      
political, and regulatory conditions that affect a particular type of           
instrument, issuer, or borrower, and changes in general market, economic,       
political, and regulatory conditions. Certain unanticipated events, such as     
natural disasters, terrorist attacks, war, and other geopolitical events can    
have a dramatic effect on the value of a debt instrument. For certain types of  
instruments, including derivatives, the value of the instrument depends in part 
on the credit quality of the counterparty to the transaction. For other types   
of debt instruments, including collateralized instruments, the price of the     
debt instrument also depends on the credit quality and adequacy of the          
underlying assets or collateral. Enforcing rights against the underlying assets 
or collateral may be difficult, or the underlying assets or collateral may be   
insufficient, if the issuer defaults.                                           

Municipal instruments supported as to the payment of principal and interest     
only by the revenue from a specific project or specific assets, or by the       
issuer's pledge to make annual appropriations for lease payments, are subject   
to greater credit risk due to the possibility that taxation supporting the      
project or assets will be discontinued, revenues for the project or from the    
assets will be insufficient, or annual appropriations for lease payments will   
not be made. If the Internal Revenue Service or state taxing authority          
determines that an issuer of a municipal instrument has not complied with       
applicable tax requirements, interest from the instrument could become taxable  
(including retroactively) and the instrument could decline significantly in     
value.                                                                          

Lower quality debt instruments and certain unrated debt instruments can involve 
a substantially greater risk of default, and their values can decline           
significantly over short periods of time. Lower quality debt instruments are    
regarded as having predominantly speculative characteristics with respect to    
capacity to pay interest and principal. Lower quality debt instruments tend to  
be more sensitive to adverse news about the issuer, or the market or economy in 
general, than higher quality debt instruments. The market for lower quality     
debt instruments and certain unrated debt instruments can be less liquid,       
especially during periods of recession or general market decline.               

MUNICIPAL MARKET RISK: The price of municipal instruments can be volatile, and  
significantly affected by adverse tax, legislative or political changes, and by 
the financial developments of municipal issuers. Because many municipal         
instruments are issued to finance similar projects, especially those relating   
to education, health care, housing, utilities, and water and sewer, conditions  
in these industries can affect the overall municipal market. In addition,       
changes in the financial condition of an individual municipal insurer can       
affect the overall municipal market.                                            

PREPAYMENT RISK: Many types of debt instruments, including mortgage-backed,     
asset-backed securities and municipal housing bonds, are subject to the risk of 
prepayment. Prepayment occurs when unscheduled payments of principal are made   
prior to an instrument's maturity. Instruments subject to prepayment can offer  
less potential for gains during a declining interest rate environment and       
greater potential for loss in a rising interest rate environment. In addition,  
prepayment rates are difficult to predict and the potential impact of           
prepayment on the price of a debt instrument depends on the terms of the        
instrument and can result in significant volatility.                            

DERIVATIVES RISK: Derivatives can be used to take both long and short positions 
(i.e., the value of a derivative can be positively or negatively related to the 
value of the underlying indicator(s) on which the derivative is based).         
Derivatives involve risks different from, and potentially greater than, those   
of the underlying indicator(s). The value of a derivative can move in           
unexpected ways, which may result in unanticipated losses and increased         
volatility if the relationship between the value of the derivative and the      
value of the indicator(s) is different than expected, or if the value of the    
underlying indicator(s) does not move in the direction or to the extent         
anticipated. Gains or losses from derivatives can be substantially greater than 
the derivatives' original cost. Derivatives can be less liquid than other types 
of investments.                                                                 

MANAGEMENT RISK: MFS' analysis of an investment can be incorrect and its        
selection of investments can lead to an investment focus that results in the    
fund underperforming other funds with similar investment strategies.            

COUNTERPARTY AND THIRD PARTY RISK: Transactions involving a counterparty other  
than the issuer of the instrument, or a third party responsible for servicing   
the instrument, are subject to the credit risk of the counterparty or third     
party, and to the counterparty's or third party's ability to perform in         
accordance with the terms of the transaction.                                   

LIQUIDITY RISK: Certain investments and types of investments are subject to     
restrictions on resale, may trade in the over-the-counter market or in limited  
volume, or may not have an active trading market, each of which can make it     
more difficult to purchase and sell them at an acceptable price.                

LEVERAGING RISK: Certain transactions, including when-issued, delayed-delivery, 
and forward commitment purchases, and some derivatives, can result in leverage. 
Leverage can cause increased volatility by magnifying gains or losses on        
underlying investments.                                                         

BAR CHART AND PERFORMANCE TABLE                                                 

The bar chart and performance table below are intended to indicate some of the  
risks of investing in the fund by showing changes in the fund's performance     
over time. The performance table also shows:                                    

o how the fund's performance over time compares with that of a broad measure
of market performance, and                                              

o returns before the deduction of taxes and returns after the deduction of  
certain taxes for Class A shares.                                       

The chart and table provide past performance information. The fund's past       
performance (before and after taxes) does not necessarily indicate how the fund 
will perform in the future. The performance information in the chart and table  
is based upon calendar year periods, while the performance information          
presented under the caption "Financial Highlights" and in the fund's            
shareholder reports is based upon the fund's fiscal year. Therefore, these      
performance results may differ.                                                 

BAR CHART. The bar chart shows changes over time in the annual total returns of 
Class A shares for each calendar year for the past ten years, assuming the      
reinvestment of distributions. The chart and related notes do not take into     
account any sales charges (loads) that you may be required to pay upon purchase 
or redemption of the fund's shares. If these sales charges were included, they  
would reduce these returns. The return of the fund's other classes of shares    
will differ from the Class A share returns shown in the bar chart, depending    
upon the expenses of those classes.                                             

CALENDAR YEAR                         

1997                     8.79%  
1998                     5.77%  
1999                    (3.07)% 
2000                     6.67%  
2001                     5.89%  
2002                     6.27%  
2003                     6.83%  
2004                     7.18%  
2005                     6.59%  
2006                     6.71%  

During the periods shown in the bar chart, the highest quarterly return was     
3.93% (for the calendar quarter ended September 30, 2004) and the lowest        
quarterly return was (2.10)% (for the calendar quarter ended December 31,       
1999).                                                                          

PERFORMANCE TABLE. This table shows how the average annual total returns of     
each class of the fund, before the deduction of taxes ("Returns Before Taxes"), 
compare to a broad measure of market performance, and assumes the deduction of  
the maximum applicable sales loads (initial sales charge and/or contingent      
deferred sales charge (CDSC), as applicable), and the reinvestment of           
distributions. In addition, for Class A shares, this table shows Class A        
average annual total returns:                                                   

o after the deduction of taxes on distributions made on Class A shares, such
as capital gains and income distributions ("Class A Shares' Return After
Taxes on Distributions"), and                                           

o after the deduction of taxes on both distributions made on Class A shares 
  and on redemption of Class A shares, assuming that the shares are redeemed
at the end of the periods for which returns are shown ("Class A Shares' 
Return After Taxes on Distributions and Sale of Class A Shares").       

Average Annual Total Returns (for the Periods Ended December 31, 2006)          

--------------------------------------------------------------------------------
RETURNS BEFORE TAXES                                1 YEAR   5 YEARS    10 YEARS
--------------------------------------------------------------------------------
SHARE CLASS                                                                     
--------------------------------------------------------------------------------
B, with CDSC (Declining over Six Years from 4%                                  
to 0%)                                              2.03%     5.57%       4.87% 
--------------------------------------------------------------------------------
C, with CDSC (1% for 12 Months)                     4.66%     5.66%       4.68% 
--------------------------------------------------------------------------------
A, with Initial Sales Charge (4.75%)                1.65%     5.68%       5.21% 
--------------------------------------------------------------------------------
RETURNS AFTER TAXES (CLASS A SHARES ONLY)                                       
--------------------------------------------------------------------------------
A Shares' Return After Taxes on Distributions,                                  
with Initial Sales Charge (4.75%)                   1.64%     5.67%       5.20% 
--------------------------------------------------------------------------------
A Shares' Return After Taxes on Distributions                                   
and Sale of Class A Shares, with Initial                                        
Sales Charge (4.75%)                                2.85%     5.66%       5.27% 
--------------------------------------------------------------------------------
BENCHMARK COMPARISON (RETURNS BEFORE TAXES)                                     
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index*+              4.85%     5.53%       5.75% 
--------------------------------------------------------------------------------

* Lehman Brothers Municipal Bond Index-a market-value-weighted index            
representative of the tax-exempt bond market.                               
+ Source: FactSet Research Systems Inc.                                         

All performance results reflect any applicable fee and expense waivers in       
effect during the periods shown; without these, the results would have been     
lower.                                                                          

After-tax returns are calculated using the historical highest individual        
federal marginal income tax rates, and do not reflect the impact of state and   
local taxes. Your actual after-tax returns will depend on your own tax          
situation, and may differ from those shown. The after-tax returns shown are not 
relevant to investors who hold their shares through tax-deferred arrangements,  
such as 401(k) plans or individual retirement accounts. The after-tax returns   
are shown for only one of the fund's classes of shares, and after-tax returns   
for the fund's other classes of shares will vary from the returns shown.        

The fund commenced investment operations February 24, 1984, with the offering   
of Class A shares, and subsequently offered Class B shares on September, 7      
1993, and Class C shares on September 25, 1998.                                 

Performance for Class C shares includes the performance of the fund's Class B   
shares for periods prior to their offering. Blended class performance has been  
adjusted to take into account differences in sales loads, if any, applicable to 
these share classes, but has not been adjusted to take into account differences 
in class specific operating expenses (such as Rule 12b-1 fees). Compared to     
performance these share classes would have experienced had they been offered    
for the entire period, the use of blended performance generally results in      
higher performance for share classes with higher operating expenses than those  
of the share class to which they are blended, and lower performance for share   
classes with lower operating expenses than those of the share class to which    
they are blended.                                                               

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EXPENSE SUMMARY                                                                 

EXPENSE TABLE                                                                   

This table describes the fees and expenses that you may pay when you buy,       
redeem, and hold shares of the fund. The annual fund operating expenses are     
based on expenses incurred during the fund's most recently completed fiscal     
year adjusted to reflect annualized expenses. The fund's annual operating       
expenses may vary in future years.                                              

Shareholder Fees (fees paid directly from your investment):                     
--------------------------------------------------------------------------------
SHARE CLASS                                  CLASS A      CLASS B        CLASS C
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on                                          
Purchases (as a percentage of offering                                          
price)                                        4.75%         N/A            N/A  
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a                                      
percentage of original purchase price or       See                              
redemption proceeds, whichever is less)     Below(#)       4.00%          1.00% 
--------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are deducted from fund assets):   
--------------------------------------------------------------------------------
SHARE CLASS                                  CLASS A      CLASS B        CLASS C
--------------------------------------------------------------------------------
Management Fees                               0.60%        0.60%          0.60% 
Distribution and Service (12b-1) Fees(1)       N/A         0.77%          1.00% 
Other Expenses(2)                             0.37%        0.37%          0.37% 
                                             -----        -----          -----
Total Annual Fund Operating Expenses(2)(4)    0.97%        1.74%          1.97% 
Fee Reductions(3)                            (0.10)%      (0.10)%        (0.10)%
                                             -------      -------        -------
Net Expenses(4)                               0.87%        1.64%          1.87% 

# A contingent deferred sales charge (referred to as a CDSC) of 1% may be   
deducted from your redemption proceeds if you buy $1 million or more of 
 Class A shares or if you are investing through a retirement plan and your
  Class A purchase meets certain requirements and you redeem your investment
within 12 months of your purchase.                                      
(1) The fund's Rule 12b-1 plan permits it to pay distribution and/or service    
 fees to support the sale and distribution of the fund's Class B and Class
C shares and the services provided by financial intermediaries. The     
  maximum rates that may be charged under the plan, together with details of
any fee reduction arrangements, are set forth under "Distribution and   
Service Fees."                                                          
(2) The fund has entered into an expense offset arrangement that reduces the    
 fund's custodian fee based upon the amount of cash maintained by the fund
with its custodian and dividend disbursing agent. Such fee reduction is 
not reflected in the table. Had this fee reduction been taken into      
account, "Total Annual Fund Operating Expenses" would have been lower.  
(3) MFS has agreed in writing to reduce its management fee to 0.50% annually    
  until at least February 28, 2009. See "Management of the Fund - Investment
Adviser."                                                               
(4) Includes certain interest expenses and fees of 0.15% related to the fund's  
 investments in inverse floating rate investments. Under accounting rules,
the fund recognizes additional income in an amount equal to these       
  expenses. Therefore, the fund's net asset values per share and performance
have not been affected by these expenses. However, these expenses are   
included in the fund's "Total Annual Operating Expenses" and "Net       
 Expenses" in the table above, and in the "Example of Expenses" below. Had
 these expenses and fees not been included, "Net Expenses" would have been
 0.72% for Class A shares, 1.49% for Class B shares, and 1.72% for Class C
shares.                                                                 

EXAMPLE OF EXPENSES                                                             

These examples are intended to help you compare the cost of investing in the    
fund with the cost of investing in other mutual funds.                          

The examples assume that:                                                       

o You invest $10,000 in the fund for the time periods indicated and you     
redeem your shares at the end of the time periods (unless otherwise     
indicated);                                                             

o Your investment has a 5% return each year and dividends and other         
distributions are reinvested; and                                       

o The fund's operating expenses remain the same except that the fund's total
operating expenses are assumed to be the fund's "Net Expenses" for the  
  period during which any written fee reductions are in effect (see "Expense
Summary - Expense Table" above).                                        

Although your actual costs may be higher or lower, under these assumptions your 
costs would be:                                                                 

--------------------------------------------------------------------------------
SHARE CLASS                               YEAR 1    YEAR 3    YEAR 5     YEAR 10
--------------------------------------------------------------------------------
A shares                                   $560      $752     $  969      $1,593
--------------------------------------------------------------------------------
B shares(1)                                                                     
--------------------------------------------------------------------------------
  Assuming redemption at end of period     $567      $831     $1,127      $1,833
--------------------------------------------------------------------------------
  Assuming no redemption                   $167      $531     $  927      $1,833
--------------------------------------------------------------------------------
C shares                                                                        
--------------------------------------------------------------------------------
  Assuming redemption at end of period     $290      $601     $1,046      $2,281
--------------------------------------------------------------------------------
  Assuming no redemption                   $190      $601     $1,046      $2,281
--------------------------------------------------------------------------------

(1) Class B shares convert to class A shares approximately eight years after    
purchase; therefore, years nine and ten reflect class A expenses.       

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CERTAIN INVESTMENT POLICIES AND RISKS                                           

TURNOVER                                                                        

MFS may engage in active and frequent trading in pursuing the fund's principal  
investment strategies. Frequent trading can result in the realization of a      
higher percentage of short-term capital gains and a lower percentage of         
long-term capital gains as compared to a fund that trades less frequently.      
Because short-term capital gains are distributed as ordinary income, this would 
generally increase your tax liability unless you hold your shares through a     
tax-deferred or exempt vehicle. Frequent trading also increases transaction     
costs, which may reduce the fund's return.                                      

TEMPORARY DEFENSIVE POLICY                                                      

In response to market, economic, political, or other conditions, MFS may depart 
from the fund's principal investment strategies by temporarily investing for    
defensive purposes. When MFS invests defensively, different factors could       
affect the fund's performance and the fund may not achieve its investment       
objective. In addition, the defensive strategy may not work as intended.        

FURTHER INFORMATION ON INVESTMENT STRATEGIES AND RISKS                          

Information about investment strategies and investment types not described in   
the Prospectus and the risks associated with those investment strategies and    
investment types are described in the fund's Statement of Additional            
Information ("SAI").                                                            

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MANAGEMENT OF THE FUND                                                          

INVESTMENT ADVISER                                                              

Massachusetts Financial Services Company ("MFS"), located at 500 Boylston       
Street, Boston, Massachusetts, serves as the investment adviser for the fund.   
Subject to the supervision of the Board of Trustees, MFS is responsible for     
managing the fund's investments, executing transactions and providing related   
administrative services and facilities under an Investment Advisory Agreement   
between the fund and MFS.                                                       

For the fiscal year ended January 31, 2007, the fund paid MFS an effective      
management fee equal to 0.50% of the fund's average daily net assets.           

The management fee set forth in the Investment Advisory Agreement is 0.60%      
annually of the first $1.4 billion, and 0.57% annually in excess of $1.4        
billion, of the fund's average daily net assets.                                

MFS has agreed in writing to reduce its management fee to 0.50% annually of the 
fund's average daily net assets. MFS has agreed in writing to maintain this     
management fee reduction until February 28, 2009, as part of its settlement     
with the New York Attorney General concerning market timing and related         
matters.                                                                        

A discussion regarding the basis for the Board of Trustees' approval of the     
Investment Advisory Agreement is available in the fund's most recent            
semi-annual report for the six-month period that ends July 31.                  

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, Massachusetts Investors Trust. Net assets    
under the management of the MFS organization were approximately $187 billion as 
of December 31, 2006.                                                           

Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,      
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various    
MFS funds, certain current and/or former Trustees of the MFS funds, and certain 
officers of MFS have been named as defendants in multiple lawsuits filed in     
federal and state courts. The various lawsuits generally allege that some or    
all of the defendants (i) permitted or acquiesced in market timing and/or late  
trading in some of the MFS funds, and inadequately disclosed MFS' internal      
policies concerning market timing and such matters, (ii) received excessive     
compensation as fiduciaries with respect to the MFS funds, or (iii) permitted   
or acquiesced in the improper use of fund assets by MFS to support the          
distribution of MFS fund shares and inadequately disclosed MFS' use of fund     
assets in this manner. The lawsuits assert that some or all of the defendants   
violated the federal securities laws, including the Securities Act of 1933 and  
the Securities Exchange Act of 1934, the Investment Company Act of 1940, and    
the Investment Advisers Act of 1940, the Employee Retirement Income Security    
Act of 1974 (ERISA), as well as fiduciary duties and other violations of common 
law. The lawsuits variously have been commenced as class actions or individual  
actions on behalf of investors who purchased, held, or redeemed shares of the   
MFS funds during specified periods, as ERISA actions by participants in certain 
retirement plan accounts on behalf of those accounts, or as derivative actions  
on behalf of the MFS funds.                                                     

The lawsuits relating to market timing and related matters have been            
transferred to, and consolidated before, the United States District Court for   
the District of Maryland, as part of a multi-district litigation of market      
timing and related claims involving several other fund complexes (In re Mutual  
Funds Investment Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam,    
Allianz Dresdner), No. 1:04-md-15863 (transfer began March 19, 2004)). The      
market timing cases related to the MFS funds include Riggs v. MFS et al., Case  
No. 04-CV-01162-JFM (direct), Hammerslough v. MFS et al., Case No. 04-MD-01620  
(derivative), Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA), and   
Reaves v. MFS Series Trust I, et al., Case No. 1:05-CV-02220-JFM (Class B       
Shares). The plaintiffs in these consolidated lawsuits generally seek           
injunctive relief including removal of the named Trustees, adviser and          
distributor, rescission of contracts and 12b-1 Plans, disgorgement of fees and  
profits, monetary damages, punitive damages, attorney's fees and costs and      
other equitable and declaratory relief. Two lawsuits alleging improper          
brokerage allocation practices and excessive compensation are pending in the    
United States District Court for the District of Massachusetts (Forsythe v. Sun 
Life Financial Inc., et al., No. 04cv10584 (GAO) (a consolidated action, first  
filed on March 25, 2004) and Marcus Dumond, et al. v. Massachusetts Financial   
Servs. Co., et al., No. 04cv11458 (GAO) (filed on May 4, 2004)). The plaintiffs 
in these lawsuits generally seek compensatory damages, punitive damages,        
recovery of fees, rescission of contracts, an accounting, restitution,          
declaratory relief, equitable and/or injunctive relief and attorney's fees and  
costs. Insofar as any of the actions is appropriately brought derivatively on   
behalf of any of the MFS funds, any recovery will inure to the benefit of the   
MFS funds. Several claims of the various lawsuits have been dismissed; MFS and  
the other named defendants continue to defend the various lawsuits.             

DISCLOSURE OF PORTFOLIO HOLDINGS. The MFS funds have established a policy with  
respect to the disclosure of fund portfolio holdings. A description of this     
policy is provided in the SAI. In addition, by clicking on a fund name under    
"Select a fund" on the MFS Web site (MFS.COM), the following information is     
generally available to you:                                                     

------------------------------------------------------------------- 
                                       APPROXIMATE DATE OF POSTING
INFORMATION                             TO WEB SITE                 
------------------------------------------------------------------- 
Fund's full securities holdings as                                  
of each month's end                     24 days after month end     
------------------------------------------------------------------- 
Fund's top 10 securities holdings                                   
as of each month's end                  14 days after month end     
------------------------------------------------------------------- 

If a fund has substantial investments in both equity and debt instruments, the  
fund's top 10 equity holdings and top 10 debt holdings will be made available.  
In addition, for funds that primarily invest in shares of the other MFS funds,  
all securities holdings in shares of MFS funds, the top 10 aggregated equity    
holdings within the underlying MFS funds, and the top 10 aggregated debt        
holdings within the underlying MFS funds will be made available.                

Note that the funds or MFS may suspend the posting of this information or       
modify the elements of this web posting policy without notice to shareholders.  
Once posted, the above information will remain available on the Web site until  
at least the date on which the fund files a Form N-CSR or Form N-Q for the      
period that includes the date as of which the Web site information is current.  

PORTFOLIO MANAGER(S)                                                            

Information regarding the portfolio manager(s) of the fund is set forth below.  
Further information regarding the portfolio manager(s), including other         
accounts managed, compensation, ownership of fund shares, and possible          
conflicts of interest, is available in the fund's SAI. The portfolio manager is 
primarily responsible for the day-to-day management of the fund.                

--------------------------------------------------------------------------------
PORTFOLIO MANAGER      PRIMARY ROLE    SINCE    TITLE AND FIVE YEAR HISTORY     
--------------------------------------------------------------------------------
Gary A. Lasman         Portfolio       2006     Vice President of MFS; employed 
                   Manager                  in the investment management
                                       area of MFS since 2002.
                                               Assistant Portfolio Manager and
                                            Senior Municipal Analyst for
                                                Liberty Funds Group from 1998 to
                     2002.
--------------------------------------------------------------------------------
Geoffrey L. Schechter  Portfolio       2002     Senior Vice President of MFS;   
                 Manager                  employed in the investment
                                            management area of MFS since
                     1993.
--------------------------------------------------------------------------------

ADMINISTRATOR                                                                   

MFS provides the fund with certain financial, legal, and other administrative   
services under a Master Administrative Services Agreement between the fund and  
MFS. Under the Agreement, MFS is paid an annual fee for providing these         
services.                                                                       

DISTRIBUTOR                                                                     

MFS Fund Distributors, Inc. (referred to as MFD), a wholly owned subsidiary of  
MFS, is the distributor of shares of the fund.                                  

SHAREHOLDER SERVICING AGENT                                                     

MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS, provides   
transfer agent and recordkeeping functions in connection with the issuance,     
transfer, and redemption of each class of shares of the fund under a            
Shareholder Servicing Agent Agreement. Under the Agreement, MFSC may receive a  
fee based on the costs it incurs in providing these services, including         
payments made to affiliated and unaffiliated service providers that provide     
certain accounting, network, subtransfer agent and other shareholder services   
(shareholder servicing payments) and out-of-pocket expenses, plus a target      
profit margin.                                                                  

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DESCRIPTION OF SHARE CLASSES                                                    

The fund offers Class A, Class B, and Class C shares through this prospectus.   

SALES CHARGES AND WAIVERS OR REDUCTIONS                                         

You may be subject to an initial sales charge when you purchase Class A, or a   
CDSC when you redeem Class A, Class B, or Class C shares. These sales charges   
are paid to MFD.                                                                

In the circumstances described below, you may qualify for a sales charge waiver 
or reduction for purchases or redemptions of Class A, Class B, or Class C       
shares. In addition, other sales charge waivers or reductions may apply to      
certain transactions by retirement plans, section 529 tuition programs, and     
certain other groups (e.g., affiliated persons of MFS) and with respect to      
certain types of investment programs (e.g., certain wrap accounts or fund       
supermarket investments). Details regarding the types of investment programs    
and categories of investors eligible for these waivers or reductions are        
provided in the SAI, which is available to you free of charge, and on the       
fund's Web site at MFS.COM. Some of these programs and waivers or reductions    
may not be available to you if your shares are held through certain types of    
accounts, such as retirement accounts and 529s plans, or certain accounts that  
you may have with your financial intermediary. Waivers or reductions may be     
eliminated, modified, and added at any time without providing advance notice.   

CLASS A SHARES. You may purchase Class A shares at the offering price (which    
includes the applicable initial sales charge). In some cases, you may purchase  
Class A shares without an initial sales charge; in these cases, you will        
generally be subject to a 1% CDSC upon redemption within 12 months of your      
purchase.                                                                       

The amount of the initial sales charge you pay when you buy Class A shares      
differs depending upon the amount you invest, as follows:                       

--------------------------------------------------------------------------------
                                 INITIAL SALES CHARGE* AS PERCENTAGE OF:
                                 ---------------------------------------
       GROSS PURCHASE AMOUNT
AMOUNT OF PURCHASE                 (OFFERING PRICE*)         NET AMOUNT INVESTED
--------------------------------------------------------------------------------
Less than $50,000                        4.75%                      4.99%       
--------------------------------------------------------------------------------
$50,000 but less than $100,000           4.25%                      4.44%       
--------------------------------------------------------------------------------
$100,000 but less than $250,000          3.75%                      3.90%       
--------------------------------------------------------------------------------
$250,000 but less than $500,000          2.75%                      2.83%       
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000        2.00%                      2.04%       
--------------------------------------------------------------------------------
$1,000,000 or more                       None**                    None**       
--------------------------------------------------------------------------------

* Offering price is calculated by dividing the net asset value of a share by  
the difference between 1 and the initial sales charge percentage. Because 
the offering price is rounded to two decimal places, actual sales charges 
you pay may be more or less than those calculated using these percentages.
** A 1% CDSC will generally apply to such purchases.                            

You pay no initial sales charge when you invest $1 million or more in Class A   
shares (or, with respect to certain retirement plans, if MFD determines in its  
sole discretion that the total purchases by the retirement plan (or by multiple 
plans maintained by the same plan sponsor) will equal or exceed within a        
reasonable period of time a specified threshold determined by MFD). However, a  
CDSC of 1% will generally be deducted from your redemption proceeds if you      
redeem within 12 months of your purchase.                                       

CLASS B SHARES. You may purchase Class B shares at net asset value without an   
initial sales charge, but if you redeem your shares within the first six years  
after purchase, you may be subject to a CDSC (declining from 4% during the      
first year to 0% after six years).                                              

The CDSC is imposed according to the following schedule:                        

--------------------------------------------------------------------------------
YEAR OF REDEMPTION AFTER PURCHASE          1st   2nd   3rd   4th  5th   6th  7th
--------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE            4%    4%    3%   3%    2%   1%    0%
--------------------------------------------------------------------------------

If you hold Class B shares for approximately eight years, they will convert to  
Class A shares of the fund. All Class B shares you acquire through the          
reinvestment of dividends and distributions will be held in a separate          
sub-account. Each time any Class B shares in your account convert to Class A    
shares, a proportionate number of the Class B shares in the sub-account will    
also convert to Class A shares.                                                 

CLASS C SHARES. You may purchase Class C shares at net asset value without an   
initial sales charge. However, a CDSC of 1% will generally be deducted from     
your redemption proceeds if you redeem within 12 months of your purchase.       

SALES CHARGE WAIVERS OR REDUCTIONS. Below is a summary of certain investor      
programs whereby the applicable sales charge may be waived or reduced. You or   
your financial intermediary must inform MFSC upon purchasing fund shares of     
your intention to invest in a fund under one of the programs below. You can     
provide this information in your account application or through a separate      
document provided by your financial intermediary.                               

------------------------------------------------------------------------------- 
                                   INVESTMENTS ELIGIBLE FOR:
                                   -------------------------
                              WAIVED INITIAL   REDUCED INITIAL        WAIVED
PROGRAM                          SALES CHARGE      SALES CHARGE          CDSC   
------------------------------------------------------------------------------- 
Letter of Intent                                        X                       
------------------------------------------------------------------------------- 
Right of Accumulation                                   X                       
------------------------------------------------------------------------------- 
Automatic Exchange Plan                X*                                       
------------------------------------------------------------------------------- 
Exchange Privilege                     X*                                       
------------------------------------------------------------------------------- 
Systematic Withdrawal Plan                                                X**   
------------------------------------------------------------------------------- 
Distribution Reinvestment              X                                        
------------------------------------------------------------------------------- 
Distribution Investment Program        X                                        
------------------------------------------------------------------------------- 
Other Sales Charge Waivers             X                                  X     
------------------------------------------------------------------------------- 

* Investments under the Automatic Exchange Plan or certain other exchanges    
under the Exchange Privilege may be subject to a sales charge in certain  
cases.                                                                    
** Not available for Class A shares and limited for Class B and Class C shares. 

 o LETTER OF INTENT (LOI). You may pay a reduced or no initial sales charge on
purchases of Class A shares if you intend to invest a specific dollar   
  amount, based on the gross amount of your investment (including the amount
of any sales charge paid), including investments through any linked     
accounts in any class of any MFS fund (and the MFS Fixed Fund, a bank   
 collective investment trust) within a 13-month period (36 months for a $1
 million commitment). Distributions reinvested in additional shares of the
   fund or distributions from other MFS funds automatically invested in shares
of the fund will not apply toward the satisfaction of the LOI.          

For each purchase you make under the LOI you will pay the initial sales 
charge rate applicable to the total amount you intended to purchase. If,
 however, you do not purchase the intended amount within the relevant time
   period, your account will be adjusted by redemption of the amount of shares
   needed to pay the higher initial sales charge level for the amount actually
purchased.                                                              

 To establish a LOI, you may complete the Letter of Intent section of your
account application or service application. In order to benefit from the
   LOI, you or your financial intermediary must inform MFSC that the LOI is in
effect each time shares of a fund are purchased.                        

o RIGHT OF ACCUMULATION (ROA). Under the ROA, you may pay a reduced or no   
initial sales charge on purchases of Class A shares by aggregating the  
total dollar amount of your investment with your existing investments or
  any linked accounts in any class of any MFS fund (and the MFS Fixed Fund),
based on the current maximum public offering price of the funds. For    
 example, you will pay a sales charge on your current purchase at the rate
 applicable to the total value of all eligible accounts based on the sales
charge schedule above.                                                  

o LINKING ACCOUNTS FOR LOI AND ROA. For purposes of obtaining reduced sales 
charges under the LOI and ROA, you may combine the value of your current
  purchase of shares of an MFS fund with the value of existing accounts held
with the MFS funds (or the MFS Fixed Fund) by you, your spouse (or legal
  equivalent under applicable state law), and your children under the age of
21.                                                                     

Eligible accounts that you may link under a LOI and ROA may include:    

o Individual accounts;                                                  

o Joint accounts;                                                       

o Trust accounts of which you, your spouse (or legal equivalent under   
applicable state law), or child under the age of 21 is the grantor; 

o MFS 529 College Savings Plan accounts;                                

o Certain single-participant retirement plan accounts;                  

o Certain Individual Retirement Accounts;                               

o Uniform Gifts/Transfers to Minor Acts accounts; and                   

  o Accounts held in the name of your financial intermediary on your behalf,
except accounts investing in Class W shares of certain MFS funds.   

   In order to link such accounts under a LOI or ROA, the broker/dealer at the
  time of your current purchase must be the broker/dealer for any additional
 accounts to be linked. MFS fund shares held as follows cannot be combined
with your current purchase for purposes of a LOI or ROA:                

o Shares held indirectly through financial intermediaries other than the
     broker/dealer for your current purchase (or the clearing broker/dealer of
   your broker/dealer so long as the clearing broker/dealer has a separate
account with MFSC for your account) (for example, shares held in a  
    different broker/dealer's brokerage account or with a bank, an insurance
company separate account or an investment adviser); or              

  o Shares held directly in a MFS fund account on which the broker/dealer is
different than the broker/dealer for your current purchase.         

It is your responsibility to inform the broker/dealer for each current  
purchase of any accounts held with the MFS funds that you believe are   
eligible to be linked under a LOI or a ROA. If you have not designated a
broker/dealer, you should inform MFSC directly of any accounts held with
 the MFS funds that you believe are eligible to be linked under a LOI or a
  ROA. You should provide your financial intermediary (including MFSC if you
   have not designated a broker/dealer) with certain supporting information at
 the time of each purchase regarding accounts held with the MFS funds that
  are eligible to be combined for purposes of a LOI or ROA. Such information
may include shareholder identification numbers or applicable account    
numbers or account statements. You should request that your financial   
intermediary provide this information to the funds or their agents when 
placing each purchase order.                                            

  SPECIAL NOTE FOR LOI OR ROA ELIGIBLE ACCOUNTS LINKED PRIOR TO MAY 1, 2006.
 Any LOI or ROA eligible accounts linked prior to May 1, 2006, will remain
   linked to the extent the broker/dealer information for such accounts is not
 modified. In the event you change the broker/dealer for any such account,
 your accounts will no longer be eligible to be linked under a LOI or ROA.
   In addition, you will not be able to link additional accounts to the extent
they do not meet the criteria discussed above.                          

o AUTOMATIC EXCHANGE PLAN. If you have an account balance of at least $2,000
in the fund, you may participate in the automatic exchange plan, a      
dollar-cost averaging program. This plan permits you to make automatic  
periodic exchanges from your account in the fund for shares of the same 
class of other MFS funds. Exchanges will generally be made at net asset 
value without any sales charges. If you exchange shares out of the MFS  
 Money Market Fund or MFS Government Money Market Fund, or if you exchange
  Class A shares out of the MFS Cash Reserve Fund into Class A shares of any
other MFS fund, you will pay an initial sales charge if you have not    
already paid this charge on these shares.                               

o SYSTEMATIC WITHDRAWAL PLAN. If you have an account balance of at least    
  $5,000 in your account in the fund, you may elect to receive (or designate
 someone else to receive) regular periodic payments (of at least $50 if by
check) through an automatic redemption of Class A, Class B, or Class C .
  For Class B and Class C shares, you may incur a CDSC when Class B or Class
C shares are redeemed under the plan (or plans if more than one plan is 
 established) if amounts greater than 10% of the value of your account are
withdrawn under the plan(s) in any one year (with respect to Class B    
 shares, determined at the time of your first withdrawal under the plan(s)
or January 1, 2007, whichever is later and reset annually thereafter and
with respect to Class C shares, determined at the time the plan is      
  established). For Class A shares, you may incur a CDSC when Class A shares
are redeemed under this plan.                                           

o DISTRIBUTION REINVESTMENT. You may automatically reinvest dividend and    
   capital gain distributions in the same fund without paying an initial sales
charge.                                                                 

o DISTRIBUTION INVESTMENT PROGRAM. You may automatically reinvest dividend  
and capital gain distributions into the same class of another MFS fund  
without paying a CDSC or an initial sales charge.                       

CALCULATION OF CDSC. As discussed above, certain investments in Class A, Class  
B, and Class C shares are subject to a CDSC. For purposes of calculating the    
CDSC, purchases made on any day during a calendar month will age one month on   
the last day of that month, and on the last day of each subsequent month. For   
example, a 1% CDSC on Class A shares purchased on August 10 will expire at the  
close of business on July 31 of the following calendar year, and a redemption   
of those shares made on or after August 1 of the following calendar year will   
not be subject to the CDSC.                                                     

Shares acquired through reinvestment of distributions are not subject to a      
CDSC. The CDSC is based on the original purchase cost or the current market     
value of the shares being sold, whichever is less. For purposes of determining  
the CDSC, if you sell only some of your shares, shares not subject to a CDSC    
are sold first, followed by shares held the longest.                            

DISTRIBUTION AND SERVICE FEES                                                   

The fund has adopted a plan in accordance with Rule 12b-1 under the Investment  
Company Act of 1940, as amended (the "Distribution Plan"). Under the            
Distribution Plan, the fund pays distribution and service fees to MFD to        
support the sale and distribution of Class B and Class C shares, as well as     
shareholder servicing and account maintenance activities. The fund has not      
adopted a Rule 12b-1 plan with respect to its Class A shares. These             
distribution and service fees equal on an annual basis up to the following      
maximum percentages of average daily net assets of the class:                   

--------------------------------------------------------------------------------
                                                                 MAXIMUM TOTAL
                       MAXIMUM                                  DISTRIBUTION AND
CLASS             DISTRIBUTION FEE      MAXIMUM SERVICE FEE        SERVICE FEE  
--------------------------------------------------------------------------------
Class B                 0.75%                  0.25%                  1.00%     
--------------------------------------------------------------------------------
Class C                 0.75%                  0.25%                  1.00%     
--------------------------------------------------------------------------------

These fees are paid out of fund assets of the applicable class of shares.       
Because these fees are an ongoing expense of the fund, they increase the cost   
of your investment over time and may cost you more than other types of sales    
charges. For one year from the date of sale of Class B shares, assets           
attributable to such Class B shares are subject to the 0.25% per annum Class B  
service fee. On assets attributable to all other Class B shares, the service    
fee is not currently in effect, but may be implemented on such date as the      
board of trustees may determine.                                                

FINANCIAL INTERMEDIARY COMPENSATION                                             

The term "financial intermediary" includes any broker/dealer, bank (including   
bank trust departments), registered investment adviser, financial planner,      
retirement plan administrator, third-party administrator, insurance company,    
and any other institutions having a selling, administration, or any similar     
agreement with MFD, MFS, or one of its affiliates.                              

Financial intermediaries receive various forms of compensation in connection    
with the sale of shares of a fund and/or the servicing of shareholder accounts. 
Financial intermediaries may receive such compensation (i) in the form of up    
front commissions and ongoing asset-based compensation paid by MFD based on     
sales charges received and expected to be received by MFD from shareholders and 
Distribution Plan distribution and service payments received by MFD from the    
fund, (ii) in the form of shareholder servicing payments paid by MFD and/or one 
or more of its affiliates (for purposes of this section only, collectively,     
"MFD") based on the receipt of such payments by MFD from the fund, and (iii) in 
the form of payments paid by MFD from MFD's own additional resources.           

The types of payments described above are not exclusive. Accordingly, financial 
intermediaries may receive payments under all or any combination of the         
above-referenced categories and such payments can be significant to the         
financial intermediary. In addition, the compensation that financial            
intermediaries receive may vary by class of shares sold and among financial     
intermediaries. Depending upon the arrangements in place at any particular      
time, financial intermediaries may have a financial incentive to recommend a    
particular fund or share class.                                                 

Financial intermediaries may receive up front commissions of up to the          
following percentage amounts for sales of the following share classes:          

------------------------------------------------------------------------------- 
                                          UP FRONT COMMISSION AS A
        SHARE CLASS                       PERCENTAGE OF OFFERING PRICE
------------------------------------------------------------------------------- 
Class A                                    4.75%  
------------------------------------------------------------------------------- 
Class B                                    3.75%  
------------------------------------------------------------------------------- 
Class C                                    1.00%  
------------------------------------------------------------------------------- 

Financial intermediaries may also receive all or a portion of the following     
payments: Distribution Plan distribution and service fees as described in       
"Description of Share Classes - Distribution and Service Fees"; and shareholder 
servicing payments as described in "Management of the Fund - Shareholder        
Servicing Agent."                                                               

In addition, financial intermediaries may receive payments from MFD from MFD's  
own additional resources as incentives to market the MFS funds, to cooperate    
with MFD's promotional efforts and/or in recognition of their marketing,        
administrative services, and/or processing support. This compensation from MFD  
is not reflected in the fees and expenses listed in the fee table section of    
the fund's prospectus. MFD compensates financial intermediaries based on        
criteria established by MFD from time to time that consider, among other        
factors, the level and/or type of marketing and administrative support provided 
by the financial intermediary, the level of assets attributable to and/or sales 
by the financial intermediary and the quality of the overall relationship with  
the financial intermediary.                                                     

These additional payments by MFD may take the form of payments to financial     
intermediaries that provide marketing support and administrative services to    
MFD with respect to fund shares sold or held through the financial              
intermediary's retail distribution network and/or through programs such as      
retirement programs, qualified tuition programs, fund supermarkets, fee-based   
advisory or wrap fee programs, bank trust programs, and insurance (e.g.,        
individual or group annuity) programs. MFD may also make payments to financial  
intermediaries to help offset the cost associated with client account           
maintenance support, statement preparation, and transaction processing. To the  
extent permitted by SEC and NASD rules and other applicable laws and            
regulations, MFD may make other payments or allow other promotional incentives  
or payments to financial intermediaries.                                        

You can find further details in the SAI about the payments made by MFD and the  
services provided by financial intermediaries. Financial intermediaries may     
charge you additional fees and/or commissions other than those disclosed in     
this prospectus. You can ask your financial intermediary for information about  
any payments it receives from MFD and any services it provides, as well as      
about fees and/or commissions it charges. Financial intermediaries that sell    
fund shares may also act as a broker/dealer in connection with a MFS fund's     
purchase or sale of portfolio securities. However, the fund and MFS do not      
consider financial intermediaries' sales of shares of a MFS fund as a factor    
when choosing broker/dealers to effect portfolio transactions for the MFS       
funds.                                                                          

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HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES                                     

You may purchase, redeem, and exchange shares of the fund in the manner         
described below. If you buy or sell shares of a fund through a retirement       
account, 529 plan, or financial intermediary, the procedures for buying,        
selling, and exchanging shares of the fund and the features, policies and fees  
may differ from those discussed in this prospectus.                             

HOW TO PURCHASE SHARES                                                          

Your shares will be bought at the offering price (the net asset value per share 
plus any applicable initial sales charge) next calculated after your purchase   
order is received in proper form. MFSC reserves the right to reject any         
purchase order that is not in proper form. The specific requirements for proper 
form vary among account types and transactions. Certain restrictions apply to   
the use of a transfer on death registration. You or your financial intermediary 
should contact MFSC to obtain a Transfer on Death registration form and for     
information regarding MFSC's other requirements for transfer on death           
registrations.                                                                  

The fund may reject for any reason, or cancel as permitted or required by law,  
any purchase orders, including exchanges. The fund may stop offering shares     
completely, or may offer shares only on a limited basis, for a period of time   
or permanently.                                                                 

The fund is required by law to obtain from you certain personal information     
that will be used to verify your identify. If you do not provide the            
information, the fund may not be able to open your account. The fund must also  
take certain steps to verify that the account information you provide is        
correct.                                                                        

CLASS A, CLASS B, AND CLASS C SHARES. With respect to Class A, Class B, and     
Class C shares, you can establish an account by having your financial           
intermediary process your purchase. The minimum initial investment is generally 
$1,000, except for: fee-based and wrap accounts offered through certain         
financial intermediaries, for which there is no minimum initial investment; and 
IRAs, for which the minimum initial investment is generally $250 ($200 for      
rollovers from certain Serviced Plans). In addition, the minimum initial        
investment is $50 for automatic investment or exchange plans. MFSC waives or    
lowers the initial investment minimum for certain types of investors and        
investments.                                                                    

Purchases of Class B shares are subject to a total account value limitation at  
the time of purchase of $99,999, and purchases of Class C shares are subject to 
a total account value limitation at the time of purchase of $999,999. If your   
existing accounts for all share classes held with the MFS funds have a total    
value equal to $99,999 for Class B share purchases or $999,999 for Class C      
share purchases, you will not be able to purchase Class B or Class C shares, as 
applicable. For the purpose of determining your total account value, existing   
accounts for all share classes held with the MFS funds that are linked under a  
LOI or ROA will be included.                                                    

The fund or its agents may at their discretion accept a purchase request for    
Class B shares or Class C shares that would otherwise exceed the total account  
value limitation of $99,999 and $999,999, respectively, under certain           
circumstances, including, but not limited to, purchases by certain types of     
group retirement plans sponsored or serviced by MFS or an affiliate.            

You may have your financial intermediary process your subsequent purchases or   
you may contact MFS directly. Generally, there is no minimum for subsequent     
investments except there is generally a $50 minimum for subsequent investments  
by check and through automatic exchange plans.                                  

o ADDITIONAL PURCHASES DIRECTLY THROUGH MFSC.                               

 o BY MAIL. You may purchase additional shares by mailing a check with the
returnable portion of your statement to MFSC.                       

   o BY TELEPHONE. You may purchase additional shares by transferring money by
phone from your pre-designated bank account. You must elect this    
privilege on your account application or service application.       

  o ELECTRONICALLY. You may purchase additional shares from a pre-designated
 bank account via the Internet at mfs.com (MFS Access). You must elect
 this privilege on your account application or service application and
 establish a personal identification number (PIN) on MFS Access to use
this service.                                                       

o BY WIRE. To purchase additional shares by wire, call MFSC for         
instructions.                                                       

o AUTOMATIC INVESTMENT PLAN. You may purchase additional shares by      
     automatically investing a designated amount from your checking or savings
  account on any day of the month. You must elect this privilege on your
account application or service application.                         

 o ADDITIONAL PURCHASES THROUGH YOUR FINANCIAL INTERMEDIARY. You can have your
financial intermediary purchase shares on your behalf. Your financial   
  intermediary will be responsible for furnishing all necessary documents to
MFSC and may charge you for this service.                               

HOW TO REDEEM SHARES                                                            

Your shares will be sold at the net asset value per share next calculated after 
your redemption order is received in proper form, minus any applicable CDSC.    
MFSC reserves the right to reject any redemption request that is not in proper  
form. The specific requirements for proper form vary among types of accounts    
and transactions. In certain circumstances, you may need to have your signature 
guaranteed and/or submit additional documentation to redeem your shares. In     
general, no signature guarantee is required for a redemption order for up to    
$100,000 that is signed by all owners or fiduciaries identified in the account  
registration, paid as registered, and mailed to the address of record.          

The fund normally sends out your redemption proceeds within seven days after    
your request is received in proper form. Under unusual circumstances, such as   
when the New York Stock Exchange is closed, trading on the Exchange is          
restricted, or as permitted by the SEC, the fund may suspend redemptions or     
postpone payment for more than seven days. Redemption proceeds (other than      
exchanges) may be delayed until money from prior purchases sufficient to cover  
your redemption has been received and collected. This can take up to seven days 
after a purchase.                                                               

You may redeem your shares either by having your financial intermediary process 
your redemption or by contacting MFSC directly.                                 

REDEEMING DIRECTLY THROUGH MFSC.                                                

o BY MAIL. To redeem shares by mail, you can send a letter to MFSC with the 
 name of the fund, your account number, and the number of shares or dollar
amount to be redeemed.                                                  

o BY TELEPHONE. If a signature guarantee is not required, you can call MFSC 
to have shares redeemed from your account and proceeds mailed to the    
address of record on the account. You can also call MFSC to have shares 
redeemed from your account and the proceeds wired directly to a         
  pre-designated bank account. You must elect this privilege on your account
application or service application if you wish to have proceeds wired to
your bank account.                                                      

o ELECTRONICALLY. You can have shares redeemed from your account and the    
 proceeds wired directly to a pre-designated bank account via the Internet
at mfs.com (MFS Access). You must elect this privilege on your account  
  application or service application and establish a personal identification
number (PIN) on MFS Access to use this service.                         

o SYSTEMATIC WITHDRAWAL PLAN. For Class A, Class B, or Class C shares, you  
 may elect to automatically receive (or designate someone else to receive)
  regular periodic payments through an automatic redemption of such classes.
Please contact MFSC for details.                                        

REDEEMING THROUGH YOUR FINANCIAL INTERMEDIARY. You can have your financial      
intermediary process a redemption on your behalf. Your financial intermediary   
will be responsible for furnishing all necessary documents to MFSC and may      
charge you for this service.                                                    

SIGNATURE GUARANTEE/ADDITIONAL DOCUMENTATION. If a signature guarantee is       
required, your signature may be guaranteed by an eligible bank, broker/dealer,  
credit union, national securities exchange, registered securities association,  
clearing agency, or savings association. MFSC may require additional            
documentation for certain types of registrations and transactions. Signature    
guarantees and this additional documentation shall be accepted in accordance    
with policies established by MFSC, and MFSC may, at its discretion, make        
certain exceptions to these requirements. Please contact MFSC with any          
questions and for the requirements for your particular situation.               

SHARE CERTIFICATES. If certificates are outstanding for your shares, you may    
only redeem such shares by mailing the certificates to MFSC. Telephone,         
electronic, and systematic withdrawal plan redemptions and checkwriting are not 
available if certificates are outstanding for your shares.                      

REDEMPTIONS IN KIND. If, during any 90-day period, you redeem shares in an      
amount greater than the lesser of $250,000 or 1% of fund net assets, the fund   
has the right to pay the redemption amount above such threshold by a            
distribution in-kind of portfolio securities (redemption in kind). In the event 
that the fund makes a redemption in kind, you should expect to incur brokerage  
and other transaction charges when converting the securities to cash, and the   
securities may increase or decrease in value before you sell them.              

INVOLUNTARY REDEMPTIONS. Because it is costly to maintain small accounts, the   
MFS funds have reserved the right to redeem your shares without your permission 
when your account contains less than $500 due to your redemptions or exchanges. 
Any applicable CDSC will be assessed. Before the fund makes such a redemption,  
you will be notified and given 60 days to increase your investment to at least  
$500.                                                                           

In addition, the MFS funds have reserved the right to redeem your shares        
without your permission in cases of threatening conduct or suspicious,          
fraudulent, or illegal activity. Any applicable CDSC will be assessed upon      
redemption of your shares.                                                      

HOW TO EXCHANGE SHARES                                                          

An exchange involves the redemption of shares of one fund and the purchase of   
shares of another fund.                                                         

EXCHANGE PRIVILEGE. You can exchange your shares for shares of the same class   
of most other MFS funds by having your financial intermediary process your      
exchange request or by contacting MFSC directly. Your shares will be bought at  
the net asset value next calculated after your exchange order is received in    
proper form.                                                                    

You can exchange your Class A shares for shares of the MFS Money Market Fund or 
the MFS Government Money Market Fund.                                           

Certain qualified retirement plans may make certain exchanges between the MFS   
funds and the MFS Fixed Fund. With respect to Class C shares subject to a CDSC, 
you will only be eligible to make the exchange to the MFS Fixed Fund if the     
CDSC would have been waived had the Class C shares been redeemed. Contact MFSC  
for information concerning transactions involving the MFS Fixed Fund.           

The MFS funds allow certain financial intermediaries to place exchange orders   
on behalf of a group of their discretionary investment advisory clients ("group 
exchange orders"). As with any exchange request, the funds and their agents     
reserve the right to reject any group exchange order, and the funds' agents     
will generally reject any group exchange order received by the funds or their   
agents after 1 p.m., Eastern time. In addition, MFD has agreements with certain 
financial intermediaries which set forth the terms and conditions under which   
group exchange orders may be placed by these financial intermediaries. These    
conditions may be more restrictive than those applicable to individual exchange 
orders, and may include the requirement to provide the funds or their agents    
with advance notice of group exchange orders.                                   

The minimum exchange amount is generally $1,000 (generally $50 for exchanges    
made under the automatic exchange plan) or all the shares in an account. MFSC   
waives or lowers the minimum exchange amount for certain types of investors and 
investments.                                                                    

Shares otherwise subject to a CDSC will not be charged a CDSC in an exchange.   
Shares will retain the CDSC schedule in effect based upon a pro rata share of   
the CDSC from the exchanged fund and the original purchase date of the shares   
subject to the CDSC.                                                            

Other funds may have different exchange restrictions. You should read the       
prospectus of the MFS fund into which you are exchanging and consider the       
differences in objectives, policies, and risks before making any exchange. The  
exchange privilege may be changed or discontinued at any time, and all          
exchanges are subject to certain limitations and MFS funds' policies concerning 
excessive trading practices, which are designed to protect the funds and their  
shareholders from the harmful effects of frequent trading.                      

OTHER CONSIDERATIONS                                                            

FREQUENT TRADING                                                                

o RIGHT TO REJECT OR RESTRICT PURCHASE AND EXCHANGE ORDERS. The Board of    
  Trustees of the MFS funds has adopted the purchase and exchange limitation
policies described below, which it believes are reasonably designed to  
discourage frequent fund share transactions. MFSC seeks to monitor and  
enforce these policies, subject to oversight by the Board of Trustees,  
   pursuant to procedures approved by the Board of Trustees. The MFS funds may
alter their policies at any time without notice to shareholders.        

o GENERAL PURCHASE AND EXCHANGE LIMITATION POLICIES. The MFS funds reserve  
the right to restrict, reject, or cancel (with respect to cancellations,
within one business day of the order), without any prior notice, any    
purchase or exchange order, including transactions believed to represent
frequent trading activity. For example, MFSC may in its discretion      
restrict, reject, or cancel a purchase or exchange order even if the    
transaction is not subject to specific exchange or other limitations    
described in this prospectus if MFSC determines that accepting the order
could interfere with the efficient management of a fund's portfolio,    
 increase costs to the fund, dilute the value of an investment in the fund
to long-term shareholders, or otherwise not be in the fund's best       
 interests. In the event that MFSC rejects or cancels an exchange request,
neither the redemption nor the purchase side of the exchange will be    
 processed. Each MFS fund reserves the right to delay for one business day
  the processing of exchange requests in the event that, in MFSC's judgment,
such delay would be in the fund's best interest, in which case both the 
redemption and purchase side of the exchange will receive the fund's net
asset values at the conclusion of the delay period.                     

o SPECIFIC EXCHANGE AND PURCHASE LIMITATION POLICIES. Under the MFS Funds'  
purchase and exchange limitation policy, MFSC will generally restrict,  
reject or cancel purchase and exchange orders if MFSC determines that an
  accountholder has made two exchanges, each in an amount of $5,000 or more,
 out of an account in an MFS fund during a calendar quarter ("two exchange
limit"). This policy does not apply to exchanges:                       

o out of the MFS money market funds; or                                 

 o initiated by a retirement plan trustee or sponsor rather than by a plan
participant, and other similar non-discretionary exchanges (e.g., in
connection with fund mergers/acquisitions/liquidations).            

In circumstances where shareholders hold shares through financial       
intermediaries, the MFS funds may rely upon the financial intermediary's
policy to restrict frequent trading and its monitoring of such policy in
lieu of the MFS funds' two-exchange limit if MFSC believes that the     
financial intermediary's policy is reasonably designed to identify and  
curtail trading activity that is not in the best interest of the fund.  

 In addition, MFSC may make exceptions to this policy if, in its judgment,
the transaction does not represent frequent trading activity, such as   
  purchases made through systematic purchase plans or payroll contributions.
  In applying this policy, MFSC considers the information available to it at
   the time and reserves the right to consider trading multiple accounts under
common ownership, control, or influence to be trading out of a single   
account.                                                                

Exchanges made on the same day in the same account are aggregated for   
  purposes of counting the number and dollar amount of exchanges made by the
accountholder (e.g., a shareholder who on the same day exchanges $6,000 
  from one MFS fund into two other MFS funds, by exchanging $3,000 into each
of the two MFS funds, will be viewed as having made one exchange        
transaction exceeding $5,000 in value).                                 

o LIMITATIONS ON THE ABILITY TO DETECT AND CURTAIL FREQUENT TRADING         
   PRACTICES. Shareholders seeking to engage in frequent trading practices may
   deploy a variety of strategies to avoid detection, and, despite the efforts
 of MFSC to prevent frequent trading, there is no assurance that MFSC will
 be able to identify such shareholders or curtail their trading practices.
The ability of MFSC to detect and curtail frequent trading practices may
also be limited by operational systems and technological limitations.   

MFSC receives purchase, exchange, and redemption orders through certain 
financial intermediaries that hold omnibus accounts with an MFS fund.   
Omnibus account arrangements are common forms of holding shares of MFS  
   funds, particularly among certain financial intermediaries such as brokers,
retirement and 529 plans, investment advisors, and variable insurance   
products. A financial intermediary's policy restricting frequent trading
may be more or less restrictive than the MFS funds' policies, may permit
  certain transactions not permitted by the MFS funds' policies, or prohibit
transactions not subject to the MFS funds' policies.                    

 MFSC is generally not able to identify trading by a particular underlying
shareholder within an omnibus account, which makes it difficult or      
   impossible to determine if a particular underlying shareholder has violated
the two exchange limit or is otherwise engaged in frequent trading.     
However, MFSC reviews trading activity at the omnibus level to detect   
   suspicious trading activity. If MFSC detects suspicious trading activity at
the omnibus level it will contact the financial intermediary to request 
underlying shareholder level activity to determine whether there is     
underlying shareholder level frequent trading. In certain instances, a  
financial intermediary may be unwilling or unable to provide MFSC with  
information about underlying shareholder level activity.                

If frequent trading is identified, MFSC will take appropriate action.   
   MFSC's ability to monitor and deter frequent trading in omnibus accounts at
the underlying shareholder level is dependent upon the capability and   
  cooperation of the financial intermediary. Accordingly, depending upon the
composition of a fund's shareholder accounts, the level of cooperation  
provided by the financial intermediary and in light of efforts made by  
certain shareholders to evade these limitations, MFSC may not be in a   
position to monitor and deter frequent trading with respect to a        
significant percentage of a fund's shareholders. You should consult your
 financial intermediary regarding the application of these limitations and
whether your financial intermediary imposes any additional or different 
limitations.                                                            

o FREQUENT TRADING RISKS. To the extent that the MFS funds or their agents  
are unable to curtail excessive trading practices in a fund, these      
practices may interfere with the efficient management of the fund's     
portfolio, may result in increased transaction and administrative costs,
and may adversely impact the fund's performance.                        

