The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law. In addition to providing a 13-month extension of benefits for the long-term unemployed, the legislation includes a long-anticipated extension of the "Bush tax cuts" that were scheduled to expire on January 1, 2011. Other significant provisions include a new alternative minimum tax (AMT) "patch," a major modification of the estate tax, and a new 1-year 2% employee Social Security payroll tax reduction.

Income tax rates

The Act extends existing federal income tax rates for 2 additional years. As in 2010, the federal tax bracket rates for 2011 and 2012 will be 10%, 15%, 25%, 28%, 33%, and 35%. (Without this legislation, federal income tax rates would have increased beginning in 2011--the current 10% federal income tax bracket would have disappeared, and the five remaining tax brackets would have been 15%, 28%, 31%, 36%, and 39.6%.)

Tax rates for long-term capital gain and qualifying dividends

Existing tax rates for long-term capital gains and qualifying dividends are also extended through 2012. As a result, long-term capital gain and qualifying dividends will continue to be taxed at a maximum rate of 15%. For individuals in the 10% or 15% marginal income tax bracket, a special 0% rate will generally continue to apply.

Alternative minimum tax (AMT)

The Act includes another temporary "patch" for the AMT--this one good for 2010 and 2011. AMT exemption amounts are slightly increased, and personal nonrefundable tax credits will be allowed to offset AMT liability through 2011.

AMT exemption amounts	2010	2011
Married filing jointly	$72,450	$74,450
Single or head of household	$47,450	$48,450
Married filing separately	$36,225	$37,225

Estate tax

The Act makes several major-- though temporary-- changes to the federal estate tax, including:

• For 2011 and 2012, the estate tax exemption amount (the applicable exclusion amount) will be $5 million per person (the $5 million will be indexed for inflation in 2012); the top estate and gift tax rate for these years will be 35%
• The $5 million exemption amount and 35% top estate tax rate will apply retroactively to 2010 as well, but for individuals who died in 2010, an election can be made to choose the estate tax provisions effective prior to this legislation (i.e., no estate tax, but modified carryover basis rules); an extended due date is provided for individuals who died on or after January 1, 2010, but before December 17, 2010.
• Beginning in 2011, the gift tax (reunified with the estate tax) will have a $5 million dollar exemption amount; the generation-skipping transfer tax, with a $5 million exemption effective January 1, 2010, will have a 0% tax rate for 2010, and a 35% rate for 2011 and 2012
• For 2011 and 2012, when one spouse dies, any unused portion of that spouse's estate tax exemption amount may be transferred to the surviving spouse

One-year reduction in employee payroll tax

For the 2011 year, the employee portion of the Social Security retirement component of FICA employment tax is reduced by 2%. Normally equal to 6.2% of covered wages up to the taxable wage base ($106,800 in 2011), for 2011 this rate will be reduced to 4.2%. Self-employed individuals, who normally pay 12.4% for the Social Security portion of their self-employment taxes, will also benefit from a 2% reduction, paying the tax at a rate of 10.4% for 2011.

"Bonus" depreciation

The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 allowed an additional 50% depreciation deduction for qualifying property placed in service during 2008 and 2009. This additional depreciation deduction was allowed for purposes of the alternative minimum tax (AMT) calculation, as well as regular tax. The Small Business Jobs Act extended the 50% additional first-year depreciation deduction for one year to apply to qualified property acquired and placed in service during 2010.

This Act increases the bonus depreciation percentage to 100% for property acquired and placed in service after September 8, 2010 and before January 1, 2012. The Act extends bonus depreciation at the 50% level through 2012 (50% bonus depreciation will apply for property placed in service after December 31, 2011, and before January 1, 2013).

IRC Section 179 expense limits

Section 179 of the Internal Revenue Code allows businesses to elect to deduct the cost of depreciable tangible personal property acquired for use in the business in the year of purchase, rather than through depreciation deductions. Since 2003, several pieces of legislation have temporarily expanded the limits that apply to Section 179.

Most recently, the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 increased the maximum amount that can be expensed to $250,000 for tax years beginning in 2008 and 2009. This amount was reduced by the amount by which the cost of qualifying property placed in service during the year exceeded $800,000. For tax years 2010 and 2011, the Small Business Jobs Act increased the maximum amount that may be expensed under Section 179 to $500,000 and increased the phase-out threshold amount to $2 million.

For 2012, the dollar limit amount and phase-out threshold level were scheduled to drop to $25,000 and $200,000, respectively. This Act sets the IRC Section 179 expense limit for 2012 at its 2007 level--$125,000, with a phase-out threshold of $500,000--indexed for inflation.

Small business stock exclusion

Noncorporate investors may generally exclude 50% of any capital gain from the sale or exchange of qualified small business stock (generally, stock issued by domestic C corporations whose assets do not exceed $50 million) issued after August 10, 1993 (if a five-year holding period requirement and other requirements are met). The Small Business Jobs Act temporarily increased the exclusion percentage for qualified small business stock acquired during 2010 to 100%, and does not treat the excluded gain as an alternative minimum tax preference. Therefore, no regular tax or alternative minimum tax is imposed on the sale of qualified small business stock issued and acquired after September 27, 2010, and before January 1, 2011, and held at least five years.

