UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2594
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MFS SERIES TRUST IV
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
James R. Bordewick, Jr.
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: August 31, 2003
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Date of reporting period: February 29, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds
SEMIANNUAL REPORT 2/29/04
MFS(R) MUNICIPAL BOND FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
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MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
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Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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MFS(R) MUNICIPAL BOND FUND
The fund seeks as high a level of current income exempt from federal income
taxes as is considered consistent with prudent investing while seeking
protection of shareholders' capital.
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To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit mfs.com.
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TABLE OF CONTENTS
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MFS PRIVACY POLICY
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LETTER FROM THE CEO 1
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MFS ORIGINAL RESEARCH(R) 4
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MANAGEMENT REVIEW 5
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PERFORMANCE SUMMARY 9
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PORTFOLIO OF INVESTMENTS 12
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FINANCIAL STATEMENTS 32
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NOTES TO FINANCIAL STATEMENTS 38
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TRUSTEES AND OFFICERS 49
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MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 51
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CONTACT INFORMATION 52
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ASSET ALLOCATION 53
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
As the firm's new Chief Executive Officer, I want to thank you for your
continued trust in MFS and tell you about the series of actions we have taken
since our recent settlements with the regulators. These actions are designed
to enhance the governance structure of the MFS funds, tighten our business
practices, and strengthen the management team at MFS.
In early February, Robert Pozen joined MFS as non-executive Chairman. A
seasoned veteran of the mutual fund industry, Bob has held prior positions as
President of Fidelity Management & Research Company, as Associate General
Counsel of the Securities and Exchange Commission, and as a visiting professor
at Harvard Law School.
In an effort to develop and implement policies that we believe will set a new
standard in regulatory compliance, MFS has hired two new senior executives.
Jeffrey Carp is joining us as General Counsel with responsibility for all of
our legal affairs. Previously he was a senior partner with the law firm of
Hale and Dorr LLP. Also joining MFS in the new position of Executive Vice
President of Regulatory Affairs is Maria Dwyer, who returned to the firm after
serving as a senior executive at Fidelity. At MFS, Maria is in charge of
compliance, internal audit, and fund treasury.
In the area of governance, we have taken steps to enhance the independence of
our funds' boards of trustees to better protect the interests of shareholders.
We have independent board chairs and at least 75% of the trustees are
independent. The trustees will appoint not only their own counsel but also an
independent compliance officer. This officer will assist the boards and their
committees in monitoring the MFS funds' compliance with federal and
state regulations.
In February, MFS reached agreements with federal and state regulators to
settle their administrative proceedings against the firm and two senior
executives in connection with market timing and related issues. Under the
terms of the settlements, we agreed to pay $225 million to compensate affected
retail fund shareholders. The $225 million will be distributed in accordance
with a distribution plan developed by an independent consultant.
We have further agreed with state regulators to reduce management fees on
certain funds we advise by approximately $25 million annually over the next
five years and to pay an administrative fine of $1 million, which will be used
for the purpose of investor education. We have introduced a set of policies
designed to protect the MFS funds and MFS fund shareholders from market timing
abuses. By July, all MFS retail funds, except money market funds, will have a
2% redemption fee on short-term trades. Our global, international, high-yield,
mid- and small-cap funds will impose the 2% fee on redemptions or exchanges of
fund shares made within 30 calendar days of a share purchase. For all other
MFS funds, except money market funds, the 2% fee will be imposed on
redemptions or exchanges made within 5 business days of a share purchase. See
the fund prospectus for more information.
We continue to use fair value pricing, a strategy that minimizes the potential
for investors to take advantage of "stale" prices. These can occur, as one
example, when funds own foreign securities whose prices close on overseas
exchanges in different time zones. At the same time, we enhanced our
monitoring of excessive trading. We did so by increasing our staff and
updating our computer systems to improve our ability to detect excessive
trading in our funds. Finally, we are supporting industry efforts to establish
a "hard" 4 p.m. close on all trading, which would prevent the possibility of
late trading.
In March, MFS reached a second settlement with the SEC under an administrative
proceeding resolving the SEC's investigation into how we disclosed brokerage
allocation practices in connection with fund sales. According to the
settlement order, we did not effectively disclose the potential conflict of
interest that may arise from these arrangements.
Under the terms of the settlement, MFS has agreed to pay one dollar in
disgorgement and $50 million in penalty to MFS fund shareholders. The
settlement noted that MFS had policies in place designed to obtain best
execution of all trades of securities within MFS portfolios.
This past November, MFS eliminated the above mentioned practice of directing
brokerage commissions to certain firms in recognition of fund sales.
Additionally, we announced in March that we would ban the use of soft dollars
to acquire third-party securities research and market data. Soft dollars are
permitted under federal securities laws. In fact, it is a common industry
practice to use a portion of the brokerage commissions to pay for certain
research and execution products and services that are provided to asset
managers. MFS will now pay cash out of its own pocket for third-party research
and market data.
MFS continues to be financially strong, with more than U.S. $140 billion (as
of 12/31/03) in assets under management, which continued to be stable during
the first quarter of 2004. We also have the full support of our parent
company, Sun Life Financial, an internationally diversified financial services
firm that manages more than U.S. $269 billion (as of 12/31/03).
We chose to settle these two proceedings with the SEC so we could concentrate
on serving our fund shareholders. As Chief Investment Officer, my focus is on
ensuring that our portfolio teams work closely together and take full
advantage of all the resources available to them to deliver the best possible
investment performance.
As the inventor of the open-end mutual fund in America in 1924, MFS has a
strong tradition and culture of innovation. By strengthening our business and
governance practices, we believe we have an unprecedented opportunity to set a
new standard in the mutual fund industry.
As I look ahead, I do so with confidence. The collaboration among MFS
employees, many of whom have worked at the firm for their entire careers,
continues as we remain singularly dedicated to our clients. It has been our
sincere privilege to serve you, and we thank you for the confidence that you
have shown in MFS.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer
MFS Investment Management(R)
March 15, 2004
Note to Shareholders: On February 6, 2004, Jeffrey L. Shames retired as
Chairman of MFS. Robert Pozen was named as non-executive Chairman. Also,
on February 6, 2004, Robert J. Manning was appointed Chief Executive Officer,
President, and Chief Investment Officer.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
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MFS ORIGINAL RESEARCH(R)
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MFS Original Research
THE MFS(R) DIFFERENCE
For 80 years MFS has been offering investors clear paths to pursuing specific
investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain
first-hand knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
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MANAGEMENT REVIEW
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MARKET ENVIRONMENT
Over the six-month period ended February 29, 2004, bond prices rallied
dramatically as rates fell. On average, municipal issues modestly outperformed
U.S. Treasury issues of similar maturities. (Principal and interest of U.S.
Treasury securities, however, are guaranteed by the U.S. government if held
to maturity.)
The key driver of falling rates, in our view, was a turnaround in investor
expectations. In September of 2003, we felt the market in general expected
that continued consumer demand would lead to increased manufacturing output,
increased capital spending by corporations, and increased hiring. Along with
many investors, we believed those trends would potentially put upward pressure
on inflation and lead the Federal Reserve Board to begin raising interest
rates by the spring of 2004.
However, while consumers did continue to spend over the period, corporate
spending on plants and equipment rose only modestly, and job creation was
disappointingly weak. This set of circumstances, in our opinion, confirmed the
view of the Federal Reserve Board, stated late in the period, that it would
leave short-term rates unchanged for the foreseeable future, in part due to
excess capacity in the system. These factors, we believe, increased the
perceived risk that the economic recovery could falter and, therefore, caused
investors to push up long-term bond prices - because high-quality bonds are
seen as a refuge in times of economic concern. As of period-end on
February 29, 2004 we believe the consensus view among economists is that the
Fed would not increase rates until December of 2004 at the earliest.
PORTFOLIO CONCENTRATION AS OF 2/29/04
QUALITY RATINGS
AAA 64.5%
AA 12.4%
A 13.5%
BBB 8.7%
BB 0.05%
Not rated 0.8%
Other 0.05%
The portfolio is actively managed, and current holdings may be different.
PERFORMANCE RELATIVE TO OUR LIPPER PEER GROUP
Over the period, the fund underperformed the average fund in its Lipper peer
group, general municipal debt funds. The key driver of that underperformance
was a relatively short average duration, as compared with our Lipper peers.
(Duration is a measure of a fund's sensitivity to changes in interest rates.)
Historically, our investment philosophy has been to try to be duration-neutral
relative to our peers. However, over the period we did manage the portfolio to
be relatively short on duration - i.e., less sensitive to interest rate
changes - because we felt there was a greater probability that rates would
rise, which would have been negative for bond prices. When the opposite
occurred and rates fell, our shorter duration caused us to benefit somewhat
less than our peers from the rally in bond prices.
Not owning lower-quality bonds was also negative for performance relative to
our peers. The fund is positioned as a high-quality fund and our prospectus
does not permit the purchase of non-investment-grade issues (those rated below
"BBB" by the major rating agencies) or the purchase of unrated issues, unless
our analysts deem those unrated bonds to be investment-grade. Our peer group,
however, includes funds that do purchase lower-rated bonds. As corporate
profits generally improved over the period and U.S. firms in general continued
to strengthen their balance sheets, lower-rated corporate-backed municipal
issues outperformed higher-grade issues. In that environment, our inability to
purchase lower-rated issues hurt performance relative to our peers.
Security selection, however, benefited performance against our peers. In the
health care sector, our analysts' selections of hospital bonds were
particularly strong. Lease-backed bonds were another area of relative
outperformance compared with our peers. These portfolio holdings were largely
state-appropriated debt issues, which are paid through annual state
appropriations.
PERFORMANCE RELATIVE TO THE LEHMAN INDEX
Over the period, the fund also underperformed its benchmark, the Lehman
Brothers Municipal Bond Index (the Lehman Index). Here again, our short
duration posture was a key detractor from relative results, as explained
above.
A relative overweighting in housing bonds also dampened results. Over the
longer term, we like this sector because it has historically delivered lower
volatility of returns and higher levels of income than some sectors with
similar risk levels. However, falling interest rates over the period increased
the prepayment risks associated with housing bonds and therefore muted their
performance. (Prepayment risk is the risk that homeowners will prepay their
mortgages to refinance at a lower rate, forcing housing bond holders to
reinvest at lower prevailing rates.)
A relative underweighting in tobacco bonds also modestly held back
performance. Tobacco bonds are state bonds backed by payments under the Master
Settlement Agreement (MSA) between the states and the major tobacco companies,
in which the states agreed to drop their lawsuits against the firms in return
for a series of payments. An underweighting in those bonds had helped
performance during the preceding one-year period that ended
August 31, 2003, as other lawsuits raised concerns about the tobacco firms'
ability to continue MSA payments. During the six-month period ended February
29, 2004, however, those litigation concerns appeared to subside, tobacco
bonds rallied, and our underweighting proved somewhat detrimental to
performance.
Positioning on the yield curve, however, helped our relative performance
against the Lehman Index. When interest rates fall, as they did over the
period, bonds with longer maturities receive a greater benefit from the rate
move than shorter-maturity bonds. In that environment, performance benefited
from our overweighting relative to the Lehman Index in longer-maturity bonds
and our underweighting in bonds with maturities below five years.
Respectfully,
/s/ Michael L. Dawson /s/ Geoffrey L. Schechter
Michael L. Dawson Geoffrey L. Schechter
Portfolio Manager Portfolio Manager
The views expressed in this report are those of the portfolio managers only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or an indication of
trading intent on behalf of any MFS Fund. References to specific securities are
not recommendations of such securities, and may not be representative of any
MFS Fund's current or future investments.
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Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment- related news.
o From Week in Review, link to MFS Global Investment Perspective for our
current view of the world.
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PERFORMANCE SUMMARY THROUGH 2/29/04
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Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Performance results reflect the percentage change in
net asset value, including the reinvestment of any dividends and capital gains
distributions. (See Notes to Performance Summary.)
VISIT MFS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE
PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A
SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TOTAL RETURNS
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Average annual
without sales charge
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Class
Share inception
class date 6-mo 1-yr 3-yr 5-yr 10-yr
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A 12/16/1976 -- 5.86% 6.78% 5.70% 5.59%
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B 9/7/1993 -- 5.02% 5.93% 4.87% 4.70%
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Average annual
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Comparative benchmarks
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Average general municipal
debt fund+ 6.43% 5.91% 5.96% 4.83% 5.34%
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Lehman Brothers Municipal
Bond Index# 6.52% 6.30% 6.93% 6.11% 6.40%
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Periods less than one year are actual, not annualized.
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Average annual
with sales charge
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Share
class 6-mo 1-yr 3-yr 5-yr 10-yr
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A -- 0.83% 5.06% 4.68% 5.08%
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B -- 1.02% 5.03% 4.53% 4.70%
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Cumulative without
sales charge
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A 6.30% 5.86% 21.74% 31.94% 72.34%
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B 5.89% 5.02% 18.85% 26.82% 58.34%
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Periods less than one year are actual, not annualized.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX - is a broad measure of the municipal
bond market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results, including sales charge, reflects the deduction of the maximum
4.75% sales charge. Class B results, including sales charge, reflects the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%.
Performance for share classes offered after class A shares includes the
performance of the fund's class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences
in sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of
blended performance generally results in higher performance for share classes
with higher operating expenses than the initial share class, and lower
performance for share classes with lower operating expenses than the initial
share class.
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. Please see the prospectus and
financial statements for complete details.
KEY RISK CONSIDERATIONS
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
Income earned on bonds issued by states of which you are not a resident, or
their political subdivisions, may be subject to taxation by the state in which
you reside.
Investments in high yield or lower-rated securities may provide greater
returns but are subject to greater-than-average risk.
These risks may increase share price volatility. Please see the prospectus for
further information regarding these and other risk considerations.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
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PORTFOLIO OF INVESTMENTS (unaudited) - 2/29/04
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The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Municipal Bonds - 98.7%
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PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
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Airport & Port Revenue - 2.9%
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Chicago, IL, O'Hare International Airport Rev. (2nd
Lien Passenger Facility D), AMBAC, 5.5%, 2019 $1,845 $2,027,563
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Chicago, IL, O'Hare International Airport Rev. (3rd
Lien Passenger Facility B), FSA, 5.75%, 2022 1,125 1,235,160
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Chicago, IL, O'Hare International Airport Rev.,
RITES, FSA, 10.2016%, 2022+(+) 2,500 2,989,600
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Chicago, IL, O'Hare International Airport Rev.,
RITES, XLCA, 10.7016%, 2029+(+) 3,000 3,705,600
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Connecticut Airport Rev. (Bradley International
Airport), FGIC, 7.65%, 2012 3,460 3,583,522
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Connecticut Airport Rev. (Bradley International
Airport), FGIC, 7.65%, 2012(++) 1,540 1,599,752
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Denver, CO, City & County Airport Rev., RITES, AMBAC,
10.71%, 2017+(+) 2,500 3,148,150
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Massachusetts Port Authority Rev., 6%, 2011 - 2012 1,205 1,394,908
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Massachusetts Port Authority Rev., 13%, 2013(++) 3,345 5,126,079
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Massachusetts Port Authority Rev., 6.125%, 2017 1,500 1,756,950
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Miami Dade County Florida, Aviation Rev. "A" (Miami
International Airport), FGIC, 5%, 2033 5,000 5,151,000
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Niagara, NY, Frontier Transportation Authority
(Buffalo-Niagara International Airport), MBIA, 5.875%, 2013 1,485 1,676,817
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Port of Seattle, WA, "A", FGIC, 5.5%, 2021 4,000 4,345,320
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$37,740,421
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Chemicals - 0.3%
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Brazos River, TX, Harbor Navigation District (Dow
Chemical Co.), 5.7%, 2033 $3,500 $3,786,335
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General Obligations - General Purpose - 12.8%
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Allen County, IN, Jail Building Corp., First
Mortgage, 5.75%, 2020 $2,750 $3,158,540
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Chelmsford, MA, School Improvements, 6%, 2018 100 118,282
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Chicago, IL, FGIC, 6.125%, 2020 3,785 4,500,592
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Chicago, IL, RITES, AMBAC, 9.7902%, 2018+(+) 5,900 7,984,824
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Commonwealth of Massachusetts, 6.5%, 2008(++) 6,300 7,423,794
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Commonwealth of Massachusetts, 6%, 2015(++) 3,700 4,456,095
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Commonwealth of Massachusetts, FGIC, 7%, 2009(++) 7,000 8,600,200
- --------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, ROLs, 9.742%, 2017+(+)(++) 2,870 3,889,596
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Commonwealth of Puerto Rico, ROLs, XLCA, 9.876%, 2017+(+) 1,150 1,587,529
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Cranston, RI, FGIC, 6.375%, 2017 830 1,002,557
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Delaware County, OH, 6.25%, 2016 1,000 1,222,520
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Detroit, MI, 6.25%, 2009 5,235 5,578,887
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Detroit/Wayne County, MI, Stadium Authority, FGIC, 5.5%, 2017 6,000 6,700,500
- --------------------------------------------------------------------------------------------
Hidalgo County, TX, AMBAC, 6%, 2016 1,005 1,196,875
- --------------------------------------------------------------------------------------------
Houston County, AL, AMBAC, 6.25%, 2019 3,315 3,996,597
- --------------------------------------------------------------------------------------------
Lincoln County, TN, FGIC, 5.25%, 2017 1,000 1,166,200
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Mobile County, AL, 6%, 2014 3,200 3,780,800
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New York City Urban Development Corp., 5.5%, 2016 14,690 16,273,141
- --------------------------------------------------------------------------------------------
New York City, NY, 7.5%, 2006 355 356,232
- --------------------------------------------------------------------------------------------
New York City, NY, "B", 7.5%, 2007 955 958,314
- --------------------------------------------------------------------------------------------
New York City, NY, "B", 5.75%, 2015 5,850 6,625,651
- --------------------------------------------------------------------------------------------
New York City, NY, "D", 7.65%, 2006 10 10,035
- --------------------------------------------------------------------------------------------
New York City, NY, FGIC, 5.75%, 2013 - 2014 18,000 20,070,600
- --------------------------------------------------------------------------------------------
New York City, NY, FGIC, 5.75%, 2015(++) 11,085 12,106,372
- --------------------------------------------------------------------------------------------
Philadelphia, PA, FSA, 5.25%, 2018 2,000 2,189,200
- --------------------------------------------------------------------------------------------
Pittsfield, MA, MBIA, 5.5%, 2017 100 114,804
- --------------------------------------------------------------------------------------------
San Antonio, TX, 5%, 2020 2,990 3,132,533
- --------------------------------------------------------------------------------------------
Southlake, TX, AMBAC, 0%, 2018 - 2021 4,985 2,059,019
- --------------------------------------------------------------------------------------------
State of California, 5.5%, 2012 - 2013 5,350 6,021,485
- --------------------------------------------------------------------------------------------
State of California, 5.1%, 2034 5,000 5,000,200
- --------------------------------------------------------------------------------------------
State of California, RITES, 9.6742%, 2012+(+) 5,825 7,887,400
- --------------------------------------------------------------------------------------------
State of California, RITES, XLCA, 10.2803%, 2017+(+) 6,875 9,057,263
- --------------------------------------------------------------------------------------------
State of Washington, 6.75%, 2010 3,880 4,744,891
- --------------------------------------------------------------------------------------------
State of Washington, 6%, 2012 4,360 5,257,419
- --------------------------------------------------------------------------------------------
$168,228,947
- --------------------------------------------------------------------------------------------
General Obligations - Improvement - 2.8%
- --------------------------------------------------------------------------------------------
Birmingham, AL, 5.75%, 2019 $1,000 $1,145,030
- --------------------------------------------------------------------------------------------
District of Columbia, MBIA, 6.5%, 2010 3,095 3,768,596
- --------------------------------------------------------------------------------------------
District of Columbia, MBIA, 6.5%, 2010(++) 2,905 3,582,272
- --------------------------------------------------------------------------------------------
Manchester, NH, Public Improvements, 5.875%, 2019(++) 2,270 2,692,651
- --------------------------------------------------------------------------------------------
Massachusetts Bay Transportation Authority (General
Transportation Systems), XLCA, 7%, 2021 10,185 13,438,394
- --------------------------------------------------------------------------------------------
Massachusetts Bay Transportation Authority, Transit
Improvements, 6.2%, 2016 400 489,876
- --------------------------------------------------------------------------------------------
Massachusetts Bay Transportation Authority,
Transportation Systems "C", XLCA, 6.1%, 2013 10,200 12,447,570
- --------------------------------------------------------------------------------------------
$37,564,389
- --------------------------------------------------------------------------------------------
General Obligations - Schools - 9.0%
- --------------------------------------------------------------------------------------------
Brazos, TX, Independent School District, PSF, 5%, 2029 $1,305 $1,358,401
- --------------------------------------------------------------------------------------------
Chicago, IL, Board of Education, AMBAC, 5.4%, 2017 3,000 3,344,190
- --------------------------------------------------------------------------------------------
Chicago, IL, Board of Education, FGIC, 5.875%, 2017 3,715 4,367,837
- --------------------------------------------------------------------------------------------
Chicago, IL, Board of Education, MBIA, 6.25%, 2009 - 2015 25,455 30,661,878
- --------------------------------------------------------------------------------------------
Chicago, IL, Board of Education, RITES, FGIC, 9.2607%, 2019+(+) 5,000 6,525,700
- --------------------------------------------------------------------------------------------
Clark County, NV, School District, "A", MBIA, 7%, 2010 4,000 4,971,880
- --------------------------------------------------------------------------------------------
Clark County, NV, School District, "B", FGIC, 5.5%, 2016(++) 5,000 5,813,150
- --------------------------------------------------------------------------------------------
Columbia & Brazoria, TX, Independent School District,
School Building, PSF, 5%, 2029 1,965 2,041,753
- --------------------------------------------------------------------------------------------
Dayton, OH, City School District (School Facilities
Construction & Improvement) "A," FGIC, 5%, 2029 2,865 3,017,361
- --------------------------------------------------------------------------------------------
Dodgeland, WI, School District, FGIC, 6%, 2016(++) 3,525 4,218,720
- --------------------------------------------------------------------------------------------
Florida Board of Education, Capital Outlay, 9.125%, 2014 1,735 2,403,044
- --------------------------------------------------------------------------------------------
Florida Board of Education, Capital Outlay, 9.125%, 2014(++) 265 373,517
- --------------------------------------------------------------------------------------------
Forsyth County, GA, School District, 6%, 2015 - 2016 1,590 1,883,564
- --------------------------------------------------------------------------------------------
Gilroy, CA, Unified School District, FGIC, 5%, 2027 1,000 1,050,050
- --------------------------------------------------------------------------------------------
Highland Park, TX, Independent School District, 5.125%, 2016 2,525 2,736,671
- --------------------------------------------------------------------------------------------
Jackson, MI, Public School System, FGIC, 6%, 2013 1,500 1,775,415
- --------------------------------------------------------------------------------------------
Kane Cook Dupage County, IL, 6.5%, 2017 1,345 1,632,857
- --------------------------------------------------------------------------------------------
Kane Cook Dupage County, IL, FSA, 6.375%, 2019 1,245 1,495,096
- --------------------------------------------------------------------------------------------
Lane County, OR, School District, 6.25%, 2016 - 2017(++) 2,150 2,609,046
- --------------------------------------------------------------------------------------------
Leander, TX, Independent School District, PSF, 0%, 2018 4,885 2,283,933
- --------------------------------------------------------------------------------------------
Lewisville, TX, Independent School District, PSF, 5%, 2018 8,500 9,068,990
- --------------------------------------------------------------------------------------------
Linn County, OR, Community School District, MBIA,
6.125%, 2016 - 2020(++) 3,465 4,202,248
- --------------------------------------------------------------------------------------------
Marshall, MI, Public School District, 5.5%, 2016 500 570,025
- --------------------------------------------------------------------------------------------
Mason, OH, City School District, School Improvement, 5.375%, 2016 1,000 1,132,910
- --------------------------------------------------------------------------------------------
Orangeburg County, SC, Consolidated School, 5.375%, 2020 1,220 1,322,456
- --------------------------------------------------------------------------------------------
Rancho Santiago, CA, Community College District,
Election of 2002, MBIA, 5%, 2027 2,200 2,310,990
- --------------------------------------------------------------------------------------------
Rockwall, TX, Independent School District, PSF, 0%, 2014 2,000 1,267,340
- --------------------------------------------------------------------------------------------
San Rafael, CA, Elementary School District, Election
of 1999, MBIA, 5%, 2028 2,500 2,621,000
- --------------------------------------------------------------------------------------------
Snohomish County, WA, School District 6, 6%, 2014 1,690 2,039,999
- --------------------------------------------------------------------------------------------
Warren Township, IN (Vision 2005 School Building
Corp.), FGIC, 5.5%, 2020 7,500 8,369,700
- --------------------------------------------------------------------------------------------
Wasco County, OR, FSA, 6%, 2017(++) 1,360 1,639,521
- --------------------------------------------------------------------------------------------
$119,109,242
- --------------------------------------------------------------------------------------------
Healthcare Revenue - Hospitals - 12.6%
- --------------------------------------------------------------------------------------------
Akron Bath Copley, OH, Hospital Rev. (Children's
Hospital), FSA, 5.25%, 2025 $1,000 $1,075,850
- --------------------------------------------------------------------------------------------
Baxter County, AR, Hospital Rev., 5.375%, 2014 1,000 1,037,700
- --------------------------------------------------------------------------------------------
Baxter County, AR, Hospital Rev., 5.6%, 2021 1,750 1,787,922
- --------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Portercare
Adventist Health Systems), 6.625%, 2026 1,250 1,396,562
- --------------------------------------------------------------------------------------------
Cullman, AL, Cullman Medical Park South, Medical
Clinic Board Rev. (Cullman Regional Medical Center), 6.5%, 2013 1,275 1,291,422
- --------------------------------------------------------------------------------------------
Delaware Health Facilities Authority Rev. (Nanticoke
Memorial Hospital) "B", 5.625%, 2032 1,610 1,683,593
- --------------------------------------------------------------------------------------------
Denver, CO, Health & Hospital Rev., 5.375%, 2028 4,350 4,202,839
- --------------------------------------------------------------------------------------------
District of Columbia, Hospital Rev. (Medlantic
Healthcare), MBIA, 5.25%, 2019(++) 6,750 7,200,225
- --------------------------------------------------------------------------------------------
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital, Inc.), 5.25%, 2018 - 2020 5,345 5,448,685
- --------------------------------------------------------------------------------------------
Gainsville & Hall County, GA, Hospital Authority Rev.