 To the extent that the fund invests in securities that trade infrequently
or are difficult to value, such as the securities of smaller companies, 
high yield debt instruments, and floating rate loans, the interests of  
long-term shareholders may be diluted as a result of price arbitrage, a 
short-term trading strategy that seeks to exploit perceived pricing     
inefficiencies in the fund's investments. Such short-term trading       
  strategies may interfere with efficient management of the fund's portfolio
to a greater degree than funds that invest in more frequently traded or 
liquid securities, in part because the fund may have difficulty selling 
   these portfolio securities at advantageous times or prices to satisfy large
and/or frequent redemption requests. Any successful price arbitrage may 
   also cause dilution in the value of fund shares held by other shareholders.

UNAUTHORIZED TRANSACTIONS. MFS will not be responsible for losses that result   
from unauthorized transactions unless MFSC does not follow procedures           
reasonably designed to verify your identity. If an account has more than one    
owner or authorized person, MFSC will accept telephone and online instructions  
from any one owner or authorized person. It is important that you contact MFSC  
immediately about any transactions you believe to be unauthorized.              

ABILITY TO CONTACT MFSC. Certain methods of contacting MFSC, such as by mail,   
telephone, or electronically, may be unavailable or delayed (for example, after 
natural disasters or during periods of significant/major political, social, or  
economic instability).                                                          

RESERVATION OF OTHER RIGHTS. In addition to the rights expressly stated         
elsewhere in this prospectus, MFSC reserves the right to: 1) alter, add, or     
discontinue any conditions of purchase, service, or privilege at any time       
without notice; and 2) freeze any account or suspend account services when MFSC 
has received reasonable notice (written or otherwise) of a dispute between      
registered or beneficial account owners or when MFSC believes a fraudulent      
transaction may occur or has occurred.                                          

ANTI-MONEY LAUNDERING RESTRICTIONS. Federal law requires the fund to implement  
policies and procedures reasonably designed to prevent, detect and report money 
laundering and other illegal activity. The fund may redeem your shares and      
close your account; suspend, restrict or cancel purchase and redemption orders; 
process redemption requests and withhold your proceeds; and take other action   
if it is unable to verify your identity within a reasonable time or conduct     
required due diligence on your account or as otherwise permitted by its         
anti-money laundering policies and procedures. Any applicable CDSC will be      
assessed upon redemption of your shares.                                        

CONFIRMATIONS IN QUARTERLY STATEMENTS. Transactions made under certain periodic 
investment and withdrawal programs (including reinvestment plans) will be       
confirmed on quarterly account statements.                                      

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OTHER INFORMATION                                                               

VALUATION                                                                       

The price of each class of the fund's shares is based on its net asset value.   
The net asset value of each class of shares is determined each day the New York 
Stock Exchange (the Exchange) is open for trading as of the close of regular    
trading on the Exchange (generally 4:00 p.m. Eastern time). However, net asset  
value may be calculated earlier as permitted by the SEC. Net asset value per    
share is computed by dividing the net assets allocated to each share class by   
the number of shares outstanding for that class. On days when the Exchange is   
closed (such as week-ends and holidays), net asset value is not calculated, and 
the fund does not transact purchase and redemption orders. To the extent the    
funds assets are traded in other markets on days when the fund does not price   
its shares, the value of the fund's assets may change when you will not be able 
to purchase or redeem shares.                                                   

To determine net asset value, the fund's investments for which reliable market  
quotations are readily available are valued at market value. Certain short term 
debt instruments are valued at amortized cost.                                  

The Board of Trustees has delegated primary responsibility for determining or   
causing to be determined the value of the fund's investments (including any     
fair valuation) to the adviser pursuant to valuation policies and procedures    
approved by the Board. If the adviser determines that reliable market           
quotations are not readily available, investments are valued at fair value as   
determined in good faith by the adviser in accordance with such procedures      
under the oversight of the Board of Trustees.                                   

Under the fund's valuation policies and procedures, market quotations are not   
considered to be readily available for many types of debt instruments and       
certain types of derivatives. These investments are generally valued at fair    
value based on information from independent pricing services. These valuations  
can be based on both dealer-supplied valuations and electronic data processing  
techniques, which take into account factors such as institutional-size trading  
in similar groups of securities, yield, quality, coupon rate, maturity, type of 
issue, trading characteristics, and other market data.                          

In addition, investments may be valued at fair value if the adviser determines  
that an investment's value has been materially affected by events occurring     
after the close of the exchange or market on which the investment is            
principally traded (such as a foreign exchange or market) and prior to the      
determination of the fund's net asset value, or after the halting of trading of 
a specific security where trading does not resume prior to the close of the     
exchange or market on which the security is principally traded. The adviser may 
rely on independent pricing services or other information (such as the          
correlation with price movements of similar securities in the same or other     
markets; the type, cost and investment characteristics of the security; the     
business and financial condition of the issuer; and trading and other market    
data) to assist in determining whether to fair value and at what value to fair  
value an investment. The value of an investment for purposes of calculating the 
fund's net asset value can differ depending on the source and method used to    
determine value. When fair valuation is used, the value of investments used to  
determine the fund's net asset value may differ from quoted or published prices 
for the same investments.                                                       

DISTRIBUTIONS                                                                   

The fund intends to declare a dividend daily and to pay these dividends to      
shareholders at least monthly.                                                  

Any capital gains are distributed at least annually.                            

DISTRIBUTION OPTIONS                                                            

The following distribution options are generally available:                     

o Dividend and capital gain distributions reinvested in additional shares   
(this option will be assigned if no other option is specified);         

o Dividend distributions in cash; capital gain distributions reinvested in  
additional shares;                                                      

o Dividend and capital gain distributions in cash; or                       

o Dividend and capital gain distributions reinvested into the same class of 
shares of another MFS Fund.                                             

The distribution option for accounts with dividend distributions of less than   
$10 will generally be changed to reinvestment in additional shares of the fund. 
If you have elected to receive distributions in cash, and the postal service is 
unable to deliver checks to your address of record, or you do not respond to    
mailings from MFSC with regard to uncashed distribution checks, your            
distribution option may be converted to having all distributions reinvested in  
additional shares. You should contact MFSC to change your distribution option,  
and your request to do so must be received by MFSC before the record date for a 
distribution in order to be effective for that distribution. No interest will   
accrue on amounts represented by uncashed distribution checks.                  

TAX CONSIDERATIONS                                                              

The following discussion is very general. You are urged to consult your tax     
adviser regarding the effect that an investment in the fund may have on your    
particular tax situation, including possible foreign, state, and local taxes.   
Also, this discussion does not apply to shares of the fund held through         
tax-exempt retirement plans.                                                    

The fund expects to distribute substantially all of its income and gains        
annually. You may receive three different types of distributions from the fund: 
exempt-interest dividends; ordinary dividends; and capital gain dividends. Most 
distributions will be exempt-interest dividends, which are exempt from federal  
income tax. Ordinary dividends are normally subject to federal income tax at    
ordinary income tax rates. (The fund does not expect any distributions to be    
treated as qualified dividend income, which is taxed at reduced rates.)         
Distributions designated as capital gain dividends are taxable as long-term     
capital gains. Any taxes that you pay on a distribution will be the same        
whether you take the distribution in cash or have it reinvested in additional   
shares of the fund. If you buy shares when a fund has realized but not yet      
distributed ordinary income or capital gains, you will pay full price for the   
shares and then receive a portion back as a taxable distribution.               

Any gain resulting from the sale or exchange of your shares will generally also 
be subject to tax.                                                              

The fund's investments in certain debt instruments may cause the fund to        
recognize income in excess of the cash generated by such instruments. Thus, the 
fund could be required at times to liquidate other investments in order to      
satisfy its distribution requirements.                                          

If you receive social security or railroad retirement benefits, you should      
consult your tax adviser to determine what effect, if any, an investment in the 
fund may have on the federal taxation of your benefits. In addition, an         
investment in the fund may result in liability for federal alternative minimum  
tax, for both individual and corporate shareholders.                            

Long-term capital gain rates applicable to most individuals have been           
temporarily reduced for taxable years beginning before January 1, 2011.         

The Form 1099 that is mailed to you every January details your distributions    
and how they are treated for federal tax purposes.                              

PROVISION OF ANNUAL AND SEMIANNUAL REPORTS AND PROSPECTUSES                     

The fund produces financial reports every six months and updates its prospectus 
annually. To avoid sending duplicate copies of materials to households, only    
one copy of the fund's annual and semiannual report and prospectus will be      
mailed to shareholders having the same residential address on the fund's        
records. However, any shareholder may contact MFSC (please see back cover for   
address and telephone number) to request that copies of these reports and       
prospectuses be sent personally to that shareholder.                            

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FINANCIAL HIGHLIGHTS                                                            

The financial highlights tables are intended to help you understand a fund's    
financial performance for the past five years (or, if shorter, the period of    
the fund's operation). Certain information reflects financial results for a     
single fund share. The total returns in the table represent the rate by which   
an investor would have earned (or lost) on an investment in a fund (assuming    
reinvestment of all distributions) held for the entire period. This information 
has been audited by the fund's independent registered public accounting firm,   
whose report, together with the fund's financial statements, are included in    
the fund's Annual Report to shareholders. The fund's Annual Report is available 
upon request by contacting MFS Service Center, Inc. (please see back cover for  
address and telephone number). The financial statements contained in the Annual 
Report are incorporated by reference into the SAI. The fund's independent       
registered public accounting firm is Ernst & Young LLP.                         

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                                                        [Enlarge/Download Table]

                                                                        YEARS ENDED 1/31                         
                                              ------------------------------------------------------------------ 
                                                  2007          2006          2005          2004          2003   
                                                                                                                 
CLASS A                                                                                                          
Net asset value, beginning of period          $     8.41    $     8.39      $   8.28    $     8.12    $     8.23 
                                              ----------    ----------      --------    ----------    ---------- 
Income (loss) from investment operations                                                                         
Net investment income (d)                     $     0.45    $     0.46      $   0.48    $     0.47    $     0.48 
Net realized and unrealized gain (loss)                                                                          
on investments                                      0.07          0.02          0.09          0.17         (0.09)
                                              ----------    ----------      --------    ----------    ---------- 
Total from investment operations              $     0.52    $     0.48      $   0.57    $     0.64    $     0.39 
                                              ----------    ----------      --------    ----------    ---------- 
Less distributions declared to shareholders                                                                      
From net investment income                    $    (0.44)   $    (0.46)     $  (0.46)   $    (0.48)   $    (0.50)
Redemption fees added to paid-in capital (d)  $     0.00(w) $     0.00(w)   $   0.00(w) $       --    $       -- 
                                              ----------    ----------      --------    ----------    ---------- 
Net asset value, end of period                $     8.49    $     8.41      $   8.39    $     8.28    $     8.12 
                                              ==========    ==========      ========    ==========    ========== 
Total return (%) (r)(s)(t)                          6.32          5.81          7.16          7.98          4.96 
                                              ----------    ----------      --------    ----------    ---------- 
Ratios (%) (to average net assets) and                                                                           
Supplemental data:                                                                                               
Expenses before expense reductions (f)              0.97          0.94(z)       0.80          0.81          0.84 
Expenses after expense reductions (f)               0.87          0.84(z)       0.71          0.79          0.79 
Expenses after expense reductions and                                                                            
excluding interest expense and fees (f)(l)          0.72          0.72          0.71          0.79          0.79 
Net investment income                               5.32          5.47          5.82          5.80          5.88 
Portfolio turnover                                    13            20            13             9            20 
Net assets at end of period (000 omitted)     $1,335,269    $1,080,805      $977,416    $1,003,328    $1,050,204 

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                                                                      YEARS ENDED 1/31                          
                                              ----------------------------------------------------------------- 
                                                2007           2006          2005          2004          2003   
                                                                                                                
CLASS B                                                                                                         
Net asset value, beginning of period          $   8.41       $   8.40      $   8.28      $   8.13      $   8.24 
                                              --------       --------      --------      --------      -------- 
Income (loss) from investment operations                                                                        
Net investment income (d)                     $   0.39       $   0.40      $   0.42      $   0.41      $   0.42 
Net realized and unrealized gain (loss) on                                                                      
investments                                       0.07           0.00(w)       0.10          0.16         (0.10)
                                              --------       --------      --------      --------      -------- 
Total from investment operations              $   0.46       $   0.40      $   0.52      $   0.57      $   0.32 
                                              --------       --------      --------      --------      -------- 
Less distributions declared to shareholders                                                                     
From net investment income                    $  (0.37)      $  (0.39)     $  (0.40)     $  (0.42)     $  (0.43)
Redemption fees added to paid-in capital (d)  $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     -- 
                                              --------       --------      --------      --------      -------- 
Net asset value, end of period                $   8.50       $   8.41      $   8.40      $   8.28      $   8.13 
                                              ========       ========      ========      ========      ======== 
Total return (%) (r)(s)(t)                        5.64           4.88          6.47          7.15          4.01 
                                              --------       --------      --------      --------      -------- 
Ratios (%) (to average net assets) and                                                                          
Supplemental data:                                                                                              
Expenses before expense reductions (f)            1.74           1.70(z)       1.57          1.59          1.63 
Expenses after expense reductions (f)             1.64           1.60(z)       1.48          1.57          1.58 
Expenses after expense reductions and                                                                           
excluding interest expense and fees (f)(l)        1.50           1.48          1.48          1.57          1.58 
Net investment income                             4.60           4.73          5.05          5.02          5.09 
Portfolio turnover                                  13             20            13             9            20 
Net assets at end of period (000 omitted)     $178,566       $220,854      $283,360      $337,065      $355,602 

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                                                                       YEARS ENDED 1/31                            
                                               -----------------------------------------------------------------   
                                                 2007           2006          2005          2004          2003     
                                                                                                                   
CLASS C                                                                                                            
Net asset value, beginning of period           $   8.42       $   8.40      $   8.29      $   8.13      $   8.24   
                                               --------       --------      --------      --------      --------   
Income (loss) from investment operations                                                                           
Net investment income (d)                      $   0.36       $   0.37      $   0.39      $   0.39      $   0.40   
Net realized and unrealized gain (loss) on                                                                         
investments                                        0.08           0.02          0.10          0.17         (0.10)  
                                               --------       --------      --------      --------      --------   
Total from investment operations               $   0.44       $   0.39      $   0.49      $   0.56      $   0.30   
                                               --------       --------      --------      --------      --------   
Less distributions declared to shareholders                                                                        
From net investment income                     $  (0.36)      $  (0.37)     $  (0.38)     $  (0.40)     $  (0.41)  
Redemption fees added to paid-in capital (d)   $   0.00(w)    $   0.00(w)   $   0.00(w)   $     --      $     --   
                                               --------       --------      --------      --------      --------   
Net asset value, end of period                 $   8.50       $   8.42      $   8.40      $   8.29      $   8.13   
                                               ========       ========      ========      ========      ========   
Total return (%) (r)(s)(t)                         5.27           4.76          6.10          6.91          3.92   
                                               --------       --------      --------      --------      --------   
Ratios (%) (to average net assets) and                                                                             
Supplemental data:                                                                                                 
Expenses before expense reductions (f)             1.97           1.94(z)       1.80          1.81          1.84   
Expenses after expense reductions (f)              1.87           1.84(z)       1.71          1.79          1.79   
Expenses after expense reductions and                                                                              
excluding interest expense and fees (f)(l)         1.72           1.72          1.71          1.79          1.79   
Net investment income                              4.30           4.44          4.80          4.78          4.86   
Portfolio turnover                                   13             20            13             9            20   
Net assets at end of period (000 omitted)      $170,047       $119,952      $ 85,715      $ 78,975      $ 71,519   

(d) Per share data are based on average shares outstanding.                                                        
(f) Ratios do not reflect reductions from fees paid indirectly.                                                    
(l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust    
    assets.                                                                                                        
(r) Certain expenses have been reduced without which performance would have been lower.                            
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be
    lower.                                                                                                         
(t) Total returns do not include any applicable sales charges.                                                     
(w) Per share amount was less than $0.01.                                                                          
(z) After the fund issued its January 31, 2006 financial statements, the fund determined that the criteria for sale
    accounting in FASB Statement No. 140 had not been met for certain transfers of municipal bonds during the      
    fiscal year ended January 31, 2006 and that its transfers of municipal bonds in connection with self-deposited 
    inverse floaters should have been accounted for as secured borrowings rather than sales. Accordingly, the      
    expense ratio has been restated to reflect interest expense and fees related to payments made to the holder of 
    the floating rate certificate from trust assets in connection with self-deposited inverse floater transactions.
    The impact of the restatement was to increase the expense ratio by 0.12%.                                      

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MFS MUNICIPAL HIGH INCOME FUND                                                  

SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF TRUSTEES. The Board of Trustees of 
the MFS funds has adopted procedures by which shareholders may send             
communications to the Board. Shareholders may mail written communications to    
the Board to the attention of the Board of Trustees, [fund name], Massachusetts 
Financial Services Company, 500 Boylston Street, Boston, MA 02116-3741,         
Attention: Frank Tarantino, Independent Chief Compliance Officer of the Fund.   
Shareholder communications must (i) be in writing and be signed by the          
shareholder, (ii) identify the MFS fund to which they relate and (iii) identify 
the class and number of shares held by the shareholder.                         

IF YOU WANT MORE INFORMATION ABOUT MFS MUNICIPAL HIGH INCOME FUND, THE          
FOLLOWING DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:                            

ANNUAL/SEMIANNUAL REPORTS. These reports contain information about the fund's   
actual investments. Annual reports discuss the effect of recent market          
conditions and investment strategies on the fund's performance during its last  
fiscal year.                                                                    

STATEMENT OF ADDITIONAL INFORMATION (SAI). The SAI, dated June 1, 2007,         
provides more detailed information about the fund and is incorporated into this 
prospectus by reference.                                                        

You can get free copies of the annual/semiannual reports, the SAI and other     
information about the fund, and make inquiries about the fund, by contacting:   

MFS Service Center, Inc.                                      
500 Boylston Street                                           
Boston, MA 02116-3741                                         
Telephone: 1-800-225-2606                                     
Internet: MFS.COM                                             

Information about the fund (including its prospectus, SAI and shareholder       
reports) can be reviewed and copied at the:                                     

Public Reference Room                                         
Securities and Exchange Commission                            
100 F Street, N.E., Room 1580                                 
Washington, D.C., 20549                                       

Information on the operation of the Public Reference Room may be obtained by    
calling the Commission at 202-551-5850. Reports and other information about the 
fund are available on the Edgar Database on the Commission's Internet Web site  
at HTTP://WWW.SEC.GOV, and copies of this information may be obtained, upon     
payment of a duplicating fee, by electronic request at the following e-mail     
address: PUBLICINFO@SEC.GOV or by writing the Public Reference Section at the   
above address.                                                                  

The fund's Investment Company Act file number is 811-2794.

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M F S(R)                                 STATEMENT OF ADDITIONAL INFORMATION    
INVESTMENT MANAGEMENT                    JUNE 1, 2007                           

MFS MUNICIPAL HIGH INCOME FUND                                                  
A SERIES OF MFS SERIES TRUST III                                                
500 BOYLSTON STREET, BOSTON, MA 02116                                           

This Statement of Additional Information ("SAI") contains additional            
information about the Fund and should be read in conjunction with the Fund's    
Prospectus dated June 1, 2007. The Fund's financial statements are incorporated 
into this SAI by reference to the Fund's most recent Annual Report to           
shareholders. A copy of the Annual Report accompanies this SAI. You may obtain  
a copy of the Fund's Prospectus and Annual Report without charge by contacting  
the Fund's transfer agent, MFS Service Center, Inc. (please see the back cover  
of Part II of this SAI for address and telephone number).                       

This SAI is divided into two Parts -- Part I and Part II. Part I contains       
information that is particular to the Fund, while Part II contains information  
that generally applies to all of the funds in the MFS Family of Funds (the "MFS 
Funds"). Each part of this SAI has a variety of appendices which can be found   
at the end of Part I and Part II, respectively.                                 

THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE  
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.              

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STATEMENT OF ADDITIONAL INFORMATION (SAI) - PART I                              

Part I of this SAI contains information that is particular to the Fund.         

DEFINITIONS .............................................................  XX   
MANAGEMENT OF THE FUND...................................................  XX   
SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS.............................  XX   
INVESTMENT STRATEGIES, RISKS, AND RESTRICTIONS...........................  XX   
TAX CONSIDERATIONS.......................................................  XX   
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.........................  XX   
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS...  XX   
APPENDIX A - TRUSTEE COMPENSATION AND COMMITTEES.........................  XX   
APPENDIX B - SHARE OWNERSHIP.............................................  XX   
APPENDIX C - PORTFOLIO MANAGER(S)........................................  XX   
APPENDIX D - CERTAIN SERVICE PROVIDER COMPENSATION.......................  XX   
APPENDIX E - SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS................  XX   
APPENDIX F - PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS............  XX   

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DEFINITIONS                                                                     
"Fund" - MFS Municipal High Income Fund.                                        

"Trust" - MFS Series Trust III, a Massachusetts business trust, organized on    
December 15, 1977. The Trust was known as "Massachusetts Financial High Income  
Trust" until it's name was changed on August 20, 1993.                          

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

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

"MFSC" - MFS Service Center, Inc., a Delaware corporation.                      

"Prospectus" - The Prospectus of the Fund, dated June 1, 2007, as amended or    
supplemented from time to time.                                                 

MANAGEMENT OF THE FUND                                                          

THE FUND                                                                        

The Fund is a diversified open-end management investment company.               

TRUSTEES AND OFFICERS - IDENTIFICATION AND BACKGROUND                           

The identification and background of the Trustees and officers of the Trust are 
set forth in Appendix A to Part II of this SAI.                                 

TRUSTEE COMPENSATION AND COMMITTEES                                             

Compensation paid to the non-interested Trustees for certain specified periods, 
as well as information regarding committees of the Board of Trustees, is set    
forth in Appendix A to this Part I.                                             

SHARE OWNERSHIP                                                                 

Information concerning the ownership of Fund shares by Trustees and officers of 
the Trust as a group, as well as the dollar value range of each Trustee's share 
ownership in the Fund and, on an aggregate basis, in all MFS Funds overseen by  
the Trustee, by investors who are deemed to "control" the Fund, if any, and by  
investors who own 5% or more of any class of Fund shares, if any, is set forth  
in Appendix B to this Part I.                                                   

PORTFOLIO MANAGER(S)                                                            

Information regarding the Fund's portfolio manager(s), including other accounts 
managed, compensation, ownership of Fund shares, and possible conflicts of      
interest, is set forth in Appendix C to this Part I.                            

CERTAIN SERVICE PROVIDER COMPENSATION                                           

Compensation paid by the Fund to certain of its service providers -- for        
advisory services, administrative services, and transfer agency services -- for 
certain specified periods, is set forth in Appendix D to this Part I.           

CUSTODIAN                                                                       

JPMorgan Chase Bank, with a place of business at One Chase Manhattan Plaza, New 
York, NY 10081, serves as a custodian of the assets of the Fund (the            
"Custodian"). The Custodian is responsible for safekeeping and controlling the  
Fund's cash and securities, handling the receipt and delivery of securities,    
collecting interest and dividends on the Fund's investments, serving as the     
Fund's foreign custody manager, and providing reports on foreign securities     
depositaries. An affiliate of the Custodian, J. P. Morgan Investor Services     
Co., with a place of business at 73 Tremont Street, Boston, MA 02108, is        
responsible for maintaining books of original entry and other required books    
and accounts for the Fund and calculating the daily net asset value of each     
class of shares of the Fund. The Fund may invest in securities of the Custodian 
and its affiliates and may deal with the Custodian and its affiliates as        
principal in securities transactions.                                           

The Fund has an expense offset arrangement that reduces the Fund's custodian    
fees based upon the amount of cash maintained by the Fund with its custodian.   

SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS                                    

SALES CHARGES                                                                   

Sales charges paid for certain specified periods in connection with the         
purchase and sale of the Fund's shares are set forth in Appendix E to this Part 
I.                                                                              

DISTRIBUTION PLAN PAYMENTS                                                      

Payments made by the Fund under the Fund's plan in accordance with Rule 12b-1   
under the Investment Company Act of 1940, as amended (the "Distribution Plan"), 
for the Fund's most recent fiscal year, are set forth in Appendix E to this     
Part I.                                                                         

INVESTMENT STRATEGIES, RISKS, AND RESTRICTIONS                                  

INVESTMENT STRATEGIES AND RISKS                                                 

Certain investment strategies and risks are described in Appendix E to Part II  
of this SAI.                                                                    

INVESTMENT RESTRICTIONS                                                         

The Fund has adopted certain investment restrictions which are described in     
Appendix F of Part II of this SAI.                                              

TAX CONSIDERATIONS                                                              

For a discussion of tax considerations, see Part II of this SAI.                

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                                

Brokerage commissions paid by the Fund for certain specified periods,           
information concerning purchases by the Fund of securities issued by its        
regular broker/dealers for its most recent fiscal year, and information         
concerning the amount of transactions and related commissions to broker/dealer  
firms that MFS has determined provide valuable research for the Fund's most     
recent fiscal year, are set forth in Appendix F to this Part I. Portfolio       
transactions and brokerage commissions are more fully described in Part II of   
this SAI under the heading "Portfolio Transactions and Brokerage Commissions."  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS          

Ernst & Young LLP is the Independent Registered Public Accounting Firm,         
providing audit services, tax return review, and other related services and     
assistance in connection with the review of various Securities and Exchange     
Commission filings.                                                             

The Fund's Financial Statements and Financial Highlights for the fiscal year    
ended January 31, 2007, are incorporated by reference into this SAI from the    
Fund's Annual Report to shareholders and have been audited by Ernst & Young     
LLP, independent registered public accounting firm, as stated in their report,  
which is incorporated herein by reference, and have been so incorporated in     
reliance upon reports of such firm, given upon their authority as experts in    
accounting and auditing. A copy of the Fund's Annual Report accompanies this    
SAI.                                                                            

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                                                           PART I - APPENDIX A

TRUSTEE COMPENSATION AND COMMITTEES                                             

The Fund pays the non-interested Trustees an annual fee plus a fee for each     
meeting attended. In addition, the non-interested Trustees are reimbursed for   
their out-of-pocket expenses.                                                   

TRUSTEE COMPENSATION TABLE                                                      

------------------------------------------------------------------------------  
                        TRUSTEE    RETIREMENT BENEFITS    TOTAL TRUSTEE FEES
                       FEES FROM    ACCRUED AS PART OF    FROM FUND AND FUND
TRUSTEE NAME              FUND(1)        FUND EXPENSE           COMPLEX(2)      
------------------------------------------------------------------------------  
INTERESTED TRUSTEES                                                             
------------------------------------------------------------------------------  
Robert J. Manning           N/A              N/A                   N/A          
------------------------------------------------------------------------------  
Robert C. Pozen             N/A              N/A                   N/A          
------------------------------------------------------------------------------  

------------------------------------------------------------------------------  
NON-INTERESTED TRUSTEES                                                         
------------------------------------------------------------------------------  
Robert E. Butler(3)       $2,790             N/A                 $210,289       
------------------------------------------------------------------------------  
Lawrence H. Cohn, M.D.    $2,760             $ 0                 $208,289       
------------------------------------------------------------------------------  
David H. Gunning          $2,947             N/A                 $219,642       
------------------------------------------------------------------------------  
William R. Gutow          $2,760             N/A                 $208,289       
------------------------------------------------------------------------------  
Michael Hegarty           $2,775             N/A                 $209,289       
------------------------------------------------------------------------------  
J. Atwood Ives            $3,932             $ 0                 $285,289       
------------------------------------------------------------------------------  
Amy B. Lane(4)            $  675             N/A                 $50,423        
------------------------------------------------------------------------------  
Lawrence T. Perera        $3,058             $ 0                 $228,289       
------------------------------------------------------------------------------  
J. Dale Sherratt          $3,387             $ 0                 $250,289       
------------------------------------------------------------------------------  
Laurie J. Thomsen         $2,775             N/A                 $209,289       
------------------------------------------------------------------------------  
Robert W. Uek(3)          $3,051             N/A                 $227,789       
------------------------------------------------------------------------------  

(1) For the fiscal year ended January 31, 2007.                                 
(2) Information provided is for calendar year 2006. Each Trustee receiving      
compensation served as Trustee of 97 funds within the MFS Fund Complex  
(having aggregate net assets at December 31, 2006 of approximately $102 
billion).                                                               
(3) Messrs. Butler and Uek became Trustees of the Fund on January 1, 2006.      
(4) Ms. Lane retired as a Trustee of the Fund on February 22, 2006.             

Retirement Benefit Deferral Plan-- Under a Retirement Benefit Deferral Plan,    
certain Trustees have deferred benefits from a prior retirement plan. The value 
of the benefits is periodically readjusted as though the Trustee had invested   
an equivalent amount in Class A shares of the Fund(s) designated by such        
Trustee. The value of the deferred benefits will be paid to the Trustees upon   
retirement or thereafter. The plan does not obligate a Fund to retain the       
services of any Trustee or pay any particular level of compensation to any      
Trustee. The plan is not funded and a Fund's obligation to pay the Trustee's    
deferred compensation is a general unsecured obligation.                        

COMMITTEES                                                                      

The Board has established the following Committees:                             

------------------------------------------------------------------------------- 
NUMBER OF                           
MEETINGS                          
              IN LAST                                  CURRENT
NAME OF COMMITTEE    FISCAL YEAR  FUNCTIONS                    MEMBERS(1)       
------------------------------------------------------------------------------- 
AUDIT COMMITTEE           9       Oversees the accounting      Butler*, Gutow*, 
                           and auditing procedures of   Sherratt*,
                              the Fund and, among other    Thomsen*, and
                     duties, considers the        Uek*
    selection of the
           independent accountants
              for the Fund and the scope
     of the audit, and
           considers the effect on
             the independence of those
      accountants of any
           non-audit services such
              accountants provide to the
         Fund and any audit or
           non-audit services such
          accountants provide to
        other MFS Funds, MFS
              and/or certain affiliates.
         The Committee is also
   responsible for
           establishing procedures
    for the receipt,
            retention, and treatment
             of complaints received by
      the Fund regarding
        accounting, internal
           accounting controls, or
            auditing matters and the
           confidential, anonymous
          submission of concerns
          regarding questionable
              fund accounting matters by
            officers of the Fund and
           employees of the Fund's
       investment adviser,
            administrator, principal
             underwriter, or any other
provider of 
      accounting-related
         services to the Fund.

------------------------------------------------------------------------------- 
COMPLIANCE AND            8       Oversees the development     Butler*, Cohn*,  
GOVERNANCE COMMITTEE              and implementation of the    Gunning*,        
                            Fund's regulatory and        Gutow*, and
                          fiduciary compliance         Sherratt*
             policies, procedures, and
            practices under the 1940
             Act, and other applicable
              laws, as well as oversight
             of compliance policies of
         the Fund's investment
             adviser and certain other
             service providers as they
              relate to Fund activities.
          The Fund's Independent
            Chief Compliance Officer
           reports directly to the
             Committee and assists the
             Committee in carrying out
            its responsibilities. In
           addition, the Committee
     advises and makes
          recommendations to the
    Board on matters
      concerning Trustee
 practices and
              recommendations concerning
            the functions and duties
            of the committees of the
Board.      
------------------------------------------------------------------------------- 
CONTRACTS REVIEW          5       Requests, reviews, and       All              
COMMITTEE                         considers the information    non-interested   
                                deemed reasonably            Trustees of the
                               necessary to evaluate the    Board (Butler,
                               terms of the investment      Cohn, Gunning,
                                advisory and principal       Gutow, Hegarty,
                              underwriting agreements      Ives, Perera,
                          and the Plan of              Sherratt,
                         Distribution under Rule      Thomsen,
                         12b-1 that the Fund          and Uek)
        proposes to renew or
             continue, and to make its
          recommendations to the
             full Board of Trustees on
  these matters.
------------------------------------------------------------------------------- 
NOMINATION AND            1       Recommends qualified         All              
COMPENSATION                      candidates to the Board in   non-interested   
COMMITTEE                         the event that a position    Trustees of the  
                               is vacated or created. The   Board (Butler,
                               Committee will consider      Cohn, Gunning,
                                recommendations by           Gutow, Hegarty,
                              shareholders when a          Ives, Perera,
                          vacancy exists.              Sherratt,
                         Shareholders wishing to      Thomsen,
                         recommend candidates for     and Uek)
             Trustee for consideration
              by the Committee may do so
            by writing to the Fund's
              Secretary at the principal
           executive office of the
              Fund. Such recommendations
          must be accompanied by
    biographical and
            occupational data on the
        candidate (including
         whether the candidate
           would be an "interested
           person" of the Fund), a
          written consent by the
              candidate to be named as a
           nominee and to serve as
              Trustee if elected, record
             and ownership information
        for the recommending
            shareholder with respect
      to the Fund, and a
      description of any
   arrangements or
            understandings regarding
         recommendation of the
 candidate for
      consideration. The
     Committee is also
          responsible for making
          recommendations to the
       Board regarding any
          necessary standards or
              qualifications for service
     on the Board. The
              Committee also reviews and
            makes recommendations to
       the Board regarding
        compensation for the
            non-interested Trustees.
------------------------------------------------------------------------------- 
PORTFOLIO TRADING         8       Oversees the policies,       Cohn*, Gunning*, 
AND MARKET REVIEW                 procedures, and practices    Hegarty*, and    
COMMITTEE                         of the Fund with respect     Perera*          
             to brokerage transactions
       involving portfolio
       securities as those
             policies, procedures, and
             practices are carried out
              by MFS and its affiliates.
               The Committee also oversees
             the administration of the
       Fund's proxy voting
              policies and procedures by
         MFS. In addition, the
              Committee receives reports
          from MFS regarding the
             policies, procedures, and
            practices of MFS and its
            affiliates in connection
            with their marketing and
             distribution of shares of
the Fund.   

 -------------------------------------------------------------------------------
PRICING COMMITTEE         8       Oversees the determination   Hegarty*,        
                         of the value of the          Perera*,
                          portfolio securities and     Thomsen*,
                         other assets held by the     and Uek*
          Fund and determines or
           causes to be determined
     the fair value of
             securities and assets for
           which market quotations
    are not "readily
            available" in accordance
          with the 1940 Act. The
       Committee delegates
              primary responsibility for
      carrying out these
             functions to MFS and MFS'
      internal valuation
         committee pursuant to
        pricing policies and
              procedures approved by the
            Committee and adopted by
         the full Board. These
    policies include
       methodologies to be
      followed by MFS in
        determining the fair
       values of portfolio
        securities and other
           assets held by the Fund
    for which market
              quotations are not readily
            available. The Committee
           meets periodically with
       the members of MFS'
      internal valuation
           committee to review and
              assess the quality of fair
       valuation and other
          pricing determinations
        made pursuant to the
           Fund's pricing policies
          and procedures, and to
         review and assess the
           policies and procedures
             themselves. The Committee
      also exercises the
           responsibilities of the
             Board under the Amortized
             Cost Valuation Procedures
            approved by the Board on
             behalf of each Fund which
         holds itself out as a
          "money market fund" in
             accordance with Rule 2a-7
       under the 1940 Act.
------------------------------------------------------------------------------- 
SERVICES CONTRACTS        8       Reviews and evaluates the    Gunning*,        
COMMITTEE                         contractual arrangements     Sherratt*,       
                          of the Fund relating to      Thomsen*,
                         transfer agency,             and Uek*
            administrative services,
        custody, pricing and
             bookkeeping services, and
        lending of portfolio
         securities, and makes
          recommendations to the
             full Board of Trustees on
  these matters.
------------------------------------------------------------------------------- 

(1) The Trustees' identification and background are set forth in Appendix A to  
Part II.                                                                
*   Non-interested or independent Trustees. Although Mr. Ives is not a member   
of all Committees of the Board, he is invited to and attends many of the
Committees' meetings in his capacity as Chair of the Trustees.          

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                                                           PART I - APPENDIX B

SHARE OWNERSHIP                                                                 

OWNERSHIP BY TRUSTEES AND OFFICERS                                              

As of February 28, 2007, the current Trustees and officers of the Trust as a    
group owned less than 1% of any class of the Fund's shares. The following table 
shows the dollar range of equity securities beneficially owned by each current  
Trustee in the Fund and, on an aggregate basis, in all MFS Funds overseen by    
each current Trustee, as of December 31, 2006.                                  

The following dollar ranges apply:                                              

N. None                                                                         
A. $1 - $10,000                                                                 
B. $10,001 - $50,000                                                            
C. $50,001 - $100,000                                                           
D. Over $100,000                                                                

------------------------------------------------------------------------------- 
                                                     AGGREGATE DOLLAR RANGE OF
                                                      EQUITY SECURITIES IN ALL
                         DOLLAR RANGE OF EQUITY      MFS FUNDS OVERSEEN BY
NAME OF TRUSTEE             SECURITIES IN THE FUND             TRUSTEE          
------------------------------------------------------------------------------- 
INTERESTED TRUSTEES                                                             
------------------------------------------------------------------------------- 
Robert J. Manning                     N                           D             
------------------------------------------------------------------------------- 
Robert C. Pozen                       N                           D             
------------------------------------------------------------------------------- 
NON-INTERESTED TRUSTEES                                                         
------------------------------------------------------------------------------- 
Robert E. Butler                      N                           D             
------------------------------------------------------------------------------- 
Lawrence H. Cohn, M.D.                N                           D             
------------------------------------------------------------------------------- 
David H. Gunning                      N                           D             
------------------------------------------------------------------------------- 
William R. Gutow                      N                           D             
------------------------------------------------------------------------------- 
Michael Hegarty                       N                           D             
------------------------------------------------------------------------------- 
J. Atwood Ives                        B                           D             
------------------------------------------------------------------------------- 
Lawrence T. Perera                    A                           D             
------------------------------------------------------------------------------- 
J. Dale Sherratt                      A                           D             
------------------------------------------------------------------------------- 
Laurie J. Thomsen                     N                           D             
------------------------------------------------------------------------------- 
Robert W. Uek                         N                           D             
------------------------------------------------------------------------------- 

25% OR GREATER OWNERSHIP OF THE FUND                                            

The following table identifies those investors who own 25% or more of the       
Fund's shares (all share classes taken together) as of February 28, 2007, and   
are therefore presumed to control the Fund. All holdings are of record unless   
otherwise indicated.                                                            

------------------------------------------------------------------------------  
NAME AND ADDRESS OF INVESTOR               PERCENTAGE OWNERSHIP                 
------------------------------------------------------------------------------  
N/A                                        N/A                                  
------------------------------------------------------------------------------  

5% OR GREATER OWNERSHIP OF SHARE CLASS                                          

The following table identifies those investors who own 5% or more of any class  
of the Fund's shares as of February 28, 2007. All holdings are of record unless 
otherwise indicated.                                                            

------------------------------------------------------------------------------- 
NAME AND ADDRESS OF INVESTOR                   PERCENTAGE OWNERSHIP             
------------------------------------------------------------------------------- 
Citigroup Global Markets Inc                   8.13% of Class A Shares          
Surpas House Account                           6.02% of Class B Shares          
ATTN: Cindy Tempesta 7th Floor                 8.30% of Class C Shares          
333 W 34th Street                                                               
New York NY 10001- 2402                                                         
------------------------------------------------------------------------------- 
Merrill Lynch Pierce Fenner & Smith, Inc.      9.33% of Class A Shares          
For the Sole Benefit of its Customers          21.42% of Class B Shares         
4800 Deerlake Drive East                       23.04% of Class C Shares         
Jacksonville, FL 32246-6484                                                     
------------------------------------------------------------------------------- 

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                                                           PART I - APPENDIX C

PORTFOLIO MANAGER(S)                                                            

COMPENSATION                                                                    

Portfolio manager total cash compensation is a combination of base salary and   
performance bonus:                                                              

Base Salary - Base salary represents a smaller percentage of portfolio manager  
total cash compensation (generally below 33%) than incentive compensation.      

Performance Bonus - Generally, incentive compensation represents a majority of  
portfolio manager total cash compensation.                                      

The performance bonus is based on a combination of quantitative and qualitative 
factors, with more weight given to the former (generally over 60%) and less     
weight given to the latter.                                                     

The quantitative portion is based on pre-tax performance of all of the accounts 
managed by the portfolio manager (which includes the Fund and any other         
accounts managed by the portfolio manager) over a one-, three-, and five-year   
period relative to the appropriate Lipper peer group universe and/or one or     
more benchmark indices with respect to each account. Primary weight is given to 
portfolio performance over a three-year time period with lesser consideration   
given to portfolio performance over one- and five-year periods (adjusted as     
appropriate if the portfolio manager has served for shorter periods).           

The qualitative portion is based on the results of an annual internal peer      
review process (conducted by other portfolio managers, analysts, and traders)   
and management's assessment of overall portfolio manager contributions to       
investor relations and the investment process (distinct from fund and other     
account performance).                                                           

Portfolio managers also typically benefit from the opportunity to participate   
in the MFS Equity Plan. Equity interests and/or options to acquire equity       
interests in MFS or its parent company are awarded by management, on a          
discretionary basis, taking into account tenure at MFS, contribution to the     
investment process, and other factors.                                          

Finally, portfolio managers are provided with a benefits package including a    
defined contribution plan, health coverage and other insurance, which are       
available to other employees of MFS on substantially similar terms. The         
percentage such benefits represent of any portfolio manager's compensation      
depends upon the length of the individual's tenure at MFS and salary level, as  
well as other factors.                                                          

OWNERSHIP OF FUND SHARES                                                        

The following table shows the dollar range of equity securities of the Fund     
beneficially owned by the Fund's portfolio manager(s) as of the Fund's fiscal   
year ended January 31, 2007. The following dollar ranges apply:                 

N. None                                                                         
A. $1 - $10,000                                                                 
B. $10,001 - $50,000                                                            
C. $50,001 - $100,000                                                           
D. $100,001 - $500,000                                                          
E. $500,001 - $1,000,000                                                        
F. Over $1,000,000                                                              

--------------------------------------------------------------------------      
NAME OF PORTFOLIO MANAGER      DOLLAR RANGE OF EQUITY SECURITIES IN FUND        
--------------------------------------------------------------------------      
Gary A. Lasman                                     D                            
--------------------------------------------------------------------------      
Geoffrey L. Schechter                              D                            
--------------------------------------------------------------------------      

OTHER ACCOUNTS                                                                  

In addition to the Fund, the Fund's portfolio manager is responsible (either    
individually or jointly) for the day-to-day management of certain other         
accounts, the number and total assets of which, as of the Fund's fiscal year    
ended January 31, 2007, were as follows:                                        

                                                        [Enlarge/Download Table]

------------------------------------------------------------------------------------------------
                       REGISTERED INVESTMENT       OTHER POOLED                                 
                            COMPANIES*          INVESTMENT VEHICLES          OTHER ACCOUNTS     
------------------------------------------------------------------------------------------------
                         NUMBER                   NUMBER                 NUMBER                 
                           OF        TOTAL          OF       TOTAL         OF                   
NAME                    ACCOUNTS     ASSETS      ACCOUNTS    ASSETS      ACCOUNTS   TOTAL ASSETS
------------------------------------------------------------------------------------------------
                                                                                                
Gary A. Lasman              2     $2.1 billion      0          N/A          0         N/A       
------------------------------------------------------------------------------------------------
Geoffrey L. Schechter      10     $6.2 billion      1      $217 million     0         N/A       
------------------------------------------------------------------------------------------------

* Includes the Fund.                                                                            

Advisory fees are not based upon performance of any of the accounts identified  
in the table above.                                                             

POTENTIAL CONFLICTS OF INTEREST                                                 

MFS seeks to identify potential conflicts of interest resulting from a          
portfolio manager's management of both the Fund and other accounts, and has     
adopted policies and procedures designed to address such potential conflicts.   

The management of multiple funds and accounts (including proprietary accounts)  
may give rise to potential conflicts of interest if the funds and accounts have 
different objectives and strategies, benchmarks, time horizons and fees as a    
portfolio manager must allocate his or her time and investment ideas across     
multiple funds and accounts. In certain instances there may be securities which 
are suitable for the Fund's portfolio as well as for accounts of MFS or its     
subsidiaries with similar investment objectives. A Fund's trade allocation      
policies may give rise to conflicts of interest if the Fund's orders do not get 
fully executed or are delayed in getting executed due to being aggregated with  
those of other accounts of MFS or its subsidiaries. A portfolio manager may     
execute transactions for another fund or account that may adversely impact the  
value of the Fund's investments. Investments selected for funds or accounts     
other than the Fund may outperform investments selected for the Fund.           

When two or more clients are simultaneously engaged in the purchase or sale of  
the same security, the securities are allocated among clients in a manner       
believed by MFS to be fair and equitable to each. It is recognized that in some 
cases this system could have a detrimental effect on the price or volume of the 
security as far as the Fund is concerned. In most cases, however, MFS believes  
that the Fund's ability to participate in volume transactions will produce      
better executions for the Fund.                                                 

MFS does not receive a performance fee for its management of the Fund. As a     
result, MFS and/or a portfolio manager may have a financial incentive to        
allocate favorable or limited opportunity investments or structure the timing   
of investments to favor accounts other than the Fund - for instance, those that 
pay a higher advisory fee and/or have a performance fee.                        

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                                                           PART I - APPENDIX D

CERTAIN SERVICE PROVIDER COMPENSATION                                           

The Fund paid compensation for advisory services, administrative services, and  
transfer agency services, over the specified periods as follows. For            
information regarding sales charges and distribution payments paid to MFD, see  
Appendix E to this Part I.                                                      

                                                        [Enlarge/Download Table]

------------------------------------------------------------------------------------------------
                     NET AMOUNT PAID                     NET AMOUNT PAID    NET AMOUNT PAID TO  
                        TO MFS FOR                         TO MFSC FOR       MFS FOR GENERAL    
                         ADVISORY          AMOUNT        TRANSFER AGENCY      ADMINISTRATIVE    
FISCAL YEAR ENDED        SERVICES       WAIVED BY MFS      SERVICES(1)           SERVICES       
------------------------------------------------------------------------------------------------
                                                                                                
January 31, 2007       $7,590,747        $1,481,571        $1,372,269            $260,487       
------------------------------------------------------------------------------------------------
January 31, 2006       $6,891,936        $1,385,471        $1,460,358            $167,174       
------------------------------------------------------------------------------------------------
January 31, 2005       $6,863,968        $1,226,568        $1,274,544            $117,047       
------------------------------------------------------------------------------------------------

(1) In addition to the fees disclosed, the Fund reimbursed MFSC for certain out-of-pocket       
    expenses and for payments made under agreements with affiliated and unaffiliated entities   
    that provide shareholder services in an amount equal to $190,294 for the fiscal year ended  
    January 31, 2007.                                                                           

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                                                           PART I - APPENDIX E

SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS                                    

SALES CHARGES                                                                   

The following sales charges were paid during the specified periods:             

                                                        [Enlarge/Download Table]
----------------------------------------------------------------------------------------------------  

                       CLASS A INITIAL SALES CHARGES:           CDSC PAID TO MFD ON:                  
----------------------------------------------------------------------------------------------------  
                                                 REALLOWED TO                                         
                                   RETAINED        FINANCIAL       CLASS A     CLASS B     CLASS C    
FISCAL YEAR END       TOTAL         BY MFD      INTERMEDIARIES      SHARES      SHARES      SHARES    
----------------------------------------------------------------------------------------------------  
                                                                                                      
January 31, 2007     $5,028,950     $627,685       $4,401,265        $ 8,428    $277,753     $34,783  
----------------------------------------------------------------------------------------------------  
January 31, 2006     $3,086,230     $459,969       $2,626,261        $63,282    $333,221     $14,471  
----------------------------------------------------------------------------------------------------  
January 31, 2005     $1,918,004     $308,156       $1,609,848        $32,505    $523,733     $14,002  
----------------------------------------------------------------------------------------------------  

DISTRIBUTION PLAN PAYMENTS                                                                            

During the fiscal year ended January 31, 2007, the Fund made the following Distribution Plan payments:

----------------------------------------------------------------------------------------------------  
                                  AMOUNT OF DISTRIBUTION AND/OR SERVICE FEES:                         
----------------------------------------------------------------------------------------------------  
                                                                           PAID TO FINANCIAL          
CLASS OF SHARES            PAID BY FUND        RETAINED BY MFD               INTERMEDIARIES(1)        
----------------------------------------------------------------------------------------------------  
Class A Shares                 N/A                   N/A                          N/A                 
----------------------------------------------------------------------------------------------------  
Class B Shares              $1,529,376           $1,529,376                       N/A                 
----------------------------------------------------------------------------------------------------  
Class C Shares              $1,437,501            $549,035                     $888,466               
----------------------------------------------------------------------------------------------------  

(1) May include amounts paid to financial intermediaries affiliated with MFD.                         

Amounts retained by MFD may represent fees paid to MFD but not yet reallowed to 
intermediaries as of the close of the period, compensation to MFD for           
commissions advanced by MFD to financial intermediaries upon sale of Fund       
shares, and/or compensation for MFD's distribution and shareholder servicing    
costs.                                                                          

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                                                           PART I - APPENDIX F

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                                

Brokerage Commissions                                                           

The Following brokerage commissions were paid by the Fund during the specified  
time periods:                                                                   

------------------------------------------------------------------------------- 
FISCAL YEAR END                         BROKERAGE COMMISSIONS PAID BY FUND      
------------------------------------------------------------------------------- 
January 31, 2007                                       $141                     
------------------------------------------------------------------------------- 
January 31, 2006                                        $0                      
------------------------------------------------------------------------------- 
January 31, 2005                                        $0                      
------------------------------------------------------------------------------- 

Securities Issued By Regular Broker/Dealers                                     

During the fiscal year ended January 31, 2007, the Fund purchased securities    
issued by the following regular broker/dealers of the Fund, which had the       
following values as of January 31, 2007:                                        

------------------------------------------------------------------------------- 
BROKER/DEALER                                  VALUE OF SECURITIES              
------------------------------------------------------------------------------- 
N/A                                                    N/A                      
------------------------------------------------------------------------------- 

Transactions with Research Firms                                                

During the fiscal year ended January 31, 2007, the Fund allocated the following 
amount of transactions, and related commissions, to broker/dealer firms that    
have been deemed by MFS to provide valuable Research ("Research Firms"). The    
provision of Research was not necessarily a factor in the placement of this     
business with such Research Firms. (1)                                          
------------------------------------------------------------------------------- 
DOLLAR AMOUNT OF TRANSACTIONS WITH    COMMISSIONS PAID ON TRANSACTIONS WITH     
RESEARCH FIRMS                                    RESEARCH FIRMS                
------------------------------------------------------------------------------- 
N/A                                                    N/A                      
------------------------------------------------------------------------------- 

(1)  The amounts shown do not include transactions directed to electronic       
communication networks (ECNs) owned by the Research Firms.            

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STATEMENT OF ADDITIONAL INFORMATION                                             

PART II                                                                         

Part II of this SAI, updated through September 1, 2006, as amended or           
supplemented from time to time, describes policies and practices that apply to  
the Funds in the MFS Family of Funds. References in this Part II to a "Fund"    
mean each Fund in the MFS Family of Funds, unless noted otherwise. References   
in this Part II to a "Trust" mean the Massachusetts business trust of which the 
Fund is a series, or, if the Fund is itself a Massachusetts business trust,     
references to a "Trust" shall mean the Fund.                                    

TABLE OF CONTENTS                                                               

I.    Definitions........................................................     2 

II.   Management of the Fund.............................................     2 

III.  Sales Charge Waivers...............................................     7 

IV.   Distribution Plan..................................................     7 

V.    Financial Intermediary Compensation................................     9 

VI.   Investment Techniques, Practices, Risks and Restrictions...........    10 

VII.  Net Income and Distributions.......................................    10 

VIII. Tax Considerations.................................................    11 

IX.   Portfolio Transactions and Brokerage Commissions...................    22 

X.    Disclosure of Portfolio Holdings...................................    24 

XI.   Determination of Net Asset Value...................................    28 

XII.  Shareholder Services...............................................    30 

XIII. Description of Shares, Voting Rights and Liabilities ..............    32 

Appendix A. Trustees and Officers - Identification and Background .......    34 

Appendix B. Proxy Voting Policies and Procedures.........................    39 

Appendix C. Waivers of Sales Charges.....................................    69 

Appendix D. Financial Intermediary Compensation..........................    77 

Appendix E. Investment Strategies and Risks..............................    88 

Appendix F. Investment Restrictions......................................   117 

Appendix G. Recipients of Non-Public Portfolio Holdings on an Ongoing           
           Basis.........................................................  120

Appendix H. Description of Bond Ratings..................................   122 

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I. DEFINITIONS                                                              

 "Alliance Plans" - include retirement plans with respect to which MFS (or one
of its affiliates) has entered into an administrative arrangement with a    
third party to provide certain recordkeeping and/or administrative services.

"Financial intermediary" - includes any broker, dealer, bank (including bank
trust departments), registered investment adviser, financial planner,       
retirement plan administrator, third-party administration, and any other    
 institutions having a selling, administration or other similar agreement with
MFD, MFS or one of its affiliates.                                          

"Majority Shareholder Vote" - as defined currently in the 1940 Act to be the
lesser of (i) 67% or more of the voting securities present at a meeting at  
which holders of voting securities representing more than 50% of the        
outstanding voting securities are present or represented by proxy, or (ii)  
more than 50% of the outstanding voting securities.                         

"MFS Serviced Plans" - include retirement plans for which MFS (or one of its
affiliates) is responsible for providing participant recordkeeping services.

"1940 Act"- the Investment Company Act of 1940 and the rules and regulations
thereunder, as amended from time to time, and as such Act, rules or         
regulations are interpreted by the Securities and Exchange Commission.      

II. MANAGEMENT OF THE FUND                                                  
> TRUSTEES/OFFICERS                                                             

Board Oversight -- The Board of Trustees which oversees the Fund provides   
broad supervision over the business and operations of the Fund.             

Trustees and Officers -- Identification and Background -- The identification
and background of the Trustees and Officers of the Trust are set forth in   
Appendix A of this Part II.                                                 

> INVESTMENT ADVISER                                                            

MFS provides the Fund with investment advisory services. MFS and its        
predecessor organizations have a history of money management dating from    
1924. MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services   
 Holdings, Inc., which in turn is an indirect majority-owned subsidiary of Sun
Life Financial, Inc. (a diversified financial services company).            

Unless otherwise noted, MFS votes proxies on behalf of the Funds pursuant to
 the proxy voting policies described in Appendix B to this SAI Part II (except
for the MFS Union Standard Equity Fund, for which JMR Financial, Inc., votes
proxies as described in Appendix B to this SAI Part II). Information        
 regarding how each Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, 2006 is available without    
 charge by visiting MFS.COM and clicking on "Proxy Voting" and by visiting the
SEC's Web site at http://www.sec.gov.                                       

INVESTMENT SUB-ADVISER - MFS has engaged Sun Capital Advisers LLC (referred 
to as Sun Capital or the Sub-Adviser) to act as sub-adviser with respect to 
the real estate related portion of the MFS Diversified Income Fund's        
portfolio. Sun Capital is located at One Sun Life Executive Park, Wellesley 
Hills, Massachusetts 02481. Sun Capital is an indirect wholly-owned         
subsidiary of Sun Life Financial Inc. ("Sun Life Financial"), a corporation 
organized in Canada as well as an affiliate of MFS. Sun Life Financial and  
its affiliates currently transact business in Canada, the United States and 
Asia Pacific region. Sun Life Financial is a reporting company under the    
 Securities Exchange Act of 1934 with common shares listed on the Toronto, New
York, and Philippine stock exchanges. Sun Life Financial Inc. is located at 
150 King Street West, Toronto, Canada, M5H 1J9.                             

The Sub-Adviser is a Delaware limited liability company and a registered    
investment adviser. The Sub-Adviser provides investment management and      
supervisory services to mutual funds and institutional accounts.            

INVESTMENT ADVISORY AGREEMENT -- MFS manages the Fund pursuant to an        
Investment Advisory Agreement (the "Advisory Agreement"). Under the Advisory
Agreement, MFS provides the Fund with investment advisory services. Subject 
to such policies as the Trustees may determine, MFS makes investment        
 decisions for the Fund. For these services, MFS receives an annual investment
 advisory fee, computed and paid monthly, as disclosed in the Prospectus under
the heading "Management of the Fund(s)."                                    