This Act extends the 100% exclusion for one year--to qualifying stock acquired before January 1, 2012, and held for more than five years.

Education provisions

• The Act extends the American Opportunity tax credit (known as the Hope tax credit before being significantly-- though temporarily--modified by the American Recovery and Reinvestment Act of 2009). The American Opportunity Tax Credit's higher maximum credit amount, increased income limits, expanded applicability to the first four years of college, and potential refundability, available in 2009 and 2010, are extended through 2012.
• The current rules that apply to Coverdell Education Savings Accounts (e.g., $2,000 annual contribution limit, education expenses expanded to include elementary and secondary school expenses) are also extended through 2012. Without this change, the annual contribution limit would have dropped to $500 beginning January 1, 2011.
• For the student loan interest deduction, increased income limits and the suspension of the 60-month rule, which would have expired at the end of 2010, are extended for 2 years (the deduction was, prior to 2001, limited to interest paid in the first 60 months of repayment).
• The deduction for qualified higher education expenses, which expired at the end of 2009, is retroactively reinstated for 2010, and extended through 2011.

Other provisions--individuals

Provisions extended through 2012 include:

• Itemized deductions and personal and dependency exemptions will not be reduced for higher-income individuals
• "Marriage penalty" relief in the form of an expanded 15% tax bracket and an increased standard deduction amount for married individuals filing jointly
• Exclusion of up to $5,250 in employer-provided education assistance for undergraduate and graduate education
• Increased earned income tax credit (EITC) for families with 3 or more children, and increased EITC income limits for married couples filing jointly
• Increased child tax credit amount with expanded refundability (15% of earnings above $3,000)
• Expanded credit for child and dependent care expenses (increased limit on eligible expenses and maximum credit percentage)
• An increased adoption tax credit and employer-paid adoption assistance exclusion amount; the credit also remains refundable

Provisions retroactively reinstated for 2010 and extended through 2011 include:

• The deduction for state and local sales tax in lieu of state and local income tax on Schedule A
• The $250 above-the-line deduction for elementary school and secondary schoolteacher classroom expenses
• Increased contribution limits and carryforward period for contributions of capital gain property for conservation purposes
• Tax-free distributions to charitable organizations from IRAs by individuals age 70 1/2 or older (up to $100,000 per year); a special provision in the Act allows qualifying individuals to treat a distribution made from an IRA to a charity in January, 2011, as if it were made in 2010

Provisions extended for one year (through 2011):

• Increased monthly exclusion amount for employer-provided transit and vanpool benefits
• Mortgage insurance premiums deductible as qualified residence interest, subject to an adjusted gross income (AGI) limitation

The Act also reinstates the tax credit for energy-efficient improvements to existing homes for 2011, but as it applied prior to the American Recovery and Reinvestment Act of 2009 (e.g., a 10% credit rate generally applies).

Other provisions--businesses

Provisions extended through 2011 include:

• Research and development credit
• Indian employment credit
• New Markets tax credit
• Employer wage credit for activated military reservists
• Enhanced charitable deductions for contributions of food inventory, book inventories, and computer equipment
• Work opportunity tax credit

--see disclaimer below--

Week in Review: Market activity light as investors prepare for holidays and set sights on 2011

Global economic news

U.S. economy sees uptick as GDP revised slightly higher
The U.S. gross domestic product (GDP) grew at an annual pace of 2.6% in the third quarter, according to the U.S. Department of Commerce. GDP, the value of all goods and services produced, is the broadest measure of a country's economic activity. While the revised third-quarter GDP figure is slightly higher than the initial reading of 2.5%, it falls below the 2.7% level projected by many economists. The economy grew at a 1.7% annual rate in the second quarter.


Wave of credit downgrades threaten eurozone
The European sovereign debt crisis was on the minds of investors and market watchers around the world as Moody's Investors Service warned that it may lower Portugal's credit rating by as much as two notches. The warning came less than a week after the agency said it may downgrade its rating on Spanish and Greek government debt. On December 17, Moody's slashed Ireland's credit rating five levels to "Baa1" from "Aa2," leaving the country just above speculative grade or junk status. France is also at risk of losing its top "AAA" rating, and Belgium is facing a possible cut. Further credit rating downgrades could make it more costly for eurozone periphery nations to borrow in capital markets.


Existing home sales edge 5.6% higher in November
The National Association of Realtors said that sales of previously occupied homes in the United States increased to a 4.68 million annual rate in November, up 5.6% from October's 4.43 million. It was the third increase in sales of existing U.S. homes in the past four months.


Gas, oil prices up
Increased demand for petroleum has resulted in a 4% jump in gasoline prices since last month while crude oil prices rose above $90 per barrel for the first time since October 2008.