(Northeast Georgia Health System), 5.5%, 2031 $1,555 $1,602,256
- --------------------------------------------------------------------------------------------
Gulfport, MS, Hospital Facilities Rev. (Memorial
Hospital), 5.75%, 2031 1,500 1,554,195
- --------------------------------------------------------------------------------------------
Harris County, TX, Health Facilities Development
Corp. "A" (Texas Children's Hospital), 5.375%, 2015 4,300 4,574,340
- --------------------------------------------------------------------------------------------
Harris County, TX, Health Facilities Development
Corp. Hospital Rev. (Memorial Herman Healthcare), 6.375%, 2029 2,000 2,180,580
- --------------------------------------------------------------------------------------------
Highlands County, FL, Health Facilities Authority
Rev. (Adventist/Sunbelt Hospital), 6%, 2031 1,000 1,070,160
- --------------------------------------------------------------------------------------------
Huntsville, AL, Health Care Authority Rev., "A", 5.625%, 2026 2,595 2,705,703
- --------------------------------------------------------------------------------------------
Illinois Development Finance Authority Rev. "A"
(Provena Health), MBIA, 5.25%, 2012 5,900 6,435,248
- --------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev.
(Advocate Health Care Network), MBIA, 5.7%, 2011 3,005 3,400,728
- --------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev.
(Centegra Health Systems), 5.25%, 2024 5,500 5,501,210
- --------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Advocate
Health Care Network), 6.375%, 2015 1,800 2,015,244
- --------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Condell
Medical Center), 6.35%, 2015 6,500 7,136,090
- --------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Decatur
Memorial Hospital), 5.75%, 2024 2,650 2,750,408
- --------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Passavant
Memorial Area Hospital Associates), 6%, 2024 1,165 1,217,565
- --------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Riverside
Health Systems), 5.75%, 2022 1,975 2,028,424
- --------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Sinai
Health), FHA, 5.15%, 2037 2,400 2,449,824
- --------------------------------------------------------------------------------------------
Iowa Finance Authority, Health Care Facilities Rev.
(Genesis Medical Center), 6.125%, 2016 2,195 2,383,880
- --------------------------------------------------------------------------------------------
Kentucky Economic Development Finance Authority,
Health Systems Rev. (Norton Healthcare, Inc.), 6.5%, 2020 4,750 5,079,175
- --------------------------------------------------------------------------------------------
Marion County, FL, Hospital District Rev. (Monroe
Hospital), 5.625%, 2019 2,610 2,732,592
- --------------------------------------------------------------------------------------------
Marshall County, AL, Health Care "A", 5.75%, 2015 1,000 1,096,610
- --------------------------------------------------------------------------------------------
Martin County, FL, Health Facilities (Martin Memorial
Medical Center) "B", 5.875%, 2032 2,200 2,257,332
- --------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities
Authority Rev. (Medstar Health), 5.5%, 2033 1,115 1,113,930
- --------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities
Authority Rev. (University of Maryland Medical
System), 6.75%, 2030 1,000 1,148,530
- --------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities
Authority Rev. (Caritas Christi Obligation), 5.7%, 2015 2,500 2,578,800
- --------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities
Authority Rev. (Partners Healthcare), 5.75%, 2021 1,500 1,628,790
- --------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev. "A"
(Crittenton), 5.625%, 2027 1,000 1,037,920
- --------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev. (Mercy Mount
Clement), MBIA, 5.75%, 2017 2,900 3,305,420
- --------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev., MBIA, 5.375%, 2014 515 581,780
- --------------------------------------------------------------------------------------------
Monroe County, PA, Hospital Authority Rev. (Pocono
Medical Center), 6%, 2043 750 783,195
- --------------------------------------------------------------------------------------------
Mount Lebanon, PA, Hospital Authority Rev. (St. Clair
Memorial Hospital), 5.625%, 2032 1,335 1,359,564
- --------------------------------------------------------------------------------------------
New Hampshire Health & Education Facilities Rev.
(Exeter Hospital), 6%, 2016 1,000 1,089,910
- --------------------------------------------------------------------------------------------
North Central, TX, Health Facilities Development
Corp. Rev. (Texas Health Resources System), MBIA, 5%, 2017 5,000 5,306,150
- --------------------------------------------------------------------------------------------
North Texas Health Facilities Development Corp.,
Hospital Rev. (United Regional Health Care Systems,
Inc.), 6%, 2023 4,000 4,261,360
- --------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority
Hospital Rev. (Adventist Health Systems), 5.625%, 2032 1,490 1,576,062
- --------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority
Hospital Rev. (Orlando Regional Healthcare), 5.75%, 2032 2,230 2,339,917
- --------------------------------------------------------------------------------------------
Palm Beach County, FL, Health Facilities Rev. (Boca
Raton Hospital), 5.5%, 2021 1,500 1,564,950
- --------------------------------------------------------------------------------------------
Peninsula Port Authority, VA, Hospital Facilities
Rev. (Whittaker Memorial), FHA, 8.7%, 2023 1,580 $1,973,467
- --------------------------------------------------------------------------------------------
Pennsylvania Higher Educational Facilities Rev.
(Alleghany Delaware Valley), MBIA, 5.3%, 2006 1,975 2,136,733
- --------------------------------------------------------------------------------------------
Pennsylvania Higher Educational Facilities Rev.
(Allegheny Delaware Valley), MBIA, 5.875%, 2016 5,000 5,554,950
- --------------------------------------------------------------------------------------------
Rhode Island Health & Education Building Rev.,
Hospital Financing (Lifespan Obligations Group), 6.375%, 2021 2,000 2,083,100
- --------------------------------------------------------------------------------------------
Richland County, OH, Hospital Facilities Rev.
(Medcentral Health Systems), 6.375%, 2022 1,000 1,071,430
- --------------------------------------------------------------------------------------------
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.7%, 2016 770 780,433
- --------------------------------------------------------------------------------------------
Shelby County, TN, Health Educational Hospital Rev.
(Methodist Healthcare), 6.375%, 2019 2,000 2,212,620
- --------------------------------------------------------------------------------------------
South Carolina Jobs & Economic Development (Bon
Secours Health Systems, Inc.), "A", 5.625%, 2030 2,055 2,102,327
- --------------------------------------------------------------------------------------------
Steubenville, OH, Hospital Rev. (Trinity Hospital), 6.375%, 2020 1,200 1,289,160
- --------------------------------------------------------------------------------------------
Tallahasse, FL, Health Facilities Rev. (Tallahassee
Memorial Healthcare), 6.25%, 2020 2,000 2,011,160
- --------------------------------------------------------------------------------------------
Tarrant County, TX, Health Facilities Development
Corp. (Fort Worth Osteopathic), MBIA, 6%, 2021 6,000 7,338,780
- --------------------------------------------------------------------------------------------
Tarrant County, TX, Health Facilities Development
Corp. (Texas Health Resources), MBIA, 5.25%, 2018 8,605 9,190,398
- --------------------------------------------------------------------------------------------
West Shore, PA, Area Hospital Authority Rev. (Holy
Spirit Hospital), 6.2%, 2026 1,250 1,294,563
- --------------------------------------------------------------------------------------------
Wichita, KS, Hospital Authority Rev. (Via Christi
Health System), 6.25%, 2019 - 2020 4,060 4,593,009
- --------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority
Rev. (Asgenesian Healthcare, Inc.), 6%, 2017 - 2021 1,170 1,253,995
- --------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority
Rev. (Aurora Healthcare), 6.875%, 2030 2,000 2,243,360
- --------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority
Rev. (Wheaton Franciscan Services), 5.75%, 2025 3,000 3,197,790
- --------------------------------------------------------------------------------------------
$165,299,915
- --------------------------------------------------------------------------------------------
Healthcare Revenue - Long Term Care - 0.2%
- --------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Corp.
Rev. (Buckner Retirement Facility), 5.25%, 2019 $2,500 $2,537,300
- --------------------------------------------------------------------------------------------
Industrial Revenue - Environmental Services - 0.1%
- --------------------------------------------------------------------------------------------
Nevada Department of Business & Industrial Solid
Waste Disposal Rev. (Republic Services, Inc.), 5.625%, 2026 $1,500 $1,593,990
- --------------------------------------------------------------------------------------------
Industrial Revenue - Other - 1.4%
- --------------------------------------------------------------------------------------------
Corpus Christi, TX, Nueces County General Rev. (Union
Pacific Corp.), 5.35%, 2010 $670 $694,656
- --------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency, Resource
Recovery Rev. (Flour Corp.), 5.625%, 2019 8,650 9,108,709
- --------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Rev.
(Sunoco Co.), 7.6%, 2024 1,500 1,588,230
- --------------------------------------------------------------------------------------------
Red River Authority, TX, Pollution Control Rev.
(Celanese), 6.7%, 2030 1,500 1,620,765
- --------------------------------------------------------------------------------------------
Shelby County, TN (FedEx Corp.), 5.05%, 2012 1,400 1,501,486
- --------------------------------------------------------------------------------------------
Tooele County, UT, Hazardous Waste Treatment Rev.
(Union Pacific Corp.), 5.7%, 2026 3,640 3,725,977
- --------------------------------------------------------------------------------------------
$18,239,823
- --------------------------------------------------------------------------------------------
Industrial Revenue - Paper - 0.4%
- --------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp. (Mead
Westvaco Escanaba), 6.25%, 2027 $1,500 $1,608,600
- --------------------------------------------------------------------------------------------
Georgetown County, SC, Resource Recovery Rev.
(International Paper Co.), 5.7%, 2014 1,400 1,574,916
- --------------------------------------------------------------------------------------------
Jay, ME, Solid Waste Disposal Rev. "A" (International
Paper Co.), 5.125%, 2018 1,500 1,538,955
- --------------------------------------------------------------------------------------------
Sabine River Authority, Louisiana Water Facilities
Rev. (International Paper Co.), 6.2%, 2025 1,250 1,335,625
- --------------------------------------------------------------------------------------------
$6,058,096
- --------------------------------------------------------------------------------------------
Miscellaneous Revenue - Entertainment & Tourism - 0.3%
- --------------------------------------------------------------------------------------------
Hamilton County, OH, Convention Facilities Authority
Rev., FGIC, 5%, 2023 - 2028 $3,330 $3,519,399
- --------------------------------------------------------------------------------------------
Miscellaneous Revenue - Other - 1.0%
- --------------------------------------------------------------------------------------------
Gallery Certificate of Trust, Pennsylvania Parking
Rev., FSA, 4.5%, 2013 $2,920 $2,965,406
- --------------------------------------------------------------------------------------------
Kentucky Property & Buildings Commission Rev., FSA,
5.85%, 2015(++) 4,000 4,744,080
- --------------------------------------------------------------------------------------------
Kentucky Property & Buildings Commission Rev., FSA,
5.9%, 2016(++) 4,500 5,349,420
- --------------------------------------------------------------------------------------------
$13,058,906
- --------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.6%
- --------------------------------------------------------------------------------------------
California Statewide Community Development Authority
Rev. (Irvine Apartments), 5.25%, 2025 $3,500 $3,659,985
- --------------------------------------------------------------------------------------------
Panhandle, TX, Regional Housing Finance Rev., 6.625%, 2020 670 704,525
- --------------------------------------------------------------------------------------------
Panhandle, TX, Regional Housing Finance Rev., 6.75%, 2031 3,330 3,506,157
- --------------------------------------------------------------------------------------------
$7,870,667
- --------------------------------------------------------------------------------------------
Parking - 0.1%
- --------------------------------------------------------------------------------------------
Rail Connections, Inc., MA Rev., 0%, 2015 - 2017(++) $1,800 $1,004,826
- --------------------------------------------------------------------------------------------
Sales & Excise Tax Revenue - 2.2%
- --------------------------------------------------------------------------------------------
Illinois Sales Tax Rev., 0%, 2009 $8,965 $7,688,742
- --------------------------------------------------------------------------------------------
Illinois Sales Tax Rev., 6.5%, 2022 5,000 6,321,200
- --------------------------------------------------------------------------------------------
Metropolitan Atlanta, GA, Rapid Transit Authority
Rev., 6.25%, 2018 4,580 5,616,088
- --------------------------------------------------------------------------------------------
Metropolitan Pier & Expo, IL, McCormick Place
Expansion, MBIA, 5.25%, 2042 2,340 2,487,163
- --------------------------------------------------------------------------------------------
Metropolitan Pier & Expo, IL, McCormick Place, MBIA, 0%, 2032 4,000 931,480
- --------------------------------------------------------------------------------------------
Rhode Island Depositors Economic Protection Corp.,
FSA, 5.75%, 2014 4,765 5,781,708
- --------------------------------------------------------------------------------------------
Route 3 North Transportation Improvement Associates,
MBIA, 5.75%, 2017 100 116,634
- --------------------------------------------------------------------------------------------
$28,943,015
- --------------------------------------------------------------------------------------------
Single Family Housing - Local - 2.0%
- --------------------------------------------------------------------------------------------
Calcasieu Parish, LA, Public Trust Authority, Single
Family Mortgage Rev. "A", GNMA, 6.05%, 2032 $2,000 $2,132,460
- --------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority
Rev., GNMA, 6.55%, 2030 1,335 1,417,823
- --------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority
Rev., GNMA, 7.3%, 2031 290 317,660
- --------------------------------------------------------------------------------------------
Chicago, IL, Single Family Mortgage Rev. "B", GNMA, 6%, 2033 710 776,981
- --------------------------------------------------------------------------------------------
Chicago, IL, Single Family Mortgage Rev. "C", GNMA, 7.05%, 2030 245 254,070
- --------------------------------------------------------------------------------------------
Chicago, IL, Single Family Mortgage Rev. "C", GNMA, 7%, 2032 215 222,149
- --------------------------------------------------------------------------------------------
Denver, CO, Single Family Mortgage Rev., GNMA, 7.3%, 2031 555 559,823
- --------------------------------------------------------------------------------------------
Escambia County, FL, Single Family Housing Rev.,
GNMA, 6.95%, 2024 710 772,246
- --------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev.,
GNMA, 6.625%, 2023 735 817,210
- --------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev.,
GNMA, 7.5%, 2026 455 482,978
- --------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev.,
GNMA, 6.75%, 2030 995 1,051,088
- --------------------------------------------------------------------------------------------
Lee County, FL, Housing Finance Authority Rev., GNMA, 7%, 2031 265 274,158
- --------------------------------------------------------------------------------------------
Lubbock, TX, Housing Finance Corp. Rev., GNMA, 6.1%, 2030 2,595 2,703,575
- --------------------------------------------------------------------------------------------
Manatee County, FL, Housing Finance Mortgage Rev.,
Single Family, Subordinated Series 3, GNMA, 6.5%, 2023 270 290,515
- --------------------------------------------------------------------------------------------
Manatee County, FL, Housing Finance Mortgage Rev.,
Single Family, Subordinated Series 3, GNMA, 5.3%, 2028 2,040 2,217,684
- --------------------------------------------------------------------------------------------
Manatee County, FL, Housing Finance Mortgage Rev.,
Single Family, Subordinated Series 3, GNMA, 5.4%, 2029 725 754,805
- --------------------------------------------------------------------------------------------
Maricopa County, AZ, Single Family Mortgage Rev. "B",
GNMA, 6.2%, 2034 1,365 1,501,172
- --------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority,
GNMA, 7.05%, 2030 930 967,470
- --------------------------------------------------------------------------------------------
San Bernardino County, CA, Single Family Mortgage
Rev., GNMA, 7.375%, 2020 115 119,255
- --------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family
Housing Rev., GNMA, 4%, 2035 1,885 2,027,393
- --------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family
Mortgage "A", GNMA, 6.875%, 2026 1,545 1,674,239
- --------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family
Mortgage "A", GNMA, 6.45%, 2029 785 858,594
- --------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family
Mortgage "B", GNMA, 5.45%, 2027 1,585 1,732,421
- --------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family
Mortgage "B", GNMA, 6.45%, 2033 2,000 2,193,680
- --------------------------------------------------------------------------------------------
$26,119,449
- --------------------------------------------------------------------------------------------
Single Family Housing - State - 4.6%
- --------------------------------------------------------------------------------------------
Arkansas Finance Authority Rev., Mortgage Backed
Securities Program, "B", GNMA, 4.45%, 2034 $1,780 $1,825,977
- --------------------------------------------------------------------------------------------
California Housing Finance Agency Rev., Home
Mortgage, FSA, 0%, 2019 19,335 8,056,314
- --------------------------------------------------------------------------------------------
California Housing Finance Agency Rev., Home
Mortgage, MBIA, 0%, 2027 - 2029 9,055 2,634,778
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.15%, 2014 94 96,640
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.05%, 2016 630 645,233
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.45%, 2016 370 377,422
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.75%, 2021 430 440,836
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 8.4%, 2021 290 302,357
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 5.9%, 2023 1,045 1,107,815
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.55%, 2025 349 350,092
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.4%, 2027 275 276,928
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.8%, 2030 875 904,365
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.25%, 2031 655 674,002
- --------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.6%, 2032 1,085 1,133,217
- --------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family
Mortgage Rev., GNMA, 7.55%, 2031 910 984,966
- --------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family
Mortgage Rev., GNMA, 6.4%, 2032 1,215 1,275,665
- --------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family
Mortgage Rev., GNMA, 6.375%, 2033 1,790 1,996,620
- --------------------------------------------------------------------------------------------
Minnesota Housing Finance Agency Rev., Residential
Housing Finance "B", 4.8%, 2023 1,600 1,650,928
- --------------------------------------------------------------------------------------------
Mississippi Home Corp. Rev., GNMA, 7.55%, 2027 531 556,366
- --------------------------------------------------------------------------------------------
Mississippi Home Corp. Rev., GNMA, 6.1%, 2034 3,725 3,865,507
- --------------------------------------------------------------------------------------------
Missouri State Housing Development Commission Single
Family Mortgage Rev., GNMA, 6.7%, 2030 2,020 2,122,677
- --------------------------------------------------------------------------------------------
Missouri State Housing Development Commission Single
Family Mortgage Rev., GNMA, 7.45%, 2031 320 335,344
- --------------------------------------------------------------------------------------------
Missouri State Housing Development Commission Single
Family Mortgage Rev., GNMA, 6.85%, 2032 590 660,900
- --------------------------------------------------------------------------------------------
Missouri State Housing Development Commission Single
Family Mortgage Rev., GNMA, 6.75%, 2034 690 745,014
- --------------------------------------------------------------------------------------------
Nebraska Investment Finance Authority Rev., GNMA, 5.6%, 2020 150 155,475
- --------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., 5.875%, 2030 860 903,086
- --------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., 6.85%, 2030 2,365 2,469,793
- --------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., 6.3%, 2031 855 930,240
- --------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Rev., 7.1%, 2030 590 640,929
- --------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Rev., 6.8%, 2031 1,410 1,491,681
- --------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Rev., GNMA, 6.25%, 2032 2,150 2,292,631
- --------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Rev., GNMA, 6.35%, 2033 1,035 1,114,146
- --------------------------------------------------------------------------------------------
North Carolina Housing Finance Agency Rev., Home
Ownership "13A", 4.25%, 2028 1,880 1,938,374
- --------------------------------------------------------------------------------------------
North Dakota Housing Finance Agency Rev., Home
Mortgage "A", 5%, 2033 1,930 1,966,265
- --------------------------------------------------------------------------------------------
Oklahoma Housing Finance Agency Rev., 6.8%, 2016 430 432,374
- --------------------------------------------------------------------------------------------
Phoenix, AZ, Single Family Mortgage Rev., GNMA, 6.1%, 2028 435 466,403
- --------------------------------------------------------------------------------------------
Texas Housing & Community Affairs, Residential
Mortgage Rev., GNMA, 7.1%, 2021 7,095 7,480,117
- --------------------------------------------------------------------------------------------
Vermont Housing Finance Agency Rev., FSA, 4.95%, 2032 3,045 3,180,716
- --------------------------------------------------------------------------------------------
Washington Housing Finance Commission Rev., Single
Family Housing, GNMA, 5%, 2023 830 877,393
- --------------------------------------------------------------------------------------------
West Virginia Housing Development Fund Rev., Housing
Finance, 0%, 2037 4,670 818,744
- --------------------------------------------------------------------------------------------
$60,178,330
- --------------------------------------------------------------------------------------------
Solid Waste Revenue - 0.8%
- --------------------------------------------------------------------------------------------
Central Wayne County, MI, Sanitation Rev., Series
VII, 4.75%, 2007 $500 $511,235
- --------------------------------------------------------------------------------------------
Delaware County, PA, Industrial Development Authority
Rev. (American Ref-fuel Co.), 6.2%, 2019 1,250 1,304,450
- --------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev. (Ogden
Haverhill Associates), 6.7%, 2014 2,400 2,572,776
- --------------------------------------------------------------------------------------------
Northeast Maryland Waste Disposal Authority Rev.
(Ogden Martin Systems), 5.9%, 2005 3,500 3,680,215
- --------------------------------------------------------------------------------------------
Northeast Maryland Waste Disposal Authority Rev.
(Southwest County Resource Recovery), MBIA, 7.2%, 2005 3,000 3,075,600
- --------------------------------------------------------------------------------------------
$11,144,276
- --------------------------------------------------------------------------------------------
State & Local Appropriation - 11.5%
- --------------------------------------------------------------------------------------------
Alabama Building Renovation Authority, AMBAC,
6%, 2015 - 2016 $3,315 $3,926,912
- --------------------------------------------------------------------------------------------
Delaware Valley, PA, Regional Finance Authority,
AMBAC, 9.8655%, 2018(+) 16,250 22,454,900
- --------------------------------------------------------------------------------------------
Fayette County, GA (Criminal Justice Center),
6.25%, 2020(++) 1,000 1,227,330
- --------------------------------------------------------------------------------------------
Indiana Office Building Commission, Miami
Correctional Phase 1A, AMBAC, 5.5%, 2016 - 2017(++) 6,090 6,891,978
- --------------------------------------------------------------------------------------------
Massachusetts Federal Highway "A", 5.75%, 2015 50 58,821
- --------------------------------------------------------------------------------------------
New York Dormitory Authority Rev. "B", 6%, 2007 1,495 1,662,739
- --------------------------------------------------------------------------------------------
New York Dormitory Authority Rev. (City University), 5.75%, 2013 30,150 35,417,205
- --------------------------------------------------------------------------------------------
New York Dormitory Authority Rev. (State University), 5.5%, 2013 7,000 8,131,830
- --------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., Mental Health
Services Facilities, 6%, 2007(++) 5 5,645
- --------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., Mental Health
Services Facilities, 5.75%, 2010 1,990 2,235,944
- --------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., Mental Health
Services Facilities, 5.75%, 2010(++) 10 11,410
- --------------------------------------------------------------------------------------------
New York Urban Development Corp., Correctional
Facilities, 5.5%, 2014 5,000 5,782,950
- --------------------------------------------------------------------------------------------
New York Urban Development Corp., Correctional
Facilities, FSA, 5.5%, 2014 4,525 5,319,771
- --------------------------------------------------------------------------------------------
Ohio Mental Health Capital Facilities, 5.5%, 2016 1,205 1,371,350
- --------------------------------------------------------------------------------------------
Orange County, CA, California Recovery Certificates,
MBIA, 6%, 2026 5,000 5,556,500
- --------------------------------------------------------------------------------------------
Pennsylvania Convention Center Authority Rev., FGIC,
6.7%, 2016(++) 26,195 33,000,461
- --------------------------------------------------------------------------------------------
Philadelphia, PA, Municipal Authority, MBIA, 5.4%, 2017 5,000 5,492,200
- --------------------------------------------------------------------------------------------
San Bernardino, CA, Joint Powers Financing Authority
Lease Rev. (California Department of Transportation), 5.5%, 2014 10,000 10,623,600
- --------------------------------------------------------------------------------------------
West Valley City, Utah Municipal Building Lease Rev.
