MFS Introduces the MFS(R) Diversified Income Fund; Innovative strategy seeks income generation with capital appreciation.

BOSTON -- MFS Investment Management(R) has introduced the MFS Diversified Income Fund. The fund's asset allocation is designed to generate income potential and lessen the effect of inflation on purchasing power.

A team of professionals within the MFS quantitative group determined the asset class selection and target weightings under the supervision of Chief Investment Strategist James Swanson. Swanson is responsible for directing cash flows into the fund. The fund will permit tactical asset allocation within each asset class.

MFS will change target allocations based on market conditions. The Diversified Income Fund invests in five asset classes including high yield bonds; government securities; real estate investment trusts (REITs); U.S. value stocks; and emerging markets debt. The assets will be managed by MFS Investment Management with the exception of the REIT component, which is sub-advised by Sun Capital Advisors.

"The MFS Diversified Income fund allows investors to diversify their portfolios using a highly distinctive strategy that combines income generation with a growth component that seeks to lessen inflation's effects on purchasing power. We believe this fund can help maximize the benefits of diversification across low-correlating asset classes and provide for greater principal stability and more attractive risk-adjusted returns," said Robert J. Manning, CEO and Chief Investment Officer of MFS.

Balancing income potential with purchasing power protection

Pursuing a high level of current income is a critical part of retirees' portfolios, Swanson said. But he said that purchasing power protection is equally important for these investors as more people are living well into their eighties and nineties and beyond. Through the years, inflation has actually represented a more serious long-term threat to an investor's portfolio than stock market fluctuation or even recession. For example, a look at the Consumer Price Index (April 2006) shows a 73% decline in the dollar's buying power 1974 through 2005. As a result, the fund's built-in growth component may help stimulate capital appreciation while seeking to maintain a higher-than-average yield.

Greater stability through efficient diversification 

Creating a portfolio with investments that have low or negative correlation to each other can help optimize returns and reduce risk potential. The correlation (a statistical measure of how two securities move in relation to each other) between the five different assets classes varied from March 31, 1996 to March 31, 2006 but remained extraordinarily low, ranging from -0.17 to 0.55(1). A correlation of "1" means the two asset classes moved in tandem.

At present, Baby Boomers have $8 trillion in retirement assets, which is expected to increase to about $20 trillion by 2012(2). As boomers refocus their attention from the accumulation phase to the distribution phase of retirement planning, income generation and purchasing power protection are critical issues facing retirees. The MFS Diversified Income Fund is designed to provide capital appreciation and generate a stream of income.

MFS manages a total of $168 billion in assets on behalf of more than 5 million individual and institutional investors worldwide as of June 30, 2006. The company traces its origins to 1924 and the creation of America's first mutual fund.

(1) Source: MFS research.

(2) Source: Merrill Lynch.

A word about risk

The value of the portfolio's bonds fluctuates based on changes in interest rates and the credit quality of the issuer, which may be magnified in emerging markets. The portfolio may invest in lower-quality debt securities which generally offer higher yields, but also carry more risk. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry, which may affect the fund.

Before investing, consider the fund's investment objectives, risks, charges, and expenses. For a prospectus containing this and other information, contact your investment professional or view online at mfs.com. Read it carefully.

MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116 06-19382 09/06