ECB to lend European banks $197 billion
The European Central Bank agreed to meet the liquidity needs of eurozone banks by lending them 149.5 billion euros ($196.8 billion USD) over a period of three months. While the central bank decided against giving 6- and 12-month loans, President Jean-Claude Trichet said that it will keep offering banks as much cash as needed through the first quarter of 2011 to help restore lending in the region.


U.S. initial jobless claims drop again
The U.S. Department of Labor reported that the number of Americans filing new unemployment claims decreased to 420,000 in the week ended December 18. The latest number of filings represents 3,000 fewer claims than the previous week's total.


Americans using less of their income to pay down debt
U.S. household financial obligations as a share of after-tax income fell to 16.78% in the third quarter from 16.97% the previous quarter. The drop indicates that Americans are allocating a smaller portion of their paychecks to paying off personal debt.


Airlines set to record biggest profits in over 10 years
The U.S. Department of Transportation reported that operating profits for airlines in the United States surpassed $7.1 billion in the first nine months of 2010. The figure exceeds the industry's full-year profit figures going back to at least 1999 when airlines reported profits of $6.89 billion for a full 12 months. This year's strong results are due in part to airfares, which are 13% higher than last year. New fees, including baggage fees, have also led to higher profits for the industry. According to the Bureau of Transportation Statistics, the industry collected $2.1 billion in fees during the third quarter alone. The airline industry lost more than $5.5 billion in 2008 at the height of the global recession.

Global corporate news

Global M&A activity jumps 16% in 2010
Deals in emerging markets helped spur a 16% increase in global mergers and acquisitions activity this year. According to preliminary data from Mergermarket, firms in developing countries closed 2,570 transactions worth a total $502.6 billion in the year to date. This figure represents a 42.9% increase over last year's $351.8 billion.

The year's two biggest deals were America Movil's $28.1 billion takeover of Carso Global Telecom and GDF Suez Energy International's $27.3 billion union with International Power. As more companies are seeking ways to spend their significant cash piles outside of their home markets, many industry analysts expect to see a continued upswing in M&A activity in emerging markets in 2011.


Other mergers and acquisitions news
Russian potash fertilizer producers OAO Uralkali and OAO Silvinit announced a long-anticipated merger earlier in the week. Uralkali reported that it is buying a 20% stake in Silvinit for $1.4 billion. The union will create a company with a market capitalization of nearly $24 billion.

Canada's Toronto-Dominion Bank agreed to purchase Chrysler Financial, the auto lender owned by private equity firm Cerberus Capital Management, for $6.3 billion. As part of the deal, Cerberus will retain about $1 billion of non-auto assets. The deal will place TD Bank in the top-five North American auto lenders. Chrysler Financial is no longer affiliated with the automaker whose name it bears.


Earnings update


ConAgra Foods reported a drop in profit for its fiscal second quarter ended November 28. Profit fell 16%, dropping to $200.9 million from $239.7 million a year ago. Net sales increased 2% to $3.16 billion, exceeding analysts' projections.


Adobe recorded a profit of $268.9 million for its fiscal fourth quarter ended December 3, up from a year-earlier loss of $32 million. The maker of Photoshop and Illustrator design software cited strong product sales and subscription revenue as reasons for its strong performance.


Walgreens said its profit for the quarter ended November 30 was $580 million, up 19% from the $489 million profit the drugstore chain reported a year earlier.


Dillard's appears to be on the verge of a comeback following a strong third quarter. The department store chain posted net income of $14.4 million, up from $8 million a year ago. Dillard's, after nearly three years of financial troubles, seems to have turned things around by shuttering stores that did not report strong sales numbers, doing a better job tracking inventory, and buying higher quality products.

The week ahead

• Japan's CPI, industrial production figures, and unemployment rate released Monday, December 27
• S&P/Case-Shiller Home Price Indices for 20 U.S. cities released Tuesday, December 28
• France's GDP released Tuesday, December 28
• U.S Conference Board's Consumer Confidence Index released Tuesday, December 28
• Initial jobless claims figures for U.S. released Thursday, December 30
• Chicago Purchasing Managers Index released Thursday, December 30
• Italy's ISAE Manufacturing and Mining Survey released Thursday, December 30
• Cal-Maine Foods, Redbook earnings released

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
.
Past performance is no guarantee of future results.

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com

Week in Review: Markets trend slightly upward on signs of growth

U.S. economic news

U.S. Congress passes $800 billion tax cut
After much negotiation, Congress approved an $858 billion bill, with $801 billion in tax cuts and $57 billion for extended unemployment insurance. The bill had bipartisan support as both Democratic and Republican lawmakers sought to prevent the across-the-board tax increase that would have occurred with the expiration of Bush administration tax cuts set for December 31.

Fed reaffirms plan to buy bonds
The Fed restated its intention to buy $600 billion in government securities in the next half year in an ongoing effort to stimulate the U.S. economy, bring down high unemployment, and avert deflation.


U.S. retail sales rise again; economic growth revised upward
Retail sales rose for the fifth-straight month in the United States, according to the U.S. Department of Commerce, matching their highest level since November 2007, before the recession began. Retail sales increased by 0.8% in November, and the October sales figure was bumped up to 1.7% growth from a previously estimated 1.2% increase. The stronger-than-expected retail sales prompted Macroeconomic Advisers to boost its tracking forecast for fourth-quarter gross domestic product to 3.1% from 2.7%.