"A", AMBAC, 5.5%, 2027 2,000 2,187,480
- --------------------------------------------------------------------------------------------
$151,359,026
- --------------------------------------------------------------------------------------------
Student Loan Revenue - 0.4%
- --------------------------------------------------------------------------------------------
Arizona Student Loan Acquisition Authority Rev., 5.8%, 2016 $2,500 $2,705,050
- --------------------------------------------------------------------------------------------
Arizona Student Loan Acquisition Authority Rev., 5.85%, 2017 2,800 3,020,472
- --------------------------------------------------------------------------------------------
$5,725,522
- --------------------------------------------------------------------------------------------
Tax - Other - 0.9%
- --------------------------------------------------------------------------------------------
Houston, TX, Certificate of Participation, 6.3%, 2020 $5,000 $5,533,850
- --------------------------------------------------------------------------------------------
Illinois Dedicated Tax Rev. (Civic Center), AMBAC, 6.25%, 2011 3,640 4,465,188
- --------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority Rev., 5.5%, 2022 2,000 2,076,280
- --------------------------------------------------------------------------------------------
$12,075,318
- --------------------------------------------------------------------------------------------
Tobacco - 1.3%
- --------------------------------------------------------------------------------------------
Badger Tobacco Asset Securitization Corp., WI,
6.125%, 2027 $2,000 $1,942,960
- --------------------------------------------------------------------------------------------
Childrens Trust Fund, Settlement Rev., PR, 5.375%,
2033 2,895 2,758,038
- --------------------------------------------------------------------------------------------
District of Columbia Tobacco Settlement, 6.25%, 2024 1,090 1,040,427
- --------------------------------------------------------------------------------------------
Golden Securization Corp., California Tobacco
Settlement, 5.375%, 2028 4,000 4,033,680
- --------------------------------------------------------------------------------------------
Iowa Tobacco Settlement Authority, 5.3%, 2025 3,000 2,578,230
- --------------------------------------------------------------------------------------------
Tobacco Settlement Authority, WA, 6.5%, 2026 495 487,451
- --------------------------------------------------------------------------------------------
Tobacco Settlement Financing Corp., LA, 5.5%, 2030 1,100 977,339
- --------------------------------------------------------------------------------------------
Tobacco Settlement Financing Corp., NJ, 5.75%, 2032 2,200 2,038,256
- --------------------------------------------------------------------------------------------
Tobacco Settlement Financing Corp., RI, 6%, 2023 500 477,365
- --------------------------------------------------------------------------------------------
Tobacco Settlement Rev., Management Authority, SC,
6.375%, 2028 1,500 1,414,305
- --------------------------------------------------------------------------------------------
$17,748,051
- --------------------------------------------------------------------------------------------
Toll Roads - 2.0%
- --------------------------------------------------------------------------------------------
E-470 Public Highway Authority Rev., Capital
Appreciation "B", MBIA, 0%, 2017 $5,000 $2,563,700
- --------------------------------------------------------------------------------------------
Harris County, TX, Toll Road Subordinated Lien, 5%, 2024 3,860 3,959,433
- --------------------------------------------------------------------------------------------
New Jersey Turnpike Authority Rev., RITES, MBIA,
9.5598%, 2020+(+) 5,000 5,808,800
- --------------------------------------------------------------------------------------------
Northwest Parkway Public Highway Authority Co. Rev.,
Capital Appreciation "B", AMBAC, 0%, 2018 - 2019 3,250 1,557,465
- --------------------------------------------------------------------------------------------
Northwest Parkway Public Highway Authority Co. Rev.,
Capital Appreciation "C", FSA, 0% to 2011, 5.35% to 2016 1,000 779,440
- --------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0%, 2012 - 2014 14,200 7,225,634
- --------------------------------------------------------------------------------------------
Texas Turnpike Authority, Dallas Thruway Rev.
(President George Bush Highway), AMBAC, 5%, 2016(++) 4,500 4,868,163
- --------------------------------------------------------------------------------------------
$26,762,635
- --------------------------------------------------------------------------------------------
Transportation - Special Tax - 4.4%
- --------------------------------------------------------------------------------------------
Illinois Regional Transportation Authority Rev.,
MBIA, 6.25%, 2018 $4,400 $5,560,016
- --------------------------------------------------------------------------------------------
Jacksonville, FL, Transpotation Authority, 9.2%, 2015(++) 2,000 2,879,400
- --------------------------------------------------------------------------------------------
Metropolitan Transportation Authority Rev., NY,
5.75%, 2013(++) 5,600 6,605,928
- --------------------------------------------------------------------------------------------
Metropolitan Transportation Authority Rev., NY "A",
FSA, 5%, 2030 2,750 2,882,853
- --------------------------------------------------------------------------------------------
Metropolitan Transportation Authority Rev., NY,
AMBAC, 5%, 2030 5,000 5,232,700
- --------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev.,
Transportation Project Sublease "A", FSA, 6%, 2016(++) 1,325 1,567,912
- --------------------------------------------------------------------------------------------
New Jersey Transportation Trust Fund Authority Rev.,
ROLs, FSA, 9.966%, 2011+(+) 7,500 10,146,150
- --------------------------------------------------------------------------------------------
New Jersey Transportation Trust Fund Authority Rev.,
Transportation Systems "B", 5.25%, 2016 8,500 9,411,625
- --------------------------------------------------------------------------------------------
New York Thruway Authority Service Contract Rev., 5.25%, 2013(++) 6,000 6,688,273
- --------------------------------------------------------------------------------------------
State of Florida, Broward County, 10%, 2014(++) 4,350 6,442,655
- --------------------------------------------------------------------------------------------
$57,417,512
- --------------------------------------------------------------------------------------------
Universities - Colleges - 3.1%
- --------------------------------------------------------------------------------------------
District of Columbia Rev. (Gonzaga College High
School), FSA, 5.25%, 2032 $3,500 $3,722,810
- --------------------------------------------------------------------------------------------
Los Angeles, CA, Community College "B", FSA, 5%, 2027 5,000 5,250,250
- --------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev. (Boston
University), XLCA, 6%, 2059 4,975 5,986,318
- --------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev.
(Massachusetts College of Pharmacy), 6.625%, 2020 350 385,451
- --------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities
Authority Rev., RITES (Harvard University),
11.2561%, 2020+(+) 8,410 13,030,118
- --------------------------------------------------------------------------------------------
Ohio State University, 6%, 2017 500 593,240
- --------------------------------------------------------------------------------------------
Texas A&M University, Permenant University Fund, 0%, 2007 6,695 6,251,523
- --------------------------------------------------------------------------------------------
University of Akron, OH, General Receipts, FGIC, 6%, 2015 1,000 1,193,070
- --------------------------------------------------------------------------------------------
University of Hawaii, University Systems Rev. "A",
FGIC, 5.5%, 2029 3,500 3,805,900
- --------------------------------------------------------------------------------------------
University of New Mexico, MBIA, 5.75%, 2020(++) 500 594,980
- --------------------------------------------------------------------------------------------
$40,813,660
- --------------------------------------------------------------------------------------------
Universities - Dormitories - 0.1%
- --------------------------------------------------------------------------------------------
Georgia Private Colleges & University Authority Rev.
(Mercer Housing Corp.), 6%, 2021 $1,000 $1,050,250
- --------------------------------------------------------------------------------------------
Universities - Secondary Schools - 0.6%
- --------------------------------------------------------------------------------------------
Clark County, NV, Economic Development Rev.
(Alexander Dawson School), 5.5%, 2020 $6,000 $6,315,120
- --------------------------------------------------------------------------------------------
Maine Finance Authority (Waynflete School), 6.5%, 2024 1,500 1,641,915
- --------------------------------------------------------------------------------------------
$7,957,035
- --------------------------------------------------------------------------------------------
Utilities - Investor Owned - 1.1%
- --------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (New Mexico
Public Service Co.), 5.8%, 2022 $4,880 $4,946,758
- --------------------------------------------------------------------------------------------
Michigan Strategic Fund, Limited Obligation Rev.
(Detroit Edison), MBIA, 7%, 2008 3,000 3,581,490
- --------------------------------------------------------------------------------------------
New Hampshire Industrial Development Authority,
Pollution Control (CT Light and Power),
5.9%, 2016 - 2018 4,500 4,694,475
- --------------------------------------------------------------------------------------------
Sabine River Authority, TX, Pollution (TXU Electric
Co.), 5.75%, 2030 1,500 1,620,555
- --------------------------------------------------------------------------------------------
$14,843,278
- --------------------------------------------------------------------------------------------
Utilities - Municipal Owned - 18.0%
- --------------------------------------------------------------------------------------------
Austin, TX, Utility Systems Rev., AMBAC, 6.75%, 2012 $2,500 $3,187,900
- --------------------------------------------------------------------------------------------
California State Department Water Resources Power
Supply Rev. "A", 5.75%, 2017 2,750 3,108,847
- --------------------------------------------------------------------------------------------
Georgia Municipal Electric Authority Power Rev.,
AMBAC, 6.5%, 2017 8,145 10,408,251
- --------------------------------------------------------------------------------------------
Georgia Municipal Electric Authority Power Rev.,
AMBAC, 6.5%, 2017(++) 365 462,017
- --------------------------------------------------------------------------------------------
Hawaii State Department Budget & Finance Rev."B"
(Electric Co. & Subsidiary), XLCA, 5%, 2022 4,000 4,157,680
- --------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "A", AMBAC, 6.15%, 2014 16,380 18,302,848
- --------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "A", AMBAC, 6.15%, 2014(++) 28,220 31,546,574
- --------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "A", AMBAC, 6%, 2021(++) 9,000 10,700,190
- --------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "A", MBIA, 5%, 2019 9,330 9,887,841
- --------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "B", MBIA, 6%, 2016 10,000 11,191,400
- --------------------------------------------------------------------------------------------
Mercer County, ND, Pollution Control Rev. (Antelope
Valley Station), AMBAC, 7.2%, 2013 4,000 5,071,800
- --------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power "A", MBIA, 5.7%, 2013 7,000 7,836,640
- --------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power "A", MBIA, 5.625%, 2014 7,735 8,643,553
- --------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power "A", MBIA, 6.5%, 2018 9,250 11,916,405
- --------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency "A", MBIA, 5.5%, 2013 1,800 2,016,720
- --------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency "B", 6.375%, 2013 1,500 1,722,165
- --------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency Catawba
Electric Rev., ROLs, MBIA, 9.418%, 2019+(+) 3,500 4,223,940
- --------------------------------------------------------------------------------------------
Northern California Transmission Agency, MBIA, 7%, 2013 4,000 5,031,360
- --------------------------------------------------------------------------------------------
Piedmont, SC, Municipal Power Agency, FGIC, 6.25%, 2021 4,150 5,186,712
- --------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority, RITES, FSA,
9.2783%, 2015 - 2016+(+) 5,500 6,697,235
- --------------------------------------------------------------------------------------------
South Carolina Public Service Authority "B", FSA,
5.125%, 2037 8,500 8,904,685
- --------------------------------------------------------------------------------------------
Southern California Public Power Authority Rev.
(Magnolia Power), AMBAC, 5%, 2036 4,200 4,392,150
- --------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear
Project #1), FSA, 5.125%, 2014 8,000 8,713,840
- --------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear
Project #1), MBIA, 5.75%, 2010 - 2011 20,600 22,886,806
- --------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear
Project #2), MBIA, 5.7%, 2012 15,000 16,648,050
- --------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear
Project #3), 7.125%, 2016 5,145 6,761,816
- --------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear
Project #3), FGIC, 0%, 2005 6,895 6,771,097
- --------------------------------------------------------------------------------------------
$236,378,522
- --------------------------------------------------------------------------------------------
Water & Sewer Utility Revenue - 1.2%
- --------------------------------------------------------------------------------------------
Forsyth County, GA, Water & Sewage Authority Rev.,
6.25%, 2019 - 2021(++) $2,055 $2,511,148
- --------------------------------------------------------------------------------------------
Houston,TX, Water & Sewer Systems Rev., FGIC, 5%, 2018 10,000 10,642,600
- --------------------------------------------------------------------------------------------
Massachusetts Water Pollution Abatement Trust Rev., 5.75%, 2016 25 29,013
- --------------------------------------------------------------------------------------------
Massachusetts Water Resources Authority Rev., FGIC, 6%, 2017 200 238,218
- --------------------------------------------------------------------------------------------
Metropolitan Water District Southern California, FGIC, 5%, 2025 2,000 2,106,400
- --------------------------------------------------------------------------------------------
$15,527,379
- --------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $1,148,797,407) $1,299,655,514
- --------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.9%
- --------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority
Rev. (Aces Presbyterian Hospital), due 3/03/04 $3,700 $3,700,000
- --------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority
Rev. (Presbyterian University Hospital), due 3/03/04 1,900 1,900,000
- --------------------------------------------------------------------------------------------
Atlanta, GA, Water & Wastewater Rev., "C", due 3/01/04 900 900,000
- --------------------------------------------------------------------------------------------
Bay Area Toll Authority, CA, Toll Bridge Rev., "A", due 3/03/04 800 800,000
- --------------------------------------------------------------------------------------------
California Department of Water Resources, Power
Supply Rev., due 3/03/04 1,800 1,800,000
- --------------------------------------------------------------------------------------------
East Baton Rouge, LA, Pollution Control Rev. (Exxon), due 3/01/04) 200 200,000
- --------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities
Authority Rev., due 3/01/04 200 200,000
- --------------------------------------------------------------------------------------------
Massachusetts Water Resources Authority Rev., due 3/03/04 200 200,000
- --------------------------------------------------------------------------------------------
New York City Municipal Water Finance Authority,
Water & Sewer System Rev., due 3/01/04 200 200,000
- --------------------------------------------------------------------------------------------
New York City Municipal Water Finance Authority,
Water & Sewer Systems Rev. "C", due 3/01/04 $200 $200,000
- --------------------------------------------------------------------------------------------
New York City, NY, due 3/01/04 500 500,000
- --------------------------------------------------------------------------------------------
New York City, NY, "B", due 3/01/04 300 300,000
- --------------------------------------------------------------------------------------------
Pinellas County, FL, Health Facilities Authority, due 3/01/04 200 200,000
- --------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, due 3/01/04 210 210,000
- --------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, due 3/03/04 155 155,000
- --------------------------------------------------------------------------------------------
State of Oregon, due 3/03/04 100 100,000
- --------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes
(Identified Cost, $11,565,000) $11,565,000
- --------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,160,362,407) $1,311,220,514
- --------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.4% 4,788,947
- --------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,316,009,461
- --------------------------------------------------------------------------------------------
+ Restricted securities.
(+) Inverse floating rate security.
(++) Refunded bond.
The following abbreviations for insurers and inverse floater are used inthe Portfolio of
Investments and are defined:
Insurers Inverse Floaters
AMBAC= AMBAC Indemnity Corp. RITES= Residual Interest Tax-Exempt Security
FGIC = Financial Guaranty Insurance Co. ROLS= Residual Option Longs
FHA = Federal Housing Administration
FSA = Financial Security Assurance Inc.
GNMA = Government National Mortgage Assn.
MBIA = Municipal Bond Investors Corp.
PSF = Permanent School Fund
XLCA = XL Capital Insurance Co.
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- ---------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities
composing the total value of your fund.
AT 2/29/04
ASSETS
Investments, at value (identified cost, $1,160,362,407) $1,311,220,514
- ---------------------------------------------------------------------------------------------------
Cash 37,105
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 6,813,483
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 239,881
- ---------------------------------------------------------------------------------------------------
Interest receivable 16,139,334
- ---------------------------------------------------------------------------------------------------
Other assets 22,007
- ---------------------------------------------------------------------------------------------------
Total assets $1,334,472,324
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $5,198,096
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased 9,039,943
- ---------------------------------------------------------------------------------------------------
Interest payable on swaps 14,037
- ---------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 687,575
- ---------------------------------------------------------------------------------------------------
Unrealized depreciation on interest rate swaps 1,166,206
- ---------------------------------------------------------------------------------------------------
Unrealized depreciation on rate lock swaps 2,043,195
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 35,236
- ---------------------------------------------------------------------------------------------------
Shareholder servicing costs 27,276
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 11,121
- ---------------------------------------------------------------------------------------------------
Administrative fee 1,844
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 238,334
- ---------------------------------------------------------------------------------------------------
Total liabilities $18,462,863
- ---------------------------------------------------------------------------------------------------
Net assets $1,316,009,461
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $1,171,865,913
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments 147,648,706
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (2,392,704)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment
income (1,112,454)
- ---------------------------------------------------------------------------------------------------
Total $1,316,009,461
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 119,251,491
- ---------------------------------------------------------------------------------------------------
See notes to financial statements.
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $1,237,729,426
- ---------------------------------------------------------------------------------------------------
Shares outstanding 112,151,623
- ---------------------------------------------------------------------------------------------------
Net asset value per share $11.04
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$11.04) $11.59
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $78,280,035
- ---------------------------------------------------------------------------------------------------
Shares outstanding 7,099,868
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $11.03
- ---------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the price of Class A shares is reduced. A contingent deferred sales
charge may be imposed on redemptions of Class A and Class B shares.
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
- ---------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and paid in expenses. It
also describes any gains and/or losses generated by fund operations.
FOR SIX MONTHS ENDED 2/29/04
NET INVESTMENT INCOME
Interest income $36,386,808
- ---------------------------------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------------------------------
Management fee $2,673,262
- ---------------------------------------------------------------------------------------------------
Trustees' compensation 19,554
- ---------------------------------------------------------------------------------------------------
Shareholder servicing costs 895,023
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 323,837
- ---------------------------------------------------------------------------------------------------
Administrative fee 37,713
- ---------------------------------------------------------------------------------------------------
Custodian fee 156,910
- ---------------------------------------------------------------------------------------------------
Printing 37,691
- ---------------------------------------------------------------------------------------------------
Postage 17,826
- ---------------------------------------------------------------------------------------------------
Auditing fees 20,678
- ---------------------------------------------------------------------------------------------------
Legal fees 3,598
- ---------------------------------------------------------------------------------------------------
Miscellaneous 60,483
- ---------------------------------------------------------------------------------------------------
Total expenses $4,246,575
- ---------------------------------------------------------------------------------------------------
Fees paid indirectly (14,246)
- ---------------------------------------------------------------------------------------------------
Net expenses $4,232,329
- ---------------------------------------------------------------------------------------------------
Net investment income $32,154,479
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- ---------------------------------------------------------------------------------------------------
Investment transactions $9,249,884
- ---------------------------------------------------------------------------------------------------
Swap transactions (2,542,114)
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments $6,707,770
- ---------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- ---------------------------------------------------------------------------------------------------
Investments $47,818,864
- ---------------------------------------------------------------------------------------------------
Swap transactions (4,750,668)
- ---------------------------------------------------------------------------------------------------
Net unrealized gain on investments $43,068,196
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $49,775,966
- ---------------------------------------------------------------------------------------------------
Increase in net assets from operations $81,930,445
- ---------------------------------------------------------------------------------------------------
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/29/04 8/31/03
(UNAUDITED)
INCREASE IN NET ASSETS
OPERATIONS
Net investment income $32,154,479 $65,893,634
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 6,707,770 (3,136,399)
- ---------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments 43,068,196 (25,179,307)
- ------------------------------------------------------ ------------ ------------
Increase in net assets from operations $81,930,445 $37,577,928
- ------------------------------------------------------ ------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- ---------------------------------------------------------------------------------------------------
Class A $(31,074,308) $(64,228,027)
- ---------------------------------------------------------------------------------------------------
Class B (1,647,613) (3,567,675)
- ------------------------------------------------------ ------------ ------------
Total distributions declared to shareholders $(32,721,921) $(67,795,702)
- ------------------------------------------------------ ------------ ------------
Net increase (decrease) in net assets from fund
share transactions $(106,029,214) $10,866,794
- ------------------------------------------------------ ------------ ------------
Total decrease in net assets $(56,820,690) $(19,350,980)
- ------------------------------------------------------ ------------ ------------
NET ASSETS
At beginning of period $1,372,830,151 $1,392,181,131
- ---------------------------------------------------------------------------------------------------
At end of period (including accumulated
distributions in excess of net investment income of
$1,112,454 and $545,012, respectively) $1,316,009,461 $1,372,830,151
- ---------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or, if shorter, the period of the fund's operation). Certain information reflects financial
results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or
lost) on an investment in the fund (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 8/31
ENDED -------------------------------------------------------------------
CLASS A 2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of period $10.64 $10.87 $10.77 $10.29 $10.35 $11.09
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.26 $0.52 $0.53 $0.54 $0.54 $0.53
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 0.41 (0.22) 0.10 0.48 0.09 (0.64)
- -------------------------------------------------- ----- ----- ----- ----- ------
Total from investment operations $0.67 $0.30 $0.63 $1.02 $0.63 $(0.11)
- -------------------------------------------------- ----- ----- ----- ----- ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.27) $(0.53) $(0.53) $(0.54) $(0.54) $(0.53)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments -- -- -- -- (0.06) (0.10)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments -- -- -- -- (0.09) --
- -------------------------------------------------- ----- ----- ----- ----- ------
Total distributions declared to
shareholders $(0.27) $(0.53) $(0.53) $(0.54) $(0.69) $(0.63)
- -------------------------------------------------- ----- ----- ----- ----- ------
Net asset value, end of period $11.04 $10.64 $10.87 $10.77 $10.29 $10.35
- -------------------------------------------------- ----- ----- ----- ----- ------
Total return (%)(+) 6.30++ 2.80 6.17 10.19 6.51 (1.08)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 0.58+ 0.59 0.59 0.59 0.58 0.57
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.81+ 4.76 5.01 5.16 5.32 4.87
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 4 13 14 12 25 30
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000,000 Omitted) $1,238 $1,291 $1,308 $1,284 $1,257 $1,385
- --------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective September 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began accreting market discount on debt securities. The effect of this change for the year
ended August 31, 2002 was to increase net investment income per share and decrease net realized gains and losses per
share. The impact of this change calculates to less than $0.01 per share. In addition, the ratio of net investment
income to average net assets increased by 0.02%. Per share, ratios, and supplemental data for periods prior to
September 1, 2001 have not been restated to reflect this change in presentation.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 8/31
ENDED -------------------------------------------------------------------
CLASS B 2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of period $10.63 $10.86 $10.76 $10.28 $10.34 $11.08
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.22 $0.43 $0.45 $0.46 $0.46 $0.44
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 0.40 (0.22) 0.10 0.48 0.09 (0.64)
- ---------------------------------------- ------ ----- ----- ----- ----- ------
Total from investment operations $0.62 $0.21 $0.55 $0.94 $0.55 $(0.20)
- ---------------------------------------- ------ ----- ----- ----- ----- ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.22) $(0.44) $(0.45) $(0.46) $(0.46) $(0.44)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments -- -- -- -- (0.06) (0.10)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments -- -- -- -- (0.09) --
- ---------------------------------------- ------ ----- ----- ----- ----- ------
Total distributions declared to
shareholders $(0.22) $(0.44) $(0.45) $(0.46) $(0.61) $(0.54)
- ---------------------------------------- ------ ----- ----- ----- ----- ------
Net asset value, end of period $11.03 $10.63 $10.86 $10.76 $10.28 $10.34
- ---------------------------------------- ------ ----- ----- ----- ----- ------
Total return (%) 5.89++ 1.96 5.33 9.35 5.70 (1.87)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.39+ 1.39 1.39 1.38 1.37 1.37
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.00+ 3.96 4.20 4.37 4.55 4.07
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 4 13 14 12 25 30
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000,000 Omitted) $78 $82 $84 $83 $70 $78
- --------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective September 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began accreting market discount on debt securities. The effect of this change for the year
ended August 31, 2002 was to increase net investment income per share and decrease net realized gains and losses per
share. The impact of this change calculates to less than $0.01 per share. In addition, the ratio of net investment
income to average net assets increased by 0.02%. Per share, ratios, and supplemental data for periods prior to
September 1, 2001 have not been restated to reflect this change in presentation.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Municipal Bond Fund (the fund) is a diversified series of MFS Series Trust
IV (the trust). The trust is organized as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Municipal securities backed by current or anticipated revenues from a specific
project or specific assets can be negatively affected by the discontinuance of
the taxation supporting the projects or assets or the inability to collect
revenues for the project or from the assets. If the Internal Revenue Service
determines an issuer of a municipal security has not complied with applicable
tax requirements, interest from the security could become taxable and the
security could decline in value.
INVESTMENT VALUATIONS - The fund uses independent pricing services approved by
the Board of Trustees wherever possible to value its portfolio securities.
Portfolio securities are valued at current market prices where current market
prices are readily available, or the fund may fair value portfolio securities
under the direction of the Board of Trustees when a determination is made that
current market prices are not readily available. Bonds and other fixed income
securities (other than short-term obligations) in the fund's portfolio are
valued at an evaluated bid price as reported by an independent pricing
service, or to the extent a valuation is not reported by a pricing service,
such securities are valued on the basis of quotes from brokers and dealers.
Prices obtained from pricing services utilize both dealer-supplied valuations
and electronic data processing techniques which take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data without exclusive reliance upon quoted prices or
exchange or over-the-counter prices, since such valuations are believed to
reflect more accurately the fair value of such securities. Bonds and other
fixed income securities for which it is determined that current market prices
are not readily available will be fair valued under the direction of the Board
of Trustees. Short-term obligations with a remaining maturity in excess of 60
days will be valued upon dealer-supplied valuations. All other short-term
obligations in the fund's portfolio are valued at amortized cost, which
constitutes market value as determined by the Board of Trustees.
SWAP AGREEMENTS - The fund may enter into swap agreements. A swap is an
exchange of cash payments between the fund and another party, which is based
on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual basis.
The value of the swap is adjusted daily and the change in value is recorded as
unrealized appreciation or depreciation. Risks may arise upon entering into
these agreements from the potential inability of counterparties to meet the
terms of their contract and from unanticipated changes in the value of the
financial index on which the swap agreement is based. The fund uses swaps for
both hedging and non-hedging purposes. For hedging purposes, the fund may use
swaps to reduce its exposure to interest rate fluctuations. For non-hedging
purposes, the fund may use swaps to take a position on anticipated changes in
the underlying financial index.
