© 2004 Dechert LLP

FORM N-CSR, CERTIFICATIONS AND

DISCLOSURE CONTROLS AND PROCEDURESJames F. DesMarais, Esq.

MFS Investment Management

Brian S. Vargo, Esq.Dechert LLP

January 26, 2004

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 2

© 2004 Dechert LLP

SARBANES-OXLEY ACT OF 2002

A primary goal - enhance responsibility for financial reports

Two separate certifications SOX § 302 SOX § 906

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 3

© 2004 Dechert LLP

SEC RULES AND FORMSINVESTMENT 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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 4

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 5

© 2004 Dechert LLP

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)

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 6

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 7

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 8

© 2004 Dechert LLP

FORM N-CSR CERTIFICATIONS

Item 10(a)(2) - Controls and procedures Disclosure controls and procedures (DCP) Internal control over financial reporting

(ICFP)

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 9

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 10

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 11

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 12

© 2004 Dechert LLP

CONDUCT OF PEO/PFOCERTIFICATION 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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 13

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 14

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 15

© 2004 Dechert LLP

DEVELOPING & IMPLEMENTING DCP

Getting started No prescribed form Tailor to particular business and

management practices Start with current practices

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 16

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 17

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 18

© 2004 Dechert LLP

DEVELOPING & IMPLEMENTING DCP

Introduction Explain rationale Emphasize importance

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 19

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 20

© 2004 Dechert LLP

DEVELOPING & IMPLEMENTING DCP

Describe the process Key personnel Methods of gathering information and

responsibility Methods of confirming information

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 21

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 22

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 23

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 24

© 2004 Dechert LLP

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

January 26, 2004Form N-CSR, Certifications and Disclosure Controls and Procedures 25

© 2004 Dechert LLP

DEVELOPING & IMPLEMENTING DCP

Keep the Board involved Approval of DCP Regular reports - evaluations, deficiencies,

changes