Eurozone's weakest economies struggle
Despite signals of eurozone optimism this week, negative developments focused on the struggling economies of Spain, Greece, and Ireland. Moody's Investors Service downgraded Ireland's debt by five levels, to Baa1 from Aa2, a drop that reflected that the country's staggering banking losses and vulnerability to further economic weakness. Moody's also announced that it would put Spain's Aa1 government bond ratings on review for a possible downgrade. Meanwhile, Greek workers staged a nationwide general strike in protest against government austerity measures. Transportation was almost brought to a standstill. Hundreds of flights were cancelled and ferry and rail services suspended. Government offices, courts, hospitals, and schools were also affected.

EU summit produces accord
At an economic summit, European Union leaders agreed to create a mechanism that would contain future debt crises through cross-border guarantees between member states. The agreement led to strengthening of the euro against 15 of its most-traded counterparts.

German business confidence soars
German business confidence rose to its highest level since 1991, with the Munich-based Ifo institute's business climate index hitting 109.9 in December, up from 109.3 in November. Germany's unemployment rate fell for the seventeenth straight month in November, reaching its lowest rate - 7.5% - since April 1992.

German investor confidence also rose in December, with the German ZEW expectations survey climbing for the second month in a row, supported by increasingly broad-based economic growth. Expectations in the survey rose to 4.3 from 1.8 in November.


European economic growth uneven
Industrial production across the 16-country Eurozone grew 0.7% in October, the most recent month reported, and 6.9% annually, according to Eurostat, the European Commission's economic statistics agency. Also, while employment contracted 0.7% in both Greece and Spain during the third quarter, it grew 0.3% in Germany and 0.2% in France over the same period.

India, China forge stronger ties
A high-profile visit to India by Chinese Premier Wen Jiabao and 400 business executives set the stage for $20 billion in announced business deals between China and India. The countries set a $100 billion target for bilateral trade by 2015. India-China trade is expected to exceed $60 billion this fiscal year, up from $42 billion for the last fiscal year.

Inflation high in both India and China
India's annual inflation rate eased in November but remained elevated at 7.48%, down from 8.58% the previous month. Meanwhile, China's consumer price index increased 5.1% in November from a year earlier. China's government said it would raise its inflation target for 2011 to 4% from 3% this year. Observers noted that this could be a sign of greater tolerance for inflation, which could mean less aggressive tightening going forward.


U.S. jobless claims down
The number of U.S. workers filing initial claims for unemployment insurance fell by 3,000 to 420,000 in the week ended December 11, the U.S. Department of Labor reported. The four-week average confirmed the positive trend, declining by 5,250 to 422,750, its lowest level since August 2, 2008.


U.S. inflation tame
The U.S. Consumer Price Index increased 0.1% in November from October. The core CPI, excluding food and energy costs, also rose 0.1%. For the 12 months ended in November, prices rose 1.1% overall and 0.8% for the core CPI. This indicates inflation is not an immediate concern for the Fed, which frees it to pursue more stimulative action.

Global economic news

FedEx raises earnings outlook, is optimistic about global economy
Despite an 18% decline in quarterly profit, FedEx raised its annual earnings forecast on optimism about global economic trends. The courier, the world's largest international package-shipping firm, is viewed as an economic bellwether. Its quarterly results were brought down by legal charges and restructuring costs, but its international air freight business had improved demand and pricing.

Oracle posts robust profits
Oracle's second-quarter earnings rose 28% on strength in the business-software giant's traditional software business and its new hardware line. The company attributed the robust results to strong revenue growth and disciplined business management.


National Semiconductor earnings soar
Sharply higher sales and improved profit margins led National Semiconductor to a 78% jump in second-quarter profit. However, the chip maker issued a lukewarm revenue outlook.


RIM's profit soars on Blackberry sales
Canadian Blackberry maker Research in Motion's quarterly earnings leapt 45% as the sales volume of the company's popular smart phones rose 40% from a year earlier in the most recent quarter. However, the company faces tough competition from Apple's iPhone and Google's Android platform.


Bank of Montreal, Canada's fourth-largest bank, said it will acquire Marshall & Isley, a Milwaukee, Wisconsin-based bank, in a $4.1 billion share swap that will double BMO's presence in the U.S.

The week ahead

• Third quarter U.S. GDP estimate released Wednesday, December 22
• Final figures for third quarter UK GDP released Wednesday, December 22
• U.S. durable goods orders for November due out Thursday, December 23
• University of Michigan Consumer Sentiment Index released Thursday, December 23
• Nike, Carnival, and Walgreen's earnings reports due

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.


Past performance is no guarantee of future results.