RATE LOCK SWAPS - The fund may enter into rate lock swaps, which are used to
reduce the interest rate risk of the portfolio. A rate lock swap is a payment
or receipt of cash on a specified future date, calculated as the difference
between the strike rate and a specific index yield on that date. The payment
received or made at the end of the measurement period is recorded as a
realized gain or loss in the Statement of Operations. The value of the swap is
adjusted daily and the change in value is recorded as unrealized appreciation
or depreciation.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States
of America. All premium and original issue discount is amortized or accreted
for tax reporting purposes as required by federal income tax regulations. Some
securities may be purchased on a "when-issued" or "forward delivery" basis,
which means that the securities will be delivered to the fund at a future
date, usually beyond customary settlement time.
FEES PAID INDIRECTLY - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the fund. This amount, for the six months ended February 29, 2004, is shown as
a reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net tax-
exempt and taxable net income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is provided.
Distributions paid by the fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because the fund intends to meet certain requirements of
the Code applicable to regulated investment companies, which will enable the
fund to pay exempt-interest dividends. The portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986 may be considered
a tax-preference item to shareholders. Distributions to shareholders are
recorded on the ex-dividend date. The fund distinguishes between distributions
on a tax basis and a financial reporting basis and only distributions in
excess of tax basis earnings and profits are reported in the financial
statements as distributions from paid-in capital. Differences in the
recognition or classification of income between the financial statements and
tax earnings and profits, which result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess of net
investment income or net realized gains. Common types of book and tax
differences that could occur include differences in accounting for derivatives
and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended August 31,
2003 and August 31, 2002 was as follows:
8/31/03 8/31/02
Distributions declared from tax
exempt income $67,795,702 $67,782,333
- ---------------------------------------------------------------------
As of August 31, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed tax-exempt income $5,225,211
- --------------------------------------------------------------------------------
Capital loss carryforward (9,231,853)
- --------------------------------------------------------------------------------
Unrealized appreciation 107,491,691
- --------------------------------------------------------------------------------
Post-October capital loss deferral (2,779,802)
- --------------------------------------------------------------------------------
Other temporary differences (5,770,223)
- --------------------------------------------------------------------------------
Post-October capital loss deferrals represent losses realized during the
current fiscal year, but recognized for tax purposes in the next fiscal year.
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on August 31, 2009, ($8,819,272) and
August 31, 2011 ($412,581).
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - The fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. Differences in per
share dividend rates are generally due to differences in separate class
expenses. Class B shares will convert to Class A shares approximately eight
years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at the following annual
rates:
First $1.3 billion of average net assets 0.40%
- --------------------------------------------------------------------------------
Average net assets in excess of $1.3 billion 0.37%
- --------------------------------------------------------------------------------
Average net assets in excess of $2 billion 0.35%
- --------------------------------------------------------------------------------
Management fees incurred for the six months ended February 29, 2004 were 0.40%
of average daily net assets on an annualized basis.
As part of the settlement agreement with the New York Attorney General
concerning market timing and related matters, MFS has agreed to reduce the
fund's management fee to 0.30% of average daily net assets for the period
March 1, 2004 through February 28, 2009. During this time period, the Board of
Trustees will continue to review the appropriateness of all advisory fees in
accordance with their oversight responsibilities. After February 28, 2009 the
management fee will be determined in accordance with then existing review
policies approved by the Board of Trustees overseeing the fund.
The fund pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the fund, all of whom receive remuneration for their services to the fund from
MFS. Certain officers and Trustees of the fund are officers or directors of
MFS, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
The fund has an unfunded, defined benefit plan for retired Independent
Trustees. Included in Trustees' compensation is a pension expense of $3,281
for retired Independent Trustees for the six months ended February 29, 2004.
ADMINISTRATOR - The fund has an administrative services agreement with
MFS to provide the fund with certain financial, legal, shareholder
communications, compliance, and other administrative services. As a partial
reimbursement for the cost of providing these services, the fund pays MFS an
administrative fee up to the following annual percentage rates of the fund's
average daily net assets:
First $2 billion 0.0175%
- --------------------------------------------------------------------------------
Next $2.5 billion 0.0130%
- --------------------------------------------------------------------------------
Next $2.5 billion 0.0005%
- --------------------------------------------------------------------------------
In excess of $7 billion 0.0000%
- --------------------------------------------------------------------------------
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$91,432 for the six months ended February 29, 2004, as its portion of the
sales charge on sales of Class A shares of the fund.
The Trustees have adopted a distribution plan for Class B shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
The fund's distribution plan provides that the fund will pay MFD an annual
percentage of its average daily net assets attributable to certain share
classes in order that MFD may pay expenses on behalf of the fund related to
the distribution and servicing of its shares. These expenses include a service
fee paid to each securities dealer that enters into a sales agreement with MFD
based on the average daily net assets of accounts attributable to such
dealers.
These fees are calculated based on each class' average daily net assets. The
maximum distribution and service fees for each class of shares are as follows:
CLASS B
Distribution Fee 0.75%
- --------------------------------------------------------------------------------
Service Fee 0.25%
- --------------------------------------------------------------------------------
Total Distribution Plan 1.00%
- --------------------------------------------------------------------------------
Except in the case of the 0.25% per annum class B service fee paid by the fund
upon the sale of Class B shares in the first year, payment of the Class B
service fee will not be implemented until such date as the Trustees of the
trust may determine. MFD received no portion of the Class B service fee for
the six months ended February 29, 2004.
Fees incurred under the distribution plan during the six months ended February
29, 2004 were as follows:
CLASS B
Total Distribution Plan 0.81%
- --------------------------------------------------------------------------------
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following the purchase.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years from
the end of the calendar month of purchase. MFD receives all contingent
deferred sales charges. Contingent deferred sales charges imposed during the
six months ended February 29, 2004, were as follows:
CLASS A CLASS B
Contingent Deferred Sales Charges Imposed $24,919 $85,927
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT - Included in shareholder servicing costs is a fee
paid to MFSC, a wholly owned subsidiary of MFS, for its services as
shareholder servicing agent. The fee is calculated as a percentage of the
fund's average daily net assets at an annual rate of 0.11%, which amounted to
$737,411 for the six months ended February 29, 2004. Also included in
shareholder servicing costs are out-of-pocket expenses, paid to MFSC, which
amounted to $55,463 for the six months ended February 29, 2004, as well as
other expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$48,492,125 and $141,449,295, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $1,157,336,006
- --------------------------------------------------------------------------------
Gross unrealized appreciation $156,449,799
- --------------------------------------------------------------------------------
Gross unrealized depreciation (2,565,291)
- --------------------------------------------------------------------------------
Net unrealized appreciation $153,884,508
- --------------------------------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
Six months ended Year ended
2/29/04 8/31/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 5,561,922 $60,059,013 38,114,117 $415,706,341
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,767,823 19,172,739 3,542,060 38,611,584
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (16,450,676) (178,566,102) (40,702,564) (443,315,265)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (9,120,931) $(99,334,350) 953,613 $11,002,660
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 390,411 $4,226,416 2,452,752 $26,727,632
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 94,772 1,026,669 201,732 2,197,148
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (1,099,281) (11,947,949) (2,673,634) (29,060,646)
- ------------------------------------------------------------------------------------------------------------
Net decrease (614,098) $(6,694,864) (19,150) $(135,866)
- ------------------------------------------------------------------------------------------------------------
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate plus 0.50%. In addition, a commitment fee, based on the average
daily unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The commitment fee
allocated to the fund for the six months ended February 29, 2004, was $4,424.
The fund had no borrowings during the period.
(7) FINANCIAL INSTRUMENTS
The fund trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates. These financial instruments include swap
agreements. The notional or contractual amounts of these instruments represent
the investment the fund has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
Swap Agreements
Interest Rate Swaps
NOTIONAL UNREALIZED
PRINCIPAL AMOUNT CASH FLOWS PAID CASH FLOWS RECEIVED APPRECIATION
EXPIRATION (000 OMITTED) BY THE FUND BY THE FUND (DEPRECIATION)
11/15/04 22,000 Fixed - 2 Year BMA Swap Floating - 7 Day BMA Swap $(102,104)
Index (1.945%) Index
- -------------------------------------------------------------------------------------------------------------------
11/18/12 14,000 Floating - 3M LIBOR X Floating - 7 Day BMA Swap 45,723
79.375% Index
- -------------------------------------------------------------------------------------------------------------------
12/18/12 28,600 Floating - 3M LIBOR X Floating - 7 Day BMA Swap 38,276
78.75% Index
- -------------------------------------------------------------------------------------------------------------------
5/26/19 10,000 Fixed - 15 Year BMA Swap Floating - 7 Day BMA Swap (271,581)
Index (4.152%) Index
- -------------------------------------------------------------------------------------------------------------------
6/23/19 10,000 Fixed - 15 Year BMA Swap Floating - 7 Day BMA Swap (362,784)
Index (4.23%) Index
- -------------------------------------------------------------------------------------------------------------------
7/21/19 13,000 Fixed - 15 Year BMA Swap Floating - 7 Day BMA Swap (137,712)
Index (4.0495%) Index
- -------------------------------------------------------------------------------------------------------------------
7/28/19 13,000 Fixed - 15 Year BMA Swap Floating - 7 Day BMA Swap (105,672)
Index (4.00%) Index
- -------------------------------------------------------------------------------------------------------------------
8/4/19 8,000 Fixed - 15 Year BMA Swap Floating - 7 Day BMA Swap (64,907)
Index (4.039%) Index
- -------------------------------------------------------------------------------------------------------------------
4/7/24 13,000 Fixed - 20 Year BMA Swap Floating - 7 Day BMA Swap (205,445)
Index (4.159%) Index
- -------------------------------------------------------------------------------------------------------------------
$(1,166,206)
- -------------------------------------------------------------------------------------------------------------------
Rate Lock Swaps
NOTIONAL
PRINCIPAL AMOUNT
OF CONTRACT UNREALIZED
(000 OMITTED) DESCRIPTION DEPRECIATION
13,000 Agreement with Merrill Lynch terminating April 7, 2004 to pay
the difference between the notional value and the market
value of a bond with a 4.842% coupon maturing on April 7,
2024 priced at a yield to maturity equal to the MMD general
obligation yield curve rate for the designated maturity year
as of the close of business on the termination date, if
negative (receive if positive) $(818,210)
- ----------------------------------------------------------------------------------------------------------
7,600 Agreement with Merrill Lynch terminating April 13, 2004 to
pay the difference between the notional value and the market
value of a bond with a 5.106% coupon maturing on April 13,
2025 priced at a yield to maturity equal to the MMD general
obligation yield curve rate for the designated maturity year
as of the close of business on the termination date, if
negative (receive if positive) (732,593)
- ----------------------------------------------------------------------------------------------------------
5,150 Agreement with Goldman Sachs terminating April 14, 2004 to
pay the difference between the notional value and the market
value of a bond with a 5.10% coupon maturing on April 14,
2025 priced at a yield to maturity equal to the MMD general
obligation yield curve rate for the designated maturity year
as of the close of business on the termination date, if
negative (receive if positive) (492,392)
- ----------------------------------------------------------------------------------------------------------
$(2,043,195)
- ----------------------------------------------------------------------------------------------------------
At February 29, 2004, the fund had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) RESTRICTED SECURITIES
The fund may invest not more than 15% of its total assets in securities, which
are subject to legal or contractual restrictions on resale. At February 29,
2004, the fund owned the following restricted securities, excluding securities
issued under Rule 144A, constituting 6.6% of net assets which may not be
publicly sold without registration under the Securities Act of 1933. The fund
does not have the right to demand that such securities be registered. The
value of these securities is determined by valuations furnished by dealers or
by a pricing service, or if not available, in good faith at the direction of
the Trustees.
SHARE/
PRINCIPAL
DATE OF AMOUNT
DESCRIPTION ACQUISITION (000 OMITTED) COST VALUE
Chicago, IL, Board of Education, RITES,
FGIC, 9.2607%, 2019 2/9/00 5,000 3,984,600 $6,525,700
- --------------------------------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport
Rev., RITES, FSA, 10.2016%, 2022 8/21/03 2,500 2,665,850 2,989,600
- --------------------------------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport
Rev., RITES, PSF, 10.7016%, 2029 8/21/03 3,000 3,278,220 3,705,600
- --------------------------------------------------------------------------------------------------------------------
Chicago, IL, RITES, AMBAC,
9.7902%, 2018 3/20/00 5,900 5,699,046 7,984,824
- --------------------------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, ROLs, 9.742%, 2017 8/28/01 2,870 3,194,941 3,889,596
- --------------------------------------------------------------------------------------------------------------------
Commonwealth of Puerto Rico, ROLs, XLCA,
9.876%, 2017 10/22/01 1,150 1,392,374 1,587,529
- --------------------------------------------------------------------------------------------------------------------
Denver, CO, City & County Airport Rev.,
RITES, AMBAC, 10.71%, 2017 8/28/00 2,500 2,683,700 3,148,150
- --------------------------------------------------------------------------------------------------------------------
Massachusetts Health & Educational
Facilities Authority Rev., RITES (Harvard
University), 11.2561%, 2020 11/8/99 8,410 9,595,810 13,030,118
- --------------------------------------------------------------------------------------------------------------------
New Jersey Transportation Trust Fund
Authority Rev., ROLs, FSA, 9.966%, 2011 1/7/02 7,500 8,479,200 10,146,150
- --------------------------------------------------------------------------------------------------------------------
New Jersey Turnpike Authority Rev., RITES,
MBIA, 9.5598%, 2020 4/19/00 5,000 4,637,900 5,808,800
- --------------------------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency
Catawba Electric Rev., ROLs, MBIA, 9.418%, 2019 3/3/03 3,500 4,008,620 4,223,940
- --------------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority, RITES,
FSA, 9.2783%, 2015 - 2016 9/16/99 5,500 5,295,450 6,697,235
- --------------------------------------------------------------------------------------------------------------------
State of California, RITES, 9.6742%, 2012 11/8/99 5,825 6,135,706 7,887,400
- --------------------------------------------------------------------------------------------------------------------
State of California, RITES, XLCA, 10.2803%,
2017 1/3/00 6,875 7,003,975 9,057,263
- --------------------------------------------------------------------------------------------------------------------
$86,681,905
- --------------------------------------------------------------------------------------------------------------------
(9) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding regarding
disclosure of brokerage allocation practices in connection with fund sales.
Under the terms of the settlement, in which MFS neither admitted nor denied
any wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50
million in penalty to certain MFS funds, pursuant to a plan to be approved by
an independent distribution consultant. The agreement with the SEC is
reflected in an order of the SEC. The settlement order states that MFS failed
to adequately disclose to the Boards of Trustees and to shareholders of the
MFS funds the specifics of its preferred arrangements with certain brokerage
firms selling MFS fund shares. The settlement order states that MFS had in
place policies designed to obtain best execution of all fund trades.
As part of the settlement, MFS also agreed to retain an independent compliance
consultant to review the completeness of its disclosure to fund trustees and
to fund shareholders of strategic alliances between MFS or its affiliates and
broker-dealers and other financial advisers who support the sale of fund
shares. The brokerage allocation practices which were the subject of this
proceeding were discontinued by MFS in November 2003.
In addition, in February, 2004, MFS reached agreement with the Securities and
Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the
Bureau of Securities Regulation of the State of New Hampshire ("NH") to settle
administrative proceedings alleging false and misleading information in certain
MFS fund prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS funds was false and misleading because, although the prospectuses
for those funds in the regulators' view indicated that the funds prohibited
market timing, MFS did not limit trading activity in 11 domestic large cap
stock, high grade bond and money market funds. MFS' former Chief Executive
Officer, John W. Ballen, and former President, Kevin R. Parke, have also
reached agreement with the SEC (Messrs. Ballen and Parke resigned their
director and officer positions with MFS on February 13, 2004). Under the terms
of the February Settlements, MFS and the executives neither admit nor deny
wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain of the MFS funds
offered to retail investors ("Retail Funds"), which has been funded by MFS and
of which $50 million is characterized as a penalty. This pool will be
distributed in accordance with a methodology developed by an independent
distribution consultant in consultation with MFS and the Boards of Trustees of
the Retail Funds, and acceptable to the SEC. MFS has further agreed with the
NYAG to reduce its management fees in the aggregate amount of approximately $25
million annually over the next five years, and not to increase certain
management fees during this period. MFS has also paid an administrative fine to
NH in the amount of $1 million, which will be used for investor education
purposes (NH will retain $250,000 and $750,000 will be contributed to the North
American Securities Administrators Association's Investor Protection Trust). In
addition, MFS and the Retail Funds will adopt certain governance changes.
Messrs. Ballen and Parke have agreed to temporary suspensions from association
with any registered investment company or investment adviser, will pay
approximately $315,000 each to the SEC, and resigned their positions as
trustees of all MFS funds, and Mr. Ballen resigned his position as President
of all MFS funds, effective February 6, 2004. Messrs. Ballen and Parke will
not be returning to MFS or the MFS funds after their suspensions.
Since December 2003, MFS, Sun Life Financial Inc., various MFS funds, the
Trustees of these MFS funds, and certain officers of MFS have been named as
defendants in multiple lawsuits filed in federal and state courts. The
lawsuits variously have been commenced as class actions or individual actions
on behalf of investors who purchased, held or redeemed shares of the funds
during specified periods, as class actions on behalf of participants in
certain retirement plan accounts, or as derivative actions on behalf of the
MFS funds. The lawsuits generally allege that some or all of the defendants
(i) permitted or acquiesced in market timing and/or late trading in some of
the MFS funds, inadequately disclosed MFS' internal policies concerning market
timing and such matters, and received excessive compensation as fiduciaries to
the MFS fund, or (ii) permitted or acquiesced in the improper use of fund
assets by MFS to support the distribution of fund shares and inadequately
disclosed MFS' use of fund assets in this manner. The actions assert that some
or all of the defendants violated the federal securities laws, including the
Securities Act of 1933 and the Securities Exchange Act of 1934, the Investment
Company Act of 1940 and the Investment Advisers Act of 1940, the Employee
Retirement Income Security Act of 1974, as well as fiduciary duties and other
violations of common law. The lawsuits seek unspecified compensatory damages.
Insofar as any of the actions is appropriately brought derivatively on behalf
of any of the MFS funds, any recovery will inure to the benefit of the funds.
The defendants are reviewing the allegations of the multiple complaints and
will respond appropriately. Additional lawsuits based on similar allegations
may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS
has established a restitution pool in the amount of $225 million to compensate
certain shareholders of the Retail Funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the
funds, and will pay $50 million to compensate certain MFS funds based upon the
amount of brokerage commissions allocated in recognition of fund sales. It is
not clear whether these amounts will be sufficient to compensate shareholders
for all of the damage they allegedly sustained, whether certain shareholders
or putative class members may have additional claims to compensation, or
whether the damages that may be awarded in any of the actions will exceed
these amounts. In the event the MFS funds incur any losses, costs or expenses
in connection with such lawsuits, the Boards of Trustees of the affected funds
may pursue claims on behalf of such funds against any party that may have
liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments will
not result in increased fund redemptions, reduced sales of fund shares, or
other adverse consequences to the funds.
- --------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust IV,
of which the fund is a series, including their principal occupations, which, unless specific dates are shown,
are of more than five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other directorships(1)
INTERESTED TRUSTEES
JOHN W. BALLEN(2)(5) (born 09/12/59) DAVID H. GUNNING(4) (born 05/30/42)
Trustee and President Trustee
Massachusetts Financial Services Company, Chief Cleveland-Cliffs Inc. (mining products and service
Executive Officer and Director (until February provider), Vice Chairman/Director (since April
2004) 2001); Encinitos Ventures (private investment
company), Principal (1997 to April 2001); Lincoln
ROBERT J. MANNING(2)(7) (born 10/20/63) Electric Holdings, Inc. (welding equipment
Trustee manufacturer), Director; Southwest Gas Corporation
Massachusetts Financial Services Company, Chief (natural gas distribution company), Director
Executive Officer, President, Chief Investment
Officer and Director WILLIAM R. GUTOW (born 09/27/41)
Trustee
KEVIN R. PARKE(2)(5) (born 12/14/59) Private investor and real estate consultant;
Trustee Capitol Entertainment Management Company (video
Massachusetts Financial Services Company, franchise), Vice Chairman
President, Chief Investment Officer and Director
(until February 2004) AMY B. LANE(4) (born 02/08/53)
Trustee
ROBERT C. POZEN(2)(7) (born 08/08/46) Retired; Merrill Lynch & Co., Inc., Managing
Trustee Director, Investment Banking Group (1997 to
Massachusetts Financial Services Company, Chairman February 2001); Borders Group, Inc. (book and
(since February 2004); Harvard Law School music retailer), Director; Federal Realty
(education), John Olin Visiting Professor (since Investment Trust (real estate investment trust),
July 2002); Secretary of Economic Affairs, The Trustee
Commonwealth of Massachusetts (January 2002 to
December 2002); Fidelity Investments, Vice ABBY M. O'NEILL(3) (born 04/27/28)
Chairman (June 2000 to December 2001); Fidelity Trustee
Management & Research Company (investment Private investor; Rockefeller Financial Services,
adviser), President (March 1997 to July 2001); The Inc. (investment advisers), Chairman and Chief
Bank of New York (financial services), Director; Executive Officer
Bell Canada Enterprises (telecommunications),
Director; Telesat (satellite communications), LAWRENCE T. PERERA (born 06/23/35)
Director Trustee
Hemenway & Barnes (attorneys), Partner
JEFFREY L. SHAMES(2)(6) (born 06/02/55)
Trustee WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Chairman Trustee
(until February 2004) Private investor; Harvard University Graduate
School of Business Administration, Class of 1961
INDEPENDENT TRUSTEES Adjunct Professor in Entrepreneurship Emeritus;
J. ATWOOD IVES (born 05/01/36) CBL & Associates Properties, Inc. (real estate
Co-Chair investment trust), Director
Private investor; KeySpan Corporation (energy
related services), Director; Eastern Enterprises J. DALE SHERRATT (born 09/23/38)
(diversified services company), Chairman, Trustee Trustee
and Chief Executive Officer (until November 2000) Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments
WARD SMITH (born 09/13/30) (investor in health care companies), Managing
Co-Chair General Partner (since 1993); Cambridge
Private investor Nutraceuticals (professional nutritional
products), Chief Executive Officer (until May
LAWRENCE H. COHN, M.D. (born 03/11/37) 2001)
Trustee
Brigham and Women's Hospital, Chief of Cardiac ELAINE R. SMITH (born 04/25/46)
Surgery; Harvard Medical School, Professor of Trustee
Surgery Independent health care industry consultant
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act) which is the principal federal law governing investment companies like the Trust. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
(3) Retired December 31, 2003.
(4) Appointed Trustee on January 27, 2004.
(5) Resigned February 6, 2004.
(6) Resigned on February 13, 2004.
(7) Appointed Trustee on February 24, 2004.
Trustees and Officers - continued
OFFICERS
JOHN W. BALLEN(1) (born 09/12/59) RICHARD M. HISEY (born 08/29/58)
Trustee and President Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Senior
Executive Officer and Director (until February Vice President (since July 2002); The Bank of New
2004) York, Senior Vice President (September 2000 to
July 2002); Lexington Global Asset Managers, Inc.,
JAMES R. BORDEWICK, JR. (born 03/06/59) Executive Vice President and Chief Financial
Assistant Secretary and Assistant Clerk Officer (prior to September 2000); Lexington
Massachusetts Financial Services Company, Senior Funds, Treasurer (prior to September 2000)
Vice President and Associate General Counsel
ROBERT J. MANNING(2) (born 10/20/63)
STEPHEN E. CAVAN (born 11/06/53) President
Secretary and Clerk Massachusetts Financial Services Company, Chief
Massachusetts Financial Services Company, Senior Executive Officer, President, Chief Investment
Vice President, General Counsel and Secretary Officer and Director
STEPHANIE A. DESISTO (born 10/01/53) ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer Assistant Treasurer
Massachusetts Financial Services Company, Vice Massachusetts Financial Services Company, Vice
President (since April 2003); Brown Brothers President
Harriman & Co., Senior Vice President (November
2002 to April 2003); ING Groep N.V./Aeltus JAMES O. YOST (born 06/12/60)
Investment Management, Senior Vice President Assistant Treasurer
(prior to November 2002) Massachusetts Financial Services Company, Senior
Vice President
ROBERT R. FLAHERTY (born 09/18/63)
Assistant Treasurer
Massachusetts Financial Services Company, Vice
President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
(1) Resigned on February 6, 2004.
(2) Appointed President on February 6, 2004.
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. The Trust will hold a shareholders' meeting in 2005 and at least once every five
years thereafter to elect Trustees. Each Trustee and officer will hold office until his or her successor is
chosen and qualified or until his or her earlier death, resignation, retirement or removal.
