Massachusetts Financial Services Company ("MFS")

UK Stewardship Code Report - 2020

MFS has been actively managing our clients’ money since we created the first open-end mutual fund in 1924. At MFS, we are appointed to act as fiduciaries to our clients to help them achieve their investment objectives, and we take these responsibilities very seriously. Put differently, we seek to achieve our clients’ long-term economic objectives by responsibly allocating their capital. Deep fundamental research and a long-term perspective are the foundation of our investment process, and we believe that integrating environmental, social and governance ("ESG") factors into our investment decisions and practicing good stewardship are essential components of this process. Over the past decade, we have made significant progress toward enhancing our ESG integration and stewardship capabilities. We have added resources dedicated to integrating sustainable investing into every aspect of our investment process and developed a comprehensive sustainable investing framework. This includes enhancing our efforts on effective stewardship through, among other things, engaging productively with companies and other industry participants and exercising our proxy voting decisions responsibility, thoughtfully, and deliberately. We believe our progress in this area is highlighted by this report and that our overall approach to sustainability and stewardship embodies each of the principles set forth in the UK Stewardship Code (2020).

Sincerely,

Susan A. Pereira

Co-Chair of the MFS Responsible Investing Committee

Michael T. Cantara

Co-Chair of the MFS Responsible Investing Committee

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Principle 1: Signatories' purpose, investment beliefs, strategy, and culture enable stewardship that creates long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.

In 1924, MFS launched the first US open-end mutual fund, opening the door to the capital markets for millions of everyday investors. Today, as a full-service global asset manager serving retail and institutional investors around the world, MFS still serves a single purpose: to create long-term value for clients by allocating capital responsibly. This purpose drives all of our collective decision-making, including our business model and strategy, investment approach, and corporate culture and values. Additionally, as highlighted throughout this report, we believe this purpose is synonymous with stewardship and sustainable investing.

Our Business Model and Ownership Structure

MFS is a majority-owned subsidiary of Sun Life of Canada (US) Financial Services Holdings, Inc., which in turn is an indirect majority-owned subsidiary of Sun Life Financial, Inc. (a diversified financial services organization). MFS has been a subsidiary of Sun Life since 1982. While the firm operates with considerable autonomy, this partnership provides significant resources, stability and structure. MFS currently operates from offices located in 20 countries around the globe, including nine investment centers — Boston, Hong Kong, London, Mexico City, São Paulo, Singapore, Sydney, Tokyo and Toronto.

We have over 1,900 employees, which includes approximately 300 investment professionals, throughout our global offices. This global footprint gives us a unique and diverse perspective that informs our investment decisions and ultimately feeds into our centralized global research platform.

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We actively manage assets globally for institutional and retail clients in both equity and fixed income strategies that are available through a variety of account types, including separate accounts and pooled vehicles. The defining feature of our active investment approach is our centralized global research platform through which we manage our clients' assets without regard to geography, client type or account type. We believe that this centralized strategy gives us a competitive advantage in providing long-term investment performance and service to help our clients meet their goals by focusing our resources, encouraging global collaboration, and establishing consistency in our decision-making.

Our Investment Approach

At MFS, our investment process is built on three distinct pillars: Collective Expertise — We believe that teams of diverse thinkers, contributing different perspectives and actively debating them within a shared value system, are more likely to understand and incorporate all financially material factors, enabling better investment outcomes. Long-Term Discipline — We have conviction in our ideas over long-time horizons, and our performance incentives are matched with that long-term view, which ensures alignment with client outcomes. Risk Management — We actively monitor material risks and opportunities in managing long-term performance.

Our approach to investing combines traditional fundamental metrics with ESG factors. Importantly, however, at MFS, sustainable investing is not something new or extra that we do. It is part of what we do as long-term active managers, and it is critical to our purpose of allocating capital responsibly for our clients.

On a day-to-day basis, members of our investment team consider all relevant factors that they believe could impact investment outcomes. Their activities include the following:

Analyzing all financially material information as we seek to identify anything that could materially impact the long-term value of specific companies or sectors, which may include ESG factors along with traditional fundamental factors;

Collaborating with each other across sectors and asset classes to share views and make sure we are aware of all material risks and opportunities; and

Engaging with company management teams and boards to better understand the risks or opportunities an issue represents to the business.

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We are convinced that sustainable investing through ESG integration and active ownership improves our ability to achieve our clients’ objectives and meet our fiduciary responsibility. While there are different ways to approach sustainable investing, MFS views ESG through an alpha lens, which is why we have committed to an integration approach. As such, our sustainable investment process reflects the following core aspects:

Sustainable investing with an eye toward creating long-term value. We focus our research and investment process on understanding valuations.

We favor ESG integration and active ownership over divestment. We believe this is better for public markets because it facilitates engagement to encourage responsible business practices.

Unless required by law or a specific client mandate, we don’t apply exclusions or screens.

Please also refer to our response to Principle 7, Principle 9, and Principle 12 below for further information concerning and examples of how we invest our clients' assets and practice active ownership.

Corporate Culture & Values At MFS, sustainability and stewardship are not just confined to our investment approach, but rather are reflected in the core tenets of our corporate culture. We believe that our culture is critical to the success of our business and that creating value for our employees, our communities and our environment is not just a fundamental responsibility, it is foundational to our ability to create long-term value for our clients. Below are the four core values that we share at MFS:

The above values permeate throughout all departments and processes at MFS, not just those impacting our investment decisions. We believe our success lies in our ability to stay focused on these values, which means hiring employees who share our values, aligning with investors who share our long-term philosophy, and always acting in our clients' best interests. We believe that this Report

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demonstrates our commit to these values and in particular, our response to Principle 2, Principle 7, Principle 9 and Principle 12.

Ensuring Our Practices Enable Stewardship and Best Serve Our Clients As stated above, we believe that our corporate purpose is synonymous with stewardship and sustainable investing. In our view, allocating capital responsibly means appropriately taking and measuring risk, thoughtfully asserting ownership rights through proxy voting and engagement, and not pre-occupying ourselves with "chasing" short-term returns at the expense of long-term performance. Incorporated within all of these processes is the recognition of the importance and impact that ESG factors may have on the long-term value of a company. As discussed throughout this report, these attributes are reflected in our current risk management approach and the steps we have taken to align our investing, compensation, client communications, and active ownership practices with long-term performance. We believe that our approach has been very effective in serving our clients by delivering strong and consistent financial returns, while ensuring that we are transparent in our practices and attentive to our clients' specific needs. Our work, however, is never complete and we strive for continuous improvements to ensure that all of our business practices continue to contribute to generating long-term value for our clients. Throughout this report, we highlight the significant progress we have made this year in enhancing our stewardship and sustainable investing capabilities. These enhancements not only demonstrate our commitment in this area, but reflect real and positive changes that add value to our clients, employees and industry and ultimately support our overarching corporate purpose of creating long-term value for our clients by allocating capital responsibility. Specifically, in 2020:

We appointed one of our most seasoned investors as Head of Sustainability and Stewardship to be an ambassador for stewardship within the investment team and MFS more broadly.

We launched investment working groups focused on targeted sustainability topics to further develop frameworks and guidance for our investment and engagement in each area;

We launched firm-wide training initiatives in topics such as sustainable investing and diversity to (i) ensure we educate all of our team members and (ii) ensure these topics continue to be ingrained in our culture.

We issued the MFS Culture Letter to our 100 largest holdings requesting the disclosure of specific workforce data that we believe is indicative of a company's corporate culture.

Participated in several collaborative engagement initiatives and joined collaborative groups, such as Climate Action 100+ and ShareAction, that align with our stewardship and sustainability approach.

Began to realigned presentation of performance in client documents to emphasis long-term results in alignment with client expectations.

Continued to enhance our ESG data and research capabilities and produce thoughtful and highly analytical proprietary research. We further refined our research platform to assist our investment team in embedding these tools into their investment process.

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Principle 2: Signatories' governance, resources and incentives support stewardship.

MFS' Stewardship Governance Structure Our approach to investing has long been well aligned with a sustainability-oriented mindset. In 2009, we formed the MFS Responsible Investing Committee to ensure that our equity and fixed income investment processes were benefiting from the systematic integration of financially material ESG topics. Since the formation of this committee over a decade ago, we have developed a more robust governance structure around our ESG activities and we have taken many other actions to accelerate the implementation of sustainable investing and stewardship practices across the firm.

MFS now maintains three distinct and independent governing bodies that provide broad oversight of our stewardship and sustainable investing activities: the MFS Responsible Investing Committee, the MFS Proxy Voting Committee, and the MFS Sustainability Group.

The MFS Responsible Investing Committee is co-chaired by senior members of our legal and distribution departments, and its membership is composed of a cross-section of representatives from various MFS business units, including our President, General Counsel and representatives from investments, legal, compliance, proxy, and distribution. The Committee maintains and updates the MFS Policy on Responsible Investing and Engagement as necessary and monitors MFS' adherence to ESG-related regulatory issues and external commitments, such as the Principles for Responsible Investment (PRI). Under this committee, we have also organized a working group, the MFS Sustainable Investing Regulatory Working Group, which meets regularly to discuss developments and other regulatory trends that may impact MFS' sustainable investing and stewardship programs. As discussed further in response to Principle 5, the MFS Responsible Investing Committee serves as an important oversight body for MFS' stewardship program.

The MFS Proxy Voting Committee is co-chaired by our Chief Investment Officer and a senior member of MFS' legal department and includes our Head of Sustainability and Stewardship and other senior leaders from our investment, legal and global investment operations departments. The committee establishes proxy voting engagement goals and priorities and oversees the administration of the MFS Proxy Voting Policies and Procedures. As discussed further in response to Principle 5, the MFS Proxy Voting Committee serves as the oversight body for MFS' proxy voting activities.

The MFS Sustainability Group includes MFS' President, Chief Investment Officer, Head of Sustainability and Stewardship, asset class CIOs, Chief Risk Officer, ESG analysts and other senior

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investors and executives. Its purpose is to guide and accelerate the implementation of sustainable investing practices across the firm and to institutionalize ESG integration as a fundamental component of MFS’ investment process and corporate culture. The MFS Sustainability Group also determines the collaborative industry initiatives and groups that the investment team participates in.

While each of these represent distinct and independent governing bodies, there is considerable overlap in membership and the chairs of these committees and groups. Additionally, the MFS Responsible Investing Committee receives standing quarterly updates from the other bodies. We believe that this approach allows for a streamlined oversight structure of our overall stewardship program that embraces specialization, while ensuring open lines of communication to report issues and share relevant developments as they occur.

MFS' Stewardship Leadership Team In order to facilitate the adoption, implementation and enhancement of sustainable investing and stewardship practices across the firm, we employ a number of individuals positioned to provide strategic leadership and support effective integration of sustainability topics across teams and disciplines.

Investments

In 2020, MFS appointed Barnaby Wiener, one of our most seasoned portfolio managers, as Head of Sustainability and Stewardship. A leader and culture carrier who has long been a champion of sustainability, Barnaby works closely with our dedicated ESG research analysts to engage with investment leadership, portfolio managers and analysts to ensure that all of our investors truly understand and have ownership of sustainability in their research and portfolio management duties. He also plays a strategic role with regard to issuer engagement on sustainability topics.

Our investment team includes two equity analysts and one fixed income analyst dedicated solely to ESG research who have done much to advance our investment team's thinking on ESG topics. Our ESG analysts fulfil a critical role in facilitating our sustainable investing efforts, however, they are not intended to be the source of all ESG research. Their role is to support and enhance the ongoing research into ESG topics performed by our portfolio managers and analysts.

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Client Engagement and Thought Leadership

We have personnel dedicated to developing thought leadership and engaging with our clients and the investment industry on ESG issues. These individuals play an important role given the high level of interest from industry participants in understanding how asset managers, such as MFS, approach sustainable investing and stewardship.

Michael Cantara, who leads our global client group, plays an important role in the advancement of sustainable investing within the firm and how we communicate our approach externally. Mike is co-chair of the MFS Sustainability Group and the MFS Responsible Investing Committee.

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The MFS Investment Solutions Group includes three individuals fully dedicated to sustainable investing. This team develops ESG thought leadership and market research as well as interacting with our clients in the capacity of investment strategists.

Proxy Voting

Our team of three dedicated proxy analysts manages day-to-day proxy voting and proxy-led engagement activity. The proxy voting team employs a collaborative approach in its decision-making, incorporating information and perspectives from our global team of investment professionals, from public disclosures and engagement discussions with our portfolio companies, and from a variety of third-party research tools. This process facilitates well-rounded viewpoints on key issues, which we believe leads to well-informed voting decisions that are in the best long-term economic interests of our clients. This group is overseen by Susan Pereira, who serves as a co-chair of the MFS Responsible Investing Committee and MFS Proxy Voting Committee.

Legal

In early 2020 we tasked a member of our legal team with focusing exclusively on assessing and monitoring the ESG-related regulatory landscape to ensure MFS is aware of all relevant regulations in jurisdictions where we do business and responding to them appropriately.

MFS' Sustainability Training Efforts At MFS, sustainability is at the core of our corporate identity. We believe that in order to achieve true ESG integration, we require the participation of our entire firm – not just our investment team. A major priority for 2020 was the development of a comprehensive training program that offered non-investment personnel the opportunity to deepen their understanding of sustainable investing. Launched in June, the course includes foundational, intermediate and advanced learning tracks that cover the history, evolution and current state of sustainable investing. The curriculum also includes detailed information about MFS' approach to sustainable investing through ESG integration and stewardship, and discussions about evolving ESG topics, trends and research. So far over 1,000 MFS employees were actively participating in the course or had completed the all course modules.

Additionally, exclusive to our investment team, we recently launched a program of monthly seminars for the entire investment team. The program was launched in early 2021 and will feature a wide

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range of mostly external presenters including asset owners, asset managers, academics and other industry stakeholders who have an interesting perspective that promises to enhance our team's understanding of sustainability-related topics.

MFS' Diversity & Inclusion Program At MFS, we value diversity of people, cultures and ideas. Diversity and inclusion (D&I) are a mindset that drives how we operate as a firm and serve our clients. We fully embrace that mindset because we believe leveraging diverse perspectives and encouraging everyone to have a voice promotes innovative thinking and better decision making. Our strength comes from the unique and valuable perspective that each person brings, and our success can only result from the collective intelligence of an array of highly competent individuals. Diversity isn’t just something we do; it’s ingrained in our culture.

Our strategy focuses on three key aspects of diversity & inclusion:

Talent -- Build a more diverse workforce and leadership Culture -- Sustain and enhance an inclusive workplace Community -- Improve industry and global diversity & inclusion

D&I are foundational to the work we do as active managers, essential to our sustainability and critical to our ability to honor our purpose. For an active manager like MFS, diversity makes it possible to bring different perspectives into our investment process. Given that we rely heavily on human capital to achieve our purpose, we aim to attract, retain and develop the best talent from all segments of the global population. This spirit of collaboration and inclusivity directly benefits our clients and enables everyone at MFS to thrive and prosper. We’ve built our D&I strategy based on these beliefs and our commitment to making our firm, industry and world a more inclusive place.