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com

Week in Review: Bond prices slump; stocks wobble amid U.S. tax deal squabbling

U.S. economic news

Democrats push back against tax compromise plan
Democrats in the U.S. House of Representatives withheld support for President Obama's tax package on Thursday by agreeing not to vote on the newly negotiated tax package in its current form. A leading Republican said the deal, highlighted by extensions of Bush-era tax cuts for two years and long-term jobless benefits, is flawed because it fails to address fiscal austerity measures that will be needed to help reduce the mounting federal deficit. Despite the Democrats' nonbinding resolution, the tax measure moved closer to passage in the Senate.


Consumer credit jumps in October
The U.S. Federal Reserve Board reported that the level of consumer borrowing in the United States rose to $2.4 trillion in October, an increase of $3.4 billion from September. The increase, the most in more than two years, was largely the result of a $9 billion increase in nonrevolving credit, which includes categories such as car loans, to $1.6 trillion. Revolving credit, almost entirely credit card debt, dropped 8.4% for the month, meaning that credit card use has fallen for a record 26th straight month.


Jobless claims drop
The U.S. Department of Labor said that the number of Americans filing initial unemployment claims fell to 421,000 in the week ended December 4. The figure is a decrease of 17,000 from a revised 438,000 claims filed the previous week.

U.S. and global corporate news

Three retailers head into holiday season with strong earnings
Talbots reported that its profit for the fiscal third quarter ended October 30 increased to $17 million from $14.6 million on higher margins. Still, the retailer lowered its earnings forecast for the year, raising concerns about its turnaround plan. Despite cutting debt, buying out its largest shareholder, and revamping its clothing line, revenue in stores open at least one year fell 7.1% for the same period.


Neiman Marcus Group, operator of its namesake store and Bergdorf Goodman, said its profit rose to $25.7 million for the quarter ended October 30. The latest figure, more than triple the $8.5 million profit the company reported a year ago, could be an indication that sales of luxury goods are on the rebound.


Costco posted a profit of $312 million for its first quarter ended November 21, up 18% from $266 million a year earlier. Revenue increased 11% to $19.24 billion, while sales increased 11% to $18.82 billion.

Global economic news

Eurozone officials disagree over size of bailout fund
Eurozone finance ministers met this week to discuss a number of issues, including the rescue package for Ireland, the creation of a temporary bailout fund for other struggling economies, and the possible establishment of a debt agency to issue "e-bonds" in lieu of national debt. Officials are split on the need to increase the size of any bailout fund as German Chancellor Angela Merkel rejected calls from Belgium and central bankers to boost the European Union's 750 billion euro emergency fund or begin joint bond sales to save countries such as Portugal and Spain.


Ireland's credit rating cut three levels
Ireland's credit rating was lowered to "BBB+" from "A+" by Fitch Ratings. It is the second downgrade of the country by Fitch in two months. Ireland agreed to an 85 billion euro bailout from European governments and the International Monetary Fund on November 28.


RBA, BOE hold rates steady
Australia's central bank voted this week to keep its benchmark interest rate unchanged at 4.75%. The Reserve Bank of Australia (RBA) said it expects inflation to remain contained over the "next few quarters." The Bank of England's Monetary Policy Committee also left its key interest rate unchanged at its all-time low rate of 0.5%.

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk.

Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.

Past performance is no guarantee of future results.


Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com


--see disclaimer below--

Market Week: December 6, 2010

The Markets Domestic equities managed to shrug off Friday's disappointing unemployment figure, buoyed by back-to-back triple-digit midweek gains. However, bond prices took a hit as the 10-year Treasury yield returned to last summer's levels. Investment Company Institute data showed that investors pulled money out of municipal bond funds for the third week in a row, as they have been doing with domestic equity mutual funds since May.

Market/Index 2009 Close Prior Week As of 12/3 Week Change YTD Change DJIA 10428.05 11092.00 11382.09 2.62% 9.15% NASDAQ 2269.15 2534.56 2591.46 2.24% 14.20% S&P 500 1115.10 1189.40 1224.71 2.97% 9.83% Russell 2000 625.39 732.73 756.42 3.23% 20.95% Global Dow 1984.48 1978.32 2039.21 3.08% 2.76% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 3.85% 2.87% 3.03% 16 bps -82 bps Last Week's Headlines After idling at 9.6% for the previous three months, unemployment rose to 9.8% in November, while nonfarm payrolls remained static. Despite the onset of holiday shopping, retail businesses had job losses, though there were gains in temporary help and healthcare. People unemployed for more than 27 weeks represented almost 42% of the 15 million people without jobs. The manufacturing sector in the U.S. expanded in November for the 15th straight month. The 56.6 reading on the Institute for Supply Management's manufacturing index was the second fastest rate of growth in the last six months. The ISM's November reading on the services sector also increased slightly, with retail trade leading the way. European leaders said they would continue to buy bonds to help support troubled sovereign debt there, and the head of the European Central Bank assured investors that his organization will take whatever steps are necessary to protect the euro. Preliminary indications from post-Thanksgiving shopping were strong, according to the National Retail Federation, which reported Black Friday sales that were higher than the previous year and an increased volume of shoppers. The bipartisan National Commission on Fiscal Responsibility and Reform failed to muster enough votes to send its proposals for cutting the national deficit to Congress. Eye on the Week Ahead With few economic data releases scheduled for the week, eyes will be on Washington for any sign of a decision on tax cut extensions, and on Irish leaders who will vote on a new budget needed to implement the country's recent bailout. Key dates and data releases: International trade (12/10). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment. --see disclaimer below--