Mr. Shames has served as a Trustee of the Trust continually since originally appointed until February 13,
2004. Messrs. Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Mr. Gutow has served as a Trustee of the Trust since
August 1, 2001. Messrs. Cohn, Sherratt and Smith, were elected by shareholders and have served as Trustees of
the Trust since January 1, 2002. Mr. Ballen was elected by shareholders and served as a Trustee from January
1, 2002, until February 6, 2004, and Mr. Parke served as a Trustee of the Trust from January 1, 2002, until
February 6, 2004. Ms. O'Neill retired on December 31, 2003. Mr. Gunning and Ms. Lane have served as Trustees
of the Trust since January 27, 2004, and Messrs. Manning and Pozen have served as Trustees of the Trust since
February 24, 2004.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 109 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
- -------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
DISTRIBUTOR JP Morgan Chase Bank
MFS Fund Distributors, Inc. One Chase Manhattan Plaza
500 Boylston Street, Boston, MA New York, NY 10081
02116-3741
PORTFOLIO MANAGERS
Michael L. Dawson
Geoffrey L. Schechter
- ------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- ------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international
equity and fixed-income investment across the full risk
spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for
building and preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
A prospectus for any MFS product can be obtained from your investment
professional. The prospectus contains complete information on the fund's
investment objective(s), the risks associated with an investment in the fund,
the fees, charges and expenses involved, as well as other information about
the fund. The prospectus should be read carefully before investing.
Variable annuities are offered through MFS/Sun Life Financial Distributors,
Inc.
- --------------------------------------------------------------------------------
CONTACT INFORMATION
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
A general description of the MFS Funds proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the About MFS section of mfs.com or by visiting the SEC's website at
http://www.sec. gov.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send
you prospectuses, reports, and proxies electronically. You get timely
information without mailbox clutter (and help your fund save printing and
postage costs).
SIGN-UP instructions: If your account is registered with us, go to mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up
options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available
to you.
[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2004 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
MMB-SEM-4/04 52M
MFS(R) Mutual Funds
SEMIANNUAL REPORT 2/29/04
MFS(R) MID CAP GROWTH FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
- -------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- -------------------------------------------------------------------------------
MFS(R) MID CAP GROWTH FUND
The fund seeks to provide long-term growth of capital.
- -------------------------------------------------------------------------------
To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit mfs.com.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
LETTER FROM THE CEO 1
- ----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- ----------------------------------------------------
MANAGEMENT REVIEW 5
- ----------------------------------------------------
PERFORMANCE SUMMARY 9
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 12
- ----------------------------------------------------
FINANCIAL STATEMENTS 18
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 34
- ----------------------------------------------------
TRUSTEES AND OFFICERS 45
- ----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 47
- ----------------------------------------------------
CONTACT INFORMATION 48
- ----------------------------------------------------
ASSET ALLOCATION 49
- --------------------------------------------------------------------------------
LETTER FROM THE CEO
- --------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Robert J. Manning]
Dear Shareholders,
As the firm's new Chief Executive Officer, I want to thank you for your
continued trust in MFS and tell you about the series of actions we have taken
since our recent settlements with the regulators. These actions are designed
to enhance the governance structure of the MFS funds, tighten our business
practices, and strengthen the management team at MFS.
In early February, Robert Pozen joined MFS as non-executive Chairman. A
seasoned veteran of the mutual fund industry, Bob has held prior positions as
President of Fidelity Management & Research Company, as Associate General
Counsel of the Securities and Exchange Commission, and as a visiting professor
at Harvard Law School.
In an effort to develop and implement policies that we believe will set a new
standard in regulatory compliance, MFS has hired two new senior executives.
Jeffrey Carp is joining us as General Counsel with responsibility for all of
our legal affairs. Previously he was a senior partner with the law firm of
Hale and Dorr LLP. Also joining MFS in the new position of Executive Vice
President of Regulatory Affairs is Maria Dwyer, who returned to the firm after
serving as a senior executive at Fidelity. At MFS, Maria is in charge of
compliance, internal audit, and fund treasury.
In the area of governance, we have taken steps to enhance the independence of
our funds' boards of trustees to better protect the interests of shareholders.
We have independent board chairs and at least 75% of the trustees are
independent. The trustees will appoint not only their own counsel but also an
independent compliance officer. This officer will assist the boards and their
committees in monitoring the MFS funds' compliance with federal and state
regulations.
In February, MFS reached agreements with federal and state regulators to
settle their administrative proceedings against the firm and two senior
executives in connection with market timing and related issues. Under the
terms of the settlements, we agreed to pay $225 million to compensate affected
retail fund shareholders. The $225 million will be distributed in accordance
with a distribution plan developed by an independent consultant.
We have further agreed with state regulators to reduce management fees on
certain funds we advise by approximately $25 million annually over the next
five years and to pay an administrative fine of $1 million, which will be used
for the purpose of investor education. We have introduced a set of policies
designed to protect the MFS funds and MFS fund shareholders from market timing
abuses. By July, all MFS retail funds, except money market funds, will have a
2% redemption fee on short-term trades. Our global, international, high-yield,
mid- and small-cap funds will impose the 2% fee on redemptions or exchanges of
fund shares made within 30 calendar days of a share purchase. For all other
MFS funds, except money market funds, the 2% fee will be imposed on
redemptions or exchanges made within 5 business days of a share purchase. See
the fund prospectus for more information.
We continue to use fair value pricing, a strategy that minimizes the potential
for investors to take advantage of "stale" prices. These can occur, as one
example, when funds own foreign securities whose prices close on overseas
exchanges in different time zones. At the same time, we enhanced our
monitoring of excessive trading. We did so by increasing our staff and
updating our computer systems to improve our ability to detect excessive
trading in our funds. Finally, we are supporting industry efforts to establish
a "hard" 4 p.m. close on all trading, which would prevent the possibility of
late trading.
In March, MFS reached a second settlement with the SEC under an administrative
proceeding resolving the SEC's investigation into how we disclosed brokerage
allocation practices in connection with fund sales. According to the
settlement order, we did not effectively disclose the potential conflict of
interest that may arise from these arrangements.
Under the terms of the settlement, MFS has agreed to pay one dollar in
disgorgement and $50 million in penalty to MFS fund shareholders. The
settlement noted that MFS had policies in place designed to obtain best
execution of all trades of securities within MFS portfolios.
This past November, MFS eliminated the above mentioned practice of directing
brokerage commissions to certain firms in recognition of fund sales.
Additionally, we announced in March that we would ban the use of soft dollars
to acquire third-party securities research and market data. Soft dollars are
permitted under federal securities laws. In fact, it is a common industry
practice to use a portion of the brokerage commissions to pay for certain
research and execution products and services that are provided to asset
managers. MFS will now pay cash out of its own pocket for third-party research
and market data.
MFS continues to be financially strong, with more than U.S. $140 billion (as
of 12/31/03) in assets under management, which continued to be stable during
the first quarter of 2004. We also have the full support of our parent
company, Sun Life Financial, an internationally diversified financial services
firm that manages more than U.S. $269 billion (as of 12/31/03).
We chose to settle these two proceedings with the SEC so we could concentrate
on serving our fund shareholders. As Chief Investment Officer, my focus is on
ensuring that our portfolio teams work closely together and take full
advantage of all the resources available to them to deliver the best possible
investment performance.
As the inventor of the open-end mutual fund in America in 1924, MFS has a
strong tradition and culture of innovation. By strengthening our business and
governance practices, we believe we have an unprecedented opportunity to set a
new standard in the mutual fund industry.
As I look ahead, I do so with confidence. The collaboration among MFS
employees, many of whom have worked at the firm for their entire careers,
continues as we remain singularly dedicated to our clients. It has been our
sincere privilege to serve you, and we thank you for the confidence that you
have shown in MFS.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer
MFS Investment Management(R)
March 15, 2004
Note to Shareholders: On February 6, 2004, Jeffrey L. Shames retired as
Chairman of MFS. Robert Pozen was named as non-executive Chairman. Also,
on February 6, 2004, Robert J. Manning was appointed Chief Executive Officer,
President, and Chief Investment Officer.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
- -------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- -------------------------------------------------------------------------------
THE MFS(R) DIFFERENCE
For 80 years MFS has been offering investors clear paths to pursuing specific
investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain first-hand
knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- -------------------------------------------------------------------------------
MANAGEMENT REVIEW
- -------------------------------------------------------------------------------
MARKET ENVIRONMENT
The turnaround in global stock markets that began in the spring of 2003
continued for most of the six-month period ended February 29, 2004. The
release of increasingly positive economic numbers as the period progressed,
particularly with regard to corporate earnings and GDP (gross domestic
product) growth, helped drive the equity rally.
Another driver of the equity rally, in our view, was the U.S. Federal Reserve
Board's decision to leave interest rates at a four-decade low throughout the
period. While energy prices rose late in the period, core inflation --
excluding volatile food and energy prices -- remained low relative to
historical averages.
For the period, the portfolio underperformed its benchmark, the Russell Midcap
Growth Index, but outperformed its peers, as measured by the average mid-cap
growth fund tracked by Lipper Inc.
DETRACTORS FROM PERFORMANCE
On a sector basis, leisure, business services and health care were the
strongest detractors from relative performance.
Among our leisure investments, media holdings such as broadcast and
programming services provider Westwood One detracted from performance because
of a slower-than-expected recovery in advertising. As of period-end, the stock
remained in the portfolio based on our expectation of increasing advertising
spending in 2004.
In the business services area, online recruitment advertiser Monster Worldwide
weighed on results, reflecting concerns about increasing competition,
management's decision not to renew a large contract, and the weak recovery in
the job market.
- -----------------------------------------------
TOP 5 STOCK HOLDINGS
AS OF 2/29/04
NTL, INC. 2.9%
Broadband and cable services provider
- -----------------------------------------------
CYTYC CORPORATION 2.5%
Medical diagnostics technology firm
- -----------------------------------------------
MILLIPORE CORP. 2.3%
Life sciences company
- -----------------------------------------------
CAREER EDUCATION CORPORATION 2.3%
Adult education and training services
provider
- -----------------------------------------------
MEDICIS PHARMACEUTICAL CORPORATION 1.8%
Pharmaceutical manufacturer
- -----------------------------------------------
The portfolio is actively managed, and current
holdings may be different.
- -----------------------------------------------
Among our health care holdings, shares of acute care provider Tenet Healthcare
declined amid weak admissions and pricing trends and ongoing concerns about
the investigation of past billing practices. Relative to our benchmark, not
owning medical and reconstructive devices firm Zimmer Holdings also held back
performance, as the firm's shares rose during
the period.
Individual stocks in other areas that held back relative performance included
jetBlue Airways, whose shares fell because of increasing competition in the
low-cost airline market and rising fuel prices. In the technology sector, we
held storage solution provider VERITAS Software, whose shares posted a
negative return for the period. Our holding in clothing retailer Talbots also
held back results. The company's shares declined after the firm posted
relatively weak profits during the 2003 fall and holiday shopping seasons.
Talbots was sold out of the portfolio by period-end.
Although it averaged less than 4% of fund assets over the period, the
portfolio's cash position was also a detractor from relative performance. In a
period when equity markets rose sharply, cash held back performance against
our benchmark, the Russell Midcap Growth Index, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Relative to our benchmark, the portfolio fared most favorably in the
technology, industrial goods and services, and consumer staples sectors.
Stockpicking in these three sectors had the largest positive effect on returns
during the period.
On a sector basis, technology was the largest contributor to performance
relative to the benchmark. Technology holdings that rose sharply included
communications semiconductor company PMC-Sierra and programmable logic design
company Xilinx. Both firms benefited from an upswing in semiconductor demand
and market share gains for their well-positioned products. Also, not owning
semiconductor equipment maker KLA-Tencor benefited relative performance as the
firm's stock declined during the period.
While the industrial goods and services sector did not hold any of the
portfolio's top contributors, several of our stock holdings in this area made
material contributions to overall relative performance, including plumbing and
HVAC equipment maker American Standard Cos. and industrial automation
manufacturer Rockwell Automation. Also, not owning Jacobs Engineering helped
relative performance, as the construction firm's shares posted negative
returns for the period.
In consumer staples, manufacturer and marketer of ice cream, frozen dessert,
and frozen novelty products CoolBrands International was among the portfolio's
top relative performers for the period.
Individual stock holdings in other sectors that helped performance included
NTL, which was the portfolio's best performer on a relative basis, Investors
Financial Services, MedImmune, Royal Caribbean Cruises, and Invitrogen.
In the leisure sector, shares of NTL, the largest broadband services and cable
operator in Great Britain, posted strong returns after the company emerged
from bankruptcy and continued to strengthen its balance sheet and improve cash
flow growth. Our position in Royal Caribbean Cruises also posted strong
results for the period, as the firm experienced improving booking trends.
In financial services, our position in Investors Financial Services
contributed to performance. The administration services provider's shares rose
on a stronger capital markets environment, healthy earnings growth, and new
business wins.
In health care, medical equipment firm Invitrogen, which sells life science
tools used in research and drug manufacturing, benefited from an industry
recovery and from improved product offerings and efficiency gains under a new
CEO. Our relative underweighting in biotech company MedImmune also helped
portfolio performance, as its shares declined during the period.
Respectfully,
/s/ Eric B. Fischman /s/ David E. Sette-Ducati
Eric B. Fischman David E. Sette-Ducati
Portfolio Manager Portfolio Manager
The views expressed in this report are those of the portfolio managers only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or an indication of
trading intent on behalf of any MFS Fund. References to specific securities are
not recommendations of such securities, and may not be representative of any
MFS Fund's current or future investments.
- -------------------------------------------------------------------------------
Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment-related news.
o From Week in Review, link to MFS Global Investment Perspective for our current
view of the world.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 2/29/04
- -------------------------------------------------------------------------------
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as average annual total returns for the
applicable time periods. Performance results reflect the percentage change in
net asset value, including reinvestment of dividends and capital gains
distributions. (See Notes to Performance Summary.)
VISIT MFS.COM FOR THE MOST CURRENT PERFORMANCE RESULTS. MARKET VOLATILITY CAN
SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE
PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A
SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share inception
class date 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 12/1/93 -- 49.02% -12.01% 4.40% 8.57%
- ------------------------------------------------------------------------------
B 12/1/93 -- 48.07% -12.68% 3.61% 7.73%
- ------------------------------------------------------------------------------
C 8/1/94 -- 48.02% -12.67% 3.63% 7.75%
- ------------------------------------------------------------------------------
I 1/2/97 -- 49.38% -11.78% 4.66% 8.76%
- ------------------------------------------------------------------------------
R1 12/31/02 -- 48.66% -12.08% 4.35% 8.55%
- ------------------------------------------------------------------------------
R2 10/31/03 -- 48.17% -12.66% 3.63% 7.74%
- ------------------------------------------------------------------------------
529A 7/31/02 -- 49.19% -12.08% 4.35% 8.55%
- ------------------------------------------------------------------------------
529B 7/31/02 -- 47.70% -12.75% 3.56% 7.71%
- ------------------------------------------------------------------------------
529C 7/31/02 -- 47.92% -12.74% 3.57% 7.71%
- ------------------------------------------------------------------------------
Comparative benchmarks
- --------------------
Average annual
- --------------------
- ------------------------------------------------------------------------------
Average mid-cap
growth fund+ 11.79% 45.51% -3.14% 4.17% 8.26%
- ------------------------------------------------------------------------------
Russell Midcap Growth
Index# 15.52% 52.71% -0.21% 3.44% 9.76%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
- --------------------
Average annual
with sales charge
- --------------------
Share
class 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A -- 40.45% -13.73% 3.18% 7.93%
- ------------------------------------------------------------------------------
B -- 44.07% -13.55% 3.31% 7.73%
- ------------------------------------------------------------------------------
C -- 47.02% -12.67% 3.63% 7.75%
- ------------------------------------------------------------------------------
529A -- 40.62% -13.80% 3.13% 7.91%
- ------------------------------------------------------------------------------
529B -- 43.70% -13.62% 3.26% 7.71%
- ------------------------------------------------------------------------------
529C -- 46.92% -12.74% 3.57% 7.71%
- ------------------------------------------------------------------------------
I, R1 and R2 class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A 12.52% 49.02% -31.87% 24.05% 127.62%
- ------------------------------------------------------------------------------
B 12.13% 48.07% -33.42% 19.41% 110.65%
- ------------------------------------------------------------------------------
C 12.13% 48.02% -33.40% 19.50% 110.94%
- ------------------------------------------------------------------------------
I 12.68% 49.38% -31.34% 25.57% 131.57%
- ------------------------------------------------------------------------------
R1 12.40% 48.66% -32.04% 23.76% 127.08%
- ------------------------------------------------------------------------------
R2 12.21% 48.17% -33.37% 19.49% 110.79%
- ------------------------------------------------------------------------------
529A 12.70% 49.19% -32.04% 23.76% 127.08%
- ------------------------------------------------------------------------------
529B 12.01% 47.70% -33.58% 19.12% 110.12%
- ------------------------------------------------------------------------------
529C 12.16% 47.92% -33.55% 19.17% 110.21%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
THE RUSSELL MIDCAP GROWTH INDEX - measures the performance of U.S. mid-cap
growth stocks.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A and 529A results, including sales charge, reflect the deduction of the
maximum 5.75% sales charge. Class B and 529B results, including sales charge,
reflect the deduction of the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C and 529C results,
including sales charge, redeemed within one year from the end of the calendar
month of purchase, reflect the deduction of the 1% CDSC. Class I shares have
no sales charges and are available only to certain investors. Class R1 and R2
shares have no sales charges and are available only to certain retirement
plans. Class 529A, 529B, and 529C shares are only available in conjunction
with qualified tuition programs, such as the MFS 529 Savings Plan.
Performance for share classes offered after class A shares includes the
performance of the fund's class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences
in sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of
blended performance generally results in higher performance for share classes
with higher operating expenses than the initial share class, and lower
performance for share classes with lower operating expenses than the initial
share class.
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. Please see the prospectus and
financial statements for complete details.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and political
conditions.
These risks may increase share price volatility. Please see the prospectus for
further information regarding these and other risk considerations.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
- -----------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) - 2/29/04
- -----------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 100.5%
- -----------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------
U.S. Stocks - 94.4%
- -----------------------------------------------------------------------------------------------
Airlines - 0.7%
- -----------------------------------------------------------------------------------------------
jetBlue Airways Corp.^* 664,593 $15,817,313
- -----------------------------------------------------------------------------------------------
Apparel Manufacturers - 1.6%
- -----------------------------------------------------------------------------------------------
Coach, Inc.* 568,900 $22,545,507
- -----------------------------------------------------------------------------------------------
Reebok International Ltd. 257,100 10,235,151
- -----------------------------------------------------------------------------------------------
Timberland Co.^* 42,000 2,593,080
- -----------------------------------------------------------------------------------------------
$35,373,738
- -----------------------------------------------------------------------------------------------
Banks & Credit Companies - 1.1%
- -----------------------------------------------------------------------------------------------
Investors Financial Services Corp. 559,100 $24,617,173
- -----------------------------------------------------------------------------------------------
Biotechnology - 4.0%
- -----------------------------------------------------------------------------------------------
Biogen Idec, Inc.^* 243,700 $13,513,165
- -----------------------------------------------------------------------------------------------
Gen-Probe, Inc.* 21,200 724,828
- -----------------------------------------------------------------------------------------------
Genzyme Corp.* 449,931 22,847,496
- -----------------------------------------------------------------------------------------------
Gilead Sciences, Inc.* 521,500 28,270,515
- -----------------------------------------------------------------------------------------------
MedImmune, Inc.* 393,800 10,116,722
- -----------------------------------------------------------------------------------------------
Neurocrine Biosciences, Inc.^* 131,600 7,316,960
- -----------------------------------------------------------------------------------------------
Protein Design Labs, Inc.^* 291,600 6,998,400
- -----------------------------------------------------------------------------------------------
$89,788,086
- -----------------------------------------------------------------------------------------------
Broadcast & Cable TV - 8.5%
- -----------------------------------------------------------------------------------------------
Citadel Broadcasting Corp.* 1,606,650 $30,044,355
- -----------------------------------------------------------------------------------------------
EchoStar Communications Corp., "A"* 981,521 35,452,539
- -----------------------------------------------------------------------------------------------
Entercom Communications Corp.* 433,100 19,991,896
- -----------------------------------------------------------------------------------------------
LIN TV Corp.^* 450,600 10,052,886
- -----------------------------------------------------------------------------------------------
NTL, Inc.* 955,447 65,505,446
- -----------------------------------------------------------------------------------------------
Westwood One, Inc.* 911,900 28,177,710
- -----------------------------------------------------------------------------------------------
$189,224,832
- -----------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 3.3%
- -----------------------------------------------------------------------------------------------
Affiliated Managers Group, Inc.^* 140,100 $11,838,450
- -----------------------------------------------------------------------------------------------
Ameritrade Holding Corp.* 1,568,100 25,528,668
- -----------------------------------------------------------------------------------------------
Legg Mason, Inc.^ 373,300 35,217,122
- -----------------------------------------------------------------------------------------------
$72,584,240
- -----------------------------------------------------------------------------------------------
Business Services - 8.5%
- -----------------------------------------------------------------------------------------------
Alliance Data Systems Corp.^* 397,700 $11,911,115
- -----------------------------------------------------------------------------------------------
Ceridian Corp.* 732,400 13,864,332
- -----------------------------------------------------------------------------------------------
Corporate Executive Board Co.* 611,300 30,485,531
- -----------------------------------------------------------------------------------------------
DST Systems, Inc.^* 572,400 25,620,624
- -----------------------------------------------------------------------------------------------
Getty Images, Inc.* 691,300 35,228,648
- -----------------------------------------------------------------------------------------------
Manpower, Inc. 547,600 24,505,100
- -----------------------------------------------------------------------------------------------
Monster Worldwide, Inc.^* 1,334,450 29,357,900
- -----------------------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc. 165,310 4,736,132
- -----------------------------------------------------------------------------------------------
Paychex, Inc. 170,460 5,483,698
- -----------------------------------------------------------------------------------------------
Robert Half International, Inc.^* 428,600 9,630,642
- -----------------------------------------------------------------------------------------------
$190,823,722
- -----------------------------------------------------------------------------------------------
Chemicals - 0.5%
- -----------------------------------------------------------------------------------------------
Lyondell Chemical Co. 670,150 $11,935,371
- -----------------------------------------------------------------------------------------------
Computer Software - 5.1%
- -----------------------------------------------------------------------------------------------
Ascential Software Corp.* 431,500 $9,734,640
- -----------------------------------------------------------------------------------------------
BEA Systems, Inc.^* 907,900 12,529,020
- -----------------------------------------------------------------------------------------------
NetScreen Technologies, Inc.^* 445,800 15,803,610
- -----------------------------------------------------------------------------------------------
Network Associates, Inc.* 1,436,440 25,195,158
- -----------------------------------------------------------------------------------------------
Symantec Corp.^* 553,100 22,754,534
- -----------------------------------------------------------------------------------------------
VERITAS Software Corp.* 924,100 28,111,122
- -----------------------------------------------------------------------------------------------
$114,128,084
- -----------------------------------------------------------------------------------------------
Consumer Goods & Services - 4.5%
- -----------------------------------------------------------------------------------------------
Career Education Corp.* 1,016,200 $50,799,838
- -----------------------------------------------------------------------------------------------
Corinthian Colleges, Inc.* 643,300 38,694,495
- -----------------------------------------------------------------------------------------------
Newell Rubbermaid, Inc. 411,100 10,520,049
- -----------------------------------------------------------------------------------------------
Strayer Education, Inc. 14,900 1,619,034
- -----------------------------------------------------------------------------------------------
$101,633,416
- -----------------------------------------------------------------------------------------------
Electrical Equipment - 1.9%
- -----------------------------------------------------------------------------------------------
American Standard Cos., Inc.* 156,900 $17,095,824
- -----------------------------------------------------------------------------------------------
AMETEK, Inc. 55,900 2,775,435
- -----------------------------------------------------------------------------------------------
Rockwell Automation, Inc. 579,550 17,653,093
- -----------------------------------------------------------------------------------------------
W.W. Grainger, Inc. 122,800 5,802,300
- -----------------------------------------------------------------------------------------------
$43,326,652
- -----------------------------------------------------------------------------------------------
Electronics - 10.4%
- -----------------------------------------------------------------------------------------------
Agere Systems, Inc., "B"* 8,253,400 $30,620,114
- -----------------------------------------------------------------------------------------------
Amphenol Corp., "A"* 274,000 16,946,900
- -----------------------------------------------------------------------------------------------
Analog Devices, Inc. 371,200 18,522,880
- -----------------------------------------------------------------------------------------------
Cymer, Inc.^* 662,400 25,528,896
- -----------------------------------------------------------------------------------------------
Integrated Circuit Systems, Inc.^* 831,900 22,910,526
- -----------------------------------------------------------------------------------------------
Novellus Systems, Inc.* 679,700 21,852,355
- -----------------------------------------------------------------------------------------------
NVIDIA Corp.^* 849,200 18,894,700
- -----------------------------------------------------------------------------------------------
PMC-Sierra, Inc.^* 822,400 16,365,760
- -----------------------------------------------------------------------------------------------
Power Integrations, Inc.^* 104,800 3,089,504
- -----------------------------------------------------------------------------------------------
Skyworks Solutions, Inc.^* 1,169,427 13,191,137
- -----------------------------------------------------------------------------------------------
Vishay Intertechnology, Inc.^* 743,600 16,738,436
- -----------------------------------------------------------------------------------------------
Xilinx, Inc.* 673,900 28,330,756
- -----------------------------------------------------------------------------------------------
$232,991,964
- -----------------------------------------------------------------------------------------------
Gaming & Lodging - 1.7%
- -----------------------------------------------------------------------------------------------
Alliance Gaming Corp.^* 61,900 $1,501,694
- -----------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd.^ 666,100 29,474,925
- -----------------------------------------------------------------------------------------------
WMS Industries, Inc.^* 287,000 7,625,590
- -----------------------------------------------------------------------------------------------
$38,602,209
- -----------------------------------------------------------------------------------------------
Internet - 0.8%
- -----------------------------------------------------------------------------------------------
InterActiveCorp.^* 536,489 $17,473,447
- -----------------------------------------------------------------------------------------------
Leisure & Toys - 0.8%
- -----------------------------------------------------------------------------------------------
International Game Technology 455,000 $17,854,200
- -----------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.4%
- -----------------------------------------------------------------------------------------------
Fisher Scientific International, Inc.^* 576,600 $30,703,950
- -----------------------------------------------------------------------------------------------
Lincare Holdings, Inc.^* 193,600 6,261,024
- -----------------------------------------------------------------------------------------------
Tenet Healthcare Corp.* 1,326,500 15,944,530
- -----------------------------------------------------------------------------------------------
$52,909,504
- -----------------------------------------------------------------------------------------------
Medical Equipment - 14.7%
- -----------------------------------------------------------------------------------------------
Apogent Technologies, Inc.^* 521,500 $14,706,300
- -----------------------------------------------------------------------------------------------
Applera Corp. 575,550 13,122,540
- -----------------------------------------------------------------------------------------------
C.R. Bard, Inc. 347,900 32,838,281
- -----------------------------------------------------------------------------------------------
Cytyc Corp.* 3,362,200 55,409,056
- -----------------------------------------------------------------------------------------------
DENTSPLY International, Inc. 672,400 29,457,844
- -----------------------------------------------------------------------------------------------
Guidant Corp. 407,200 27,746,608
- -----------------------------------------------------------------------------------------------
Invitrogen Corp.* 477,500 35,191,750
- -----------------------------------------------------------------------------------------------
Kinetic Concepts, Inc.* 87,900 3,546,765
- -----------------------------------------------------------------------------------------------
Millipore Corp.* 972,300 50,899,905
- -----------------------------------------------------------------------------------------------
Thermo Electron Corp.* 1,164,300 32,681,901
- -----------------------------------------------------------------------------------------------
Thoratec Corp.^* 969,300 12,600,900
- -----------------------------------------------------------------------------------------------
Waters Corp.* 535,000 19,762,900
- -----------------------------------------------------------------------------------------------
$327,964,750
- -----------------------------------------------------------------------------------------------
Oil Services - 3.2%
- -----------------------------------------------------------------------------------------------
BJ Services Co.* 768,700 $33,277,023
- -----------------------------------------------------------------------------------------------
Cooper Cameron Corp.* 458,600 20,279,292
- -----------------------------------------------------------------------------------------------
Smith International, Inc.* 356,700 18,073,989
- -----------------------------------------------------------------------------------------------
$71,630,304
- -----------------------------------------------------------------------------------------------
Pharmaceuticals - 2.3%
- -----------------------------------------------------------------------------------------------
Allergan, Inc. 138,900 $12,159,306
- -----------------------------------------------------------------------------------------------
Medicis Pharmaceutical Corp.^ 1,009,600 39,747,952
- -----------------------------------------------------------------------------------------------
$51,907,258
- -----------------------------------------------------------------------------------------------
Printing & Publishing - 1.4%
- -----------------------------------------------------------------------------------------------
Meredith Corp. 632,200 $31,799,660
- -----------------------------------------------------------------------------------------------
Restaurants - 1.9%
- -----------------------------------------------------------------------------------------------
Cheesecake Factory, Inc.^* 489,000 $23,095,470
- -----------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. 298,500 14,444,415
- -----------------------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.* 95,000 4,623,650
- -----------------------------------------------------------------------------------------------
$42,163,535
- -----------------------------------------------------------------------------------------------
Specialty Retailers - 5.4%
- -----------------------------------------------------------------------------------------------
Circuit City Stores, Inc. 368,500 $4,119,830
- -----------------------------------------------------------------------------------------------
Hot Topic, Inc.* 156,700 4,549,001
- -----------------------------------------------------------------------------------------------
Pacific Sunwear of California, Inc.* 566,000 13,567,020
- -----------------------------------------------------------------------------------------------
PETsMART, Inc. 1,299,050 35,256,217
- -----------------------------------------------------------------------------------------------
Ross Stores, Inc. 1,016,300 32,572,415
- -----------------------------------------------------------------------------------------------
Tiffany & Co. 725,600 30,511,480
- -----------------------------------------------------------------------------------------------
$120,575,963
- -----------------------------------------------------------------------------------------------
Telecommunications - Wireless - 4.7%
- -----------------------------------------------------------------------------------------------
American Tower Corp.^* 3,414,746 $37,732,943
- -----------------------------------------------------------------------------------------------
Andrew Corp.^* 712,000 12,687,840
- -----------------------------------------------------------------------------------------------
Crown Castle International Corp.^* 2,566,700 30,928,735
- -----------------------------------------------------------------------------------------------
SpectraSite, Inc.* 663,520 24,284,832
- -----------------------------------------------------------------------------------------------
$105,634,350
- -----------------------------------------------------------------------------------------------
Telecommunications - Wireline - 3.6%
- -----------------------------------------------------------------------------------------------
CIENA Corp.* 1,570,900 $9,001,257
- -----------------------------------------------------------------------------------------------
Comverse Technology, Inc.* 339,200 6,689,024
- -----------------------------------------------------------------------------------------------
Corning, Inc.* 2,259,500 28,356,725
- -----------------------------------------------------------------------------------------------
F5 Networks, Inc.* 137,630 4,554,177
- -----------------------------------------------------------------------------------------------
Harris Corp. 285,500 13,489,875
- -----------------------------------------------------------------------------------------------
InterDigital Communications Corp.* 478,600 12,711,616
- -----------------------------------------------------------------------------------------------
Juniper Networks, Inc.* 67,600 1,748,812
- -----------------------------------------------------------------------------------------------
Openwave Systems, Inc.* 63,900 968,724
- -----------------------------------------------------------------------------------------------
Powerwave Technologies, Inc.^* 224,000 2,210,880
- -----------------------------------------------------------------------------------------------
$79,731,090
- -----------------------------------------------------------------------------------------------
Trucking - 1.4%
- -----------------------------------------------------------------------------------------------
Expeditors International of Washington, Inc. 448,900 $17,300,606
- -----------------------------------------------------------------------------------------------
Swift Transportation Co., Inc.* 608,900 13,091,350
- -----------------------------------------------------------------------------------------------
$30,391,956
- -----------------------------------------------------------------------------------------------
Total U.S. Stocks $2,110,882,817
- -----------------------------------------------------------------------------------------------
Foreign Stocks - 6.1%
- -----------------------------------------------------------------------------------------------
Bermuda - 1.5%
- -----------------------------------------------------------------------------------------------
Marvell Technology Group Ltd. (Electronics)* 746,600 $33,992,698
- -----------------------------------------------------------------------------------------------
Brazil - 0.3%
- -----------------------------------------------------------------------------------------------
Brasil Telecom Participacoes S.A. (Telephone Services) 65,900 $2,512,108
- -----------------------------------------------------------------------------------------------
Embraer-Empresa Brasileira de Aeronautica S.A.
