MFS TECHNOLOGY FUND. Q3 18 Investment Update. Technology stocks of any size. Fund objective. Key performance points

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1 MFS TECHNOLOGY FUND Technology stocks of any size Focuses on technology stocks believed to have above-average growth potential. These stocks generally come from the computer systems and software, networking and telecommunications, internet, business services, and electronics industries but may also include investments from other technology-related industries. Benchmark: Standard & Poor's North American Technology Sector Index. Fund objective Seeks capital appreciation. Key performance points Class I underperformed the Standard & Poor's North American Technology Sector Index during the third quarter of 2018 with a return of 6.43% versus 8.89% for the Standard & Poor's North American Technology Sector Index. Detractors Overweight: Microchip Technologies, Facebook and Alibaba Group Underweight: Apple Not holding: QUALCOMM Our modest allocation to cash, used for transactional purposes, negatively impacted relative performance Contributors Overweight: Salesforce.com and DXC Technology Not holding: Intel, Micron Technology and Twitter Significant impacts on performance - detractors Overweight An overweight position in semiconductor manufacturer Microchip Technology (United States) detracted from relative returns. A softer-than-expected revenue outlook, driven by unexpected weakness at recently acquired semiconductor producer Microsemi, where slower top-line growth led to the overall share price drop. Overweighting shares of social networking firm Facebook (United States) hurt relative performance. Facebook's stock declined, mid-period, as the company surprised investor's by lowering its full-year revenue guidance and reported softer-than-expected revenues in the second quarter. Increasing privacy regulations, such as the European General Data Protection Regulation (GDPR), and currency headwinds were cited as reasons for the slowdown in advertising sales. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Page 1 of 6

2 The portfolio's position in ecommerce giant Alibaba Group (China) held back relative performance. Although the company's quarterly financials were largely in line with consensus estimates, concerns over the retail macro environment in China and increasing investment expenditures appeared to have given investors a more cautious outlook for the company, thus resulting in the stock's price decline late in the period. Underweight A portfolio underweight to global personal electronics giant Apple (United States) weighed on relative returns during the period. The company reported better-than-expected quarterly results, driven by an average sales price increase on iphones, which resulted in stronger revenues, services acceleration and growth in wearables. Company management also increased their guidance for the September quarter, which further supported the stock. Not Holding Not owning shares of wireless communications software company QUALCOMM (United States) held back relative performance during the quarter. Shares appreciated after management reported revenue and earnings results that were above consensus expectations, driven by strong performance in both the company's Qualcomm Technology Licensing and Qualcomm CDMA Technologies segments. Significant impacts on performance contributors Overweight An overweight position in customer information software manager Salesforce.com (United States) aided relative performance. The company reported healthy quarterly earnings, with a bullish commentary on the business climate, citing strength in pipeline deals and better revenues, despite incremental foreign exchange headwinds. The portfolio's overweight position in technology, outsourcing and support services consulting firm DXC Technology (United States) contributed to relative returns. The company reported a solid quarter with better-than-expected earnings results, driven by its continued execution of cost-cutting initiatives and a lower-than-expected tax rate, despite lighter-than-anticipated bookings and revenue. The company also maintained its fiscal-year 2019 outlook for revenue and earnings, which further supported the stock. Not Holding Not owning shares of computer technology manufacturer Intel (United States) helper relative returns during the quarter. Heightened concerns that Intel would lose share to rivals, due to a delay in the rollout of its 10-nanometer chips, appeared to have weighed on the stock. Avoiding holding shares of semiconductor company Micron Technology (United States) aided relative returns as the stock underperformed during the period. A shortage of PC and server CPUs in a seasonally strong part of the year combined with China/US trade tariffs appear to have caused weaker than anticipated demand. Not owning shares of social networking service provider Twitter (United States) boosted relative performance. The company reported quarterly results that were in-line with expectations, however, the stock price appeared to have been negatively impacted after the management provided EBITDA guidance for the upcoming year below market consensus. This softer guidance was driven largely by investment initiatives aimed at cleaning up the platform, through the pruning of fake accounts, as well as other initiatives. Page 2 of 6