Training

MFS has training and educational programs for managers to provide them with tools to lead their diverse and global teams. Inclusive leadership is a management expectation that is included in manager evaluations. We also conduct regular trainings on anti-harassment/anti-discrimination and unconscious bias.

We continuously evaluate the state of D&I at MFS, providing tools and learning opportunities to equip our employees and managers to increase knowledge and understanding. To inform our choices, we conduct surveys to evaluate employee perceptions of D&I at the company. We also provide learning and professional development opportunities such as trainings and unconscious bias for all employees.

MFS' Diversity Annual Report

For further information regarding MFS' efforts to further D&I in the work environment, please access MFS' 2020 Diversity Annual Report through the following website: https://www.mfs.com/content/dam/mfs-enterprise/mfscom/sales-tools/sales-brochures/mfs_diversi_ann.pdf

Diversity in MFS' Workforce

MFS uses availability analysis vs. incumbent workforce to determine if there are areas of improvement and engages in relevant hiring and recruitment activities to support our diversity goals. The below graphics reflect the current diversity of MFS' employees (please note that for non-gender categories, MFS is limited to reporting only US figures).

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Diversity Targets and Strategic Priorities

At MFS we do not set explicit diversity targets for our workforce, as we believe that implementing a holistic program that values D&I will attract candidates from all backgrounds. We have, however, set the following goals for the next year in our D&I program:

Initiative Alignment Goal(s)

Communication and Education

• All employees engage in 3 hours of diversity/inclusion activities per calendar year (i.e., corporate diversity events/panels, ERG’s, recruitment events, mentorships, inclusivity training etc.) • >80% all employee participation in engagement survey (in years when conducted).

Leadership • All leaders & participate in Inclusive leadership training • All employees participate in inclusivity/unconscious bias training • Cascade a firm-wide employee goal that asks for summary action taken to drive/support diversity and inclusion.

Recruiting • All hiring managers participate in ‘Advanced Interview Skills’ training • 2-4 self-identified diverse interviewers on each hiring team for new roles

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MFS' Investment in Systems, Processes, Research and Analysis

Please refer to our response to Principle 7 below for further information concerning the systems, processes, research and analysis used by MFS to support is sustainable investing and stewardship programs.

MFS' Use of Service Providers in its Sustainable Investing and Stewardship Program

Please refer to our responses to Principle 7, Principle 8, and Principle 12 below for further information concerning MFS' use of third-party service providers in its sustainable

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investing and stewardship programs.

Performance Evaluation & Compensation of Investment Personnel MFS’ philosophy is to align the compensation of investment personnel with the goal to provide shareholders with long-term value through a collaborative investment process. Therefore, MFS uses long-term investment performance as well as contribution to the overall investment process and collaborative culture as key factors in determining such compensation. As a result, investment personnel are incentivized to consider long-term risks and opportunities, including those related to ESG topics, in their investment decision making process. Compensation of investment personnel consists of a base salary and performance bonus, with the latter typically representing more than a majority of the total cash compensation and is based upon quantitative and qualitative factors. To encourage long-term focus, the quantitative portion is primarily based on the pre-tax performance of accounts managed over a range of fixed-length time periods, intended to provide the ability to assess performance over time periods consistent with a full market cycle and a strategy's investment horizon. In addition, a portion of each individual's compensation is based on qualitative factors, such as, beginning in 2020, an analysis of an individual consideration and communication of material ESG risks and opportunities. We believe that this overall approach, which is rooted incentivizing long-term performance, collaboration, and the consideration of factors, such as ESG issues, exemplifies MFS' prioritization of stewardship.

Effectiveness of MFS' Governance and Resourcing of its Stewardship Program

At MFS, we continue to invest significant time and resources towards enhancing our stewardship capabilities and recognize that this is a process that requires continual reassessment and improvement. We believe that this mandate is at the center of our stated purpose of helping our clients’ achieve their long-term economic objectives by responsibly allocating their capital. This year we took a significant step forward by appointing Barnaby Weiner, one our most seasoned portfolio managers, as our Head of Stewardship and Sustainability. Since his appointment, Barnaby has served as a catalyst for further developing our stewardship program, both within the investment team and the firm more broadly. In addition to Barnaby's appointment, we made following enhancements, among others, to our stewardship program in 2020:

launched a firm-wide sustainability training program;

added the consideration of ESG factors to our compensation practices for investment personnel;

launched targeted sustainability working groups within our investment team to further develop and socialize our investment and stewardship approach in specific sustainability areas (please see our response to Principle 4 and Principle 7 for more information on these groups);

added a dedicated legal resource to tracking ESG regulatory developments; and

implemented significant enhancements to our internal research and data analysis capabilities.

As noted above, however, our work in developing our stewardship program and governance structure is never finished. While we believe our current committee and working group structure and the composition of these committees and groups has served our stewardship objectives well to

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this point, we recognize that this is an area of ever increasing complexity. As such, in 2021, our corporate compliance group is undertaking a review of our structure to determine if enhancements are need to the existing structure in terms of reporting lines, responsibilities, and membership composition. Specifically, with respect to membership, we recognize that sustainable investing and stewardship more broadly is become more data intensive and, as such, we anticipate adding members of MFS' global technology team to certain of these groups and committees. Finally, in the area of engagement, our investment team is in the process of codifying a set of standard principles to be used by our investment team when engaging with our issuers, which we believe will build on our existing engagement policies, ensure consistency in our engagement practices and help further socialize our stewardship expectations.

We look forward to providing an update on these initiatives and others in our UK Stewardship Code Report for 2021.

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Principle 3: Signatories manage conflicts of interest to put the best interest of clients and beneficiaries first.

Our policies and oversight structure is designed to ensure that our clients are treated fairly, honestly, and ethically at all times. Delivering on this commitment requires policies and procedures to ensure that conflicts of interest are identified, mitigated, and where necessary, disclosed to clients. Conflicts may arise in different business contexts and we have adopted policies that address the most common of these. Specifically, MFS' Conflicts of Interest Policy establishes a framework for managing conflicts of interest across MFS and requires that employees take reasonable steps to identify, prevent, and manage our conflicts of interest. The Conflicts of Interest Policy also requires MFS to maintain a Conflicts of Interest Inventory of the identified conflicts of interest relating to firm and client activities. The inventory includes both actual and potential conflicts of interest and is updated as necessary to reflect any new conflicts or changes to already identified conflicts arising from MFS' business activities. Examples of potential or actual conflicts included in the Conflicts of Interest Inventory include, but are not limited to:

Conflict of Interest Actions / Processes to Address Conflict

MFS could be incentivized to favor certain client accounts over others in the allocation of resources and investment opportunities

MFS has established committees that review trade oversight, investment management, and employee conduct to monitor this conflict. Additionally, MFS has implemented policies and procedures that address investment allocation issues, personal and corporate investing.

MFS employees engaging in outside business activities and holding director positions outside of MFS, particularly on boards of public companies or entities that issue public debt may be made aware of material, non-public information which could prevent MFS from trading in certain securities.

MFS has adopted a monitoring, reporting, and approval process for these circumstances and has implemented policies and codes of ethics establishing guardrails for outside business activities.

MFS employees could be incentivized to work with a business partner because he/she received something of value from the business partner.

MFS has adopted an employee code of business conduct and gifts and entertainment policy, which implements maximum value limits and a reporting structure.

MFS may be motivated to selectively disclose information to a client or business partner prior to making the information available publicly or to other clients in order to retain business or win

MFS has implemented policies concerning the disclosure of holdings and other sensitive information, which establishes specific processes and approvals from senior management for disclosing sensitive

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business. information.

MFS could direct trades to certain brokers to compensate them for selling other MFS products or services.

MFS has implemented policies and regular reporting, reconciliation procedures, and controls, such as broker votes, to monitor for correlations and other indicia of this type of activity.

In addition, from time to time, MFS employees may disclose potential conflicts as required under the MFS Code of Business Conduct. These disclosures are investigated by MFS' Compliance Department and steps are taken to remove, mitigate or manage the actual or potential conflict. Additionally, MFS' Compliance Department has designated specific individuals to serve as MFS Conflict Officers in each jurisdiction in which MFS conducts business operations. The MFS Conflict Officers are intended to serve a local contact points for employees to report, discuss or otherwise escalate an actual or potential conflict of interest.

As noted above, MFS has adopted policies and procedures that address and mitigate the types of conflicts of interest that arise in the ordinary course of providing services to our clients. In addition, MFS may take the following action to control a conflict of interest:

disclosing it to the relevant parties; establishing informational, physical, and operational barriers (ethical walls); segregating responsibilities or performing independent reviews of decisions; and requiring clients to maintain funds and securities with an independent custodian.

Additionally, we maintain an organizational structure that further mitigates the potential for conflicts. In general, oversight is performed through our Internal Compliance Controls Committee Structure (the "ICCC Structure"). The ICCC Structure consists of various committees, each of which oversees one or more business activities and either directly or indirectly reports compliance violations to the Internal Compliance Controls Committee. Separately, we maintain a corporate structure that allows for the mitigation of potential conflicts of interest through:

segregation of duties; establishment of ethical walls and other informational barriers, where appropriate; and independence of compliance, risk and internal audit function.

Use of Non-Pubic or Inside Information

The MFS Inside Information Policy governs the receipt and communication of material, non-public information and prohibits the use of such information in violation of relevant jurisdictional laws. The policy applies to all directors, officers and employees of MFS and each of its subsidiaries (MFS representatives), and it generally prohibits trading or recommending trading in any security while in possession of material, non-public information relating to the issuer of that security or while knowing that another MFS representative is in possession of such material, non-public information. MFS maintains a restricted trading list that applies to both MFS and employee trading.

Informational Barrier with Sun Life Financial Inc.

MFS has adopted a policy to ensure that there are appropriate informational barriers, or ethical walls, between MFS and Sun Life Financial Inc. and its subsidiaries other than MFS ("Sun Life"). Pursuant to this policy, no employee, officer or director of Sun Life may be involved in voting or investment decisions (including ESG integration or stewardship activities) for securities or derivative instruments

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owned or managed by MFS or provide direction or information to individuals at MFS with the intent of influencing voting or investment decisions.

Proxy Voting

Proxy voting may present unique challenges concerning conflicts of interests and as such, our proxy voting policies and procedures include a description of how we manage potential, material conflicts of interest in regards to proxy voting at portfolio companies. Our policy is that proxy voting decisions are made in what we believe to be in the best long-term economic interests of our clients, and not in the interests of any other party or in our corporate interests. For clarification, we vote in what we believe to be the best, long-term economic interest of our clients entitled to vote at the shareholder meeting, regardless of whether other MFS clients hold "short" positions in the same issuer.1 If a member of the MFS Proxy Voting Committee or any other employee involved in a voting decision identifies a personal interest with respect to such voting decision, then he or she must recuse himself or herself from participating in the voting process. Further, the Proxy Voting Committee does not include individuals whose job responsibilities primarily include client relationship management, marketing or sales.

Additionally, in cases where we (i) consider overriding a specific guideline in our proxy voting policies or procedures, (ii) consider a matter that is not governed by a specific guideline in our policies, (iii) evaluate an excessive executive compensation issue related to the election of directors, or (iv) consider a matter that requires consultation with our investment team, we will check to see whether the matter involves an issuer that has a significant relationship with MFS. Where we identify a potential conflict, the Proxy Voting Committee (with participation of an MFS Conflicts Officer) will carefully evaluate the proposed vote to ensure that the proxy is ultimately voted in what we believe to be the best long-term economic interests of our clients and not in our corporate interests. Likewise, in instances where we are evaluating a director nominee who also serves as a director of the MFS Funds (i.e., pooled investment vehicles sponsored by MFS), then the Proxy Voting Committee will adhere to the process described in the previous sentence regardless of whether MFS has a significant relationship with the issuer.

If a client has the right to vote on a matter submitted to shareholders by Sun Life, we will cast the vote as such client instructs or in the event that a client instruction is unavailable pursuant to the recommendations of the relevant proxy advisory firm's benchmark policy, or as required by law. Likewise, if a client has the right to vote on a matter submitted to shareholders by a public company for which an MFS Fund director/trustee serves as an executive officer, we will cast the vote as such client instructs or in the event that client instruction is unavailable pursuant to the recommendations of the proxy advisory firm or as required by law.

Moreover, certain our retail funds (each a "top tier fund") from time to time may own shares of other retail funds (each an "underlying fund"). If an underlying fund submits a matter to a shareholder vote, the top tier fund will generally vote its shares in the same proportion as the other shareholders of the underlying fund. If there are no other shareholders in the underlying fund, the top tier fund will vote in what we believe to be in the top tier fund's best long-term economic interest. If a client has the right to vote on a matter submitted to shareholders by an MFS fund, we will cast a vote on behalf of such client in the same proportion as the other shareholders of the fund.

1 Likewise, except in limited circumstances (e.g. a bondholder meeting), we vote on behalf of clients' equity interest.

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Principle 4: Signatories identify and respond to market-wide and systemic risks to promote a well-functioning financial system.

MFS' Investment Risk Management Framework As noted in our response to Principle 1 above, our cultural emphasis on risk management is incorporated into all facets of our investment process. At MFS, the goal is not to minimize risk, but rather to understand its sources and effectively manage it. The risk management process strives to ensure that each strategy takes an appropriate level of risk that is disciplined and consistent with the investment philosophies of its mandate while also meeting long-term investment objectives. Risks impacting each strategy may come in the form of either systemic or issuer-specific factors. As a result, we take a collaborative approach to assess and manage portfolio risk to ensure all types of risks are identified and managed.

Security Level. On a day-to-day basis, fundamental analysts assess the operational, financial and valuation risk characteristics of each issuer they follow and quantitative models use factors based on earnings momentum, price momentum, valuation and earnings quality. Each team engages in a comprehensive evaluation of the risk characteristics of all investment ideas as a consideration for inclusion within their portion of the portfolio.

Portfolio Level. The portfolio management team uses daily exposure and monthly attribution reports to review a portfolio’s industry and sector weightings versus the benchmark to confirm that a portfolio’s positioning is consistent with the team’s investment convictions and theses that result from its bottom-up fundamental research. The Investment Management Committee reviews the portfolio risk reports monthly to ensure that our investment policies are carried out by the team.

Firm Level. MFS has instituted a comprehensive approach to risk management that is a combination of disciplined internal controls and managerial oversight. Risk policies are dictated, first and foremost, by portfolio limits and regulatory restrictions. But we have established an organizational structure, systems, and processes to identify current and emerging risks to our portfolios and communicate these throughout the investment team.