(Aerospace)^ 97,600 2,946,544
- -----------------------------------------------------------------------------------------------
$5,458,652
- -----------------------------------------------------------------------------------------------
Canada - 2.0%
- -----------------------------------------------------------------------------------------------
Aber Diamond (Metals & Mining)* 117,000 $3,949,470
- -----------------------------------------------------------------------------------------------
Aber Diamond Corp. (Metals & Mining)* 105,400 3,557,899
- -----------------------------------------------------------------------------------------------
CoolBrands International, Inc. (Food & Non-Alcoholic
Beverages)* 1,388,200 26,247,566
- -----------------------------------------------------------------------------------------------
Four Seasons Hotels, Inc. (Gaming & Lodging)^ 213,100 11,507,400
- -----------------------------------------------------------------------------------------------
$45,262,335
- -----------------------------------------------------------------------------------------------
Cayman Islands - 0.8%
- -----------------------------------------------------------------------------------------------
Garmin Ltd. (Telecommunications - Wireline)^ 229,300 $10,511,112
- -----------------------------------------------------------------------------------------------
Seagate Technology LLC (Personal Computers &
Peripherals)^ 355,000 6,141,500
- -----------------------------------------------------------------------------------------------
$16,652,612
- -----------------------------------------------------------------------------------------------
United Kingdom - 1.5%
- -----------------------------------------------------------------------------------------------
Amdocs Ltd. (Computer Software)* 1,232,300 $34,356,524
- -----------------------------------------------------------------------------------------------
Total Foreign Stocks $135,722,821
- -----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,854,072,877) $2,246,605,638
- -----------------------------------------------------------------------------------------------
Short-Term Obligations - 1.2%
- -----------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------
Citicorp, due 3/11/04 $4,000 $3,998,856
- -----------------------------------------------------------------------------------------------
General Electric Capital Corp., due 3/01/04 12,833 12,833,000
- -----------------------------------------------------------------------------------------------
General Motors Acceptance Corp., due 3/04/04 - 3/29/04 10,300 10,295,480
- -----------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $27,127,336
- -----------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 11.3%
- -----------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 252,806,206 $252,806,206
- -----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,134,006,419) $2,526,539,180
- -----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (13.0)% (290,374,532)
- -----------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,236,164,648
- -----------------------------------------------------------------------------------------------
* Non-income producing security.
^ All or a portion of this security is on loan.
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- ---------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities
composing the total value of your fund.
AT 2/29/04
ASSETS
Investments, at value, including $246,523,364 of
securities on loan (identified cost, $2,134,006,419) $2,526,539,180
- ---------------------------------------------------------------------------------------------------
Cash 670
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 39,804,489
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 2,586,522
- ---------------------------------------------------------------------------------------------------
Interest and dividends receivable 814,884
- ---------------------------------------------------------------------------------------------------
Other assets 1,585
- ---------------------------------------------------------------------------------------------------
Total assets $2,569,747,330
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $21,430,613
- ---------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 58,431,320
- ---------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 252,806,206
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 139,587
- ---------------------------------------------------------------------------------------------------
Shareholder servicing costs 177,719
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 86,405
- ---------------------------------------------------------------------------------------------------
Administrative fee 3,139
- ---------------------------------------------------------------------------------------------------
Program manager fee 11
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 507,682
- ---------------------------------------------------------------------------------------------------
Total liabilities $333,582,682
- ---------------------------------------------------------------------------------------------------
Net assets $2,236,164,648
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $3,568,110,420
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 392,536,898
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (1,711,983,200)
- ---------------------------------------------------------------------------------------------------
Accumulated net investment loss (12,499,470)
- ---------------------------------------------------------------------------------------------------
Net assets $2,236,164,648
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 271,222,153
- ---------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $1,297,776,739
- ---------------------------------------------------------------------------------------------------
Shares outstanding 155,248,481
- ---------------------------------------------------------------------------------------------------
Net asset value per share $8.36
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$8.36) $8.87
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $541,516,811
- ---------------------------------------------------------------------------------------------------
Shares outstanding 67,364,225
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $8.04
- ---------------------------------------------------------------------------------------------------
Class C shares
Net assets $180,899,075
- ---------------------------------------------------------------------------------------------------
Shares outstanding 23,023,808
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $7.86
- ---------------------------------------------------------------------------------------------------
Class I shares
Net assets $211,958,175
- ---------------------------------------------------------------------------------------------------
Shares outstanding 25,102,511
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $8.44
- ---------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $3,480,617
- ---------------------------------------------------------------------------------------------------
Shares outstanding 417,460
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $8.34
- ---------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $5,504
- ---------------------------------------------------------------------------------------------------
Shares outstanding 661
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $8.33
- ---------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class 529A shares
Net assets $262,293
- ---------------------------------------------------------------------------------------------------
Shares outstanding 31,442
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per share $8.34
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$8.34) $8.85
- ---------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $105,140
- ---------------------------------------------------------------------------------------------------
Shares outstanding 13,117
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $8.02
- ---------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $160,294
- ---------------------------------------------------------------------------------------------------
Shares outstanding 20,448
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $7.84
- ---------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A and Class 529A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class
529B, and 529C shares.
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
- ---------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and paid in expenses. It
also describes any gains and/or losses generated by fund operations.
FOR SIX MONTHS ENDED 2/29/04
NET INVESTMENT INCOME (LOSS)
Income
- ---------------------------------------------------------------------------------------------------
Dividends $2,725,335
- ---------------------------------------------------------------------------------------------------
Interest 347,459
- ---------------------------------------------------------------------------------------------------
Income on securities loaned 243,713
- ---------------------------------------------------------------------------------------------------
Foreign taxes withheld (8,625)
- ---------------------------------------------------------------------------------------------------
Total investment income $3,307,882
- ---------------------------------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------------------------------
Management fee $7,782,171
- ---------------------------------------------------------------------------------------------------
Trustees' compensation 24,280
- ---------------------------------------------------------------------------------------------------
Shareholder servicing costs 2,374,966
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 1,540,063
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 2,556,496
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 873,448
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 6,242
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class R2) 8
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 309
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 380
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 615
- ---------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 221
- ---------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 95
- ---------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 154
- ---------------------------------------------------------------------------------------------------
Administrative service fee (Class R2) 4
- ---------------------------------------------------------------------------------------------------
Administrative fee 62,299
- ---------------------------------------------------------------------------------------------------
Custodian fee 233,566
- ---------------------------------------------------------------------------------------------------
Printing 156,296
- ---------------------------------------------------------------------------------------------------
Postage 145,207
- ---------------------------------------------------------------------------------------------------
Auditing fees 18,969
- ---------------------------------------------------------------------------------------------------
Legal fees 3,470
- ---------------------------------------------------------------------------------------------------
Miscellaneous 10,125
- ---------------------------------------------------------------------------------------------------
Total expenses $15,789,384
- ---------------------------------------------------------------------------------------------------
Fees paid indirectly (72,290)
- ---------------------------------------------------------------------------------------------------
Net expenses $15,717,094
- ---------------------------------------------------------------------------------------------------
Net investment loss $(12,409,212)
- ---------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (identified cost basis)
- ---------------------------------------------------------------------------------------------------
Investment transactions $185,444,592
- ---------------------------------------------------------------------------------------------------
Foreign currency transactions 58,320
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
transactions $185,502,912
- ---------------------------------------------------------------------------------------------------
Change in unrealized appreciation
- ---------------------------------------------------------------------------------------------------
Investments $76,963,850
- ---------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies 3,618
- ---------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation $76,967,468
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency $262,470,380
- ---------------------------------------------------------------------------------------------------
Increase in net assets from operations $250,061,168
- ---------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting from operations,
any distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/29/04 8/31/03
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $(12,409,212) $(16,213,770)
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 185,502,912 (190,010,373)
- --------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign
currency translation 76,967,468 606,619,785
- ------------------------------------------------------- ------------- ------------
Increase in net assets from operations $250,061,168 $400,395,642
- ------------------------------------------------------- ------------- ------------
Net increase (decrease) in net assets from fund
share transactions $21,722,899 $(42,284,399)
- ------------------------------------------------------- ------------- ------------
Total increase in net assets $271,784,067 $358,111,243
- ------------------------------------------------------- ------------- ------------
NET ASSETS
At beginning of period $1,964,380,581 $1,606,269,338
- --------------------------------------------------------------------------------------------------
At end of period (including accumulated net
investment loss of $12,499,470 and $90,258,
respectively) $2,236,164,648 $1,964,380,581
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or, if shorter, the period of the fund's operation). Certain information reflects financial
results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or
lost) on an investment in the fund (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 8/31
ENDED ---------------------------------------------------------------------------
CLASS A 2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning
of period $7.43 $5.84 $10.50 $19.67 $11.34 $7.71
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment loss $(0.04) $(0.05) $(0.08) $(0.07) $(0.10) $(0.07)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.97 1.64 (4.42) (6.35) 10.11 5.04
- ------------------------------- ------- ------ ------ ------ ------ ------
Total from investment
operations $0.93 $1.59 $(4.50) $(6.42) $10.01 $4.97
- ------------------------------- ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net realized gain
on investments and
foreign currency
transactions $-- $-- $(0.15) $(1.90) $(1.68) $(1.34)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on
investments and foreign
currency transactions -- -- -- (0.85) -- --
- ------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- (0.01) -- -- --
- ------------------------------- ------- ------ ------ ------ ------ ------
Total distributions
declared to shareholders $-- $-- $(0.16) $(2.75) $(1.68) $(1.34)
- ------------------------------- ------- ------ ------ ------ ------ ------
Net asset value, end of
period $8.36 $7.43 $5.84 $10.50 $19.67 $11.34
- ------------------------------- ------- ------ ------ ------ ------ ------
Total return (%)(+) 12.52++ 27.23 (43.48) (35.42) 94.75 68.83
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 8/31
ENDED ----------------------------------------------------------------------------
CLASS A (CONTINUED) 2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.28+ 1.34 1.39 1.26 1.24 1.32
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.96)+ (0.76) (0.87) (0.50) (0.61) (0.69)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 47 120 147 109 132 158
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of
period
(000 Omitted) $1,297,777 $1,182,259 $946,866 $1,036,376 $526,748 $83,238
- ------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 8/31
ENDED -------------------------------------------------------------------------
CLASS B 2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of
period $7.17 $5.68 $10.22 $19.24 $11.16 $7.60
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment loss $(0.06) $(0.09) $(0.14) $(0.17) $(0.22) $(0.14)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) on
investments and foreign
currency 0.93 1.58 (4.32) (6.19) 9.92 4.97
- ----------------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.87 $1.49 $(4.46) $(6.36) $9.70 $4.83
- ----------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net realized gain on
investments and foreign
currency transactions $-- $-- $(0.07) $(1.84) $(1.62) $(1.27)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments and
foreign currency
transactions -- -- -- (0.82) -- --
- ----------------------------------- ------ ------ ------ ------ ------ ------
From paid-in capital -- -- (0.01) -- -- --
- ----------------------------------- ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $-- $-- $(0.08) $(2.66) $(1.62) $(1.27)
- ----------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $8.04 $7.17 $5.68 $10.22 $19.24 $11.16
- ----------------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 12.13++ 26.23 (43.94) (35.85) 93.37 67.41
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 2.03+ 2.09 2.14 2.01 1.99 2.07
- -------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.71)+ (1.51) (1.60) (1.25) (1.36) (1.44)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 47 120 147 109 132 158
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $541,517 $498,021 $450,803 $781,652 $605,584 $111,355
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 8/31
ENDED ------------------------------------------------------------------------
CLASS C 2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning
of period $7.01 $5.55 $10.00 $18.92 $11.01 $7.53
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment loss $(0.06) $(0.09) $(0.14) $(0.16) $(0.22) $(0.14)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) on
investments and foreign
currency 0.91 1.55 (4.22) (6.08) 9.77 4.91
- ---------------------------------- -------- ------ ------ ------ ------ ------
Total from investment
operations $0.85 $1.46 $(4.36) $(6.24) $9.55 $4.77
- ---------------------------------- -------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net realized gain on
investments and foreign
currency transactions $-- $-- $(0.08) $(1.85) $(1.64) $(1.29)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain
on investments and foreign
currency transactions -- -- -- (0.83) -- --
- ---------------------------------- -------- ------ ------ ------ ------ ------
From paid-in capital -- -- (0.01) -- -- --
- ---------------------------------- -------- ------ ------ ------ ------ ------
Total distributions $-- $-- $(0.09) $(2.68) $(1.64) $(1.29)
- ---------------------------------- -------- ------ ------ ------ ------ ------
Net asset value, end of period $7.86 $7.01 $5.55 $10.00 $18.92 $11.01
- ---------------------------------- -------- ------ ------ ------ ------ ------
Total return (%) 12.13++ 26.31 (43.94) (35.87) 93.37 67.33
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 2.03+ 2.09 2.14 2.01 1.99 2.07
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.71)+ (1.51) (1.60) (1.25) (1.36) (1.44)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 47 120 147 109 132 158
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $180,899 $172,466 $176,786 $301,405 $178,008 $18,097
- ------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 8/31
ENDED --------------------------------------------------------------------
CLASS I 2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning
of period $7.49 $5.87 $10.55 $19.73 $11.37 $7.73
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment loss $(0.03) $(0.03) $(0.05) $(0.03) $(0.07) $(0.04)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.98 1.65 (4.46) (6.37) 10.12 5.04
- -------------------------------------- -------- ------ ------ ------ ------ ------
Total from investment operations $0.95 $1.62 $(4.51) $(6.40) $10.05 $5.00
- -------------------------------------- -------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net realized gain on
investments and foreign
currency transactions $-- $-- $(0.16) $(1.92) $(1.69) $(1.36)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain
on investments and foreign
currency transactions -- -- -- (0.86) -- --
- ------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- (0.01) -- -- --
- -------------------------------------- -------- ------ ------ ------ ------ ------
Total distributions $-- $-- $(0.17) $(2.78) $(1.69) $(1.36)
- -------------------------------------- -------- ------ ------ ------ ------ ------
Net asset value, end of period $8.44 $7.49 $5.87 $10.55 $19.73 $11.37
- -------------------------------------- -------- ------ ------ ------ ------ ------
Total return (%) 12.68++ 27.60 (43.38) (35.23) 95.21 69.03
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.03+ 1.11 1.14 1.01 0.99 1.07
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.69)+ (0.53) (0.63) (0.26) (0.36) (0.44)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 47 120 147 109 132 158
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $211,958 $109,332 $31,798 $30,490 $23,539 $1,841
- ------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS PERIOD
ENDED ENDED
CLASS R1 2/29/04 8/31/03*
(UNAUDITED)
Net asset value, beginning of period $7.42 $5.66
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss $(0.05) $(0.05)
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 0.97 1.81
- ---------------------------------------------------------------------- ------- ------
Total from investment operations $0.92 $1.76
- ---------------------------------------------------------------------- ------- ------
Net asset value, end of period $8.34 $7.42
- ---------------------------------------------------------------------- ------- ------
Total return (%) 12.40++ 31.10++
- --------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Expenses## 1.53+ 1.67+
- --------------------------------------------------------------------------------------------------------
Net investment loss (1.19)+ (1.16)+
- --------------------------------------------------------------------------------------------------------
Portfolio turnover 47 120
- --------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $3,481 $2,039
- --------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through August 31, 2003.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
2/29/04*
CLASS R2 (UNAUDITED)
Net asset value, beginning of period $7.61
- -----------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss $(0.04)
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 0.76
- ----------------------------------------------------------------- ---------
Total from investment operations $0.72
- ----------------------------------------------------------------- ---------
Net asset value, end of period $8.33
- ----------------------------------------------------------------- ---------
Total return (%) 9.46++
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 1.72+
- -----------------------------------------------------------------------------
Net investment loss (1.38)+
- -----------------------------------------------------------------------------
Portfolio turnover 47
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $6
- -----------------------------------------------------------------------------
* For the period from the inception of Class R2 shares, October 31, 2003,
through February 29, 2004.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
2/29/04 8/31/03 8/31/02*
CLASS 529A (UNAUDITED)
Net asset value, beginning of period $7.40 $5.83 $5.84
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss $(0.05) $(0.07) $(0.00)+++
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 0.99 1.64 (0.01)
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $0.94 $1.57 $(0.01)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.34 $7.40 $5.83
- ------------------------------------------------------- ----------- ------ ------
Total return (%)(+) 12.70++ 26.93 (1.17)++
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.62+ 1.73 1.74+
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (1.28)+ (1.18) (1.22)+
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover 47 120 147
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $262 $123 $5
- -----------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529A shares, July 31, 2002, through August 31, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $(0.01).
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class 529A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
2/29/04 8/31/03 8/31/02*
CLASS 529B (UNAUDITED)
Net asset value, beginning of period $7.16 $5.68 $5.69
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss $(0.07) $(0.11) $(0.01)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 0.93 1.59 (0.00)+++
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $0.86 $1.48 $(0.01)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.02 $7.16 $5.68
- ------------------------------------------------------- ----------- ------ ------
Total return (%) 12.01++ 26.06 (0.18)++
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 2.27+ 2.36 2.39+
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (1.94)+ (1.78) (1.85)+
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover 47 120 147
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $105 $55 $5
- -----------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529B shares, July 31, 2002, through August 31, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $(0.01).
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
2/29/04 8/31/03 8/31/02*
CLASS 529C (UNAUDITED)
Net asset value, beginning of period $6.99 $5.55 $5.56
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss $(0.07) $(0.10) $(0.01)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 0.92 1.54 (0.00)+++
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $0.85 $1.44 $(0.01)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.84 $6.99 $5.55
- ------------------------------------------------------- ----------- ------ ------
Total return (%) 12.16++ 25.95 (1.18)++
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 2.27+ 2.36 2.39+
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (1.93)+ (1.78) (1.85)+
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover 47 120 147
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $160 $86 $5
- -----------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529C shares, July 31, 2002, through August 31, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $(0.01).
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Mid Cap Growth Fund (the fund) is a diversified series of MFS Series Trust
IV (the trust). The trust is organized as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The fund can invest in foreign securities.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
INVESTMENT VALUATIONS - The fund uses independent pricing services approved by
the Board of Trustees wherever possible to value its portfolio securities.