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

 The Trust pays the compensation of the Trustees who are "not affiliated" with
MFS and all expenses of the Fund incurred in its operation and offering of  
 shares (other than those assumed by MFS in writing) including but not limited
to: management fees; Rule 12b-1 fees; administrative services fees;         
retirement plan administration services fees; program management services   
fees; governmental fees; interest charges; taxes; membership dues in the    
Investment Company Institute allocable to the Fund; fees and expenses of    
 independent auditors, of legal counsel, and of any transfer agent, registrar,
or dividend disbursing agent of the Fund; expenses of repurchasing and      
redeeming shares and servicing shareholder accounts; expenses of preparing, 
printing and mailing stock certificates, shareholder reports, notices, proxy
statements, confirmations, periodic investment statements and reports to    
 governmental officers and commissions; brokerage and other expenses connected
with the execution, recording, and settlement of portfolio security         
transactions; insurance premiums; fees and expenses of the Fund's custodian,
for all services to the Fund, including safekeeping of funds and securities 
and maintaining required books and accounts; expenses of calculating the net
asset value of shares of the Fund; organizational and start up costs; and   
such non-recurring or extraordinary expenses as may arise, including those  
relating to actions, suits, or proceedings to which the Fund is a party or  
otherwise may have an exposure, and the legal obligation which the Fund may 
have to indemnify the Trust's Trustees and officers with respect thereto.   
Expenses relating to the issuance, registration and qualification of shares 
of the Fund and the preparation, printing and mailing of prospectuses for   
such purposes are borne by the Fund except to the extent that the           
Distribution Agreement with MFS Fund Distributors, Inc. ("MFD"), provides   
that MFD is to pay all of such expenses. 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.        

The Advisory Agreement has an initial two-year term and continues in effect 
thereafter only if such continuance is specifically approved at least       
annually by the Board of Trustees or by Majority Shareholder Vote and, in   
either case, by a majority of the Trustees who are not "interested persons" 
of the Fund or MFS as defined by the 1940 Act. The Advisory Agreement       
terminates automatically if it is assigned and may be terminated without    
penalty by a Majority Shareholder Vote, or by either party on not more than 
 60 days' nor less than 30 days' written notice. The Advisory Agreement may be
approved, renewed, amended, or terminated as to one Fund in the Trust, even 
though the Agreement is not approved, renewed, amended, or terminated as to 
any other Fund in the Trust.                                                

 The Advisory Agreement also provides that neither MFS nor its personnel shall
 be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and       
management of the Fund, except for willful misfeasance, bad faith, gross    
negligence, or reckless disregard of its or their duties and obligations    
under the Advisory Agreement.                                               

SUB-ADVISORY AGREEMENT - Sun Capital serves as the MFS Diversified Income   
Fund's Sub-Adviser pursuant to a Sub-Investment Advisory Agreement between  
the Adviser and Sun Capital (the "Sub-Advisory Agreement"). The Sub-Advisory
Agreement provides that the Adviser delegate to Sun Capital the authority to
make investment decisions for a portion of the MFS Diversified Income Fund  
(for the purposes of this paragraph, the "Fund"). Sun Capital will provide  
portfolio management services for the Fund for the portion of the portfolio 
invested in REITs ("real estate investment trust") and other real estate    
related investments. For these services, the Adviser pays the Sub-Adviser an
investment advisory fee, computed daily and paid monthly in arrears, at the 
annual rate of 0.30% of the Fund's average daily net assets managed by the  
Sub-Adviser. The Sub-Advisory Agreement will continue in effect after its   
initial two year period provided that such continuance is specifically      
approved at least annually by a majority of the Independent Trustees. The   
Sub-Advisory Agreement terminates automatically if it is assigned and may be
terminated without penalty by a majority of the Independent Trustees, by a  
Majority Shareholder Vote, or by the Adviser or Sub-Adviser on not less than
60 days' written notice. The Sub-Advisory Agreement specifically provides   
that neither the Sub-Adviser nor its personnel shall be liable for any error
of judgment or mistake of law or for any loss arising out of any investment 
or for any act or omission in the execution and management of the Fund,     
except for willful misconduct, bad faith, reckless disregard, or gross      
negligence in the performance of its duties or by reason of reckless        
disregard of its obligations and duties under the Sub-Advisory Agreement.   

> ADMINISTRATOR                                                                 

MFS provides the Fund with certain financial, legal and other administrative
services under a Master Administrative Services Agreement between the Fund  
and MFS. Under the Agreement, the fund pays an annual fee to MFS for        
providing these services.                                                   

Effective August 1, 2006, the maximum annual fee payable by each Fund is    
$17,500 plus an amount equal to the following percentage of the Fund's      
average daily net assets (except for Funds investing primarily in shares of 
MFS Funds):                                                                 

-----------------------------------------------------------------------     
On the first $50,000,000 in assets                              0.0000%     
-----------------------------------------------------------------------     
$50,000,000 - $750,000,000 in assets                            0.0175%     
-----------------------------------------------------------------------     
$750,000,000 - $1,500,000,000 in assets                         0.0170%     
-----------------------------------------------------------------------     
$1,500,000,000 - $2,500,000,000 in assets                       0.0165%     
-----------------------------------------------------------------------     
$2,500,000,000 - $4,000,000,000 in assets                       0.0120%     
-----------------------------------------------------------------------     
Over $4,000,000,000                                             0.0000%     

 The fees are subject to minimum and maximum fees, based on the asset level of
the MFS Funds.                                                              

In addition, MFS provides, either directly or through affiliated and/or     
unaffiliated entities, certain administrative, recordkeeping, and           
communication/educational services to the retirement plans and retirement   
plan participants which invest in Class R1, Class R2, Class R3, Class R4 and
 Class R5 shares under a Master Class R Administration and Services Agreement.
 Under the Agreement, the Fund pays an annual fee to MFS for these services at
the following percentages of the average daily net assets attributable to   
 that class of shares: 0.45% for Class R1; 0.40% for Class R2; 0.25% for Class
R3; 0.15% for Class R4; and 0.10% for Class R5 shares. In addition, MFS has 
agreed in writing to waive the fee to 0.35% for Class R1, 0.25% for Class R2
and 0.15% for Class R3, until at least September 30, 2007.                  

> SHAREHOLDER SERVICING AGENT                                                   

 MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS, provides
transfer agent and recordkeeping functions in connection with the issuance, 
transfer, and redemption of each class of shares of the Fund under a        
Shareholder Servicing Agent Agreement. Under the Agreement, MFSC may receive
 a fee based on the costs it incurs in providing these services, plus a target
profit margin. MFSC may also contract with other third party service        
providers to provide some or all of the services described above. MFSC has  
contracted with State Street Bank and Trust Company to perform dividend     
disbursing agent functions for the Fund.                                    

 Under the Agreement, MFSC may receive a fee from the Fund designed to achieve
a target pre-tax annual profit margin. Taking into account this goal,       
effective April 1, 2006, the Fund (except Funds investing primarily in other
MFS Funds) pays MFSC a fee based on its average daily net assets equal to   
 0.0964%. Such fee rate shall continue until modified by agreement between the
Fund and MFSC, taking into account MFSC's pre-tax profit margin target.     

In addition, MFSC is reimbursed by the Fund for certain expenses incurred by
 MFSC on behalf of the Fund. These reimbursements include payments for certain
out-of-pocket expenses, such as costs related to mailing shareholder        
 statements and the use of third party recordkeeping systems, incurred by MFSC
in performing the services described above. MFSC is also reimbursed for     
payments made under agreements with third parties that provide omnibus      
accounting, network, subtransfer agency and other shareholder services,     
including without limitation recordkeeping, reporting and transaction       
 processing services. Payments made under these agreements are based either on
the Fund's average daily net assets or the Fund accounts serviced by the    
third party.                                                                

> DISTRIBUTOR                                                                   

MFS Fund Distributors, Inc. ("MFD" or the "Distributor"), a wholly owned    
subsidiary of MFS, serves as distributor for the continuous offering of     
shares of the Fund pursuant to a Distribution Agreement. The Agreement      
obligates MFD to use best efforts to find purchasers for shares of the Fund.

See Appendix D to this Part II for information regarding sales charges and  
Rule 12b-1 distribution and service payments paid to MFD.                   

> PROGRAM MANAGER(S)                                                            

MFD serves as program manager for a qualified tuition program under Section 
529 of the Internal Revenue Code through which 529 share classes are        
 available as investment options to program participants. The Fund's 529 share
classes may also be offered through qualified tuition programs for which MFD
does not serve as program manager. MFD provides, either directly or through 
 third parties, recordkeeping, tax reporting, and account services, as well as
services designed to maintain the programs' compliance with the Internal    
Revenue Code and other regulatory requirements under a Master 529           
Administrative Services Agreement.                                          

Under the Agreement, the Fund pays MFD a fee for these services of up to    
0.35% annually of the assets attributable to the 529 share classes. The     
current annual fee has been established at 0.25% of the average daily net   
assets attributable to each 529 share class up to $10 billion in assets,    
 0.225% from $10 billion in assets up to $20 billion in assets, and 0.20% from
$20 billion in assets and above. The fee may only be increased with the     
approval of the Fund's Board of Trustees. MFD pays a portion of this fee to 
third parties who provide these services.                                   

Please consult the program description for your particular qualified tuition
program for a discussion of the fees paid to and services received from the 
program manager.                                                            

> CODE OF ETHICS                                                                

The Fund, its Adviser, its sub-adviser (if applicable) and Distributor have 
 adopted separate codes of ethics as required under the Investment Company Act
of 1940 ("the 1940 Act"). Subject to certain conditions and restrictions,   
each code permits personnel subject to the code to invest in securities for 
their own accounts, including securities that may be purchased, held or sold
by the Fund. Securities transactions by some of these persons may be subject
to prior approval of the Adviser's or sub-adviser's Compliance Departments, 
and securities transactions of certain personnel are subject to quarterly   
reporting and review requirements.                                          

III.      SALES CHARGE WAIVERS                                              

In certain circumstances, the initial sales charge paid to MFD and imposed  
 upon purchases of Class A and Class 529A shares, and the CDSC paid to MFD and
imposed upon redemptions of Class A, Class B, Class C, Class 529B, and Class
529C shares, are waived. These circumstances are described in Appendix C of 
this Part II. The Fund, MFS, and their affiliates reserve the right to      
eliminate, modify, and add waivers at any time in their discretion.         

IV. DISTRIBUTION PLAN                                                       

The Trustees have approved a plan in accordance with Rule 12b-1 under the   
1940 Act for Class A, Class B, Class C, Class 529A, Class 529B, Class 529C, 
Class R, Class R1, Class R2, Class R3, Class R4, Class W and Class J shares 
(the "Distribution Plan"). The Fund has not adopted a Distribution Plan with
respect to its Class I or Class R5 shares. In approving the Distribution    
Plan, the Trustees, including a majority of the Trustees who are not        
"interested persons" of the Trust as defined in the 1940 Act and have no    
direct or indirect financial interest in the operation of the Distribution  
Plan or any agreements relating to the Distribution Plan ("Distribution Plan
Qualified Trustees"), concluded that there is a reasonable likelihood that  
the Distribution Plan would benefit the Fund and each respective class of   
shareholders.                                                               

The Distribution Plan is designed to promote sales of shares and minimize   
redemptions, as well as to assist in the servicing and maintenance of       
 shareholder accounts. Increasing a Fund's net assets through sales of shares,
or minimizing reductions in net assets by minimizing redemptions, may help  
reduce a Fund's expense ratio by spreading the Fund's fixed costs over a    
larger base and may reduce the potential adverse effect of selling a Fund's 
portfolio securities to meet redemptions. There is, however, no assurance   
that the net assets of the Fund will increase or not be reduced, or that    
other benefits will be realized as a result of the Distribution Plan.       

The Distribution Plan remains in effect from year to year only if its       
continuance is specifically approved at least annually by vote of both the  
Trustees and a majority of the Distribution Plan Qualified Trustees. The    
Distribution Plan also requires that the Fund and MFD each provide the      
Trustees, and that the Trustees review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Distribution Plan.
The Distribution Plan may be terminated at any time by vote of a majority of
 the Distribution Plan Qualified Trustees or by a Majority Shareholder Vote of
the shares of the class to which the Distribution Plan relates ("Designated 
Class"). The Distribution Plan may not be amended to increase materially the
amount of permitted distribution expenses without the approval of a majority
of the shares of the Designated Class of the Fund, or may not be materially 
amended in any case without a vote of the Trustees and a majority of the    
Distribution Plan Qualified Trustees.                                       

The distribution and service fees paid to MFD equal on an annual basis up to
the following maximum percentages of average daily net assets of the class: 

 -----------------------------------------------------------------------------
                                                                 MAXIMUM TOTAL
                        MAXIMUM             MAXIMUM               DISTRIBUTION
                    DISTRIBUTION           SERVICE               AND SERVICE
    CLASS           FEE                 FEE                      FEE
 -----------------------------------------------------------------------------
Class A                0.10%                0.25%                    0.35%  
 -----------------------------------------------------------------------------
Class 529A             0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class B                0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class 529B             0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class C                0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class 529C             0.75%                0.25%                    1.00%  
 -----------------------------------------------------------------------------
Class R                0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R1               0.50%                0.25%                    0.75%  
 -----------------------------------------------------------------------------
Class R2               0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R3               0.25%                0.25%                    0.50%  
 -----------------------------------------------------------------------------
Class R4               0.00%                0.25%                    0.25%  
 -----------------------------------------------------------------------------
Class W                0.10%                0.00%                    0.10%  
 -----------------------------------------------------------------------------
 Class J                0.25%                0.70%/0.75%           0.95%/1.00%
 -----------------------------------------------------------------------------
Service Class          0.25%                0.00%                    0.25%  
 -----------------------------------------------------------------------------

In certain circumstances, the fees described below may not be implemented,  
are being waived, or do not apply to certain MFS Funds. Current distribution
and service fees for each Fund are reflected under the captions "Expense    
Summary" and "Description of Share Classes -- Distribution and Service Fees"
in the Prospectus.                                                          

> SERVICE FEES                                                                  

The Distribution Plan provides that the Fund may pay MFD a service fee based
on the average daily net assets attributable to the Designated Class, (i.e.,
 Class A, Class B, Class C, Class 529A, Class 529B, Class 529C, Class R, Class
R1, Class R2, Class R3, Class R4, or Class J shares, as appropriate)        
annually. Class W shares do not pay a service fee. MFD may, at its          
discretion, retain all or a portion of such payments or pay all or a portion
of such payments to financial intermediaries. Service fees compensate MFD   
and/or financial intermediaries for shareholder servicing and account       
maintenance activities, including, but not limited to, shareholder          
recordkeeping (including assisting in establishing and maintaining customer 
accounts and records), transaction processing (including assisting with     
 purchase, redemption and exchange requests), shareholder reporting, arranging
for bank wires, monitoring dividend payments from the Funds on behalf of    
customers, forwarding certain shareholder communications from the Funds to  
customers, corresponding with shareholders and customers regarding the Funds
(including receiving and responding to inquiries and answering questions    
regarding the Funds), and aiding in maintaining the investment of their     
respective customers in the Funds. Financial intermediaries may from time to
time be required to meet certain criteria in order to receive service fees. 

> DISTRIBUTION FEES                                                             

The Distribution Plan provides that the Fund may pay MFD a distribution fee 
 based on the average daily net assets attributable to the Designated Class as
partial consideration for distribution services performed and expenses      
incurred in the performance of MFD's obligations under its distribution     
agreement with the Fund. Distribution fees compensate MFD and/or financial  
 intermediaries for their expenses in connection with the distribution of Fund
shares, including, but not limited to, commissions to financial             
intermediaries, printing prospectuses and reports used for sales purposes,  
the preparation and printing of sales literature, personnel, travel, office 
expense and equipment, payments made to wholesalers employed by MFD         
(employees may receive additional compensation if they meet certain targets 
 for sales of one or more MFS Funds), and other distribution-related expenses.
The amount of the distribution fee paid by the Fund with respect to each    
class differs under the Distribution Plan, as does the use by MFD of such   
distribution fees. While the amount of compensation received by MFD in the  
form of distribution fees during any year may be more or less than the      
expenses incurred by MFD under its distribution agreement with the Fund, the
 Fund is not liable to MFD for any losses MFD may incur in performing services
under its Distribution Agreement with the Fund.                             

In addition, with respect to Massachusetts Investors Trust, Massachusetts   
Investors Growth Stock Fund, MFS Growth Opportunities Fund, MFS Emerging    
Growth Fund, MFS High Income Fund, MFS Total Return Fund, MFS Research Fund,
 MFS Capital Opportunities Fund, MFS Strategic Income Fund, and MFS Bond Fund,
to the extent that the annualized aggregate service and distribution fees   
paid under the Distribution Plan do not exceed 0.35% of Class A shares'     
average daily net assets, the Fund is permitted to pay such                 
distribution-related expenses or other distribution-related expenses.       

V. FINANCIAL INTERMEDIARY COMPENSATION                                      

MFD and/or its affiliates may pay commissions, Rule 12b-1 distribution and  
service fees, 529 administrative services fees, retirement plan             
administrative and service fees, shareholder servicing fees, and other      
payments to financial intermediaries that sell Fund shares as described in  
Appendix D of this Part II.                                                 

VI. INVESTMENT TECHNIQUES, PRACTICES, RISKS AND RESTRICTIONS                

Set forth in Appendix E of this Part II is a description of investment      
techniques and practices which the MFS Funds may generally use in pursuing  
their investment objectives and investment policies to the extent such      
techniques and practices are consistent with their investment objectives and
investment policies, and a description of the risks associated with these   
investment techniques and practices. Set forth in Appendix F of this Part II
is a description of investment restrictions to which the Fund is subject.   

VII. NET INCOME AND DISTRIBUTIONS                                           

> MONEY MARKET FUNDS                                                            

The net income attributable to each MFS Fund that is a money market fund is 
determined each day during which the New York Stock Exchange is open for    
 trading (see "Determination of Net Asset Value" below for a list of days that
the Exchange is closed).                                                    

For this purpose, the net income attributable to shares of a money market   
 fund (from the time of the immediately preceding determination thereof) shall
consist of (i) all interest income accrued on the portfolio assets of the   
money market fund less (ii) all actual and accrued expenses of the money    
market fund determined in accordance with generally accepted accounting     
principles. Interest income shall include discount earned (including both   
original issue and market discount) on discount paper accrued ratably to the
date of maturity.                                                           

Since the net income is declared as a dividend each time the net income is  
determined, the net asset value per share (i.e., the value of the net assets
of the money market fund divided by the number of shares outstanding) is    
expected to remain at $1.00 per share immediately after each such           
determination and dividend declaration. Any increase in the value of a      
shareholder's investment, representing the reinvestment of dividend income, 
is reflected by an increase in the number of shares in the shareholder's    
account.                                                                    

It is expected that the shares of the money market fund will have a positive
net income at the time of each determination thereof. If for any reason the 
net income determined at any time is a negative amount, which could occur,  
for instance, upon default by an issuer of a portfolio security, the money  
market fund would first offset the negative amount with respect to each     
 shareholder account from the dividends declared during the month with respect
to each such account. If and to the extent that such negative amount exceeds
such declared dividends at the end of the month (or during the month in the 
case of an account liquidated in its entirety), the money market fund could 
reduce the number of its outstanding shares by treating each shareholder of 
the money market fund as having contributed to its capital that number of   
full and fractional shares of the money market fund in the account of such  
shareholder which represents its proportion of such excess. Each shareholder
of the money market fund will be deemed to have agreed to such contribution 
in these circumstances by his or her investment in the money market fund.   
 This procedure would permit the net asset value per share of the money market
fund to be maintained at a constant $1.00 per share.                        

In addition, the money market funds intend to distribute net realized short-
and long-term capital gains, if any, at least annually.                     

> OTHER FUNDS                                                                   

Each MFS Fund other than the MFS money market funds intends to distribute to
 its shareholders all or substantially all of its net investment income. These
Funds' net investment income consists of non-capital gain income less       
expenses. In addition, these Funds intend to distribute net realized short- 
and long-term capital gains, if any, at least annually. Shareholders will be
 informed of the tax consequences of such distributions, including whether any
portion represents a return of capital, after the end of each calendar year.

VIII. TAX CONSIDERATIONS                                                    

The following discussion is a brief summary of some of the important federal
(and, where noted, state) income tax consequences affecting the Fund and its
shareholders. The discussion is very general, and therefore prospective     
investors are urged to consult their tax advisers about the impact an       
investment in the Fund may have on their own tax situations.                

> TAX TREATMENT OF THE FUND                                                     

Federal Taxes -- The Fund (even if it is a Fund in a Trust with multiple    
 series) is treated as a separate entity for federal income tax purposes under
the Internal Revenue Code of 1986, as amended (the "Code"). The Fund has    
elected (or in the case of a new Fund, intends to elect) to be, and intends 
 to qualify to be treated each year as, a "regulated investment company" under
Subchapter M of the Code.                                                   

In order to qualify for the special tax treatment accorded regulated        
investment companies and their shareholders, the Fund must, among other     
things:                                                                     

  (a) derive at least 90% of its gross income for each taxable year from (i)
   dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including but not limited to gains from    
options, futures, or forward contracts) derived with respect to its     
   business of investing in such stock, securities, or currencies and (ii) net
 income derived from interests in "qualified publicly traded partnerships"
(as defined below);                                                     

   (b) distribute with respect to each taxable year at least 90% of the sum of
  its investment company taxable income (as that term is defined in the Code
without regard to the deduction for dividends paid-generally, taxable   
   ordinary income and the excess, if any, of the net short-term capital gains
  over net long-term capital losses) and net tax-exempt interest income, for
such year; and                                                          

(c) diversify its holdings so that, at the end of each quarter of the   
Fund's taxable year, (i) at least 50% of the market value of the Fund's 
total assets is represented by cash and cash items, U.S. Government     
 securities, securities of other regulated investment companies, and other
   securities limited in respect of any one issuer to a value not greater than
5% of the value of the Fund's total assets and not more than 10% of the 
   outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of the Fund's total assets is invested (x) in the securities  
(other than those of the U.S. Government or other regulated investment  
companies) of any one issuer or of two or more issuers which the Fund   
 controls and which are engaged in the same, similar, or related trades or
businesses or (y) in the securities of one or more qualified publicly   
traded partnerships (as defined below).                                 

In the case of the Fund's investment in loan participations, the Fund shall 
treat a financial intermediary as an issuer for the purposes of meeting the 
diversification requirement described in paragraph (c).                     

 In general, for purposes of the 90% income requirement described in paragraph
(a) above, income derived from a partnership will be treated as qualifying  
income only to the extent such income is attributable to items of income of 
 the partnership which would be qualifying income if realized by the regulated
investment company. However, 100% of the net income derived from an interest
in a "qualified publicly traded partnership" (which is defined as any       
partnership (i) whose interests are traded on an established securities     
market or whose interests are readily traded on a secondary market or the   
substantial equivalent thereof and (ii) that derives less than 90% of its   
income from the qualifying income described in paragraph (a)(i) above) will 
 be treated as qualifying income. In addition, although in general the passive
loss rules of the Code do not apply to regulated investment companies, such 
rules do apply to a regulated investment company with respect to items      
attributable to an interest in a qualified publicly traded partnership.     
Finally, for purposes of paragraph (c) above, the term "outstanding voting  
securities of such issuer" will include the equity securities of a qualified
publicly traded partnership.                                                

As a regulated investment company, the Fund will not be subject to any      
federal income or excise taxes on its net investment income and net realized
capital gains that it distributes to shareholders in accordance with the    
 timing requirements imposed by the Code. The Fund's foreign-source income, if
any, may be subject to foreign withholding taxes. If the Fund failed to     
qualify as a "regulated investment company" in any year, it would incur a   
 regular federal corporate income tax on all of its taxable income, whether or
not distributed, and Fund distributions would generally be taxable as       
dividend income to the shareholders.                                        

If the Fund fails to distribute in a calendar year substantially all of its 
ordinary income for such year and substantially all of its capital gain net 
income for the one-year period ending October 31 (or later if the Fund is   
 permitted so to elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the undistributed      
amounts. A dividend paid to shareholders by the Fund in January of a year   
generally is deemed to have been paid by the Fund on December 31 of the     
preceding year, if the dividend was declared and payable to shareholders of 
record on a date in October, November, or December of that preceding year.  
The Fund intends generally to make distributions sufficient to avoid        
imposition of the 4% excise tax.                                            

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

> TAXATION OF SHAREHOLDERS                                                      

Tax Treatment of Distributions -- Subject to the special rules discussed    
 below for Municipal Funds, shareholders of the Fund normally will have to pay
federal income tax and any state or local income taxes on the dividends and 
"Capital Gain Dividends" (as defined below) they receive from the Fund.     
 Except as described below, any distributions from ordinary income or from net
short-term capital gains are taxable to shareholders as ordinary income for 
federal income tax purposes whether paid in cash or reinvested in additional
shares.                                                                     

For taxable years beginning before January 1, 2011, "qualified dividend     
income" received by an individual will be taxed at the rates applicable to  
long-term capital gains. In order for some portion of the dividends received
by a Fund shareholder to be qualified dividend income, the Fund must meet   
holding period and other requirements with respect to some portion of the   
 dividend-paying stocks in its portfolio and the shareholder must meet holding
period and other requirements with respect to the Fund's shares. A dividend 
will not be treated as qualified dividend income (at either the Fund or     
shareholder level) (1) if the dividend is received with respect to any share
of stock held for fewer than 61 days during the 121-day period beginning on 
the date which is 60 days before the date on which such share becomes       
ex-dividend with respect to such dividend (or, in the case of certain       
preferred stock, 91 days during the 181-day period beginning 90 days before 
such date), (2) to the extent that the recipient is under an obligation     
 (whether pursuant to a short sale or otherwise) to make related payments with
 respect to positions in substantially similar or related property, (3) if the
recipient elects to have the dividend income treated as investment interest,
 or (4) if the dividend is received from a foreign corporation that is (a) not
eligible for the benefits of a comprehensive income tax treaty with the     
United States (with the exception of dividends paid on stock of such a      
foreign corporation readily tradable on an established securities market in 
the United States) or (b) treated as a passive foreign investment company.  
Payments in lieu of dividends, such as payments pursuant to securities      
 lending arrangements, also do not qualify to be treated as qualified dividend
income.                                                                     

In general, a distribution of investment income designated by the Fund as   
derived from qualified dividend income will be treated as qualified dividend
 income by a shareholder taxed as an individual provided the shareholder meets
 the holding period and other requirements described above with respect to the
 Fund's shares. In any event, if the qualified dividend income received by the
Fund during any taxable year is 95% or more of its gross income for that    
taxable year, then 100% of the Fund's dividends (other than Capital Gain    
Dividends), will be eligible to be treated as qualified dividend income. For
 this purpose, in the case of a sale or other disposition of the Fund of stock
or securities, the only gain included in the term "gross income" is the     
excess of net short-term capital gain from such sales or dispositions over  
the net long-term capital loss from such sales or dispositions.             

Properly designated distributions of net capital gain (i.e., the excess of  
net long-term capital gain over the net short-term capital loss) ("Capital  
Gains Dividends"), whether paid in cash or reinvested in additional shares, 
 are taxable to shareholders as long-term capital gains for federal income tax
purposes without regard to the length of time the shareholders have held    
their shares.                                                               

Long-term capital gain rates applicable to individuals have been temporarily
reduced for taxable years beginning before January 1, 2011.                 

Any Fund dividend that is declared in October, November, or December of any 
calendar year, payable to shareholders of record in such a month and paid   
during the following January, will be treated as if received by the         
shareholders on December 31 of the year in which the dividend is declared.  
The Fund will notify shareholders regarding the federal tax status of its   
distributions after the end of each calendar year.                          

Any Fund distribution, other than dividends that are declared by the Fund on
 a daily basis, will have the effect of reducing the per share net asset value
of Fund shares by the amount of the distribution. If you buy shares when a  
fund has realized but not yet distributed ordinary income or capital gains, 
you will pay full price for the shares and then receive a portion back as a 
taxable distribution.                                                       

 Capital Loss Carryovers-- Distributions from capital gains are generally made
after applying any available capital loss carryovers. The amounts and       
expiration dates of any capital loss carryovers available to the Fund are   
shown in the notes to the financial statements for the Fund.                

 Dividends-Received Deduction-- If the Fund receives dividend income from U.S.
corporations, a portion of the Fund's ordinary income dividends is normally 
eligible for the dividends-received deduction for corporations if the       
recipient otherwise qualifies for that deduction with respect to its holding
of Fund shares. Availability of the deduction for particular corporate      
shareholders is subject to certain limitations, and deducted amounts may be 
subject to the alternative minimum tax or result in certain basis           
adjustments.                                                                

Disposition of Shares-- In general, any gain or loss realized upon a        
disposition of Fund shares by a shareholder that holds such shares as a     
capital asset will be treated as a long-term capital gain or loss if the    
shares have been held for more than 12 months and otherwise as a short-term 
capital gain or loss. However, any loss realized upon a disposition of Fund 
shares held for six months or less will be treated as a long-term capital   
loss to the extent of any Capital Gain Dividends made with respect to those 
shares.                                                                     

Shares Purchased Through Tax-Qualified Plans -- Distributions by the Fund to
retirement plans that qualify for tax-exempt treatment under federal income 
tax laws will not be taxable. Special tax rules apply to investments through
such plans. You should consult your tax adviser to determine the suitability
of the Fund as an investment through such a plan and the tax treatment of   
distributions (including distributions of amounts attributable to an        
investment in the Fund) from such a plan.                                   

U.S. Taxation of Non-U.S. Persons -- Capital Gain Dividends and             
exempt-interest dividends, if any, will not be subject to withholding of    
federal income tax. However, distributions properly designated as           
exempt-interest dividends may be subject to backup withholding, as discussed
below. In general, dividends other than Capital Gain Dividends and          
exempt-interest dividends, if any, paid by the Fund to a shareholder that is
not a "U.S. person" within the meaning of the Code (such shareholder, a     
"Non-U.S. Person") are subject to withholding of U.S federal income tax at a
rate of 30% (or lower applicable treaty rate) even if they are funded by    
income or gains (such as portfolio interest, short-term capital gains, or   
foreign-source dividend and interest income) that, if paid to a Non-U.S.    
Person directly, would not be subject to withholding. However, effective for
taxable years of the Fund beginning after December 31, 2004, and before     
January 1, 2008, the Fund will not be required to withhold any amounts with 
respect to (i) distributions (other than distributions to a Non-U.S. Person 
(w) that has not provided a satisfactory statement that the beneficial owner
is not a U.S. person, (x) to the extent that the dividend is attributable to
certain interest on an obligation if the Non-U.S. Person is the issuer or is
 a 10% shareholder of the issuer, (y) that is within certain foreign countries
that have inadequate information exchange with the United States, or (z) to 
the extent the dividend is attributable to interest paid by a person that is
a related person of the Non-U.S. Person and the Non-U.S. Person is a        
controlled foreign corporation) from U.S.-source interest income that would 
 not be subject to U.S. federal income tax if earned directly by an individual
Non-U.S. Person (an "interest-related dividend"), and (ii) distributions    
(other than distributions to an individual Non-U.S. Person who is present in
 the United States for a period or periods aggregating 183 days or more during
the year of the distribution) of net short-term capital gains in excess of  
net long-term capital losses (a "short-term capital gain dividend"), in each
such case to the extent such distributions are properly designated by the   
Fund. This provision will first apply to the Fund (1) with respect to its   
direct portfolio investments (if any) in its taxable year beginning after   
December 31, 2004, and, (2) with respect to its investments in underlying   
 Funds (if any), with respect to designated distributions from such underlying
Funds in their taxable years beginning after December 31, 2004, that are    
received by the Fund in its taxable year beginning after December 31, 2004. 
Depending on the circumstances, the Fund may make such designations with    
respect to all, some or none of its potentially eligible dividends and/or   
treat such dividends, in whole or in part, as ineligible for this exemption 
for withholding. The Fund does not currently intend to designate            
distributions as interest-related dividends or as short-term capital gain   
dividends except with respect to Research Bond Fund J shares. In order to   
qualify for this exemption from withholding, a foreign person will need to  
comply with applicable certification requirements relating to its non-U.S.  
status (including, in general, furnishing an IRS Form W-8BEN or substitute  
Form). In the case of shares held through an intermediary, the intermediary 
may withhold even if the Fund makes a designation with respect to a payment.
Foreign persons should contact their intermediaries with respect to the     
application of these rules to their accounts.                               

If a beneficial holder who is a Non-U.S. Person has a trade or business in  
the United States, and the dividends are effectively connected with the     
 conduct by the beneficial holder of a trade or business in the United States,
the dividend will be subject to U.S. federal net income taxation at regular 
income tax rates.                                                           

In general, special tax rules apply to distributions that a "qualified      
investment entity" (a "QIE") pays to foreign shareholders that are          
attributable to gain from the Fund's sale or exchange of "U.S. real property
 interests" (a "USRPI Distribution"). A Fund will be a QIE if it is both (i) a
regulated investment company and (ii) a "U.S. real property holding         
corporation" (determined without regard to certain exceptions, described    
below, for 5% holders of publicly traded classes of stock and for interests 
in domestically-controlled regulated investment companies and real estate   
investment trusts ("REITs")). Under the Code, a "U.S. real property holding 
corporation" is any corporation that holds (or held during the previous     
five-year period) "U.S. real property interests" ("USRPIs") (defined as U.S.
real property and interests (other than solely as a creditor) in "U.S. real 
property holding corporations") with an aggregate fair market value equal to
50% or more of the fair market value of the corporation's real property     
assets and other trade-or-business assets. A USRPI does not include (i) any 
class of stock of a corporation that is traded on an established securities 
market with respect to a person who holds 5% or less of such class of stock 
at all times during the previous five-year period and (ii) a regulated      
investment company's interests in domestically controlled REITs and other   
regulated investment companies.                                             

For taxable years beginning on or after January 1, 2006, where a foreign    
shareholder has owned more than 5% of a class of shares of a Fund that is a 
QIE during the one-year period preceding the date of the USRPI Distribution,
the Fund will be required to withhold 35% of any USRPI Distribution and the 
 foreign shareholder will have an obligation to file a U.S. tax return and pay
tax. For all other foreign shareholders of a Fund that is a QIE, a USRPI    
Distribution will be treated as ordinary income (notwithstanding any        
designation by the Fund that such distribution is a Capital Gain Dividend)  
and the Fund will be required to withhold 30% (or lower applicable treaty   
rate) of such distribution. If a Fund that is a QIE makes a distribution to 
its foreign shareholders that is attributable to a USRPI Distribution       
 received by the Fund from a "lower-tier" REIT or regulated investment company
that is a QIE, that distribution will retain its character as a USRPI       
 Distribution when passed through to the foreign shareholder regardless of the
Fund's percentage ownership of the "lower-tier" REIT or regulated investment
company.                                                                    

Under U.S. federal tax law, a beneficial holder of shares who is a foreign  
shareholder is not, in general, subject to U.S. federal income tax on gains 
 (and is not allowed a deduction for losses) realized on the sale of shares of
the Fund or on Capital Gain Dividends unless (i) such gain or Capital Gain  
Dividend is effectively connected with the conduct of a trade or business   
carried on by such holder within the United States, (ii) in the case of an  
 individual holder, the holder is present in the United States for a period or
periods aggregating 183 days or more during the year of the sale or Capital 
Gain Dividend and certain other conditions are met, or (iii) the shares are 
USRPIs or the Capital Gain Dividends are USRPI Distributions.               

Foreign shareholders in the Fund should consult their tax advisers with     
respect to the potential application of the above rules.                    

Backup Withholding -- The Fund is also required in certain circumstances to 
apply backup withholding at the rate of 28% on taxable dividends, including 
Capital Gain Dividends, redemption proceeds (except for redemptions by money
market funds), and certain other payments that are paid to any non-corporate
shareholder (including a Non-U.S. Person) who does not furnish to the Fund  
certain information and certifications or who is otherwise subject to backup
withholding. Backup withholding will not, however, be applied to payments   
that have been subject to the 30% withholding tax on shareholders who are   
neither citizens nor residents of the United States. The back-up withholding
rules also apply to distributions that are properly designated as           
exempt-interest dividends.                                                  

Foreign Income Taxation of a Non-U.S. Person -- Distributions received from 
the Fund by a Non-U.S. Person may also be subject to tax under the laws of  
their own jurisdictions.                                                    

 State and Local Income Taxes: U.S. Government Securities -- Dividends paid by
 the Fund that are derived from interest on obligations of the U.S. Government
and certain of its agencies and instrumentalities (but generally not        
distributions of capital gains realized upon the disposition of such        
obligations) may be exempt from state and local income taxes. The Fund      
generally intends to advise shareholders of the extent, if any, to which its
dividends consist of such interest. Shareholders are urged to consult their 
tax advisers regarding the possible exclusion of such portion of their      
dividends for state and local income tax purposes.                          

 Certain Investments -- Any investment in zero coupon bonds, deferred interest
bonds, payment-in-kind bonds, certain stripped securities, and certain      
securities purchased at a market discount (including certain high yield debt
obligations) will cause the Fund to recognize income prior to the receipt of
 cash payments with respect to those securities. To distribute this income and
avoid a tax on the Fund, the Fund may be required to liquidate portfolio    
securities that it might otherwise have continued to hold, potentially      
resulting in additional taxable gain or loss to the Fund. The Fund's        
 investments in REIT equity securities may also require the Fund to accrue and
distribute income not yet received and may at other times result in the     
Fund's receipt of cash in excess of the REIT's earnings. If the Fund        
distributes such amounts, such distribution could constitute a return of    
capital to Fund shareholders for federal income tax purposes. Income from   
REIT securities generally will not be eligible for treatment as qualified   
dividend income. Any investment in residual interests of a Collateralized   
 Mortgage Obligation (a "CMO") that has elected to be treated as a real estate
mortgage investment conduit (a "REMIC") can create complex tax problems,    
especially if the Fund has state or local governments or other tax-exempt   
organizations as shareholders. Under current law, the Fund serves to block  
unrelated business taxable income ("UBTI") from being realized by its       
tax-exempt shareholders. Notwithstanding the foregoing, a tax-exempt        
shareholder could realize UBTI by virtue of its investment in the Fund if   
 either: (1) the Fund invests in REITs that hold residual interests in REMICs;
or (2) shares in the Fund constitute debt-financed property in the hands of 
the tax-exempt shareholder within the meaning of Code Section 514(b). If a  
 charitable remainder trust (as defined in Code Section 664) realizes any UBTI
for a taxable year, it will lose its tax-exempt status for the year.        

Options, Futures Contracts, and Forward Contracts -- The Fund's transactions
in options, futures contracts, forward contracts, short sales "against the  
 box," and swaps and related transactions will be subject to special tax rules
that may affect the amount, timing, and character of Fund income and        
distributions to shareholders. For example, certain positions held by the   
Fund on the last business day of each taxable year will be marked to market 
 (i.e., treated as if closed out on that day), and any gain or loss associated
with the positions will be treated as 60% long-term and 40% short-term      
capital gain or loss. Certain positions held by the Fund that substantially 
diminish its risk of loss with respect to other positions in its portfolio  
may constitute "straddles," and may be subject to special tax rules that    
would cause deferral of Fund losses, adjustments in the holding periods of  
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects with   
respect to those investments; in order to distribute this income and avoid a
tax on the Fund, the Fund may be required to liquidate portfolio securities 
that it might otherwise have continued to hold, potentially resulting in    
additional taxable gain or loss to the Fund. The Fund will limit its        
activities in options, futures contracts, forward contracts, short sales    
"against the box" and swaps and related transactions to the extent necessary
to meet the diversification requirements of Subchapter M of the Code.       

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

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

If more than 50% of the total assets of a Fund are represented by direct    
 investments in foreign stock and securities at the close of its taxable year,
 the Fund may elect to "pass through" to its shareholders foreign income taxes
paid by it. If the Fund so elects, shareholders will be required to treat   
their pro rata portions of the foreign income taxes paid by the Fund as part
of the amounts distributed to them by it and thus includable in their gross 
income for federal income tax purposes. Shareholders who do not itemize     
deductions would (subject to such limitations) be able to claim a credit but
not a deduction. No deduction will be permitted to individuals in computing 
 their alternative minimum tax liability. If the Fund is not eligible, or does
not elect, to "pass through" to its shareholders foreign income taxes it has
paid, shareholders will not be able to claim any deduction or credit for any
part of the foreign taxes paid by the Fund. In addition, the Fund's         
investments in certain foreign securities (including fixed income securities
 and derivatives) denominated in foreign currencies may increase or accelerate
the Fund's recognition of ordinary income and may affect the timing, amount,
or character of the Fund's distributions.                                   

Tax Shelter Reporting -- Under Treasury regulations, if a shareholder       
 recognizes a loss with respect to the Fund's shares of $2 million or more for
 an individual shareholder or $10 million or more for a corporate shareholder,
the shareholder must file with the Internal Revenue Service a disclosure    
statement on Form 8886. Shareholders should consult their tax advisers to   
 determine the applicability of these regulations in light of their individual
circumstances.                                                              

Underlying Funds -- If the Fund invests all of its assets in shares of      
underlying Funds, its distributable income and gains will normally consist  
entirely of distributions from underlying Funds' income and gains and gains 
and losses on the dispositions of shares of underlying Funds. To the extent 
that an underlying Fund realizes net losses on its investments for a given  
taxable year, the Fund will not be able to recognize its share of those     
losses (so as to offset distributions of net income or capital gains from   
other underlying Funds) until it disposes of shares of the underlying Fund. 
Moreover, even when the Fund does make such a disposition, a portion of its 
 loss may be recognized as a long-term capital loss, which will not be treated
as favorably for federal income tax purposes as a short-term capital loss or
 an ordinary deduction. In particular, the Fund will not be able to offset any
capital losses from its dispositions of underlying Fund shares against its  
ordinary income, which includes distributions of any net short-term capital 
 gains realized by an underlying Fund. As a result of the foregoing rules, and
certain other special rules, it is possible that the amounts of net         
investment income and net capital gains that the Fund will be required to   
distribute to shareholders will be greater than such amounts would have been
had the Fund invested directly in the securities held by the underlying     
Funds, rather than investing in shares of the underlying Funds. For similar 
reasons, the character of distributions from a Fund (i.e., long-term capital
gains, eligibility for dividends-received deduction, etc.) will not         
necessarily be the same as it would have been had the Fund invested directly
in the securities held by the underlying Funds.                             

If the Fund received dividends from an underlying Fund that qualifies as a  
regulated investment company, and the underlying Fund designates such       
dividends as "qualified dividend income," then the Fund is permitted in turn
 to designate a portion of its distributions as "qualified dividend income" as
well, provided the Fund meets holding period and other requirements with    
respect to shares of the underlying Fund.                                   

 Depending on the Fund's percentage ownership in an underlying Fund before and
after a redemption of shares of such underlying Fund, such a redemption may 
cause the Fund to be treated as receiving a dividend on the full amount of  
the distribution instead of receiving capital gain income on the shares of  
the underlying Fund. This would be the case where the Fund holds a          
significant interest in an underlying Fund and redeems only a small portion 
of such interest. It is possible that such a dividend will qualify as       
"qualified dividend income;" otherwise, it will be taxable as ordinary      
income.                                                                     

The fact that a Fund achieves its investment objectives by investing in     
underlying Funds will generally not adversely affect the Fund's ability to  
pass on to foreign shareholders the full benefit of the interest-related    
dividends and short-term capital gain dividends that it receives from its   
underlying investments in the Funds, except possibly to the extent that (1) 
interest-related dividends received by the Fund are offset by deductions    
allocable to the Fund's qualified interest income or (2) short-term capital 
gain dividends received by the Fund are offset by the Fund's net short- or  
 long-term capital losses, in which case the amount of a distribution from the
Fund to a foreign shareholder that is properly designated as either an      
interest-related dividend or a short-term capital gain dividend,            
respectively, may be less than the amount that such shareholder would have  
received had they invested directly in the underlying Funds. Furthermore, if
the Fund is a QIE and invests in an underlying Fund that is a QIE, a        
distribution to a foreign shareholder that is attributable to a USRPI       
Distribution received by the Fund will retain its character as a USRPI      
 Distribution when passed through to the foreign shareholder regardless of the
Fund's percentage ownership of the underlying Fund.                         

Under the current law, a Fund of Funds cannot pass through to shareholders  
foreign tax credits borne in respect of foreign securities income earned by 
an underlying Fund. A Fund is permitted to elect to pass through to its     
 shareholders foreign income taxes it pays only if it directly holds more than
 50% of its assets in foreign stock and securities at the close of its taxable
year. Foreign securities held indirectly through an underlying Fund do not  
contribute to this 50% threshold.                                           

> SPECIAL RULES FOR MUNICIPAL FUND DISTRIBUTIONS                                

 The following special rules apply to shareholders of Funds whose objective is
to invest primarily in obligations that pay interest that is exempt from    
federal income tax ("Municipal Funds").                                     

Tax-Exempt Distributions -- The portion of a Municipal Fund's distributions 
of net investment income that is attributable to interest from tax-exempt   
securities will be designated by the Fund as an "exempt-interest dividend"  
under the Code and will generally be exempt from federal income tax in the  
hands of shareholders so long as at least 50% of the total value of the     
Fund's assets consists of tax-exempt securities at the close of each quarter
of the Fund's taxable year. Distributions of tax-exempt interest earned from
certain securities may, however, be treated as an item of tax preference for
shareholders under the federal alternative minimum tax, and all             
 exempt-interest dividends will increase a corporate shareholder's alternative
minimum tax. Except when the Fund provides actual monthly percentage        
 breakdowns, the percentage of income designated as tax-exempt will be applied
uniformly to all distributions by the Fund of net investment income made    
during each fiscal year of the Fund and may differ from the percentage of   
distributions consisting of tax-exempt interest in any particular month.    
Shareholders are required to report exempt-interest dividends received from 
the Fund on their federal income tax returns.                               

Taxable Distributions -- A Municipal Fund may also earn some income that is 
 taxable as ordinary income (including interest from any obligations that lose
their federal tax exemption and, subject to a de minimis exception, when a  
bond purchased at a price less than its stated redemption price at maturity 
(a so-called "market discount bond") matures or is disposed of by the       
 Municipal Fund) and may recognize capital gains and losses as a result of the
disposition of securities and from certain options and futures transactions.
Shareholders normally will have to pay federal income tax on the non-exempt 
 interest dividends and capital gain distributions they receive from the Fund,
whether paid in cash or reinvested in additional shares. However, such Funds
 do not expect that the non-tax-exempt portion of their net investment income,
 if any, will be substantial. Because Municipal Funds expect to earn primarily
tax-exempt interest income, it is expected that dividends from such Funds   
will not qualify for the dividends-received deduction for corporations and  
will not be treated as "qualified dividend income" taxable to non-corporate 
shareholders at reduced rates.                                              

Consequences of Distributions by a Municipal Fund: Effect of Accrued        
Tax-Exempt Income -- Shareholders redeeming shares after tax-exempt income  
has been accrued but not yet declared as a dividend should be aware that a  
portion of the proceeds realized upon redemption of the shares will reflect 
the existence of such accrued tax-exempt income and that this portion may be
subject to tax as a capital gain even though it would have been tax-exempt  
had it been declared as a dividend prior to the redemption. For this reason,
if a shareholder wishes to redeem shares of a Municipal Fund that does not  
declare dividends on a daily basis, the shareholder may wish to consider    
whether he or she could obtain a better tax result by redeeming immediately 
 after the Fund declares dividends representing substantially all the ordinary
income (including tax-exempt income) accrued for that period.               

 Certain Additional Information for Municipal Fund Shareholders -- Interest on
indebtedness incurred by shareholders to purchase or carry Municipal Fund   
shares will not be deductible for federal income tax purposes.              
 Exempt-interest dividends are taken into account in calculating the amount of
social security and railroad retirement benefits that may be subject to     
federal income tax. You should consult your tax adviser to determine what   
effect, if any, an investment in a Fund may have on the federal taxation of 
your benefits. Entities or persons who are "substantial users" (or persons  
related to "substantial users") of facilities financed by private activity  
bonds should consult their tax advisers before purchasing Fund shares.      

Consequences of Redeeming Shares -- Any loss realized on a redemption of    
Municipal Fund shares held for six months or less will be disallowed to the 
extent of any exempt-interest dividends received with respect to those      
shares. If not disallowed, any such loss will be treated as a long-term     
 capital loss to the extent of any distributions of net capital gain made with
respect to those shares.                                                    

State and Local Income Taxes: Municipal Obligations -- The exemption of     
exempt-interest dividends for federal income tax purposes does not          
necessarily result in exemption under the income tax laws of any state or   
local taxing authority. Some states do exempt from tax that portion of an   
exempt interest dividend that represents interest received by a regulated   
 investment company on its holdings of securities issued by that state and its
 political subdivisions and instrumentalities. Therefore, the Fund will report
annually to its shareholders the percentage of interest income earned by it 
during the preceding year on Municipal Bonds and will indicate, on a        
state-by-state basis only, the source of such income.                       

> SPECIAL CONSIDERATIONS FOR 529 SHARE CLASSES                                  

The following special consideration applies specifically to the ownership of
a Fund' 529 share classes through a tuition program that qualifies under    
Section 529 of the Code.                                                    

The 529 share classes are an investment option under one or more tuition    
programs designed to qualify under Section 529 of the Code so that earnings 
 on investments are not subject to federal income tax (to either a contributor
to the tuition program or a designated beneficiary) until the earnings are  
withdrawn. Withdrawals of earnings that are used to pay "qualified higher   
education expenses" are tax-free for federal income tax purposes. State and 
local taxes may still apply. These tax benefits are not available to 529    
shares that are not owned through a qualifying Section 529 tuition program. 

Withdrawals of earnings that are not used for the designated beneficiary's  
 qualified higher education expenses generally are subject not only to federal
income tax but also to a 10% penalty tax unless such amounts are transferred
within sixty (60) days to another tuition program for the same designated   
beneficiary (only one such transfer may be made in any twelve (12) month    
period) or another designated beneficiary who is a member of the family of  
the designated beneficiary with respect to which the distribution was made  
and certain other conditions are satisfied. The 10% penalty tax will not    
apply to withdrawals made under certain circumstances, including certain    
withdrawals made after the designated beneficiary dies, becomes disabled, or
receives a scholarship or other tax-free payment for educational expenses   
 that does not exceed the amount of the distribution. Withdrawals attributable
to contributions to the tuition program (including the portion of any       
rollover from another tuition program that is attributable to contributions 
to that program) are not subject to tax.                                    

IX. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS                        

For the purposes of this section, all references to the "Adviser" shall     
include the Sub-Adviser with respect to that portion of the MFS Diversified 
 Income Fund for which the Sub-Adviser provides day-to-day investment advisory
services.                                                                   

Specific decisions to purchase or sell securities for the Fund are made by  
persons affiliated with the Adviser. Any such person may serve other clients
of the Adviser or any subsidiary of the Adviser in a similar capacity.      

In connection with the selection of broker/dealers and the placing of Fund  
portfolio transactions, the Adviser seeks to achieve for the Fund the best  
 overall price and execution available from brokerage firms, taking account of
all factors it deems relevant, including by way of illustration: price; the 
size of the transaction; the nature of the market for the security; the     
amount of the commission; the timing and impact of the transaction taking   
into account market prices and trends; the reputation, experience and       
financial stability of the broker/dealer involved; and the quality of       
services rendered by the broker/dealer in that and other transactions.      

In the case of securities traded in the over-the-counter market, portfolio  
transactions may be effected either on an agency basis, which involves the  
payment of negotiated brokerage commissions to the broker/dealer, including 
electronic communication networks, or on a principal basis at net prices    
without commissions, but which include compensation to the broker/dealer in 
the form of a mark-up or mark-down, depending on where the Adviser believes 
best execution is available. In the case of securities purchased from       
underwriters, the cost of such securities generally includes a fixed        
underwriting commission or concession. From time to time, soliciting dealer 
fees are available to the Adviser on tender or exchange offers. Such        
soliciting or dealer fees are, in effect, recaptured by the Funds.          

As permitted by Section 28(e) of the Securities Exchange Act of 1934, as    
amended ("Section 28(e)"), the Adviser may cause the Fund to pay a          
 broker/dealer which provides "brokerage and research services" (as defined by
the Securities Exchange Act of 1934, as amended) to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of 
 the amount other broker/dealers would have charged for the transaction if the
 Adviser determines in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
 executing broker/dealer viewed in terms of either a particular transaction or
the Adviser's overall responsibilities to the Fund and its other clients.   
"Commissions," as interpreted by the SEC, include fees paid to brokers for  
trades conducted on an agency basis, and certain mark-ups, markdowns,       
commission equivalents and other fees received by dealers in riskless       
principal transactions placed in the over-the-counter market.               

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

Broker/dealers may be willing to furnish statistical, research and other    
factual information or services ("Research"), for example, investment       
research reports; access to analysts; execution systems and trading         
analytics; reports or databases containing corporate, fundamental, and      
technical analyses; portfolio modeling strategies; and economic research    
services, such as publications, chart services, and advice from economists  
concerning macroeconomics information, and analytical investment information
about particular corporations to the Adviser for no consideration other than
brokerage or underwriting commissions. Securities may be bought or sold from
time to time through such broker/dealers on behalf of the Fund. The Adviser 
may use brokerage commissions from the Fund's portfolio transactions to     
 acquire Research, subject to the procedures and limitations described in this
discussion.                                                                 

The advisory fee paid by the Fund to the Adviser is not reduced as a        
consequence of the Adviser's receipt of Research. To the extent the Fund's  
 portfolio transactions are used to obtain Research, the brokerage commissions
paid by the Fund might exceed those that might otherwise be paid for        
execution only. The Research received may be useful and of value to the     
Adviser in serving both the Fund and other clients of the Adviser;          
accordingly, not all of the Research provided by brokers through which the  
 Fund effects securities transactions may be used by the Adviser in connection
with the Fund. While the Research is not expected to reduce the expenses of 
the Adviser, the Adviser would, through the use of the Research, avoid the  
additional expenses that would be incurred if it attempted to develop       
comparable information through its own staff.                               

From time to time, the Adviser prepares a list of broker/dealer firms that  
have been deemed by the Adviser to provide valuable Research as determined  
periodically by the investment staff ("Research Firms"), together with a    
suggested non-binding amount of brokerage commissions ("non-binding target")
to be allocated to each Research Firm, subject to certain requirements. All 
trades with Research Firms will be executed in accordance with the Adviser's
obligation to seek best execution for its client accounts. Neither the      
Adviser nor the Fund has an obligation to any Research Firm if the amount of
brokerage commissions paid to the Research Firm is less than the applicable 
non-binding target. The Adviser reserves the right to pay cash to the       
Research Firm from its own resources in an amount the Adviser determines in 
its discretion.                                                             

If the Adviser determines that any service or product has a mixed use (i.e.,
 it also serves functions that do not assist the investment decision-making or
trading process), the Adviser will allocate the costs of such service or    
product accordingly in its reasonable discretion. The Adviser will allocate 
brokerage commissions to Research Firms only for the portion of the service 
or product that the Adviser determines assists it in the investment         
decision-making or trading process and will pay for the remaining value of  
the product or service in cash.                                             

In effecting portfolio transactions on behalf of the Fund and the Adviser's 
other clients, the Adviser from time to time may instruct the broker/dealer 
that executes a transaction to allocate, or "step out," a portion of such   
transaction to another broker/dealer. The broker/dealer to which the Adviser
has "stepped out" would then settle and complete the designated portion of  
the transaction, and the executing broker/dealer would settle and complete  
the remaining portion of the transaction that has not been "stepped out."   
Each broker/dealer may receive a commission or brokerage fee with respect to
that portion of the transaction that it settles and completes.              

 In certain instances there may be securities that are suitable for the Fund's
portfolio as well as for one or more of the other clients of the Adviser or 
any subsidiary of the Adviser. It may develop that a particular security is 
 bought or sold for only one client even though it might be held by, or bought
 or sold for, other clients. Likewise, a particular security may be bought for
one or more clients when one or more other clients are selling that same    
security. Some simultaneous transactions are inevitable when several clients
 receive investment advice from the same investment adviser, particularly when
the same security is suitable for the investment objectives of more than one
client. Transactions for each client are generally effected independently   
unless the Advisor determines to purchase or sell the same securities for   
several clients at approximately the same time. The Advisor may, but is not 
required to, aggregate together purchases and sales for several clients and 
allocate the trades in a fair and equitable manner, across participating    
clients. The Adviser has adopted policies that are reasonably designed to   
ensure that when two or more clients are simultaneously engaged in the      
purchase or sale of the same security, the securities are allocated among   
 clients in a manner believed by the Adviser to be fair and equitable to each.
Among other things, these policies prohibit allocations of equity initial   
public offerings, equity limited offerings or fixed income new issues to,   
among others: (1) Private Portfolio Services accounts; (2) funds or accounts
the beneficial owners of which are principally the Adviser's officers and   
 employees of the Trust or Trustees which are not being offered to the public;
and (3) any accounts owned beneficially solely by the Adviser or any direct 
or indirect subsidiary of the Adviser. However, these policies do not       
prohibit allocations to Funds or accounts owned beneficially by Sun Life of 
 Canada (U.S.) Financial Services Holdings, Inc., or Sun Life Financial, Inc.,
or their affiliates other than the Adviser and its direct and indirect      
subsidiaries.                                                               

It is recognized that in some cases this system could have a detrimental    
effect on the price or volume of the security as far as the Fund is         
concerned. In other cases, however, the Adviser believes that the Fund's    
ability to participate in volume transactions will produce better executions
for the Fund.                                                               

X. DISCLOSURE OF PORTFOLIO HOLDINGS                                         

The Fund has established a policy governing the disclosure of its portfolio 
holdings that is reasonably designed to protect the confidentiality of the  
Fund's non-public portfolio holdings and prevent inappropriate selective    
disclosure of such holdings. The Fund's Board of Trustees has approved this 
policy and will be asked to approve any material amendments to this policy. 
Exceptions to this policy may be authorized by MFS' general counsel or a    
senior member of the MFS legal department acting under the supervision of   
MFS' general counsel (an "Authorized Person").                              