3 Outlook and positioning is positioned as a broad based technology portfolio, with holdings primarily spanning the semiconductor, software, hardware, networking, internet, and services industries. We believe the market tends to overpay for short term earnings and underpay for duration of growth and out year earnings power. By analyzing companies and fundamentals with a longer-term view, we believe we have a better opportunity of finding when stocks are mispriced by the market. We seek to maintain discipline with respect to valuation aimed to balance the risks relative to returns. MFS team of domestic and international technology research analysts allows for the kind of in-depth and global analysis that seeks to generate favorable stock picking driven investment returns. Technology investors have experienced a strong run of performance within the sector over the last several years. Despite impressive absolute and relative returns, we continue to believe that the world is in the early stages of a number of very powerful secular trends that could benefit the sector broadly for many years in the future. The world has changed dramatically since Apple launched the iphone in June of Today there are roughly 4 billion people in the world with internet access, 2 billion people with smartphones, and 1 billion fixed broadband connections. This dramatic rise in internet access and connectivity has afforded companies the ability to reach consumers and vice versa. While developed markets are fairly well penetrated, there remains significant opportunity to build out internet access in developing regions, particularly in Latin America and India where broadband is only about 15% penetrated. We believe one of the biggest opportunities for growth in a connected world resides in companies and customers that transact digitally. Despite worldwide internet access and connectivity, it is amazing to think that 75-80% of the world s transactions are still done with physical cash or check 1. Over the next 5-10 years, we believe this ratio will improve dramatically as a number of well-positioned companies enable non-cash commerce around the world. Obvious examples include Visa and MasterCard who provide the platform, or the rails, to allow millions of transactions to take place each day in both the digital world of ecommerce and the physical world of traditional brick and mortar retailing. In addition, companies such as PayPal, which is transitioning to a platform of value-add services including P2P, digital transfer, credit, digital acquirer, and software, stand to potentially benefit from the shift toward digital payments. We were also attracted to the sticky business models of financial technology companies Fiserv and Fidelity National Information Services, who offer mission-critical processing and payment solutions to financial institutions. As they provide much of the infrastructure technology to allow digital payments to occur, they are benefiting from many of the same secular growth trends as Visa and MasterCard. Other companies such as Global Payments and Total Systems Services, both merchant acquirers that connect the merchant with Visa or MasterCard, as well as PagSeguro, an emerging online payment-based ecommerce service for commercial operations also referred to as the Square of Brazil, are enabling non-cash commerce in other ways. We believe this transition is still in the early stages of growth and that it could take 10 years or longer before the majority of the world s transactions move away from cash or check. We continue to believe there is a huge opportunity for investment in this area and a long runway for potential growth. Looking ahead, we feel there are a number of tectonic shifts occurring in the information technology landscape, in addition to the transition to digital transactions discussed above. Consumer preferences and behaviors will also shift, and we believe businesses that adapt to the new paradigm will benefit tremendously. We feel the portfolio will be able to take advantage of this changing environment by remaining committed to our investment discipline and using bottom-up stock selection to try and identify companies with durable growth driven by some combination of having a large addressable market, pricing power, or being early in the technology life cycle. Page 3 of 6

4 Overall, we are pleased with the portfolio s performance in the year thus far despite lagging in the third quarter. As is typical, the majority of excess return was driven by stock selection across a variety of technology sub industries. Several secular winners that are levered to strong trends cloud adoption and streaming media such as salesforce.com, Adobe, and Netflix have been strong contributors to performance. Relative underweights to Amazon and Apple, which represent nearly 10% of the index each and have performed well, represented a bulk of the underperformance year to date. At times, what you don t own can be as important to performance as what you do own. We have chosen to avoid several legacy technology companies we view as melting ice cubes because they are in secular decline. For example, we do not hold Intel which remains heavily tied to PC sales and was not able to effectively make the shift to processors for the expanding mobile device market. Other stocks we ve avoided for similar reasons include IBM, Cisco, and Oracle even though they represent significant weightings in the index. We remain optimistic about our prospects going forward and confident, after eight years investing in the technology space, that our focus on fundamental stock and industry research will continue to drive strong performance for shareholders. Significant transactions during the period included: We participated in the 3Q18 IPO of Farfetch, a UK-based luxury e-commerce company. Farfetch operates in a highly fragmented market and has built a two-sided platform, aggregating supply from luxury brands and boutiques, and demand from consumers. As an aggregator of supply and demand, we feel the assetlight business model should allow for low reinvestment rates and potentially attractive operating margins as e-commerce continues to grow as a percentage of total retail sales. We started a position in Vicor, a modular power component manufacturer. Vicor has recently developed power regulator solutions used in data centers to capitalize on cloud adoption trends. As cloud computing companies ramp up their artificial intelligence computing and processing needs, we feel Vicor could benefit as the current best-in-class producer. We also started a position in Spotify, considered the current leader in the secular growth of streaming music. It has carved out a strong current position in an end market that is growing rapidly. We believe that as a critical influencer of audience and aggregator of demand generation, they should be able to benefit from scale, artist fragmentation, and new artist & label services. We eliminated the position in global semiconductor device supplier Broadcom during the quarter following the announcement of the CA Technologies takeover deal. In the wake of the failed takeover of Qualcomm, we struggled to see the strategic rationale of the acquisition and saw it as a further drift from the company s core competency. 1 Source: worldpaymentsreport.com, Capgemini and BNP Paribas Page 4 of 6