Portfolio securities are valued at current market prices where current market
prices are readily available, or the fund may fair value portfolio securities
under the direction of the Board of Trustees when a determination is made that
current market prices are not readily available. Equity securities in the
fund's portfolio for which market quotations are available are valued at the
last sale or official closing price as reported by an independent pricing
service on the primary market or exchange on which they are primarily traded,
or at the last quoted bid price for securities in which there were no sales
during the day. Equity securities traded over the counter are valued at the
last sales price traded each day as reported by an independent pricing
service, or to the extent there are no sales reported, such securities are
valued on the basis of quotations obtained from brokers and dealers. Equity
securities for which it is determined that current market prices are not
readily available will be fair valued under the direction of the Board of
Trustees. The fund may also fair value foreign equity securities in cases
where closing market prices are not readily available or are deemed not
reflective of readily available market prices. For example, significant events
(such as movement in the U.S. securities market, or other regional and local
developments) may occur between the time that foreign markets close (where the
security is principally traded) and the time that the fund calculates its net
asset value (generally, the close of the NYSE) that may impact the value of
securities traded in these foreign markets. In these cases, the fund may
utilize information from an external vendor or other sources to adjust closing
market prices of foreign equity securities to reflect what it believes to be
the fair value of the securities as of the fund's valuation time. Because the
frequency of significant events is not predictable, fair valuation of foreign
equity securities may occur on a frequent basis. Short-term obligations with a
remaining maturity in excess of 60 days will be valued upon dealer-supplied
valuations. All other short-term obligations in the fund's portfolio are
valued at amortized cost, which constitutes market value as determined by the
Board of Trustees. Money market mutual funds are valued at net asset value.
Investment valuations, other assets, and liabilities initially expressed in
foreign currencies are converted each business day into U.S. dollars based
upon current exchange rates.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The
fund monitors, on a daily basis, the value of the collateral to ensure that
its value, including accrued interest, is greater than amounts owed to the
fund under each such repurchase agreement. The fund, along with other
affiliated entities of Massachusetts Financial Services Company (MFS), may
utilize a joint trading account for the purpose of entering into one or more
repurchase agreements.
FOREIGN CURRENCY TRANSLATION - Purchases and sales of foreign investments,
income, and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions. Gains
and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized gains
and losses on investments. Gains and losses attributable to foreign exchange
rate movements on income and expenses are recorded for financial statement
purposes as foreign currency transaction gains and losses. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed.
SECURITY LOANS - State Street Bank and Trust Company ("State Street") and
J.P. Morgan Chase and Co. ("Chase"), as lending agents, may loan the
securities of the fund to certain qualified institutions (the "Borrowers")
approved by the fund. The loans are collateralized at all times by cash and/or
U.S. Treasury securities in an amount at least equal to the market value of
the securities loaned. State Street and Chase provide the fund with
indemnification against Borrower default. The fund bears the risk of loss with
respect to the investment of cash collateral. On loans collateralized by cash,
the cash collateral is invested in a money market fund or short-term
securities. A portion of the income generated upon investment of the
collateral is remitted to the Borrowers, and the remainder is allocated
between the fund and the lending agents. On loans collateralized by U.S.
Treasury securities, a fee is received from the Borrower, and is allocated
between the fund and the lending agents. The dividend and interest income
earned on the securities loaned is accounted for in the same manner as other
dividend and interest income.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States
of America. All discount is accreted for tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
FEES PAID INDIRECTLY - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. During the six months ended February 29, 2004, the fund's custodian fees
were reduced by $7,296 under this arrangement. The fund has entered into a
commission recapture agreement under which certain brokers will credit the fund
a portion of the commissions generated, to offset certain expenses of the fund.
For the six months ended February 29, 2004, the fund's miscellaneous expenses
were reduced by $64,994 under this agreement. These amounts are shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. Distributions to
shareholders are recorded on the ex-dividend date. The fund distinguishes
between distributions on a tax basis and a financial reporting basis and only
distributions in excess of tax basis earnings and profits are reported in the
financial statements as distributions from paid-in capital. Differences in the
recognition or classification of income between the financial statements and
tax earnings and profits, which result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess of net
investment income or net realized gains. Common types of book and tax
differences that could occur include differences in accounting for currency
transactions and passive foreign investment companies.
The tax character of distributions declared for the years ended
August 31, 2003 and August 31, 2002 was as follows:
8/31/03* 8/31/02
Distributions declared from
- -------------------------------------------------------------------------------
Ordinary income $-- $29,844,255
- -------------------------------------------------------------------------------
Tax return of capital -- $1,957,586
- -------------------------------------------------------------------------------
Long-term capital gain -- 5,313
- -------------------------------------------------------------------------------
Total distributions declared $-- $31,807,154
- -------------------------------------------------------------------------------
* The fund made no distributions for the fiscal year ended August 31, 2003.
As of August 31, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Capital loss carryforward $(1,858,981,945)
- ---------------------------------------------------------------------------
Unrealized appreciation 304,267,437
- ---------------------------------------------------------------------------
Post-October capital loss deferral (27,202,174)
- ---------------------------------------------------------------------------
Other temporary differences (90,258)
- ---------------------------------------------------------------------------
Post-October capital loss deferrals represent losses realized during the
current fiscal year, but recognized for tax purposes in the next fiscal year.
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on August 31, 2010, $(71,932,545) and
August 31, 2011 $(1,787,049,400).
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - The fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B and Class
529B shares will convert to Class A and Class 529A shares, respectively
approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with MFS to
provide overall investment advisory and administrative services, and general
office facilities. The management fee is computed daily and paid monthly at an
annual rate of 0.75% of the fund's average daily net assets.
The fund pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the fund, all of whom receive remuneration for their services to the fund from
MFS. Certain officers and Trustees of the fund are officers or directors of
MFS, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
The fund has an unfunded, defined benefit plan for retired Trustees and an
unfunded retirement benefit deferral plan for current Trustees. Included in
Trustees' compensation is a net increase of $7,607 as a result of the change
in the fund's pension liability for current Trustees and a pension expense of
$1,465 for retired Independent Trustees for the six months ended February 29,
2004.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS an administrative fee
up to the following annual percentage rates of the fund's average daily
net assets:
First $2 billion 0.0175%
---------------------------------------------------------
Next $2.5 billion 0.0130%
---------------------------------------------------------
Next $2.5 billion 0.0005%
---------------------------------------------------------
In excess of $7 billion 0.0000%
---------------------------------------------------------
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain administrative
services with respect to Class R2 shares. These services include various
administrative, recordkeeping, and communication/educational services with
respect to the retirement plans which invest in Class R2 shares, and may be
provided directly by MFS or by a third party. The fund pays an annual 0.25%
administrative service fee solely from the assets of Class R2 shares to MFS
for the provision of these services.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor,
received $81,513 and $682 for the six months ended February 29, 2004, as its
portion of the sales charge on sales of Class A and Class 529A shares of the
fund, respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R1, Class R2, Class 529A, Class 529B and Class 529C shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
The fund's distribution plan provides that the fund will pay MFD an annual
percentage of its average daily net assets attributable to certain share
classes in order that MFD may pay expenses on behalf of the fund related to
the distribution and servicing of its shares. These expenses include a service
fee paid to each securities dealer that enters into a sales agreement with MFD
based on the average daily net assets of accounts attributable to such
dealers.
These fees are calculated based on each class' average daily net assets. The
maximum distribution and service fees for each class of shares are as follows:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.50%
- ------------------------------------------------------------------------------------------------------------------
CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.25% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.50% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the six months ended
February 29, 2004, amounted to:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Service Fee Retained
by MFD $77,264 $1,976 $2,023 $-- $--
- --------------------------------------------------------------------------------
CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained
by MFD $100 $6 $26
- ------------------------------------------------------------------------------
Fees incurred under the distribution plan during the six months ended February 29, 2004, were as follows:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Effective Annual
Percentage Rates 0.25% 1.00% 1.00% 0.50% 0.50%
- --------------------------------------------------------------------------------
CLASS 529A CLASS 529B CLASS 529C
Effective Annual
Percentage Rates 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will be implemented on
such a date as the Trustees of the Trust may determine. Payment of the 0.15%
per annum portion of the Class 529A distribution fee that is not currently
being charged will be implemented on such a date as the Trustees of the Trust
may determine.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within, for
Class A shares, 12 months following the purchase, and, for Class C and 529C
shares, the first year from the end of the calendar month of purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B and Class 529B shares in the event of a shareholder redemption within
six years from the end of the calendar month of purchase. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the six months ended February 29, 2004, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred
Sales Charges Imposed $46,748 $582,186 $6,077 $-- $--
- --------------------------------------------------------------------------------
The fund has and may from time to time enter into contracts with program
managers and other parties which administer the tuition programs through which
an investment in the fund's 529 share classes is made. The fund has entered
into an agreement with MFD pursuant to which MFD receives an annual fee of up
to 0.35% from the fund based solely upon the value of the fund's 529 share
classes attributable to tuition programs to which MFD or a third party which
contracts with MFD provides administrative services. The current fee has been
established at 0.25% annually of average net assets of the fund's 529 share
classes attributable to such programs. The fee may only be increased with the
approval of the Board of Trustees that oversees the fund. The services
provided by MFD or a third party with which MFD contracts include
recordkeeping and tax reporting and account services, as well as services
designed to maintain the program's compliance with the Internal Revenue Code
and other regulatory requirements.
SHAREHOLDER SERVICING AGENT - Included in shareholder servicing costs is a fee
paid to MFSC, a wholly owned subsidiary of MFS, for its services as
shareholder servicing agent. The fee is calculated as a percentage of the
fund's average daily net assets at an annual rate of 0.11%, which amounted to
$1,141,385 for the six months ended February 29, 2004. Also included in
shareholder servicing costs are out-of-pocket expenses, paid to MFSC, which
amounted to $582,600 for the six months ended February 29, 2004, as well as
other expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,018,422,531 and $959,169,149 respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $2,145,308,412
----------------------------------------------------------------
Gross unrealized appreciation $406,037,032
----------------------------------------------------------------
Gross unrealized depreciation (24,806,264)
----------------------------------------------------------------
Net unrealized appreciation $381,230,768
----------------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
Six months ended Year ended
2/29/04 8/31/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 40,613,020 $313,432,631 181,954,489 $1,088,392,317
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (44,512,305) (347,017,796) (185,042,807) (1,097,881,697)
- -----------------------------------------------------------------------------------------------------------
Net decrease (3,899,285) $(33,585,165) (3,088,318) $(9,489,380)
- -----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 6,543,056 $48,590,541 15,210,068 $89,253,437
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (8,638,496) (64,858,286) (25,169,116) (142,893,641)
- -----------------------------------------------------------------------------------------------------------
Net decrease (2,095,440) $(16,267,745) (9,959,048) $(53,640,204)
- -----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 2,402,316 $17,339,499 4,962,908 $28,338,955
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (3,988,059) (29,188,220) (12,223,323) (67,806,795)
- -----------------------------------------------------------------------------------------------------------
Net decrease (1,585,743) $(11,848,721) (7,260,415) $(39,467,840)
- -----------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 11,281,902 $88,035,878 13,641,327 $84,546,970
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (767,859) (5,961,675) (4,467,797) (26,019,696)
- -----------------------------------------------------------------------------------------------------------
Net increase 10,514,043 $82,074,203 9,173,530 $58,527,274
- -----------------------------------------------------------------------------------------------------------
Six months ended Period ended
2/29/04 8/31/03*
SHARES AMOUNT SHARES AMOUNT
CLASS R1 SHARES
Shares sold 243,454 $1,901,265 622,456 $3,714,458
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (100,602) (770,760) (347,848) (2,127,496)
- -----------------------------------------------------------------------------------------------------------
Net increase 142,852 $1,130,505 274,608 $1,586,962
- -----------------------------------------------------------------------------------------------------------
Period ended
2/29/04**
SHARES AMOUNT
CLASS R2 SHARES
Shares sold 661 $5,020
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Net increase 661 $5,020
- -----------------------------------------------------------------------
Six months ended Year ended
2/29/04 8/31/03
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 15,806 $123,586 15,744 $95,696
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Shares reacquired (947) (7,341) (39) (227)
- -----------------------------------------------------------------------------------------------------------
Net increase 14,859 $116,245 15,705 $95,469
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CLASS 529B SHARES
Shares sold 5,674 $42,026 6,850 $39,495
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Shares reacquired (290) (2,128) (54) (302)
- -----------------------------------------------------------------------------------------------------------
Net increase 5,384 $39,898 6,796 $39,193
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CLASS 529C SHARES
Shares sold 8,294 $59,881 11,441 $64,339
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Shares reacquired (172) (1,222) (39) (212)
- -----------------------------------------------------------------------------------------------------------
Net increase 8,122 $58,659 11,402 $64,127
- -----------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through August 31, 2003.
** For the period from the inception of Class R2 shares, October 31, 2003, through February 29, 2004.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate plus 0.50%. In addition, a commitment fee, based on the average
daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The commitment fee
allocated to the fund for the six months ended February 29, 2004, was $6,823.
The fund had no borrowings during the period.
(7) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding regarding
disclosure of brokerage allocation practices in connection with fund sales.
Under the terms of the settlement, in which MFS neither admitted nor denied
any wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50
million in penalty to certain MFS funds, pursuant to a plan to be approved by
an independent distribution consultant. The agreement with the SEC is
reflected in an order of the SEC. The settlement order states that MFS failed
to adequately disclose to the Boards of Trustees and to shareholders of the
MFS funds the specifics of its preferred arrangements with certain brokerage
firms selling MFS fund shares. The settlement order states that MFS had in
place policies designed to obtain best execution of all fund trades.
As part of the settlement, MFS also agreed to retain an independent compliance
consultant to review the completeness of its disclosure to fund trustees and
to fund shareholders of strategic alliances between MFS or its affiliates and
broker-dealers and other financial advisers who support the sale of fund
shares. The brokerage allocation practices which were the subject of this
proceeding were discontinued by MFS in November 2003.
In addition, in February, 2004, MFS reached agreement with the Securities and
Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the
Bureau of Securities Regulation of the State of New Hampshire ("NH") to settle
administrative proceedings alleging false and misleading information in certain
MFS fund prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS funds was false and misleading because, although the prospectuses
for those funds in the regulators' view indicated that the funds prohibited
market timing, MFS did not limit trading activity in 11 domestic large cap
stock, high grade bond and money market funds. MFS' former Chief Executive
Officer, John W. Ballen, and former President, Kevin R. Parke, have also
reached agreement with the SEC (Messrs. Ballen and Parke resigned their
director and officer positions with MFS on February 13, 2004). Under the terms
of the February Settlements, MFS and the executives neither admit nor deny
wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain of the MFS funds
offered to retail investors ("Retail Funds"), which has been funded by MFS and
of which $50 million is characterized as a penalty. This pool will be
distributed in accordance with a methodology developed by an independent
distribution consultant in consultation with MFS and the Boards of Trustees of
the Retail Funds, and acceptable to the SEC. MFS has further agreed with the
NYAG to reduce its management fees in the aggregate amount of approximately $25
million annually over the next five years, and not to increase certain
management fees during this period. MFS has also paid an administrative fine to
NH in the amount of $1 million, which will be used for investor education
purposes (NH will retain $250,000 and $750,000 will be contributed to the North
American Securities Administrators Association's Investor Protection Trust). In
addition, MFS and the Retail Funds will adopt certain governance changes.
Messrs. Ballen and Parke have agreed to temporary suspensions from association
with any registered investment company or investment adviser, will pay
approximately $315,000 each to the SEC, and resigned their positions as
trustees of all MFS funds, and Mr. Ballen resigned his position as President
of all MFS funds, effective February 6, 2004. Messrs. Ballen and Parke will
not be returning to MFS or the MFS funds after their suspensions.
Since December 2003, MFS, Sun Life Financial Inc., various MFS funds, the
Trustees of these MFS funds, and certain officers of MFS have been named as
defendants in multiple lawsuits filed in federal and state courts. The
lawsuits variously have been commenced as class actions or individual actions
on behalf of investors who purchased, held or redeemed shares of the funds
during specified periods, as class actions on behalf of participants in
certain retirement plan accounts, or as derivative actions on behalf of the
MFS funds. The lawsuits generally allege that some or all of the defendants
(i) permitted or acquiesced in market timing and/or late trading in some of
the MFS funds, inadequately disclosed MFS' internal policies concerning market
timing and such matters, and received excessive compensation as fiduciaries to
the MFS fund, or (ii) permitted or acquiesced in the improper use of fund
assets by MFS to support the distribution of fund shares and inadequately
disclosed MFS' use of fund assets in this manner. The actions assert that some
or all of the defendants violated the federal securities laws, including the
Securities Act of 1933 and the Securities Exchange Act of 1934, the Investment
Company Act of 1940 and the Investment Advisers Act of 1940, the Employee
Retirement Income Security Act of 1974, as well as fiduciary duties and other
violations of common law. The lawsuits seek unspecified compensatory damages.
Insofar as any of the actions is appropriately brought derivatively on behalf
of any of the MFS funds, any recovery will inure to the benefit of the funds.
The defendants are reviewing the allegations of the multiple complaints and
will respond appropriately. Additional lawsuits based on similar allegations
may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS
has established a restitution pool in the amount of $225 million to compensate
certain shareholders of the Retail Funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the
funds, and will pay $50 million to compensate certain MFS funds based upon the
amount of brokerage commissions allocated in recognition of fund sales. It is
not clear whether these amounts will be sufficient to compensate shareholders
for all of the damage they allegedly sustained, whether certain shareholders
or putative class members may have additional claims to compensation, or
whether the damages that may be awarded in any of the actions will exceed
these amounts. In the event the MFS funds incur any losses, costs or expenses
in connection with such lawsuits, the Boards of Trustees of the affected funds
may pursue claims on behalf of such funds against any party that may have
liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments will
not result in increased fund redemptions, reduced sales of fund shares, or
other adverse consequences to the funds.
- --------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust IV,
of which the fund is a series, including their principal occupations, which, unless specific dates are shown,
are of more than five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other directorships(1)
INTERESTED TRUSTEES
JOHN W. BALLEN(2)(5) (born 09/12/59) DAVID H. GUNNING(4) (born 05/30/42)
Trustee and President Trustee
Massachusetts Financial Services Company, Chief Cleveland-Cliffs Inc. (mining products and service
Executive Officer and Director (until February provider), Vice Chairman/Director (since April
2004) 2001); Encinitos Ventures (private investment
company), Principal (1997 to April 2001); Lincoln
ROBERT J. MANNING(2)(7) (born 10/20/63) Electric Holdings, Inc. (welding equipment
Trustee manufacturer), Director; Southwest Gas Corporation
Massachusetts Financial Services Company, Chief (natural gas distribution company), Director
Executive Officer, President, Chief Investment
Officer and Director WILLIAM R. GUTOW (born 09/27/41)
Trustee
KEVIN R. PARKE(2)(5) (born 12/14/59) Private investor and real estate consultant;
Trustee Capitol Entertainment Management Company (video
Massachusetts Financial Services Company, franchise), Vice Chairman
President, Chief Investment Officer and Director
(until February 2004) AMY B. LANE(4) (born 02/08/53)
Trustee
ROBERT C. POZEN(2)(7) (born 08/08/46) Retired; Merrill Lynch & Co., Inc., Managing
Trustee Director, Investment Banking Group (1997 to
February 2001); Borders Group, Inc. (book and
Massachusetts Financial Services Company, Chairman music retailer), Director; Federal Realty
(since February 2004); Harvard Law School Investment Trust (real estate investment trust),
(education), John Olin Visiting Professor (since Trustee
July 2002); Secretary of Economic Affairs, The
Commonwealth of Massachusetts (January 2002 to ABBY M. O'NEILL(3) (born 04/27/28)
December 2002); Fidelity Investments, Vice Trustee
Chairman (June 2000 to December 2001); Fidelity Private investor; Rockefeller Financial Services,
Management & Research Company (investment Inc. (investment advisers), Chairman and Chief
adviser), President (March 1997 to July 2001); The Executive Officer
Bank of New York (financial services), Director;
Bell Canada Enterprises (telecommunications), LAWRENCE T. PERERA (born 06/23/35)
Director; Telesat (satellite communications), Trustee
Director Hemenway & Barnes (attorneys), Partner
JEFFREY L. SHAMES(2)(6) (born 06/02/55) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Company, Chairman Private investor; Harvard University Graduate
(until February 2004) School of Business Administration, Class of 1961
Adjunct Professor in Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc. (real estate
J. ATWOOD IVES (born 05/01/36) investment trust), Director
Co-Chair
Private investor; KeySpan Corporation (energy J. DALE SHERRATT (born 09/23/38)
related services), Director; Eastern Enterprises Trustee
(diversified services company), Chairman, Trustee Insight Resources, Inc. (acquisition planning
and Chief Executive Officer (until November 2000) specialists), President; Wellfleet Investments
(investor in health care companies), Managing
WARD SMITH (born 09/13/30) General Partner (since 1993); Cambridge
Co-Chair Nutraceuticals (professional nutritional
Private investor products), Chief Executive Officer (until May
2001)
LAWRENCE H. COHN, M.D. (born 03/11/37)
Trustee ELAINE R. SMITH (born 04/25/46)
Brigham and Women's Hospital, Chief of Cardiac Trustee
Surgery; Harvard Medical School, Professor of Independent health care industry consultant
Surgery
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act) which is the principal federal law governing investment companies like the Trust. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
(3) Retired December 31, 2003.
(4) Appointed Trustee on January 27, 2004.
(5) Resigned February 6, 2004.
(6) Resigned on February 13, 2004.
(7) Appointed Trustee on February 24, 2004.
Trustees and Officers - continued
OFFICERS
JOHN W. BALLEN(1) (born 09/12/59) RICHARD M. HISEY (born 08/29/58)
Trustee and President Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Senior
Executive Officer and Director (until February Vice President (since July 2002); The Bank of New
2004) York, Senior Vice President (September 2000 to
July 2002); Lexington Global Asset Managers, Inc.,
JAMES R. BORDEWICK, JR. (born 03/06/59) Executive Vice President and Chief Financial
Assistant Secretary and Assistant Clerk Officer (prior to September 2000); Lexington
Massachusetts Financial Services Company, Senior Funds, Treasurer (prior to September 2000)
Vice President and Associate General Counsel
ROBERT J. MANNING(2) (born 10/20/63)
STEPHEN E. CAVAN (born 11/06/53) President
Secretary and Clerk Massachusetts Financial Services Company, Chief
Executive Officer, President, Chief Investment
Massachusetts Financial Services Company, Senior Officer and Director
Vice President, General Counsel and Secretary
ELLEN MOYNIHAN (born 11/13/57)
STEPHANIE A. DESISTO (born 10/01/53) Assistant Treasurer
Assistant Treasurer Massachusetts Financial Services Company, Vice
Massachusetts Financial Services Company, Vice President
President (since April 2003); Brown Brothers
Harriman & Co., Senior Vice President (November JAMES O. YOST (born 06/12/60)
2002 to April 2003); ING Groep N.V./Aeltus Assistant Treasurer
Investment Management, Senior Vice President Massachusetts Financial Services Company, Senior
(prior to November 2002) Vice President
ROBERT R. FLAHERTY (born 09/18/63)
Assistant Treasurer
Massachusetts Financial Services Company, Vice
President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
(1) Resigned on February 6, 2004.
(2) Appointed President on February 6, 2004.
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. The Trust will hold a shareholders' meeting in 2005 and at least once every five
years thereafter to elect Trustees. Each Trustee and officer will hold office until his or her successor is
chosen and qualified or until his or her earlier death, resignation, retirement or removal.
Mr. Shames has served as a Trustee of the Trust continually since originally appointed until February 13,
2004. Messrs. Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Mr. Gutow has served as a Trustee of the Trust since
August 1, 2001. Messrs. Cohn, Sherratt and Smith, were elected by shareholders and have served as Trustees of
the Trust since January 1, 2002. Mr. Ballen was elected by shareholders and served as a Trustee from January
1, 2002, until February 6, 2004, and Mr. Parke served as a Trustee of the Trust from January 1, 2002, until
February 6, 2004. Ms. O'Neill retired on December 31, 2003. Mr. Gunning and Ms. Lane have served as Trustees
of the Trust since January 27, 2004, and Messrs. Manning and Pozen have served as Trustees of the Trust since
February 24, 2004.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 109 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
- --------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER PORTFOLIO MANAGERS
Massachusetts Financial Services Company Eric B. Fischman
500 Boylston Street, Boston, MA David E. Sette-Ducati
02116-3741
CUSTODIANS
DISTRIBUTOR State Street Bank and Trust Company
MFS Fund Distributors, Inc. 225 Franklin Street, Boston, MA
500 Boylston Street, Boston, MA 02110
02116-3741
J.P. Morgan Chase Bank
One Chase Manhattan Plaza
New York, NY 10081
- ------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- ------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international
equity and fixed-income investment across the full risk
spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for
building and preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
A prospectus for any MFS product can be obtained from your investment
professional. The prospectus contains complete information on the fund's
investment objective(s), the risks associated with an investment in the fund,
the fees, charges and expenses involved, as well as other information about
the fund. The prospectus should be read carefully before investing.
Variable annuities are offered through MFS/Sun Life Financial Distributors, Inc.
- -------------------------------------------------------------------------------
CONTACT INFORMATION
- -------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
A general description of the MFS Funds proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the About MFS section of mfs.com or by visiting the SEC's website at
http://www.sec. gov.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send
you prospectuses, reports, and proxies electronically. You get timely
information without mailbox clutter (and help your fund save printing and
postage costs).
SIGN-UP instructions: If your account is registered with us, go to mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up
options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available
to you.
[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2004 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
OTC-SEM-4/04 247M
MFS(R) Mutual Funds
SEMIANNUAL REPORT 2/29/04
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY
MARKET FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
- -------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- -------------------------------------------------------------------------------
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
The investment objective of both funds is to seek as high a level of current
income as is consistent with preservation of capital and liquidity.
