© 2004 Dechert LLP FORM N-CSR, CERTIFICATIONS AND DISCLOSURE CONTROLS AND PROCEDURES James F. DesMarais, Esq. MFS Investment Management Brian S. Vargo, Esq. Dechert LLP January 26, 2004

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 2 SARBANES-OXLEY ACT OF 2002 A primary goal - enhance responsibility for financial reports Two separate certifications  SOX § 302  SOX § 906

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 3 SEC RULES AND FORMS INVESTMENT COMPANY ACT OF 1940 ICA Rule 30e-1  Semi-annual reports to stockholders  Annual audited financial statements ICA Rules 30b2-1 and 30d-1 – Form N-CSR ICA Rule 30a-2 – Certifications ICA Rule 30a-3 – Controls and Procedures

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 4 FORM N-CSR ICA and Exchange Act report Items include  Reports to stockholders  Code of ethics  Audit committee financial expert  Principal accountant fees and services  Controls and procedures  Exhibits - including certifications Note Exchange Act Rule 12b-20 – further material information

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 5 FORM N-CSR CERTIFICATIONS Principal executive officer and principal financial officer Two separate forms of certifications  Form N-CSR Item 10(a)(2) – ICA Rule 30a-2(a)  Form N-CSR Item 10(b) – ICA Rule 30a2(b)

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 6 FORM N-CSR CERTIFICATIONS Item 10(a)(2)  Reviewed the report  Based on his or her knowledge, no material misstatement or omission  Based on his or her knowledge, financial statements and financial information fairly present in all material respects financial condition, results of operations, changes in net assets, and cash flows (if required)  Disclosure controls and procedures  Internal control over financial reporting

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 7 FORM N-CSR CERTIFICATIONS Item 10(b)  Report fully complies with Exchange Act requirements  Information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 8 FORM N-CSR CERTIFICATIONS Item 10(a)(2) - Controls and procedures  Disclosure controls and procedures (DCP)  Internal control over financial reporting (ICFP)

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 9 FORM N-CSR CERTIFICATIONS Item 10(a)(2) - DCP  Responsibility for establishing and maintaining  Designed to ensure knowledge of material information  Evaluation and report  Form N-CSR, Item 9 - conclusions regarding effectiveness of DCP

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 10 FORM N-CSR CERTIFICATIONS Item 10(a)(2) - ICFR  Responsibility for establishing and maintaining  Designed to provide reasonable assurance regarding reliability of financial reporting and the preparation of financial statements in accordance with GAAP  Disclosure of material changes and deficiencies

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 11 CHANGES TO SHAREHOLDER REPORTS Tighten MDFP  Use of standardized template  Base discussion on attribution analysis  Eliminate discussion of comparative performance to benchmarks not included in attribution analysis  Elimination of forward-looking statements  Note significant positions sold out of fund after the reporting period  Discuss effect of cash position on relative performance Use of separate document that is not part of shareholder report  President letter  Forward looking statements  Expanded discussion on fund performance

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 12 CONDUCT OF PEO/PFO CERTIFICATION MEETING Frequency – monthly for many fund groups Attendees – major contributors to N-CSR Purpose – to fulfill requirement that PEO/PFO have reviewed the shareholder report Topics  Approve minutes  Discussion of material changes to processes or controls  Discuss significant issues arising from other operating committees Risk Committee Valuation Committee Trade Processing Committee  Discuss whistleblower reports  Discuss reports under Attorney Conduct Rule  Regulatory update  Update on industry compliance activities/efforts  Review current N-CSR filings/process  Confirm receipt of all sub-certifications

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 13 DISCLOSURE CONTROLS AND PROCEDURES ICA Rule 30a-3 Funds must maintain and regularly evaluate DCP DCP - controls and other procedures designed to ensure that  information required to be disclosed on Form N-CSR (includes shareholder report!) is recorded, processed, summarized and reported on a timely basis  information is timely communicated to management to enable timely decisions regarding disclosure

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 14 DISCLOSURE CONTROLS AND PROCEDURES What’s the point of DCP?  SEC rules require them  Process provides the basis for certifications Accuracy of information Compliance with disclosure requirements

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 15 DEVELOPING & IMPLEMENTING DCP Getting started  No prescribed form  Tailor to particular business and management practices  Start with current practices

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 16 DEVELOPING & IMPLEMENTING DCP Initial assessment  Understand and document the process by which information is collected and reported  Evaluate current practice Timely communication Accuracy Records Personnel

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 17 DEVELOPING & IMPLEMENTING DCP Identify key personnel/functions Determine how to effectively gather information  Questionnaires  Interviews  Disclosure review and meetings  Sub-certifications Determine the level of diligence to confirm information Establish schedules for each step in the process

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 18 DEVELOPING & IMPLEMENTING DCP Introduction  Explain rationale  Emphasize importance

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 19 DEVELOPING & IMPLEMENTING DCP Establish a disclosure controls committee (DCC)  Role Oversee the process Ensure efficiency and effectiveness Resolve disputes Consider disclosure issues  Members - senior management of each major department/function that contributes to disclosure

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 20 DEVELOPING & IMPLEMENTING DCP Describe the process  Key personnel  Methods of gathering information and responsibility  Methods of confirming information

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 21 DEVELOPING & IMPLEMENTING DCP Active role for senior management  PEO and PFO are “on the hook”  At a minimum PEO and PFO must review each report DCC should meet or communicate with PEO and PFO to review the process implemented, disclosure issues, and the accuracy and completeness of disclosures

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 22 DEVELOPING & IMPLEMENTING DCP Sub-certifications  Support PEO and PFO certifications  Internal - personnel who provide or verify information  External - service providers Certification of information Verification of integrity of process  Investment activities, pricing, marketing and information services, legal and compliance, administration, accounting, custody, transfer agency

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 23 DEVELOPING & IMPLEMENTING DCP Coverage  PEO and PFO certifications cover the entire report MDFP Marketing information “President’s letter” Financial statements and information  DCP must be comprehensive and coordinate efforts of all groups that contribute to disclosure  Use checklists and flow charts Required information Responsible persons Sub-certifications

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 24 DEVELOPING & IMPLEMENTING DCP Records  Create a “paper trail” - document each step in the disclosure process  Regular meetings and minutes of DCC  Compiled reports and information  Completed checklists  Sub-certifications

© 2004 Dechert LLP January 26, 2004 Form N-CSR, Certifications and Disclosure Controls and Procedures 25 DEVELOPING & IMPLEMENTING DCP Keep the Board involved  Approval of DCP  Regular reports - evaluations, deficiencies, changes