Specifically, with respect to ESG, we consider both risks and opportunities when evaluating ESG factors and trends, and we have implemented systematic processes designed to help our investment team manage ESG-related risks at the security and portfolio levels. Starting in 2020, we introduced annual portfolio sustainability reviews designed by our ESG analysts to provide portfolio managers with a comprehensive view of the ESG risks and opportunities in their portfolios based on MFS' own internal research and viewpoints. Separately, we also conduct a broader semiannual portfolio risk review process for each portfolio, which is conducted by MFS’ Chief Risk Officer and respective asset class CIOs, which covers a wide variety of topics including investment risk exposures, investment philosophy, and current portfolio positioning. These semi-annual reviews also incorporate third party ESG ratings and perspectives, such that each portfolio's ESG profile is evaluated against that of its benchmark and ESG rating changes since the last review. Both the annual portfolio sustainability reviews and the semi-annual risk reviews are intended to prompt additional research and collaboration among the investment team.

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Additionally, in 2020, our investment team launched a framework of working groups in specific sustainable investing focus areas. These working groups are organized under the newly created Sustainable Investing Steering Group, which includes our Head of Sustainability and Stewardship, CIO, ESG analysts and various other members of our investment team, and are designed to develop our investment teams' approach on each subject and to identify and socialize emerging issues, including material risks. Currently, our investment team has launched the following working groups: Climate Working Group, Governance Working Group, Societal Impact Working Group, and Sovereign Working Group. We will consider launching additional working groups as needed.

Market-Wide and Systemic Risks This section provides an overview of many of the specific market-wide and systemic risks that our investment team has focused on in 2020, and describes, in conjunction with the examples we provide in our response to Principle 7 and Principle 9, how these risks have influenced our investment and engagement processes. It is important to note that, while we feel these risks were particularly relevant in 2020, we ultimately prioritize all risks based on the potential material economic impact that they pose to each individual portfolio.

Climate Change. We believe that climate change will be a defining investment topic for the decade ahead, creating risks and opportunities for all businesses. As long-term investors seeking to allocate capital responsibly, MFS is carefully analyzing the impact that climate change has on all companies held in our clients' portfolios, as well as on those companies being considered for future investment. Climate change and regulations associated with climate change are materially impacting many businesses’ revenue growth, margins and returns, cash flows, capital expenditures and valuation. These impacts are arising due to regional and country commitments (e.g., carbon prices and taxes), changing consumer expectations and preferences for lower-impact products and services, physical disruptions caused by a warming climate and increased divestment/investment based on certain companies' preparedness for climate change. As long-term investors seeking to understand the duration and stability of financial returns, we assess and manage this important issue at both the issuer (company, sovereign or sub-sovereign) level and portfolio level. MFS also regularly engages with companies to encourage better disclosure and management of climate risks.

As with all risks and opportunities, our assessment of environmental issues like climate change begins with in-depth, fundamental company and industry analysis. Our investment team has conducted a substantial amount of climate research, which has been shared in sector team discussions, regional investment meetings, thematic presentations and one-on-one interactions. This research has covered a wide range of industries spanning the highly affected energy, utility, and industrial sectors alongside other industries that are increasingly being impacted by climate change (e.g., real estate, insurance, consumer staples). Our work has focused on understanding risk in the four areas illustrated below.

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Recently, our investment team has started to evaluate how various climate scenarios could impact individual companies. When done properly, these analyses are highly complex, requiring forecasts of commodity prices, mix shifts in various types of energy, market share changes at the industry and company level and costs related to carbon taxes and regulations, among many other factors. Given this complexity, we plan to continue to evaluate how to efficiently and effectively create scenarios at the company level before moving to portfolio-level climate scenario analysis.

Additionally, MFS has used carbon intensity analysis to evaluate the climate risk of various portfolios relative to their benchmarks. Many of our equity portfolios have typically exhibited a lower carbon footprint than their benchmarks, and we have invested, across many portfolios, in companies that are helping to drive the transition to a lower-carbon world. Because of this and the depth of our fundamental company analysis, we believe most of our portfolios would respond favorably in scenarios where global temperature increases are severely limited by increased regulation and physical impacts.

COVID-19 Pandemic. The COVID-19 pandemic, which continues to impact all of us, has been a wake-up call in so many ways. Our ESG research analysts have produced thematic research on the social implications of the COVID-19 crisis. Over the past few years, our overarching message has been that society is shifting away from a shareholder primacy model of managing a business to a stakeholder-centric approach. COVID-19 is likely to accelerate this shift, and it will require investors to better understand the value that companies are creating for and extracting from all stakeholders, including employees, customers, suppliers, the environment, the government and society. Our ESG analysts examined how this shift could impact normalized corporate margins through dimensions such as income inequality, supply chain and corporate taxation.

We also recognize that the COVID-19 pandemic does not just impact our investment process and how we evaluate portfolio companies, but MFS' staff as well. As has been the case since the beginning of the pandemic, we have remained focused on our employees’ health and well-being, which enables us to continue to serve our clients and business partners in the best manner possible. We implemented a mandatory work from home requirement to ensure the continued safety of our employees and the continuity of our business operations. Throughout the pandemic, we have continuously worked with our critical vendors to keep abreast of their status and ensure that they can provide continued services to MFS. We have formed a “return to the office” task force charged with developing and implementing a plan that allows employees to return to our offices in a prudent and safe manner.

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Income Inequity. Developed market income inequality is being driven by structural factors (e.g., automation, outsourcing/globalization, etc.) that are unlikely to naturally reverse based on market forces. We believe these structural factors will cause society to put more emphasis on addressing inequality through regulation, which could reverse many of the margin-enhancing steps companies have taken to reduce labor costs.

For example, the value of service sector jobs has diminished substantially. Few of these jobs offer a living wage, health and retirement benefits or consistent schedules, which has forced society to pick up the cost of the negative externalities associated with these types of employment practices. Research suggests that layoffs substantially hinder the job performance of remaining employees, the cost of replacing an employee is up to two times his or her salary, and new employees can take two years to get to full productivity. Given this, we should be willing to look through the short-term pain of margin degradation and select companies that invest in their employees and can outperform over the long term by avoiding these pitfalls.

These could be companies that already manage their workforce well (i.e., those that have avoided relying too much on the labor cost reduction levers described above) or those that have sufficient margins or sustainable pricing power to absorb increased labor costs. Such increased employee costs are also likely to become stickier during downturns, further impacting decreasing margins in future recessions. The things we have focused on recently include:

extra Covid-19-related compensation per employee

total COVID related costs (including extra cleaning) as percentage of revenues

analyzing Glassdoor ratings mix of contract and temporary employees employee turnover rates offshoring mix

Our investment team has engaged extensively with companies to discuss how they are managing corporate culture, employees and layoffs during the COVID-19 crisis and beyond. This is especially important given an increasing societal emphasis on inequality and its materiality.

During 2020, our ESG research analysts also produced an analysis on the risks around the growth of the "gig" economy (predominately used by companies offering "ride-shares" and other delivery services), which has created new job opportunities globally, but may give rise to issues such as (i) income inequality, (ii) companies increasing reliance on temporary/contract workers, and (iii) regulatory risk. The two biggest problems with the way these employment platforms treat labor are 1) workers cannot earn a living wage and 2) platforms exert excessive control over workers. As global governments continue to recognize these risks, companies using this employment model may face increase margin pressure as labor costs increase. To assist our investment team, our analyst developed a framework to differentiate companies using this type labor to identify companies with unsustainable labor practices and costs as well as the countries most likely to see regulatory changes.

Modern Slavery and Abusive Labor Practices. During 2020, modern slavery and other abusive labor practices continued to move to the forefront of market-wide risks that are significant to us as investors. During the year, one of our ESG research analyst produced in depth research on the risks of modern slavery in the supply chain of retailers, consumer staples brands and other impacted industries. The potential risks related to modern slavery are increasing due to regulatory activity, increasing consumer awareness of the issue, and a growing investor interest in ESG in general and issues such as modern slavery in particular. These factors are likely to result in various financial impacts, supply chain disruptions, fines or lowered valuations for companies that can’t effectively manage this risk. Our analysis outlined three steps that our portfolio managers and analysts can take to better understand this risk: 1) determine which companies are most likely to face this risk, 2) carry

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out internal and external assessments of company risk and 3) engage in dialogues with company management teams.

In addition to the global issues related to labor practices, our investment team also focuses on more targeted risk that arise out of specific countries or regions and factor this analysis in our risk assessment of impacted issuers. For example, our research analysts have been following developments around labor standards in India. In particular, we are concerned about the three-year labor law suspension in Uttar Pradesh. This decision was made to revive the state’s economy, which has been disrupted due to the COVID-mandated lockdown, by luring industrialists to the region. It is our understanding that one of our portfolio company’s suppliers may source from this region. In October, we sent a letter to encourage the company to require its suppliers to do the following: (1) maintain the worker-beneficial standards of pre-COVID labor laws; (2) keep salaries at or above minimum wage (3) encourage the use of “regular” and directly employed workers versus “contract” or indirect/ casual labor, and (4) avoid the use of labor agents when such use serves to limit workers’ benefits from Employees’ State Insurance (ESI) & Provident Fund (PF) contributions.

Corporate tax practices and transparency. During 2020, our ESG analysts continued to work with industry groups and government representatives to emphasize the importance of transparency and fairness in global corporate tax practices. Over the past serval years, we have collaborated with other market participants to promote the importance appropriate tax disclosure standards as a critical step towards address this risk.

Please refer to our response to Principle 10 below for examples of industry initiatives that we participated in and stakeholders that we have worked with to promote these risks and others.

MFS' Commitment to Well-Functioning Financial Markets In addition to identify material risks that may impact our portfolio investments, we are also committed to supporting and playing our part in developing efficient and fair financial markets. We believe this is an important component of being a responsible participant in the asset management industry and ultimately a good steward of our clients' capital. For example, our commitment in this area is illustrated by our role as a part owner of Luminex. Luminex is an equity trading venue that is owned, operated and governed by a consortium of buy-side firms to benefit the clients of the investment managers that trade on the platform. Luminex allows investment managers to source blocks of equity liquidity while minimizing information leakage and market impact, enabling participants to pass along the benefits of lower trading costs, enhanced transparency of trading protocols, and improved portfolio performance to their clients. Luminex currently does not aim to make money but rather aims to operate as close to break-even as possible while remaining financially sound and self-sustaining.

Assessment of Effectiveness in Identifying and Responding to Market-Wide and Systemic Risk and Promoting Well-Functioning Financial Markets

We believe that the above approach has been and continues to be effective in identifying and aligning our investment process with relevant risks, including the systemic and market-wide risks discussed above. We believe this approach strikes the right balance between being structured to ensure systematic risk analysis of each of our strategies in a uniform and consistent manner, while being flexible enough to properly identify and mitigate emerging risks as they arise. With respect to ESG and stewardship more broadly, please refer to our responses to Principle 7, Principle 9, and Principle 10 for examples of how these risks have impacted MFS' specific investment and engagement practices.

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Principle 5: Signatories review their policies, assure their processes and assess the effectiveness of their activities.

At MFS, oversight of all policies is performed through the MFS Committee Governance structure. Four internal supervisory committees: the Internal Compliance Controls Committee, the Enterprise Risk Management Committee, the Employee Conduct Oversight Committee and the Investment Management Committee, oversee compliance activities, risk management functions, investment management, and operational processes. Supporting the supervisory committees are a group of key business process/functional committees which are designed to offer a forum for the communication of all issues that arise with respect to a committee's subject matter, including any relevant policies and procedures. Within this framework, MFS has organized the Policy Committee, which is co-chaired by MFS’ General Counsel and includes the Chief Compliance Officer as a member, to formalize the review of policies and to ensure a comprehensive approach to policy development and refinement. The Policy Committee has implemented a Policy Governance Framework that requires policies to be reviewed by their owner and the assigned functional committee at least annually. This annual review is focused on determining if revisions or updates are necessary to respond to developments of a business, operational, legal or regulatory nature. The MFS Legal and Compliance Departments assist policy owners in their review. Changes to policies are approved by the applicable functional committee, reviewed and approved by the Policy Committee, and are ratified on a quarterly basis by the MFS Internal Compliance Controls Committee before becoming effective.

As it relates to MFS' stewardship program and oversight of MFS' ESG integration, engagement and proxy-voting processes, MFS has established the following functional committees: the MFS Responsible Investing Committee and the MFS Proxy Voting Committee. The MFS Responsible Investing Committee is composed of senior representatives from various departments, including MFS' General Counsel and MFS' President and Head of Global Distribution, and is responsible for, among other things, reviewing and updating, at least annually, MFS' Policy on Responsible Investing and Engagement and ensuring that this policy accurately reflects MFS' approach with respect to ESG integration and engagement. The MFS Proxy Voting Committee, which includes MFS senior leadership and MFS' proxy voting staff, provides governance and oversight with respect to all matters relating to MFS' proxy voting program, including reviewing and updating, at least annually, the MFS Proxy Voting Policies and Procedures.

Policy Enhancements and Changes during the 2020 Reporting Period As discussed above, all policies, including those related to stewardship, are reviewed by MFS at least annually to ensure they accurately reflect current practices and requirements. This policy review framework also provides an opportunity to consider enhancements to MFS' practices based on client, market, or MFS internal expectations. We view this process as critical to ensure appropriate oversight by MFS senior staff and relevant MFS committees.

During the most recent annual policy review by the MFS Proxy Voting Committee, the following material changes were incorporated into the MFS Proxy Voting Policies and Procedures:

Approach to Lead Independent Director Tenure (US): MFS will consider the re-election of the lead independent director to the board of any US issuer on a case-by-case basis if

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the tenure of the director on the board exceeds twenty years.

Expansion of Board Gender Diversity Policy (US, Canada, Europe): MFS will generally vote against the chair of the nominating or governance committee (or equivalent position) of any US, Canadian or European issuer when less than 15% of its board of directors are women.

During the most recent annual policy review by the MFS Responsible Investing Committee, there were no material changes made to MFS' Policy on Responsible Investing and Engagement.

Internal and External Assurances in relation to MFS' Stewardship As discussed above, MFS has established an extensive internal committee structure to oversee its various activities, including those related to MFS' stewardship. In particular, the MFS Proxy Voting Committee and MFS Responsible Investing Committee, which are composed of members of MFS' senior management, provide an effective oversight function and forum to evaluate MFS' ESG integration, engagement and proxy-voting processes and stewardship practices generally. Additionally, as described further in our response to Principle 2 and Principle 7, we have embedded oversight groups and working groups within our investment process, namely the Sustainable Investing Group (to serve as a forum to discuss MFS sustainable investing program on a firm-wide level), the Sustainable Investment Steering Group (to serve as an organizing body for our topic-specific investing sub-groups), Climate Change Working Group, Societal Impact Working Group, Governance Working Group and Sovereign Risk Working Group, to, among other things, develop frameworks and evaluate progress made with respect to the relevant subject matter. Furthermore, as discussed in our response to Principle 4, our investment team has also implemented regular risk reviews that provide valuable oversight concerning each strategy's integration of ESG factors, including semi-annual general investment risk reviews and more targeted annual sustainable investing deep-dive reviews. Finally, in 2020, we began developing a compliance program specifically dedicated to overseeing our sustainable investing process. While developing this program is a multi-year process, we are already seeing the benefits of having dedicated staff in this area. We believe the above approach provides a robust and continuous framework of assurance that leverages both senior management and subject matter experts to review each component of MFS' stewardship program. During calendar year 2020, the above assurance process led to a number of enhancements in MFS' stewardship program, including, for example: (i) adding a standing semi-annual update of MFS sustainability compliance program to the agenda of MFS Responsible Investing Committee; (ii) the development of global ESG and sustainability regulatory "heat map"; (iii) a new emphasis on conducting engagements with members of the board of our portfolio companies and (iv) development of an overall engagement framework and topic specific investing frameworks to guide all investment staff.