Week in Review: Eurozone debt crisis, slow U.S. labor recovery rock global financial markets

U.S. economic news

Employers add fewer jobs than expected
The U.S. economy added fewer jobs than expected in November, and the unemployment rate unexpectedly increased. Nonfarm payrolls increased 39,000, less than expected, and the jobless rate rose to 9.8%, the highest since April. Hours worked and earnings stagnated. The numbers underline the continued weakness in the labor market, whose turnaround is seen as key to economic recovery. This week the law that extended unemployment benefits to as long as 99 weeks expired after Democratic and Republican senators blocked rival attempts to renew it. That means that extended jobless benefits affecting about two million people are set to expire at the end of the year.

Other data suggest recovery gathering momentum
Despite the discouraging signs from the labor market, other reports showed momentum this week. Retailers have reported robust November sales as consumers kept spending despite high unemployment. U.S. manufacturing expanded for the sixteenth month in a row in November, according to the Institute for Supply Management. Factory output grew as consumers and businesses spent more on autos, computers, and other goods. Also last month, consumer confidence rose, according to the Consumer Confidence Index^®. The measure rose to 54.1 in November from 49.9 in October, reaching its highest level in five months

Housing prices still falling
The Standard & Poor's/Case-Shiller index of home values showed that home prices are falling faster in the nation's largest cities than in the rest of the country. The home-price index fell 0.7% in September from August. Eighteen of the 20 cities recorded monthly price declines.

House agrees to extend tax cuts
The U.S. House of Representatives approved legislation this week that would extend the current tax rates on income up to $250,000. They also agreed to allow taxes on higher earnings to increase. However, the legislation is expected to fail in the Senate.

U.S. and global corporate news

S&P puts several Portuguese banks on credit watch
Standard & Poor's said it has put several Portuguese banks on credit watch with negative implications after it did the same with Portugal's long-term rating earlier in the week. The banks put on watch include Banco Santander, Santander Totta, Banco Comercial Portugues, Banco Espirito Santo, Banco BPI and the state-owned Caixa Geral de Depositos. S&P said it believes "that Portugal's macroeconomic challenges and difficult external financing conditions will put pressure on the bank's operating environment, potentially weakening their creditworthiness."

Toll Brothers swings to profit
The luxury home builder Toll Brothers swung to a profit for the second quarter in a row. The builder was helped by a tax benefit and fewer writedowns. At the same time revenues fell less than expected.

Global economic news

ECB extends liquidity measures
As the crisis in Ireland rocked global markets, the European Central Bank opted to extend its special liquidity measures, abandoning plans to wind down emergency support for banks and government debt markets. ECB President Jean-Claude Trichet said the ECB would continue to offer unlimited liquidity to banks for as long as necessary. He added that the bank would continue its special bond purchasing program to support the weakened eurozone debt markets.

Eurozone and U.K. economies show slow recovery
Meanwhile, reports this week showed that the eurozone economy slowed sharply in the third quarter as business investment ground to a halt. The slowing investment suggests companies are still too uncertain about the prospects of recovery to commit more capital. In the United Kingdom, weak confidence and jobs cuts weighed down the dominant services sector, which expanded at a marginally slower pace in November.

India posts 8.9% growth for quarter
India posted an 8.9% year-over-year increase for the quarter ended September 30 as the country's economic expansion continued.


Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.

Past performance is no guarantee of future results.
 
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com

December 2010 Schnack Financial Newsletter

"Hi,

The opening paragraph of the report of the National Commission on Fiscal Responsibility and Reform reads as follows: Throughout our nation’s history, Americans have found the courage to do right by our children’s future. Deep down, every American knows we face a moment of truth once again. We cannot play games or put off hard choices any longer. Without regard to party, we have a patriotic duty to keep the promise of America to give our children and grandchildren a better life.

Every American should read it."
FULL REPORT


--Randy

Financial Tips for Twenty-Somethings You're on your own now. You've finished school, are working your first real job, and maybe you're even buying a home or getting married. Here are a few tips to help you start managing your finances. More Details

Cash-In Refinancing: Can You Benefit from This Growing Trend? Mortgage interest rates are at or near historic lows, but stricter lending standards and declining home values have made it harder to refinance. Enter cash-in refinancing. More Details

Fixed Annuities vs. CDs: Is One Better Than the Other? While some features are similar, fixed annuities and bank certificates of deposit (CDs) also have characteristics that differ. What works for you may depend on which of these factors best fits your financial situation and investment objectives. More Details