Neither MFS nor the Fund nor, if applicable, a sub-adviser, will receive any
 compensation or other consideration in connection with its disclosure of Fund
portfolio holdings.                                                         

> PUBLIC DISCLOSURE OF PORTFOLIO HOLDINGS                                       

In addition to the public disclosure of Fund portfolio holdings through     
required SEC quarterly filings, a Fund may make its portfolio holdings      
publicly available on the MFS Web site in such scope and form and with such 
frequency as MFS may reasonably determine.                                  

The following information is generally available to you on the MFS Web site 
(mfs.com):                                                                  

 Information                           Approximate Date of Posting to Web Site
 -----------                           ---------------------------------------
Fund's top 10 securities holdings     14 days after month end               
as of each month's end                                
Fund's full securities holdings       29 days after month end               
as of each month's end                                    

Note that the Fund or MFS may suspend the posting of this information or    
modify the elements of this Web posting policy without notice to            
 shareholders. Once posted, the above information will remain available on the
 Web site until at least the date on which the Fund files a Form N-CSR or Form
N-Q for the period that includes the date as of which the Web site          
information is current.                                                     

Not all registered investment companies that are advised by MFS publicly    
disclose portfolio holdings in the form or on the schedule described above, 
and registered investment companies that are sub-advised by MFS or its      
 affiliates may be subject to different portfolio holdings disclosure policies
that may permit public disclosure of portfolio holdings information in      
different forms and at different times. In addition, separate account and   
unregistered product clients of MFS or its affiliates have access to their  
portfolio holdings, and prospective clients have access to representative   
portfolio holdings. These clients and prospective clients are not subject to
the Fund's portfolio holdings disclosure policies. Some of these registered 
investment companies, sub-advised Funds, separate accounts, and unregistered
products, all advised or sub-advised by MFS or its affiliates, have         
substantially similar or identical investment objectives and strategies to  
certain Funds. They therefore have potentially substantially similar, and in
certain cases nearly identical, portfolio holdings as those Funds.          

 A Fund's portfolio holdings are considered to be publicly disclosed: (a) upon
the disclosure of the portfolio holdings in a publicly available, routine   
filing with the SEC that is required to include the information, (b) the day
after the Fund makes such information available on its Web site (assuming   
 that it discloses in its prospectus that such information is available on its
Web site), or (c) at such additional times and on such additional basis as  
determined by the SEC or its staff.                                         

> DISCLOSURE OF NON-PUBLIC PORTFOLIO HOLDINGS                                   

A Fund may, in certain cases, disclose to third parties its portfolio       
holdings which have not been made publicly available. Disclosure of         
non-public portfolio holdings to third parties may only be made if an       
Authorized Person determines that such disclosure is not impermissible under
applicable law or regulation. In the case of sub-advisers, as applicable,   
this determination may be made by a senior member of the sub-adviser's legal
or compliance departments (a "Sub-Adviser Authorized Person"). In addition, 
the third party receiving the non-public portfolio holdings may, at the     
discretion of an Authorized Person, be required to agree in writing to keep 
 the information confidential and/or agree not to trade directly or indirectly
based on the information. Such agreements may not be required in            
circumstances such as where portfolio securities are disclosed to brokers to
obtain bids/prices or in interviews with the media. MFS will seek to monitor
a recipient's use of non-public portfolio holdings provided under these     
agreements and, when appropriate, use its best efforts to enforce the terms 
of these agreements. The restrictions and obligations described in this     
paragraph do not apply to non-public portfolio holdings provided to MFS or  
its affiliates.                                                             

 In addition, to the extent that an Authorized Person determines that there is
a potential conflict with respect to the disclosure of information that is  
 not publicly available between the interests of a Fund's shareholders, on the
one hand, and MFS, MFD or an affiliated person of MFS, MFD, or the Fund, on 
the other hand, the Authorized Person must inform MFS' conflicts officer of 
such potential conflict, and MFS' conflicts officer shall determine whether,
in light of the potential conflict, disclosure is reasonable under the      
circumstances, and shall report such potential conflict of interest         
determinations to the Fund's Independent Chief Compliance Officer and the   
Board of Trustees of the Fund. MFS also reports to the Board of Trustees of 
the Fund regarding the disclosure of information regarding the Fund that is 
not publicly available.                                                     

Subject to compliance with the standards set forth in the previous two      
paragraphs, non-public portfolio holdings may be disclosed in the following 
circumstances:                                                              

 Employees of MFS or MFD or, if applicable, a sub-adviser, (collectively "Fund
representatives") disclose non-public portfolio holdings in connection with 
 the day-to-day operations and management of the Fund. Full portfolio holdings
 are disclosed to a Fund's custodians, independent registered accounting firm,
financial printers, regulatory authorities, and stock exchanges and other   
listing organizations. Portfolio holdings are disclosed to a Fund's pricing 
service vendors and broker/dealers when requesting bids for, or price       
quotations on, securities, and to other persons (including independent      
contractors) who provide systems or software support in connection with Fund
operations, including accounting, compliance support, and pricing. Portfolio
holdings may also be disclosed to persons assisting a Fund in the voting of 
 proxies or in connection with litigation relating to Fund portfolio holdings.
In connection with managing the Funds, MFS or, if applicable, a sub-adviser,
may use analytical systems provided by third parties who may have access to 
Fund portfolio holdings.                                                    

Non-public portfolio holdings may be disclosed in connection with other     
activities, such as to participants in in-kind purchases and redemptions of 
Fund shares, to service providers facilitating the distribution or analysis 
of portfolio holdings, once the information is public, and in other         
circumstances not described above. All such disclosures are subject to      
compliance with the applicable disclosure standards.                        

In addition, subject to such disclosure not being impermissible under       
applicable law or regulation, Fund representatives may disclose Fund        
portfolio holdings and related information, which may be based on non-public
portfolio holdings, under the following circumstances (among others):       

Fund representatives may provide oral or written information ("portfolio    
commentary") about a Fund, including, but not limited to, how the Fund's    
investments are divided among various sectors, industries, countries, value 
and growth stocks, small, mid, and large-cap stocks, among stocks, bonds,   
currencies and cash, types of bonds, bond maturities, bond coupons, and bond
credit quality ratings. This portfolio commentary may also include          
information on how these various weightings and factors contributed to Fund 
performance. Fund representatives may also express their views orally or in 
writing on one or more of a Fund's portfolio holdings or may state that a   
Fund has recently purchased or sold one or more holdings.                   

Fund representatives may also provide oral or written information           
 ("statistical information") about various financial characteristics of a Fund
or its underlying portfolio securities including, but not limited to, alpha,
beta, coefficient of determination, duration, maturity, information ratio,  
Sharpe ratio, earnings growth, payout ratio, price/book value, projected    
earnings growth, return on equity, standard deviation, tracking error,      
weighted average quality, market capitalization, percent debt to equity,    
price to cash flow, dividend yield or growth, default rate, portfolio       
turnover, and risk and style characteristics.                               

The portfolio commentary and statistical information may be provided to     
 members of the press, shareholders in the Fund, persons considering investing
in the Fund, or representatives of such shareholders or potential           
shareholders, such as fiduciaries of a 401(k) plan or a trust and their     
advisers, and the content and nature of the information provided to each of 
these persons may differ.                                                   

> ONGOING ARRANGEMENTS TO MAKE NON-PUBLIC PORTFOLIO HOLDINGS AVAILABLE          

 With authorization from an Authorized Person or, as applicable, a Sub-Adviser
Authorized Person, consistent with "Disclosure of Non-Public Portfolio      
Holdings" above, Fund representatives may disclose non-public Fund portfolio
holdings to the recipients identified on Appendix G to this SAI Part II, or 
permit the recipients identified in Appendix G to this SAI Part II to have  
access to non-public Fund portfolio holdings, on an on-going basis.         

This list of recipients in Appendix G to this SAI Part II is current as of  
June 30, 2006, and any additions, modifications, or deletions to this list  
that have occurred since June 30, 2006, are not reflected. The portfolio    
holdings of the Fund which are provided to these recipients, or to which    
these recipients have access, may be the Fund's current portfolio holdings. 
As a condition to receiving or being provided access to non-public Fund     
portfolio holdings, the recipients listed in Appendix G to this SAI Part II 
must agree, or otherwise have an independent duty, to maintain this         
information in confidence.                                                  

XI. DETERMINATION OF NET ASSET VALUE                                        

The net asset value per share of each class of the Fund is determined each  
day during which the New York Stock Exchange (the "Exchange") is open for   
trading. (As of the date of this SAI, the Exchange is open for trading every
 weekday except in an emergency and for the following holidays (or the days on
 which they are observed): New Year's Day; Martin Luther King Day; Presidents'
Day; Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving   
Day, and Christmas Day.) This determination is made once each day as of the 
close of regular trading on the Exchange (generally, 4 p.m., Eastern time)  
(the "valuation time") by deducting the amount of the liabilities           
attributable to the class from the value of the assets attributable to the  
class and dividing the difference by the number of Fund shares outstanding  
for that class. In accordance with regulations for regulated investment     
companies and except for money market funds, changes in portfolio holdings  
and number of shares outstanding are generally reflected in a Fund's net    
asset value the next business day after such change.                        

> MONEY MARKET FUNDS                                                            

Money market instruments are valued at amortized cost, which approximates   
market value. Amortized cost involves valuing an instrument at its cost as  
 adjusted for amortization of premium or accretion of discount rather than its
current market value. Each money market fund's use of amortized cost is     
subject to the Fund's compliance with Rule 2a-7 under the Investment Company
Act of 1940. The amortized cost value of an instrument can be different from
the market value of an instrument.                                          

The Board of Trustees for each money market fund has established procedures 
designed to stabilize its net asset value per share at $1.00 and has        
delegated to the Adviser the responsibility for the implementation and      
administration of such procedures. Under the procedures, the adviser is     
responsible for monitoring and notifying the Board of Trustees of           
 circumstances where the net asset value calculated by using market valuations
may deviate from the $1.00 per share calculated using amortized cost and    
might result in a material dilution or other unfair result to investors or  
existing shareholders. Under such circumstances, the Board may take such    
 corrective action, if any, as it deems appropriate to eliminate or reduce, to
the extent reasonably practicable, any such dilution or unfair results. Such
corrective action could include selling portfolio instruments prior to      
maturity to realize capital gains or losses; shortening average portfolio   
maturity; withholding dividends; calculating net asset value by using       
 available market quotations; and such other measures as the Trustees may deem
appropriate.                                                                

> NON-MONEY MARKET FUNDS                                                        

Open-end investment companies are generally valued at their net asset value 
per share. The underlying investments of open-end investment companies      
managed by the Adviser are valued as described below.                       

Equity securities, including restricted equity securities, are generally    
valued at the last sale or official closing price as reported by an         
independent pricing service on the market or exchange on which they are     
primarily traded. For securities for which there were no sales reported that
day, equity securities are generally valued at the last quoted daily bid    
quotation as reported by an independent pricing service on the market or    
exchange on which they are primarily traded.                                

Debt instruments (other than short-term instruments), including restricted  
debt instruments, are generally valued at an evaluated or composite bid as  
reported by an independent pricing service. Values of debt instruments      
obtained from pricing services can utilize both dealer-supplied valuations  
and electronic data processing techniques, which take into account factors  
such as institutional-size trading in similar groups of securities, yield,  
quality, coupon rate, maturity, type of issue, trading characteristics, and 
other market data.                                                          

Short-term instruments with a maturity at issuance of 60 days or less may be
valued at amortized cost, which approximates market value.                  

Exchange-traded options are generally valued at the last sale or official   
closing price as reported by an independent pricing service on the exchange 
on which they are primarily traded. Exchange-traded options for which there 
were no sales reported that day are generally valued at the last daily bid  
quotation as reported by an independent pricing service on the exchange on  
which they are primarily traded. Options not traded on an exchange are      
generally valued at a broker/dealer bid quotation. Foreign currency options 
are generally valued using an external pricing model that uses market data  
from an independent source.                                                 

Futures contracts are generally valued at last posted settlement price as   
reported by an independent pricing service on the market on which they are  
primarily traded. Futures contracts for which there were no trades that day 
for a particular position are generally valued at the closing bid quotation 
 as reported by an independent pricing service on the market on which they are
primarily traded.                                                           

Forward foreign currency contracts are generally valued at the mean of bid  
and asked prices for the time period interpolated from rates reported by an 
independent pricing service for proximate time periods.                     

Swaps are generally valued at a broker-dealer bid quotation.                

 Securities and other assets generally valued on the basis of information from
an independent pricing service may also be valued at a broker/dealer bid    
quotation.                                                                  

The values of foreign securities and other assets and liabilities expressed 
 in foreign currencies are converted to U.S. dollars using the mean of bid and
asked prices for rates reported by an independent pricing service.          

XII. SHAREHOLDER SERVICES                                                   

> INVESTMENT AND WITHDRAWAL PROGRAMS                                            

The Fund makes available certain programs designed to enable shareholders to
add to or withdraw from their investment with applicable sales charges      
reduced or waived. These programs are generally described in the prospectus 
and additional details regarding certain of these programs are set forth    
below. These programs or waivers may be changed or discontinued by the Fund 
at any time without notice. Some of these programs and waivers may not be   
available to you if your shares are held through certain types of accounts, 
such as certain retirement accounts and 529 plans, or certain accounts that 
you maintain with your financial intermediary. You or your financial        
intermediary must inform MFSC of your intention to invest in the Fund under 
one of the programs below upon purchasing Fund shares. You can provide this 
information in your account application or through a separate document      
provided by your financial intermediary.                                    

LETTER OF INTENT. Out of the shareholder's initial purchase (or subsequent  
purchases if necessary), 5% of the dollar amount specified in the Letter of 
Intent application shall be held in escrow by MFSC in the form of shares    
registered in the shareholder's name. All distributions on escrowed shares  
will be paid to the shareholder or to the shareholder's order. When the     
minimum investment so specified is completed (either prior to or by the end 
of the 13-month period or 36-month period, as applicable), the shareholder  
will be notified and the escrowed shares will be released.                  

If the intended minimum investment amount is not completed, MFSC will redeem
 an appropriate number of the escrowed shares in order to pay the higher sales
charge level for the amount actually purchased. Shares remaining after any  
such redemption will be released by MFSC. By completing and signing the     
 Account Application or separate Letter of Intent application, the shareholder
 irrevocably appoints MFSC his or her attorney to surrender for redemption any
or all escrowed shares with full power of substitution in the premises.     

SYSTEMATIC WITHDRAWAL PLAN ("SWP"). To initiate this service, shares having 
an aggregate value of at least $5,000 either must be held on deposit by, or 
certificates for such shares must be deposited with, MFSC. MFSC may charge  
 the account for services rendered and expenses incurred beyond those normally
assumed by the Fund with respect to the redemption of shares. No charge is  
currently assessed against the account, but one could be instituted by MFSC 
on 60 days' notice in writing to the shareholder in the event that the Fund 
ceases to assume the cost of these services. The Fund may terminate any SWP 
for an account if the value of the account falls below $5,000 as a result of
share redemptions (other than as a result of a SWP). Any SWP may be         
terminated at any time by either the shareholder or the Fund.               

GROUP PURCHASES. A bona fide group and all its members may be treated at    
MFD's discretion as a single purchaser and, under the Right of Accumulation 
 (but not the Letter of Intent), obtain quantity sales charge discounts on the
purchase of Class A or 529A shares if the group (1) gives its endorsement or
authorization to the investment program so that it may be used by the       
financial intermediary to facilitate solicitation of the membership, thus   
effecting economies of sales effort; (2) has been in existence for at least 
six months and has a legitimate purpose other than to purchase mutual fund  
shares at a discount; (3) is not a group of individuals whose sole          
organizational nexus is as credit cardholders of a company, policyholders of
an insurance company, customers of a bank or financial intermediary, clients
of an investment adviser, or other similar groups; and (4) agrees to provide
 certification of membership of those members investing money in the MFS Funds
upon the request of MFD.                                                    

> EXCHANGE PRIVILEGE                                                            

MONEY MARKET FUNDS                                                          

If you exchange your shares out of MFS Cash Reserve Fund, MFS Government    
 Money Market Fund, or MFS Money Market Fund into Class A or Class 529A shares
of any other MFS Fund, you will pay the initial sales charge, if applicable,
if you have not already paid this charge on these shares. You will not pay  
the charge if:                                                              

 o the shares exchanged from either Fund were acquired by an exchange from any
other MFS Fund;                                                         

 o the shares exchanged from either Fund were acquired by automatic investment
of dividends from any other MFS Fund; or                                

o the shares being exchanged would have, at the time of purchase, been      
 eligible for purchase at net asset value had you invested directly in the
MFS Fund into which the exchange is being made.                         

MFS FIXED FUND. Class A, Class C, Class R, Class R1, Class R2, Class R3,    
Class R4, and Class R5 shares of any MFS Fund held by certain qualified     
 retirement plans may be exchanged for units of participation of the MFS Fixed
 Fund (the "Units"), and Units may be exchanged for Class A, Class C, Class R,
Class R1, Class R2, Class R3, Class R4, and Class R5 shares of any MFS Fund 
(if the share purchase eligibility for these share classes is met). With    
respect to exchanges between Class C shares subject to a CDSC and Units, a  
 shareholder will only be eligible to make the exchange if the CDSC would have
been waived had the Class C shares been redeemed. With respect to exchanges 
 between Class A shares and Units, shares otherwise subject to a CDSC will not
be charged a CDSC in an exchange. Shares or Units will retain the CDSC      
 schedule in effect based upon a pro rata share of the CDSC from the exchanged
 Fund and the original purchase date of the shares subject to the CDSC. In the
event that a shareholder initially purchases Units and then exchanges into  
Class A shares subject to an initial sales charge of a MFS Fund, the initial
sales charge shall be due upon such exchange, but will not be imposed with  
respect to any subsequent exchanges between such Class A shares and Units   
with respect to shares on which the initial sales charge has already been   
paid.                                                                       

TELEPHONE EXCHANGES. No more than ten exchanges may be made in any one      
exchange request by telephone.                                              

XIII. DESCRIPTION OF SHARES, VOTING RIGHTS, AND LIABILITIES                 

The Trust's Declaration of Trust, as amended or amended and restated from   
time to time, permits the Trust's Board of Trustees to issue an unlimited   
number of full and fractional shares of beneficial interest (without par    
value) of each series, to divide or combine the shares of any series into a 
 greater or lesser number of shares without thereby changing the proportionate
beneficial interests in that series, and to divide such shares into classes.
The Board of Trustees has reserved the right to create and issue additional 
series and classes of shares and to classify or reclassify outstanding      
shares.                                                                     

Each shareholder of the Fund is entitled to one vote for each dollar of net 
asset value (number of shares of the Fund owned times net asset value per   
share) of the Fund, on each matter on which the shareholder is entitled to  
 vote. Each fractional dollar amount is entitled to a proportionate fractional
vote. Except when a larger vote is required by applicable law, a majority of
the voting power of the shares voted in person or by proxy on a matter will 
 decide that matter and a plurality of the voting power of the shares voted in
person or by proxy will elect a Trustee. Shareholders of all series of the  
Trust generally will vote together on all matters except when a particular  
matter affects only shareholders of a particular class or series or when    
applicable law requires shareholders to vote separately by series or class. 

Except in limited circumstances, the Trustees may, without any shareholder  
vote, amend or otherwise supplement the Trust's Declaration of Trust. Each  
Trust except MFS Series Trust XII, or any series or class thereof, may merge
or consolidate or may sell, lease, or exchange all or substantially all of  
its assets if authorized (either at a meeting or by written consent) by a   
Majority Shareholder Vote of the class, series, or trust, as applicable. MFS
Series Trust XII, or any series or class of MFS Series Trust XII, may merge 
or consolidate or may sell, lease, or exchange all or substantially all of  
its assets without any shareholder vote to the extent permitted by law. Each
Trust, or any series or class, may reincorporate or reorganize (but not with
 another operating entity) without any shareholder vote. The Trust, any series
of the Trust, or any class of any series, may be terminated at any time by a
vote of 1) a Majority Shareholder Vote, or 2) by the Trustees by written    
notice to the shareholders of that series or class.                         

The Trustees may cause a shareholder's shares to be redeemed for any reason 
 under terms set by the Trustees, including, but not limited to, 1) to protect
the tax status of a Fund, 2) the failure of a shareholder to provide a tax  
identification number if required to do so, 3) the failure of a shareholder 
to pay when due for the purchase of shares issued to the shareholder, 4) in 
order to eliminate accounts whose values are less than a minimum amount     
established by the Trustees, 5) the failure of a shareholder to meet or     
maintain the qualifications for ownership of a particular class of shares,  
and 6) to eliminate ownership of shares by a particular shareholder when the
Trustees determine that the particular shareholder's ownership is not in the
 best interests of the other shareholders of the applicable Fund (for example,
in the case of an alleged market timer). The exercise of the above powers is
subject to any applicable provisions under the 1940 Act or the rules adopted
thereunder.                                                                 

Under the Declaration of Trust, the Fund may convert to a master/feeder     
structure or a fund of funds structure without shareholder approval. In a   
master/feeder structure, a Fund invests all of its assets in another        
 investment company with similar investment objectives and policies. In a Fund
 of Funds structure, a Fund invests all or a portion of its assets in multiple
investment companies.                                                       

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

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

The Trust's Declaration of Trust provides that shareholders may not bring   
suit on behalf of the fund without first requesting that the Trustees bring 
such suit unless there would be irreparable injury to the Fund or if a      
majority of the Trustees (or a majority of Trustees on any committee        
established to consider the merits of such action) have a personal financial
interest in the action. Trustees are not considered to have a personal      
financial interest by virtue of being compensated for their services as     
Trustees or as trustees of Funds with the same or an affiliated investment  
adviser or distributor.                                                     

The Trust's Declaration of Trust provides that by becoming a shareholder of 
the Fund, each shareholder shall be expressly held to have assented to and  
agreed to be bound by the provisions of the Declaration of Trust.           

485APOS
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                                                                    APPENDIX A

TRUSTEES AND OFFICERS - IDENTIFICATION AND BACKGROUND 

The Trustees and officers of the Trust, as of September 1, 2006, are listed     
below, together with their principal occupations during the past five years.    
(Their titles may have varied during that period.) The address of each Trustee  
and officer is 500 Boylston Street, Boston, Massachusetts 02116.                

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

                                                     PRINCIPAL OCCUPATIONS
                POSITION(S)                         DURING THE PAST FIVE
NAME, DATE OF      HELD WITH     TRUSTEE/OFFICER          YEARS & OTHER     
 BIRTH             FUND           SINCE(1)            DIRECTORSHIPS(2)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INTERESTED                                                                      
TRUSTEES                                                                        
--------------------------------------------------------------------------------
Robert J.           Trustee       April 2005;        Massachusetts Financial    
Manning(3)                        December 2004 -    Services Company, Chief    
(born 10/20/63)                   March 2005         Executive Officer,         
                                  (Advisory          President, Chief Investment
                            Trustee);          Officer  and Director
February -  
 December 2004
(Trustee)   
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert C. Pozen(3)  Trustee       April 2005;        Massachusetts Financial    
(born 8/8/46)                     December 2004      Services Company, Chairman 
                             -March 2005        (since February 2004);
                            (Advisory          Secretary of Economic
                                Trustee);          Affairs, The Commonwealth
                               February -         December 2002); Fidelity
                                December 2004      of Massachusetts (January
                                (Trustee)          2002 to Investments, Vice
                                                Chairman (June 2000 to
                                                  December 2001); Fidelity
                                               Management & Research
                                             Company (investment
                                                    adviser), President (March
                                                  1997 to July 2001); Bell
                                            Canada Enterprises
                                               (telecommunications),
                                                   Director; Medtronic, Inc.
                                               (medical technology),
                                           Director; Telesat
                                    (satellite
                                                   communications), Director
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INDEPENDENT                                                                     
TRUSTEES                                                                        
--------------------------------------------------------------------------------
J. Atwood Ives      Trustee and   February 1992      Private investor; Eastern  
(born 5/1/36)       Chair of                         Enterprises (diversified   
           Trustees                         services company),
                                               Chairman, Trustee and
                                                 Chief Executive Officer
                                               (until November 2000)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert E.           Trustee       January 2006       Consultant - regulatory    
Butler(4)                                            and compliance matters     
(born 11/29/41)                                      (since July 2002);         
                                                    PricewaterhouseCoopers LLP
                                                (professional services
                                                  firm), Partner (November
                                               2000 until June 2002)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Lawrence H. Cohn,   Trustee       August 1993        Brigham and Women's        
M.D.                                                 Hospital, Chief of Cardiac 
(born 3/11/37)                                       Surgery (until 2005);      
                                                 Harvard Medical School,
                                               Professor of Surgery;
                                             Brigham and Women's
                                              Hospital Physician's
                                                  Organization Chair (2000
                                  to 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
David H. Gunning    Trustee       January 2004       Cleveland-Cliffs Inc.      
(born 5/30/42)                                       (mining products and       
                                                 service provider), Vice
                                                  Chairman/Director (since
                                                April 2001); Encinitos
                                           Ventures (private
                                              investment company),
                                                  Principal (1997 to April
                                                 2001); Lincoln Electric
                                                 Holdings, Inc. (welding
                                                  equipment manufacturer),
                                  Director

--------------------------------------------------------------------------------
William R. Gutow    Trustee       December 1993      Private investor and real  
(born 9/27/41)                                       estate consultant; Capitol 
                                                  Entertainment Management
                                                    Company (video franchise),
                                       Vice Chairman
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Michael Hegarty     Trustee       December 2004      Retired; AXA Financial     
(born 12/21/44)                                      (financial services and    
                                                   insurance), Vice Chairman
                                             and Chief Operating
                                                   Officer (until May 2001);
                                            The Equitable Life
                                           Assurance Society
                                                    (insurance), President and
                                                 Chief Operating Officer
                                          (until May 2001)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Lawrence T.         Trustee       July 1981          Hemenway & Barnes          
Perera                                               (attorneys), Partner       
(born 6/23/35)                                                                  
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
J. Dale Sherratt    Trustee       August 1993        Insight Resources, Inc.    
(born 9/23/38)                                       (acquisition planning      
                                                  specialists), President;
                                               Wellfleet Investments
                                                  (investor in health care
                                              companies), Managing
                                                General Partner (since
                                          1993); Cambridge
                                        Nutraceuticals
                                                   (professional nutritional
                                                    products), Chief Executive
                                                  Officer (until May 2001)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Laurie J. Thomsen   Trustee       March 2005         Private investor; Prism    
(born 8/5/57)                                        Venture Partners (venture  
                                                  capital), Co-founder and
                                                General Partner (until
                                              June 2004); St. Paul
                                             Travelers Companies
                                              (commercial property
                                               liability insurance),
                                  Director
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Robert W. Uek       Trustee       January 2006       Retired (since 1999);      
(born 5/18/41)                                       PricewaterhouseCoopers LLP 
                                                (professional services
                                               firm), Partner (until
                                              1999); Consultant to
                                            investment company
                                                   industry (since 2000); TT
                                             International Funds
                                                (mutual fund complex),
                                             Trustee (2000 until
                                         2005); Hillview
                                                   Investment Trust II Funds
                                                (mutual fund complex),
                                                   Trustee (2000 until 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
OFFICERS                                                                        
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Maria F. Dwyer(3)   President     November 2005      Massachusetts Financial    
(born 12/1/58)                                       Company, Executive Vice    
                                             President and Chief
                                                   Regulatory Officer (since
                                               March 2004); Fidelity
                                               Management & Research
                                                 Company, Vice President
                                                (prior to March 2004);
                                                  Fidelity Group of Funds,
                                                 President and Treasurer
                                               (prior to March 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Tracy Atkinson(3)   Treasurer     September 2005     Massachusetts Financial    
(born 12/30/64)                                      Services Company, Senior   
                                               Vice President (since
                                          September 2004);
                                                PricewaterhouseCoopers
                                                LLP, Partner (prior to
                                         September 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Christopher R.      Assistant     July 2005          Massachusetts Financial    
Bohane(3)           Secretary                        Services Company, Vice     
(born 1/18/74)      and                              President and Senior       
                    Assistant                        Counsel (since April 2003);
                    Clerk                             Kirkpatrick & Lockhart LLP
                                               (law firm), Associate
                                               (prior to April 2003)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Ethan D.            Assistant     July 2005          Massachusetts Financial    
Corey(3)            Secretary                        Services Company, Special  
(born 11/21/63)     and                              Counsel (since December    
                Assistant                        2004); Dechert LLP (law
                 Clerk                            firm), Counsel (prior to
                                        December 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
David L.            Assistant     July 2005          Massachusetts Financial    
DiLorenzo(3)        Treasurer                        Services Company, Vice     
(born 8/10/68)                                       President (since June      
                                                   2005); JP Morgan Investor
                                                  Services, Vice President
                                              (prior to June 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Timothy M.          Assistant     September 2005     Massachusetts Financial    
Fagan(3)            Secretary                        Services Company, Vice     
(born 7/10/68)      and                              President and Senior       
                 Assistant                        Counsel (since September
            Clerk                            2005); John Hancock
                                             Advisers, LLC, Vice
                                             President and Chief
                                            Compliance Officer
                                                   (September 2004 to August
                                                2005), Senior Attorney
                                                    (prior to September 2004);
                                               John Hancock Group of
                                                   Funds, Vice President and
                                                  Chief Compliance Officer
                                            (September 2004 to
                                        December 2004)

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

--------------------------------------------------------------------------------
Mark D.             Assistant     July 2005          Massachusetts Financial    
Fischer(3)          Treasurer                        Services Company, Vice     
(born 10/27/70)                                      President (since May 2005);
                                              JP Morgan Investment
                                                  Management Company, Vice
                                                 President (prior to May
                               2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Brian E.            Assistant     May 2006           Massachusetts Financial    
Langenfeld(3)       Secretary                        Services Company, Assistant
(born 3/7/73)       and                              Vice President and Counsel 
               Assistant                        (since May 2006); John
               Clerk                            Hancock Advisers, LLC,
                                                  Assistant Vice President
                                                  and Counsel (May 2005 to
                                                   April 2006); John Hancock
                                                 Advisers, LLC, Attorney
                                                 and Assistant Secretary
                                             (prior to May 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Ellen Moynihan(3)   Assistant     April 1997         Massachusetts Financial    
(born 11/13/57)     Treasurer                        Services Company, Senior   
                                        Vice President

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

--------------------------------------------------------------------------------
Susan S. Newton(3)  Assistant     May 2005           Massachusetts Financial    
(born 3/7/50)       Secretary                        Services Company, Senior   
           and                              Vice President and
                  Assistant                        Associate General Counsel
                 Clerk                            (since April 2005); John
                                                Hancock Advisers, LLC,
                                                Senior Vice President,
                                                   Secretary and Chief Legal
                                                 Officer (prior to April
                                                   2005); John Hancock Group
                                               of Funds, Senior Vice
                                                  President, Secretary and
                                                    Chief Legal Officer (prior
                                        to April 2005)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Susan A.            Assistant     July 2005          Massachusetts Financial    
Pereira(3)          Secretary                        Services Company, Vice     
(born 11/5/70)      and                              President and Senior       
                   Assistant                        Counsel (since June 2004);
                   Clerk                            Bingham McCutchen LLP (law
                                                    firm), Associate (prior to
                                    June 2004)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Mark N.             Secretary     January 2006       Massachusetts Financial    
Polebaum(3)         and Clerk                        Services Company, Executive
(born 5/1/52)                                         Vice President, General   
                                               Counsel and Secretary
                                               (since January 2006);
                                                 Wilmer Cutler Pickering
                                                Hale and Dorr LLP (law
                                                  firm), Partner (prior to
                                       January 2006)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Frank L. Tarantino  Independent   June 2004          Tarantino LLC (provider of 
(born 3/7/44)       Chief                            compliance services),      
              Compliance                       Principal (since June
            Officer                          2004); CRA Business
                                          Strategies Group
                                                (consulting services),
                                                  Executive Vice President
                                                    (April 2003 to June 2004);
                                               David L. Babson & Co.
                                               (investment adviser),
                                                  Managing Director, Chief
                                                    Administrative Officer and
                                                  Director (prior to March
                               2003)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
James O. Yost(3)    Assistant     September 1990     Massachusetts Financial    
(born 06/12/60)     Treasurer                        Services Company, Senior   
                                        Vice President
--------------------------------------------------------------------------------

------------------                                                              
(1) Date first appointed to serve as Trustee/officer of an MFS fund. Each       
Trustee has served continuously since appointment unless indicated      
otherwise.                                                              
(2) Directorships or trusteeships of companies required to report to the        
Securities and Exchange Commission (i.e., "public companies").          
(3) "Interested person" of the trust within the meaning of the Investment       
 Company Act of 1940 (referred to as the 1940 Act), which is the principal
federal law governing investment companies like the fund, as a result of
position with MFS. The address of MFS is 500 Boylston Street, Boston,   
Massachusetts 02116.                                                    
(4) In 2004 and 2005, Mr. Butler provided consulting services to the            
independent compliance consultant retained by MFS pursuant to its       
 settlement with the SEC concerning market timing and related matters. The
   terms of that settlement required that compensation and expenses related to
the independent compliance consultant be borne exclusively by MFS and,  
therefore, MFS paid Mr. Butler for the services he rendered to the      
  independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a
total of $351,119.29.                                                   

The Trust held a shareholders' meeting in 2005 to elect Trustees, and will hold 
a shareholders' meeting at least once every five years thereafter, to elect     
Trustees. Each Trustee (except Messrs. Butler and Uek) has been elected by      
shareholders and each Trustee and officer holds office until his or her         
successor is chosen and qualified or until his or her earlier death,            
resignation, retirement or removal.                                             

Messrs. Butler, Sherratt and Uek and Ms. Thomsen are members of the Trust's     
Audit Committee.                                                                

Each of the Trust's Trustees and officers holds comparable positions with       
certain other funds of which MFS or a subsidiary is the investment adviser or   
distributor, and, in the case of the officers, with certain affiliates of MFS.  
As of January 1, 2006, the Trustees served as board members of 98 funds within  
the MFS Family of Funds.                                                        

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                                                                    APPENDIX B

PROXY VOTING POLICIES AND PROCEDURES

MASSACHUSETTS FINANCIAL SERVICES COMPANY

PROXY VOTING POLICIES AND PROCEDURES

SEPTEMBER 17, 2003, AS REVISED ON SEPTEMBER 20, 2004, 
MARCH 15, 2005 AND MARCH 1, 2006  

Massachusetts Financial Services Company, MFS Institutional Advisors, Inc. and  
MFS' other investment adviser subsidiaries (collectively, "MFS") have adopted   
proxy voting policies and procedures, as set forth below ("MFS Proxy Voting     
Policies and Procedures"), with respect to securities owned by the clients for  
which MFS serves as investment adviser and has the power to vote proxies,       
including the registered investment companies sponsored by MFS, other than the  
MFS Union Standard Equity Fund (the "MFS Funds"). References to "clients" in    
these policies and procedures include the MFS Funds and other clients of MFS,   
such as funds organized offshore, sub-advised funds and separate account        
clients, to the extent these clients have delegated to MFS the responsibility   
to vote proxies on their behalf under the MFS Proxy Voting Policies and         
Procedures.                                                                     

The MFS Proxy Voting Policies and Procedures include:                           

A. Voting Guidelines;                                                           

B. Administrative Procedures;                                                   

C. Monitoring System;                                                           

D. Records Retention; and                                                       

E. Reports.                                                                     

A. VOTING GUIDELINES                                                            

1. GENERAL POLICY; POTENTIAL CONFLICTS OF INTEREST                              

MFS' policy is that proxy voting decisions are made in what MFS believes to be  
the best long-term economic interests of MFS' clients, and not in the interests 
of any other party or in MFS' corporate interests, including interests such as  
the distribution of MFS Fund shares, administration of 401(k) plans, and        
institutional relationships.                                                    

MFS has carefully reviewed matters that in recent years have been presented for 
shareholder vote by either management or shareholders of public companies.      
Based on the overall principle that all votes cast by MFS on behalf of its      
clients must be in what MFS believes to be the best long-term economic          
interests of such clients, MFS has adopted proxy voting guidelines, set forth   
below, that govern how MFS generally will vote on specific matters presented    
for shareholder vote. In all cases, MFS will exercise its discretion in voting  
on these matters in accordance with this overall principle. In other words, the 
underlying guidelines are simply that - guidelines. Proxy items of significance 
are often considered on a case-by-case basis, in light of all relevant facts    
and circumstances, and in certain cases MFS may vote proxies in a manner        
different from these guidelines.                                                

As a general matter, MFS maintains a consistent voting position on similar      
proxy proposals with respect to various issuers. In addition, MFS generally     
votes consistently on the same matter when securities of an issuer are held by  
multiple client accounts. However, MFS recognizes that there are gradations in  
certain types of proposals that might result in different voting positions      
being taken with respect to different proxy statements. There also may be       
situations involving matters presented for shareholder vote that are not        
clearly governed by the guidelines, such as proposed mergers and acquisitions.  
Some items that otherwise would be acceptable will be voted against the         
proponent when it is seeking extremely broad flexibility without offering a     
valid explanation. MFS reserves the right to override the guidelines with       
respect to a particular shareholder vote when such an override is, in MFS' best 
judgment, consistent with the overall principle of voting proxies in the best   
long-term economic interests of MFS' clients.                                   

From time to time, MFS receives comments on these guidelines as well as         
regarding particular voting issues from its clients and corporate issuers.      
These comments are carefully considered by MFS, when it reviews these           
guidelines each year and revises them as appropriate.                           

These policies and procedures are intended to address any potential material    
conflicts of interest on the part of MFS or its affiliates that are likely to   
arise in connection with the voting of proxies on behalf of MFS' clients. If    
such potential material conflicts of interest do arise, MFS will analyze,       
document and report on such potential material conflicts of interest (see       
Sections B.2 and E below), and shall ultimately vote the relevant proxies in    
what MFS believes to be the best long-term economic interests of its clients.   
The MFS Proxy Review Group is responsible for monitoring and reporting with     
respect to such potential material conflicts of interest.                       

2. MFS' POLICY ON SPECIFIC ISSUES                                               

ELECTION OF DIRECTORS                                                           

MFS believes that good governance should be based on a board with a majority of 
directors who are "independent" of management, and whose key committees (e.g.,  
compensation, nominating, and audit committees) are comprised entirely of       
"independent" directors. While MFS generally supports the board's nominees in   
uncontested elections, we will withhold our vote for a nominee for a board of a 
U.S. issuer if, as a result of such nominee being elected to the board, the     
board would be comprised of a majority of members who are not "independent" or, 
alternatively, the compensation, nominating or audit committees would include   
members who are not "independent." MFS will also withhold its vote for a        
nominee to the board if we can determine that he or she failed to attend at     
least 75% of the board and/or relevant committee meetings in the previous year  
without a valid reason. In addition, MFS will withhold its vote for all         
nominees standing for election to a board of a U.S. issuer if we can determine: 
(1) if, since the last annual meeting of shareholders and without shareholder   
approval, the board or its compensation committee has repriced underwater       
options; or (2) if, within the last year, shareholders approved by majority     
vote a resolution recommending that the board rescind a "poison pill" and the   
board has failed to take responsive action to that resolution. Responsive       
action would include the rescission of the "poison pill"(without a broad        
reservation to reinstate the "poison pill" in the event of a hostile tender     
offer), or public assurances that the terms of the "poison pill" would be put   
to a binding shareholder vote within the next five to seven years.              

MFS evaluates a contested election of directors on a case-by-case basis         
considering the long-term financial performance of the company relative to its  
industry, management's track record, the qualifications of the nominees for     
both slates and an evaluation of what each side is offering shareholders.       

MFS votes for reasonably crafted proposals calling for directors to be elected  
with an affirmative majority of votes cast and/or the elimination of the        
plurality standard for electing directors (including binding resolutions        
requesting that the board amend the company's bylaws), provided the proposal    
includes a carve-out for a plurality voting standard when there are more        
director nominees than board seats (e.g., contested elections) ("Majority Vote  
Proposals").                                                                    

MFS considers voting against Majority Vote Proposals if the company has         
adopted, or has proposed to adopt in the proxy statement, formal corporate      
governance principles that present a meaningful alternative to the majority     
voting standard and provide an adequate response to both new nominees as well   
as incumbent nominees who fail to receive a majority of votes cast.             

MFS believes that a company's election policy should address the specific       
circumstances at that company. MFS considers whether a company's election       
policy articulates the following elements to address each director nominee who  
fails to receive an affirmative majority of votes cast in an election:          

Establish guidelines for the process by which the company determines the status 
of nominees who fail to receive an affirmative majority of votes cast and       
disclose the guidelines in the annual proxy statement;                          

Guidelines should include a reasonable timetable for resolution of the          
nominee's status and a requirement that the resolution be disclosed together    
with the reasons for the resolution;                                            

Vest management of the process in the company's independent directors, other    
than the nominee in question; and                                               

Outline the range of remedies that the independent directors may consider       
concerning the nominee.                                                         

CLASSIFIED BOARDS                                                               

MFS opposes proposals to classify a board (e.g., a board in which only          
one-third of board members are elected each year). MFS supports proposals to    
declassify a board.                                                             

NON-SALARY COMPENSATION PROGRAMS                                                

Restricted stock plans should reward results rather than tenure. In some cases, 
restricted stock is granted to the recipient at deep discounts to fair market   
value, sometimes at par value. The holder cannot sell for a period of years,    
but in the meantime the holder is able to vote and receive dividends.           
Eventually the restrictions lapse and the stock can be sold by the holder.      

MFS votes against stock option programs for officers, employees or non-employee 
directors that do not require an investment by the optionee, that give "free    
rides" on the stock price, or that permit grants of stock options with an       
exercise price below fair market value on the date the options are granted.     

MFS opposes stock option programs that allow the board or the compensation      
committee, without shareholder approval, to reprice underwater options or to    
automatically replenish shares (i.e., evergreen plans). MFS will consider on a  
case-by-case basis proposals to exchange existing options for newly issued      
options (taking into account such factors as whether there is a reasonable      
value-for-value exchange).                                                      

MFS opposes stock option and restricted stock plans that provide unduly         
generous compensation for officers, directors or employees, or could result in  
excessive dilution to other shareholders. As a general guideline, MFS votes     
against stock option and restricted stock plans if all such plans for a         
particular company involve potential dilution, in the aggregate, of more than   
15%. However, MFS may accept a higher percentage (up to 20%) in the case of     
startup or small companies which cannot afford to pay large salaries to         
executives, or in the case where MFS, based upon the issuer's public            
disclosures, believes that the issuer has been responsible with respect to its  
recent compensation practices, including the mix of the issuance of restricted  
stock and options.                                                              

MFS votes in favor of stock option or restricted stock plans for non-employee   
directors as long as they satisfy the requirements set forth above with respect 
to stock option and restricted stock plans for company executives.              

EXPENSING OF STOCK OPTIONS                                                      

While we acknowledge that there is no agreement on a uniform methodology for    
expensing stock options, MFS supports shareholder proposals to expense stock    
options because we believe that the expensing of options presents a more        
accurate picture of the company's financial results to investors. We also       
believe that companies are likely to be more disciplined when granting options  
if the value of stock options were treated as an expense item on the company's  
income statements.                                                              

EXECUTIVE COMPENSATION                                                          

MFS believes that competitive compensation packages are necessary to attract,   
motivate and retain executives. Therefore, MFS opposes shareholder proposals    
that seek to set limits on executive compensation. Shareholder proposals        
seeking to set limits on executive compensation tend to specify arbitrary       
compensation criteria. MFS also opposes shareholder requests for disclosure on  
executive compensation beyond regulatory requirements because we believe that   
current regulatory requirements for disclosure of executive compensation are    
appropriate and that additional disclosure is often unwarranted and costly.     
Although we support linking executive stock option grants to a company's stock  
performance, MFS opposes shareholder proposals that mandate a link of           
performance-based options to a specific industry or peer group index. MFS       
believes that compensation committees should retain the flexibility to propose  
the appropriate index or other criteria by which performance-based options      
should be measured. MFS evaluates other executive compensation restrictions     
(e.g., terminating the company's stock option or restricted stock programs,     
freezing executive pay during periods of large layoffs, and establishing a      
maximum ratio between the highest paid executive and lowest paid employee)      
based on whether such proposals are in the best long-term economic interests of 
our clients.                                                                    

EMPLOYEE STOCK PURCHASE PLANS                                                   

MFS supports the use of a broad-based employee stock purchase plans to increase 
company stock ownership by employees, provided that shares purchased under the  
plan are acquired for no less than 85% of their market value and do not result  
in excessive dilution.                                                          

"GOLDEN PARACHUTES"                                                             

From time to time, shareholders of companies have submitted proxy proposals     
that would require shareholder approval of severance packages for executive     
officers that exceed certain predetermined thresholds. MFS votes in favor of    
such shareholder proposals when they would require shareholder approval of any  
severance package for an executive officer that exceeds a certain multiple of   
such officer's annual compensation that is not determined in MFS' judgment to   
be excessive.                                                                   

ANTI-TAKEOVER MEASURES                                                          

In general, MFS votes against any measure that inhibits capital appreciation in 
a stock, including proposals that protect management from action by             
shareholders. These types of proposals take many forms, ranging from "poison    
pills" and "shark repellents" to super-majority requirements.                   

MFS will vote for proposals to rescind existing "poison pills" and proposals    
that would require shareholder approval to adopt prospective "poison pills."    
Nevertheless, MFS will consider supporting the adoption of a prospective        
"poison pill" or the continuation of an existing "poison pill" if the following 
two conditions are met: (1) the "poison pill" allows MFS clients to hold an     
aggregate position of up to 15% of a company's total voting securities (and of  
any class of voting securities); and (2) either (a) the "poison pill" has a     
term of not longer than five years, provided that MFS will consider voting in   
favor of the "poison pill" if the term does not exceed seven years and the      
"poison pill" is linked to a business strategy or purpose that MFS believes is  
likely to result in greater value for shareholders; or (b) the terms of the     
"poison pill" allow MFS clients the opportunity to accept a fairly structured   
and attractively priced tender offer (e.g., a "chewable poison pill" that       
automatically dissolves in the event of an all cash, all shares tender offer at 
a premium price).                                                               

MFS will consider on a case-by-case basis proposals designed to prevent tenders 
which are disadvantageous to shareholders such as tenders at below market       
prices and tenders for substantially less than all shares of an issuer.         

REINCORPORATION AND REORGANIZATION PROPOSALS                                    

When presented with a proposal to reincorporate a company under the laws of a   
different state, or to effect some other type of corporate reorganization, MFS  
considers the underlying purpose and ultimate effect of such a proposal in      
determining whether or not to support such a measure. While MFS generally votes 
in favor of management proposals that it believes are in the best long-term     
economic interests of its clients, MFS may oppose such a measure if, for        
example, the intent or effect would be to create additional inappropriate       
impediments to possible acquisitions or takeovers.                              

ISSUANCE OF STOCK                                                               

There are many legitimate reasons for issuance of stock. Nevertheless, as noted 
above under "Non-Salary Compensation Programs", when a stock option plan        
(either individually or when aggregated with other plans of the same company)   
would substantially dilute the existing equity (e.g., by approximately 15% or   
more), MFS generally votes against the plan. In addition, MFS votes against     
proposals where management is asking for authorization to issue common or       
preferred stock with no reason stated (a "blank check") because the unexplained 
authorization could work as a potential anti-takeover device.                   

REPURCHASE PROGRAMS                                                             

MFS supports proposals to institute share repurchase plans in which all         
shareholders have the opportunity to participate on an equal basis. Such plans  
may include a company acquiring its own shares on the open market, or a company 
making a tender offer to its own shareholders.                                  

CONFIDENTIAL VOTING                                                             

MFS votes in favor of proposals to ensure that shareholder voting results are   
kept confidential. For example, MFS supports proposals that would prevent       
management from having access to shareholder voting information that is         
compiled by an independent proxy tabulation firm.                               

CUMULATIVE VOTING                                                               

MFS opposes proposals that seek to introduce cumulative voting and for          
proposals that seek to eliminate cumulative voting. In either case, MFS will    
consider whether cumulative voting is likely to enhance the interests of MFS'   
clients as minority shareholders. In our view, shareholders should provide      
names of qualified candidates to a company's nominating committee, which now    
for the first time (for U.S. listed companies) must be comprised solely of      
"independent" directors.                                                        

WRITTEN CONSENT AND SPECIAL MEETINGS                                            

Because the shareholder right to act by written consent (without calling a      
formal meeting of shareholders) can be a powerful tool for shareholders, MFS    
generally opposes proposals that would prevent shareholders from taking action  
without a formal meeting or would take away a shareholder's right to call a     
special meeting of company shareholders.                                        

INDEPENDENT AUDITORS                                                            

MFS believes that the appointment of auditors is best left to the board of      
directors of the company and therefore supports the ratification of the board's 
selection of an auditor for the company. Recently, some shareholder groups have 
submitted proposals to limit the non-audit activities of a company's audit      
firm. Some proposals would prohibit the provision of any non-audit services by  
a company's auditors to that company. MFS opposes proposals recommending the    
prohibition or limitation of the performance of non-audit services by an        
auditor, and proposals recommending the removal of a company's auditor due to   
the performance of non-audit work for the company by its auditor. MFS believes  
that the board, or its audit committee, should have the discretion to hire the  
company's auditor for specific pieces of non-audit work in the limited          
situations permitted under current law.                                         

BEST PRACTICES STANDARDS                                                        

Best practices standards are rapidly developing in the corporate governance     
areas as a result of recent corporate scandals, the Sarbanes-Oxley Act of 2002  
and revised listing standards on major stock exchanges. MFS generally supports  
these developments. However, many issuers are not publicly registered, are not  
subject to these enhanced listing standards, or are not operating in an         
environment that is comparable to that in the United States. In reviewing proxy 
proposals under these circumstances, MFS votes for proposals that enhance       
standards of corporate governance so long as we believe that - given the        
circumstances or the environment within which the issuers operate - the         
proposal is consistent with the best long-term economic interests of our        
clients.                                                                        

SOCIAL ISSUES                                                                   

There are many groups advocating social change, and many have chosen the        
publicly-held corporation as a vehicle for advancing their agenda. Common among 
these are resolutions requiring the corporation to refrain from investing or    
conducting business in certain countries, to adhere to some list of goals or    
principles (e.g., environmental standards) or to promulgate special reports on  
various activities. MFS votes against such proposals unless their               
shareholder-oriented benefits will outweigh any costs or disruptions to the     
business, including those that use corporate resources to further a particular  
social objective outside the business of the company or when no discernible     
shareholder economic advantage is evident.                                      

The laws of various states may regulate how the interests of certain clients    
subject to those laws (e.g., state pension plans) are voted with respect to     
social issues. Thus, it may be necessary to cast ballots differently for        
certain clients than MFS might normally do for other clients.                   

FOREIGN ISSUERS                                                                 

MFS will evaluate items on proxies for foreign companies in the context of the  
guidelines described above, as well as local market standards and best          
practices. Proxies for foreign companies often contain significantly more       
voting items than those of U.S. companies. Many of these items on foreign       
proxies involve repetitive, non-controversial matters that are mandated by      
local law. Accordingly, the items that are generally deemed routine and which   
do not require the exercise of judgment under these guidelines (and therefore   
voted in favor) for foreign issuers include the following: (i) receiving        
financial statements or other reports from the board; (ii) approval of          
declarations of dividends; (iii) appointment of shareholders to sign board      
meeting minutes; (iv) discharge of management and supervisory boards; (v)       
approval of share repurchase programs; (vi) election of directors in            
uncontested elections and (vii) appointment of auditors.                        

In accordance with local law or business practices, many foreign companies      
prevent the sales of shares that have been voted for a certain period beginning 
prior to the shareholder meeting and ending on the day following the meeting    
("share blocking"). Depending on the country in which a company is domiciled,   
the blocking period may begin a stated number of days prior to the meeting      
(e.g., one, three or five days) or on a date established by the company. While  
practices vary, in many countries the block period can be continued for a       
longer period if the shareholder meeting is adjourned and postponed to a later  
date. Similarly, practices vary widely as to the ability of a shareholder to    
have the "block" restriction lifted early (e.g., in some countries shares       
generally can be "unblocked" up to two days prior to the meeting whereas in     
other countries the removal of the block appears to be discretionary with the   
issuer's transfer agent). Due to these restrictions, MFS must balance the       
benefits to its clients of voting proxies against the potentially serious       
portfolio management consequences of a reduced flexibility to sell the          
underlying shares at the most advantageous time. For companies in countries     
with share blocking periods, the disadvantage of being unable to sell the stock 
regardless of changing conditions generally outweighs the advantages of voting  
at the shareholder meeting for routine items. Accordingly, MFS will not vote    
those proxies in the absence of an unusual, significant vote.                   

B. ADMINISTRATIVE PROCEDURES                                                    

1. MFS PROXY REVIEW GROUP                                                       

The administration of these MFS Proxy Voting Policies and Procedures is         
overseen by the MFS Proxy Voting Committee, which includes senior personnel     
from the MFS Legal and Global Investment Support Departments. The MFS Proxy     
Voting Committee:                                                               

Reviews these MFS Proxy Voting Policies and Procedures at least annually and    
recommends any amendments considered to be necessary or advisable;              

Determines whether any potential material conflicts of interest exist with      
respect to instances in which (i) MFS seeks to override these MFS Proxy Voting  
Policies and Procedures and (ii) votes on ballot items not clearly governed by  
these MFS Proxy Voting Policies and Procedures; and                             

Considers special proxy issues as they may arise from time to time.             

2. POTENTIAL CONFLICTS OF INTEREST                                              

The MFS Proxy Voting Committee is responsible for monitoring potential material 
conflicts of interest on the part of MFS or its affiliates that could arise in  
connection with the voting of proxies on behalf of MFS' clients. Any            
significant attempt to influence MFS' voting on a particular proxy matter       
should be reported to the MFS Proxy Voting Committee.                           

In cases where proxies are voted in accordance with these MFS Proxy Voting      
Policies and Procedures, no material conflict of interest will be deemed to     
exist. In cases where (i) MFS is considering overriding these MFS Proxy Voting  
Policies and Procedures, or (ii) matters presented for vote are not clearly     
governed by these MFS Proxy Voting Policies and Procedures, the MFS Proxy       
Voting Committee, or delegees, will follow these procedures:                    

Compare the name of the issuer of such proxy against a list of significant      
current and potential (i) distributors of MFS Fund shares, (ii) retirement      
plans administered by MFS, and (iii) MFS institutional clients (the "MFS        
Significant Client List");                                                      

If the name of the issuer does not appear on the MFS Significant Client List,   
then no material conflict of interest will be deemed to exist, and the proxy    
will be voted as otherwise determined by the MFS Proxy Voting Committee;        

If the name of the issuer appears on the MFS Significant Client List, then at   
least one member of the MFS Proxy Voting Committee will carefully evaluate the  
proposed vote in order to ensure that the proxy ultimately is voted in what MFS 
believes to be the best long-term economic interests of MFS' clients, and not   
in MFS' corporate interests; and                                                

For all potential material conflicts of interest identified under clause (c)    
above, the MFS Proxy Voting Committee will document: the name of the issuer,    
the issuer's relationship to MFS, the analysis of the matters submitted for     
proxy vote, and the basis for the determination that the votes ultimately were  
cast in what MFS believes to be the best long-term economic interests of MFS'   
clients, and not in MFS' corporate interests. A copy of the foregoing           
documentation will be provided to the MFS' Conflicts Officer.                   

The members of the MFS Proxy Voting Committee are responsible for creating and  
maintaining the MFS Significant Client List, in consultation with MFS'          
distribution, retirement plan administration and institutional business units.  
The MFS Significant Client List will be reviewed and updated periodically, as   
appropriate.                                                                    

3. GATHERING PROXIES                                                            

Most proxies received by MFS and its clients originate at Automatic Data        
Processing Corp. ("ADP") although a few proxies are transmitted to investors by 
corporate issuers through their custodians or depositories. ADP and issuers     
send proxies and related material directly to the record holders of the shares  
beneficially owned by MFS' clients, usually to the client's custodian or, less  
commonly, to the client itself. This material will include proxy cards,         
reflecting the proper shareholdings of Funds and of clients on the record dates 
for such shareholder meetings, as well as proxy statements with the issuer's    
explanation of the items to be voted upon.                                      

MFS, on behalf of itself and the Funds, has entered into an agreement with an   
independent proxy administration firm, Institutional Shareholder Services, Inc. 
(the "Proxy Administrator"), pursuant to which the Proxy Administrator performs 
various proxy vote related services, such as vote processing and recordkeeping  
functions for MFS' Funds and institutional client accounts. The Proxy           
Administrator receives proxy statements and proxy cards directly or indirectly  
from various custodians, logs these materials into its database and matches     
upcoming meetings with MFS Fund and client portfolio holdings, which are input  
into the Proxy Administrator's system by an MFS holdings datafeed. Through the  
use of the Proxy Administrator system, ballots and proxy material summaries for 
the upcoming shareholders' meetings of over 10,000 corporations are available   
on-line to certain MFS employees and the MFS Proxy Voting Committee.            