MFS' Internal Audit Department conducts routine and targeted audits based on internal risk assessments. While these reviews do not occur every calendar year, MFS' stewardship activities, including, but not limited to, its proxy voting practices and sustainable investing practices are subject to these audits. As a matter of company policy, we do not disclose the results of internal audits publically, but we do view these reviews as an essential component of our oversight program that provide a mechanism to ensure MFS is continuously reviewing and improving the activities that represent the cornerstones of our stewardship program.

Clear, Fair and Balanced Reporting of Stewardship Our stewardship reporting and client communications may take several forms, ranging from bespoke

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individual client reporting to webinars and stewardship reports intended for larger public audiences. In all of this reporting we seek to ensure that our communication is clear, fair and balanced by staying true to our corporate values discussed in our response to Principle 1, namely succeeding together through collaboration. Regardless of the type of report or client communication, we use a collaborative approach, which includes input from subject matter experts but also checks and balances. Our client services and investor solutions teams are continuous working with our clients to assess reporting expectations and with our investment, proxy voting, and marketing team members to determine the type, frequency, and content of reporting that most effectively meets our clients' expectations and needs. As result of this work, we publicly provide the MFS Sustainable Investing Annual Report, Quarterly Stewardship Reports and research insights on target sustainable investing topics. All of these materials are available by visiting www.mfs.com/sustainability. All external communications are subject to a review by legal and compliance team members prior to being published to ensure accuracy of the content and compliance with local regulatory standards. Additionally, to ensure clarity and consistency in our communications, all public reporting is reviewed by dedicated members of our editorial standards team prior to be published. For non-public client-specific reporting, we rely on relationship managers, which are assigned for each client, to ensure (i) our clients are receiving the necessary information from us; (ii) all reporting expectations are communicated to the relevant business units within MFS, and (iii) any reporting expectation are codified in client agreements or other written instructions. As with our public communications, all materials are subject to reviews by subject matter experts and appropriate checks and balances.

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Principle 6: Signatories take account of client and beneficiary needs and communicate the activities and outcomes of their stewardship and investment to them.

MFS' Asset Under Management and Client Base MFS' assets under management ("AUM") as of December 31, 2020, was $608.4 billion. The following table provides a further breakdown of MFS' AUM based on asset class and geography.

Assets Managed by Asset Class

Asset Class Assets (US $ - billions) Percentage of Total

Equity $503.11 82.69%

Fixed Income $77.64 12.76%

Balanced $27.65 4.54%

Total $608.4 -

Geographic Breakdown of Assets Managed

Geography Assets (US $ - billions) Percentage of Total

Americas $480.94 79.04%

Europe/Middle East/Africa (EMEA) $69.26 11.38%

United Kingdom1 $5.62 0.92%

Asia-Pacific (APAC) $58.19 9.56%

Total $608.4 -

1 Included in EMEA AUM for purposes of calculating MFS' Total AUM.

As of December 31, 2020, MFS had 1162 clients globally. The following table provides a further breakdown of MFS' global client based by client type and geographic region.

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Accounts by Type

Account Type Number of Accounts Percentage of Total

Retail Accounts1 170 12.26%

Institutional Accounts 1216 87.73%

Total 1386 -

Accounts by Geography

Geography Number of Accounts Percentage of Total

Americas 823 59.37%

Europe/Middle East/Africa (EMEA) 271 19.55%

United Kingdom2 16 1.1%

Asia-Pacific (APAC) 292 21.06%

Total 1386 -

1 Includes pooled vehicles (such as US mutual funds registered under the Investment Company Act of 1940) available to retail investors and does not reflect the number of investors in such products. 2 Included with EMEA total for purposes of calculating MFS' total number of accounts.

MFS' Investment Horizon At MFS, we invest our clients' assets with a long-term view and generally do not focus on or "chase" short-term investment performance. We focus on the long-term because we believe that this approach reflects what it means to a good steward of our clients' capital. While we do not set specific investment horizons, our investment team generally views a full market cycle as a seven-year holding period. Ultimately, our investment horizon will depend on a number of factors, including, but not limited to, a client's stated expectations and goals, the asset class, and overall market conditions.

Seeking Our Client's Views In managing our clients' assets, we believe it is critical to understand and incorporate their views in order to deliver on their expectations as it relates to investment outcomes and stewardship. Our approach, however, will ultimately vary depending on the type of client. As reflected in the tables above, we have both institutional and retail clients. For our institutional clients, we are generally able to engage in a more in-depth dialogue about a client's expectations through assigned relationship managers and regular and ad-hoc meetings to discuss our progress towards achieving a client's goals. Additionally, a client's investments objectives, restrictions, and reporting expectations will be reflected in a tailored written agreement, which is updated as necessary to ensure we are meeting a client's current needs and expectations. For our retail clients, investing in our retail mutual funds and other pooled vehicles, we rely on a continuous dialogue with external distribution partners to understand and meet our retail clients' needs and expectations. Our distribution partners are ultimately the client-facing entities for investors in our retail funds and therefore we have assigned

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relationship managers for each distributor, regular due diligence and product discussions to elicit feedback to ensure we are meeting our retail clients' needs. For both retail and institutional client bases we organize and host events regularly to communicate our investment capabilities and approach and to further engage with our distribution partners that provides services to these investors.

Additionally, we believe client surveys represent highly effective tools for both retail and institutional clients that we may use from time to time to gather information on our clients' views and needs. These are effective channels to also education our clients on our investment and stewardship process. In 2020, we conducted the following investor surveys:

We conducted our MFS Institutional Investor Compass survey (now in its fifth year of publication), which gathers insights from over 500 of our global institutional clients concerning their views and sentiment towards issues such as asset allocation, the role of active management, and product/strategy implementation. This year's survey also included a focus on participants' views of sustainable investing and the role of engagement.

We surveyed of over a thousand US retirement plan investors, which revealed a number of valuable insights regarding the current demand and expectation for investment products in their retirement portfolios that incorporate ESG factors.

Surveys such as these, in addition to information gathered through both institutional and retail communication channels, helps to inform what products we offer and how these portfolios are managed to meet our clients' expectation. We believe our approach in this area continues to be effective and informs changes that we make in our client communications and stewardship processes generally.

An example of a recent change we have made in our approach to better align with our clients' expectations is our presentation of performance information. Our clients hire us to deliver long-term value and, as noted above, our strategies are managed to a long-term investment horizon. As such, in 2020, we implemented a company-wide change that performance information (subject to compliance with local regulations), will be presented in all materials with the longest performance periods first. This is a departure from the industry standard of presenting performance in the sequence of 1, 3, 5 and 10 years. While this change may seem minor, we believe it will better reflect our investors long-term investment expectations and further align performance discussions with long-term objectives.

We take meeting our client expectations extremely seriously. During calendar year 2020, we are not aware of any instances where we intentionally deviated from a client's stewardship and investment policies that have been communicated to us. With respect to our investment activities, we do not typically use investment screens for managing our strategies, unless directed to by a client or regulation. Any investment restrictions, however, are monitored and tracked through our centralized investment compliance platform. With respect to our proxy voting activities, as discussed further in our response to Principle 12 below, we vote according our MFS Proxy Voting Policies and Procedures and will only vote proxies not accordance with our policies if we receive written instructions from our clients. In the all circumstances, where a client's expectation may not have been satisfied, we take all reasonable efforts to remedy the issue and make the client whole.

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MFS' Communications with Clients about Stewardship MFS shares information regarding our stewardship-related activities as well as portfolio-level data and metrics (including ESG-related attributes) with our clients upon request. We publish an annual report, the MFS Sustainable Investing Annual Report, and Quarterly Stewardship Reports that summarize developments in our ESG integration approach, as well as proxy voting and engagement activities for each quarter and year. Additionally, we report on our responsible investing efforts in accordance with collaborative initiatives that we join, such as the Principles for Responsible Investing ("PRI"). We also regularly publish thematic ESG research performed by our investment team as well as sustainable investing thought leadership, which can be found on our website: www.mfs.com/sustainability.

Our clients who have delegated to us proxy voting authority receive a periodic vote summary report for their portfolio. We also publicly disclose the votes of certain pooled vehicles for which we serve as investment adviser on a quarterly basis, which are available on our website at Proxy Voting (mfs.com) (please click, "Europe", "United Kingdom" and then "Investment Professional"). We additionally include in the MFS Sustainable Investing Annual Report a summary of our proxy voting and engagement activities.

We believe that the above approach to communicating our stewardship activities to our clients continued to be an effective in 2020 because it incorporates the flexibility to provide client-specific information, such as proxy voting reports (where applicable) and bespoke portfolio-level metrics, with more general reporting, such as our annual and quarterly sustainability reports, that provide insights into MFS' views of current and emerging issues and how these may impact our investment and stewardship processes.

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Principle 7: Signatories systemically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfill their responsibilities.

MFS' Approach to ESG Integration & Serving Our Clients As an active manager, we seek to identify investments that can add sustainable, long-term value for our clients. While many asset managers have chased market demand by launching new ESG strategies or re-labelling their existing portfolios, we have maintained a process-focused approach that ensures ESG considerations are a part of every investment decision.

Comprehensively and holistically integrating ESG factors into our investment process improves our understanding of what is, and what is not, priced into equity and fixed income valuations. This helps us identify businesses that we believe have the potential to offer more consistent and durable returns.

Our multifaceted ESG integration strategy combines analytic, bottom-up research and systematic risk management, as well as active ownership through engagement and proxy voting.

A variety of activities, processes, data sets, and governance structures support our ability to make sound, long-term investment decisions on behalf of our clients. The following graphic highlights the principal areas where we focus our time and attention.

Our clients are often surprised when we tell them that MFS' ESG research analysts are not actually responsible for ESG integration. Instead, each of our equity and fixed income analysts and portfolio managers are responsible for integrating ESG factors into their conversations with management teams, financial modeling, valuation, and security selection decisions. The importance of this fact

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cannot be overstated. This broad ownership of ESG analysis leads to many benefits.

FIRST: It is efficient. It spreads the substantial work required to properly analyze these topics over a greater number of individuals. Isolated ESG teams, no matter how large, cannot match the power of our more than 300 analysts and portfolio managers working daily around the globe to understand the companies in which we invest.

SECOND: It is effective. It places the responsibility for integrating ESG topics in the hands of the individuals best positioned to understand industry dynamics and the unique characteristics of individual portfolios.

THIRD: It produces better research. Broad ownership leads to more diverse views being shared on financially material ESG topics.

We believe that this approach to ESG integration best serves our clients by ensuring that the consideration of material ESG issues permeates throughout our entire investment process and, in turn, is incorporated across all asset classes, strategies, and product types. Additionally, since our ESG research analysts are intentionally not placed in silos, this facilitates the broader investment team's ability to leverage their research and subject matter expertise and incorporate this into a process that is tailored for specific strategies or clients. This ensures that all clients, regardless of strategy, asset class, or geographic domicile, receive the benefits our research, expertise and overall approach to ESG integration.

MFS' Sustainability Investment Leadership In order to facilitate the adoption, implementation and enhancement of sustainable investing practices across the firm, we employ a number of individuals positioned to provide strategic leadership on sustainable investing and support effective integration of sustainability, including:

Barnaby Wiener, one of our most seasoned portfolio managers, serves as Head of Sustainability and Stewardship. A leader and culture carrier who has long been a champion of sustainability, Barnaby works closely with our ESG research analysts to engage with investment leadership, portfolio managers and analysts to ensure that all of our investors truly understand and have ownership of sustainability in their research and portfolio management duties. He also plays a strategic role with regard to issuer engagement on sustainability topics.

Our investment team includes two equity analysts and one fixed income analyst dedicated solely to ESG research who have done much to advance our investment team's thinking on ESG topics. Our ESG analysts fulfil a critical role in facilitating our sustainable investing efforts. However, they are not intended to be the source of all ESG research. Their role is to support and enhance the ongoing research into ESG topics performed by our portfolio managers and analysts.

Enhancements made to MFS' Integration of ESG during 2020 During 2020, in spite of the business challenges presented by the global COVID-19 pandemic, MFS took a significant step forward in the advancement of its sustainable investing capabilities. Over the course of the year, we undertook a number of initiatives in support of our overarching goal: to ensure that sustainability is fully embedded in every part of our investment process. This impacts both how we determine what we invest in and how we engage with the issuers we own.

MFS' Sustainable Investment Steering Group and Thematic Working Groups

In order to deepen our ESG integration efforts within the investment team, we launched the

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Sustainable Investment Steering Group. Comprising our Head of Sustainability and Stewardship, CIO, ESG analysts and various other members of our investment team, the purpose of this group is to provide guidance and feedback on our ESG integration strategy. We also formed four working groups reporting to Sustainable Investing Steering Group to focus and lead on the following sustainability pillars: Climate Change, Societal Impact, Governance and Sovereign Risk. Each group includes our ESG analysts and a cross section of investment team members, including specialists and generalists from fixed income and equity as well as proxy voting (in the case of the governance working group). The purpose of these groups is to stimulate discussion across the investment team and develop practical frameworks that will inform our investment decision-making process and corporate engagement strategy.

Sector and Asset Class Research

Our eight sector research teams are continually incorporating ESG-focused research into their meeting schedule, and have now formalized a new goal of dedicating at least one meeting a quarter to a discussion of relevant sustainability topics. Likewise, our fixed income sub-asset class teams are also dedicating meetings solely to ESG issues affecting sovereigns, Municipals, High Yield, etc.

Investment Roundtable

During our virtual Investment Roundtable event in September 2020, the agenda had several sustainability related keynotes and thematic presentations. Kasper Rorsted, CEO of Adidas, provided insights into his company's sustainability journey during his presentation and Q&A with the investment team. Our ESG analysts delivered a presentation on how rising inequality is affecting society, companies and various stakeholders. This was followed by breakout sessions where various members of the investment research and portfolio management teams discussed the implications of this important social theme on their portfolios and sector coverage.

Portfolio Sustainability Reviews

As part of our systematic approach to ESG risk management, all MFS strategies are now subject to annual ESG reviews focused exclusively on sustainability risks. These reviews cover a wide variety of sustainability metrics and will complement the ESG dimension of our broader semiannual portfolio risk review process.

Board Level Interaction

In order to deepen our understanding of each issuer's governance and culture, and enable more effective engagement, we are making it standard practice to try to meet with members of the board of directors from each of our investee companies on a regular basis.