Can I roll over my traditional 401(k) plan distribution to a Roth IRA? You can roll most traditional 401(k) plan distributions to a Roth IRA. These are treated as taxable conversions. More Details Can I roll over my Roth 401(k) plan distribution to a Roth IRA? You can roll your Roth 401(k) plan distribution over to a Roth IRA. Your rollover will be tax free regardless of whether your distribution from the Roth 401(k) plan is qualified or nonqualified. More Details

Week in Review: World markets wary as eurozone watch intensifies

U.S. economic news

Economy grows 2.5% in third quarter
U.S. gross domestic product (GDP), the value of all goods and services produced in the country, rose at an annual seasonally adjusted rate of 2.5% during the period July through September. The figure is significantly higher than the 2.0% expansion rate reported by the U.S. Department of Commerce in its initial report released on October 29. The government cited stronger exports and increased consumer spending as reasons for the improved GDP. Consumer spending rose 0.4% in October after a 0.3% gain in September.


E-commerce on the rise, accounts for 4.2% of total retail sales
The Commerce Department said e-commerce sales hit $41.5 billion in the third quarter, up 15.1% from the fourth quarter of 2007 at the beginning of the recession. Retail sales excluding Internet sales were down 4.6% for the same time period. According to projections from a number of leading economists, the nation's retailers are cautiously optimistic about a strong holiday shopping season, which traditionally kicks off today, Black Friday. As many as 138 million shoppers are expected to hit stores this weekend.


New and existing home sales fall in October
Sales of new homes unexpectedly fell in October, despite near record-low borrowing costs. New home purchases decreased 8.1% to a 283,000 annual rate, according to figures from the Commerce Department. One group of economists surveyed had projected an increase to a 312,000 home annual pace. The National Association of Realtors said that sales of previously owned homes dipped 2.2% to a 4.43 million annual rate in October from 4.53 million units in September. The drop was larger than was projected by economists, who said sales would decrease to a 4.48 million home pace. Reasons cited for the sales declines include foreclosure moratoriums and a lack of credit in the U.S. housing market.


Initial jobless claims fall sharply
The U.S. Department of Labor said that new unemployment claims fell by 34,000 to a seasonally adjusted 407,000 in the week ending November 20. The drop means that the number of Americans filing for new unemployment benefits was as its lowest level since June 2008. Wall Street analysts had projected a much smaller drop in new claims.

U.S. and global corporate news

Campbell Soup reported its sales slipped 1.4% in the fiscal first quarter ended October 31, 2010, while net income fell 8.2% to $279 million from $304 million a year ago. Heavy promotional spending in the quarter by the world's biggest soup maker failed to spur sales. Campbell's, one of the first large U.S. packaged food makers to focus heavily on reducing salt across its product line, believes it has addressed the sodium issue and is turning its attention to creating better-tasting soups and more varieties.

Cost cuts helped Hormel Foods post a profit of $121.1 million for the fiscal fourth quarter ended October 31, up 17% from $103.9 million one year ago. Hormel, the maker of Spam and Dinty Moore stews, set its earnings outlook for the upcoming year at $3.10 to $3.20 per share. These figures exceed the average analyst estimate of $3.05 per share.


Del Monte Foods agreed on Thursday to a $4 billion takeover by an investor group led by Kohlberg Kravis Roberts & Co. KKR, Vestar Capital Partners, and Centerview Partners bid $19 per share in cash for the maker of pet foods and canned vegetables. If the deal goes through, it would be one of the year's largest private-equity buyouts.

Global economic news

Ireland gets EU, IMF funds; European leaders disagree over eurozone bailout
Although Ireland has enough money to pay its debts until the middle of 2011, it requested a rescue package from the European Union and the International Monetary Fund amid concerns that the cost of bailing out its banks would overwhelm government finances. EU finance ministers accepted Ireland's request for a three-year package of loans totaling approximately 85 billion euros. Of the total, 35 billion euros will be allocated for bailing out ailing banks and 50 billion euros will help finance the Irish government. As part of the bailout, the government said it will cut spending by nearly 20% and raise income taxes to narrow the country's budget deficit to 3% of gross domestic product by the end of 2014.

The EU commission announced a proposal on Wednesday to double the size of Europe's 440 billion euros bailout fund for eurozone governments. The proposal was quickly dismissed by Germany. The heightened tension in the region comes as investors and world leaders fear the eurozone debt crisis could expand to Portugal and Spain.


Eurozone's private sector grows despite debt problems
Financial information services company Markit said that the preliminary composite purchasing managers' index for the eurozone rose to 55.4 in November from 53.8 in October. Growth in the region's private sector was boosted by strong expansion in France and Germany. The increase surpassed projections of economists, who forecast the composite measure would increase to 53.9.

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.

Past performance is no guarantee of future results.

Standard & Poor's 500 Stock Index measures the broad U.S. stock market.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com

Week in Review: Markets await Irish aid package

U.S. economic news

Inflation at lowest level since 1957
Two key inflation gauges showed muted price movements in October. The U.S. Department of Labor reported that the seasonally-adjusted consumer price index (CPI) rose 0.2% from September and 1.2% from October 2009. The core inflation rate excluding food and energy prices was unchanged from September and rose 0.6% from a year earlier.