4. ANALYZING PROXIES                                                            

Proxies are voted in accordance with these MFS Proxy Voting Policies and        
Procedures. The Proxy Administrator at the prior direction of MFS automatically 
votes all proxy matters that do not require the particular exercise of          
discretion or judgment with respect to these MFS Proxy Voting Policies and      
Procedures as determined by the MFS Proxy Voting Committee. With respect to     
proxy matters that require the particular exercise of discretion or judgment,   
MFS considers and votes on those proxy matters. Representatives of the MFS      
Proxy Voting Committee review, as appropriate, votes cast to ensure conformity  
with these MFS Proxy Voting Policies and Procedures.                            

As a general matter, portfolio managers and investment analysts have little or  
no involvement in specific votes taken by MFS. This is designed to promote      
consistency in the application of MFS' voting guidelines, to promote            
consistency in voting on the same or similar issues (for the same or for        
multiple issuers) across all client accounts, and to minimize the potential     
that proxy solicitors, issuers, or third parties might attempt to exert         
inappropriate influence on the vote. In limited types of votes (e.g., corporate 
actions, such as mergers and acquisitions), a representative of the MFS Proxy   
Voting Committee may consult with or seek recommendations from portfolio        
managers or analysts.(1) However, the MFS Proxy Voting Committee would          
ultimately determine the manner in which all proxies are voted.                 

-----------------                                                               
(1) From time to time, due to travel schedules and other commitments, an        
appropriate portfolio manager or research analyst is not available to   
provide a recommendation on a merger or acquisition proposal. If such a 
 recommendation cannot be obtained within a few business days prior to the
 shareholder meeting, the MFS Proxy Review Group may determine to vote the
proxy in what it believes to be the best long-term economic interests of
MFS' clients.                                                           

As noted above, MFS reserves the right to override the guidelines when such an  
override is, in MFS' best judgment, consistent with the overall principle of    
voting proxies in the best long-term economic interests of MFS' clients. Any    
such override of the guidelines shall be analyzed, documented and reported in   
accordance with the procedures set forth in these policies.                     

5. VOTING PROXIES                                                               

In accordance with its contract with MFS, the Proxy Administrator also          
generates a variety of reports for the MFS Proxy Voting Committee, and makes    
available on-line various other types of information so that the MFS Proxy      
Voting Committee may review and monitor the votes cast by the Proxy             
Administrator on behalf of MFS' clients.                                        

C. MONITORING SYSTEM                                                            

It is the responsibility of the Proxy Administrator and MFS' Proxy Voting       
Committee to monitor the proxy voting process. When proxy materials for clients 
are received, they are forwarded to the Proxy Administrator and are input into  
the Proxy Administrator's system. Through an interface with the portfolio       
holdings database of MFS, the Proxy Administrator matches a list of all MFS     
Funds and clients who hold shares of a company's stock and the number of shares 
held on the record date with the Proxy Administrator's listing of any upcoming  
shareholder's meeting of that company.                                          

When the Proxy Administrator's system "tickler" shows that the voting cut-off   
date of a shareholders' meeting is approaching, a Proxy Administrator           
representative checks that the vote for MFS Funds and clients holding that      
security has been recorded in the computer system. If a proxy card has not been 
received from the client's custodian, the Proxy Administrator calls the         
custodian requesting that the materials be forwarded immediately. If it is not  
possible to receive the proxy card from the custodian in time to be voted at    
the meeting, MFS may instruct the custodian to cast the vote in the manner      
specified and to mail the proxy directly to the issuer.                         

D. RECORDS RETENTION                                                            

MFS will retain copies of these MFS Proxy Voting Policies and Procedures in     
effect from time to time and will retain all proxy voting reports submitted to  
the Board of Trustees, Board of Directors and Board of Managers of the MFS      
Funds for the period required by applicable law. Proxy solicitation materials,  
including electronic versions of the proxy cards completed by representatives   
of the MFS Proxy Voting Committee, together with their respective notes and     
comments, are maintained in an electronic format by the Proxy Administrator and 
are accessible on-line by the MFS Proxy Voting Committee. All proxy voting      
materials and supporting documentation, including records generated by the      
Proxy Administrator's system as to proxies processed, including the dates when  
proxy ballots were received and submitted, and the votes on each company's      
proxy issues, are retained as required by applicable law.                       

E. REPORTS                                                                      

MFS FUNDS                                                                       

MFS will report the results of its voting to the Board of Trustees, Board of    
Directors and Board of Managers of the MFS Funds. These reports will include:   
(i) a summary of how votes were cast; (ii) a review of situations where MFS did 
not vote in accordance with the guidelines and the rationale therefor; (iii) a  
review of the procedures used by MFS to identify material conflicts of          
interest; and (iv) a review of these policies and the guidelines and, as        
necessary or appropriate, any proposed modifications thereto to reflect new     
developments in corporate governance and other issues. Based on these reviews,  
the Trustees, Directors and Managers of the MFS Funds will consider possible    
modifications to these policies to the extent necessary or advisable.           

ALL MFS ADVISORY CLIENTS                                                        

At any time, a report can be printed by MFS for each client who has requested   
that MFS furnish a record of votes cast. The report specifies the proxy issues  
which have been voted for the client during the year and the position taken     
with respect to each issue.                                                     

Generally, MFS will not divulge actual voting practices to any party other than 
the client or its representatives (unless required by applicable law) because   
we consider that information to be confidential and proprietary to the client.  

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MFS UNION STANDARD EQUITY FUND

PROXY VOTING GUIDELINES 

INTRODUCTION                                                                    

The following Proxy Voting Guidelines set forth the policies and practices      
behind individual proxy votes. The policies described here address the major    
corporate governance issues raised by shareholders and management.              

The Guidelines that follow each policy describe voting practices and standard   
voting responses to specific corporate conditions. For those issues not         
described in these Guidelines, JMR Financial, Inc. ("JMR") will use reasonable  
judgment, in accordance with U.S. Department of Labor Interpretative Bulletin   
94-2, and vote those issues on a case-by-case basis.                            

1. BOARD OF DIRECTORS                                                           

1.1. Election of Directors                                                      

Corporate Directors have the fiduciary duties to hire, monitor, compensate and, 
if necessary, terminate senior management. In order to effectively discharge    
these duties, Directors must have the necessary qualifications, a commitment to 
performing their duties, high ethical standards, and independence from the      
company management that they oversee. A corporate Board's effectiveness is      
enhanced when the Board is composed of at least two-thirds Independent          
Directors and when an Independent Director serves as its Chairperson.           

The election of Directors occurs in two contexts, uncontested elections or      
contested elections, and at two levels, for the entire Board or for individual  
Directors.                                                                      

1.1.1. Uncontested Elections                                                    

In the case of an uncontested election, we consider the following factors in    
voting on the entire Board:                                                     

o The long-term financial and economic performance of the company in comparison 
with its peers as well as with a broader market such as the S&P 500;        

o The degree of independence of the Board in its entirety;                      

o Whether or not the Board takes actions which are value-enhancing. Actions in  
opposition to this might include: awarding excessive compensation to        
 executives or to the Directors themselves, approving corporate restructurings
or downsizings that are not in the company's best long-term interest,       
adopting take-over provisions without shareholder approval, or refusing to  
provide information to which the shareholders are entitled;                 

o Whether or not the Board has implemented the proposals which were approved by 
a majority of the shareholders during the previous fiscal year; and         

o The concerns of other important company stakeholders such as their employees  
and the communities in which they operate. Should these stakeholders make   
their concerns known, this might expose situations which are or could affect
 the company's performance. We give these concerns consideration in evaluating
Board performance.                                                          

In the case of an uncontested election, we consider the following additional    
factors in voting on individual Directors:                                      

o The independence of the audit, compensation, and nominating committees. These 
committees maintain important roles in the process of management oversight  
and therefore should be composed entirely of Independent Directors (as is   
more fully described in the Guidelines, below);                             

o The performance of the audit, compensation, and nominating committees.        
Factors to consider include the quality of committee disclosure as well as  
the actions taken by the committees;                                        

o The attendance of incumbent Directors. The Securities and Exchange Commission 
(SEC) requires companies to disclose any incumbent Director who attended    
fewer that 75% of the aggregate Board and applicable committee meetings     
 during the last fiscal year. A failure to include this information is assumed
to mean that all Directors attended 75% of the meetings;                    

o The ability of the nominee to devote sufficient time and energy to carrying   
out the fiduciary duties of a Director. Director nominees who are employed, 
or self-employed, on a full-time basis and who serve on Boards at fewer than
three other public companies, as well as nominees who are retired and who   
serve on Boards at fewer than five other public companies are generally     
believed to have this ability;                                              

o Chapter 7 bankruptcy, SEC violations, and criminal offenses by an individual  
director; and                                                               

o Whether or not the performance of the Director on other Boards has been       
acceptable.                                                                 

1.1.2. Contested Election of Directors                                          

Greater scrutiny should be paid in those situations where a change of control   
is occurring in the context of a contested election for the Board of Directors. 
Contested elections generally occur when a Board candidate or slate runs for    
the purpose of seeking significant change in corporate policy or control of the 
Board. Competing slates should be evaluated based upon all of the factors       
described in the Guidelines' Section 1.1.1. Uncontested Elections as well as    
the following:                                                                  

o The background of the proxy contest;                                          

o The qualifications of the slate's individual candidates;                      

o The quality of the strategies the slate plans to implement to overcome the    
company's current inefficiencies as well as to enhance the company's        
long-term value; and                                                        

o The slate's expressed and demonstrated commitment to the interests of company 
shareholders and other important stakeholders.                              

1.2. Independent Directors                                                      

Independence is critical to ensure that Directors carry out their fiduciary     
duties to hire, monitor, compensate and, if necessary, terminate senior         
management select. Weighed against this is the fact that, in a change of        
control situation, inside Directors may be more responsive to the interests of  
employees and the communities in which they operate.                            

An Independent Director is one who either maintains only one non-trivial        
relationship with the company, that of being a Director, or is a rank-and-file  
employee. A Director is considered NOT INDEPENDENT if he or she:                

o Is, or was, employed by the company or by an affiliate in an executive        
capacity;                                                                   

o Is, or is affiliated with a company that is, an adviser or consultant to the  
company or a member of the company's senior management;                     

o Is, or within the past five years was, employed by a present or former        
auditor of the company;                                                     

o Is employed by a customer or supplier with a nontrivial business              
relationship;                                                               

o Is employed by, or is affiliated with, a foundation or university that        
receives grants or endowments from the company;                             

o Has a personal services contract with the company;                            

o Is an officer of a firm on which the company's chief executive officer or     
chairman is also a Board member;                                            

o Is employed by a public company at which an executive officer of the Company  
serves as a director; or                                                    

o Is related to of any person described above.                                  

1.3. Equal Access to the Proxy                                                  

Proposals that give long-term shareholders the same ability as management to    
cost-effectively nominate Directors to represent their interests, as long as    
these efforts do not provide a tool that can be used to facilitate hostile      
takeovers by short-term investors.                                              

1.4. Separate Offices of Chairman & CEO                                         

One of the principal functions of the Board of Directors is to protect          
shareholders' interests by monitoring and evaluating the performance of company 
management, including its Chief Executive Officer (CEO). When the Chairman of   
the Board is also the CEO of the company, his or her duty to oversee management 
is obviously compromised when he or she is required to monitor him or herself.  
In addition, the CEO normally determines the agenda for Board meetings,         
controls what information the Directors receive, and often dominates the        
selection of who sits on the Board and who is a member of the Board's           
committees. This unity of power has caused concern in governance commissions    
and activist pension funds about whether or not having a CEO who is also the    
Chairman of the Board best serves the company's shareholders. The principal     
arguments in favor of a separate or non-executive chair have to do with         
enhancing the ability of the Board to monitor the CEO's performance. It is      
assumed that Directors will feel more at ease about raising challenges to the   
CEO and executing their legal responsibilities for oversight if the Board is    
led by a fellow Director. In addition, fund managers seek to guard against      
cases where a CEO seeks first to serve himself or herself and only secondarily  
the shareholders.                                                               

Generally proposals seeking to separate the positions of Chairman and CEO       
should be supported. However, under certain circumstances, such as a small-cap  
company with a limited group of leaders, it may be appropriate for these        
positions to be combined for some period of time.                               

1.5. Lead Independent Director                                                  

At companies that have not adopted an Independent Board Chairperson, we support 
the establishment of a Lead Independent Director. In addition to serving as the 
presiding director at meetings of the Board's Independent Directors, a Lead     
Independent Director is responsible for coordinating the activities of the      
Independent Directors. At a minimum, a Lead Independent Director helps to help  
set the schedule and agenda for Board meetings, monitors the quality, quantity  
and timeliness of the flow of information from management, and has the ability  
to hire independent consultants necessary for the Independent Directors to      
effectively and responsibly perform their duties.                               

1.6. Board and Committee Size                                                   

A Board that is too large may function inefficiently; conversely, a Board that  
is too small may allow the CEO to exert excessive control. It is generally      
believed that the most effective Board size lies within a range of five to      
fifteen Directors.                                                              

1.7. Cumulative Voting                                                          

Most corporations provide that shareholders are entitled to cast one vote for   
each share owned. Under a cumulative voting scheme the shareholder is permitted 
to have one vote per share for each Director to be elected. Shareholders are    
permitted to apportion those votes in any manner they wish among the Director   
candidates. Shareholders have the opportunity to elect a minority shareholder   
to a Board not controlled by a majority shareholder through cumulative voting,  
thereby ensuring representation for all sizes of shareholders. Shareholders     
need to have flexibility in supporting candidates for a company's Board of      
Directors. This is the only mechanism that minority shareholders can use to be  
represented on a company's Board.                                               

Cumulative voting is a method for obtaining minority shareholder representation 
on a Board of Directors and is a way of obtaining Board independence from       
management and thus, is generally supported.                                    

1.8. Term Limits                                                                

Proposals to limit Director terms may prohibit the service by Directors who are 
otherwise qualified to serve the company. Since other Guidelines serve to hold  
Directors to high standards, the best way to ensure a Directors' qualification  
to elect him or her annually.                                                   

1.9. Director Liability                                                         

According to United States' state incorporation laws, corporate Boards have a   
legal responsibility for the management of a company. The downside of this is   
that Directors may potentially face a wide range of liability claims. State     
jurisdictions generally agree that Directors must uphold and adhere to three    
basic duties vis-a-vis the companies they serve:                                

o The DUTY OF DILIGENCE requires that Directors make business decisions on an   
informed basis, and act in good faith and with an honest belief that their  
actions were taken to serve the best interests of the corporation;          

o The DUTY OF OBEDIENCE is the requirement that Directors themselves must obey  
the law and that they must ensure that the corporation itself obeys the law.
They must not commit what are called ultra vires acts - acts that are       
performed without the authority to commit them. In essence, Directors must  
confine their activities within the powers conferred by the company's       
 corporate charter and its articles of incorporation, regulations, and bylaws;
and                                                                         

o The DUTY OF LOYALTY requires Directors to avoid conflicts of interest. They   
 must refrain from personal activities that either take advantage of or injure
the corporation.                                                            

Although these three duties set general legal parameters for Directors'         
obligations, the courts at the same time recognize that not all actions taken   
by Directors will benefit the corporation or in hindsight appear to have been   
the best course. States have therefore established what is called the business  
judgment rule, which can be invoked in liability cases as a defense when        
Directors are presented with claims of mismanagement or breach of care. This    
rule focuses on the duty of diligence surrounding the actual process of         
decision making and de-emphasizes the decision outcome: "the business judgment  
rule provides that courts should not examine the quality of the Directors'      
business decisions, but only the procedures followed in reaching that decision, 
when determining director liability."                                           

Management proposals occasionally seek to amend a company's charter to limit or 
eliminate the personal liability of Directors for monetary damages for any      
breach of fiduciary duty to the fullest extent permitted by law. However, the   
great responsibility and authority of Directors justifies holding them          
accountable for their actions.                                                  

In determining whether or not to support such proposals, we consider the        
following factors:                                                              

o The performance of the Board;                                                 

o The independence of the Board and its audit, compensation and nominating      
committees; and                                                             

o Whether or not the company has anti-takeover devices in place.                

We may support liability-limiting proposals when the company satisfactorily     
argues that such action is necessary to attract and retain Directors.           
Liability-limiting proposals are generally opposed for:                         

o Breach of the duty of loyalty;                                                

o Omissions not done in good faith or acts done intentionally or in violation   
of the law;                                                                 

o Acts involving unlawful purchase or redemption of stock;                      

o Payment of unlawful dividends;                                                

o Receipt of improper personal benefits;                                        

In addition, limiting liability for Directors when litigation is pending        
against the company is generally opposed.                                       

1.10. Indemnification                                                           

Indemnification is the payment by a company of the expenses of Directors who    
become involved in litigation as a result of their service to a company.        
Proposals to indemnify a company's Directors differ from those to eliminate or  
reduce their liability because with indemnification Directors may still be      
liable for his or her acts or omissions, but the company will bear the costs    
for the director's conduct.                                                     

We may support such indemnification proposals if the company can demonstrate    
the need to retain qualified Directors and not compromise their Independence.   
We may oppose indemnification when it is being proposed to insulate Directors   
from actions they have already taken. Generally, we:                            

o Vote AGAINST indemnification proposals that would expand coverage beyond just 
legal expenses to acts, such as negligence that are more serious violations 
of fiduciary obligations than mere carelessness.                            

o Vote AGAINST indemnification proposals that insulate Directors from actions   
that they have already taken.                                               

o Vote FOR only those proposals that provide such expanded coverage in cases    
 when a Director's legal defense was unsuccessful if the director was found to
have acted in good faith and in a manner that he reasonably believed was in 
the best interests of the company.                                          

1.11. Outside Director Compensation & Benefits                                  

Shareholder evaluation of Director compensation is especially important since   
Directors are responsible for compensating themselves. We support compensating  
Directors in a fashion that rewards excellent service and in a manner that does 
not compromise the independence of Directors. To enhance Directors'             
independence from management, Director compensation plans should be separate    
from executive compensation plans and should be voted on separately by          
shareholders. Excessively large compensation packages may also make Directors   
less willing to challenge management out of fear of not being re-nominated.     
Directors who receive pensions based upon years of service as Directors are     
less likely to challenge management if they perceive that such action might     
reduce the possibility of vesting. Direct stock ownership is the best way to    
align the interests of outside Directors and shareholders. Accordingly, a       
significant proportion of Director compensation should be in the form of stock. 
Directors should be subject to reasonable equity holding requirements. In       
addition to these conditions, Director compensation plans should be evaluated   
using the same standards as apply to executive compensation plans.              

1.12. Broader Participation on the Board                                        

A more diverse Board of qualified Directors benefits the company and            
shareholders. Gender and ethnic diversity bring different perspectives to       
Boards which can lead to improved corporate performance. Another example of     
such diversity would be employee shareholders, and we generally support         
proposals that would allow for such representations.                            

1.13. Business Development                                                      

Shareholders have introduced proposals asking for further disclosures on the    
role that the Board of Directors plays in developing business. We generally     
support proposals asking for such additional disclosure.                        

2. CORPORATE GOVERNANCE & CHANGES IN CONTROL                                    

Issues in this section have the potential to significantly impact the value of  
the plan investments. We review each issue in this section on a case-by-case    
basis and take a decision based upon what is in the long-term economic best     
interests of plan participants and beneficiaries.                               

Some of the proposals involving the issues in this section occur in the context 
of an impending or ongoing contest for company control. Other proposals can     
have a direct effect on the likelihood of material transactions such as tender  
offers, leveraged buyouts, mergers, acquisitions, restructurings, and           
spin-offs. In determining how to vote, we undertake an analysis of the          
long-term business plans of the competing parties as well as a cost/benefit     
analysis of the likely economic result of a change of control or material       
transaction.                                                                    

With regard to corporate governance proposals not in the context of an          
impending or ongoing contest for corporate control, we consider the impact of   
the vote on plan assets as well as the ability of shareholders to hold          
management accountable for corporate performance.                               

2.1. Increasing Authorized Common Stock                                         

We may support management proposals requesting shareholder approval to an       
increase in the number of shares of authorized common stock when management     
provides persuasive justification for the increase and the amount of this       
increase is reasonable. Providing adequate shares for a stock split is          
justification for an increase whereas additional shares to implement a poison   
pill or other takeover defense probably do not justify such an increase. Stock  
authorizations that increase the existing authorization by more than 50% are    
generally opposed unless very specific criteria and/or extenuating              
circumstances are involved.                                                     

2.2. Reverse Stock Splits                                                       

We may support a reverse stock split if management provides a reasonable        
justification for the reduced split and reduces authorized shares accordingly.  
Reverse stock splits exchange multiple shares for a lesser amount to increase   
the share price. Increasing share price is sometimes necessary to restore a     
company's stock price to a level that will allow it to be traded on the         
national stock exchanges, and can thus help to maintain stock liquidity.        

Failure to reduce authorized share as part of a reverse split, however,         
effectively results in an increase in authorized shares.                        

2.3. Blank-Check Preferred Stock                                                

Blank-check preferred stock is preferred stock that includes broad powers       
granted to Directors to establish voting, dividend and other rights without     
shareholder review. We may generally oppose requests that authorize Blank-check 
preferred stock especially when it may be used as an anti-takeover device.      

2.4. Tracking Stock                                                             

We may oppose management proposals to issue tracking stocks designed to reflect 
the performance of a particular business segment. Tracking stocks can be        
problematic in that they bring the likelihood of creating conflicts of interest 
between shareholders, Directors, and management as the Board is placed in the   
position of having to balance competing sets of interests under a single        
fiduciary authority.                                                            

2.5. Reincorporation                                                            

We may vote in favor of reincorporation to another jurisdiction as long as      
there is a sound justification for doing so and there is no significant         
diminution of corporate governance, management accountability, or workers'      
rights. We may also vote for proposals which block or prohibit companies from   
reincorporating in tax havens and support proposals which urge companies to     
reincorporate to the US.                                                        

We may oppose reincorporation when it may be used as a takeover defense or as a 
method to limit Director liability.                                             

2.6. Shareholder Rights Plans                                                   

We may support the legitimate use of shareholder rights plans, typically known  
as poison pills. The evaluation of these plans should focus on whether or not   
management puts the plan to a periodic vote of the shareholders, preferably     
every three years, as well as whether or not the acquisition attempts thwarted  
by the pill could be detrimental to the long term interests of plan             
participants and beneficiaries. In addition, we consider the threshold for      
triggering a poison pill, and may oppose any plan with a threshold of less than 
20% of a company's shares.                                                      

2.7. Supermajority Voting Requirements                                          

We review supermajority proposals on a case-by-case basis, weighing the         
consideration that supermajority voting requirements may be used to undermine   
voting rights and entrench management against the potential benefit, in some    
circumstances, of protecting the interests of minority or outside shareholders. 
Generally, management proposals to require a supermajority vote and support     
shareholder proposals to lower supermajority voting requirements may be         
opposed.                                                                        

2.8. Dual Class Voting                                                          

Dual Class Voting is the issuance of new classes of stock with unequal voting   
rights. This voting system is often designed to enhance the voting rights of    
company insiders and is common in family controlled companies. Dual Class       
Voting may entrench management at the expense of shareholders. We consider the  
impact on share value, the impact of creating unequal voting rights, as well as 
the principle of one share -- one vote when voting on such a proposal.          

2.9. Confidential Voting & Independent Tabulation of Voting                     

The purpose of confidential voting is to protect shareholders from management   
pressure to change their votes before the shareholder meeting at which those    
votes are cast. Proxy voting must be protected from management coercion and use 
of corporate funds to lobby shareholders to change their votes.                 

2.10. Shareholders' Right to Call Special Meetings                              

In evaluating this issue, we weigh the importance of shareholders' need to      
raise important issues against the potential for facilitating changes in        
control at the company. Generally, we may oppose any attempts to limit and      
eliminate such rights if they already exist in a company's by-laws, and may     
support resolutions that seek to restore these rights.                          

2.11. Mergers and Acquisitions                                                  

In determining its votes on mergers and acquisitions, we consider the following 
factors:                                                                        

o The potential impact of the merger on long -term corporate value;             

o The anticipated financial benefits of the merger;                             

o The offer price;                                                              

o How was the deal negotiated;                                                  

o Any changes in corporate governance and their impact on shareholder rights;   
and                                                                         

o The impact on important stakeholders of both companies, including employees   
and communities.                                                            

2.12. Fair-Price Provisions                                                     

Fair price provisions help to guard against two-tiered tender offers, in which  
a raider offers a substantially higher cash bid for an initial and often        
controlling stake in a company and then offers a lower price for the remaining  
shares. The coercive pressures associated with two-tiered offers may force      
shareholders to tender their holdings before they have considered all relevant  
facts. These provisions guarantee an equal price for all shareholders and are   
generally supported. However, we also consider the provision's potential for    
minimizing the company's debt and the resulting impact on the long-term value   
of holdings in the event the shareholders do not tender.                        

2.13. Greenmail Payments                                                        

Greenmail is the name given to certain discriminatory share repurchases.        
Typically, it refers to the payments that a raider receives from a company in   
exchange for the raider's shares in addition to a guarantee that he or she will 
terminate his or her takeover bid. These payments are usually a premium above   
the market price, so while greenmail may ensure the continued independence of a 
company, it discriminates against other shareholders. Buying out the shares of  
one shareholder at a price not available to others is unfair. The payment of    
greenmail may also have an adverse effect on the company's image. Economic      
studies show that greenmail devalues a company's stock price. When voting on    
this issue, we take into account whether or not the greenmail payments          
discriminate against some shareholders and whether or not the payments reduce   
shareholders' value. If the greenmail payments fail to serve the long-term      
economic interests of plan participants and beneficiaries, such payments may be 
opposed.                                                                        

2.14. Approving Other Business                                                  

Granting management the authority to approve other business gives management    
broad authority to act without prior shareholder approval. We generally oppose  
such unmonitored authority.                                                     

3. EMPLOYEE RELATED PROPOSALS                                                   

3.1. Employee Stock Purchase Plans                                              

Employee Stock Purchase Plans promote a linkage between a company's employees   
and its shareholders. We generally support such proposals when the plan covers  
a large number of employees.                                                    

3.2. High-Performance Workplaces                                                

High-performance workplace practices can contribute to a company's productivity 
as well as to its long-term financial performance. These practices include:     
employee training, direct employee involvement in decision-making, compensation 
linked to performance, employee security, and a supportive work environment.    
Additionally, these practices may include other measures of performance, such   
as the extent to which a company uses part-time or contract employees to the    
exclusion of full-time paid employees. We may generally support proposals       
encouraging high-performance workplace practices. However, we review these      
proposals to ensure that they are in the shareholders' best interests and do    
not unduly interfere with the company's operations.                             

3.3. Pension Choice                                                             

A number of companies have recently faced controversy as they converted         
traditional defined benefit plans into cash-balance plans. Traditional plan     
benefits accrue based on a percentage of base salary multiplied by the number   
of years of service, multiplied by the final five-year average base pay.        
Cash-balance plans reserve a fixed percentage of base salary plus interest and  
are portable. Conversions to cash-balance plans often hurt older workers and    
may be motivated by a company's desire to inflate its book profits by boosting  
surpluses in its pension trust funds. We may generally support proposals        
seeking to restore employee choice in this manner.                              

4. EXECUTIVE AND DIRECTOR COMPENSATION                                          

Executive compensation should reward executives for superior performance while  
ensuring that the long-term interests of the company and its shareholders are   
being best served. To this end, executive compensation plans should be          
structured with consideration for the company's goals for growth and            
development; the individual executive's performance; the various compensation   
plan features; and the potential dilution of shareholders' voting power and     
economic value which would occur if the compensation plan were implemented. It  
is the structure of an executive's compensation package which most influences   
whether he or she will focus on boosting the corporation's day-to-day share     
price or will concentrate on building long-term corporate value.                

Many experts agree that pay-for-performance should be the central theme of      
every executive compensation plan. Pay-for-performance rewards executives for   
meeting explicit and demanding performance goals, as determined by the Board of 
Directors, and penalizes them for failing to meet those goals.                  

In determining an executive's performance goals, the Board should focus on the  
ways in which the executive might individually contribute to the growth and     
development of the company as well as how the executive might be instrumental   
in maximizing shareholder wealth. Measures of growth and development of the     
company may include financial performance, such as revenue growth and           
profitability; stock price increases; social corporate performance, such as the 
company's efforts to promote basic human rights within its operations;          
compliance with environmental, health, and safety standards; labor standards;   
and downsizing and layoffs standards.                                           

The best measures of shareholder wealth maximization are Market Value Added     
(MVA) and Economic Value Added (EVA). Shareholder wealth is maximized by        
maximizing the difference between the market value of the firm's stock and the  
amount of equity capital that is supplied by shareholders. This difference is   
MVA. Whereas MVA measures the effects of managerial efforts since the very      
inception of a company, EVA focuses on managerial effectiveness in a given year 
and is therefore the more appropriate measure to use to evaluate the            
executive's contributions to maximizing shareholder wealth. A firm adds value - 
that is, has a positive EVA - if its return on invested capital is greater than 
its weighted average cost of capital. If an executive's compensation plan is    
structured so that the executive focuses on creating positive EVA in all of the 
projects under his or her control, this will help to ensure that he or she will 
operate in a manner which is consistent with maximizing shareholder wealth.     

Executive compensation packages are generally composed of annual salary, annual 
incentive awards, long-term incentive awards, stock options, and other forms of 
equity compensation.                                                            

4.1. Stock Option Plans                                                         

Proponents of including stock options in executive compensation plans argue     
that options serve to attract, retain, and motivate qualified executives. These 
individuals take the position that options align management and shareholder     
interests and encourage executives to maximize shareholder value. In addition,  
these individuals maintain that when stock options are performance-based they   
generally are not subject to the limits contained in Section 162(m) of the      
Internal Revenue Code of 1986, as amended (the Code), which caps income tax     
deductions for executive salaries at $1 million.                                

However, stock options are sometimes abused and often have unintended and       
unacknowledged consequences. Opponents of stock options argue that most         
executives are adequately paid through salaries and cash incentive plans. In    
addition, these individuals maintain that stock options have an unlimited       
upside potential and no downside risk for executives. Whereas, shareholders     
bear all of the risk of stock options in terms of both economic value and       
voting power dilution. Furthermore, these individuals hold that stock options   
may harm long-term shareholder interests by motivating executives to focus on   
short-term expense-reduction strategies, such as cutting important research and 
development plans, or on undertaking overly risky projects all in an attempt to 
temporarily inflate stock prices and the net value of their options. Lastly,    
these individuals assert that stock options do not necessarily align executive  
interests with those of shareholders. For these reasons, stock options are      
often not believed to be an appropriate form of compensation for executives.    

If companies choose to use stock options for executive compensation, certain    
safeguards should be in place. These features include stock option expensing,   
performance-based stock options, share holding requirements, acceptable         
dilution levels, and a prohibition on retroactively repricing stock options.    

When voting on management proposals relating to stock options, we consider the  
criteria defined below.                                                         

4.1.1. Performance-Based                                                        

Performance-based stock options tie compensation to company performance more    
closely than they tie compensation to the stock market, which standard stock    
options do. As a result, participants in performance-based stock option plans   
are rewarded only when company shareholders also benefit.                       

Performance-based stock options are defined as one of the following:            

o PERFORMANCE VESTING STOCK OPTIONS - grants which do not vest or become        
exercisable unless specific price or business performance goals are met;    

o PREMIUM PRICED STOCK OPTIONS - grants with an option exercise price higher    
than fair market value on date of grant;                                    

o INDEX OPTIONS - grants with a variable option exercise price geared to a      
relative external measure such as a comparable peer group or S&P industry   
index; or                                                                   

o PERFORMANCE ACCELERATED STOCK OPTIONS - grants whose vesting is accelerated   
upon achievement of specific stock price or business performance goals.     

There is a lot of support for compensation policies which provide challenging   
performance objectives and which motivate executives and Directors to maximize  
long-term shareholder value. As a result, institutional investors are           
increasingly urging that, in order to align the interests of executives with    
those of shareholders, some portion of the stock option grants to executives    
and Directors should be performance-based.                                      

Premium-priced and performance-vesting options encourage executives and         
Directors to set and meet ambitious but realistic performance targets. Indexed  
options may have the added benefit of discouraging repricing in the event of an 
industry downturn. In addition, when stock options are performance-based they   
generally are not subject to the limits contained in Section 162(m) of the      
Code, which caps income tax deductions for executive salaries at $1 million. To 
ensure the full-tax deductibility of executive pay, companies now tend to pay   
amounts in excess of $1 million to executives in the form of incentive-based    
pay such as stock or stock options.                                             

4.1.2. Expensing                                                                

A failure to properly account for stock options as a compensation expense has   
promoted the excessive use of stock options for executive compensation at some  
companies. This practice also obscures and understates the cost of excessive    
executive compensation. We generally only support the use of stock options if   
the stock options are fully expensed.                                           

4.1.3. Dilution                                                                 

Stock option plans dilute company earnings, as well as shareholders' voting     
power and economic value. The amount of acceptable dilution varies, but any     
proposal which could potentially cause a total dilution of either outstanding   
voting power or outstanding shareholders' equity greater than 10% may be        
opposed. Higher levels of dilution may be acceptable for plans that are         
particularly broad-based or have especially challenging performance-based       
objectives.                                                                     

4.1.4. Grant Rates                                                              

In determining how to vote on a stock option plan, we consider whether or not   
past equity compensation grants to senior executives were within reason and     
prudent. Repeatedly providing large grants may lessen the options' incentive    
value and may needlessly dilute the company's shares. Equity compensation plans 
generally should not exceed an annual stock option grant rate of one percent of 
shares outstanding to senior executives. Higher grant rates may be acceptable   
for plans that are particularly broad-based or have especially challenging      
performance-based objectives. We may also oppose plans that reserve a specified 
percentage of outstanding shares for award each year (known as an evergreen     
plan) instead of having a termination date.                                     

4.1.5. Repricing                                                                

We generally may oppose any stock option plan that does not explicitly prohibit 
repricing, unless the company has adopted a policy against repricing. Similarly 
we may oppose the replacement of underwater stock options with new option       
grants at a lower exercise price. In both circumstances executives would be     
rewarded for the poor performance of the company's stock, undermining the       
intention of stock option awards.                                               

4.1.6. Reloads                                                                  

Reload grants give stock option recipients additional stock options to replace  
the options that have been exercised. Reloading options make it possible for    
the recipient to lock-in increases in stock price with no attendant risk, a     
benefit not available to other shareholders. Stock option reloads also          
contribute to excessively large compensation packages and increase stock option 
dilution. Lastly, reload features transfer responsibility for new option grants 
from Directors to the executives who are exercising their options.              

4.1.7. Broad-based                                                              

In determining how to vote on a stock option plan, we consider whether or not a 
proposed plan is available to a broad base of employees. Plans which are        
targeted to only the top executives of a company create disparities in the      
workplace which may adversely affect employee productivity and morale. We       
generally oppose plans if a significant proportion of option shares granted the 
previous year were issued to the top five executives.                           

4.1.8. Holding Period                                                           

Equity compensation awards are intended to align management interests with      
those of shareholders. Allowing executives to sell their shares while they are  
employed by the company undermines this purpose. Executives should be required  
to hold a substantial portion of their equity compensation awards, including    
any shares received from option exercise, while they remain employed by the     
company.                                                                        

4.1.9. Complexity                                                               

Some plans are needlessly complex, inconsistent, and complicated, or weaken     
performance criteria by providing Directors with excessive discretionary power. 
We may oppose plans that allow pyramiding (using shares obtained from the       
exercise of each option to purchase additional shares covered under the plan),  
gross-ups (in which the company provides cash or additional options to cover    
the tax-liability of options), or acceleration of the vesting requirements of   
outstanding awards. We may also oppose plans which bundle several kinds of      
awards into one plan or which do not provide clear guidelines for the           
allocation of awards to executives.                                             

4.2. Restricted Stock                                                           

Many agree that the best way to align the interests of executives with          
shareholders is through direct stock holdings, coupled with at-risk variable    
compensation that is tied to explicit and challenging performance benchmarks.   
Performance-vesting restricted stock is a compensation plan feature which not   
only increases executives' direct share holdings, but also incorporates at-risk 
features. In an effort to reward performance and not job tenure, restricted     
stock vesting requirements should be performance-based. Such plans should       
explicitly define the performance criteria for awards to executives and may     
include a variety of corporate performance measures in addition to the use of   
stock price targets. In addition, executives should be required to hold their   
vested restricted stock as long as they remain employees of the company.        

We may support the use of performance-vesting restricted stock as long as the   
absolute amount of restricted stock being granted is a reasonable proportion of 
an executive's overall compensation.                                            

4.3. Proposals on Base Compensation                                             

Annual salaries and other forms of guaranteed pay should be reasonable for the  
recruitment and retention of executives. Section 162(m) of the Code limits the  
tax deductibility of executive compensation in excess of $1 million unless it   
is performance-based. We may support proposals which address this limitation as 
well as those which establish reasonable levels of executive base compensation. 

4.4. Proposals on Variable Compensation                                         

We support enhanced disclosure and shareholder oversight of executive benefits  
and other perquisites. In addition, we may oppose the provisions of any         
perquisite or benefit to executives which exceeds what is generally offered to  
other company employees.                                                        

4.5. Golden Parachutes                                                          

Golden parachutes, which are severance packages contingent upon a change in     
control, may be detrimental to shareholder interests. Proponents argue that     
golden parachutes ensure that executives will continue to devote their time and 
attention to the business, despite the threat of potential job loss due to a    
change in control. Golden parachutes ensure that executives will not oppose a   
merger that might be in the shareholders' best interests but may cost the       
executives their jobs.                                                          

However, since parachutes assure covered executives of specified benefits, they 
may reduce management accountability to shareholders and reduce their           
incentives to maximize shareholder value during merger negotiations. Golden     
parachutes may also be unnecessary and a waste of corporate assets. In light of 
these negatives, companies should ban or put to shareholder approval all future 
golden parachutes.                                                              

Any severance plan or stock option "change in control" vesting feature should   
be contingent upon the completion of a merger, rather than the lesser standard  
of shareholder approval of a merger.                                            

4.6. Proposals Seeking Greater Transparency and Oversight                       

Shareholders benefit from full disclosure of all forms of compensation received 
by senior executives. Requiring shareholder approval of important compensation  
matters also provides an important safeguard against excessive executive pay.   

4.7. Proposals Seeking Alternative Performance Measure                          

These shareholder proposals seek to link executive compensation to the          
company's achievement of objectives to improve the company's long-term          
performance and sustainability. We may support such proposals provided that the 
objectives are evaluated in addition to the traditional financial measures of   
company performance in determining executive compensation.                      

4.8. Outside Director Compensation & Benefits                                   

The evaluation of outside Director compensation and benefits is important       
because Directors compensate themselves. We support compensating Directors in a 
manner which rewards excellent service and at the same time does not compromise 
the independence of Directors. Excessively large compensation packages may make 
Directors less willing to challenge management out of fear of not being         
re-nominated. Direct stock ownership is the best way to align the interests of  
outside Directors and shareholders. Accordingly, a significant proportion of    
Director compensation should be in the form of stock. The voting fiduciary may  
support the elimination of Director pensions. Directors who receive pensions    
based upon years of service as Directors and not upon their performance as      
Directors are less likely to challenge management if they perceive that such    
action might reduce the possibility of vesting. In addition to these            
conditions, we evaluate Director compensation plans using the same standards as 
those which apply to executive compensation plans.                              

4.9. Disclosing or Restricting Executive Compensation                           

Proposals which link executive compensation, benefits, and perquisites to the   
long-term goals of the company should be supported. In addition, proposals that 
seek to expand disclosure of executive compensation, benefits, and perquisites  
are of value to shareholders as long as such disclosure is not unduly           
burdensome on the company. In general, we may oppose the provision of any       
perquisite or benefit to executives that exceeds what is generally offered to   
other company employees.                                                        

5. CORPORATE RESPONSIBILITY                                                     

Corporate Responsibility shareholder proposals are based on the premise that,   
in order to succeed over the long-term, companies need to treat employees,      
suppliers, and customers well; need to be environmentally responsible; and need 
to be responsive to the communities in which they operate. In general, we may   
support such proposals as long as they contribute to or have no adverse effect  
upon the long-term economic interests of plan participants and beneficiaries.   

5.1. Special Policy Review & Shareholder Advisory Committees                    

Such policy committees are usually established by Boards of Directors to        
address broad corporate policy and to address issues on matters including       
shareholder relations, the environment and health & safety issues. We generally 
support proposals calling for the formation of such committees given the fact   
that this creates a method for effecting shareholder influence on companies.    

5.2. Corporate Conduct, International Labor Standards, and Human Rights         

We generally support shareholder proposals which address corporate              
responsibility relating to environmental, labor and human rights standards as   
long as the proposals contribute to or have no adverse impact upon the          
long-term interests of plan participants and beneficiaries.                     

5.3. Adoption of "MacBride Principles"                                          

The MacBride Principles call on companies operating in Northern Ireland to      
treat workers in those facilities in the same manner that the companies treat   
their employees domestically. We consider whether or not it is in the best      
long-term interests of plan participants and beneficiaries for a company to     
conduct its business in accordance with such principles.                        

5.4. Adoption of "CERES Principles"                                             

CERES Principles call for the companies to protect the environment and the      
health and safety of the companies' employees. We generally support proposals   
of this kind since the corporate conduct created by implementing them enhances  
business operations, improves companies' image, and enhances shareholder value. 

5.5. Legal & Regulatory Compliance                                              

Legal and regulatory compliance proposals call upon companies to comply with,   
and report on, government mandates relating to non-discrimination; health and   
safety; affirmative action; environmental issues; labor protections; and other  
policies and practices that affect long-term company performance. In general we 
may support such proposals because reporting on affirmative action keeps the    
issue high on a company's agenda, reaffirms a commitment to equal employment    
opportunity, and bolsters its standing with employees and the public and thus   
its economic well-being.                                                        

5.6. Supplier Standards                                                         

Supplier standards proposals call on companies to institute a review process to 
ensure that they do not do business with suppliers that fail to comply with all 
applicable laws and standards relating to labor and human rights. In general,   
we may support such proposals.                                                  

5.7. Fair Lending                                                               

Fair lending proposals call for financial institutions to affirmatively comply  
with fair-lending regulations and statutes, institute or report on overall fair 
lending policies or goals by the parent and financial subsidiaries of the       
corporation, or disclose lending data to shareholders and the public. It is     
important for financial institutions to examine the risks inherent to their     
fair lending compliance practices, to institute corrective steps and            
safeguards, if necessary, and to report to shareholders on their findings and   
activities in this regard. We may generally support proposals seeking such      
actions.                                                                        

5.8. Political Reporting                                                        

Management is unaccountable in making political contributions and in funding    
Political Action Committees (PACs) unless such donations are a matter of public 
information easily available to shareholders. While information on PAC          
contributions is available, direct contributions by the company at the state    
and local levels generally are not available, and few companies have reported   
on their expenses for PAC administration and solicitation. Aside from the right 
of shareholders to know about corporate political activities, knowledge that    
information on political contributions is readily available will lessen the     
chance that officers will make contributions that could be embarrassing to the  
corporation. We generally support such proposals as long as the cost of         
preparing reports on political contributions is minimal, and the request for    
them is reasonable.                                                             

5.9. Tobacco lndustry                                                           

The regulation of marketing practices is a responsibility of national or local  
governments. However, individual companies still have an undiminished duty to   
market their products responsibly within government-established boundaries.     
Tobacco ads continue to cause significant controversy for tobacco companies     
because they are said to affect those who may not be able to make an informed   
decision about the health risks of smoking. Companies that engage in such       
marketing should make sure that they fully comply with the letter and spirit of 
any government guidelines as well as any industry codes that address the topic. 
Reports on the marketing of tobacco products are a relatively inexpensive way   
for a company to let its shareholders gauge whether the company is marketing    
responsibly. Therefore, we may generally support proposals that ask management  
to report on or change tobacco product marketing practices.                     

5.10. Business Strategy                                                         

Shareholders have introduced proposals asking Boards to examine the impact of   
particular business strategies on long-term corporate value in light of         
changing market conditions, and to report back to shareholders. We generally    
support enhanced disclosure to shareholders on how the company addresses issues 
that may present significant risk to long-term corporate value. We also         
generally support proposals which seek Board review of business strategies that 
may not contribute to building long-term corporate value, so long as these      
proposals do not impose undue costs on the corporation.                         

5.11. Analyst Independence                                                      

Recent investigations by the SEC and the New York State Attorney General        
exposed widespread conflicts of interest involving investment banking practices 
at many financial services companies. We believe that these conflicts have      
helped to undermine investor confidence in the capital markets in general and   
investor confidence in the financial services industry in particular. Several   
recent shareholder proposals have urged financial service companies to          
effectively manage investment banking related conflicts of interest by formally 
separating the company's investment banking business from the company's         
sell-side analyst research and Initial Public Offering (IPO) allocation         
process, or by taking other measures. We generally support such proposals.      

6. AUDITORS                                                                     

Independent auditors play the important role in the capital markets of helping  
to protect the integrity and reliability of corporate financial reporting. The  
independent audit and resulting opinion letter are intended to enhance          
investors' confidence that the financial statements on which they rely provide  
an accurate picture of a company's financial condition. Recent accounting       
scandals illustrate the consequences for investors when this audit process      
breaks down.                                                                    

When a company engages its audit firm to perform non-audit services, this may   
compromise the independence of the audit firm, and may give rise to questions   
and concerns about the integrity and reliability of the auditor's work. Both    
the type and the amount of work performed for a company by its outside audit    
firm must be scrutinized. Real and perceived auditor conflicts are most serious 
when non-audit services constitute a significant percentage of the total fees   
paid by the company to the auditor, or when the nature of these non-audit       
services places the auditor in the role of advocate for the company, or its     
executives.                                                                     

We might consider that companies should only engage their auditors to perform   
audit services. However, the performance of certain non-audit services might    
not necessarily compromise the independence of the audit process.               

6.1. Auditor Ratification                                                       

We may vote against ratification of the auditors when:                          

o There is reason to believe that the company's auditors have become complacent 
in the performance of their auditing duties;                                

o There has been a change in auditors from the prior years and it is determined 
that the cause is a disagreement between the company and the terminated     
auditor on a matter of accounting principles or practices, financial        
statement disclosure or auditing scope or practice;                         

o The auditor provides advice on tax avoidance strategies, as disclosed in the  
qualitative discussion of tax services, or any other tax or other service   
 that the voting fiduciary believes places the auditor in the role of advocate
for the company or its executives;                                          

o The fees for non-audit services account for a significant percentage of total 
fees. When fees for non-audit services are more than 20% of total fees there
 should be concern, and when non-audit services exceed 50% of total fees it is
inappropriate and a serious threat to auditor independence. In determining  
the appropriate threshold at a particular company, the voting fiduciary     
should consider the nature of the non-audit services provided and the level 
of detail provided in the qualitative descriptions of non-audit fees; and   

o A company has had the same audit firm for more than seven years.              

We recognize that a vote against ratification of the auditor based upon the     
above standards may raise concerns about the performance of the audit           
committee. When these concerns are serious, we may also consider withholding    
votes for Directors serving on the audit committee.                             

6.2. Shareholder Proposals Relating to Auditors                                 

We may support shareholder proposals to enhance auditor independence, including 
those that complement or strengthen the minimum acceptable standards            
established above.                                                              

485APOS
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                                                          PART II - APPENDIX C

WAIVERS OF SALES CHARGES

This Appendix sets forth the various circumstances in which the initial sales   
charge (ISC) and/or the CDSC is waived for the MFS funds' share classes. Some   
of the following information will not apply to certain funds, depending on      
which classes of shares are offered by the funds. In order to qualify for a     
sales charge waiver, you must advise MFS that you are eligible for the waiver   
at the time of purchase and/or redemption. The funds, MFS, and their affiliates 
reserve the right to eliminate, modify, and add waivers at any time at their    
discretion.                                                                     

In addition, transfers, rollovers or other transactions from one account to the 
same class of the same fund of another account otherwise subject to a CDSC or   
an ISC will not be charged a CDSC or ISC so long as each account is held in     
your name or for your benefit (either individually or collectively) by MFSC or  
an affiliate. Shares will retain the CDSC schedule in effect based upon a pro   
rata share of the CDSC from the fund in the first account and the original      
purchase date of the shares subject to the CDSC.                                

As used in this Appendix C, the term "ESP" includes employer sponsored plans,   
the term "SRO" includes salary reduction only plans, and the term "ERISA"       
refers to the Employment Retirement Income Security Act of 1974, as amended.    

                                                        [Enlarge/Download Table]
RETIREMENT PLANS:                                                                                       


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                                                            SALES CHARGE WAIVED                         
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WAIVER CATEGORY                                                CLASS      CLASS       CLASS       CLASS 
                                                               A ISC      A CDSC      B CDSC      C CDSC
--------------------------------------------------------------------------------------------------------
1. WAIVERS FOR MFS SERVICED PLANS                                                                       
--------------------------------------------------------------------------------------------------------
                                                                                                        
o To the extent that redemption proceeds are used to pay                    V            V          V   
  expenses (or certain participant expenses) of the 401(a)                                              
  or ESP Plan (e.g., participant account fees).                                                         
--------------------------------------------------------------------------------------------------------
o Shares purchased or redeemed representing transfers from,      V          V            V          V   
  or transfers to, plan investments other than the MFS                                                  
  funds.                                                                                                
--------------------------------------------------------------------------------------------------------
o Shares acquired pursuant to repayments by retirement plan      V          V            V          V   
  participants of loans from 401(a) or ESP Plans.                                                       
--------------------------------------------------------------------------------------------------------
o By a retirement plan which established an account with                                 V              
  MFSC between July 1, 1996 and December 31, 1998.                                                      
--------------------------------------------------------------------------------------------------------
o By a retirement plan which established its account with                                V              
  MFSC on or after January 1, 1999 (provided that the plan                                              
  establishment paperwork is received by MFSC in good order                                             
  on or after November 15, 1998 and before December 31,                                                 
  2002).                                                                                                
--------------------------------------------------------------------------------------------------------
o Transfers from a single account maintained for a 401(a)                   V            V          V   
  Plan to multiple accounts maintained by MFSC on behalf of                                             
  individual participants of such Plan.                                                                 
--------------------------------------------------------------------------------------------------------
o All MFS Serviced Plans.                                        V                                  V   
--------------------------------------------------------------------------------------------------------
o Transfers due to the eligibility of a MFS Serviced Plan        V          V            V          V   
  to move its investment into a new share class under                                                   
  certain eligibility criteria established from time to                                                 
  time by MFD (sales charges waived may vary depending upon                                             
  the criteria established by MFD).                                                                     
--------------------------------------------------------------------------------------------------------
o Transfer or rollover to MFS Prototype IRA from a MFS           V          V            V          V   
  Serviced Plan.                                                                                        
--------------------------------------------------------------------------------------------------------
Reinvestment of Redemption Proceeds from Class B Shares          V          V                           

Shares acquired by a retirement plan whose account                                                      
application was received by MFD on or prior to March 30,                                                
2001 where the purchase represents the immediate                                                        
reinvestment of proceeds from the plan's redemption of                                                  
its Class B shares of the MFS funds and is equal to or                                                  
exceeds $500,000, either alone or in aggregate with the                                                 
current market value of the plan's existing Class A                                                     
shares; or                                                                                              
--------------------------------------------------------------------------------------------------------
Shares acquired by a retirement plan whose account                                                      
application was received by MFD on or after April 2, 2001                                               
and before December 31, 2002 where the purchase                                                         
represents the immediate reinvestment of proceeds from                                                  
the plan's redemption of its Class B shares of the MFS                                                  
funds and is equal to or exceeds $1,000,000, either alone                                               
or in aggregate with current market value of the plan's                                                 
existing Class A shares.                                                                                
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2. WAIVERS FOR NON-MFS SERVICED PLANS ("TA PLANS")                                                      
--------------------------------------------------------------------------------------------------------
A. 401(A) PLANS AND ESP PLANS                                                                           
--------------------------------------------------------------------------------------------------------
o Where the retirement plan and/or sponsoring organization       V          V                           
  demonstrates to the satisfaction of, and certifies to,                                                
  MFSC that the retirement plan (or multiple plans                                                      
  maintained by the same plan sponsor) has, at the time of                                              
  certification or will have pursuant to a purchase order                                               
  placed with the certification, a market value of $500,000                                             
  or more (applies only when the certification was received                                             
  by MFSC on or prior to March 30, 2001) or $1,000,000 or                                               
  more (applies only when the certification is received by                                              
  MFSC on or after April 2, 2001), invested in shares of                                                
  any class or classes of the MFS funds and aggregate                                                   
  assets of at least $10 million; provided, however, that                                               
  the CDSC will not be waived (i.e., it will be imposed)                                                
  (a) with respect to plans which establish an account with                                             
  MFSC on or after November 1, 1997, in the event that the                                              
  plan makes a complete redemption of all of its shares in                                              
  the MFS Family of funds, or (b) with respect to plans                                                 
  which establish an account with MFSC prior to November 1,                                             
  1997, in the event that there is a change in law or                                                   
  regulations which result in a material adverse change to                                              
  the tax advantaged nature of the plan, or in the event                                                
  that the plan and/or sponsoring organization: (i) becomes                                             
  insolvent or bankrupt; (ii) is terminated under ERISA or                                              
  is liquidated or dissolved; or (iii) is acquired by,                                                  
  merged into, or consolidated with any other entity.                                                   
--------------------------------------------------------------------------------------------------------
Investment in Class A shares by certain retirement plans         V(1)                                   
subject to ERISA, if                                                                                    

The plan established an account with MFSC between July 1,                                               
1997 and December 31, 1999;                                                                             

The plan records are maintained on a pooled basis by                                                    
MFSC; and                                                                                               

The sponsoring organization demonstrates to the                                                         
satisfaction of MFD that, at the time of purchase, the                                                  
employer has at least 200 eligible employees and the plan                                               
has aggregate assets of at least $2,000,000.                                                            
--------------------------------------------------------------------------------------------------------
3. WAIVERS FOR BOTH MFS SERVICED PLANS AND TA PLANS                                                     
--------------------------------------------------------------------------------------------------------
A. BENEFIT RESPONSIVE WAIVERS                                                                           
--------------------------------------------------------------------------------------------------------
o Death, disability or retirement of 401(a) or ESP Plan                     V            V          V   
  participant, or death or disability of IRA owner, SRO                                                 
  Plan Participant or SAR-SEP Plan Participant.                                                         
--------------------------------------------------------------------------------------------------------
o Eligible participant distributions, such as distributions                 V            V          V   
  due to death, disability, financial hardship, retirement                                              
  and termination of employment from MFS Serviced Plans and                                             
  nonqualified deferred compensation plans (excluding,                                                  
  however, a termination of a plan).                                                                    
--------------------------------------------------------------------------------------------------------
o Loan from 401(a) or ESP Plan.                                             V            V          V   
--------------------------------------------------------------------------------------------------------
o Financial hardship (as defined in Treasury Regulation                     V            V          V   
  Section 1.401(k)-l(d)(2), as amended from time to time)                                               
  for 401(a) Plans and ESP Plans.                                                                       
--------------------------------------------------------------------------------------------------------
o Termination of employment of 401(a) or ESP Plan                           V            V          V   
  participant (excluding, however, a termination of the                                                 
  Plan).                                                                                                
--------------------------------------------------------------------------------------------------------
o Tax-free return of excess 401(a) Plan, ESP Plan or IRA                    V            V          V   
  contributions.                                                                                        
--------------------------------------------------------------------------------------------------------
o Distributions from a 401(a) or ESP Plan that has invested                 V            V          V   
  its assets in one or more of the MFS funds for more than                                              
  10 years from the later to occur of (i) January 1, 1993                                               
  or (ii) the date such 401(a) or ESP Plan first invests                                                
  its assets in one or more of the MFS funds. The sales                                                 
  charges will be waived in the case of a redemption of all                                             
  of the 401(a) or ESP Plan's shares in all MFS funds                                                   
  (i.e., all the assets of the 401(a) or ESP Plan invested                                              
  in the MFS funds are withdrawn), unless immediately prior                                             
  to the redemption, the aggregate amount invested by the                                               
  401(a) or ESP Plan in shares of the MFS funds (excluding                                              
  the reinvestment of distributions) during the prior four                                              
  years equals 50% or more of the total value of the 401(a)                                             
  or ESP Plan's assets in the MFS funds, in which case the                                              
  sales charges will not be waived.                                                                     
--------------------------------------------------------------------------------------------------------
o Distributions made on or after the IRA owner, ESP                         V                           
  participant, SRO Plan participant or 401(a) Plan                                                      
  participant has attained the age of 59 1/2 years old.                                                 
--------------------------------------------------------------------------------------------------------
o Certain involuntary redemptions and redemptions in                        V            V          V   
  connection with certain automatic withdrawals from a                                                  
  401(a) Plan.                                                                                          
--------------------------------------------------------------------------------------------------------
o Distributions made on or after the IRA owner or the                       V            V          V   
  401(a), ESP, SRO or SAR-SEP Plan participant, as                                                      
  applicable, has attained the age of 70 1/2 years old, but                                             
  only with respect to the minimum distribution under Code                                              
  rules.                                                                                                
--------------------------------------------------------------------------------------------------------

Investments in Class A shares by certain retirement plans        V(1)                                   
(1) subject to ERISA, if, prior to July 1, 1996,                                                        

The plan had established an account with MFSC; and                                                      

The sponsoring organization had demonstrated to the                                                     
satisfaction of MFD that either:                                                                        

The employer had at least 25 employees; or                                                              

The total purchases by the retirement plan of Class A shares                                            
of the MFS funds would be in the amount of at least $250,000                                            
within a reasonable period of time, as determined by MFD in                                             
its sole discretion.                                                                                    

--------------------------------------------------------------------------------------------------------
Investments in Class A shares by certain retirement plans        v(1)                                   
subject to ERISA, if                                                                                    

The plan established an account with MFSC between July 1,                                               
1996 and March 30, 2001;                                                                                

The plan has, at the time of purchase, either alone or in                                               
aggregate with other plans maintained by the same plan                                                  
sponsor, a market value of $500,000 or more invested in                                                 
shares of any class or classes of the MFS funds; and                                                    

THE RETIREMENT PLANS WILL QUALIFY UNDER THIS CATEGORY ONLY                                              
IF THE PLANS OR THEIR SPONSORING ORGANIZATION INFORMS MFSC                                              
PRIOR TO THE PURCHASES THAT THE PLANS HAVE A MARKET VALUE                                               
OF $500,000 OR MORE INVESTED IN SHARES OF ANY CLASS OR                                                  
CLASSES OF THE MFS FUNDS; MFSC HAS NO OBLIGATION                                                        
INDEPENDENTLY TO DETERMINE WHETHER SUCH PLANS QUALIFY UNDER                                             
THIS CATEGORY.                                                                                          
--------------------------------------------------------------------------------------------------------
B. CERTAIN TRANSFERS OF REGISTRATION                                                                    
--------------------------------------------------------------------------------------------------------
o Transfers to an IRA rollover account where any sales                      V            V          V   
  charges with respect to the shares being reregistered                                                 
  would have been waived had they been redeemed.                                                        
--------------------------------------------------------------------------------------------------------
C. ADMINISTRATIVE SERVICE ARRANGEMENTS                                                                  
--------------------------------------------------------------------------------------------------------
o Where the retirement plan is, at that time, a party to a       V          V                           
  retirement plan recordkeeping or administrative services                                              
  agreement with MFD or one of its affiliates pursuant to                                               
  which certain of those services are provided by Benefit                                               
  Services Corporation or any successor service provider                                                
  designated by MFD.                                                                                    
--------------------------------------------------------------------------------------------------------
o Where the retirement plan has established an account with      V          V                           
  MFSC on or after January 1, 2000, and is, at that time, a                                             
  party to a retirement plan recordkeeping or                                                           
  administrative services agreement with MFD or one of its                                              
  affiliates pursuant to which such services are provided                                               
  with respect to at least $10 million in plan assets.                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by retirement plans or trust accounts          V          V                           
  whose financial intermediaries have entered into an                                                   
  administrative services agreement with MFD or one of its                                              
  affiliates to perform certain administrative services,                                                
  subject to certain operational and minimum size                                                       
  requirements specified from time to time by MFD or one or                                             
  more of its affiliates.                                                                               
--------------------------------------------------------------------------------------------------------

(1) Purchases of Class A shares are not subject to an initial sales charge; however, a CDSC of 1% will  
    be deducted from redemption proceeds if the redemption is made within 12 months of purchase.        