Continued Development of ESG Integration Capabilities for Fixed Income During 2020, we continued to focus on improving our ESG integration frameworks for all fixed income sub-asset classes, including corporates, sovereigns, US municipals, and securitized fixed income. Some of the recent enhancements in our fixed income ESG integration capabilities include:

Sovereign Debt

Members of the newly formed Sovereign Risk Working Group were tasked with developing an ESG sovereign risk framework to support and enhance our investment decision-making process across all asset classes. Once codified, it will enable the broader investment team to look at country risk through an ESG lens and better understand how it might be impacting their investments.

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Municipal Bonds

We undertook due diligence on research providers that offer sustainability data for issuers in the US municipal bond investment universe. Relative to corporates, issuer specific ESG data is still scarce for muni's and analysts largely rely on other sources, such as regulatory and government mandated disclosures, for relevant information. We selected a vendor that can provide demographic, socio- economic and climate risk data, which will improve our ability to assess the physical risks faced by municipal issuers.

High Yield

During the year, our fixed income ESG analyst engaged in robust conversations with his sector counterparts to deepen understanding of material ESG issues in their company or other issuer coverage. One of the preferred means used to increase awareness of both materiality and application of these types of issues is to present the relevant information to the broader team and facilitate dialogue. For example, members of the High Yield research team covered a wide variety of issues in the second half of the year. The analyst covering one of the largest subscription based streaming services discussed the importance of governance factors including founder control and impending digital tax legislation that might have a financial impact. The analyst covering gaming companies discussed the potential for increased regulations to protect communities from the perceived harmful effects of gambling. The analyst covering autos and auto parts companies discussed the implications of the shift to electric vehicles and its effect on financials and credit metrics in the medium and long term. Our London based analyst elaborated on the various governance red flags that he had encountered over the course of his career and using them as an early indicator of credit downgrades and potential defaults in the European high yield issuer universe.

Sustainability Bonds

We continue to own themed social bonds including green bonds, social bonds and sustainability linked bonds across various portfolios. Our exposure to these bonds more than doubled in 2020, reflecting greater issuance and our increasing asset base.

Social bond issuance soared as a result of the COVID-19 crisis (approaching 150 billion USD for the full year compared to 18 billion USD in 20192) as both corporates and governments issued bonds to fight the pandemic on a variety of fronts. Some of the use-of-proceeds included improved access to healthcare, loans to small businesses and increasing the supply of protective equipment. Cumulative Green bond issuance in 2020 surpassed the $1 trillion USD level in late September as that market

2 Source: Bloomberg

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continues to draw in new issuers and investors.

How Our Research Informs Our Investment Decisions3

During the past year, our investment team produced in-depth research on a variety of ESG themes we believe to be financially material to the companies we own and influenced our global investment decision-making.4 We do not maintain a list of discrete issues that our investment team prioritizes, but rather we prioritize issues based on financial materiality to each specific investment. We have adopted this approach because we view all of our investee companies through an independent lens and we believe that a "one-size-fits all" approach does not yield the best long-term investment outcomes. Ultimately, we believe this approach is in the best interest of our clients and aligns with our corporate purpose discussed in our response to Principle 1 above.

The environmental impact of plastic packaging and its role in climate change. In 2020, our ESG analysts developed a framework for assessing the environmental impacts of single use plastic packaging and their implications for the entire plastics value chain. This framework initially focused on the chemicals, plastic packaging, consumer staples and waste management industries and it provided a basis for our sector teams to begin identifying associated risks and opportunities for companies in their coverage. In particular, how changing consumer preferences, regulation, and costs for plastic packaging affected the competitive positioning and profitability of companies over the long-term. Their evaluation extended to dedicated engagements with various companies and developing their own data sets to compare company progress versus stated targets, which could later be used for further engagement.

Many investment decisions have been impacted by this research. Most notably, our US-based packaging analyst upgraded an aluminum can packaging company from a hold rating to a buy rating based primarily on her view that lower plastic bottle consumption due to consumer concern and regulatory costs associated with emissions and plastics pollution would likely cause a resurgence in the demand for aluminum cans. Aluminum cans have similar emissions footprint to recycled plastic and are infinitely recyclable compared to plastic, which is severely limited by current recycling technology. In addition, one of our Singapore-based equity analysts reduced the growth rate in his long-term terminal value calculation for a plastics supplier to account for regulatory risks and consumer shifts away from plastic. More on this topic is also available as part of our research publication series: ESG in Depth – Sustainable Packaging: Risks to the Plastic Value Chain.

Over reliance carbon-based energy sources. A US-based portfolio manager collaborated with one of our ESG research analysts to analyze the coal exposure and carbon mitigation efforts of a utility company. Their joint analysis found that coal accounted for more than 40% of the company’s energy mix and that the management team was not focused on climate issues. Due to the stranded assets risk and ESG concerns, our portfolio manager reduced his exposure to this name.

One of our ESG analyst undertook a data-driven study of emerging market capital goods names in the heavy-industry subsector. Her analysis identified extremely high operational and execution risk for a South Asian power company. The company has exhibited consistently high fatality levels (higher even than much larger companies) and a worsening water-use track record over time. Additionally, many of their plants are located in severely water-stressed regions with little to no water

3 Please note that, due to specific jurisdictional regulatory requirements, we are unable to include the name of specific companies that we use in this report as examples of investment, engagement, or proxy voting decisions. We are limited to providing only a description of the company. 4 Although our team researched and debated a number of other ESG themes during 2020, the following examples are intended to display the breadth of our thematic ESG research and its importance to our investment process.

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management infrastructure and limited investment in transitioning away from coal toward greener power. This work was shared with the covering industry analyst as well as the broader investment platform. Given the analyst’s decreased confidence in execution, we have taken a more negative view on this security.

Corporate structure. Our Singapore-based ESG analyst collaborated with our analysts covering Chinese internet names to analyze their variable interest entity (VIE) structures5 and evaluate the relative risk of the founders 1) using the VIE to appropriate value away from minority shareholders or 2) losing control of the listed entity to the ultimate VIE owners. The team found that all the VIEs were structured similarly, with the key licenses owned by the VIE owners. The team also found that one of these names has the most shareholder-friendly VIE structure, as both the operating entity and the licenses were owned by a joint venture comprising the listed company along with the VIE owners. The joint venture runs the most valuable parts of the business, enabling the listed company to effectively and directly control business operations while avoiding the limitation of license regulations that the VIE seeks to circumvent. This governance analysis was incorporated into our investment team's view of relative attractiveness of each of these internet companies as potential investments for our portfolios.

Please refer to our response to Principle 4 above for further information concerning how we have used ESG research and risks to inform our investment decisions.

ESG Integration Across Geographic Regions, Client Type, and Asset Class

As describe in our response to Principle 1, our investment team operates on a global research and investment platform. Our investment decisions are rooted in collaboration and consensus across our globally located investment teams and, as such, we do not manage our clients' assets differently based on geographic location, client type, or asset class. With that said, we do have investment personnel located in major financial centers all over the world. While our process remains consistent, this broad reach provides us the ability to dig deep into local issues and provide more insightful and tailored research, which can be leveraged by our global investment team. Examples of this research addressing sustainability issues can be found by visiting www.mfs.com/sustainability.

ESG Data and Tools

The ESG data landscape is changing rapidly, as are the tools available for analyzing this data. During 2020, MFS' ESG data integration strategy advanced substantially.

We enhanced our investment team's access to both internal and external ESG data and insights. We broadened the scope of data we receive from existing third-party ESG research providers and added a new provider that offers insights on municipal bond issuers. This new data source will help our investment team better understand the physical risks faced by an issuer in the municipal bond market and enhance ESG integration in this important sub-asset class.

All of our selected third-party service providers receive clear and actionable criteria to support the integration of ESG into our investment process. We hire these third-party service providers for a specific purpose or to fill an existing data or research need. These service providers are evaluated by MFS through multiple channels. As noted in our response to Principle 8 below, MFS has implemented

5 A VIE is a legal business structure in which an investor has a controlling interest despite not having a majority of voting rights.

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a robust vendor management program, which includes a due diligence framework, which is driven by a risk analysis of each service provider, and a vendor contract approach, which ensures material terms and clear expectations are reflected and achieved. Additionally, on a more informal basis, members of our investment team regularly communicate with these service providers, to provide feedback on the quality of research and data received. These informal meetings in particular serve a critical function of ensuring our data providers are provided clear and real-time instruction in meeting our needs.

Please also refer to our response to Principle 8 below for further information concerning how we hold our third-party service providers accountable and ensure our expectations are met.

To house our proprietary ESG research and relevant third-party data, MFS maintains easily accessible, issuer-specific ESG pages within our investment research system. Links to notes written by our analysts and portfolios managers that are tagged as containing ESG content are automatically added, enabling the broader team to quickly identify and evaluate internal viewpoints on the material ESG factors impacting the companies they cover or hold in a portfolio.

During 2020, we added our proprietary ESG "sector maps" to each company's ESG page. MFS' sector maps outline the key environmental and social issues we believe are material to the industry in which a company operates. Each topic shown on a company's map includes an assessment of the risk or opportunity level, an overview of the topic (including key data points to analyze), and potential questions.

Over the past year, we have also increased the amount of external ESG research available on these company-specific ESG pages. Our team can now access multiple providers' data and reports from a centralized location. All of this information is available for any public company globally, making it a powerful ESG research tool.

In addition to increasing the availability of data within our research database, we have also enhanced the team's access to ESG data through other means. For example, in 2020, our ESG analysts developed an ESG dashboard tool that instantly and simultaneously displays a wide variety of third party data and insights for up to 100 issuers. This includes emissions data, water usage, diversity, injury rates, employee attrition, data security and bribery/corruption practices, executive compensation and governance information, audit quality and controversies amongst other information.

There are still many shortcomings in the availability and comparability of ESG data, which is one reason that we believe there is no substitute for in-depth issuer analysis. Materiality assessment cannot be automated. ESG issues are complex, interconnected and evolving too quickly for a single rating or data point to effectively reflect the full extent of sustainability-related risks and opportunities facing a company or investment.

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Principle 8: Signatories monitor and hold to account managers and/or service providers.

MFS utilizes the following third-party service providers in implementing its ESG integration and proxy voting programs.

Proxy Advisory Firms Institutional Shareholder Services, Inc. (ISS) Glass, Lewis, & Co., Inc.

Please refer to our response to Principle 12 below for further information concerning how we use proxy advisory firms in our proxy voting process.

ESG Research and Data Providers MSCI ESG Research TruCost RepRisk Bloomberg ISS

Please refer to our response to Principle 7 above for further information concerning how we use third-party ESG research and data providers.

MFS monitors all of its service providers, including the proxy advisory firms and ESG research and data providers listed in the above tables, through a centrally organized vendor management program. This program provides a framework for MFS' management to identify, measure, monitor, and control the risks associated with outsourced vendors and other vendor services. Our vendor selection and monitoring process employs a risk-based approach utilizing tools and techniques detailed in the program. The program is administered through the MFS Vendor Management Policy and Procedures, which are under the oversight of MFS' Enterprise Risk Management Department.

Our policy provides a framework for vendor selection and ongoing due diligence. Specifically, a vendor relationship manager is assigned to each service provider and is ultimately responsible for the management and oversight of the relationship and serves as the primary point of contact between MFS and the service provider. Each service provider is assigned a materiality risk rating, which determines the frequency and type of oversight and monitoring that is performed. Service providers, such as the proxy advisory firms and certain of our ESG research and data providers, that have access to non-public information regarding MFS' portfolio holdings or other confidential information are considered "material vendors" and therefore (1) are subject to due diligence reviews on at least an annual basis and (2) are required to provide the results of independent audits on their operations (where applicable). Service providers that are not considered "material" are subject to the same due diligence process, but on a less frequent schedule (typically 18 – 24 months), or in the case of service providers that provide products solely for MFS' consumption are subject only to ongoing monitoring of deficiencies and other "red flags". Other key monitoring techniques employed in the program include the following:

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ad-hoc or informal feedback site visits periodic meetings

identification of fourth- party sub-service providers

establishment and monitoring of service levels

When applicable, service providers are evaluated by the MFS Business Continuity and Information Technology and Security groups to ensure compliance with the respective MFS standards.

Written agreements are also in place with each service provider. These agreements are generally tailored to include contractual assurances that are appropriate given the nature of the services being performed. Contractual terms are maintained in accordance with MFS standards that are developed in partnership with MFS subject matter experts. For example, our Information Security team and Privacy Officer are responsible for establishing contractual terms governing data protection and information security terms. Service provider invoices are evaluated for accuracy upon receipt and prior to payment.

During 2020, MFS conducted annual due diligence reviews of both proxy advisory firms, Glass Lewis and ISS, and MSCI and Bloomberg. These reviews involved the analysis of each firm's (i) adequacy and quality of its staff; (ii) its conflict of interest procedures; (iii) its independent audit reports; (iv) data security; (v) business continuity planning, and (vi) the voting guidelines and methodologies (where applicable). Additionally, MFS required quarterly reports from these service providers concerning any violations or changes to their conflict of interest procedures. Other ESG data and research providers used by MFS in 2020, namely TruCost and RepRisk, have been classified as lower risk and therefore were not subject to a due diligence review this year.

Based on the reviews conducted of each ESG research and data provider and proxy advisory firms used by MFS in accordance with the above process, there were no material deficiencies or issues or violations of the relevant written agreements to report for 2020. MFS believes that all ESG research and data providers and proxy voting advisory firms used by MFS in the 2020 met MFS' expectations and added value to MFS' stewardship program.

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Principle 9: Signatories engage with issuers to maintain or enhance the value of assets.

Engagement is at the heart of our stewardship program. As an active manager, we believe open communication with issuers is vital to ensuring all issues, including ESG risks and opportunities, receive adequate attention from management teams and other stakeholders. At its core, we strive to maintained a regular dialogue with the companies we invest in. Increasingly, we are trying to use our privileged access to executive teams to engage with them on social and environmental issues which are, or could be, material to their business. Examples of these issues are outlined in our response to Principle 4 above, and include, but are not limited to, an issuer's specific environmental risks, particularly involving climate change, their labor and employment practices, and their overall compensation practices. Recognizing the critical importance of the board in influencing corporate culture and strategy, not to mention appointing the executive team, starting in 2020 we started making a point of setting up periodic meetings with non-executive directors to complement our discussions with management. We prefer conversation to confrontation, and expect to make more progress that way, but we are willing to use our vote or other means if necessary to expedite change.

Overall, MFS' long-term approach to investing inspires a long-term approach to engagement. Our multiyear engagement horizon typically allows us to develop very strong relationships with our portfolio companies. As a result, we are able to have more candid and insightful discussions as we foster these long-term dialogues.

MFS' Engagement Methodologies We engage with issuers in several ways:

Informal investment-led engagement

Our investment team engages with companies on a continual basis, sharing ideas and asking ESG-related questions of management teams during in-house meetings, on-site visits and investment conferences. These informal engagements are very common and typically used to cover any issue or topic that MFS considers relevant to its investment thesis of a company, including ESG issues.

