MFS Announces Details for Partial Redemption of Auction Rate Preferred Shares of MFS High Income Municipal Trust

MFS Investment Management (MFS) announced today the redemption dates for a percentage of auction rate preferred shares (ARPs) issued by one of its closed-end funds that utilizes ARPs: MFS High Income Municipal Trust (NYSE: CXE) (the “Fund”).

The Fund is expected to redeem the following amounts of ARPs on the dates listed below for its two series of ARPs, subject to satisfying certain notice and regulatory requirements:

The redemption price will be equal to the liquidation preference of $25,000 per share, plus the amount of accumulated but unpaid dividends.

The record holder of the ARPs is CEDE & Co., the nominee of the Depository Trust Company (“DTC”). DTC has well-established rules for allocating partial redemptions among participating broker-dealer accounts. Each broker-dealer is then responsible for allocating the redemption among its investors. Allocation procedures among different brokers may vary, but the Financial Industry Regulatory Authority (FINRA) recently issued Regulatory Notice 08-21 and related interpretive guidance, reminding its members, which include registered broker dealers, that they are obligated to follow an allocation process that complies with New York Stock Exchange Rule 402.30 (which requires an impartial lottery system) unless they obtain a determination from FINRA that an alternate process is equally acceptable.

The Fund is financing this redemption of ARPs through tender options bonds (“TOBs”). In creating a TOB, typically a fund transfers a highly rated bond from its portfolio to a special purpose trust that issues two classes of securities: floating rate certificates, which pay an interest rate that will be reset weekly, and residual interest certificates, which pay an interest rate based on the difference between the interest rate earned on the underlying bonds and the interest rate paid on the floating rate certificates, after TOB program expenses. The fund holds the residual interest certificates and uses the proceeds from the sale of the floating rate certificates to redeem a portion of its outstanding ARPs. MFS has experience in creating TOBs and has invested in TOB residuals on behalf of other funds that it manages since 1991.

The TOB structure is less permanent than ARPs since TOBs may be unwound upon the occurrence of certain events such as a failed remarketing of the TOB securities, a bankruptcy of the issuer of the underlying security or if the bonds are insured, the bankruptcy of the issuer and the bankruptcy of the insurer, as well as certain other credit events. There is no certainty that TOB financing will be available in the future. TOBs have been reasonably steady in recent markets but there is no certainty that they will be profitable in future interest rate environments. Due to the requirements of the TOB structure, a fund that utilizes TOBs may hold more concentrated positions in individual securities, leading to increased impact on fund performance if such securities experience a ratings downgrade.

Based on market conditions that have persisted for several months, and including the fact that the dividend rate payable on the ARPs is determined by reference to the maximum applicable dividend rate, the total cost of financing through TOBs is expected to be lower than the total cost of financing through ARPs. Various limitations on the Fund’s ability to hold bonds suitable for use in the creation of TOBs, along with certain other considerations, permit only a portion of the Fund’s ARPs to be redeemed at this time. Under different market conditions, the cost of financing through TOBs may become disadvantageous (and may become more expensive than financing through ARPs); in that circumstance, the Board of Trustees will evaluate alternatives that it considers to be in the best interests of the Fund’s shareholders.

Subject to market conditions, MFS expects that it will provide more specific information within the next 30 – 60 days regarding partial refinancing of the outstanding ARPs of MFS closed-end fund MFS Municipal Income Trust (NYSE: MFM) through the creation of TOBs. MFS announced on July 23, 2008, redemption dates for a percentage of ARPs issued by two other MFS closed-end funds: MFS Investment Grade Municipal Trust (NYSE: CXH) and MFS High Yield Municipal Trust (NYSE: CMU). At this time, MFS does not expect to be able to refinance through the creation of TOBs any of the outstanding ARPs of a fifth, smaller MFS closed-end fund, MFS California Insured Municipal Fund (AMEX: CCA), because it would be necessary to take concentration risk in CCA to create a TOB of sufficient size to be marketable. MFS believes this level of concentration risk is not advisable under current market conditions.

MFS continues to participate in industry–wide efforts to restructure ARPs in a way to make them eligible for repurchase by money market funds. However, it is not certain when, or if, the MFS closed-end funds’ remaining ARPs will be restructured or redeemed.

MFS manages approximately $183 billion in assets on behalf of more than 5 million individual and institutional investors worldwide as of June 30, 2008. The company traces its origins to 1924 and the creation of America’s first mutual fund.

Statements made in this release that look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such risks and uncertainties include, without limitation, the adverse effect from a decline in the securities markets or a decline in a Fund’s performance, a general downturn in the economy, competition from other closed-end investment companies, changes in government policy or regulation, inability of a Fund’s investment adviser to attract or retain key employees, inability of a Fund to implement its investment strategy, inability of a Fund to manage rapid expansion and unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations.

This update is not a prospectus, circular or representation intended for use in the purchase or sale of Fund shares. Shares of the Funds are not FDIC-insured and are not deposits or other obligations of, or guaranteed by, any bank. Shares of the funds involve investment risk, including possible loss of principal. For more complete information about each fund, including risks, charges, and expenses, please see the fund’s annual and semi annual shareholder report or contact your financial adviser.

CXH, CMU, MFM, CXE and CCA are closed-end investment products. Common shares of these funds are only available for purchase/sale on the NYSE at the current market price, except CCA which is available for purchase/sale on the AMEX at the current market price. Common shares may trade at a discount to NAV. ARPs are available for purchase/sale through the funds’ auction agent Deutsche Bank.

MFS Fund Distributors Inc.

500 Boylston St., Boston, MA  02109

15146.1

Contacts:

MFS Investment Management
Shareholders or Advisors (investment product info):
Jed Koenigsberg, 617-954-5697
or
Media Only:
John Reilly, 617-954-5305
or
Dan Flaherty, 617-954-4256