WAIVERS FOR 529 TUITION PROGRAMS:                                                                       


                                                                  SALES CHARGE WAIVED                   

WAIVER CATEGORY                                                           CLASS       CLASS      CLASS  
                                                                          529A        529B       529C   
                                                                          ISC         CDSC       CDSC   
--------------------------------------------------------------------------------------------------------
                                                                                                        

A. CERTAIN SPONSORED PLANS                                                                              
--------------------------------------------------------------------------------------------------------
o Shares acquired on behalf of a group, association or                      V            V          V   
  employer sponsored plan, pursuant to guidelines created                                               
  by MFD from time to time.                                                                             
--------------------------------------------------------------------------------------------------------
B. INVESTMENT PROCEEDS FROM CERTAIN REDEMPTIONS OF CLASS A,                                             
CLASS B AND CLASS C SHARES                                                                              
--------------------------------------------------------------------------------------------------------
o The initial sales charge imposed on purchases of Class                    V            V          V   
  529A shares, and the CDSC imposed on certain redemptions                                              
  of Class A, Class B and Class C shares, are waived where                                              
  Class 529A, Class 529B and Class 529C shares are acquired                                             
  following the reinvestment of the proceeds of a                                                       
  redemption of Class A, Class B and Class C shares,                                                    
  respectively, of the same fund; provided however, that                                                
  any applicable CDSC liability on the Class B or Class C                                               
  shares redeemed will carry over to the Class 529B or                                                  
  Class 529C shares acquired and for purposes of                                                        
  calculating the CDSC, the length of time you have owned                                               
  your Class 529B or Class 529C shares will be measured                                                 
  from the date of original purchase of the Class B or                                                  
  Class C shares redeemed.                                                                              
--------------------------------------------------------------------------------------------------------
C. ADMINISTRATIVE SERVICE ARRANGEMENTS                                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by 529 tuition programs whose sponsors or                 V                           
  administrators have entered into an administrative                                                    
  services agreement with MFD or one of its affiliates to                                               
  perform certain administrative or investment advisory                                                 
  services subject to certain operational and minimum size                                              
  requirements specified from time to time by MFD or one or                                             
  more of its affiliates.                                                                               
--------------------------------------------------------------------------------------------------------
D. QUALIFIED HIGHER EDUCATION EXPENSES                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed where the redemption proceeds are used to                              V          V   
  pay for qualified higher education expenses, which may                                                
  include tuition, fees, books, supplies, equipment and                                                 
  room and board (see the program description for further                                               
  information on qualified higher education expenses);                                                  
  however the CDSC will not be waived for redemptions where                                             
  the proceeds are transferred or rolled over to another                                                
  tuition program.                                                                                      
--------------------------------------------------------------------------------------------------------
E. SCHOLARSHIP                                                                                          
--------------------------------------------------------------------------------------------------------
o Shares redeemed where the account beneficiary has                                      V          V   
  received a scholarship, up to the amount of the                                                       
  scholarship.                                                                                          
--------------------------------------------------------------------------------------------------------
F. DEATH OF 529 PLAN BENEFICIARY                                                                        
--------------------------------------------------------------------------------------------------------
o Shares redeemed on account of the death of the 529 plan                                V          V   
  account beneficiary if the shares were held solely for                                                
  the benefit of the deceased individual.                                                               
--------------------------------------------------------------------------------------------------------
G. USA COLLEGECONNECT 529 PLAN                                                                          
--------------------------------------------------------------------------------------------------------
o Shares acquired as a result of the conversion of the USA                  V                           
  CollegeConnect 529 Plan to the MFS 529 Savings Plan                                                   
  (shares acquired after the conversion are not entitled to                                             
  a waiver under this category).                                                                        

GENERAL WAIVERS:                                                                                        


                                                        SALES CHARGE WAIVED                             

WAIVER CATEGORY                                              CLASS       CLASS        CLASS      CLASS  
                                                             A/529A      A CDSC       B/529B     C/529C 
                                                             ISC                      CDSC       CDSC   
                                                                                                        
--------------------------------------------------------------------------------------------------------
A. DIVIDEND REINVESTMENT                                                                                
--------------------------------------------------------------------------------------------------------
o Shares acquired through dividend or capital gain               V          V            V          V   
  reinvestment.                                                                                         
--------------------------------------------------------------------------------------------------------
o Shares acquired by automatic reinvestment of                   V          V            V          V   
  distributions of dividends and capital gains of any fund                                              
  in the MFS funds pursuant to the Distribution Investment                                              
  Program.                                                                                              
--------------------------------------------------------------------------------------------------------
B. AFFILIATES OF A MFS FUND/CERTAIN FINANCIAL ADVISERS                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by officers, eligible directors,               V          V            V          V   
  employees (including former employees) and agents of MFS,                                             
  Sun Life, or any of their subsidiary companies.                                                       
--------------------------------------------------------------------------------------------------------
o Shares acquired by trustees and retired trustees of any        V          V            V          V   
  investment company for which MFD serves as distributor.                                               
--------------------------------------------------------------------------------------------------------
o Shares acquired by employees, directors, partners,             V          V            V          V   
  officers and trustees of any subadviser to any MFS fund.                                              
--------------------------------------------------------------------------------------------------------
o Shares acquired by certain family members of any such          V          V            V          V   
  individual identified above and their spouses (or legal                                               
  equivalent under applicable state law), and certain                                                   
  trusts, pension, profit-sharing or other retirement plans                                             
  for the sole benefit of such persons, provided the shares                                             
  are not resold except to the MFS fund which issued the                                                
  shares.                                                                                               
--------------------------------------------------------------------------------------------------------
o Shares acquired by employees or registered                     V          V            V          V   
  representatives (including former employees) of financial                                             
  intermediaries or an employee's spouse (or legal                                                      
  equivalent under applicable state law) or employee's                                                  
  children under the age of 21. For employees or registered                                             
  representatives of financial intermediaries who                                                       
  established an account with MFS prior to May 1, 2006,                                                 
  shares acquired by certain family members of employees or                                             
  registered representatives of financial intermediaries                                                
  and their spouses (or legal equivalent under applicable                                               
  state law), and certain trusts, pension, profit-sharing                                               
  or other retirement plans for the sole benefit of such                                                
  persons, provided the shares are not resold except to the                                             
  MFS Fund which issued the shares.                                                                     
--------------------------------------------------------------------------------------------------------
o Shares acquired by institutional clients of MFS or             V          V            V          V   
  MFS Institutional Advisors, Inc.                                                                      
--------------------------------------------------------------------------------------------------------
C. INVOLUNTARY REDEMPTIONS                                                                              
--------------------------------------------------------------------------------------------------------
o Shares redeemed at a MFS fund's direction due to the                      V            V          V   
  small size of a shareholder's account.                                                                
--------------------------------------------------------------------------------------------------------
D. BANK TRUST DEPARTMENTS AND LAW FIRMS                                                                 
--------------------------------------------------------------------------------------------------------
o Shares acquired by certain bank trust departments  or          V          V                           
  law firms acting as trustee or manager for trust accounts                                             
  which have entered into an administrative services                                                    
  agreement with MFD and are acquiring such shares for the                                              
  benefit of their trust account clients.                                                               
--------------------------------------------------------------------------------------------------------
E. INVESTMENT OF PROCEEDS FROM CERTAIN REDEMPTIONS OF                                                   
CLASS I SHARES                                                                                          
--------------------------------------------------------------------------------------------------------
o The initial sales charge imposed on purchases of Class A       V          V                           
  or Class 529A shares and the contingent deferred sales                                                
  charge imposed on certain redemptions of Class A shares,                                              
  are waived with respect to Class A or Class 529A shares                                               
  acquired of any of the MFS funds through the immediate                                                
  reinvestment of the proceeds of a redemption of Class I                                               
  shares of any of the MFS funds.                                                                       
--------------------------------------------------------------------------------------------------------
F. SYSTEMATIC WITHDRAWALS                                                                               
--------------------------------------------------------------------------------------------------------
o Systematic withdrawals with respect to up to 10% per year                              V          V   
  (or 15% per year, in the case of accounts registered as                                               
  IRAs where the redemption is made pursuant to Section                                                 
  72(t) of the Internal Revenue Code of 1986, as amended)                                               
  of the account value at the time of establishment.                                                    
--------------------------------------------------------------------------------------------------------
G. DEATH OF OWNER                                                                                       
--------------------------------------------------------------------------------------------------------
o Shares redeemed on the account of the death of the                                     V          V   
  account owner (e.g., shares redeemed by the estate or any                                             
  transferee of the shares from the estate) if the shares                                               
  were held solely in the deceased individual's name, or                                                
  for the benefit of the deceased individual.                                                           
--------------------------------------------------------------------------------------------------------
H. DISABILITY OF OWNER                                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed on account of the disability of the                                    V          V   
  account owner if shares are held either solely or jointly                                             
  in the disabled individual's name in a living trust for                                               
  the benefit of the disabled individual (in which case a                                               
  disability certification form is required to be submitted                                             
  to MFSC), or shares redeemed on account of the disability                                             
  of the 529 account beneficiary.                                                                       
--------------------------------------------------------------------------------------------------------
I. WRAP ACCOUNT AND FUND "SUPERMARKET" INVESTMENTS                                                      
--------------------------------------------------------------------------------------------------------
o Shares acquired by investments through certain dealers         V          V                           
  (including registered investment advisers and financial                                               
  planners) which have established certain operational                                                  
  arrangements with MFD which include a requirement that                                                
  such shares be sold for the sole benefit of clients                                                   
  participating in a "wrap" account, mutual fund                                                        
  "supermarket" account or a similar program under which                                                
  such clients pay a fee to such dealer.                                                                
--------------------------------------------------------------------------------------------------------
J. INSURANCE COMPANY SEPARATE ACCOUNTS                                                                  
--------------------------------------------------------------------------------------------------------
o Shares acquired by insurance company separate accounts.        V          V                           
--------------------------------------------------------------------------------------------------------
K. NO COMMISSIONS PAID                                                                                  
--------------------------------------------------------------------------------------------------------
o Shares redeemed where MFD has not paid an up front                        V            V          V   
  commission with respect to the sale of the shares,                                                    
  provided that such arrangement meets certain conditions                                               
  established by MFD from time to time.                                                                 
--------------------------------------------------------------------------------------------------------
L. MISCELLANEOUS                                                                                        
--------------------------------------------------------------------------------------------------------
o In connection with settlements reached between certain         V                                      
  broker/dealers and the NASD, SEC, and/or other regulatory                                             
  bodies regarding sales of Class B and Class C shares in                                               
  excess of certain dollar thresholds, the funds will, at                                               
  times, permit shareholders who are clients of these firms                                             
  to redeem Class B and Class C shares of the fund and                                                  
  concurrently purchase Class A shares without paying an                                                
  initial sales charge.                                                                                 

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

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                                                      SAI PART II - APPENDIX D

FINANCIAL INTERMEDIARY COMPENSATION 

Financial intermediaries receive various forms of compensation in connection    
with the sale of shares of a fund and/or the servicing of shareholder accounts. 
Financial intermediaries may receive such compensation (i) in the form of       
upfront commissions and ongoing asset-based compensation paid by MFD based on   
sales charges received and expected to be received by MFD from shareholders,    
and Rule 12b-1 ("Distribution Plan") distribution and service payments received 
by MFD from the fund, (ii) in the form of 529 administrative services payments, 
retirement plan administrative and service payments, and shareholder servicing  
payments paid by MFD and/or one or more of its affiliates (for purposes of this 
section only, collectively, "MFD") based on the receipt of such payments by MFD 
from the fund, and (iii) in the form of retail marketing support, program       
support, processing support, and/or other payments paid from MFD's own          
additional resources. In addition, financial intermediaries may benefit from    
payments made to other entities for consulting, research, or analytical         
services.                                                                       

The types of payments described above are not exclusive. Accordingly, financial 
intermediaries may receive payments under all or any combination of the         
above-referenced categories. In addition, the compensation that financial       
intermediaries receive may vary by class of shares sold and among financial     
intermediaries. Depending upon the arrangements in place at any particular      
time, financial intermediaries may have a financial incentive to recommend a    
particular fund or share class.                                                 

Financial intermediaries may charge you additional fees and/or commissions. You 
can ask your financial intermediary for information about any payments it       
receives from MFD and any services it provides, as well as about fees and/or    
commissions it charges. Financial intermediaries may categorize and disclose    
these arrangements differently than MFD does. Financial intermediaries that     
sell fund shares may also act as a broker or dealer in connection with a MFS    
fund's purchase or sale of portfolio securities. However, the fund and MFS do   
not consider financial intermediaries' sale of shares of a MFS fund as a factor 
when choosing brokers or dealers to effect portfolio transactions for the MFS   
funds.                                                                          

COMMISSIONS AND DISTRIBUTION PLAN PAYMENTS                                      

Class A, Class 529A, and Class J Shares                                         

For purchases of Class A, Class 529A and Class J shares subject to an initial   
sales charge, MFD generally pays a portion of the initial sales charge to       
financial intermediaries as an upfront commission of up to the following        
amounts:                                                                        

Equity/Asset Allocation/Total Return Funds                                      

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          5.00%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             4.00%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            3.00%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            2.25%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.75%                                
--------------------------------------------------------------------------------

Bond Funds                                                                      

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          4.00%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             3.50%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            3.00%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            2.25%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.75%                                
------------------------------------------ -------------------------------------

Short-Term Bond Funds                                                           

--------------------------------------------------------------------------------
Amount of Purchase                         Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Less than $50,000                          2.25%                                
--------------------------------------------------------------------------------
$50,000 but less than $100,000             2.00%                                
--------------------------------------------------------------------------------
$100,000 but less than $250,000            1.75%                                
--------------------------------------------------------------------------------
$250,000 but less than $500,000            1.50%                                
--------------------------------------------------------------------------------
$500,000 but less than $1,000,000          1.25%                                
--------------------------------------------------------------------------------

The difference between the total amount invested and the sum of (a) the net     
proceeds to the fund and (b) the financial intermediary commission, is the      
amount of the initial sales charge retained by MFD. Because of rounding in the  
computation of offering price, the portion of the sales charge retained by MFD  
may vary and the total sales charge may be more or less than the sales charge   
calculated using the sales charge expressed as a percentage of the offering     
price or as a percentage of the net amount invested as listed in the            
Prospectus. From time to time, MFD may pay financial intermediaries up to 100%  
of the applicable initial sales charge of Class A, Class 529A and Class J       
shares of certain specified funds sold by financial intermediaries during a     
specified sales period. In addition, financial intermediaries are generally     
eligible to receive some or all of the Distribution Plan service fee payments   
of up to 0.25% annually of the average daily net assets of the class with       
respect to such shares.                                                         

For purchases of Class A and Class 529A shares not subject to an initial sales  
charge other than by MFS Serviced Plans, MFD may pay financial intermediaries   
an upfront commission of up to 1% annually of the amount purchased through such 
financial intermediary. In addition, financial intermediaries will generally    
become eligible to receive some or all of the Distribution Plan service fee     
payments of up to 0.25% annually of the average daily net assets of the class   
with respect to such shares commencing in the 13th month following purchase.    

For purchases of Class 529A shares by employer sponsored or payroll deduction   
529 plans for which there is no initial sales charge or the Class 529A initial  
sales charge is waived, MFD will generally pay financial intermediaries an      
upfront commission of up to the following:                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $25,000,000 plus              0.50%                                
--------------------------------------------------------------------------------
Over $25,000,000                           0.25%                                
--------------------------------------------------------------------------------

At the discretion of MFD, MFD may pay certain financial intermediaries an       
upfront commission of up to 1% of the amount of Class 529A shares purchased     
through such financial intermediary instead of the upfront commission described 
above. In addition, such financial intermediaries will generally become         
eligible to receive some or all of the Distribution Plan service fee payments   
of up to 0.25% annually of the average daily net assets of the class with       
respect to such shares commencing in the 13th month following purchase.         

For purchases of Class A shares by MFS Serviced Plans prior to April 2, 2001    
(including sales to plans for which account establishment paperwork was         
received in good order by MFD on or prior to March 30, 2001), for which the     
initial sales charge is waived, MFD will generally pay financial intermediaries 
an upfront commission of up to the following:                                   

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

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

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

In the case of MFS Serviced Plans whose account establishment paperwork was     
received in good order after December 31, 1999, purchases will be aggregated as 
described above but the cumulative purchase amount will not be re-set after the 
date of the first such purchase.                                                

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares.                                                                         

For purchases of Class A shares by MFS Serviced Plans on or after April 2, 2001 
(including, sales to plans for which account establishment paperwork was        
received in good order by MFD on or after April 2, 2001), for which the initial 
sales charge is waived, MFD will generally pay financial intermediaries an      
upfront commission of up to the following:                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $4,000,000 plus                   1.00%                            
--------------------------------------------------------------------------------
Over $4,000,000 to $25,000,000 plus            0.50%                            
--------------------------------------------------------------------------------
Over $25,000,000                               0.25%                            
--------------------------------------------------------------------------------

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

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

Class B and Class 529B Shares                                                   

Except as noted below, for purchases of Class B and Class 529B shares, MFD will 
generally pay an upfront commission to financial intermediaries of up to 3.75%  
of the amount purchased through such financial intermediaries. MFD will also    
generally advance to financial intermediaries some or all of the first year     
Distribution Plan service fee payments of up to 0.25% of the amount of Class B  
and Class 529B shares purchased through such financial intermediary. In         
addition, financial intermediaries will generally become eligible to receive    
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

For purchases of Class B shares by a MFS Serviced Plan for which account        
establishment paperwork was received in good order by MFD between July 1, 1996  
and December 31, 1998, MFD will generally pay an upfront commission to          
financial intermediaries equal to 2.75% of the amount of Class B shares         
purchased through such financial intermediary. MFD will also generally advance  
to financial intermediaries some or all of the first year Distribution Plan     
service fee payments of up to 0.25% of the amount of Class B shares purchased   
through such financial intermediary. In addition, financial intermediaries will 
generally become eligible to receive some or all of the Distribution Plan       
service fee payments of up to 0.25% annually of the average daily net assets of 
the class with respect to such shares commencing in the 13th month following    
purchase.                                                                       

For purchases of Class B shares by a MFS Serviced Plan which established its    
account with MFSC between January 1, 1999, and December 31, 2002 (i.e., plan    
establishment paperwork is received by MFSC in good order by December 31, 2002) 
and certain other retirement plans as determined by MFD from time to time, MFD  
pays no upfront commission to financial intermediaries, but, instead, generally 
pays asset-based compensation to financial intermediaries of up to 1% annually  
of the average daily net assets of the class attributable to plan assets (of    
which 0.25% consists of the Distribution Plan service fee). This commission     
structure is not available with respect to a plan with a pre-existing           
account(s) with any MFS fund which seeks to switch to the MFS Recordkeeper Plus 
product.                                                                        

Class C and Class 529C Shares                                                   

Except as noted below, for purchases of Class C and Class 529C shares, MFD will 
generally pay an upfront commission to financial intermediaries of up to 1% of  
the amount of Class C and Class 529C shares purchased through such financial    
intermediary. In addition, financial intermediaries will generally become       
eligible to receive some or all of the Distribution Plan distribution fee       
payment of up to 0.75% and some or all of the Distribution Plan service fee     
payment of up to 0.25% annually of the average daily net assets of the class    
with respect to such shares commencing in the 13th month following purchase.    

For purchases of Class C shares by MFS Serviced Plans established on or after   
January 1, 2003 (i.e., plan establishment paperwork is received by MFSC in good 
order on or after January 1, 2003), MFD pays no upfront commission to financial 
intermediaries, but, instead, generally pays asset-based compensation to        
financial intermediaries of up to 1% annually of the average daily net assets   
of the class attributable to plan assets (of which 0.25% consists of the        
Distribution Plan service fee).                                                 

For purchases of Class C shares by an Alliance Plan, MFD will pay upfront       
commissions or asset-based compensation to financial intermediaries under       
either option discussed above, at the financial intermediary's discretion.      

Class R, Class R1, Class R2, Class R3 and Class R4 Shares                       

Except as noted below, for purchases of the following R share classes, MFD pays 
no upfront commission to financial intermediaries, but, instead, generally pays 
asset-based compensation to financial intermediaries of up to the following     
rates annually of the average daily net assets of the fund attributable to plan 
assets (of which up to 0.25% consists of the Distribution Plan service fee), as 
follows:                                                                        

------------------------------------------------------------                    
Class                                 Annual Rate                               
------------------------------------------------------------                    

------------------------------------------------------------                    
Class R1                              0.75%                                     
------------------------------------------------------------                    
Class R, Class R2, Class R3           0.50%                                     
------------------------------------------------------------                    
Class R4                              0.25%                                     
------------------------------------------------------------                    

In addition, MFD may pay financial intermediaries who sell Class R4 shares an   
upfront commission of up to 0.25% of up to $25 million of a MFS Serviced Plan's 
initial investment. MFD generally will not pay financial intermediaries         
receiving this upfront commission an upfront commission with respect to any     
subsequent sale of Class R4 shares (subject to MFD waiving this limitation from 
time to time).                                                                  

For purchases of Class R shares by a MFS Serviced Plan whose account            
establishment paperwork was received in good order after December 31, 2002, MFD 
will generally pay financial intermediaries an upfront commission of up to the  
following:                                                                      

--------------------------------------------------------------------------------
Cumulative Purchase Amount                 Upfront Commission as a Percentage of
                    Offering Price
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
On the first $4,000,000 plus               1.00%                                
--------------------------------------------------------------------------------
Over $4,000,000 to $25,000,000 plus        0.50%                                
--------------------------------------------------------------------------------
Over $25,000,000                           0.25%                                
--------------------------------------------------------------------------------

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

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

For purchases of Class R shares by an Alliance Plan whose account establishment 
paperwork was received in good order after December 31, 2002, MFD will          
generally pay financial intermediaries an upfront commission of up to 0.60% of  
the amount of Class R shares purchased through such financial intermediary.     

In addition, financial intermediaries will generally become eligible to receive 
some or all of the Distribution Plan service fee payments of up to 0.25%        
annually of the average daily net assets of the class with respect to such      
shares commencing in the 13th month following purchase.                         

529 ADMINISTRATIVE SERVICES FEES, RETIREMENT PLAN ADMINISTRATIVE AND SERVICES   
FEES, AND SHAREHOLDER SERVICING PAYMENTS                                        

Financial intermediaries may receive all or a portion of the following          
payments: 529 administrative services fees as described in "Management of the   
Fund - Program Manager"; retirement plan administrative and service fees as     
described in "Management of the Fund - Administrator"; and shareholder          
servicing payments as described in "Management of the Fund - Shareholder        
Servicing Agent."                                                               

OTHER MFD PAYMENTS                                                              

Financial intermediaries may receive payments from MFD from MFD's own           
additional resources that fall within one or more of the following categories,  
each of which is described in greater detail below, as incentives to market the 
MFS funds, to cooperate with MFD's promotional efforts, and/or in recognition   
of their marketing, administrative services, and/or processing support:         

o Retail Marketing Support Payments;                                        

o Program Support Payments;                                                 

o Processing Support Payments; and                                          

o Other Payments.                                                           

In determining what types of payments MFD may make to financial intermediaries, 
MFD distinguishes between Retail Assets and Program Assets. "Retail Assets" are 
shares (or the value of shares as determined from time to time) of a fund sold  
or held through a financial intermediary's retail distribution channel.         
"Program Assets" are shares (or the value of shares as determined from time to  
time) of a fund sold or held through programs, such as retirement programs,     
qualified tuition programs, fund supermarkets, fee-based advisory or wrap fee   
programs, bank trust programs, and insurance (e.g., individual or group         
annuity) programs. A single financial intermediary may receive payments from    
MFD with respect to both Retail Assets ("retail marketing support payments")    
and Program Assets ("program support payments").                                

Retail Marketing Support Payments                                               

MFD may make retail marketing support and/or administrative services payments   
to financial intermediaries that sell fund shares or provide services to MFD,   
the fund or shareholders of the fund through the financial intermediary's       
retail distribution channel. In addition to the opportunity to participate in a 
financial intermediary's retail distribution channel, retail marketing support  
payments may include one or more of the following: business planning            
assistance; educating financial intermediary personnel about the fund;          
assistance with fund shareholder financial planning; placement on the financial 
intermediary's preferred or recommended fund list; access to sales              
representatives and management representatives of the financial intermediary;   
and administrative and account maintenance services.                            

MFD compensates financial intermediaries differently depending upon, among      
other factors, the level, and/or type of marketing and administrative support   
provided by the financial intermediary and the level of assets attributable to  
and/or sales by the financial intermediary. MFD generally does not make retail  
marketing support payments to a financial intermediary in an amount that        
exceeds, at the end of each calendar year, the sum of 0.10% of that financial   
intermediary's total sales of the fund (with respect to each of the Retail      
Assets and the Program Assets), and 0.05% of the average net assets of the fund 
attributable to that financial intermediary (with respect to the aggregate of   
both the Retail Assets and the Program Assets). Since this restriction on       
retail marketing support payments is based upon both Retail Assets and Program  
Assets, the retail marketing support payments may be greater than if such       
payments were calculated only on the basis of Retail Assets attributable to the 
financial intermediary. This restriction is subject to certain limited          
exceptions and may be increased or otherwise modified by MFD from time to time. 
Retail marketing support payments made under an existing agreement with         
Linsco/Private Ledger Corp. ("LPL") are not subject to the above restrictions,  
but payments to LPL on Retail Assets will not exceed, at the end of each        
calendar year, 0.15% of the average net assets of the fund (Retail Assets and   
Program Assets) attributable to LPL.                                            

Program Support Payments                                                        

MFD may make marketing support and/or administrative services payments to       
financial intermediaries that sell fund shares or provide services to MFD, the  
fund, or shareholders of the fund, through programs such as retirement          
programs, qualified tuition programs, fund supermarkets, fee-based advisory or  
wrap fee programs, bank trust programs, and insurance (e.g., individual or      
group annuity) programs. In addition to the opportunity to participate in a     
financial intermediary's program, program support payments may include one or   
more of the following, which will vary depending upon the nature of the         
program: participant or shareholder record-keeping; reporting or transaction    
processing; program administration; fund/investment selection and monitoring;   
enrollment; and education. A financial intermediary may perform the services    
itself or may arrange with a third party to perform the services.               

MFD compensates financial intermediaries differently depending upon, among      
other factors, the level and/or type of marketing and administrative support    
provided by the financial intermediary and the level of assets attributable to  
and/or sales by the financial intermediary. Program support payments to a       
financial intermediary generally will not exceed, at the end of each calendar   
year, 0.25% of the average net assets in the program attributable to that       
financial intermediary. This limitation is subject to certain limited           
exceptions and may be increased or otherwise modified by MFD from time to time. 

Processing Support Payments                                                     

MFD may make payments to certain financial intermediaries that sell fund shares 
(Retail Assets and/or Program Assets) to help offset the financial              
intermediaries' costs associated with client account maintenance support,       
statement preparation, and transaction processing. The types of payments that   
MFD may make under this category include, among others, payment of ticket       
charges of up to $20 per purchase or exchange order placed by a financial       
intermediary, payment of networking fees of up to $6 per shareholder account    
maintained on certain mutual fund trading systems, or one-time payments for     
ancillary services such as setting up funds on a financial intermediary's       
mutual fund trading system.                                                     

Other Payments                                                                  

From time to time, MFD, from MFD's own additional resources, may make           
additional payments to financial intermediaries that sell or provide services   
in connection with the sale of MFS fund shares (Retail Assets and/or Program    
Assets) or the servicing of shareholder accounts. Such payments by MFD may      
include payment or reimbursement to, or on behalf of, financial intermediaries  
for costs associated with the purchase of products or services used in          
connection with sales and marketing, participation in and/or presentation at    
conferences or seminars, sales or training programs, client and investor        
entertainment and events, and other sponsored events, and travel expenses,      
including lodging incurred by registered representatives and other employees in 
connection with training and educational meetings, client prospecting,          
retention, and due diligence trips. Other compensation may be offered,          
including goodwill payments relating to servicing, to the extent not prohibited 
by federal or state laws or any self-regulatory agency, such as the NASD. MFD   
makes payments for entertainment events it deems appropriate, subject to MFD's  
policies and applicable law. These payments may vary depending upon the nature  
of the event.                                                                   

NASD Member Broker/Dealers Receiving Marketing Support, Program Support and/or  
Processing Support Payments                                                     

Set forth below is a list of the member firms of the NASD to which MFD expects  
as of July 1, 2006 to make Retail Marketing Support, Program Support and/or     
Processing Support Payments with respect to the funds. Payments may also be     
made to affiliates of these firms. Any additions, modifications, or deletions   
to the broker/dealers identified in this list that have occurred since July 1,  
2006, are not reflected. In addition to member firms of the NASD, MFD also      
makes Retail Marketing Support, Program Support and/or Processing Support       
Payments to other financial intermediaries that sell or provide services to the 
funds and shareholders, such as banks, insurance companies, and plan            
administrators. These firms are not included in this list and may include       
affiliates of MFD. You should ask your financial intermediary if it receives    
Retail Marketing Support, Program Support or Processing Support Payments from   
MFD.                                                                            

401(K) Investment Services, Inc.                                                

A.G. Edwards & Sons, Inc.                                                       

ADP Broker-Dealer, Inc.                                                         

AIG Financial Advisors, Inc.                                                    

Ameriprise Financial Services, Inc.                                             

American General Securities Incorporated                                        

Bear, Stearns Securities Corp.                                                  

Becker & Suffern, LTD.                                                          

Charles Schwab & Co., Inc.                                                      

Chase Investment Services Corp.                                                 
Citigroup Global Markets Inc.                                                   

Commonwealth Financial Network                                                  

CUNA Brokerage Services, Inc.                                                   

Fidelity Brokerage Services LLC                                                 

Financial Network Investment Corp.                                              

H.D. Vest Investment Services                                                   

Hewitt Financial Services LLC                                                   

ICMA - RC Services, LLC                                                         

IFMG Securities, Inc.                                                           

ING Financial Partners, Inc.                                                    

Legg Mason Investor Services, LLC                                               

Linsco/Private Ledger Corp.                                                     

Merrill Lynch, Pierce, Fenner & Smith Incorporated                              

Metlife Securities Inc.                                                         

Mid-Atlantic Securities, Inc.                                                   

Morgan Stanley DW Inc.                                                          

MSCS Financial Services, LLC                                                    

Multi Financial Services, Inc.                                                  

Paychex Securities Corporation                                                  

Piper Jaffray & Co.                                                             

Primevest Financial Services, Inc.                                              

Princor Financial Services Corporation                                          

Prudential Investment Management Services LLC                                   

Raymond James & Associates, Inc.                                                

Raymond James Financial Services, Inc.                                          

RBC Dain Rauscher Inc.                                                          

State Street Global Markets, LLC                                                

SunTrust Investment Services, Inc.                                              

UBS Financial Services Inc.                                                     

U.S. Bancorp Investments, Inc.                                                  

UVest Financial Services Group, Inc.                                            

Wachovia Securities, LLC                                                        

Wells Fargo Investments LLC                                                     

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                                                                    APPENDIX E

INVESTMENT STRATEGIES AND RISKS 

In addition to the principal investment strategies and the principal risks      
described in the prospectus, your fund may employ other investment practices    
and may be subject to other risks, which are described below. Because the       
following is a combined description of the investment strategies and risks for  
all MFS Funds, certain matters described herein may not apply to your fund.     

ASSET-BACKED SECURITIES. Asset-backed securities are securities that represent  
a participation in, or are secured by and payable from, pools of underlying     
assets such as debt securities, bank loans, motor vehicle installment sales     
contracts, installment loan contracts, leases of various types of real and      
personal property, receivables from revolving credit (i.e., credit card)        
agreements and other receivables. These underlying assets are securitized       
through the use of trusts and special purpose entities. Payment of interest and 
repayment of principal on asset-backed securities may be largely dependent upon 
the cash flows generated by the underlying assets backing the securities and,   
in certain cases, may be supported by letters of credit, surety bonds, or other 
credit enhancements.                                                            

Asset-backed securities are often subject to more rapid repayment than their    
stated maturity date would indicate, as a result of the pass-through of         
prepayments of principal on the underlying assets. The rate of principal        
payments on asset-backed securities is related to the rate of principal         
payments on the underlying asset pool and related to the priority of payment of 
the security with respect to the asset pool. The occurrence of prepayments is a 
function of several factors, such as the level of interest rates, general       
economic conditions, the location, and age of the underlying obligations, asset 
default and recovery rates, and other social and demographic conditions.        
Because prepayments of principal generally occur when interest rates are        
declining, an investor generally has to reinvest the proceeds of such           
prepayments at lower interest rates than those at which its assets were         
previously invested. Therefore, asset-backed securities may have less potential 
for capital appreciation in periods of falling interest rates than other        
income-bearing securities of comparable maturity.                               

The credit quality of asset-backed securities depends primarily on the quality  
of the underlying assets, the level of credit enhancement, if any, provided for 
the securities, and the credit quality of the credit-support provider, if any.  
The value of asset-backed securities may be affected by the various factors     
described above and other factors, such as changes in interest rates, the       
availability of information concerning the pool and its structure, the          
creditworthiness of the servicing agent for the pool, the originator of the     
underlying assets, or the entities providing the credit enhancement. Because    
asset-backed securities may not have the benefit of a security interest in the  
underlying assets that is comparable to a mortgage, asset-backed securities     
present certain additional risks that are not present with mortgage-backed      
securities.                                                                     

BORROWING. If the fund borrows money, its share price may be subject to greater 
fluctuation until the borrowing is paid off. If the fund makes additional       
investments while borrowings are outstanding, this may be considered a form of  
leverage and may cause a fund to liquidate investments when it would not        
otherwise do so. Money borrowed will be subject to interest charges and may be  
subject to other fees or requirements which would increase the cost of          
borrowing above the stated interest rate.                                       

COMMON STOCK. Common stock represents an equity or ownership interest in an     
issuer. In the event an issuer is liquidated or declares bankruptcy, the claims 
of owners of bonds and preferred stock take precedence over the claims of those 
who own common stock.                                                           

CONVERTIBLE SECURITIES. Convertible securities are bonds, debentures, notes, or 
other securities that may be converted into or exchanged for (by the holder or  
by the issuer) shares of stock (or cash or other securities of equivalent       
value) of the same or a different issuer at a stated exchange ratio. A          
convertible security may also be called for redemption or conversion by the     
issuer after a particular date and under certain circumstances (including a     
specified price) established upon issue.                                        

Convertible securities generally have less potential for gain or loss than      
common stocks. Convertible securities generally provide yields higher than the  
underlying common stocks, but generally lower than comparable non-convertible   
securities. Because of this higher yield, convertible securities generally sell 
at prices above their "conversion value," which is the current market value of  
the stock to be received upon conversion. The difference between this           
conversion value and the price of convertible securities will vary over time    
depending on changes in the value of the underlying common stocks and interest  
rates. When the underlying common stocks decline in value, convertible          
securities will tend not to decline to the same extent because of the interest  
or dividend payments and the repayment of principal at maturity for certain     
types of convertible securities. However, securities that are convertible other 
than at the option of the holder generally do not limit the potential for loss  
to the same extent as securities convertible at the option of the holder. When  
the underlying common stocks rise in value, the value of convertible securities 
may also be expected to increase. At the same time, however, the difference     
between the market value of convertible securities and their conversion value   
will narrow, which means that the value of convertible securities will          
generally not increase to the same extent as the value of the underlying common 
stocks. Because convertible securities may also be interest-rate sensitive,     
their value may increase as interest rates fall and decrease as interest rates  
rise. Convertible securities are also subject to credit risk, and are often     
lower-quality securities.                                                       

COUNTRY LOCATION. The issuer of a security or other investment is generally     
deemed to be economically tied to a particular country if: (a) the security or  
other investment 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; (e) the issuer has 50% or more of its       
assets in that country; (f) the issuer is included in an index which is         
representative of that country; or (g) the issuer is exposed to the economic    
fortunes and risks of that country.                                             

DEPOSITARY RECEIPTS. Depositary receipts are securities that evidence ownership 
interests in a security or a pool of securities that have been deposited with a 
"depository." Depositary receipts may be sponsored or unsponsored and include   
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and    
Global Depositary Receipts (GDRs). In sponsored programs, an issuer has made    
arrangements to have its securities trade in the form of ADRs, EDRs, or GDRs.   
In unsponsored programs, the issuer may not be directly involved in the         
creation of the program. For ADRs, the depository is typically a U.S. financial 
institution and the underlying securities are issued by a foreign issuer. For   
other depositary receipts, the depository may be a foreign or a U.S. entity,    
and the underlying securities may have a foreign or a U.S. issuer. Depositary   
receipts will not necessarily be denominated in the same currency as their      
underlying securities. Generally, ADRs are issued in registered form,           
denominated in U.S. dollars, and designed for use in the U.S. securities        
markets. Other depositary receipts, such as GDRs and EDRs, may be issued in     
bearer form and denominated in other currencies, and may be offered privately   
in the United States and are generally designed for use in securities markets   
outside the U.S. The deposit agreement sets out the rights and responsibilities 
of the underlying issuer, the depository, and the depositary receipt holders.   

With sponsored facilities, the underlying issuer typically bears some of the    
costs of the depositary receipts (such as dividend payment fees of the          
depository), although most sponsored depositary receipts holders may bear costs 
such as deposit and withdrawal fees. Depositories of most sponsored depositary  
receipts agree to distribute notices of shareholder meetings, voting            
instructions, and other shareholder communications and financial information to 
the depositary receipt holders at the underlying issuer's request.              

Holders of unsponsored depositary receipts generally bear all the costs of the  
facility. The depository usually charges fees upon the deposit and withdrawal   
of the underlying securities, the conversion of dividends into U.S. dollars or  
other currency, the disposition of non-cash distributions, and the performance  
of other services. The depository of an unsponsored facility frequently is      
under no obligation to distribute shareholder communications received from the  
underlying issuer or to pass through voting rights to depositary receipt        
holders with respect to the underlying securities.                              

EMERGING MARKETS. Investing in emerging market countries involves certain risks 
not typically associated with investing in the United States, and imposes risks 
greater than, or in addition to, risks of investing in more developed foreign   
markets. These risks include, but are not limited to, the following: greater    
risks of nationalization or expropriation of assets or confiscatory taxation;   
currency devaluations and other currency exchange rate fluctuations; greater    
social, economic, and political uncertainty and instability (including          
amplified risk of war and terrorism); more substantial government involvement   
in the economy; less government supervision and regulation of the securities    
markets and participants in those markets; controls on foreign investment and   
limitations on repatriation of invested capital and on the fund's ability to    
exchange local currencies for U.S. dollars; unavailability of currency hedging  
techniques in certain emerging market countries; the fact that companies in     
emerging market countries may be smaller, less seasoned, and newly organized;   
the difference in, or lack of, auditing and financial reporting standards,      
which may result in unavailability of material information about issuers; the   
risk that it may be more difficult to obtain and/or enforce a judgment in a     
court outside the United States; the risk that a judgment against a foreign     
government may be unenforceable; and greater price volatility, less liquidity,  
and significantly smaller market capitalization of securities markets. Also,    
any change in the leadership or politics of emerging market countries, or the   
countries that exercise a significant influence over those countries, may halt  
the expansion of or reverse the liberalization of foreign investment policies   
now occurring and adversely affect existing investment opportunities.           
Furthermore, high rates of inflation and rapid fluctuations in inflation rates  
have had, and may continue to have, negative effects on the economies and       
securities markets of certain emerging market countries.                        

FOREIGN CURRENCIES. Foreign securities may be denominated in foreign currencies 
and international currency units and foreign currencies may be purchased        
directly. Accordingly, the weakening of these currencies and units against the  
U.S. dollar would result in a decline in the value of securities denominated in 
that currency or the value of the currency itself.                              

While holding currencies permits an investor to take advantage of favorable     
movements in the applicable exchange rate, this strategy also exposes the       
investor to risk of loss if exchange rates move in a direction adverse to the   
investor's position. Such losses could reduce any profits or increase any       
losses sustained by the investor from the sale or redemption of securities and  
could reduce the dollar value of interest or dividend payments received.        

Some foreign countries have managed currencies, which are not free floating     
against the U.S. dollar. Managed currencies can experience a steep devaluation  
relative to the U.S. dollar.                                                    

In addition, there is risk that certain foreign countries may restrict the free 
conversion of their currencies into other currencies. Further, certain          
currencies may not be internationally traded.                                   

Foreign currency transactions can be made on a spot (i.e., cash) or forward     
basis (i.e., by entering into forward contracts to purchase or sell foreign     
currencies). Although foreign exchange dealers generally do not charge a fee    
for such conversions, they do realize a profit based on the difference between  
the prices at which they are buying and selling various currencies. Thus, a     
dealer may offer to sell a foreign currency at one rate, while offering a       
lesser rate of exchange should the counterparty desire to resell that currency  
to the dealer. Forward contracts are customized transactions that require a     
specific amount of a currency to be delivered at a specific exchange rate on a  
specific date or range of dates in the future. Forward contracts are generally  
traded in an interbank market directly between currency traders (usually large  
commercial banks) and their customers. The parties to a forward contract may    
agree to offset or terminate the contract before its maturity, or may hold the  
contract to maturity and complete the contemplated currency exchange.           

A "settlement hedge" or "transaction hedge" attempts to protect against an      
adverse change in foreign currency values between the date a security is        
purchased or sold and the date on which payment is made or received. Entering   
into a forward contract for the purchase or sale of the amount of foreign       
currency involved in an underlying security transaction for a fixed amount of   
U.S. dollars "locks in" the U.S. dollar price of the security. Forward          
contracts to purchase or sell a foreign currency may also be used in            
anticipation of future purchases or sales of securities denominated in foreign  
currency, even if the specific investments have not yet been selected.          

Forward contracts can be used to hedge against a decline in the value of        
existing investments denominated in foreign currency. For example, if an        
investor owned securities denominated in pounds sterling, the investor could    
enter into a forward contract to sell pounds sterling in return for U.S.        
dollars to hedge against possible declines in the pound's value. Such a hedge,  
sometimes referred to as a "position hedge," would tend to offset both positive 
and negative currency fluctuations, but would not offset changes in security    
values caused by other factors. An investor could also hedge the position by    
selling another currency expected to perform similarly to the pound sterling.   
This type of hedge, sometimes referred to as a "proxy hedge," could offer       
advantages in terms of cost, yield, or efficiency, but generally would not      
hedge currency exposure as effectively as a direct hedge into U.S. dollars.     
Proxy hedges may result in losses if the currency used to hedge does not        
perform similarly to the currency in which the hedged securities are            
denominated.                                                                    

Forward contracts can also be used to shift investment exposure from one        
currency into another. This may include shifting exposure from U.S. dollars to  
a foreign currency or from one foreign currency to another foreign currency.    
This type of strategy, sometimes known as a "cross-hedge," will tend to reduce  
or eliminate exposure to the currency that is sold, and increase exposure to    
the currency that is purchased, much as if a fund had sold a security           
denominated in one currency and purchased an equivalent security denominated in 
another. Cross-hedges protect against losses resulting from a decline in the    
hedged currency, but will cause a fund to assume the risk of fluctuations in    
the value of the currency it purchases.                                         

Swap agreements, indexed securities, hybrid securities and options and futures  
contracts relating to foreign currencies can be used for the same purposes.     

Successful use of currency management strategies will depend on MFS' skill in   
analyzing currency values. Currency management strategies may increase the      
volatility of a fund's returns and could result in significant losses to a fund 
if currencies do not perform as MFS anticipates. For example, if a currency's   
value rose at a time when MFS had hedged a fund by selling that currency in     
exchange for dollars, a fund would not participate in the currency's            
appreciation. If MFS hedges currency exposure through proxy hedges, a fund      
could realize currency losses from both the hedge and the security position if  
the two currencies do not move in tandem. Similarly, if MFS increases a fund's  
exposure to a foreign currency and that currency's value declines, a fund will  
realize a loss. There is no assurance that MFS' use of currency management      
strategies will be advantageous to a fund or that it will hedge at appropriate  
times.                                                                          

FOREIGN MARKETS. Foreign securities and foreign currencies, as well as any      
securities issued by U.S. entities with substantial foreign operations, may     
involve significant risks in addition to the risks inherent in U.S.             
investments. Foreign investments involve risks relating to local political,     
economic, regulatory, or social instability, military action or unrest, or      
adverse diplomatic developments, and may be affected by actions of foreign      
governments adverse to the interests of U.S. investors. Such actions may        
include expropriation or nationalization of assets, confiscatory taxation,      
restrictions on U.S. investment or on the ability to repatriate assets or       
convert currency into U.S. dollars, or other government intervention. The debt  
instruments of foreign governments and their agencies and instrumentalities may 
or may not be supported by the full faith and credit of the foreign government. 
Additionally, governmental issuers of foreign debt securities may be unwilling  
to pay interest and repay principal when due and may require that the           
conditions for payment be renegotiated. In addition, the value of securities    
denominated in foreign currencies and of dividends and interest paid with       
respect to such securities will fluctuate based on the relative strength of the 
U.S. dollar.                                                                    

Foreign stock markets, while growing in volume and sophistication, are          
generally not as developed as those in the United States, and securities of     
some foreign issuers may be less liquid and more volatile than securities of    
comparable U.S. issuers. Foreign security trading, settlement and custodial     
practices (including those involving securities settlement where fund assets    
may be released prior to receipt of payment) are often less developed than      
those in U.S. markets, and may result in increased risk or substantial delays   
in the event of a failed trade or the insolvency of, or breach of duty by, a    
foreign broker-dealer, securities depository, or foreign subcustodian. In       
addition, the costs associated with foreign investments, including withholding  
taxes, brokerage commissions, and custodial costs, are generally higher than    
with U.S. investments.                                                          

Foreign markets may offer less protection to investors than U.S. markets.       
Foreign issuers are generally not bound by uniform accounting, auditing, and    
financial reporting requirements and standards of practice comparable to those  
applicable to U.S. issuers. Adequate public information on foreign issuers may  
not be available, and it may be difficult to secure dividends and information   
regarding corporate actions on a timely basis. In general, there is less        
overall governmental supervision and regulation of securities exchanges,        
brokers, and listed companies than in the United States. OTC markets tend to be 
less regulated than stock exchange markets and, in certain countries, may be    
totally unregulated. Regulatory enforcement may be influenced by economic or    
political concerns, and investors may have difficulty enforcing their legal     
rights in foreign countries.                                                    

Some foreign securities impose restrictions on transfer within the United       
States or to U.S. persons. Although securities subject to such transfer         
restrictions may be marketable abroad, they may be less liquid than foreign     
securities of the same class that are not subject to such restrictions.         

FUTURES CONTRACTS. A futures contract is a standardized agreement between two   
parties to buy or sell in the future a specific quantity of an asset, currency, 
interest rate, index, instrument or other indicator at a specific price and     
time. The value of a futures contract typically fluctuates in correlation with  
the increase or decrease in the value of the underlying indicator. The buyer of 
a futures contract enters into an agreement to purchase the underlying          
indicator on the settlement date and is said to be "long" the contract. The     
seller of a futures contract enters into an agreement to sell the underlying    
indicator on the settlement date and is said to be "short" the contract. The    
price at which a futures contract is entered into is established either in the  
electronic marketplace or by open outcry on the floor of an exchange between    
exchange members acting as traders or brokers. Open futures contracts can be    
liquidated or closed out by physical delivery of the underlying indicator or    
payment of the cash settlement amount on the settlement date, depending on the  
terms of the particular contract. Some financial futures contracts (such as     
security futures) provide for physical settlement at maturity. Other financial  
futures contracts (such as those relating to interest rates, foreign currencies 
and securities indexes) generally provide for cash settlement at maturity. In   
the case of cash settled futures contracts, the cash settlement amount is equal 
to the difference between the final settlement price on the last trading day of 
the contract and the price at which the contract was entered into. Most futures 
contracts, however, are not held until maturity but instead are "offset" before 
the settlement date through the establishment of an opposite and equal futures  
position.                                                                       

The purchaser or seller of a futures contract is not required to deliver or pay 
for the underlying indicator unless the contract is held until the settlement   
date. However, both the purchaser and seller are required to deposit "initial   
margin" with a futures commission merchant (FCM) when the futures contract is   
entered into. Initial margin deposits are typically calculated as a percentage  
of the contract's market value. If the value of either party's position         
declines, that party will be required to make additional "variation margin"     
payments to settle the change in value on a daily basis. This process is known  
as "marking-to-market."                                                         

The risk of loss in trading futures contracts can be substantial, because of    
the low margin deposits required, the extremely high degree of leverage         
involved in futures pricing, and the potential high volatility of the futures   
markets. As a result, a relatively small price movement in a futures position   
may result in immediate and substantial loss (or gain) to the investor. Thus, a 
purchase or sale of a futures contract may result in unlimited losses. In the   
event of adverse price movements, an investor would continue to be required to  
make daily cash payments to maintain its required margin. In addition, on the   
settlement date, an investor may be required to make delivery of the indicators 
underlying the futures positions it holds.                                      

An investor could suffer losses if it is unable to close out a futures contract 
because of an illiquid secondary market. Futures contracts may be closed out    
only on an exchange which provides a secondary market for such products.        
However, there can be no assurance that a liquid secondary market will exist    
for any particular futures product at any specific time. Thus, it may not be    
possible to close a futures position, and an investor would remain obligated to 
meet margin requirements until the position is closed. Moreover, most futures   
exchanges limit the amount of fluctuation permitted in futures contract prices  
during a single trading day. The daily limit establishes the maximum amount     
that the price of a futures contract may vary either up or down from the        
previous day's settlement price at the end of a trading session. Once the daily 
limit has been reached in a particular type of contract, no trades may be made  
on that day at a price beyond that limit. The daily limit governs only price    
movement during a particular trading day and therefore does not limit potential 
losses, because the limit may prevent the liquidation of unfavorable positions. 
Futures contract prices have occasionally moved to the daily limit for several  
consecutive trading days with little or no trading, thereby preventing prompt   
liquidation of future positions and subjecting some futures traders to          
substantial losses. The inability to close futures positions also could have an 
adverse impact on the ability to hedge a portfolio investment or to establish a 
substitute for a portfolio investment.                                          

An investor could lose margin payments it has deposited with its futures        
commission merchant (FCM), if, for example, the FCM breaches its agreement with 
the investor or becomes insolvent or goes into bankruptcy. In that event, the   
investor may be entitled to return of margin owed to it only in proportion to   
the amount received by the FCM's other customers, potentially resulting in      
losses to the investor.                                                         

If MFS attempts to use a futures contract as a hedge against, or as a           
substitute for, a portfolio investment, the futures position may not correlate  
as expected with the portfolio investment, resulting in losses to the fund.     
While hedging strategies involving futures products can reduce the risk of      
loss, they can also reduce the opportunity for gain or even result in losses by 
offsetting favorable price movements in other fund investments.                 

Pursuant to a claim of exemption filed with the Commodity Futures Trading       
Commission (CFTC) on behalf of the MFS Funds that are permitted by their        
investment objectives and policies to use futures and options on futures        
contracts, each such MFS Fund is not deemed to be a "commodity pool" or         
"commodity pool operator" under the Commodity Exchange Act and is not subject   
to registration or regulation as such under the Commodity Exchange Act.         

HYBRID INSTRUMENTS. Hybrid instruments are generally considered derivatives and 
combine the elements of swaps, futures contracts, or options with those of      
debt, preferred equity or a depository instrument. A hybrid instrument may be a 
debt instrument, preferred stock, warrant, convertible security, certificate of 
deposit or other evidence of indebtedness on which a portion of or all interest 
payments, and/or the principal or stated amount payable at maturity, redemption 
or retirement, is determined by reference to prices, changes in prices, or      
differences between prices, of securities, currencies, intangibles, goods,      
commodities, indexes, economic factors or other measures, including interest    
rates, currency exchange rates, or commodities or securities indices, or other  
indicators (collectively, "indicators").                                        

The risks of investing in hybrid instruments reflect a combination of the risks 
of investing in securities, swaps, options, futures and currencies. An          
investment in a hybrid instrument may entail significant risks that are not     
associated with a similar investment in a traditional debt instrument that has  
a fixed principal amount, is denominated in U.S. dollars or bears interest      
either at a fixed rate or a floating rate determined by reference to a common,  
nationally published benchmark. The risks of a particular hybrid instrument     
will depend upon the terms of the instrument, but may include the possibility   
of significant changes in the benchmark(s) or the prices of the underlying      
indicators to which the instrument is linked. Such risks generally depend upon  
factors unrelated to the operations or credit quality of the issuer of the      
hybrid instrument, which may not be foreseen by the purchaser, such as economic 
and political events, the supply and demand of the underlying indicators and    
interest rate movements. Hybrid instruments may be highly volatile.             

Hybrid instruments are potentially more volatile and carry greater market risks 
than traditional debt instruments. Depending on the structure of the particular 
hybrid instrument, changes in a benchmark, underlying asset or indicator may be 
magnified by the terms of the hybrid instrument and have an even more dramatic  
and substantial effect upon the value of the hybrid instrument. Also, the       
prices of the hybrid instrument and the benchmark, underlying asset or          
indicator may not move in the same direction or at the same time.               

Hybrid instruments may bear interest or pay preferred dividends at below market 
(or even relatively nominal) rates. Alternatively, hybrid instruments may bear  
interest at above market rates but bear an increased risk of principal loss (or 
gain). The latter scenario may result if "leverage" is used to structure the    
hybrid instrument. Leverage risk occurs when the hybrid instrument is           
structured so that a given change in a benchmark or underlying indicator is     
multiplied to produce a greater value change in the hybrid instrument, thereby  
magnifying the risk of loss as well as the potential for gain.                  