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Formal investment-led engagement

Our investment team also pursues what we regard as "formal" engagements. More limited in number than informal engagements, formal engagements occur when other avenues have failed to produce a desired outcome. Formal engagements typically take the form of meetings between our investment team and C-suite executives or board members or may take the form of a formal exchange of correspondence.

Collective and other forms of engagement

MFS believes that collective (or collaborative) engagement can generate positive impacts for industries, individual companies and a wide range of stakeholders, including shareholders. We actively participate in a number of industry initiatives, organizations, and working groups that seek to improve, and provide guidance on, corporate and investor best practices, ESG integration, and proxy voting issues.

Please refer to our response to Principle 10 below for further information concerning our collaborative engagements during 2020.

Formal proxy voting-led engagements

We believe that open communication with issuers on proxy voting and corporate governance matters is an important aspect of our ownership responsibilities. Our proxy voting team engages in dialogue with management teams, board members and other senior representatives of MFS' portfolio companies through in-person meetings, conference calls and formal letter writing campaigns. In 2020, the proxy team led 104 engagements with 94 distinct portfolio companies across 11 different markets.

Prioritizing Engagements MFS' investment personnel prioritize engagements based on a number of factors, such as the size of a holding and the financial materiality of an issue that may impact the company. We believe these factors are the most important in the context of our client portfolios and we are likely to have more influence with companies where we have a larger ownership stake. Additionally, ESG and other sustainability-related issues continue to be a priority for our investment-led engagements, particularly the issues identified in our response to Principle 4 above.

In 2020, proxy-led engagement priorities were focused on corporate culture, diversity and executive compensation issues. Specifically, when engaging on diversity, our proxy team seeks to understand a board's refreshment and recruitment processes, as well as the demonstrated impact of diversity and inclusion initiatives. With respect to the broader workforce, we look for initiatives aimed at strengthening diversity and investments in the culture of belonging and inclusion. Demonstrating accountability for employee diversity throughout the workforce can be established through disclosure of employee diversity metrics and goals, progress toward achieving diversity related goals, hiring diverse talent and fostering inclusive leadership.

Engagements in Fixed Income Open communication with issuers is an important aspect of bond ownership. We believe that long-term oriented asset managers, investing in all asset classes, who engage companies can positively influence governance and business practices by encouraging executive teams to recognize that certain issues, such as ESG issues, are relevant to an increasingly broad investor base and require further consideration. As such, beginning in 2020, our fixed income investment professionals are now included in all issuer engagement meetings conducted by the proxy voting team. We believe that fixed income investment professionals offer a unique perspective at these meetings and this may

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serve as a means of encouraging more open communication between issuers and bondholders. In addition to engaging individually with portfolio companies, investors, including bondholders, can participate in various industry working groups and organizations that seek to develop thought leadership on emerging issues. As an example, please refer to our response to Principle 10 below concerning our recent work with the PRI's Sub-Sovereign Debt Advisory Committee.

Engagement Across Geographic Regions As discussed above in our response to Principle 7 above, while MFS is a global asset manager, we operate through a centralized platform and therefore do not significantly vary our practices based on geographic regions. With that said, we do have offices and investment staff located in major financial centers throughout world, which provides efficiencies and insights into local market dynamics, which we leverage in our engagement and investment practices. For example, investment staff typically lead engagements involving companies located in their region of coverage. However, overall, we use the same approach and methodologies in our engagements in all markets in which we invest. We think this approach best serves our clients because it allows us to most efficiently focus our resources and ownership stakes and ensure consistency in our process. The examples included in the chart below illustrate our approach.

Our Engagement Approach in Action6

Investment-Led Engagements

February 2020

Approach Formal engagement

Description

Two of our research analysts engaged with the independent directors of a company based in the United Arab Emirates specializing in cargo logistics, port terminal operations, maritime service, and free trade zones that was set to be acquired by its parent. Our analyst expressed concerns regarding the low buyout valuation offered to minority shareholders and questioned the process used by the parent and subsidiary to negotiate valuation.

Outcome We were dissatisfied with their answers, and because we did not expect any improvement in valuation to result from our engagement, several of our portfolio managers began to sell out of their positions in the company.

March 2020

Approach Formal engagement

Description

Several members of our fixed income team met with the new CFO of the Panama Canal Authority. This entity is exclusively responsible for the operation, management and maintenance of one of the world’s major waterways. A decrease in water due to drought has led the agency to restrict the amount of cargo that ships can carry through, which will in turn impact tonnage-based revenues. During most of the meeting, we discussed the water issues and the associated longer-term fixes. The CFO, who brings a capitalist mindset, outlined numerous ways to potentially increase revenue in the event of a water shortage.

Outcome The agency is working on longer-term plans to directly address the issue. On top of that, it has a solid governance and board structure, a long track record of

6 Please note that, due to specific jurisdictional regulatory requirements, we are unable to include the name of specific companies that we use in this report as examples of investment, engagement, or proxy voting decisions. We are limited to providing only a description of the company.

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Investment-Led Engagements

performance and a strong capital structure. We continue to remain positive on this credit while monitoring environmental issues such as drought.

June 2020

Approach Informal engagement

Description

Several members of our investment team had a call to discuss sustainability topics with the management team of a company based in the United Kingdom operating in the telecommunications industry. The company has a substantial opportunity to benefit from ESG-related tailwinds. It enabled better connectivity for the local population, improved service reliability, lowered telecom costs (savings ideally passed through to consumers as competition intensifies) and has reduced its fuel consumption as it consolidates mobile network operators within fewer sites. The business also faces significant ESG risks, most notably bribery and corruption. Fortunately, the company has had strong practices in this area. Management has also designed a corporate culture that addresses these risks. During the call, we pressed the company’s team, as we have many times in the past, about its use of diesel to power its cell towers.

Outcome

We would like the company to continue to find innovative ways to power its sites more sustainably. The company is working to improve in this area: it has many sites using solar and hybrid forms of energy. The company generally tries to connect its sites to the electric grid, but in many of the regions where the company operates, it is not always possible. Overall, our discussion was positive and the team reinforced our view that while there is plenty of room for improvement, the company continues to make progress on enhancing the sustainability of its operations. Further monitoring and engagement is expected.

July 2020

Approach Formal engagement

Description

One of our US-based ESG analyst and the covering industry analyst engaged with the board chair of a company based in the United States operating in the healthcare sector in a discussion of issues relating to board structure and corporate culture, including excessive board and C-Suite tenure — both of which could create a culture of complacency versus innovation, especially when competition appears to be increasing.

Outcome

Coming out of the discussion it was clear that the board required a refresh and changes were imminent. These changes would likely cause some short-term disruption, but could be positive in the long run. We plan to continue monitoring the evolution of the board and company culture.

October 2020

Approach Informal and formal engagement

Description

One of our US-based ESG analyst, along with the covering industry analyst undertook a sustainability review of major European alcoholic beverage companies. They identified taxation and health and safety to be some of the key issues for this group. In particular, they identified a growing risk that governments looking for additional sources of revenue could impose higher taxes on alcohol due to the COVID-19 pandemic. Given that alcohol-related health issues cost society more than the government collects in alcohol taxes, there appears to be a

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Investment-Led Engagements

sufficient incentive for taxes to increase. As such, the covering analyst accounted for potentially higher taxes in forecasts. The team also identified elevated fatality and injury rates at one of the companies and questioned the CEO on this topic.

Outcome

This company provided us with some more detailed fatality data points and explanations as to why their fatality rates might appear to be higher than peers. They also reassured us that the company is focused on workplace safety improvements and have seen some progress so far in 2020. We will continue to monitor the company’s progress and engage on this topic in future meetings.

November 2020

Approach Informal engagement

Description

Members of our investment team met with a Brazilian pulp and paper producer as part of our ongoing evaluation of the company’s sustainability-related risks and opportunities. We hosted an hour-long call to discuss environmental factors and we left generally pleased with the company’s sustainability efforts, which have been substantially improved over the past few years.

Outcome

After our meeting, we analyzed the potential risk to company EBITDA from future carbon prices or taxes. Based on our analysis, we believe the risk is manageable at this time; however, we will update our analysis as expectations for future carbon prices change. Looking forward, we plan to do more work to understand water and wood sourcing.

Proxy-Led Engagements

2020

Description

Over the course of calendar year 2020 members of our proxy team conducted multiple meetings with representatives of an agricultural machinery company to discuss our concerns regarding the company's governance practices, board composition and compensation policies.

Outcome The board recently appointed a new lead independent director with enhanced duties, appointed three new committee chairs, adopted term limits for board leadership positions and updated hedging and pledging policies.

2020

Description We engaged with members of the board from a United States based gas and electric company regarding the diversity of both the board and the wider workforce.

Outcome

The company is working to improve its diversity as evidenced by a number of concrete changes such as the nomination of a female director to the board, updating corporate governance guidelines to promote active recruitment of women and minority candidates in the board candidate pool, enhancing disclosure around board refreshment and agreeing to provide EEO-1 disclosure.

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Proxy-Led Engagements

September 2020

Description

Our proxy team has engaged over twenty times with a United States based aerospace/technology conglomerate over the past eight years to communicate our expectations as shareholders. Most recently, we engaged with the company on political and lobbying disclosures to monitor alignment of such contributions with the company's stewardship commitments.

Outcome Given our feedback and voting activity, the company has improved related disclosures by publishing a list of contributions made to trade associations in excess of $50,000.

April 2020

Description

Members of our proxy voting and investment teams engaged with representatives of a United States based financial services company both prior to, and following, the company's 2020 annual shareholder meeting. These discussions were primarily focused on executive compensation. Prior to the shareholder meeting, we discussed the board's approach to measuring and rewarding performance.

Outcome

In light of the amount of pay driven by qualitative assessment, as opposed to quantitative metrics, MFS did not support the advisory vote on executive compensation. Discussions following the meeting to explain the rationale behind our voting decision prompted modifications to the company's compensation program such that quantitative measures figure much more prominently in executive compensation.

Other Engagement Initiatives

MFS Culture Letter. Over the past several years, our investment team has spent a great deal of time discussing the importance, and potential impact, of corporate culture on sustainability. This work, and our ongoing discussions on culture and diversity with a wide variety of companies, led us, in 2020, to issue a letter to our 100 largest holdings requesting the explicit disclosure of each company's workforce composition, diversity and employee turnover data. As investors, we believe that this information is important and can have a material impact on our investment decisions. We also feel strongly that we should be willing to disclose the same data we expect our portfolio companies to disclose. As such, the letter included our company data on these metrics as a show of good faith and to demonstrate our own progress and qualitative commentary on these topics.

MFS' NASDAQ Comment Letter. In late 2020, NASDAQ proposed a new rule requiring certain disclosure and composition requirements related to diversity on boards of NASDAQ-listed companies. As a large holder of NASDAQ-listed companies and a proponent of increased diversity-standards in our portfolio companies, we submitted a comment letter to the US Securities and Exchange Commission in support of the proposed rule and the enhancements to board diversity and reporting contemplated by the proposed rule.

Enhancements to our Engagement Program in 2020 In an effort to continuously improve our engagement approach, we implemented the following enhancements to our engagement program in 2020:

To enable our investment and proxy voting teams to more accurately track, monitor and report on the vast number of engagements that are occurring across our global investment platform, we have developed a new engagement tracking tool embedded within our global research system.

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The first phase of this tool went live during the fourth quarter of 2020.

In order to deepen our understanding of each issuer's governance and culture, and enable more effective engagement, we are making it standard practice to try to meet with members of the board of directors from each of our investee companies on a regular basis.

Our investment team is in the process of codifying a set of standard principles to be used by our investment team when engaging with our issuers, which we will be complementary to the MFS Responsible Investing and Engagement Policy.

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Principle 10: Signatories, where necessary, participate in collaborative engagement to influence issuers.

MFS believes that collective (or collaborative) engagement can generate positive impacts for industries, individual companies and a wide range of stakeholders, including shareholders. We actively participate in a number of industry initiatives, organizations and working groups that seek to improve, and provide guidance on, corporate and investor best practices, ESG integration and proxy voting issues. We typically join an industry initiative or other collaborative group for one of two reasons: (1) the work or objective of group or initiative aligns with our investment philosophy on a specific topic, or (2) we believe the initiative or group provides access to research or data that enhances our investment process and ultimately is in the long-term best interests of our clients. The following table lists the collaborative initiatives and organizations that MFS is currently affiliated with and notes our role in the initiative or organization.

Collaborative Initiatives and Organizations

Initiative/Organization MFS' Role Year Joined

Asian Corporate Governance Association (ACGA) Signatory 2019

Carbon Disclosure Project (CDP) Signatory 2010

Climate Action 100+ Signatory 2020

Farm Animal Investment Risk & Return (FAIRR) Initiative

Signatory 2021

Focusing Capital on Long Term (FCLT) Signatory 2018

Investors Against Slavery and Trafficking Initiative (IAST)

Signatory 2020

Investor Stewardship Group Founding Member

2017

Principles for Responsible Investment (PRI) Signatory 2010

ShareAction Workforce Disclosure Initiative (WDI) Signatory 2020

Science Based Targets Initiative (SBTi) Signatory 2020

Swiss Sustainable Finance Signatory 2020

Thinking Ahead Institute Signatory 2017

Task Force on Climate-related Financial Disclosure (TCFD)

Signatory 2019

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MFS' Notable Collaborative Engagements in 20207

Environmental

MFS joined Climate Action 100+: (CA100+), in December 2020. CA100+ is an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. Climate Action 100+ focuses on engaging with 167 companies that are critical to the net-zero emissions transition. Investor members are responsible for driving engagement and developing and implementing company-specific engagement strategies. As part of being a signatory, MFS joined three company engagements. Through these engagements, we hope to encourage these companies to implement a strong governance framework on climate change, take action to reduce greenhouse gas emissions across the value chain and provide enhanced corporate disclosure.

MFS signed on to the Science Based Targets initiative. Launched in September 2020 by the Climate Disclosure Project (CDP), the UN Global Compact (UNGC), the World Resources Institute (WRI) and the World Wildlife Foundation (WWF), the SBTi calls on high-emitting companies to set science-based emission reduction targets. Adopting such targets can help companies align with Paris Agreement goals, increase the effectiveness of their scenario-based analyses and provide their stakeholders with greater transparency around climate-related risks and opportunities. We started incorporating this standard, which we recognize as the "gold standard" for companies in this area, into our analysis and engagement activities with issuers.

Social

Preventing PFAS pollution by removing forever chemicals from food packaging. MFS, along with other investors, joined Fidra (a UK-based nonprofit) to draft a joint letter to a number of supermarkets, food-to-go, packaging and fast-moving consumer goods companies requesting that they entirely remove per- and polyfluoroalkyl substances (PFAS) from their food packaging products. This chemical is known to be hazardous and may cause cancer. Several companies responded positively, including one company that committed to eliminate PFAS from their food packaging entirely. As a next step, our investment team members will ask corporate management teams about their stance on PFAS in food packaging in upcoming engagements with the goal of getting these targeted companies to consider removing these hazardous chemicals.