Meanwhile, wholesale prices remained under control. The Producer Price Index (PPI), which measures how much manufacturers pay for goods and services, rose a seasonally adjusted 0.4% for finished goods in October from September, and 4.3% from a year ago. However, the core index, without food and energy prices included, declined 0.6% last month, in its sharpest monthly drop in four years. The core index was up just 1.5% year over year.


Retail sales rise 1.2%
U.S. consumers appeared to be loosening their purse strings, as retail sales increased 1.2% in October, the fourth consecutive month of rising spending and the largest monthly increase since March. Retail sales risen to their highest level since August 2008.


Fed to require bank capital plans
All 19 banks that went through stress tests in early 2009 will have to submit capital plans to the Fed early next year to demonstrate their ability to withstand losses. This initiative is part of the Fed's efforts to bolster bank supervision in the wake of the financial crisis and make sure large banks are on solid financial ground.


U.S. mortgage delinquencies decline
The rate of U.S. mortgage delinquencies fell in the third quarter of 2010, though still remained quite high. According to the Mortgage Bankers Association, the delinquency rate on single-family homes fell to 9.13%, a drop of 0.72 percentage points. The percentage of loans in foreclosure proceedings fell to 4.39% from 4.57%.


U.S. jobless claims rise slightly
The number of U.S. workers filing first-time claims for unemployment insurance rose 2,000 to 439,000 in the week ended November 13, the U.S. Department of Labor reported. Meanwhile, the four-week moving average of initial claims fell 4,000 to 443,000, its lowest level since September 2008.

U.S. and global corporate news

GM revs up finances with IPO
In the second largest U.S. initial public offering ever, General Motors raised $15.8 billion through common shares in its offering, selling 478 million shares at $33 per share, a higher-than-expected price. Counting additional shares that underwriters may exercise their right to sell, the total common stock sale could reach $18.1 billion. GM also raised $4.35 billion in preferred shares as the automaker sought to re-establish its financial independence after being bailed out by the federal government last year.


Big box stores in the black
A number of high-profile large companies posted third-quarter profits. Wal-Mart's third-quarter earnings climbed 9.3% on strong international operations, but same-store sales in the U.S. fell for the sixth consecutive quarter, reflecting tight spending by low-income earners.


Home Depot's earnings jumped 21% as cost controls and share repurchases offset the impact of the weak U.S. economy. The home improvement retailer also boosted its profit expectations for the year. Competing firm Lowe's also reported rising profits, with earnings up 17% after reduced discounts and increased sales of private-label profits helped offset a shortfall in overall sales. In contrast to Home Depot, Lowe's reduced its full-year outlook.


Sears loss widens while Penney's profit soars
Sears Holdings' third-quarter loss grew as sales fell substantially and the retailer continued to lose business to rivals. Comparable-store sales at Sears' namesake stores declined by 8.2% while the company's Kmart stores comparable-store sales fell just 0.7%, leading to a small profit within the division. In contrast, J.C.Penney's third-quarter earnings rose 63% under improving sales conditions. However, the retailer's inventory rose 6.2% from a year ago, and its gross margin, which indicates profitability, fell slightly.

Global economic news

Irish economic rescue package imminent
The Irish government, despite its distaste for depending on foreign financing, indicated that it would accept an international bailout to rescue its troubled banking industry. Late in the week, the government was negotiating a loan package with the IMF and European Union. Details of the loan, reportedly in the tens of billions of euros, were still being finalized. The Central Bank of Ireland said Friday that largely technical discussions with international delegations would continue for days to come.


China acts to curb inflation
The Chinese government made two decisive moves to counter inflation this week, with China's State Council announcing Wednesday that it would limit price increases on a wide range of products, including grain, oil, sugar and cotton. On Friday, China increased bank reserve requirements for the second time in two weeks, essentially withdrawing cash from the banking system. Last week, official data showed China's consumer price index rose 4.4% year over year in October, its fastest pace in two years and above the targeted 3% inflation rate for 2010.


Spanish economy stalls; bond sales ease fears
Spain's economy continued to struggle in the third quarter, as its gross domestic product remained unchanged from the previous quarter and up just 0.3% from a year earlier, according to the country's National Statistics Institute. Sales of close to $5 billion (3.65 billion euros) of long-term bonds on Thursday paid higher yields than two months ago, resulting in a higher level of confidence in the country's weak economy and troubled banking sector.


Germany's economic indicators are positive
German economic expectations rose more than expected in November. A closely watched economic-expectations index increased to 1.8 points in November from -7.2 points in October. The increase followed six consecutive months of decline. Additionally, a Centre for European Economic Research survey of analysts and institutional investors jumped 8.9 points to 82.5 points.


Eurozone inflation rises
Inflation in the 16 countries that use the euro climbed at the fastest rate in almost two years in October. Eurostat reported that consumer prices rose by 0.4% from September to October, and by 1.9% from a year earlier. The core rate of inflation excluding the prices for food and energy stood at 1.1% in October.

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.


Past performance is no guarantee of future results.

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com