If MFS attempts to use a hybrid instrument as a hedge against, or as a          
substitute for, a portfolio investment, the hybrid instrument may not correlate 
as expected with the portfolio investment, resulting in losses to the fund.     
While hedging strategies involving hybrid instruments can reduce the risk of    
loss, they can also reduce the opportunity for gain or even result in losses by 
offsetting favorable price movements in other fund investments.                 

Hybrid instruments may also carry liquidity risk since the instruments are      
often "customized" to meet the portfolio needs of a particular investor, and    
therefore, the number of investors that are willing and able to buy such        
instruments in the secondary market may be smaller than that for more           
traditional debt instruments. Under certain conditions, the redemption value of 
such an investment could be zero. In addition, because the purchase and sale of 
hybrid investments could take place in an over-the-counter market without the   
guarantee of a central clearing organization, or in a transaction between the   
fund and the issuer of the hybrid instrument, hybrid instruments are subject to 
the creditworthiness of the issuer of the hybrid instrument, and their values   
may decline substantially if the issuer's creditworthiness deteriorates. Hybrid 
instruments also may not be subject to regulation by the CFTC, which generally  
regulates the trading of commodity futures by U.S. persons, the SEC, which      
regulates the offer and sale of securities by and to U.S. persons, or any other 
governmental regulatory authority.                                              

INFLATION-INDEXED BONDS. Inflation-indexed bonds are debt instruments whose     
principal value is adjusted periodically according to a rate of inflation       
(usually a consumer price index). Two structures are most common. The U.S.      
Treasury and some other issuers use a structure that accrues inflation into the 
principal value of the bond. Most other issuers pay out the inflation accruals  
as part of a semiannual coupon.                                                 

U.S. Treasury Inflation Protected Securities (TIPS) currently are issued with   
maturities of five, ten, or thirty years, although it is possible that          
securities with other maturities will be issued in the future. The principal    
amount of TIPS adjusts for inflation, although the inflation-adjusted principal 
is not paid until maturity. Semi-annual coupon payments are determined as a     
fixed percentage of the inflation-adjusted principal at the time the payment is 
made.                                                                           

If the rate measuring inflation falls, the principal value of inflation-indexed 
bonds will be adjusted downward, and consequently the interest payable on these 
securities (calculated with respect to a smaller principal amount) will be      
reduced. At maturity, TIPS are redeemed at the greater of their                 
inflation-adjusted principal or at the par amount at original issue. If an      
inflation-indexed bond does not provide a guarantee of principal at maturity,   
the adjusted principal value of the bond repaid at maturity may be less than    
the original principal.                                                         

The value of inflation-indexed bonds is expected to change in response to       
changes in real interest rates. Real interest rates in turn are tied to the     
relationship between nominal interest rates and the rate of inflation. For      
example, if inflation were to rise at a faster rate than nominal interest       
rates, real interest rates would likely decline, leading to an increase in      
value of inflation-indexed bonds. In contrast, if nominal interest rates        
increase at a faster rate than inflation, real interest rates would likely      
rise, leading to a decrease in value of inflation-indexed bonds.                

While these securities, if held to maturity, are expected to be protected from  
long-term inflationary trends, short-term increases in inflation may lead to a  
decline in value. If nominal interest rates rise due to reasons other than      
inflation (for example, due to an expansion of non-inflationary economic        
activity), investors in these securities may not be protected to the extent     
that the increase in rates is not reflected in the bond's inflation measure.    

The inflation adjustment of TIPS is tied to the Consumer Price Index for Urban  
Consumers ("CPI-U"), which is calculated monthly by the U.S. Bureau of Labor    
Statistics. The CPI-U is a measurement of price changes in the cost of living,  
made up of components such as housing, food, transportation, and energy. There  
can be no assurance that the CPI-U will accurately measure the real rate of     
inflation in the prices of goods and services.                                  

INVERSE FLOATING RATE OBLIGATIONS. Inverse floating rate obligations have       
variable interest rates that typically move in the opposite direction from      
movements in prevailing interest rates, most often short-term rates.            
Accordingly, the value of inverse floating rate obligations or other            
obligations or certificates structured to have similar features generally moves 
in the opposite direction as interest rates. The value of an inverse floating   
rate instrument can be considerably more volatile than the value of other debt  
instruments of comparable maturity and quality. Inverse floating rate           
obligations incorporate varying degrees of leverage. Generally, greater         
leverage results in greater price volatility for any given change in interest   
rates. Inverse floating rate obligations may be subject to legal or contractual 
restrictions on resale and therefore may be less liquid than other types of     
securities.                                                                     

LENDING OF PORTFOLIO SECURITIES. Lending of portfolio securities will usually   
be made only to member firms of the New York Stock Exchange (the "Exchange")    
(and subsidiaries thereof) and member banks of the Federal Reserve System, and  
would be required to be secured by collateral in cash, an irrevocable letter of 
credit, or U.S. Treasury securities maintained on a current basis at an amount  
at least equal to the market value of the securities loaned. When one party     
lends portfolio securities to another party, the lender has the right to call   
the loan and obtain the securities loaned at any time on customary industry     
settlement notice (which will not usually exceed five business days). For the   
duration of a loan, the borrower pays the lender an amount equal to any         
interest or dividends received on the securities loaned. The lender also        
receives a fee from the borrower or compensation from the investment of the     
collateral, less a fee paid to the borrower (if the collateral is in the form   
of cash). The lender does not, however, have the right to vote any securities   
having voting rights during the existence of the loan, but it can call the loan 
in anticipation of an important vote to be taken among holders of the           
securities or of the giving or withholding of their consent on a material       
matter affecting the investment. A fund's performance will continue to reflect  
changes in the value of the securities loaned and will also reflect the receipt 
of interest, through investment of cash collateral by the fund or a fee. If the 
borrower defaults on its obligation to return the securities loaned because of  
insolvency or other reasons, the lender could experience delays and costs in    
recovering the securities loaned or in gaining access to the collateral. These  
delays and costs could be greater for foreign securities. If the lender is not  
able to recover the securities loaned, the lender may sell the collateral and   
purchase a replacement investment in the market. The value of the collateral    
could decrease below the value of the replacement investment by the time the    
replacement investment is purchased.                                            

LOANS AND OTHER DIRECT INDEBTEDNESS. Loans and other direct indebtedness are    
interests in amounts owed by corporations, governmental or other borrowers to   
lenders or lending syndicates (loans and loan participations), to suppliers of  
goods and services (trade claims and other receivables), or to other parties.   
Some loans may be unsecured in part or in full. Loans may be in default at the  
time of purchase. Loans that are fully secured should protect the purchaser to  
a greater extent than unsecured loans in the event of nonpayment of scheduled   
interest or principal. However, there can be no assurance that the liquidation  
of collateral acquired in connection with the default of a secured loan would   
satisfy the borrower's obligation, or that such collateral could be liquidated. 

Loans generally are made to finance internal growth, mergers, acquisitions,     
stock repurchases, leveraged buy-outs or other corporate activities. Such loans 
typically are originated, negotiated and structured by a syndicate of lenders   
represented by an agent lender that has negotiated and structured the loan and  
that is responsible for collecting interest and principal payments and other    
amounts due on behalf of all of the lenders in the syndicate, and for enforcing 
the lenders' rights against the borrower. Typically, the agent is given broad   
discretion in monitoring the borrower's performance and is obligated to use the 
same care it would use in the management of its own property. Upon an event of  
default, the agent typically will enforce the loan agreement after instruction  
from the lenders. The borrower compensates the agent for these services. This   
compensation may include special fees paid when the loan is structured or       
funded and other fees paid on a continuing basis. The typical practice of an    
agent or a lender to rely exclusively or primarily on reports from the borrower 
involves a risk of fraud by the borrower.                                       

If an agent becomes insolvent, or has a receiver, conservator or similar        
official appointed for it by an appropriate authority, or if it becomes a       
debtor in a bankruptcy proceeding, the agent's appointment may be terminated,   
and a successor agent typically may be appointed by the lenders. If an          
appropriate authority determines that assets held by the agent for the benefit  
of lenders or purchasers of loans are subject to the claims of the agent's      
general or secured creditors, then such lenders or purchasers might incur       
certain costs and delays in realizing payment on a loan or suffer a loss of     
principal and/or interest. Furthermore, in the event of the borrower's          
bankruptcy or insolvency, the borrower's obligation to repay a loan may be      
subject to certain defenses that the borrower can assert as a result of         
improper conduct by the agent.                                                  

Loans may be acquired by participating directly in a lending syndicate as a     
lender. Alternatively, loans or an interest in loans may be acquired by         
novation, by assignment or by participation from members of the lending         
syndicate or from other participants. In a novation or an assignment, the       
acquirer assumes all of the rights of the lender in the loan or of the          
participant in the participants' portion of the loan and, in the case of a      
novation or an assignment from a member of the lending syndicate, becomes a     
party of record with respect to the loan. In a participation, the acquirer      
purchases a portion of the lender's or the participants' interest in the loan,  
but has no direct contractual relationship with the borrower. An investment in  
a loan by participation gives rise to several risks. The acquirer must rely on  
another party not only for the enforcement of the acquirer's rights against the 
borrower, but also for the receipt and processing of principal, interest or     
other payments due under the loan and may be subject to the credit risk of the  
other party in addition to the borrower. The acquirer may be subject to delays, 
expenses, and risks that are greater than those that would be involved if the   
acquirer could enforce its rights directly against the borrower. In addition,   
under the terms of a participation agreement, the acquirer may be regarded as a 
creditor of the seller of the participation interest (rather than of the        
borrower), so that the acquirer also may be subject to the risk that such       
seller could become insolvent. A participation agreement also may limit the     
rights of the acquirer to vote on changes that may be made to the underlying    
loan agreement, such as waiving a breach of a covenant.                         

Direct indebtedness includes trade or other claims against companies, which     
generally represent monies owed by such companies to suppliers of goods or      
services. Such claims may be purchased when such companies are in default.      

The ability to receive payments of principal and interest on loans and other    
direct indebtedness will depend primarily on the financial condition of the     
borrower. Because an acquirer may be required to rely on another party to       
collect and to pass on to it amounts payable with respect to the loan or other  
direct indebtedness and to enforce the acquirer's rights under the loan or      
other direct indebtedness, an insolvency, bankruptcy or reorganization of such  
other party may delay or prevent the acquirer from receiving such amounts. The  
highly leveraged nature of many loans and other direct indebtedness may make    
such loans and other direct indebtedness especially vulnerable to adverse       
changes in economic or market conditions.                                       

Revolving credit facilities and other standby financing commitments obligate    
the purchaser to fund additional cash on a certain date or on demand. A         
revolving credit facility differs from other types of financing commitments in  
that as the borrower repays the loan, an amount equal to the repayment may be   
borrowed again during the term of the revolving credit facility. These          
commitments may have the effect of requiring a purchaser to increase its        
investment in a company at a time when the purchaser might not otherwise decide 
to do so (including at a time when the company's financial condition makes it   
unlikely that such amounts will be repaid).                                     

Floating rate loans generally are subject to legal or contractual restrictions  
on resale. Floating rate loans currently are not listed on any securities       
exchange or automatic quotation system. As a result, no active market may exist 
for some floating rate loans, and to the extent a secondary market exists for   
other floating rate loans, such market may be subject to irregular trading      
activity, wide bid/ask spreads and extended trade settlement periods.           
Additionally, the supply of floating rate loans may be limited from time to     
time due to a lack of sellers in the market for existing floating rate loans or 
to the number of new floating rate loans currently being issued. As a result,   
the floating rate loans available for purchase may be of lower quality or may   
have a higher price.                                                            

With respect to its management of investments in bank loans, MFS will normally  
seek to avoid receiving material, non-public information ("MNPI") about the     
issuers of bank loans being considered for acquisition by the fund or held in   
the fund's portfolio. In many instances, borrowers may offer to furnish MNPI to 
prospective investors, and to holders, of the issuer's loans. MFS' decision not 
to receive MNPI may place MFS at a disadvantage relative to other investors in  
loans (which could have an adverse effect on the price the fund pays or         
receives when buying or selling loans). Also, in instances where holders of     
loans are asked to grant amendments, waivers or consent, MFS' ability to assess 
their significance or desirability may be adversely affected. For these and     
other reasons, it is possible that MFS' decision not to receive MNPI under      
normal circumstances could adversely affect the fund's investment performance.  

Notwithstanding its intention generally not to receive MNPI with respect to its 
management of investments in loans, MFS may from time to time come into         
possession of MNPI about the issuers of loans that may be held in the fund's    
portfolio. Possession of such information may in some instances occur despite   
MFS' efforts to avoid such possession, but in other instances MFS may choose to 
receive such information (for example, in connection with participation in a    
creditors' committee with respect to a financially distressed issuer). As, and  
to the extent, required by applicable law, MFS' ability to trade in these loans 
for the account of the fund could potentially be limited by its possession of   
such information. Such limitations on MFS' ability to trade could have an       
adverse effect on the fund by, for example, preventing the fund from selling a  
loan that is experiencing a material decline in value. In some instances, these 
trading restrictions could continue in effect for a substantial period of time. 

LOWER QUALITY DEBT INSTRUMENTS. Lower quality debt instruments are considered   
speculative with respect to the issuer's continuing ability to meet principal   
and interest payments and, while generally expected to provide greater income   
than investments in higher quality debt instruments, will involve greater risk  
of principal and income (including the possibility of default or bankruptcy of  
the issuers of such instruments) and may involve greater volatility of price    
(especially during periods of economic uncertainty or change) than higher       
quality debt instruments. In addition, because yields vary over time, no        
specific level of income can ever be assured. These lower quality debt          
instruments generally tend to reflect economic changes (and the outlook for     
economic growth), short-term corporate and industry developments and the        
market's perception of their credit quality to a greater extent than higher     
quality debt instruments, which react primarily to fluctuations in the general  
level of interest rates (although these lower quality debt instruments are also 
affected by changes in interest rates). In the past, economic downturns or an   
increase in interest rates have, under certain circumstances, resulted in a     
higher incidence of default by the issuers of these instruments and may do so   
in the future, especially in the case of highly leveraged issuers. The prices   
for these instruments may be affected by legislative and regulatory             
developments. The market for these lower quality debt instruments may be less   
liquid than the market for investment grade debt instruments. Furthermore, the  
liquidity of these lower quality debt instruments may be affected by the        
market's perception of their credit quality.                                    

Instruments in the lowest tier of investment-grade debt instruments, 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.                           

See Appendix H for a description of bond ratings.                               

MONEY MARKET INSTRUMENTS. Money market instruments, or short-term debt          
instruments, consist of obligations such as commercial paper, bank obligations  
(e.g., certificates of deposit and bankers' acceptances), repurchase            
agreements, and various government obligations, such as Treasury bills. Money   
market instruments may be structured to be, or may employ a trust or other form 
so that they are, eligible investments for money market funds. For example, put 
features can be used to modify the maturity of a security or interest rate      
adjustment features can be used to enhance price stability. If a structure      
fails to function as intended, adverse tax or investment consequences may       
result. Neither the Internal Revenue Service (IRS) nor any other regulatory     
authority has ruled definitively on certain legal issues presented by certain   
structured securities. Future tax or other regulatory determinations could      
adversely affect the value, liquidity, or tax treatment of the income received  
from these securities. Commercial paper is a money market instrument issued by  
banks or companies to raise money for short-term purposes. Unlike some other    
debt obligations, commercial paper is typically unsecured. Commercial paper may 
be issued as an asset-backed security.                                          

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities that      
represent direct or indirect participation in, or are collateralized by and     
payable from, mortgage loans secured by real property or instruments derived    
from such loans. Mortgage-backed securities include various types of securities 
such as pass-throughs, stripped mortgage-backed securities, and collateralized  
mortgage obligations. There are a wide variety of mortgage types underlying     
these securities, including mortgage instruments whose principal or interest    
payments may vary or whose terms to maturity may be shorter than customary.     

Generally, mortgage-backed securities represent interests in pools of mortgage  
loans assembled for sale to investors by various governmental agencies, such as 
the Government National Mortgage Association (GNMA), by government-related      
organizations, such as the Federal National Mortgage Association (FNMA) and the 
Federal Home Loan Mortgage Corporation (FHLMC), as well as by private issuers,  
such as commercial banks, savings and loan institutions and mortgage bankers.   
Government mortgage-backed securities are backed by the full faith and credit   
of the United States as to payment of principal and interest. GNMA, the         
principal U.S. guarantor of these securities, is a wholly-owned U.S. government 
corporation within the Department of Housing and Urban Development.             
Government-related mortgage-backed securities are not backed by the full faith  
and credit of the United States. Issuers of government-related mortgage-backed  
securities include FNMA and FHLMC. FNMA is a congressionally chartered          
corporation owned entirely by private stockholders, and is subject to general   
regulation by the Secretary of Housing and Urban Development. Private           
mortgage-backed securities may be less liquid than government or                
government-related mortgage-backed securities.                                  

Pass-through securities issued by FNMA are guaranteed as to timely payment of   
principal and interest by FNMA. FHLMC is a stockholder-owned                    
government-sponsored enterprise established by Congress. Participation          
certificates representing interests in mortgages from FHLMC's national          
portfolio are guaranteed as to the timely payment of interest and principal by  
FHLMC. Private mortgage-backed securities represent interest in pass-through    
pools consisting principally of conventional residential mortgage loans created 
by non-government issuers, such as commercial banks and savings and loan        
associations and private mortgage insurance companies. Private, government, or  
government-related entities may create mortgage loan pools offering             
pass-through investments in addition to those described above. Interests in     
pools of mortgage-related securities differ from other forms of debt            
instruments, which normally provide for periodic payment of interest in fixed   
amounts with principal payments at maturity or specified call dates. Instead,   
these securities typically provide a monthly payment which consists of both     
interest and principal payments. In effect, these payments generally are a      
"pass-through" of the monthly payments made by the individual borrowers on      
their residential or commercial loans, net of any fees paid to the issuer or    
guarantor of such securities. Additional payments are caused by repayments of   
principal resulting from the sale of the underlying property, refinancing or    
foreclosure, net of fees or costs incurred.                                     

Mortgage-backed securities are often subject to more rapid repayment than their 
stated maturity date would indicate as a result of the pass-through of          
prepayments of principal on the underlying loans. Prepayments of principal by   
mortgagors or mortgage foreclosures shorten the term of the mortgage pool       
underlying the mortgage-backed security. The occurrence of prepayments is a     
function of several factors, including interest rates, general economic         
conditions, the location of the mortgaged property, the age of the mortgage or  
other underlying obligations, and other social and demographic conditions.      
Because prepayment rates of individual mortgage pools vary widely, the average  
life of a particular pool is difficult to predict. A fund's ability to maintain 
positions in mortgage-backed securities is affected by the reductions in the    
principal amount of such securities resulting from prepayments. The values of   
mortgage-backed securities vary with changes in market interest rates generally 
and the differentials in yields among various kinds of U.S. government          
securities, mortgage-backed securities, and asset-backed securities. In periods 
of rising interest rates, the rate of prepayment tends to decrease, thereby     
lengthening the average life of a pool of mortgages supporting a                
mortgage-backed security. Conversely, in periods of falling interest rates, the 
rate of prepayment tends to increase thereby shortening the average life of     
such a pool. Because prepayments of principal generally occur when interest     
rates are declining, an investor generally has to reinvest the proceeds of such 
prepayments at lower interest rates than those at which its assets were         
previously invested. Therefore, mortgage-backed securities typically have less  
potential for capital appreciation in periods of falling interest rates than    
other income-bearing securities of comparable maturity.                         

Collateralized mortgage obligations (CMOs) are mortgage-backed securities that  
are collateralized by whole loan mortgages or mortgage pass-through securities. 
The bonds issued in a CMO transaction are divided into groups, and each group   
of bonds is referred to as a "tranche." Under the traditional CMO structure,    
the cash flows generated by the mortgages or mortgage pass-through securities   
in the collateral pool are used to first pay interest and then pay principal to 
the CMO bondholders. The bonds issued under a traditional CMO structure are     
retired sequentially as opposed to the pro-rata return of principal found in    
traditional pass-through obligations. Subject to the various provisions of      
individual CMO issues, the cash flow generated by the underlying collateral (to 
the extent it exceeds the amount required to pay the stated interest) is used   
to retire the bonds. Under a CMO structure, the repayment of principal among    
the different tranches is prioritized in accordance with the terms of the       
particular CMO issuance. The "fastest-pay" tranches of bonds, as specified in   
the prospectus for the issuance, would initially receive all principal          
payments. When those tranches of bonds are retired, the next tranche, or        
tranches, in the sequence, as specified in the prospectus, receive all of the   
principal payments until they are retired. The sequential retirement of bond    
groups continues until the last tranche is retired. Accordingly, the CMO        
structure allows the issuer to use cash flows of long maturity, monthly-pay     
collateral to formulate securities with short, intermediate, and long final     
maturities, as well as varied expected average lives and risk characteristics.  
In recent years, new types of CMO tranches have evolved. These include floating 
rate CMOs, parallel pay CMOs planned amortization classes, accrual bonds and    
CMO residuals. These newer structures affect the amount and timing of principal 
and interest received by each tranche from the underlying collateral. Under     
certain of these new structures, given 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 fund invests, the investment may be    
subject to a greater or lesser risk of prepayment than other types of           
mortgage-backed securities.                                                     

The primary risk of CMOs is the uncertainty of the timing of cash flows that    
results from the rate of prepayments on the underlying mortgages serving as     
collateral and from the structure of the particular CMO transaction (that is,   
the priority of the individual tranches). An increase or decrease in prepayment 
rates (resulting from a decrease or increase in mortgage interest rates) will   
affect the yield, average life, and price of CMOs. The prices of certain CMOs,  
depending on their structure and the rate of prepayments, can be volatile. Some 
CMOs may also not be as liquid as other securities.                             

Stripped mortgage-backed securities (SMBSs) are derivative multi-class          
mortgage-backed securities. SMBSs may be issued by agencies 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 entities formed  
or sponsored by any of the foregoing. SMBSs may be less liquid than other types 
of mortgage-backed securities.                                                  

SMBSs are usually structured with two classes that receive different            
proportions of the interest and principal distributions on a pool of mortgage   
assets. A common type of SMBS will have one class receiving some of the         
interest and most of the principal from the mortgage assets, while the other    
class will receive most of the interest and the remainder of the principal. In  
the most extreme case, one class will receive all of the interest (the          
interest-only or "IO" class), while the other class will receive all of the     
principal (the principal-only or "PO" class). The price and yield-to-maturity   
on an IO class is extremely sensitive to the rate of principal payments         
(including prepayments) on the related underlying mortgage assets, and a rapid  
rate of principal payments may have a material adverse effect on a fund's yield 
to maturity from these securities. If the underlying mortgage assets experience 
greater than anticipated prepayments of principal, a fund may fail to recoup    
some or all of its initial investment in these securities, even if the security 
is in one of the highest rating categories. The mortgages underlying these      
securities may be alternative mortgage instruments, that is, mortgage           
instruments whose principal or interest payments may vary or whose terms to     
maturity may be shorter than customary.                                         

MORTGAGE "DOLLAR ROLL" TRANSACTIONS. In mortgage "dollar roll" transactions,    
the investor sells mortgage-backed securities for delivery in the future and    
simultaneously contracts to repurchase substantially similar securities on a    
specified future date. During the roll period, the investor foregoes principal  
and interest paid on the mortgage-backed securities. The lost interest is       
compensated by the difference between the current sales price and the lower     
price for the future purchase (often referred to as the "drop") as well as by   
the interest earned on, and gains from, the investment of the cash proceeds of  
the initial sale. A commitment fee may also be received for participation in    
such transaction.                                                               

If the income and capital gains from the investment of the cash from the        
initial sale do not exceed the income, capital appreciation and gain or loss    
that would have been realized on the securities sold as part of the dollar      
roll, the use of this technique will result in a lower return than would have   
been realized without the use of the dollar rolls. Dollar roll transactions     
involve the risk that the market value of the securities that are required to   
be purchased in the future may decline below the agreed upon repurchase price   
of those securities. If the party to whom the securities are sold becomes       
insolvent, the right to purchase or repurchase securities may be restricted.    
Successful use of mortgage dollar rolls may depend upon the investor's ability  
to correctly predict interest rates and prepayments.                            

A dollar roll can be viewed as a borrowing. If a fund makes additional          
investments while a dollar roll is outstanding, this may be considered a form   
of leverage.                                                                    

MUNICIPAL INSTRUMENTS. Debt instruments issued by or on behalf of states,       
territories and possessions of the United States and the District of Columbia   
and their political subdivisions, agencies or instrumentalities, are known as   
"municipal instruments." Generally, interest received on municipal instruments  
is exempt from federal income tax. The tax-exempt nature of the interest on a   
municipal instrument is generally the subject of a bond counsel opinion         
delivered in connection with the issuance of the instrument. There is no        
assurance that the IRS will agree with bond counsel's opinion that such         
interest is tax-exempt or that the interest payments on such municipal          
instruments will continue to be tax exempt for the life of the municipal        
instrument. Issuers or other parties generally enter into covenants requiring   
continuing compliance with federal tax requirements to preserve the tax-free    
status of interest payments over the life of the municipal instrument. If at    
any time the covenants are not complied with, or if the IRS otherwise           
determines that the issuer did not comply with relevant tax requirements,       
interest payments from a municipal instrument could become federally taxable,   
possibly retroactively to the date the municipal instrument was issued and an   
investor may need to file an amended income tax return. Certain types of        
structured securities are designed so that tax exempt interest from municipal   
instruments held by the underlying entity will pass through to the holders of   
the structured security. There is no assurance that the IRS will agree that     
such interest is tax exempt.                                                    

The value of municipal instruments can be affected by changes in their actual   
or perceived credit quality. The credit quality of municipal instruments can be 
affected by, among other things, the financial condition of the issuer or       
guarantor, the issuer's future borrowing plans and sources of revenue, the      
economic feasibility of the revenue bond project or general borrowing purpose,  
political or economic developments in the region where the instrument is issued 
and the liquidity of the security. Municipal instruments generally trade in the 
over-the-counter market.                                                        

General obligation bonds are backed by the issuer's pledge of its full faith    
and credit and taxing power for the repayment of principal and the payment of   
interest. Issuers of general obligation bonds include states, counties, cities, 
towns, and regional districts. The proceeds of these obligations are used to    
fund a wide range of public projects, including construction or improvement of  
schools, highways and roads, and water and sewer systems. The rate of taxes     
that can be levied for the payment of debt service on these bonds may be        
limited. Additionally, there may be limits as to the rate or amount of special  
assessments or taxes that can be levied to meet these obligations.              

Some general obligation bonds are backed by both a pledge of a specific revenue 
source, such as a special assessment or tax and an issuer's pledge of its full  
faith and credit and taxing power. Debt service from these general obligation   
bonds is typically paid first from the specific revenue source and second, if   
the specific revenue source is insufficient, from the general taxing power.     

Revenue bonds are generally backed by the net revenues derived from a           
particular facility, group of facilities, or, in some cases, the proceeds of a  
special excise tax or other specific revenue source, such as a state's or local 
government's proportionate share of the payments from the Tobacco Master        
Settlement Agreement. Revenue bonds are issued to finance a wide variety of     
capital projects. Examples include electric, gas, water and sewer systems;      
highways, bridges, and tunnels; port and airport facilities; colleges and       
universities; and hospitals. Industrial development bonds, a type of revenue    
bond, are issued by or on behalf of public authorities to raise money to        
finance various privately operated facilities for a variety of purposes,        
including economic development, solid waste disposal, transportation, and       
pollution control. Although the principal security for revenue bonds is         
typically the revenues of the specific facility, project, company or system,    
many revenue bonds are secured by additional collateral in the form of a        
mortgage on the real estate comprising a specific facility, project or system,  
a lien on receivables and personal property, as well as the pledge of various   
reserve funds available to fund debt service, working capital, capital          
expenditures or other needs. Net revenues and other security pledged may be     
insufficient to pay principal and interest due which will cause the price of    
the bonds to decline. In some cases, revenue bonds issued by an authority are   
backed by a revenue stream unrelated to the issuer, such as a hotel occupancy   
tax, a sales tax, or a special assessment. In these cases, the ability of the   
authority to pay debt service is solely dependent on the revenue stream         
generated by the special tax. Furthermore, the taxes supporting such issues may 
be subject to legal limitations as to rate or amount.                           

Municipal insurance policies typically insure, subject to the satisfaction of   
the policy conditions, timely and scheduled payment of all principal and        
interest due on the underlying municipal instruments. The insurance may be      
obtained by either (i) the issuer at the time the municipal instrument is       
issued, commonly referred to as primary market insurance or (ii) another party  
after the municipal instrument has been issued, commonly referred to as         
secondary market insurance. The financial strength of the companies issuing the 
bond insurance can vary.                                                        

In general, municipal insurance does not insure any risk other than nonpayment. 
Municipal insurance does not insure against market fluctuations which affect    
the price of a security. In addition, a municipal insurance policy will not     
insure (i) the payment of regularly scheduled debt service payments until       
maturity if an issuer redeems the municipal bonds prior to maturity in          
accordance with the call provisions of the municipal instrument; (ii) over the  
loss of prepayment or other acceleration payment which at any time may become   
due in respect of any instrument, (except for a mandatory sinking fund          
redemption; (iii) the payment of a prepayment or acceleration premium; or (iv)  
nonpayment of principal or interest caused by negligence or bankruptcy of the   
paying agent. A municipal insurance policy often reserves to the insurer the    
exclusive right to accelerate the instruments upon a payment default.           

Because a significant portion of the municipal instruments issued and           
outstanding are insured by a small number of insurance companies, an event      
involving one or more of these insurance companies could have a significant     
adverse effect on the value of the securities insured by that insurance company 
and on the municipal market as a whole.                                         

Education. In general, there are two types of education-related bonds: (i)      
those issued to finance projects for public and private colleges and            
universities, charter schools and private schools, and (ii) those representing  
pooled interests in student loans. Bonds issued to supply educational           
institutions with funding are subject to many risks, including the risks of     
unanticipated revenue decline, primarily the result of decreasing student       
enrollment, decreasing state and federal funding, or a change in general        
economic conditions. Additionally, higher than anticipated costs associated     
with salaries, utilities, insurance or other general expenses could impair the  
ability of a borrower to make annual debt service payments. Student loan        
revenue bonds are generally offered by state (or substate) authorities or       
commissions and are backed by pools of student loans. Underlying student loans  
may be guaranteed by state guarantee agencies and may be subject to             
reimbursement by the United States Department of Education through its          
guaranteed student loan program. Others may be private, uninsured loans made to 
parents or students which may be supported by reserves or other forms of credit 
enhancement. Recoveries of principal due to loan defaults may be applied to     
redemption of bonds or may be used to re-lend, depending on program latitude    
and demand for loans. Cash flows supporting student loan revenue bonds are      
impacted by numerous factors, including the rate of student loan defaults,      
seasoning of the loan portfolio, and student repayment deferral periods of      
forbearance. Other risks associated with student loan revenue bonds include     
potential changes in federal legislation regarding student loan revenue bonds,  
state guarantee agency reimbursement and continued federal interest and other   
program subsidies currently in effect.                                          

Electric Utilities. The electric utilities industry has been experiencing       
increased competitive pressures. Federal and state legislation in recent years  
has been moving the industry toward opening transmission access to any          
electricity supplier, although it is not presently known to what extent         
competition will evolve. Other risks include: (a) the availability and cost of  
fuel, (b) the availability and cost of capital, (c) the effects of conservation 
on energy demand, (d) the effects of rapidly changing environmental, safety,    
and licensing requirements, and other federal, state, and local regulations,    
(e) timely and sufficient rate increases thereby assisting utilities in         
recovering increasing energy costs, and (f) opposition to nuclear power.        

Health Care. The health care industry is subject to regulatory action by a      
number of governmental agencies, including federal, state, and local            
governmental agencies. A major source of revenues for the health care industry  
is payments from the Medicare and Medicaid programs. As a result, the industry  
is sensitive to legislative changes and reductions in governmental spending for 
such programs. A second major source of revenues for the health care industry   
is payments from private insurance companies and health maintenance             
organizations. As such, any changes to and reductions in reimbursement rates    
from these entities for services provided could be detrimental to the revenues  
of the providers. Numerous other factors may affect the industry, such as       
general and local economic conditions; demand for services; expenses (including 
for example, labor, malpractice insurance premiums and pharmaceutical           
products); and competition among health care providers. In the future, the      
following factors may adversely affect health care facility operations:         
adoption of legislation proposing a national health insurance program; other    
state or local health care reform measures; medical and technological advances  
which dramatically alter the need for health services or the way in which such  
services are delivered; changes in medical coverage which alter the traditional 
fee-for-service revenue stream; and efforts by employers, insurers, and         
governmental agencies to reduce the costs of health insurance and health care   
services.                                                                       

Housing. Housing revenue bonds typically are issued by a state, county, or      
local housing authority and are secured by the revenues of mortgages originated 
by the authority using the proceeds of the bond issue. These bonds may be used  
to make mortgage loans for single-family housing, multi-family housing, or a    
combination of the two. Because of the impossibility of precisely predicting    
demand for mortgages from the proceeds of such an issue, there is a risk that   
the proceeds of the issue will be in excess of demand, which would result in    
early retirement of the bonds by the issuer. Moreover, such housing revenue     
bonds depend for their repayment upon the cash flow from the underlying         
mortgages, which cannot be precisely predicted when the bonds are issued. Any   
difference in the actual cash flow from such mortgages from the assumed cash    
flow could have an adverse impact upon the ability of the issuer to make        
scheduled payments of principal and interest on the bonds, or could result in   
early retirement of the bonds. Additionally, such bonds depend in part for      
scheduled payments of principal and interest upon reserve funds established     
from the proceeds of the bonds, assuming certain rates of return on investment  
of such reserve funds. If the assumed rates of return are not realized because  
of changes in interest rate levels or for other reasons, the actual cash flow   
for scheduled payments of principal and interest on the bonds may be            
inadequate. The financing of multi-family housing projects is affected by a     
variety of factors which may impact the borrower's ability to pay debt service  
and may impair the value of the collateral securing the bonds, if any. These    
factors include satisfactory completion of construction within cost             
constraints, the achievement and maintenance of a sufficient level of           
occupancy, sound management of the developments, timely and adequate increases  
in rents to cover increases in operating expenses, including taxes, utility     
rates and maintenance costs, changes in applicable laws and governmental        
regulations and social and economic trends. Some authorities provide additional 
security for the bonds in the form of insurance, subsidies, additional          
collateral, or state pledges (without obligation) to make up deficiencies.      

Transportation. Transportation debt may be issued to finance the construction   
of airports, toll roads, highways, or other transit facilities. Airport bonds   
are dependent on the economic conditions of the airport's service area and may  
be affected by the business strategies and fortunes of specific airlines. They  
may also be subject to competition from other airports and modes of             
transportation. Air traffic generally follows broader economic trends and is    
also affected by the price and availability of fuel. Toll road bonds are also   
affected by the cost and availability of fuel as well as toll levels, the       
presence of competing roads and the general economic health of an area. Fuel    
costs, transportation taxes and fees, and availability of fuel also affect      
other transportation-related securities, as do the presence of alternate forms  
of transportation, such as public transportation.                               

Tobacco Settlement Revenue Bonds. Tobacco settlement revenue bonds are secured  
by a single source of revenue --a state or jurisdiction's proportionate share   
of periodic payments made by tobacco companies under the Master Settlement      
Agreement (the "MSA") entered into by participating cigarette manufacturers, 46 
states, and other jurisdictions in November of 1998 in settlement of certain    
smoking-related litigation. Annual payments on the bonds are dependent on the   
receipt by the issuer of future settlement payments under the MSA. These annual 
payments are subject to numerous adjustments. The actual amount of future       
settlement payments depends on annual domestic cigarette shipments, inflation,  
market share gains by non-participating cigarette manufacturers, and other      
factors. MSA adjustments may cause bonds to be repaid faster or slower than     
originally projected. Tobacco bonds are subject to additional risks, including  
the risk that cigarette consumption declines, that a tobacco company defaults   
on its obligation to make payments to the state or that the MSA or state        
legislation enacted pursuant to the MSA is void or unenforceable.               

Water and Sewer. Water and sewer revenue bonds are generally secured by the     
fees charged to each user of the service. The issuers of water and sewer        
revenue bonds generally enjoy a monopoly status and latitude in their ability   
to raise rates. However, lack of water supply due to insufficient rain,         
run-off, or snow pack can be a concern and has led to past defaults. Further,   
public resistance to rate increases, declining numbers of customers in a        
particular locale, costly environmental litigation, and Federal environmental   
mandates are challenges faced by issuers of water and sewer bonds.              

MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations and participations in  
municipal leases are undivided interests in a portion of an obligation in the   
form of a lease or installment purchase or conditional sales contract which is  
issued by a state, local government, or a municipal financing corporation to    
acquire land, equipment, and/or facilities (collectively hereinafter referred   
to as "lease obligations"). Generally lease obligations do not constitute       
general obligations of the municipality for which the municipality's taxing     
power is pledged. Instead, a lease obligation is ordinarily backed by the       
municipality's covenant to budget for, appropriate, and make the payments due   
under the lease obligation. As a result of this structure, municipal lease      
obligations are generally not subject to state constitutional debt limitations  
or other statutory requirements that may apply to other municipal securities.   

Lease obligations may contain "non-appropriation" clauses which provide that    
the municipality has no obligation to make lease or installment purchase        
payments in future years unless money is appropriated for that purpose on a     
yearly basis. If the municipality does not appropriate in its budget enough to  
cover the payments on the lease obligation, the lessor may have the right to    
repossess and relet the property to another party. Depending on the property    
subject to the lease, the value of the property may not be sufficient to cover  
the debt.                                                                       

In addition to the risk of "non-appropriation," municipal lease securities may  
not have as highly liquid a market as conventional municipal bonds.             
Furthermore, municipal lease obligations have the same risk characteristics as  
Municipal Instruments do generally.                                             

OPTIONS. An option is a contract which conveys the right, but not the           
obligation, to purchase (in the case of a call option) or sell (in the case of  
a put option) a specific amount or value of a particular underlying interest at 
a specific price (called the "exercise" or "strike" price) at one or more       
specific times before the option expires. The underlying interest of an option  
contract can be a security, currency, index, future, swap or other type of      
financial instrument. The seller of an option is called an option writer. The   
purchase price of an option is called the premium. The potential loss to an     
option purchaser is limited to the amount of the premium plus transaction       
costs. This will be the case, for example, if the option is held and not        
exercised prior to its expiration date.                                         

Options can be traded either through established exchanges ("exchange traded    
options") or privately negotiated transactions (over-the-counter or "OTC        
options"). Exchange traded options are standardized with respect to, among      
other things, the underlying interest, expiration date, contract size and       
strike price. The terms of OTC options are generally negotiated by the parties  
to the option contract which allows the parties greater flexibility in          
customizing the agreement, but OTC options are generally less liquid than       
exchange traded options.                                                        

All option contracts involve credit risk if the counterparty to the option      
contract fails to perform. Credit risk is low in exchange traded options        
because the performance of the contract by the counterparty is backed by the    
clearing agency for the exchange on which the options are traded. The credit    
risk in OTC options is dependent on the credit worthiness of the individual     
counterparty to the contract and may be greater than the credit risk associated 
with exchange traded options.                                                   

When purchasing a put option, the purchaser obtains the right (but not the      
obligation) to sell a specific amount or value of a particular interest to the  
option writer at a fixed strike price. In return for this right, the purchaser  
pays the option premium. The purchaser of a typical put option can expect to    
realize a gain if the price of the underlying interest falls. However, if the   
underlying interest's price does not fall enough to offset the cost of          
purchasing the option, the purchaser of a put option can expect to suffer a     
loss (limited to the amount of the premium, plus related transaction costs).    

The purchaser of a put option may terminate its position by allowing the option 
to expire, exercising the option or closing out its position in the secondary   
market at the option's current price, if a liquid secondary markets exists. If  
the option is allowed to expire, the purchaser will lose the entire premium. If 
the option is exercised, the purchaser would complete the sale of the           
underlying interest to the option writer at the strike price.                   

When purchasing a call option, the purchaser obtains the right (but not the     
obligation) to purchase a specified amount or value of a particular interest    
from the option writer at a fixed strike price. In return for this right, the   
purchaser pays the option premium. The purchaser of a typical call option can   
expect to realize a gain if the price of the underlying interest rises.         
However, if the underlying interest's price does not rise enough to offset the  
cost of purchasing the option, the buyer of a call option can expect to suffer  
a loss (limited to the amount of the premium, plus related transaction costs).  

The writer of a put or call option takes the opposite side of the transaction   
from the option's purchaser. In return for receipt of the premium, the writer   
assumes the obligation to buy or sell (depending on whether the option is a put 
or a call) a specified amount or value of a particular interest at the strike   
price if the purchaser of the option chooses to exercise it.                    

Generally, an option writer sells options with the goal of obtaining the        
premium paid by the option purchaser. If an option sold by an option writer     
expires without being exercised, the writer retains the full amount of the      
premium. The option writer, however, has unlimited economic risk because its    
potential loss, except to the extent offset by the premium received when the    
option was written, is equal to the amount the option is "in-the-money" when    
the option is exercised. A call option is in-the-money if the value of the      
underlying interest exceeds the strike price of the option. A put option is     
in-the-money if the strike price of the option exceeds the value of the         
underlying interest. Generally, any profit realized by an option purchaser      
represents a loss for the option writer. The writer of a futures option is      
required to deposit and maintain initial and variation margin with respect to   
the option in the same manner as if the writer were entering into a futures     
contract.                                                                       

The writer of a put option may seek to terminate a position in the put option   
before exercise by closing out the option in the secondary market at its        
current price. If the secondary market is not liquid for a put option, however, 
the writer must continue to be prepared to pay the strike price while the       
option is outstanding, regardless of price changes.                             

A physical delivery option gives its owner the right to receive physical        
delivery (if it is a call), or to make physical delivery (if it is a put) of    
the underlying interest when the option is exercised. A cash-settled option     
gives its owner the right to receive a cash payment based on the difference     
between a determined value of the underlying interest at the time the option is 
exercised and the fixed exercise price of the option. A cash-settled call       
conveys the right to receive a cash payment if the determined value of the      
underlying interest at exercise exceeds the exercise price of the option, and a 
cash-settled put conveys the right to receive a cash payment if the determined  
value of the underlying interest at exercise is less than the exercise price of 
the option.                                                                     

Combination option positions are positions in more than one option at the same  
time. A spread involves being both the buyer and writer of the same type of     
option on the same underlying interest but different exercise prices and/or     
expiration dates. A straddle consists of purchasing or writing both a put and a 
call on the same underlying interest with the same exercise price and           
expiration date.                                                                

The principal factors affecting the market value of a put or call option        
include supply and demand, interest rates, the current market price of the      
underlying interest in relation to the exercise price of the option, the        
volatility of the underlying interest and the remaining period to the           
expiration date.                                                                

If a trading market in particular options were to become unavailable, investors 
in those options would be unable to close out their positions until trading     
resumes, and option writers may be faced with substantial losses if the value   
of the underlying interest moves adversely during that time. Lack of investor   
interest, changes in volatility, or other factors or conditions might adversely 
affect the liquidity, efficiency, continuity, or even the orderliness of the    
market for particular options. Exchanges or other facilities on which options   
are traded may establish limitations on options trading, may order the          
liquidation of positions in excess of these limitations, or may impose other    
sanctions that could adversely affect parties to an options transaction.        

Many options, in particular OTC options, are complex and often valued based on  
subjective factors. Improper valuations can result in increased cash payment    
requirements to counterparties or a loss of value to a fund.                    

PREFERRED STOCK. Preferred stock represents an equity or ownership interest in  
an issuer and is therefore subject to the same risks as other equity            
securities. Preferred stock has precedence over common stock in the event the   
issuer is liquidated or declares bankruptcy, but is junior to the interests of  
the debt instruments of the issuer. Preferred stock, unlike common stock, often 
has a stated dividend rate payable from the corporation's earnings. Preferred   
stock dividends may be cumulative or non-cumulative, participating, or auction  
rate. "Cumulative" dividend provisions require all or a portion of prior unpaid 
dividends to be paid before dividends can be paid to the issuer's common stock. 
"Participating" preferred stock may be entitled to a dividend exceeding the     
stated dividend in certain cases. If interest rates rise, the fixed dividend on 
preferred stocks may be less attractive, causing the price of such stocks to    
decline. Preferred stock may have mandatory sinking fund provisions, as well as 
provisions allowing the stock to be called or redeemed, which can limit the     
benefit of a decline in interest rates. The value of preferred stock is         
sensitive to changes in interest rates and to changes in the issuer's credit    
quality.                                                                        

REAL ESTATE RELATED INVESTMENTS. Investment in real estate related investments  
are subject to similar risks to those associated with the direct ownership of   
real estate and with the real estate industry in general. These risks include,  
among others: possible declines in the value of real estate; risks related to   
general and local economic conditions; possible lack of availability of         
mortgage funds; overbuilding; extended vacancies of properties; increases in    
competition, property taxes and operating expenses; changes in zoning or        
applicable tax law; costs resulting from the clean-up of, and liability to      
third parties for damages resulting from, environmental problems; casualty or   
condemnation losses; uninsured damages from floods, earthquakes or other        
natural disasters; limitations on and variations in rents; and changes in       
interest rates.                                                                 

Real estate investment trusts ("REITs") are pooled investment vehicles that     
invest primarily in income producing real estate or real estate related loans   
or interests. REITs are generally classified as equity REITs, mortgage REITs,   
or a combination of equity and mortgage REITs. Equity REITs invest most of      
their assets directly in real property and derive income primarily from the     
collection of rents. Equity REITs can also realize capital gains by selling     
properties that have appreciated in value. Mortgage REITs invest most of their  
assets in real estate mortgages and derive income from interest payments. An    
investor will indirectly bear its proportionate share of any expenses (such as  
operating expenses and advisory fees) paid by REITs in which it invests in      
addition to the expenses paid by the investor.                                  

Equity REITs may be affected by changes in the value of the underlying property 
owned by the trusts, while mortgage REITs may be affected by the quality of any 
credit extended. Further, equity and mortgage REITs are dependent upon          
management skills of the REIT's manager and generally are not diversified.      
Equity and mortgage REITs are also subject to heavy cash flow dependency,       
borrower default, and self-liquidation.                                         

Mortgage REITs are also subject to different combinations of prepayment,        
extension, interest rate and other market risks. The real estate mortgages      
underlying mortgage REITs are generally subject to a faster rate of principal   
repayments in a declining interest rate environment and to a slower rate of     
principal repayments in an increasing interest rate environment.                

In addition, a REIT may be unable to obtain financing to satisfy income and     
gain distributions required by federal tax law, may fail to qualify for the     
federal tax exemption for distributed income, or may be adversely affected by   
changes in federal tax law, for example, by limiting their permissible          
businesses or investments.                                                      

REPURCHASE AGREEMENTS. A repurchase agreement is an agreement under which a     
buyer would acquire a security for a relatively short period of time (usually   
not more than a week) subject to the obligation of the seller to repurchase and 
the buyer to resell such security at a fixed time and price (representing the   
buyer's cost plus interest). The buyer bears the risk of loss in the event that 
the other party to a repurchase agreement defaults on its obligations and the   
buyer is delayed or prevented from exercising its rights to dispose of the      
collateral. This risk includes the risk of procedural costs or delays in        
addition to a loss on the securities if their value should fall below their     
repurchase price.                                                               

RESTRICTED SECURITIES. Restricted securities are securities that are subject to 
legal restrictions on their re-sale. Difficulty in selling securities may       
result in a loss or be costly to an investor. Restricted securities generally   
can be sold in privately negotiated transactions, pursuant to an exemption from 
registration under the Securities Act of 1933, or in a registered public        
offering. Where registration is required, the holder of a registered security   
may be obligated to pay all or part of the registration expense and a           
considerable period may elapse between the time it decides to seek registration 
and the time it may be permitted to sell a security under an effective          
registration statement. If, during such a period, adverse market conditions     
were to develop, the holder might obtain a less favorable price than prevailed  
when it decided to seek registration of the security.                           

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, an investor   
sells securities and receives cash proceeds, subject to its agreement to        
repurchase the securities at a later date for a fixed price reflecting a market 
rate of interest. There is a risk that the counter party to a reverse           
repurchase agreement will be unable or unwilling to complete the transaction as 
scheduled, which may result in losses to the investor. Unless the appreciation  
and income on assets purchased with proceeds from reverse repurchase agreements 
exceed the costs associated with them, the investor's performance is lower than 
it otherwise would have been. A reverse repurchase agreement can be viewed as a 
borrowing. If a fund makes additional investments while a reverse repurchase    
agreement is outstanding, this may be considered a form of leverage.            

SECURITIES OF OTHER INVESTMENT COMPANIES. Securities of other investment        
companies include shares of closed-end investment companies, unit investment    
trusts, and open-end investment companies, represent interests in               
professionally managed portfolios that may invest in any type of interest.      
Investing in other investment companies involves substantially the same risks   
as investing directly in the underlying interests, but may involve additional   
expenses at the investment company-level, such as a proportionate share of      
portfolio management fees and operating expenses. Certain types of investment   
companies, such as closed-end investment companies, issue a fixed number of     
shares that trade on a stock exchange or over-the-counter at a premium or a     
discount to their net asset value (NAV) per share. Others are continuously      
offered at NAV, but may also be traded in the secondary market. The extent to   
which a fund can invest in securities of other investment companies is limited  
by the Investment Company Act of 1940.                                          

SHORT SALES. A seller may make short sales that are made "against the box" and  
also those that are not made "against the box." A short sale that is not made   
"against the box" is a transaction in which a party sells a security it does    
not own, in anticipation of a decline in the market value of that security. To  
complete such a transaction, the seller must borrow the security to make        
delivery to the buyer. The seller then is obligated to replace the security     
borrowed by purchasing it at the market price at the time of replacement. The   
price at such time may be more or less than the price at which the security was 
sold by the seller. Until the security is replaced, the seller is required to   
repay the lender any dividends or interest which accrue during the period of    
the loan. To borrow the security, the seller also may be required to pay a      
premium, which would increase the cost of the security sold. The net proceeds   
of the short sale will be retained by the broker, to the extent necessary to    
meet margin requirements, until the short position is closed out. The seller    
also will incur transaction costs in effecting short sales.                     

The seller will incur a loss as a result of the short sale if the price of the  
security or index increases between the date of the short sale and the date on  
which the seller replaces the borrowed security. Such loss may be unlimited.    
The seller will realize a gain if the price of the security declines between    
those dates. The amount of any gain will be decreased, and the amount of any    
loss increased, by the amount of the premium, dividends or interest the seller  
may be required to pay in connection with a short sale.                         

A seller may also make short sales "against the box," i.e., when a security     
identical to one owned by the seller is borrowed and sold short. If the seller  
enters into a short sale against the box, it is required to hold securities     
equivalent in kind and amount to the securities sold short (or securities       
convertible or exchangeable into such securities) while the short sale is       
outstanding. The seller will incur transaction costs, including interest, in    
connection with opening, maintaining, and closing short sales against the box   
and will forgo an opportunity for capital appreciation in the security.         

SOVEREIGN DEBT OBLIGATIONS. Sovereign debt obligations are issued or guaranteed 
by foreign governments or their agencies, including debt of developing          
countries. Sovereign debt may be in the form of conventional securities or      
other types of debt instruments such as loans or loan participations. Sovereign 
debt of developing countries may involve a high degree of risk, and may be in   
default or present the risk of default. Governmental entities responsible for   
repayment of the debt may be unable or unwilling to repay principal and pay     
interest when due, and may require renegotiation or rescheduling of debt        
payments. In addition, prospects for repayment of principal and payment of      
interest may depend on political as well as economic factors. Although some     
sovereign debt, such as Brady Bonds, is collateralized by U.S. Government       
securities, repayment of principal and payment of interest is not guaranteed by 
the U.S. Government.                                                            

SWAPS AND RELATED DERIVATIVES. A swap is an agreement between two parties       
pursuant to which each party agrees to make one or more payments to the other,  
based on different interest rates, currency exchange rates, security or         
commodity prices, the prices or rates of other types of financial instruments,  
assets, the levels of specified indices, or other indicators. For example, in a 
typical interest rate swap, one party agrees to pay a fixed rate of interest    
determined by reference to a specified interest rate or index multiplied by a   
specified amount (the "notional amount"), while the other party agrees to pay   
an amount equal to a floating rate of interest determined by reference to an    
interest rate or index which is reset periodically and multiplied by the same   
notional amount. On each payment date, the obligations of parties are netted    
against each other, with only the net amount paid by one party to the other.    

Swap agreements are typically individually negotiated and structured to provide 
exposure to a variety of different types of investments or market factors. Swap 
agreements may be entered into for hedging or non-hedging purposes. Swap        
agreements can take many different forms and are known by a variety of names    
and other types of swap agreements may be available.                            

Other types of over-the-counter derivatives, such as "caps," "floors,"          
"collars" and options on swaps, or "swaptions," may be entered into for the     
same types of hedging or non-hedging purposes as swaps. A "cap" transaction is  
one in which one party pays a single or periodic fixed amount and the other     
party pays a floating amount equal to the amount by which a specified fixed or  
floating rate or other indicator exceeds another rate or indicator (multiplied  
by a notional amount). A "floor" transaction is one in which one party pays a   
single or periodic fixed amount and the other party pays a floating amount      
equal to the excess, if any, of a specified rate or other indicator over a      
different rate or indicator (multiplied by a notional amount). A "collar"       
transaction is a combination of a cap and a floor in which one party pays the   
floating amount on the cap and the other party pays the floating amount on the  
floor. A swaption is an option to enter into a swap agreement. Like other types 
of options, the buyer of a swaption pays a non-refundable premium for the       
option and obtains the right, but not the obligation, to enter into the         
underlying swap on the agreed-upon terms.                                       

The most significant factor in the performance of swaps, caps, floors, and      
collars is the change in the underlying price, rate, index level or other       
indicator that determines the amount of payments to be made under the           
arrangement.                                                                    

If MFS attempts to use a swap or related investment as a hedge against, or as a 
substitute for, a portfolio investment, the swap or related derivative may not  
correlate as expected with the portfolio investment, resulting in losses to the 
fund. While hedging strategies involving swaps and related derivatives can      
reduce the risk of loss, they can also reduce the opportunity for gain or even  
result in losses by offsetting favorable price movements in other fund          
investments.                                                                    

Swaps and related derivatives may also be subject to liquidity risk since the   
derivatives are often "customized" to meet the portfolio needs of a particular  
investor, and therefore, the number of investors that are willing and able to   
buy such derivatives in the secondary market may be smaller than that for more  
traditional debt instruments. The swaps market is largely unregulated. It is    
possible that developments in the swaps market, including potential government  
regulations, could adversely affect an investor's ability to terminate its      
existing swap agreements or to realize amounts received under such agreements.  

In addition, because the purchase and sale of swap and related derivatives      
takes place in an over-the-counter market, swaps and related derivatives are    
subject to the creditworthiness of the counterparty to the swap or related      
derivative, and their values may decline substantially if the counterparty's    
creditworthiness deteriorates. If the counterparty defaults, the other party's  
risk of loss consists of the net amount of payments that the non-defaulting     
party is contractually entitled to receive. The counterparties may be able to   
eliminate or reduce their exposure under these arrangements by assignment or    
other disposition or by entering into an offsetting agreement with the same or  
another counterparty.                                                           

TEMPORARY DEFENSIVE POSITIONS. In response to market, economic, political, or   
other conditions, MFS may depart from its investment strategies for a fund by   
temporarily investing for defensive purposes. MFS may invest a large portion or 
all of a fund's assets 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.                                                  

TENDER OPTION BONDS. Tender option bonds, also known as put bonds or puttable   
securities, give the bondholder the right to require the issuer or a specified  
third party acting as agent for the issuer to purchase the bonds, usually at    
par, at a certain time or times prior to maturity or upon the occurrence of     
specified events or conditions. These securities may be floating or variable    
rate securities. The issuer or third party agent may be unable to purchase the  
bonds on the purchase date due to a variety of circumstances, which may result  
in a loss of value of the bonds.                                                

WARRANTS. Warrants are instruments which entitle the holder to buy an equity    
security at a specific price for a specific period of time. Changes in the      
value of a warrant do not necessarily correspond to changes in the value of its 
underlying security. The price of a warrant may be more volatile than the price 
of its underlying security, and a warrant may offer greater potential for       
capital appreciation as well as capital loss. Warrants do not entitle a holder  
to dividends or voting rights with respect to the underlying security and do    
not represent any rights in the assets of the issuing company. A warrant ceases 
to have value if it is not exercised prior to its expiration date. These        
factors can make warrants more speculative than other types of investments.     