Investor statement in support of living income and living wages in agricultural supply chains. MFS was part of a collection of asset managers that signed a corporate letter organized by Sustainalytics to shed light on living wage issues and other labor abuses that are particularly acute in small-scale food producers and agricultural supply chains. The letter noted the risks and opportunities associated with supporting a living wage for these workers and invited recipient companies to sign a pre-prepared corporate statement supporting this initiative, which would then be publicly available. This work remains ongoing.

Investor statement on modern slavery, human trafficking and labor exploitation issues. MFS was part of a coalition of 24 investors that signed a public letter organized by Investors Against Slavery and Trafficking Asia-Pacific (IAST APAC) detailing the concerns related to modern slavery and other exploitive labor practices and provided a list of detailed practices that companies can undertake to mitigate the risk of these practices in their supply chain. The next steps will involve monitoring

7 Please note that, due to specific jurisdictional regulatory requirements, we are unable to include the name of specific companies that we use in this report as examples of investment, engagement, or proxy voting decisions. We are limited to providing only a description of the company.

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relevant company practices for incorporation of these recommendations.

Investor letter to the United Nations calling for urgent action on the stranded seafarer crisis. MFS was part of wide-ranging group of interested parties that signed a letter organized by Fidelity International and directed to the Secretary-General of the United Nation in order to shed light on a potential humanitarian crisis resulting from seafarers in the commercial shipping industry stranded at sea as a result of various national COVID-19 restrictions. In addition to the humanitarian risks, this letter pointed out the economic and environmental costs that could result from this issue and urged the UN to work with global nations to remedy this problem and establish standards to protect these workers. Each signatory also committed to engage with relevant portfolio companies on the subject.

MFS joined the ShareAction Workforce Disclosure Initiative (WDI), in September 2020. The WDI, focuses on how companies treat their employees with the goal of improving both the quantity and quality of company disclosure on employee management practices. The WDI survey provides a standardized format for companies to report on a range of topics such as human rights diligence, workforce composition, diversity and inclusion, wage levels and pay gaps. Our ESG and covering analysts have actively been engaging with portfolio companies to improve participation in the WDI and using WDI data to diligence employee management practices at a number of different companies. Again, in an effort to offer disclosure where we seek it, MFS has also worked to complete the WDI survey with our own company data.

Governance

In 2020 our investment team continued work on transparency in corporate tax practices. In late 2020, one of our ESG analysts participated in a call along with a consortium of private sector representatives with US Congressional staff members regarding country-by-country corporate tax disclosures, continuing our longstanding effort to improve corporate tax disclosure. This work builds off the collaborative work this ESG analyst performed on the subject in previous years. In 2019, this analyst contributed to the Global Reporting Initiative (GRI) technical committee on corporate taxation that began in January 2018. The GRI's independent standard-setting body, the Global Sustainability Standards Board (GSSB), gathered a group of eight global tax experts to develop a new taxation disclosure standard for corporations that report their sustainability activity using the GRI framework.

Other

In 2020, MFS continued its longstanding involvement with the sub-committees organized by the Principles for Responsible Investment (PRI). The head of our municipal fixed income research team and our fixed income ESG analyst participated in the PRI's Sub-Sovereign Debt Advisory Committee, which is working to develop guidance for addressing ESG incorporation in US municipal bonds. This guidance will mirror similar guidance available for integrating ESG in other fixed income sub-asset classes.

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Principle 11: Signatories, where necessary, escalate stewardship activities to influence issuers.

We believe escalating an engagement can be a very important tool for asserting our influence and ultimately being a good steward of our client's capital. At MFS, we do not maintain a prescriptive framework for engagement escalation with rigid milestones, as we view every engagement as a unique endeavor. Also we do not prioritize specific issues for escalation, as all of our engagement and investment decisions are rooted in economic materiality, which by nature will vary depending on the facts and circumstances of a particular company. We do, however, recognize that often times our unique position as a large shareholder in companies allows us to garner more attention from management. As such, when deemed to be in the best long-term interests of our clients, we will not hesitate to escalate an engagement on issues that we deem to be economically material to an investment.

Investment-led Escalation8

Informal and formal engagements. As discussed in our response to Principle 9, our investment team engages with companies on an informal and formal basis. Informal engagements occur on a continual basis and may take several forms, such as conference calls or meetings with non-executive management, on-site visits or investment conferences. If our informal engagements are not producing adequate results with respect to an issue that is material our clients' long-term economic interest, our investment team will escalate the engagement through a formal engagement. These engagements generally involve meetings with executive management or board members or involve formal correspondence.

In 2020, after numerous informal discussions spanning several years with companies we own around the disclosure of key employment data points, such as diversity and turnover of workforce, which we found to be very inefficient and ineffective, our investment team decided to issue a formal correspondence, the MFS Culture Letter. This letter was issued to our largest 100 holdings. We believe that the information requested in this letter is correlated to organizational success and ultimately strong long-term financial performance. We decided to escalate this engagement through a formal letter because of the efficiency this method provides. It is too early to tell how effective this letter will ultimately be, but we continue to monitor our investee company disclosures.

Public statements. MFS does not generally make public statements about a particular engagement activity, in preference for direct and private engagement with companies on a one-on-one basis. MFS considers that this type of engagement is constructive and has a meaningful impact that better serves our clients. However, MFS may occasionally escalate an engagement by making known its position openly in the public domain where such a course of action is deemed necessary to protect the long- term economic interests of our clients.

In 2020, we did not feel it was warranted to make any public statements concerning our engagements.

In past years, however, we have found this to be an effective tool. For example, we

8 Please note that, due to specific jurisdictional regulatory requirements, we are unable to include the name of specific companies that we use in this report as examples of investment, engagement, or proxy voting decisions. We are limited to providing only a description of the company.

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previously published a letter in the German press targeted at companies operating in the German residential real estate sector, expressing our concern that a proposed acquisition in the sector, and more broadly other recent M&A activity, was not justified from a shareholder value standpoint. Ultimately the acquisition failed to achieve sufficient shareholder support. We find this method of escalation to be effective in notifying other investors and the market in general of our concerns.

Divestment. When other methods of engagement have proven to be or appear likely to be unsuccessful, we may divest our holdings in a company. Our investment team does not generally view divesting as a productive outcome to an engagement, in fact we view it as an abnegation of our stewardship responsibilities, as it does not solve a problem, but rather puts it on someone else. Ultimately, however, in some instances divestment is the outcome that is deemed to be the best course of action for protecting our clients' long-term economic interest. As cited in our response to Principle 9, the following example is representative of when we deemed divestment necessary.

February 2020

Description

Two of our research analysts engaged with the independent directors of a company based in the United Arab Emirates specializing in cargo logistics, port terminal operations, maritime service, and free trade zones that was set to be acquired by its parent. Our analyst expressed concerns regarding the low buyout valuation offered to minority shareholders and questioned the process used by the parent and subsidiary to negotiate valuation.

Outcome We were dissatisfied with their answers, and because we did not expect any improvement in valuation to result from our engagement, several of our portfolio managers began to sell out of their positions in the company.

Proxy-led Escalation.

Continued and consistent raising of issues. If our proxy team is not achieving sufficient progress or attention from a company on an issue that we deem to be economically material to our clients, our proxy team will simply keep raising the issue until we see the results that we want. While this is not a formal escalation mechanism, it is one of the most important tools that we have available to us. This seemingly simple approach can be extremely effective in communicating to companies that (i) the subject matter is important to us, and (ii) we expect eventual results from company management. As cited in our response to Principle 9, the following is a good example of how persistent engagement can create results.

September 2020

Description

Our proxy team has engaged over twenty times with a United States based aerospace/technology conglomerate over the past eight years to communicate our expectations as shareholders with respect to a variety of issues related to corporate governance (such as board composition, executive pay, and political contributions). Most recently, we engaged with the company on political and lobbying disclosures to monitor alignment of such contributions with the company's stewardship commitments.

Outcome

Given our feedback and voting activity, the company has improved related disclosures by publishing a list of contributions made to trade associations in excess of $50,000. Previously this company made other governance changes, in part, due to our persistent engagement, including improving compensation claw back policies and enhancing the role of the lead independent director of the board.

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Voting against board members. A key escalation tool that we have built into our proxy policies and procedures is voting against director nominees, where a board has not taken sufficient action on an issue that we determine is economically material to shareholders. For example, if a shareholder proposal receives majority approval at a prior shareholder meeting and the board has not acted on the resolution, MFS will typically vote against the entire board's reelection at future annual shareholder meetings. Similarly, if a significant number of shareholders have expressed dissatisfaction with a company's executive pay program and the board has not addressed it, MFS may vote against the compensation committee or full board.

In 2020, MFS voted against board members at five companies for failing to adequately respond to shareholder concerns (compared with four in 2019). As an example, in 2020 we voted against the compensation committee of a US-based global cosmetics company for the company's failure to response to a compensation vote the previous year. MFS also maintains a list of directors that we believe do not warrant support at any company based on their poor corporate governance track records.

Letter writing campaigns. Our formal letter writing campaign takes place at least annually. We send a written communication to the board of directors to explain the rationale behind our vote, express our expectations as investors and invite a dialogue with the issuer on a specific topic in order to seek a resolution.

At the beginning of calendar year 2020 we sent letters to 11 companies addressing our votes from the 2019 shareholder meeting which ranged from compensation concerns to shareholder rights. Towards the end of the calendar year the proxy team sent letters to 17 companies to explain our vote at the company's 2020 shareholder meeting and express our forward looking expectations. We have since engaged (telephonically) with 7 of those companies.

Collaborative Engagements.

As discussed, in our response to Principle 10 above, in 2020 we joined both Climate Action 100+ and ShareAction. Both of these organizations are centered around collective engagements and we have already committed to three engagements with Climate Action 100+. While these engagements are not intended to serve as an explicit mechanism to escalate or replace our investment-led and proxy-led engagements, there is significant cross-over in topics and we view these collective forums as potentially a "louder" platform to enact change.

Escalating Engagements Across Geographies, Account Types, and Asset Classes As discussed further in our responses to Principle 1, Principle 7, and Principle 9, our business model is based on global investment and engagement platforms and therefore we do not significantly vary our processes for specific accounts or geographies. We believe this approach builds consistency in our practices and allows us to leverage centralized resources, which we believe ultimately benefits our clients through a collaborative and non-siloed process. As with engagement generally and other stewardship activities, practices are more developed for equity owners. As we have noted elsewhere in this report, bondholder ownership practices are a developing area for us, but we do not have distinctive engagement escalation practices for different asset classes.

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Principle 12: Signatories actively exercise their rights and responsibilities. MFS maintains its own publicly available proxy voting policy and procedures, which guide, and provide a framework, for our proxy voting decisions. All of our proxy voting practices, however, are grounded in the principle of excising our voting discretion in a manner that reflects the best long-term economic interests of our clients. When considering ballot items for which the MFS Proxy Voting Policies and Procedures do not provide explicit guidance, we are able to combine the collective expertise of our dedicated proxy voting analysts with the unique perspectives and experience of our global investment team to vote applicable proxies. This enables us to formulate viewpoints with multiple inputs, which we believe leads to well-informed voting decisions.

During the 2020 calendar year, MFS was eligible to vote on 22,976 ballot items at 1,992 shareholder meetings across 60 markets. MFS voted shares at approximately 99% of these meetings, with the remaining meetings not voted due to share-blocking concerns (nine meetings), late receipt of ballot (one meeting) or market-specific voting impediments (thirteen meetings). The map below shows the number of meetings voted around the world along with the overall percentage of meetings voted within each region.

2020 Proxy Voting Statistics by Geography

As with our investment and engagement practices, at MFS, we do not typically vary our proxy voting practices based on geography. We believe that this approach ensures consistency in our voting practices and demonstrates our global commitment to holding companies accountable and supporting our core principle of voting in best long-term economic interest of our clients. However, as outlined further in our proxy voting policies and procedures, there are certain areas where we may vary of practices based on geography:

in certain markets (currently the US, Canada, Europe and Australia) we will generally vote against

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the chair of nominating and governance committees if a board is composed of less than 15% female directors;

certain markets have adopted best practice guidelines relating to corporate governance matters, such as the United Kingdom’s and Japan's Corporate Governance Codes, and we may vote against ballot items if the issuer has not complied with such guidelines in a satisfactory manner;

we may vote again the election of a statutory auditor in specific markets, if we believe that such auditors are not truly independent; and

we will not vote at certain companies or on certain directors if we determine doing so would violate any government imposed sanctions that prohibit us from exercising these rights.

MFS Proxy Voting Records and Summary Statistics A full record of MFS' proxy votes cast, including any votes that were withheld and votes against management, is publically available at the following website: Proxy Voting (mfs.com) (please click, "Europe", "United Kingdom" and then "Investment Professional").

Additionally, during 2020, MFS:

voted against management recommendations on approximately 7% of all ballot items globally and cast a vote against management recommendations on at least one ballot item at approximately 39% of all shareholder meetings;

voted against approximately 10% of executive compensation proposals; voted against board members at five companies for failing to adequately respond to

shareholder concerns; and voted against 104 directors over diversity concerns.

A Deeper Look at MFS' 2020 Proxy Voting Activities9 Executive Pay

MFS believes "Say on Pay" votes are an effective mechanism for expressing our view on a company's executive pay practices and can help ensure that they are aligned with shareholder interests and do not incentivize excessive risk taking. Competitive pay packages are necessary to attract, motivate and retain executives; however, excessive or short-term- oriented compensation schemes are unlikely to be in the best long-term interest of shareholders.

9 Please note that, due to specific jurisdictional regulatory requirements, we are unable to include the name of specific companies that we use in this report as examples of investment, engagement, or proxy voting decisions. We are limited to providing only a description of the company.

0.0%10.0%20.0%30.0%40.0%50.0%

Australia Brazil Canada Switzerland UnitedKingdom

UnitedStates

AllCountries

2020 Global Compensation Scorecard: How Often MFS Voted Against Execuitive Pay

2018 2019 2020

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During the 2020 proxy period, MFS voted on more than 1,500 Say on Pay proposal, voting against or abstained on such proposals approximately 9% of the time. This compares with 11% during the 2019 proxy period. Our rationale for voting against executive compensation practices was due to a range of issues including: disclosure concerns (30%), performance targets/metrics (21.4%), pay-for-performance disconnect (20.7%), pay magnitude (11.1%), employment agreements (6.4%), or other reasons (10.4%).

On a global scale, the number of remuneration report "strikes" in Australia continues to increase. MFS voted against approximately 11% of remuneration-related proposals at Australian portfolio companies during the 2020 proxy season as compared with 10% and 4% in the 2019 and 2018 proxy seasons, respectively. This increase is primarily due to a growing number of issuers amending executive remuneration structures that contain problematic performance metrics or targets, compounded by concerns with corresponding disclosure.

We note an increase in remuneration-related proposals in European markets given the amendments to the Shareholder Rights Directive (SRD II). Remuneration reports are now subject to an annual vote, and the content of remuneration disclosures going forward will contain more specific performance criteria disclosure. While the impact of voting remains to be seen, as compliance becomes mandatory in 2021, the uptick in remuneration consultation engagements with European issuers has been notable.