5 Performance review as of 9/30/18 Portfolio % Q Year 3 Years 5 Years 10 Years Class A without sales charge Class A with 5.75% maximum sales charge Class I Class R Standard & Poor's North American Technology Sector Index Lipper Science & Technology Funds Cat. Avg Fund Expenses Class A Class I Class R4 Gross Expense Ratio Net Expense Ratio Gross expense ratio is the fund's total operating expense ratio from the fund's most recent prospectus. Net expense ratio reflects the reduction of expenses from fee waivers, reimbursements, and the exclusion of interest and fees. Elimination of these reductions will result in higher expenses and lower performance. Performance data shown represents past performance and are no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. For most recent month-end performance, please visit mfs.com. The performance shown is attributable in part to unusual market conditions. These conditions may not be repeated in the future. Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. All results assume the reinvestment of dividends and capital gains. The performance is as of the date shown; it may not include the fund's entire investment portfolio and is subject to change. Class R4 shares are available only to certain retirement plans. Class I Shares are only available through certain retirement plans, bank trust departments or law firms acting as trustee or manager for trust accounts, and other institutional investors and do not include sales charges. Sales Charges Class I shares ("I") have no sales charge or Rule 12b-1 fees and are available only to eligible investors. Class R4 shares ("R4") have no initial sales charge or CDSC. Shares are available only to certain retirement plans. Standard & Poor's North American Technology Sector Index measures technology stocks. Index returns do not take into account investment-related fees and expenses. It is not possible to invest directly in an index. Standard & Poor s and S&P S&P are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by [Issuer]. The S&P 500 is a product of S&P Dow Jones Indices LLC, and has been licensed for use by [Issuer]. [Issuer]'s [Product(s)] is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates make any representation regarding the advisability of investing in such product(s). Page 5 of 6

6 Important risk considerations The fund may not achieve its objective and/or you could lose money on your investment in the fund. Stock markets and investments in individual stocks are volatile and can decline significantly in response to issuer, market, economic, industry, political, regulatory, geopolitical, and other conditions. Investments in growth companies can be more sensitive to the company's earnings and more volatile than the stock market in general. The fund's performance could be more volatile than the performance of more diversified funds. Investments in the technology sector can be very volatile because of the rapid pace of product change, technological developments, and other factors. Please see the prospectus for further information on these and other risk considerations. This portfolio is actively managed, and current holdings may be different. This is a list of the positions mentioned above and the percentage (based on the equivalent exposure of unaudited net assets) they represent in the portfolio as of 9/30/2018: Microchip Technologies 2.01%, Facebook 6.10%, Alibaba Group 0.66%, Apple 2.50%, QUALCOMM 0.00%, Salesforce.com 4.38%, DXC Technology 3.27%, Intel 0.00%, Micron Technology 0.00%, Twitter 0.00%, Microsemi 0.00%, Visa 4.10%, MasterCard 3.48%, PayPal 1.78%, Fiserv 1.56%, Fidelity National Information Services 1.53%, Global Payments 1.96%, Total Systems Services 1.81%, PagSeguro 0.42%, Adobe Systems 3.91%, Netflix 2.57%, Amazon 7.17%, IBM 0.00%, Cisco 0.00%, Oracle 0.00%, Farfetch 0.45%, Vicor 0.33%, Spotify 0.43%, Broadcom 0.00% and CA Technologies 0.00%. Equivalent exposure measures how a portfolio's value would change due to price changes in an asset held either directly or, in the case of a derivative contract, indirectly. The market value of the holding may differ. The views expressed are those of MFS and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any other MFS investment product. No forecasts can be guaranteed. Before investing consider the fund s investment objectives, risks, charges, and expenses. For a prospectus, or summary prospectus, containing this and other information, contact your investment professional or view online at mfs.com. Read it carefully. MFS investment products are offered through MFS Fund Distributors, Inc., 111 Huntington Ave, Boston, MA Page 6 of 6