WHEN-ISSUED, DELAYED-DELIVERY, AND FORWARD-COMMITMENT TRANSACTIONS.             
When-issued, delayed-delivery, and forward-commitment transactions involve a    
commitment to purchase or sell specific securities at a predetermined price or  
yield in which payment and delivery take place after the customary settlement   
period for that type of security. Typically, no interest accrues to the         
purchaser until the security is delivered. When purchasing securities pursuant  
to one of these transactions, payment for the securities is not required until  
the delivery date. However, the purchaser assumes the rights and risks of       
ownership, including the risks of price and yield fluctuations and the risk     
that the security will not be issued or delivered as anticipated. If a fund     
makes additional investments while a delayed delivery purchase is outstanding,  
this may result in a form of leverage.                                          

VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate securities    
are debt instruments that provide for periodic adjustments in the interest rate 
paid on the security. Variable rate securities provide for a specified periodic 
adjustment in the interest rate, while floating rate securities have interest   
rates that may change with changes to the level of prevailing interest rates or 
the issuer's credit quality. There is a risk that the current interest rate on  
variable and floating rate securities may not accurately reflect current market 
interest rates or adequately compensate the holder for the current              
creditworthiness of the issuer. Some variable or floating rate securities are   
structured with liquidity features such as (1) put options or tender options    
that permit holders (sometimes subject to conditions) to demand payment of the  
unpaid principal balance plus accrued interest from the issuers or certain      
financial intermediaries or (2) auction rate features, remarketing provisions,  
or other maturity-shortening devices designed to enable the issuer to refinance 
or redeem outstanding debt securities (market-dependent liquidity features).    
The market-dependent liquidity features may not operate as intended as a result 
of the issuer's declining creditworthiness, adverse market conditions, or other 
factors or the inability or unwillingness of a participating broker-dealer to   
make a secondary market for such securities. As a result, variable or floating  
rate securities that include market-dependent liquidity features may lose value 
and the holders of such securities may be required to retain them for an        
extended period of time or until maturity.                                      

ZERO COUPON BONDS, DEFERRED INTEREST BONDS, AND PIK BONDS. Zero coupon and      
deferred interest bonds are debt instruments which are issued at a discount     
from face value. The discount approximates the total amount of interest the     
instruments 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 instrument 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. Bonds on which the      
interest is payable in kind are known as "PIK bonds." PIK bonds are debt        
instruments which provide that the issuer may, at its option, pay interest on   
such instruments in cash or in the form of additional debt instruments. Such    
instruments 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 instruments may experience greater  
volatility in market value than debt instruments which make regular payments of 
interest.                                                                       

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                                                          PART II - APPENDIX F

INVESTMENT RESTRICTIONS 

The Fund has adopted the following restrictions which cannot be changed without 
the approval of a Majority Shareholder Vote.                                    

As fundamental investment restrictions, the Fund may not:                       

(1) borrow money except to the extent such borrowing is not prohibited by the   
 Investment Company Act of 1940, as amended (the "1940 Act") and exemptive
orders granted under such Act;                                          

(2) underwrite securities issued by other persons, except that all or any       
   portion of the assets of the Fund may be invested in one or more investment
companies, to the extent not prohibited by the 1940 Act and exemptive   
orders granted under such Act, and except insofar as the Fund may       
 technically be deemed an underwriter under the Securities Act of 1933, as
amended, in selling a portfolio security;                               

(3) issue any senior securities except to the extent not prohibited by the 1940 
Act and exemptive orders granted under such Act; for purposes of this   
restriction, collateral arrangements with respect to any type of swap,  
   option, Forward Contracts and Futures Contracts and collateral arrangements
with respect to initial and variation margin are not deemed to be the   
issuance of a senior security;                                          

(4) make loans except to the extent not prohibited by the 1940 Act and          
exemptive orders granted under such Act; and                            

(5) purchase or sell real estate (excluding securities secured by real estate   
or interests therein and securities of companies, such as real estate   
investment trusts, which deal in real estate or interests therein),     
   interests in oil, gas or mineral leases, commodities or commodity contracts
   (excluding currencies and any type of option, Futures Contracts and Forward
Contracts) in the ordinary course of its business; the Fund reserves the
freedom of action to hold and to sell real estate, mineral leases,      
commodities or commodity contracts (including currencies and any type of
option, Futures Contracts and Forward Contracts) acquired as a result of
the ownership of securities.                                            

     * * * * * *

FOR THE MFS CASH RESERVE FUND, MFS GOVERNMENT MONEY MARKET FUND AND THE MFS     
MONEY MARKET FUND:                                                              

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
 business activities are in the same industry, provided however, that this
restriction shall not apply to securities or obligations issued or      
   guaranteed by banks or bank holding companies, finance companies or utility
companies.                                                              

FOR THE MFS FLOATING RATE HIGH INCOME FUND:                                     

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry. For purposes of this      
restriction, loan participations will be considered investments in the  
  industry of the underlying borrower, rather than that of the seller of the
loan participation.                                                     

FOR THE MFS HIGH INCOME FUND:                                                   

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry, provided however, that the
Fund may invest up to 40% of the value of its assets in each of the     
electric utility and telephone industries.                              

FOR THE MFS UTILITIES FUND:                                                     

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry, provided however, that the
Fund will invest at least 25% of its total assets in the utilities      
industry.                                                               

FOR ALL OTHER FUNDS:                                                            

(6) purchase any securities of an issuer in a particular industry if as a       
 result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal 
business activities are in the same industry.                           

     * * * * * *

In addition, the Funds have adopted the following non-fundamental policies,     
which may be changed without shareholder approval.                              

FOR THE MFS CASH RESERVE FUND, MFS GOVERNMENT MONEY MARKET FUND AND THE MFS     
MONEY MARKET FUND:                                                              

The Fund will not:                                                              

(1) invest in illiquid investments, including securities subject to legal or    
contractual restrictions on resale or for which there is no readily     
available market (e.g., trading in the security is suspended, or, in the
 case of unlisted securities, where no market exists), if more than 10% of
the Fund's net assets (taken at market value) would be invested in such 
  securities; repurchase agreements maturing in more than seven days will be
 deemed to be illiquid for purposes of the Fund's limitation on investment
in illiquid securities; securities that are not registered under the    
   Securities Act of 1933 but are determined to be liquid by the Trust's Board
of Trustees (or its delegee) will not be subject to this 10% limitation.

FOR ALL OTHER FUNDS:                                                            

The Fund will not:                                                              

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

     * * * * * *

FOR ALL FUNDS:                                                                  

Except for investment restriction no. 1 and the Fund's non-fundamental policy   
on investing in illiquid securities, these investment restrictions are adhered  
to at the time of purchase or utilization of assets; a subsequent change in     
circumstances will not be considered to result in a violation of policy. In the 
event the investments exceed the percentage specified in the Fund's             
non-fundamental policy on illiquid investments, the Fund will reduce the        
percentage of its assets invested in illiquid investments in due course, taking 
into account the best interests of shareholders.                                

For purposes of investment restriction no. 6, investments in securities issued  
or guaranteed by the U.S. Government or its agencies or instrumentalities and   
tax-exempt obligations issued or guaranteed by a U.S. territory or possession,  
a state or local government, or a political subdivision of any of the           
foregoing, are not considered an investment in any particular industry.         

For purposes of investment restriction no. 6, investments in other investment   
companies are not considered an investment in any particular industry and       
portfolio securities held by an underlying fund in which the Fund may invest    
are not considered to be securities purchased by the Fund.                      

FOR MFS LIFETIME RETIREMENT INCOME FUND, MFS LIFETIME 2010 FUND, MFS LIFETIME   
2020 FUND, MFS LIFETIME 2030 FUND, MFS LIFETIME 2040 FUND, MFS INTERNATIONAL    
DIVERSIFICATION FUND, MFS AGGRESSIVE GROWTH ALLOCATION FUND, MFS CONSERVATIVE   
ALLOCATION FUND, MFS GROWTH ALLOCATION FUND AND MFS MODERATE ALLOCATION FUND:   

In accordance with the Fund's investment program as set forth in its            
Prospectus, the Fund may invest more than 25% of its assets in any one          
underlying fund. Although the Fund does not have a policy to concentrate its    
investments in a particular industry, 25% or more of the Fund's total assets    
may be indirectly exposed to a particular industry or group of related          
industries through its investment in one or more underlying funds.              

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                                                          PART II - APPENDIX G

RECIPIENTS OF NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS 

NAME OF RECIPIENT                              PURPOSE OF DISCLOSURE            
-----------------                              ---------------------            

MSCI BARRA, Inc.                               Analytical Tool                  

Bloomberg L.P.                                 Analytical Tool                  

Board of Trustees                              Fund Governance                  

Bowne                                          Typesetting and Printing Services

CDS/Computer                                   Software Vendor                  

Checkfree                                      Software Vendor                  

eA Data Automation Services, LLC               Data Formatting and Organization 
                     Service

Eagle Investment Systems Corp.                 Accounting System                

Ernst & Young LLP                              Independent Registered Public    
                             Accounting Firm

FactSet Research Systems Inc.                  Analytical Tool                  

GainsKeeper, Inc.                              Accounting System                

GFP Acquisition Company, Inc. D.B.A.                                            
GCom2 Solutions                                Software Vendor                  

G.H. Dean Co.                                  Typesetting and Printing Services

Institutional Shareholder Services Inc.        Proxy Service Provider           

Investor Tools Perform                         Analytical Tool                  

ITG, Inc.                                      Analytical Tool                  

JP Morgan Chase Bank                           Fund Custodian                   

Lipper Inc.                                    Publication Preparation          

The MacGregor Group                            Software Vendor                  

Massachusetts Financial Services Co.           Fund Management                  

MFS Fund Distributors, Inc.                    Fund Distribution                

OMGEO LLC                                      Software Vendor                  

Plexus                                         Analytical Tool                  

Radianz                                        Software Vendor                  

Ropes & Gray LLP                               Legal Counsel                    

Saloman Analytics Inc.                         Analytical Tool                  

Standard & Poor's Securities Evaluations       Fund Pricing                     
Services                                                                        

State Street Bank and Trust Company            Custodian                        

Sun Capital Advisers LLC*                      Fund Management                  

Wilshire Analytics/Axiom                       Analytical Tool                  

* Sun Capital Advisers LLC receives non-public portfolio holdings disclosure    
regarding the portion of the MFS Diversified Income Fund for which it serves
as sub-adviser.                                                             

This list is current as of June 30, 2006, and any additions, modifications or   
deletions to the list that have occurred since June 30, 2006 are not reflected. 

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                                                                    APPENDIX H

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                                                       

Moody's long-term obligation ratings are opinions of the relative credit risk   
of fixed income obligations with an original maturity of one year or more. They 
address the possibility that a financial obligation will not be honored as      
promised. Such ratings reflect both the likelihood of default and any financial 
loss suffered in the event of default.                                          

AAA: Obligations rated "Aaa" are judged to be of the highest quality, with      
minimal credit risk.                                                            

AA: Obligations rated "Aa" are judged to be of high quality and are subject to  
very low credit risk.                                                           

A: Obligations rated "A" are considered upper-medium grade and are subject to   
low credit risk.                                                                

BAA: Obligations rated "Baa" are subject to moderate credit risk. They are      
considered medium-grade and as such may possess certain speculative             
characteristics.                                                                

BA: Obligations rated "Ba" are judged to have speculative elements and are      
subject to substantial credit risk.                                             

B: Obligations rated "B" are considered speculative and are subject to high     
credit risk.                                                                    

CAA: Obligations rated "Caa" are judged to be of poor standing and are subject  
to very high credit risk.                                                       

CA: Obligations rated "Ca" are highly speculative and are likely in, or very    
near, default, with some prospect of recovery of principal and interest.        

C: Obligations rated "C" are the lowest rated class of bonds and are typically  
in default, with little prospect for recovery of principal or interest.         

Note: Moody's applies numerical modifiers "1", "2" and "3" to each generic      
rating classification from "Aa" through "Caa." The modifier "1" indicates that  
the obligation ranks in the higher end of its generic rating category; the      
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a    
ranking in the lower end of that generic rating category.                       

STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC.                

Issue credit ratings are based, in varying degrees, on the following            
considerations: (1) likelihood of payment capacity and willingness of the       
obligor to meet its financial commitment on an obligation in accordance with    
the terms of the obligation; (2) nature of and provisions of the obligation;    
and (3) protection afforded by, and relative position of, the obligation in the 
event of bankruptcy, reorganization, or other arrangement under the laws of     
bankruptcy and other laws affecting creditors' rights.                          

The issue ratings definitions are expressed in terms of default risk. As such,  
they pertain to senior obligations of an entity. Junior obligations are         
typically rated lower than senior obligations, to reflect the lower priority in 
bankruptcy, as noted above.                                                     

AAA: An obligation rated "AAA" has the highest rating assigned by Standard &    
Poor's. The obligor's capacity to meet its financial commitment on the          
obligation is extremely strong.                                                 

AA: An obligation rated "AA" differs from the highest-rated obligations only to 
a small degree. The obligor's capacity to meet its financial commitment on the  
obligation is very strong.                                                      

A: An obligation rated "A" is somewhat more susceptible to the adverse effects  
of changes in circumstances and economic conditions than obligations in higher  
rated categories. However, the obligor's capacity to meet its financial         
commitment on the obligation is still strong.                                   

BBB: An obligation rated "BBB" exhibits adequate protection parameters.         
However, adverse economic conditions or changing circumstances are more likely  
to lead to a weakened capacity of the obligor to meet its financial commitment  
on the obligation.                                                              

BB, B, CCC, CC, AND C: Obligations rated "BB", "B", "CCC", "CC", and "C" are    
regarded as having significant speculative characteristics. "BB" indicates the  
least degree of speculation and "C" the highest. While such obligations will    
likely have some quality and protective characteristics, these may be           
outweighed by large uncertainties or major exposures to adverse conditions.     

BB: An obligation rated "BB" is less vulnerable to nonpayment than other        
speculative issues. However, it faces major ongoing uncertainties or exposure   
to adverse business, financial, or economic conditions, which could lead to the 
obligor's inadequate capacity to meet its financial commitment on the           
obligation.                                                                     

B: An obligation rated "B" is more vulnerable to nonpayment than obligations    
rated "BB", but the obligor currently has the capacity to meet its financial    
commitment on the obligation. Adverse business, financial, or economic          
conditions will likely impair the obligor's capacity or willingness to meet its 
financial commitment on the obligation.                                         

CCC: An obligation rated "CCC" is currently vulnerable to nonpayment and is     
dependent upon favorable business, financial, and economic conditions for the   
obligor to meet its financial commitment on the obligation. In the event of     
adverse business, financial, or economic conditions, the obligor is not likely  
to have the capacity to meet its financial commitment on the obligation.        

CC: An obligation rated "CC" is currently highly vulnerable to nonpayment.      

C: The "C" rating may be used to cover a situation where a bankruptcy petition  
has been filed or similar action has been taken, but payments on this           
obligation are being continued.                                                 

D: An obligation rated "D" is in payment default. The "D" rating category is    
used when payments on an obligation are not made on the date due even if the    
applicable grace period has not expired, unless Standard & Poor's 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 or the taking of a similar     
action if payments on an obligation 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   
applicable rating category.                                                     

N.R.: Not rated.                                                                

FITCH RATINGS                                                                   

International Long-Term Credit Ratings (LTCR) may also be referred to as        
Long-Term Ratings. When assigned to most issuers, it is used as a benchmark     
measure of probability of default and is formally described as an Issuer        
Default Rating (IDR).                                                           

Investment Grade                                                                

AAA: Highest credit quality. "AAA" ratings denote the lowest expectation of     
credit risk. They are assigned only in case of exceptionally strong capacity    
for payment of financial commitments. This capacity is highly unlikely to be    
adversely affected by foreseeable events.                                       

AA: Very high credit quality. "AA" ratings denote expectations of very low      
credit risk. They indicate very strong capacity for payment of financial        
commitments. This capacity is not significantly vulnerable to foreseeable       
events.                                                                         

A: High credit quality. "A" ratings denote expectations of low credit risk. The 
capacity for payment of financial commitments is considered strong. This        
capacity may, nevertheless, be more vulnerable to changes in circumstances or   
in economic conditions than is the case for higher ratings.                     

BBB: Good credit quality. "BBB" ratings indicate that there is currently        
expectations of low credit risk. The capacity for payment of financial          
commitments is considered adequate, but adverse changes in circumstances and    
economic conditions are more likely to impair this capacity. This is the lowest 
investment-grade category.                                                      

Speculative Grade                                                               

BB: Speculative. "BB" ratings indicate that there is a possibility of credit    
risk developing, particularly as the result of adverse economic change over     
time; however, business or financial alternatives may be available to allow     
financial commitments to be met. Securities rated in this category are not      
investment grade.                                                               

B: Highly speculative. "B" ratings indicate that significant credit risk is     
present, but a limited margin of safety remains. Financial commitments are      
currently being met; however, capacity for continued payment is contingent upon 
a sustained, favorable business and economic environment.                       

CCC: Default is a real possibility. Capacity for meeting financial commitments  
is solely reliant upon sustained, favorable business or economic conditions.    

CC: Default of some kind appears probable.                                      

C: Default is imminent.                                                         

RD: Indicates an entity that has failed to make due payments (within the        
applicable grace period) on some but not all material financial obligations,    
but continues to honor other classes of obligations.                            

D: Indicates an entity or sovereign that has defaulted on all of its financial  
obligations. Default generally is defined as one of the following:              

   o Failure of an obligor to make timely payment of principal and/or interest
under the contractual terms of any financial obligation;            

o The bankruptcy filings, administration, receivership, liquidation, or 
other winding-up or cessation of business of an obligor; or         

o The distressed or other coercive exchange of an obligation, where     
    creditors were offered securities with diminished structural or economic
terms compared with the existing obligation.                        

Default ratings are not assigned prospectively; within this context,            
non-payment on an instrument that contains a deferral feature or grace period   
will not be considered a default until after the expiration of the deferral or  
grace period.                                                                   

Issuers will be rated "D" upon a default. Defaulted and distressed obligations  
typically are rated along the continuum of "C" to "B" ratings categories,       
depending upon their recovery prospects and other relevant characteristics.     

Default is determined by reference to the terms of the obligations'             
documentation. Fitch will assign default ratings where it has reasonably        
determined that payment has not been made on a material obligation in           
accordance with the requirements of the obligation's documentation, or where it 
believes that default ratings consistent with Fitch's published definition of   
default are the most appropriate ratings to assign.                             

The modifiers "+" or "-`' may be appended to a rating to denote relative status 
within major ratings categories. Such suffixes are not added to the "AAA"       
Long-term ratings category, to categories below "CCC," or to Short-term ratings 
other than "F1." (The +/- modifiers are only used to denote issues within the   
"CCC" category, whereas issuers are only rated "CCC" without the use of         
modifiers.)                                                                     

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INVESTMENT ADVISER                                                              

MFS Investment Management                                                       

500 Boylston Street, Boston, MA 02116                                           

(617) 954-5000                                                                  

DISTRIBUTOR                                                                     

MFS Fund Distributors, Inc.                                                     

500 Boylston Street, Boston, MA 02116                                           

(617) 954-5000                                                                  

CUSTODIANS                                                                      

State Street Bank and Trust Company                                             

225 Franklin Street, Boston, MA 02110                                           

JP Morgan Chase Bank                                                            

One Chase Manhattan Plaza                                                       

New York, NY 10081                                                              

SHAREHOLDER SERVICING AGENT                                                     

MFS Service Center, Inc.                                                        

500 Boylston Street, Boston, MA 02116                                           

Toll free: (800) 225-2606                                                       

Mailing Address:                                                                

P.O. Box 55824, Boston, MA 02205-5824                                           

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   MFS(R) SERIES TRUST III

   MFS(R) HIGH INCOME FUND
    MFS(R) HIGH YIELD OPPORTUNITIES FUND
   MFS(R) MUNICIPAL HIGH INCOME FUND

  PART C

ITEM 23. EXHIBITS:                                                              

   1 (a) Amended and Restated Declaration of Trust, dated December
16, 2004. (3)                                   

          (b) Amendment, dated March 10, 2005, to the Declaration of Trust -
         Establishment and Designation of Class R Shares, Class R3
               Shares, Class R4 Shares and Class R5 Shares for MFS High Income
Fund. (3)                                       

         (c) Amendment, dated April 1, 2005, to the Declaration of Trust -
               Redesignation of Class R1 Shares as Class R Shares and of Class
          R2 Shares as Class R3 Shares for MFS High Income Fund. (3)

     2 (a) Master Amended and Restated By-Laws, dated January 1, 2002,
as revised June 23, 2004. (12)                  

          (b) Appendix A, dated June 28, 2005 as revised, February 27, 2007,
            to the Master Amended and Restated By-Laws, dated January 1,
2002. (20)                                      

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

    4     Investment Advisory Agreement, dated January 1, 2002. (13)

5     (a) Distribution Agreement, dated January 1, 1995. (1)

        (b) Dealer Agreement between MFS Fund Distributors, Inc. ("MFD")
             and a dealer as of September, 2004; The Mutual Fund Agreement
       effective May 2002; Supplement to Mutual Fund Agreement
     October, 2004; Amended and Restated MFS Serviced Plan
              Supplement to Dealer or Mutual Fund Agreement September, 2006;
      Notice of Amendment to Dealer or Mutual Fund Agreement
          effective August 2005; and Rule 22c-2 Supplement to Dealer
     Agreement or Mutual Fund Agreement August, 2006. (10)

6 (a) Retirement Plan for Non-Interested Person Trustees, as
amended and restated February 17, 1999. (9)     

      (b) Amendment to the Retirement Plan for Non-Interested Person
Trustees, dated July 1, 2002. (14)              

      (c) Retirement Benefit Deferral Plan, dated July 1, 2002. (14)

  7 (a) Master Custodian Agreement between the Registrant and JP
     Morgan Chase Bank, N.A., dated November 13, 2006. (8)

    (b) Appendix A to the Master Custodian Agreement between the
               Registrant and JP Morgan Chase Bank, N.A., dated as of February
27, 2007. (20)                                  

          (c) Fund Accounting Agreement between the Registrant and JP Morgan
   Investor Services Co., dated November 13, 2006. (8)

   (d) Appendix A to the Fund Accounting Agreement between the
           Registrant and JP Morgan Investor Services Co., dated as of
February 27, 2007. (20)                         

          8 (a) Shareholder Servicing Agent Agreement, dated August 1, 1985. (5)

           (b) Amendment to Exhibit B, dated April 1, 2003, to the Amended and
Restated Shareholder Servicing Agreement. (19)  

         (c) Amendment to Shareholder Servicing Agreements, dated February
22, 2005. (16)                                  

         (d) Master Administrative Services Agreement, dated March 1, 1997
as amended and restated August 1, 2006. (6)     

       (e) Appendix A to the Master Administrative Services Agreement,
dated as of February 27, 2007. (20)             

         (f) Master 529 Administrative Services Agreement, dated August 1,
2002. (17)                                      

(g) Addendum, dated October 16, 2002, to the Master 529 
Administrative Services Agreement. (17)         

(h) Exhibit A, dated July 20, 2004, to the Master 529   
Administrative Services Agreement. (15)         

           (i) Master Class R Plan Administration and Service Agreement, as of
April 1, 2005. (3)                              

      (j) Exhibit A, dated July 26, 2005, to the Master Class R Plan
Administration and Service Agreement. (12)      

     (k) Exhibit C, dated April 1, 2007 to the Master Class R Plan
     Administration and Service Agreement; filed herewith.

  9 (a) Consent and Opinion of Counsel, dated May 26, 2006. (11)

        (b) Legal Opinion Consent, dated March 26, 2007; filed herewith.

    10 (a) Consent of Deloitte & Touche LLP - MFS High Income Fund and
              MFS High Yield Opportunities Fund, dated March 26, 2007; filed
herewith.                                       

          (b) Consent of Ernst & Young LLP - MFS Municipal High Income Fund,
dated March 26, 2007; filed herewith.           

11     Not Applicable.                                        

12     Not Applicable.                                        

  13     Master Distribution Plan pursuant to Rule 12b-1 under the
              Investment Company Act of 1940, effective January 1, 1997, and
     Amended and Restated effective October 25, 2006. (21)

        14     Plan pursuant to Rule 18f-3(d) under the Investment Company Act
            of 1940 effective September 6, 1996, as amended and restated
effective October 25, 2006; filed herewith.     

15     Reserved                                               

    16 (a) Code of Ethics as amended and restated effective January 1,
             2007, pursuant to Rule 17j-1 under the Investment Company Act
of 1940; filed herewith.                        

(b) Code of Ethics for Personal Trading and Conduct for 
           Non-Management Directors of MFS, effective October 6, 2004.
(18)                                            

    (c) Code of Ethics for Non-MFS Management Trustees effective
January 1, 2005. (4)                            

Power of Attorney, dated February 27, 2007; (Trustees)  (21)  
Power of Attorney, dated February 27, 2007; (Dwyer)  (21)     
Power of Attorney, dated February 27, 2007; (Atkinson)  (21)  

-----------------------------                                                   
(1)  Incorporated by reference to the Registrant's Post-Effective Amendment No. 
20 filed with the SEC via EDGAR on May 31, 1995.                      

(2)  Incorporated by reference to MFS Series Trust XII (File Nos. 333-126328 and
   811-21780) Post-Effective Amendment No. 2 filed with the SEC via EDGAR on
August 25, 2006.                                                      

(3)  Incorporated by reference to MFS Series Trust III (File Nos. 2-60491 and   
   811-2794) Post-Effective Amendment No. 37 filed with the SEC via EDGAR on
March 31, 2005.                                                       
(4)  Incorporated by reference to MFS Series Trust I (File Nos. 33-7638 and     
   811-4777) Post-Effective Amendment No. 45 filed with the SEC via EDGAR on
December 29, 2004.                                                    
(5)  Incorporated by reference to the Registrant's Post-Effective Amendment No. 
21 filed with the SEC via EDGAR on October 13, 1995.                  

(6)  Incorporated by reference to MFS Series Trust X (File Nos. 33-1657 and     
   811-4492) Post-Effective Amendment No. 62 filed with the SEC via EDGAR on
September 29, 2006.                                                   

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

(8)  Incorporated by reference to MFS Series Trust II (File Nos. 33-7637 and    
   811-4775) Post-Effective Amendment No. 39 filed with the SEC via EDGAR on
January 26, 2007.                                                     

(9)  Incorporated by reference to Registrant's Post-Effective Amendment No. 25  
filed with the SEC via EDGAR on May 15, 1998.                         

(10) Incorporated by reference to MFS Series Trust VIII (File Nos. 33-37972 and 
   811-2464) Post-Effective Amendment No. 28 filed with the SEC via EDGAR on
December 28, 2006.                                                    
(11) Incorporated by reference to Registrant's Post-Effective Amendment No. 39  
filed with the SEC via EDGAR on May 31, 2006.                         
(12) Incorporated by reference to MFS Series Trust X (File Nos. 33-1657 and     
   811-4492) Post-Effective Amendment No. 57 filed with the SEC via EDGAR on
September 28, 2005.                                                   

(13) Incorporated by reference to Registrant's Post-Effective Amendment No. 32  
filed with the SEC via EDGAR on May 31, 2002.                         
(14) Incorporated by reference to MFS Series Trust IX (File Nos. 2-50409 and    
   811-2464) Post-Effective Amendment No. 44 filed with the SEC via EDGAR on
August 1, 2002.                                                       
(15) Incorporated by reference to MFS Series Trust X (File Nos. 33-1657 and     
   811-4492) Post-Effective Amendment No. 50 filed with the SEC via EDGAR on
July 9, 2004.                                                         
(16) Incorporated by reference to MFS Series Trust X (File Nos. 33-1657 and     
   811-4492) Post-Effective Amendment No. 55 filed with the SEC via EDGAR on
March 14, 2005.                                                       
(17) Incorporated by reference to MFS Series Trust X (File Nos. 33-1657 and     
   811-4492) Post-Effective Amendment No. 43 filed with the SEC via EDGAR on
November 27, 2002.                                                    
(18) Incorporated by reference to MFS Series Trust I (File Nos. 33-7638 and     
   811-4777) Post-Effective Amendment No. 44 filed with the SEC via EDGAR on
October 29, 2004.                                                     
(19) Incorporated by reference to Registrant's Post-Effective Amendment No. 34  
filed with the SEC via EDGAR on May 29, 2003.                         

(20) Incorporated by reference to MFS Series Trust XIV in Registration Statement
N-1A on March 15, 2007.                                               
(21) Incorporated by reference to MFS Municipal Series Trust (File Nos. 2-92915 
    and 811-4096) Post-Effective Amendment No. 46 filed with the SEC via EDGAR
on March 20, 2007.                                                    

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.         

Not Applicable.                                               

ITEM 25. INDEMNIFICATION                                                        

       Reference is hereby made to (a) Article V of Registrant's Amended and
Restated Declaration of Trust, dated December 16, 2004, incorporated by         
reference to Registrant's Post-Effective Amendment No. 37 filed with the SEC    
via EDGAR on March 31, 2005 and (b) Section 9 of the Shareholder Servicing      
Agent Agreement, incorporated by reference to Registrant's Post-Effective       
Amendment No. 21 filed with the SEC via EDGAR on October 13, 1995.              

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

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER                   

  MFS serves as investment adviser to the following open-end Funds
comprising the MFS Family of Funds: MASSACHUSETTS INVESTORS GROWTH STOCK FUND;  
MASSACHUSETTS INVESTORS TRUST; MFS GROWTH OPPORTUNITIES FUND; MFS SERIES TRUST  
I (which has 8 series: MFS Cash Reserve Fund, MFS Core Equity Fund, MFS Core    
Growth Fund, MFS New Discovery Fund, MFS Research International Fund, MFS       
Strategic Growth Fund, MFS Technology Fund and MFS Value Fund); MFS SERIES      
TRUST II (which has one series: MFS Emerging Growth Fund); MFS SERIES TRUST III 
(which has three series: MFS High Income Fund, MFS High Yield Opportunities     
Fund and MFS Municipal High Income Fund); MFS SERIES TRUST IV (which has four   
series: MFS Government Money Market Fund, MFS Mid Cap Growth Fund, MFS Money    
Market Fund and MFS Municipal Bond Fund); MFS SERIES TRUST V (which has three   
series: MFS International New Discovery Fund, MFS Research Fund and MFS Total   
Return Fund); MFS SERIES TRUST VI (which has three series: MFS Global Equity    
Fund, MFS Global Total Return Fund and MFS Utilities Fund); MFS SERIES TRUST    
VII (which has one series: MFS Capital Opportunities Fund); MFS SERIES TRUST    
VIII (which has two series: MFS Global Growth Fund and MFS Strategic Income     
Fund); MFS SERIES TRUST IX (which has seven series: MFS Bond Fund, MFS          
Inflation-Adjusted Bond Fund, MFS Intermediate Investment Grade Bond Fund, MFS  
Limited Maturity Fund, MFS Municipal Limited Maturity Fund, MFS Research Bond   
Fund and MFS Research Bond Fund J); MFS SERIES TRUST X (which has 13 series:    
MFS Aggressive Growth Allocation Fund, MFS Conservative Allocation Fund, MFS    
Emerging Markets Debt Fund, MFS Emerging Markets Equity Fund, MFS Floating Rate 
High Income Fund, MFS Growth Allocation Fund, MFS International Diversification 
Fund, MFS International Growth Fund, MFS International Value Fund, MFS Moderate 
Allocation Fund, MFS New Endeavor Fund and MFS Strategic Value Fund); MFS       
SERIES TRUST XI (which has two series: MFS Mid Cap Value Fund and MFS Union     
Standard Equity Fund); MFS SERIES TRUST XII (which has 6 series: MFS Lifetime   
Retirement Income Fund, MFS Lifetime 2010 Fund, MFS Lifetime 2020 Fund, MFS     
Lifetime 2030 Fund; MFS Lifetime 2040 Fund and MFS Sector Rotational Fund; MFS  
SERIES TRUST XIII (which has 2 series: MFS Government Securities Fund and MFS   
Diversified Income Fund); and MFS MUNICIPAL SERIES TRUST (which has 16 series:  
MFS Alabama Municipal Bond Fund, MFS Arkansas Municipal Bond Fund, MFS          
California Municipal Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia    
Municipal Bond Fund, MFS Maryland Municipal Bond Fund, MFS Massachusetts        
Municipal Bond Fund, MFS Mississippi Municipal Bond Fund, MFS Municipal Income  
Fund, MFS New York Municipal Bond Fund, MFS North Carolina Municipal Bond Fund, 
MFS Pennsylvania Municipal Bond Fund, MFS South Carolina Municipal Bond Fund,   
MFS Tennessee Municipal Bond Fund, MFS Virginia Municipal Bond Fund and MFS     
West Virginia Municipal Bond Fund (the "MFS Funds"). The principal business     
address of each of the MFS Funds is 500 Boylston Street, Boston, Massachusetts, 
02116.                                                                          

        MFS also serves as investment adviser of the following open-end Funds:
MFS Institutional Trust ("MFSIT") (which has three series) and MFS Variable     
Insurance Trust ("MVI") (which has 16 series). The principal business address   
of each of the aforementioned funds is 500 Boylston Street, Boston,             
Massachusetts, 02116.                                                           

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

       Lastly, MFS serves as investment adviser to MFS/Sun Life Series Trust
("MFS/SL") (which has 28 series), Capital Appreciation Variable Account, Global 
Governments Variable Account, Government Securities Variable Account, High      
Yield Variable Account, Money Market Variable Account and Total Return Variable 
Account (collectively, the "Accounts"). The principal business address of       
MFS/SL is 500 Boylston Street, Boston, Massachusetts, 02116. The principal      
business address of each of the aforementioned Accounts is One Sun Life         
Executive Park, Wellesley Hills, Massachusetts, 02181.                          

        The Directors of MFS are Robert C. Pozen, Robert J. Manning, Martin E.
Beaulieu, Robin A. Stelmach, Donald A. Stewart, James C. Baillie, Ronald W.     
Osborne and William K. O'Brien. Robert C. Pozen is the Chairman and Chairman of 
the Board, Mr. Manning is Chief Executive Officer, Chief Investment Officer and 
President, Mr. Beaulieu is Executive Vice President and the Director of Global  
Distribution, Robin A. Stelmach is Executive Vice President and Chief Operating 
Officer; Maria F. Dwyer is Executive Vice President, Chief Regulatory Officer   
and Chief Compliance Officer, Mark N. Polebaum is an Executive Vice President,  
General Counsel and Secretary, Mitchell C. Freestone, Ethan D. Corey, Mark D.   
Kaplan, Jeremy Kream and Susan S. Newton are Assistant Secretaries, Michael W.  
Roberge is an Executive Vice President, Chief Investment Officer-U.S. and       
Co-Director of Global Research, David A. Antonelli is an Executive Vice         
President, Chief Investment Officer-Non U.S. and Global Equity Investments and  
Co-Director of Global Research, Deborah H. Miller is an Executive Vice          
President and Director of Equity Quantitative Research, Paul T. Kirwan is an    
Executive Vice President, Chief Financial Officer and Treasurer and Joseph E.   
Lynch is the Assistant Treasurer and Timothy Tierney is the Tax Officer.        

MASSACHUSETTS INVESTORS TRUST                                 
MASSACHUSETTS INVESTORS GROWTH STOCK FUND                     
MFS GROWTH OPPORTUNITIES FUND                                 
MFS SERIES TRUST I                                            
MFS SERIES TRUST II                                           
MFS SERIES TRUST III                                          
MFS SERIES TRUST IV                                           
MFS SERIES TRUST V                                            
MFS SERIES TRUST VI                                           
MFS SERIES TRUST VII                                          
MFS SERIES TRUST VIII                                         
MFS SERIES TRUST IX                                           
MFS SERIES TRUST X                                            
MFS SERIES TRUST XI                                           
MFS SERIES TRUST XII                                          
MFS SERIES TRUST XIII                                         
MFS MUNICIPAL SERIES TRUST                                    
MFS VARIABLE INSURANCE TRUST                                  
MFS INSTITUTIONAL TRUST                                       
MFS MUNICIPAL INCOME TRUST                                    
MFS MULTIMARKET INCOME TRUST                                  
MFS GOVERNMENT MARKETS INCOME TRUST                           
MFS INTERMEDIATE INCOME TRUST                                 
MFS CHARTER INCOME TRUST                                      
MFS SPECIAL VALUE TRUST                                       

    J. Atwood Ives is the Chair, Maria F. Dwyer is President, Tracy A.
Atkinson, a Senior Vice President of MFS, is Treasurer, Ellen Moynihan, a       
Senior Vice President of MFS and James O. Yost, David L. DiLorenzo and Mark     
Fischer, Vice Presidents of MFS, are the Assistant Treasurers, Mark N.          
Polebaum, Senior Vice President, General Counsel and Secretary of MFS, is the   
Secretary, Brian E. Langenfeld, Assistant Vice President and Counsel of MFS,    
Christopher R. Bohane, Susan A. Pereira and Timothy M. Fagan, Vice Presidents   
and Senior Counsels of MFS, Ethan D. Corey, Special Counsel of MFS and Susan S. 
Newton, Senior Vice President and Associate General Counsel of MFS are          
Assistant Secretaries and Assistant Clerks.                                     

MFS/SUN LIFE SERIES TRUST                                     

      J. Kermit Birchfield is Chairman, Maria F. Dwyer is President, Tracy
A. Atkinson is the Treasurer, James O. Yost, Ellen M. Moynihan, David L.        
DiLorenzo and Mark Fischer are the Assistant Treasurers, Mark N. Polebaum is    
the Secretary, Brian E. Langenfeld, Christopher R. Bohane, Ethan D. Corey,      
Susan A. Pereira, Timothy M. Fagan and Susan S. Newton are the Assistant        
Secretaries and Assistant Clerks.                                               

MONEY MARKET VARIABLE ACCOUNT                                 
HIGH YIELD VARIABLE ACCOUNT                                   
CAPITAL APPRECIATION VARIABLE ACCOUNT                         
GOVERNMENT SECURITIES VARIABLE ACCOUNT                        
TOTAL RETURN VARIABLE ACCOUNT                                 
GLOBAL GOVERNMENTS VARIABLE ACCOUNT                           

      J. Kermit Birchfield is Chairman, Maria F. Dwyer is President, Tracy
A. Atkinson is Treasurer, Jim Yost, Ellen M. Moynihan, David L. DiLorenzo and   
Mark Fischer are the Assistant Treasurers, Mark N. Polebaum is the Secretary    
and Brian E. Langenfeld, Christopher R. Bohane, Ethan D. Corey, Susan A.        
Pereira, Timothy M. Fagan and Susan S. Newton are the Assistant Secretaries and 
Assistant Clerks.                                                               

      MFS FLOATING RATE INCOME FUND - (CAYMAN ISLANDS REGISTERED FUND) MFS
MERIDIAN FUNDS, SICAV                                         

Martin E. Beaulieu, Maria F. Dwyer and Robin A. Stelmach are  
Directors, Tracy A. Atkinson is Treasurer, James O. Yost and Ellen M. Moynihan  
are the Assistant Treasurers, and Christopher R. Bohane is the Assistant        
Secretary.                                                                      

     MFS INTERNATIONAL LTD. ("MIL BERMUDA"), a limited liability company
organized under the laws of Bermuda and a subsidiary of MFS, whose principal    
business address is Canon's Court, 22 Victoria Street, Hamilton HM 12 Bermuda,  
serves as investment adviser to and distributor for MFS Floating Rate Income    
Fund and the MFS Meridian Funds, SICAV ("SICAV Funds"). The SICAV Funds are     
organized in Luxembourg and qualify as an undertaking for collective            
investments in transferable securities (UCITS). The principal business address  
of the Funds is 47, Boulevard Royal, L-2449 Luxembourg. The SICAV Funds include 
Asia Pacific Ex-Japan Fund, Continental European Equity Fund, Emerging Markets  
Debt Fund, Emerging Markets Equity Fund, Euro Reserve Fund, European Bond Fund, 
European Equity Fund, European Growth Fund, European High Yield Bond Fund,      
European Smaller Companies Fund, European Value Fund, Global Balanced Fund,     
Global Equity Fund, Global Growth Fund, Global Value Fund, Inflation-Adjusted   
Bond Fund, Japan Equity Fund, Limited Maturity Fund, Research Bond Fund,        
Research International Fund, Strategic Income Fund, Technology Fund, UK Equity  
Fund, US Dollar Money Market Fund, US Emerging Growth Fund, US Equity Fund, US  
Government Bond Fund, US High Yield Bond Fund, US Research Fund, US Strategic   
Growth Fund and US Value Fund. The MFS Floating Rate Income Fund is organized   
as an exempt company under the laws of the Cayman Islands. The principal        
business address for the MFS Floating Rate Income Fund is P.O. Box 309, Grand   
Cayman, Cayman Islands, British West Indies.                                    

     James A. Jessee is a Director and President, Martin E. Beaulieu and
Robert J. Manning are Directors, Paul T. Kirwan is the Treasurer, Mark N.       
Polebaum and Juliet Evans are the Secretaries, Mitchell C. Freestone, Ethan D.  
Corey, Jeremy Kream, Mark D. Kaplan and Susan Newton are Assistant Secretaries, 
Timothy F. Tierney is the Tax Officer, Sarah Moule is Resident Representative   
and Appleby Corporate Svs. Ltd. Is Assistant Resident Representative.           

     MFS INTERNATIONAL (U.K.) LTD. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales whose current  
address is Eversheds, Senator House, 85 Queen Victoria Street, London, England  
EC4V 4JL, is involved primarily in marketing and investment research activities 
with respect to private clients and the Cayman Islands Registered Fund and the  
MFS Meridian Funds, SICAV.                                                      

 Olivier Lebleu is Managing Director, Mitchell C. Freestone is a
Director and Barnaby Wiener is a Director. Paul T. Kirwan is the Treasurer,     
Joseph E. Lynch is Assistant Treasurer, Mark N. Polebaum is the Secretary,      
Ethan D. Corey, Jeremy Kream, Mark D. Kaplan and Susan Newton are Assistant     
Secretaries, and Timothy F. Tierney is the Tax Officer.                         

  MFS DO BRAZIL DESENVOLVIMENT O DE MARCAAO LTDA ("MIL BRAZIL"), a
private commercial limited liability quota company organized under the laws of  
Brazil whose current address is Al Campinas, 1070, 7 andar, Sala 15, Sao Paulo, 
Sao Paulo, Brazil, is primarily involved in providing market development        
services to increment the use of MFS products and services in Brazil as well as 
being a distributor of the MFS Floating Rate Income Fund and MFS Meridian       
Funds, SICAV.                                                                   

       Robert J. Manning is the Advisory Board Member and Benedicto D. Filho
is the Manager.                                                                 

   MFS INSTITUTIONAL ADVISORS (AUSTRALIA) LTD. ("MFSI-AUSTRALIA"), a
private limited company organized under the Corporations Law of New South       
Wales, Australia whose current address is Level 27, Australia Square, 264       
George Street, Sydney, NSW2000, Australia, is involved primarily in investment  
management and distribution of Australian superannuation unit trusts and acts   
as an investment adviser to institutional accounts.                             

      Graham E. Lenzner is the Director and Chairman of the Board, Loretta
Lenzner, Robert J. Manning and Sheldon Rivers are Directors, Paul T. Kirwan is  
the Treasurer, Joseph E. Lynch is Assistant Treasurer and Mitchell C.           
Freestone, Ethan D. Corey, Mark D. Kaplan, Jeremy Kream and Susan Newton are    
Assistant Secretaries and Timothy F. Tierney is the Tax Officer.                

        MFS FUND DISTRIBUTORS, INC. ("MFD"), a wholly owned subsidiary of MFS,
serves as distributor for the MFS Funds, MVI and MFSIT.                         

     Robert J. Manning is the Director, Martin E. Beaulieu is a Director
and Chairman of the Board, James A. Jessee is President, Randolph J. Verzillo   
is the Treasurer, Joseph E. Lynch is Assistant Treasurer, Mark N. Polebaum is   
the Secretary, Mitchell C. Freestone, Mark D. Kaplan, Ethan D. Corey, Jeremy    
Kream and Susan S. Newton are Assistant Secretaries and Timothy F. Tierney is   
the Tax Officer.                                                                

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

  Robert J. Manning is Director and Chairman of the Board, Maureen
Leary-Jago is a Director and the President, Mark N. Polebaum is the Secretary,  
Mitchell C. Freestone, Ethan D. Corey, Mark D. Kaplan, Jeremy Kream and Susan   
S. Newton are Assistant Secretaries, Paul T. Kirwan is the Treasure, Joseph E.  
Lynch is Assistant Secretary and Timothy F. Tierney is the Tax Officer.         

      MFS INSTITUTIONAL ADVISORS, INC. ("MFSI"), a wholly owned subsidiary
of MFS, provides investment advice to substantial private clients.              

      Robert J. Manning is Chairman of the Board, Chief Investment Officer
and a Director, Martin E. Beaulieu is a Director, Carol Geremiah is the         
President, Maria Dwyer is Chief Compliance Officer, John F. O'Connor and David  
J. Picher are Senior Vice Presidents, Jeremy Kream is the Secretary, Mitchell   
C. Freestone, Ethan D. Corey and Mark D. Kaplan are Assistant Secretaries and   
Paul T. Kirwan is the Treasurer, Joseph E. Lynch is Assistant Treasurer and     
Timothy F. Tierney is Tax Officer.                                              

 SUN LIFE RETIREMENT SERVICES (U.S.), INC. ("SUN LIFE RETIREMENT
SERVICES"), a wholly owned subsidiary of Sun Life Financial (U.S.) Holdings,    
Inc., markets MFS products to retirement plans and provides administrative and  
record keeping services for retirement plans.                                   

        Claude Accum is a Director, Chairman of the Board, President and Chief
Executive Officer, Martin E. Beaulieu and Ronald Friesen are Directors, Paul T. 
Kirwan is the Treasurer, Joseph E. Lynch is Assistant Secretary, Mark N.        
Polebaum is the Secretary, Mitchell C. Freestone, Ethan D. Corey, Mark D.       
Kaplan, Jeremy Kream and Susan S. Newton are Assistant Secretaries and Timothy  
F. Tierney is the Tax Officer.                                                  

  MFS INVESTMENT MANAGEMENT K.K. (JAPAN) ("MIMKK"), a wholly owned
subsidiary of MFS, is a corporation incorporated in Japan. MIMKK, whose address 
is 16F Daido Seimei Kasumigaseki Bldg., 1-4-2- Kasumigaseki, Chiyoda-ku, Tokyo  
Japan 100 0013, is involved in investment management activities.                

       Carol W. Geremia and Susan Pereira are Directors, Takafumi Ishii is a
Director and Representative Director, Paul T. Kirwan is Statutory Auditor, Mark 
N. Polebaum is Secretary, Ethan D. Corey, Jeremy Kream, Susan Newton, Mitchell  
C. Freestone and Mark D. Kaplan are Assistant Secretaries. Timothy F. Tierney   
is the Tax Officer.                                                             

     MFS HERITAGE TRUST COMPANY ("MFS TRUST"), a New Hampshire-chartered
limited-purpose trust company whose current address is 650 Elm Street, Suite    
404, Manchester, NH 03101, provides directed trustee services to retirement     
plans.                                                                          

  Carol W. Geremia is Director and President, Deborah H. Miller is
Director and Investment Officer, Maureen Leary-Jago and Joseph F. Flaherty are  
Directors, Paul T. Kirwan is the Treasurer, Ethan D. Corey, Jeremy Kream and    
Susan S. Newton are Assistant Clerks, Mark D. Kaplan is Clerk and Trust Officer 
and Timothy F. Tierney is the Tax Officer.                                      

        MFS JAPAN HOLDINGS, LLC, a private limited liability company organized
under the laws of Delaware whose address is 500 Boylston Street, Boston, MA     
02116, is primarily a holding company and is 50% owned by Massachusetts         
Financial Services Company and 50% owned by Sun Life Financial (Japan), Inc.    

Robert J. Manning, Carol W. Geremia and Donald A. Stewart are 
Managers, Mark N. Polebaum is the Secretary, Paul T. Kirwan is Treasurer,       
Joseph E. Lynch is Assistant Secretary, Mitchell C. Freestone, Ethan D. Corey,  
Jeremy Kream, Susan S. Newton and Mark D. Kaplan are Assistant Secretaries and  
Timothy F. Tierney is the Tax Officer.                                          

        SUN LIFE OF CANADA (U.S.) FINANCIAL SERVICES HOLDINGS, INC., a company
incorporated under the laws of Delaware whose address is 500 Boylston Street,   
Boston, Massachusetts 02116, is the direct parent company of Massachusetts      
Financial Services Company.                                                     

Robert J. Manning is the Director, Chairman of the Board and  
President, Donald A. Stewart is a Director, Mark N. Polebaum is the Secretary,  
Mitchell C. Freestone, Ethan D. Corey, Mark D. Kaplan and Susan S. Newton are   
Assistant Secretaries, Paul T. Kirwan is the Treasurer, Joseph Lynch is the     
Assistant Treasurer and Timothy F. Tierney is the Tax officer.                  

     MFS INVESTMENT MANAGEMENT COMPANY (LUX) S.A., a joint stock company
organized under the laws of Luxembourg whose registered office is 49, Avenue    
J.F. Kennedy, L-1855, Kirchberg, Luxembourg, is the management company of the   
MFS Investment Funds, which has 3 portfolios: MFS Investment Funds-Global       
Equity Ex-Japan Fund, MFS Investment Funds-Global Equity Fund and MFS           
Investment Funds-Global Equity Eurozone Bias Fund.                              

Maria F. Dwyer, Martin E. Beaulieu and Robin A. Stelmach are  
Directors, Paul T. Kirwan is Treasurer, Joseph E. Lynch is Assistant Treasurer, 
Mark N. Polebaum is the Secretary, Mitchell C. Freestone, Ethan D. Corey,       
Jeremy Kream, Susan S. Newton and Mark D. Kaplan are Assistant Secretaries and  
Timothy F. Tierney is the Tax Officer.                                          

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

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

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

        William W. Stinson      Non-Executive Chairman, Sun Life Financial and
                               Sun Life Assurance Company of Canada, Sun
                                 Life Centre, 150 King Street West, Toronto,
                          Ontario, Canada; Chairman, Westshore
                               Terminals Income Fund, Vancouver, British
                               Columbia; Director, Grant Forest Products
                                Inc., Ontario, Canada and Trustee, Fording
                           Canadian Coal Trust, Calgary, Alberta

 James C. Baillie        Counsel, Torys, Ontario, Canada; Chair,
                              Independent Electricity Market Operator,
                                Ontario, Canada; Chair, Corel Corporation,
                         Ontario, Canada; Director, Sun Life
                              Financial, Ontario Canada; Director, FPI
                Ltd., Newfoundland, Canada

ITEM 27. DISTRIBUTORS                                                           

(a) Reference is hereby made to Item 26 above.                

       (b) Reference is hereby made to Item 26 above; the principal business
address of each of these persons is 500 Boylston Street, Boston, Massachusetts  
02116.                                                                          

(c) Not applicable.                                           

ITEM 28.  LOCATION OF ACCOUNTS AND RECORDS                                    

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

     NAME                              ADDRESS
     ----                              -------

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

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

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

JP Morgan Chase Bank                       270 Park Avenue    
                                           New York, NY  10017

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

    Ropes & Gray                               One International Place
(counsel)                                Boston, MA  02110

ITEM 29. MANAGEMENT SERVICES                                                    

Not Applicable.                                               

ITEM 30. UNDERTAKINGS                                                           

Not Applicable.                                               

485APOS
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SIGNATURES

    Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this             
Post-Effective Amendment to the Registration Statement to be signed on its      
behalf by the undersigned, thereto duly authorized, in the City of Boston and   
The Commonwealth of Massachusetts on the 26th day of March 2007.                

                    MFS SERIES TRUST III

                      By:    MARIA F. DWYER*
                                             -------------------------------
                     Name:  Maria F. Dwyer
                Title: President

  Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by 
the following persons in the capacities indicated on March 26, 2007.            

SIGNATURE                           TITLE             
---------                           -----             

MARIA F. DWYER*                      President (Principal Executive Officer)    
-----------------------------                                                   
Maria F. Dwyer                                                                  

TRACY A. ATKINSON*                   Principal Financial and Accounting Officer 
-----------------------------                                                   
Tracy A. Atkinson                                                               

ROBERT E. BUTLER*                    Trustee                                    
-----------------------------                                                   
Robert E. Butler                                                                

LAWRENCE H. COHN*                    Trustee                                    
-----------------------------                                                   
Lawrence H. Cohn                                                                

DAVID H. GUNNING*                    Trustee                                    
-----------------------------                                                   
David H. Gunning                                                                

WILLIAM R. GUTOW*                    Trustee                                    
-----------------------------                                                   
William R. Gutow                                                                

MICHAEL HEGARTY*                     Trustee                                    
-----------------------------                                                   
Michael Hegarty                                                                 

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

ROBERT J. MANNING*                   Trustee                                    
-----------------------------                                                   
Robert J. Manning                                                               

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

ROBERT C. POZEN*                     Trustee                                    
-----------------------------                                                   
Robert C. Pozen                                                                 

J. DALE SHERRATT*                    Trustee                                    
-----------------------------                                                   
J. Dale Sherratt                                                                

LAURIE J. THOMSEN*                   Trustee                                    
-----------------------------                                                   
Laurie J. Thomsen                                                               

ROBERT W. UEK*                       Trustee                                    
-----------------------------                                                   
Robert W. Uek                                                                   

                     *By:  SUSAN S. NEWTON
                                             ---------------------------------
                     Name: Susan S. Newton
                               as Attorney-in-fact

                                        Executed by Susan S. Newton on behalf of
                                     those indicated pursuant to Powers of
                                        Attorney, dated February 27, 2007; filed
                                       herewith (Trustees) (Dwyer) (Atkinson).

485APOS
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     INDEX TO EXHIBITS

EXHIBIT NO.                   DESCRIPTION OF EXHIBIT              PAGE NO.      
-----------                   ----------------------              --------      

8 (k)    Exhibit C, dated April 1, 2007 to the Master               
Class R Plan Administration and Service       
Agreement.                                    

9 (b)    Legal Opinion Consent, dated March 26, 2007.               

10 (a)    Consent of Deloitte & Touche LLP - MFS High                 
Income Fund and MFS High Yield Opportunities  
Fund, dated March 26, 2007.                   

(b)    Consent of Ernst & Young LLP - MFS Municipal             
High Income Fund, dated March 26, 2007.       

14        Plan pursuant to Rule 18f-3(d) under the                    
Investment Company Act of 1940 effective      
September 6, 1996, as amended and restated    
effective October 25, 2006.                   

16 (a)    Code of Ethics as amended and restated effective            
January 1, 2007, pursuant to Rule 17j-1 under 
the Investment Company Act of 1940.           

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘485APOS’ Filing		Date		First		Last			Other Filings
		1/1/11		9		103
		2/28/09		6		84
		5/31/08		48
		1/1/08		35		103
		9/30/07		35		103
		6/1/07		2		95			497
		5/31/07		1
		4/1/07		114		116
Filed on:		3/29/07		1
		3/26/07		114		116
		3/20/07		114
		3/15/07		114
		2/28/07		29		97
		2/27/07		114		115
		1/31/07		6		101			24F-2NT,  N-CSR,  NSAR-B
		1/26/07		114
		1/1/07		7		116
		12/31/06		3		97
		12/28/06		114
		11/13/06		114					497
		10/25/06		114		116
		9/29/06		114					497
		9/1/06		34		104			497
		8/25/06		114					N-PX
		8/1/06		35		114
		7/1/06		40		108
		6/30/06		35		111			N-PX
		5/31/06		114					485BPOS
		5/26/06		114
		5/1/06		7		107			497
		4/1/06		35		103
		3/1/06		37		105			497
		2/22/06		28		96
		1/31/06		31		101			24F-2NT,  N-CSR,  NSAR-B
		1/1/06		28		104
		9/28/05		114					NSAR-A
		7/26/05		114
		6/30/05		7					N-PX
		6/28/05		114
		4/1/05		3		114			497,  497J
		3/31/05		7		114			485BPOS,  NSAR-B
		3/15/05		37		105
		3/14/05		114
		3/10/05		114
		2/22/05		114
		1/31/05		31		101			24F-2NT,  N-CSR,  NSAR-B,  NSAR-B/A
		1/1/05		114
		12/31/04		35		103
		12/29/04		114
		12/16/04		114
		10/29/04		114
		10/6/04		114
		9/30/04		81
		9/20/04		37		105
		7/20/04		114
		7/9/04		114
		6/23/04		114
		5/4/04		6		84			NSAR-B/A
		3/25/04		6		84
		3/19/04		6		84
		10/31/03		3		23
		9/17/03		37		105
		6/30/03		3
		5/29/03		114					485BPOS
		4/1/03		114					497
		1/1/03		40		108
		12/31/02		3		108
		11/27/02		114
		10/16/02		114
		8/1/02		114					497J
		7/31/02		3		23			N-30D,  NSAR-A
		7/1/02		114
		5/31/02		114					485BPOS
		1/1/02		114
		12/31/01		47
		4/2/01		39		108
		3/30/01		39		108			497
		12/31/00		47
		1/1/00		39		107
		12/31/99		39		108
		2/17/99		114
		1/1/99		39		108
		12/31/98		39		108
		11/15/98		39		107
		9/30/98		3					NSAR-A
		9/25/98		81					497
		7/1/98		47
		5/15/98		114					485APOS
		11/1/97		39		107
		7/1/97		39		107
		3/1/97		114
		1/2/97		3					497
		1/1/97		114
		9/6/96		114		116
		8/27/96		114					485BPOS
		7/1/96		39		108			497
		10/13/95		114					485BPOS
		5/31/95		114					485BPOS
		1/1/95		114
		1/3/94		3
		9/27/93		3
		8/20/93		27		95
		1/1/93		39		107
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