Finally, the revised UK Corporate Governance Code provides that pension contribution rates for executive directors should be aligned with those available to the workforce. MFS will vote against remuneration-related proposals where companies do not take action to be in-line with this provision of the code and we are engaging on this topic with companies that are lagging in this practice.

Director Elections

We believe that a well-balanced board with diverse perspectives is the foundation of sound corporate governance and that gender diversity is one of the many ways corporate boards can enhance the diversity of their views, skill sets and collective expertise. In 2019, we amended the MFS Proxy Policies to require votes against the nominating and governance committee chairs of the boards of US companies where less than 15% of directors are female. In 2020, we expanded this amendment to include Canadian and European issuers. As a result, we voted against nominees at more than 100 companies across Canada, Europe and the US during the 2020 proxy period.

We also believe that the amount of time required of US public-company directors has grown significantly in recent years, and we are mindful about the impact of excessive service on outside boards. During the 2020 proxy period, we voted against director nominees at 90 US companies due to excessive outside service.

As noted in our response to Principle 11, MFS may also vote against director nominees if the board has not taken responsive action on an issue of concern to shareholders. For example, if a shareholder proposal receives majority approval at a prior shareholder meeting and the board has not acted on the resolution, MFS will typically vote against the entire board's reelection at future annual shareholder meetings. Similarly, if a significant number of shareholders have expressed dissatisfaction with a company's executive pay program and the board has not addressed it, MFS may vote against the compensation committee or full board. In 2020, MFS voted against board members at five companies for failing to adequately respond to shareholder concerns (compared with four in 2019). MFS also maintains a list of directors that we believe do not warrant support at any company based on their poor corporate governance track records.

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During 2020, MFS voted against approximately 6.0% of director nominees globally (compared with 7.2% in 2019).

Shareholder Proposals

Shareholder proposals can often be used as a catalyst to bring about positive change on ESG issues. During 2020, more than 550 proposals were submitted to companies by shareholders seeking a vote on a wide variety of ESG issues. The most prevalent topics included climate change, lobbying/political activities, human capital management and proposals seeking an independent board chairs.

Environmental Issues

During the 2020 proxy period, shareholder proposals relating to environmental issues typically centered on increased disclosure on the impact of climate change or environmental impacts on communities, and some proposals called for specific reductions in GHG emissions. We note that the number of environmental proposals put to a vote has decreased over the past five years; however, average support continues to increase, with more proposals receiving majority support in 2020 than in 2019. Specifically, shareholder support for climate change proposals increased from 2019, and

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2020 Global Director Scorecard: How Often MFS Voted Against Directors

2018 2019 2020

9%

21%70%

2020 Global Shareholder Proposal Scorecard: How MFS Voted on Shareholder Proposals

Environmental Proposals

Social Proposals

Governance Proposals

For 60.5%Against 39.5%

For 55.9%Against 44.1%

For 25%Against 75%

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four climate change proposals received majority support. MFS was entitled to vote on two such proposals, both at multinational energy companies, and supported both. We also supported a shareholder proposal requesting that a multinational package-delivery and supply-chain-management company publish a report on climate change disclosing how it plans to manage GHG emissions. We supported this proposal because we believe thought it valuable to shareholders seeking to ascertain how the company is managing climate related risks.

MFS generally supports proposals that request additional disclosure on the impact of environmental issues such as climate change on a company’s operations unless we believe that the company already provides enough information on the topic to allow shareholders to assess the relevant risks. We supported 33% of the climate change–related proposals we were eligible to vote on globally. Overall, MFS supported 25% of 52 proposals relating to environmental issues during the 2020 proxy period (compared with the 38% in 2019). The change is largely attributable to the higher percentage of environmentally focused shareholder proposals submitted outside the United States that we deemed overly prescriptive or poorly drafted. For example, we do not support proposals calling for companies to amend their articles to mandate government involvement. Nor do we support proposals aimed at prohibiting the provision of financial support to a specific company.

Social Issues

MFS voted on 124 shareholder proposals relating to social issues during the 2020 proxy period, supporting 61% of these proposals (compared with 71% in 2019). Shareholder requests for the increased disclosure of corporate political contributions were at center stage yet again, accounting for over 35% of proposals in this category. These proposals typically focused on the increased disclosure of oversight mechanisms related to company political spending. MFS generally supports such shareholder proposals and of the 43 proposals we supported, two received the majority support of shareholders. We do not support these proposals, however, if we believe that a company already provides publicly available information that is sufficient to enable shareholders to evaluate potential risks associated with political contributions.

Shareholder proposals related to diversity efforts were also a focus during 2020. MFS supported 57% of proposals requesting the reporting of a company's policies and goals with respect to diversity at both the board and workplace level (similar to the 60% supported in 2019). MFS supported 39% of all diversity-related proposals that we reviewed during the 2020 proxy period. MFS supported 100% of the proposals that we were entitled to vote on requesting the disclosure of EE0-1 data, as we believe that disclosure in a consistent format allows shareholders to assess and manage the risks and opportunities associated with human capital management. MFS supported 33% of proposals relating to board diversity that we were entitled to vote on. We firmly believe that it is warranted to vote against certain shareholder proposals that are not drafted or targeted appropriately. For example, we declined to support proposals seeking information on Board candidates' political ideology. The nuanced scope of shareholder proposals is best served by a case-by-case review and analysis to determine if the proposal merit support.

Corporate Governance Issues Corporate governance has typically been the most common subject of shareholder proposals. Overall, MFS voted on 404 governance-related shareholder proposals globally during 2020, supporting 56% of such proposals (compared with 52% in 2019). Among the governance-related shareholder proposals we reviewed during 2020, the most prevalent topic was the separation of

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the chair and CEO roles. MFS supported 15 out of 38 of these proposals. We analyze such proposals on a case-by-case basis by evaluating the board structure to ensure robust independent oversight. We also consider individual facts and circumstances of the current leadership structure, as well as what we believe to be the optimal approach in the future. For example, we supported a proposal seeking to separate the role of CEO and chair at a global media and technology company because we believe this large, complex organization would be best served by the most independent form of oversight at the next transition of CEO.

Additionally, the number of proposals seeking the right of shareholders to call special meetings increased in 2020 after halving the previous year. The number of proposals that requested the right to act by written consent, after remaining relatively flat in 2019, increased by nearly 50% to 42 proposals. Such proposals received, on average, 37% support in 2020 — a slight decrease from the 40% average support such proposals received in 2019.

During the 2020 proxy season, MFS voted in favor of the following: 100% of proposals to declassify the board 100% of proposals seeking majority voting in director elections 100% of proposals to provide the right to act by written consent 100% of proposals to eliminate supermajority voting rights 100% of proposals to provide certain shareholders the ability to nominate a certain

number of board nominees (adopt a proxy access right)

MFS' Proxy Voting Policies and Procedures MFS has adopted a clear and robust policy on voting securities owned by clients for which MFS has been delegated voting authority. In summary, proxy voting decisions are made in what MFS believes to be the best long-term economic interest of MFS' clients. In addition to this overriding principle, MFS' Proxy Voting Policies and Procedures set forth MFS' voting policy and approach with respect to specific issues, including, but not limited to, the election and independence of directors, classified boards (i.e. a board in which only one-third of board members are elected each year), proxy access (i.e. the ability of shareholders to nominate directors on an issuer's proxy statement), advisory votes on executive compensation, and shareholder proposals on executive compensation as well as proposals relating to environmental, social, and governance matters.

As a general matter, MFS aims to vote consistently on similar proxy voting proposals across all shareholder meetings. Certain proposals, such as proposals that MFS is concerned could result in excessive executive compensation or which involve ESG considerations, are analyzed on a case-by- case basis based on the relevant facts and circumstances. Such proposals are considered by MFS' dedicated proxy voting professionals in collaboration with the relevant MFS investment professionals in determining how the votes should be cast in the long term economic interests of the applicable clients. MFS may therefore vote similar proposals differently based on the specific facts and circumstances of the company or the terms of the proposal. Additionally, MFS' Proxy Voting Policies and Procedures describe situations where we may vote against directors and management recommendations. We seek to vote all shares held by our clients, with the exception of certain cross-border voting impediments such as “share-blocking” requirements.

While MFS generally votes consistently on the same matter when the securities of an issuer are held across multiple client portfolios, certain MFS separate account clients may retain or reserve voting authority in relation to voting rights attached to securities acquired by MFS on their behalf. Additionally, certain clients may override MFS' intended voting decision through providing MFS with

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explicit voting instructions to vote differently on behalf of their portfolio. For MFS' pooled accounts and vehicles, such as its mutual funds, individual clients in these products do not have ability to direct MFS' voting due to the collective nature of the products. Voting for pooled accounts and vehicles is done only pursuant to the MFS Proxy Voting Policies and Procedures.

MFS' proxy voting activities are overseen by the MFS Proxy Voting Committee (which includes senior personnel from the investment and legal teams) with the assistance of dedicated proxy voting professionals. The MFS Proxy Committee's primary responsibilities include: maintaining and updating as necessary the MFS Proxy Voting Policies and Procedures, monitoring and resolving potential conflicts of interest that arise in MFS proxy voting activities, considering any special proxy voting issues that arise, and determining engagement priorities and strategies with respect to MFS' proxy voting activities. The MFS Proxy Voting Committee does not include MFS personnel whose primary duties relate to client relationship management, marketing, or sales. A copy of MFS' current Proxy Voting Policies and Procedures is available at the following website: Proxy Voting (mfs.com) (please click, "Europe", "United Kingdom" and then "Investment Professional").

Use of Proxy Advisory Firms MFS uses proxy advisory firms to perform various proxy voting-related administrative services, such as vote processing and recordkeeping. Specifically, depending on the client, MFS has contracted with ISS and Glass Lewis to provide these services. MFS will rely on these proxy advisory firms to collate relevant proxy materials, such as proxy statements and proxy ballots, based on MFS' client portfolio holdings and make these materials available to MFS proxy voting professionals through an on-line platform. The proxy advisory firms will then vote proxies based on MFS' direction. MFS is able to monitor all voting activity conducted by a proxy advisory firm through the on-line platform.

MFS also receives research reports and vote recommendations from the proxy advisory firms, however MFS analyzes all proxy voting issues within the context of the MFS Proxy Voting Policy and Procedures, which are developed internally and independent of its proxy advisory firms. MFS' voting decisions are not defined by any proxy advisory firm's benchmark policy recommendations. Proxy advisory firm research reports are one aspect of MFS' comprehensive analysis, which includes other essential sources of information (for example, collaboration with MFS investment professionals, proxy materials, engagement, other third-party information, etc.) that help determine the votes that MFS believes are in the best long-term economic interest of our clients. MFS may also use proxy advisory firms to identify general best practices within certain markets, including, for example, certain aspects of the UK Governance Code. MFS additionally has due diligence procedures in place to reasonably address any potentially material conflicts of interest with proxy advisory firms.

Please refer to our response to Principle 8 above for further information concerning how monitor our proxy advisory firms.

Monitoring Our Voting Rights As discussed further in MFS' Proxy Voting Policies and Procedures, we work with our proxy advisory firms to monitor and track what shares and voting rights we have. Depending on the client we use one of two proxy advisory firms, ISS or Glass Lewis, who (i) receive proxy statements and proxy ballots directly or indirectly from our clients' custodian banks, (ii) log these materials into a database and (iii) match upcoming meetings with client portfolio holdings, which are input into the proxy advisory firm's system by an MFS holdings data-feed. Through the use of the relevant proxy advisory firm's system, ballots and proxy material summaries for all upcoming shareholders’ meetings are available

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on-line to certain MFS employees and members of the MFS Proxy Voting Committee.

The relevant proxy advisory firm reconciles a list of all MFS client accounts that hold shares of a company’s stock and the number of shares held on the record date by these accounts with the proxy advisory firm’s list of any upcoming shareholders' meeting of that company. If a proxy ballot has not been received, the proxy advisory firm will contact the relevant custodian back to determine the reason why a ballot has not been received.

Securities Lending As further discussed in MFS' Proxy Voting Policies and Procedures, certain of MFS' sponsored pooled investment vehicles, such as MFS' U.S. registered mutual funds, may participate in a securities lending program. For these vehicles, MFS will attempt to recall U.S. securities on loan if MFS or its agent receive timely notice of a shareholder meeting before the relevant record date. There may be instances in which MFS is unable to timely recall U.S. securities on loan and therefore MFS will not be able to vote these shares. MFS generally does not recall non-U.S. securities on loan because there may be insufficient advanced notice of proxy materials, record dates, or vote cut-off dates to allow MFS to timely recall the shares in certain markets on an automated basis. As a result, non-U.S. securities that are on loan will not generally be voted. If MFS receives timely notice of what MFS determines to be an unusual, significant vote for a non-U.S. security on loan and MFS determines that voting is in the best long-term economic interest of its shareholders, then MFS will attempt to timely recall the loaned shares.

Fixed Income Securities When compared to proxy voting and stewardship activities available to holders of equity securities, such opportunities for fixed income instruments and other asset classes are significantly less developed. At MFS, fixed income strategies in particular represent a large percentage of our assets under management and, as such, we are continuously seeking ways to enhance our approach with respect to asserting our rights as owners of an issuer's debt. In reality, however, the depth of fixed income markets generally and the nature of the typical instruments that we invest in (i.e. larger debt offerings) limits our ability to influence terms or covenants. Our investment team instead focuses on reviewing prospectuses and transactional documents and engaging with management and underwriters prior to investing to understand the risks and terms of a debt offering. Based on this analysis we will determine if the investment is in the best long-term interest of our clients. Occasionally, however, when participating in certain debt offerings (typically smaller offerings), we do have more flexibility to assert our influence. This activity generally takes the form of engaging with management around a proposed waiver of a covenant or adding additional indebtedness. In all circumstances, we only agree to terms that we believe generate or otherwise preserve long-term value for our clients. For example, we recently engaged with a small education institution whose debt we hold, who requested a waiver of a permitted indebtedness covenant in order to upgrade its air conditioning system. In this circumstance we engaged directly with management, discussed financing alternatives, and confirmed the operational need for the system upgrade prior to consenting to the waiver. Finally, in extraordinary circumstances, such as a default, we may have the ability to work with an issuer and other investors to help shape a path to recovery or responsible disposition of the assets. Even in these circumstances, we seek to achieve, where possible, long-term and durable solutions that we believe benefit our clients and reflects our approach to being a good steward of capital.

Additionally, as discussed above, we are continuously seeking ways to enhance our approach. As discussed in our response to Principle 9, a recent enhancement we made in 2020 involves including

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fixed income investment professionals in all issuer engagement meetings conducted by the proxy voting team. Fixed income investment professionals are also now involved in decisions relating to all non-standard proxy voting matters. We believe that fixed income investment professionals offer a unique perspective at these meetings and this may serve as a means of encouraging more open communication between issuers and debt holders.