- -------------------------------------------------------------------------------
To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit mfs.com.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
LETTER FROM THE CEO 1
- ----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- ----------------------------------------------------
MANAGEMENT REVIEW 5
- ----------------------------------------------------
PERFORMANCE SUMMARY 7
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 8
- ----------------------------------------------------
FINANCIAL STATEMENTS 11
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 19
- ----------------------------------------------------
TRUSTEES AND OFFICERS 25
- ----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 27
- ----------------------------------------------------
CONTACT INFORMATION 28
- ----------------------------------------------------
ASSET ALLOCATION 29
- --------------------------------------------------------------------------------
LETTER FROM THE CEO
- --------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Robert J. Manning]
As the firm's new Chief Executive Officer, I want to thank you for your
continued trust in MFS and tell you about the series of actions we have taken
since our recent settlements with the regulators. These actions are designed
to enhance the governance structure of the MFS funds, tighten our business
practices, and strengthen the management team at MFS.
In early February, Robert Pozen joined MFS as non-executive Chairman. A
seasoned veteran of the mutual fund industry, Bob has held prior positions as
President of Fidelity Management & Research Company, as Associate General
Counsel of the Securities and Exchange Commission, and as a visiting professor
at Harvard Law School.
In an effort to develop and implement policies that we believe will set a new
standard in regulatory compliance, MFS has hired two new senior executives.
Jeffrey Carp is joining us as General Counsel with responsibility for all of
our legal affairs. Previously he was a senior partner with the law firm of
Hale and Dorr LLP. Also joining MFS in the new position of Executive Vice
President of Regulatory Affairs is Maria Dwyer, who returned to the firm after
serving as a senior executive at Fidelity. At MFS, Maria is in charge of
compliance, internal audit, and fund treasury.
In the area of governance, we have taken steps to enhance the independence of
our funds' boards of trustees to better protect the interests of shareholders.
We have independent board chairs and at least 75% of the trustees are
independent. The trustees will appoint not only their own counsel but also an
independent compliance officer. This officer will assist the boards and their
committees in monitoring the MFS funds' compliance with federal and state
regulations.
In February, MFS reached agreements with federal and state regulators to
settle their administrative proceedings against the firm and two senior
executives in connection with market timing and related issues. Under the
terms of the settlements, we agreed to pay $225 million to compensate affected
retail fund shareholders. The $225 million will be distributed in accordance
with a distribution plan developed by an independent consultant.
We have further agreed with state regulators to reduce management fees on
certain funds we advise by approximately $25 million annually over the next
five years and to pay an administrative fine of $1 million, which will be used
for the purpose of investor education. We have introduced a set of policies
designed to protect the MFS funds and MFS fund shareholders from market timing
abuses. By July, all MFS retail funds, except money market funds, will have a
2% redemption fee on short-term trades. Our global, international, high-yield,
mid- and small-cap funds will impose the 2% fee on redemptions or exchanges of
fund shares made within 30 calendar days of a share purchase. For all other
MFS funds, except money market funds, the 2% fee will be imposed on
redemptions or exchanges made within 5 business days of a share purchase. See
the fund prospectus for more information.
We continue to use fair value pricing, a strategy that minimizes the potential
for investors to take advantage of "stale" prices. These can occur, as one
example, when funds own foreign securities whose prices close on overseas
exchanges in different time zones. At the same time, we enhanced our
monitoring of excessive trading. We did so by increasing our staff and
updating our computer systems to improve our ability to detect excessive
trading in our funds. Finally, we are supporting industry efforts to establish
a "hard" 4 p.m. close on all trading, which would prevent the possibility of
late trading.
In March, MFS reached a second settlement with the SEC under an administrative
proceeding resolving the SEC's investigation into how we disclosed brokerage
allocation practices in connection with fund sales. According to the
settlement order, we did not effectively disclose the potential conflict of
interest that may arise from these arrangements.
Under the terms of the settlement, MFS has agreed to pay one dollar in
disgorgement and $50 million in penalty to MFS fund shareholders. The
settlement noted that MFS had policies in place designed to obtain best
execution of all trades of securities within MFS portfolios.
This past November, MFS eliminated the above mentioned practice of directing
brokerage commissions to certain firms in recognition of fund sales.
Additionally, we announced in March that we would ban the use of soft dollars
to acquire third-party securities research and market data. Soft dollars are
permitted under federal securities laws. In fact, it is a common industry
practice to use a portion of the brokerage commissions to pay for certain
research and execution products and services that are provided to asset
managers. MFS will now pay cash out of its own pocket for third-party research
and market data.
MFS continues to be financially strong, with more than U.S. $140 billion (as
of 12/31/03) in assets under management, which continued to be stable during
the first quarter of 2004. We also have the full support of our parent
company, Sun Life Financial, an internationally diversified financial services
firm that manages more than U.S. $269 billion (as of 12/31/03).
We chose to settle these two proceedings with the SEC so we could concentrate
on serving our fund shareholders. As Chief Investment Officer, my focus is on
ensuring that our portfolio teams work closely together and take full
advantage of all the resources available to them to deliver the best possible
investment performance.
As the inventor of the open-end mutual fund in America in 1924, MFS has a
strong tradition and culture of innovation. By strengthening our business and
governance practices, we believe we have an unprecedented opportunity to set a
new standard in the mutual fund industry.
As I look ahead, I do so with confidence. The collaboration among MFS
employees, many of whom have worked at the firm for their entire careers,
continues as we remain singularly dedicated to our clients. It has been our
sincere privilege to serve you, and we thank you for the confidence that you
have shown in MFS.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer
MFS Investment Management(R)
March 15, 2004
Note to Shareholders: On February 6, 2004, Jeffrey L. Shames retired as
Chairman of MFS. Robert Pozen was named as non-executive Chairman. Also,
on February 6, 2004, Robert J. Manning was appointed Chief Executive Officer,
President, and Chief Investment Officer.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
- --------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- --------------------------------------------------------------------------------
THE MFS(R) DIFFERENCE
For 80 years MFS has been offering investors clear paths to pursuing specific
investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain first-hand
knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- --------------------------------------------------------------------------------
MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The reporting period began with an unsettled market environment characterized
by high jobless claims, mixed economic news, and volatile energy prices. By
the end of the six-month period on February 29, 2004, economic conditions
appeared to be improving as jobless claims were down. However, energy prices
still appeared high to us.
In an effort to continue to stabilize prices and stimulate the economy, the
Federal Reserve Board (the Fed) maintained the federal funds overnight
borrowing rate at 1.00% throughout the period -- a 46-year low. The Fed
maintained in February that it would "...continue to be patient..." before it
began to raise rates.
CONTINUED SHORT SUPPLY OF COMMERCIAL PAPER
Despite signs of growing economic strength, the supply of commercial paper
continued to be constrained by cautious corporate spending in our view.
Businesses, taking advantage of low absolute yields, issued longer-term debt
in place of commercial paper.
FUND POSITIONING
As of February 29, 2004, about 92% of MFS Money Market Fund was invested in
commercial paper with the balance of the portfolio invested in U.S. government
discount, and U.S. government agency notes.
Discount agency notes and repurchase agreements collateralized by U.S.
government agency discount notes form the core of MFS Government Money Market
Fund.
During this reporting period, when interest rates were at historical lows and
the Fed continued its accommodative stance, we strategically targeted an
average maturity range for the portfolio of 45 to 55 days.
COMMITMENT TO QUALITY
Regardless of market or economic conditions, we intend to maintain the
funds' high quality as we focus on the funds' objectives of income, capital
preservation, and liquidity.
Respectfully,
/s/ Edward L. O'Dette /s/ Terri A. Vittozzi
Edward L. O'Dette Terri A. Vittozzi
Portfolio Manager Portfolio Manager
The views expressed in this report are those of the portfolio managers only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or an indication of
trading intent on behalf of any MFS Fund. References to specific securities are
not recommendations of such securities, and may not be representative of any
MFS Fund's current or future investments.
The portfolios are actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment- related news.
o From Week in Review, link to MFS Global Investment Perspective for our
current view of the world.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 2/29/04
- --------------------------------------------------------------------------------
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND
MORE CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA
QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE
PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A
SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
MFS MONEY MARKET FUND(1)(2) MFS GOVERNMENT MONEY MARKET FUND(1)(2)
6-month total return: 0.23% 6-month total return: 0.17%
- --------------------------------------------------------------------------------
7-day current yield with and 7-day current yield with and
without waiver: 0.40% without waiver: 0.28%
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE SUMMARY
Yields quoted are based on the latest seven days ended as of February 29,
2004, with dividends annualized. The yield quotations more closely reflect the
current earnings of the portfolios than a total return quotation would.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been
less favorable. Please see the prospectus and financial statements for
complete details. All results are historical and assume the reinvestment of
dividends and capital gains.
KEY RISK CONSIDERATIONS
(1) Government guarantees apply to the underlying securities only and not to
the prices and yields of the portfolio.
(2) Investments in the portfolio are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
portfolio seeks to preserve the value of your investment, it is possible
to lose money by investing in the portfolio. The portfolio's yield will
fluctuate with changes in market conditions.
These risks may increase share price volatility. Please see the prospectus
for these and other risk considerations.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
- --------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) 2/29/04
- --------------------------------------------------------------------------------------------------
MFS MONEY MARKET FUND
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Commercial Paper - 92.4%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- --------------------------------------------------------------------------------------------------
Abbey National PLC, due 3/01/04 $12,286 $12,286,000
- --------------------------------------------------------------------------------------------------
Archer Daniels Midland Co., due 3/16/04 17,856 17,847,816
- --------------------------------------------------------------------------------------------------
Bank of America Corp., due 3/15/04 - 5/03/04 35,129 35,082,978
- --------------------------------------------------------------------------------------------------
Barclays Bank PLC, due 3/05/04 30,255 30,251,336
- --------------------------------------------------------------------------------------------------
Barton Capital Corp., due 4/13/04 - 4/19/04 34,514 34,469,096
- --------------------------------------------------------------------------------------------------
Cafco LLC, due 4/16/04 - 5/28/04 33,974 33,916,097
- --------------------------------------------------------------------------------------------------
Cargill, Inc., due 5/11/04 10,000 9,979,489
- --------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, due 3/09/04 - 3/17/04 17,120 17,115,520
- --------------------------------------------------------------------------------------------------
Citicorp, due 4/26/04 - 5/28/04 14,695 14,665,500
- --------------------------------------------------------------------------------------------------
Citigroup Global Markets, due 3/25/04 19,132 19,118,225
- --------------------------------------------------------------------------------------------------
Cofco Capital Corp., due 4/01/04 7,500 7,493,154
- --------------------------------------------------------------------------------------------------
CRC Funding LLC, due 4/06/04 34,934 34,897,669
- --------------------------------------------------------------------------------------------------
Deutsche Bank, due 4/08/04 15,000 14,983,375
- --------------------------------------------------------------------------------------------------
Edison Asset Securitization LLC, due 4/12/04 - 6/01/04 35,000 34,933,950
- --------------------------------------------------------------------------------------------------
FCAR Owner Trust, due 3/02/04 - 5/04/04 34,764 34,730,429
- --------------------------------------------------------------------------------------------------
General Electric Capital Corp., due 3/03/04 - 4/06/04 37,240 37,235,357
- --------------------------------------------------------------------------------------------------
Govco, Inc., due 4/06/04 - 5/25/04 33,985 33,916,671
- --------------------------------------------------------------------------------------------------
HBOS Treasury Services PLC, due 5/07/04 25,000 24,951,146
- --------------------------------------------------------------------------------------------------
HSBC America, Inc., due 4/13/04 17,102 17,080,756
- --------------------------------------------------------------------------------------------------
ING America Insurance Holdings, due 4/12/04 35,000 34,957,942
- --------------------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc., due 5/06/04 25,000 24,952,333
- --------------------------------------------------------------------------------------------------
Jupiter Securitization Corp., due 6/30/04 34,036 33,915,881
- --------------------------------------------------------------------------------------------------
Kittyhawk Funding Corp., due 4/19/04 - 4/27/04 32,730 32,677,889
- --------------------------------------------------------------------------------------------------
Metlife Funding, Inc., due 3/04/04 - 4/21/04 34,626 34,589,474
- --------------------------------------------------------------------------------------------------
New Center Asset Trust, due 4/30/04 30,000 29,948,000
- --------------------------------------------------------------------------------------------------
Old Line Funding Corp., due 3/19/04 25,000 24,986,500
- --------------------------------------------------------------------------------------------------
Societe Generale, due 5/04/04 33,600 33,537,877
- --------------------------------------------------------------------------------------------------
Svenska Handelsbanken AB, due 5/25/04 32,000 31,921,422
- --------------------------------------------------------------------------------------------------
Thunder Bay Funding Corp., due 3/08/04 - 4/20/04 33,961 33,932,093
- --------------------------------------------------------------------------------------------------
Total Commercial Paper, at Amortized Cost $780,373,975
- --------------------------------------------------------------------------------------------------
U.S. Government and Agency Obligations - 7.2%
- --------------------------------------------------------------------------------------------------
Fannie Mae, due 3/05/04 $50,000 $49,993,944
- --------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 6/25/04 - 8/11/04 10,850 10,807,579
- --------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations,
at Amortized Cost $60,801,523
- --------------------------------------------------------------------------------------------------
Total Investments, at Amortized Cost and Value $841,175,498
- --------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.4% 3,204,703
- --------------------------------------------------------------------------------------------------
Net Assets - 100.0% $844,380,201
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) 2/29/04
- --------------------------------------------------------------------------------------------------
MFS GOVERNMENT MONEY MARKET FUND
U.S. Government and Agency Obligations - 89.8%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- --------------------------------------------------------------------------------------------------
Fannie Mae, due 3/10/04 - 6/01/04 $21,355 $21,327,042
- --------------------------------------------------------------------------------------------------
Federal Agricultural Mortgage Corp., due 3/16/04 564 563,746
- --------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, due 4/15/04 - 7/28/04 11,700 11,667,655
- --------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 3/01/04 - 8/11/04 35,926 35,883,586
- --------------------------------------------------------------------------------------------------
Freddie Mac, due 3/22/04 - 6/21/04 21,609 21,572,311
- --------------------------------------------------------------------------------------------------
Student Loan Marketing Assn., due 3/04/04 5,000 4,999,608
- --------------------------------------------------------------------------------------------------
Tennessee Valley Authority, due 3/25/04 3,000 2,998,140
- --------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations,
at Amortized Cost $99,012,088
- --------------------------------------------------------------------------------------------------
Repurchase Agreement - 10.0%
- --------------------------------------------------------------------------------------------------
Merrill Lynch, dated 2/27/04, due 3/01/04, total to be
received $11,013,945 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account),
at Cost $11,013 $11,013,000
- --------------------------------------------------------------------------------------------------
Total Investments, at Amortized Cost and Value $110,025,088
- --------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.2% 174,878
- --------------------------------------------------------------------------------------------------
Net Assets - 100.0% $110,199,966
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES (unaudited)
- -------------------------------------------------------------------------------
MFS MONEY MARKET FUND
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 2/29/04
ASSETS
Investments, at amortized cost and value $841,175,498
- -------------------------------------------------------------------------------
Cash 179
- -------------------------------------------------------------------------------
Receivable for fund shares sold 5,434,315
- -------------------------------------------------------------------------------
Other assets 9,690
- -------------------------------------------------------------------------------
Total assets $846,619,682
- -------------------------------------------------------------------------------
LIABILITIES
Distributions payable $4,380
- -------------------------------------------------------------------------------
Payable for fund shares reacquired 2,015,345
- -------------------------------------------------------------------------------
Payable to affiliates
- -------------------------------------------------------------------------------
Management fee 32,178
- -------------------------------------------------------------------------------
Shareholder servicing costs 19,483
- -------------------------------------------------------------------------------
Administrative fee 1,173
- -------------------------------------------------------------------------------
Accrued expenses and other liabilities 166,922
- -------------------------------------------------------------------------------
Total liabilities $2,239,481
- -------------------------------------------------------------------------------
NET ASSETS
Net assets (represented by paid-in capital) $844,380,201
- -------------------------------------------------------------------------------
Shares of beneficial interest outstanding 844,380,201
- -------------------------------------------------------------------------------
Net asset value per share
(net assets / shares of beneficial interest
outstanding) $1.00
- -------------------------------------------------------------------------------
See notes to financial statements.
Statements of Assets and Liabilities (unaudited) - continued
MFS GOVERNMENT MONEY MARKET FUND
AT 2/29/04
ASSETS
Investments, at amortized cost and value $99,012,088
- -------------------------------------------------------------------------------
Repurchase agreements, at value 11,013,000
- -------------------------------------------------------------------------------
Total investments, at amortized cost and value $110,025,088
- -------------------------------------------------------------------------------
Cash $124
- -------------------------------------------------------------------------------
Receivable for fund shares sold 225,306
- -------------------------------------------------------------------------------
Interest receivable 945
- -------------------------------------------------------------------------------
Other assets 520
- -------------------------------------------------------------------------------
Total assets $110,251,983
- -------------------------------------------------------------------------------
LIABILITIES
Distributions payable $443
- -------------------------------------------------------------------------------
Payable for fund shares reacquired 13,596
- -------------------------------------------------------------------------------
Payable to affiliates
- -------------------------------------------------------------------------------
Management fee 4,459
- -------------------------------------------------------------------------------
Shareholder servicing costs 1,521
- -------------------------------------------------------------------------------
Administrative fee 153
- -------------------------------------------------------------------------------
Accrued expenses and other liabilities 31,845
- -------------------------------------------------------------------------------
Total liabilities $52,017
- -------------------------------------------------------------------------------
NET ASSETS
Net assets (represented by paid-in capital) $110,199,966
- -------------------------------------------------------------------------------
Shares of beneficial interest outstanding 110,199,966
- -------------------------------------------------------------------------------
Net asset value per share
(net assets / shares of beneficial interest
outstanding) $1.00
- -------------------------------------------------------------------------------
See notes to financial statements.
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS OF OPERATIONS (unaudited)
- -------------------------------------------------------------------------------
MFS MONEY MARKET FUND
This statement describes how much your fund received in investment income and
paid in expenses.
FOR SIX MONTHS ENDING 2/29/04
NET INVESTMENT INCOME
Interest income $5,752,308
- -------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------
Management fee $2,307,053
- -------------------------------------------------------------------------------
Trustees' compensation 27,912
- -------------------------------------------------------------------------------
Shareholder servicing costs 842,387
- -------------------------------------------------------------------------------
Administrative fee 24,619
- -------------------------------------------------------------------------------
Custodian fee 37,662
- -------------------------------------------------------------------------------
Printing 45,895
- -------------------------------------------------------------------------------
Postage 52,733
- -------------------------------------------------------------------------------
Auditing fees 11,020
- -------------------------------------------------------------------------------
Legal fees 2,911
- -------------------------------------------------------------------------------
Miscellaneous 111,108
- -------------------------------------------------------------------------------
Total expenses $3,463,300
- -------------------------------------------------------------------------------
Fees paid indirectly (118,587)
- -------------------------------------------------------------------------------
Net expenses $3,344,713
- -------------------------------------------------------------------------------
Net investment income $2,407,595
- -------------------------------------------------------------------------------
See notes to financial statements.
Statements of Operations (unaudited) - continued
MFS GOVERNMENT MONEY MARKET FUND
FOR SIX MONTHS ENDING 2/29/04
NET INVESTMENT INCOME
Interest income $639,944
- -------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------
Management fee $302,526
- -------------------------------------------------------------------------------
Trustees' compensation 3,724
- -------------------------------------------------------------------------------
Shareholder servicing costs 75,574
- -------------------------------------------------------------------------------
Administrative fee 3,128
- -------------------------------------------------------------------------------
Custodian fee 11,734
- -------------------------------------------------------------------------------
Printing 3,336
- -------------------------------------------------------------------------------
Postage 2,084
- -------------------------------------------------------------------------------
Auditing fees 9,469
- -------------------------------------------------------------------------------
Legal fees 1,473
- -------------------------------------------------------------------------------
Miscellaneous 23,355
- -------------------------------------------------------------------------------
Total expenses $436,403
- -------------------------------------------------------------------------------
Fees paid indirectly (10,247)
- -------------------------------------------------------------------------------
Net expenses $426,156
- -------------------------------------------------------------------------------
Net investment income $213,788
- -------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
MFS MONEY MARKET FUND
This statement describes the increases and/or decreases in net assets
resulting from operations, and any shareholder transactions.
SIX MONTHS YEAR
ENDING ENDING
2/29/04 8/31/03
(UNAUDITED)
INCREASE IN NET ASSETS
OPERATIONS
Net investment income, declared as distributions to
shareholders $2,407,595 $15,391,590
- --------------------------------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS
Net proceeds from sale of shares $1,091,393,168 $46,756,065,891
- --------------------------------------------------------------------------------------------------
Shares issued in reinvestment of distributions 2,106,624 10,612,859
- --------------------------------------------------------------------------------------------------
Shares reacquired (2,372,578,811) (46,605,378,781)
- ----------------------------------------------------- --------------- ----------------
Net increase (decrease) in net assets from fund share
transactions $(1,279,079,019) $161,299,969
- ----------------------------------------------------- --------------- ----------------
NET ASSETS
At beginning of period $2,123,459,220 $1,962,159,251
- --------------------------------------------------------------------------------------------------
At end of period $844,380,201 $2,123,459,220
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
Statements of Changes in Net Assets - continued
MFS GOVERNMENT MONEY MARKET FUND
SIX MONTHS YEAR
ENDING ENDING
2/29/04 8/31/03
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income, declared as distributions to
shareholders $213,788 $772,690
- --------------------------------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS
Net proceeds from sale of shares $421,404,735 $928,173,362
- --------------------------------------------------------------------------------------------------
Shares issued in reinvestment of distributions 209,341 744,165
- --------------------------------------------------------------------------------------------------
Shares reacquired (444,302,224) (850,770,218)
- ------------------------------------------------------ ------------- -------------
Net increase (decrease) in net assets from fund share
transactions $(22,688,148) $78,147,309
- ------------------------------------------------------ ------------- -------------
NET ASSETS
At beginning of period $132,888,114 $54,740,805
- --------------------------------------------------------------------------------------------------
At end of period $110,199,966 $132,888,114
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
MFS MONEY MARKET FUND
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the
table represent the rate by which an investor would have earned (or lost) on an investment in the fund (assuming reinvestment
of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 8/31
ENDED -------------------------------------------------------------
2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.00+++ $0.01 $0.02 $0.05 $0.05 $0.04
- ---------------------------------------- ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.00)+++ $(0.01) $(0.02) $(0.05) $(0.05) $(0.04)
- ---------------------------------------- ------- ------ ------ ------ ------ ------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------- ------- ------ ------ ------ ------ ------
Total return (%) 0.23++ 0.81 1.67 4.97 5.58 4.54
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 0.66+ 0.60 0.68 0.67 0.66 0.69
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.46+ 0.80 1.66 4.86 5.38 4.38
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000,000 Omitted) $844 $2,123 $1,962 $1,461 $913 $1,080
- --------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
MFS GOVERNMENT MONEY MARKET FUND
SIX MONTHS YEAR ENDED 8/31
ENDED -----------------------------------------------------------------
2/29/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.00+++ $0.01 $0.01 $0.05 $0.05 $0.04
- ------------------------------------ ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.00)+++ $(0.01) $(0.01) $(0.05) $(0.05) $(0.04)
- ------------------------------------ ------- ------ ------ ------ ------ ------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------ ------- ------ ------ ------ ------ ------
Total return (%) 0.17++ 0.66 1.51 4.71 5.18 4.35
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 0.72+ 0.72 0.82 0.90 0.86 0.78
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.35+ 0.61 1.56 4.55 5.05 4.26
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $110,200 $132,888 $54,741 $62,078 $44,038 $57,074
- --------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Money Market Fund and MFS Government Money Market Fund (the funds) are
each a diversified series of MFS Series Trust IV (the trust). The trust is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
INVESTMENT VALUATIONS - Money market instruments are valued at amortized cost,
which the Trustees have determined in good faith approximates market value.
The funds' use of amortized cost is subject to the funds' compliance with
certain conditions as specified under Rule 2a-7 of the Investment Company Act
of 1940.
REPURCHASE AGREEMENTS - The funds may enter into repurchase agreements with
institutions that each funds' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each fund
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the funds to
obtain those securities in the event of a default under the repurchase
agreement. The funds' monitor, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the funds under each such repurchase agreement. The funds along with
other affiliated entities of Massachusetts Financial Services Company (MFS),
may utilize a joint trading account for the purpose of entering into one or
more repurchase agreements.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized and accreted for financial statement purposes and
tax reporting purposes in accordance with generally accepted accounting
principles and federal tax regulations, respectively.
FEES PAID INDIRECTLY - The funds' custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the fund. This amount for the six months ended February 29, 2004 is shown as
a reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The funds' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The funds
distinguish between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
The tax character of distributions declared for the years ended August 31,
2003 and August 31, 2002 was as follows:
Government Money
Money Market Fund Market Fund
8/31/03 8/31/02 8/31/03 8/31/02
Distributions declared from
ordinary income $15,391,590 $25,276,859 $772,690 $927,415
- --------------------------------------------------------------------------------
As of August 31, 2003, the components of distributable earnings on a tax basis
were as follows:
Government Money
Money Market Fund Market Fund
8/31/03 8/31/03
Undistributed ordinary income $236,442 $2,606
- --------------------------------------------------------------------------------
Capital loss carryforward (11,496) --
- --------------------------------------------------------------------------------
Other temporary differences (224,946) (10,319)
- --------------------------------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on August 31, 2011 for MFS Money
Market Fund.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - Each fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at the following annual
rates:
First $300 million of average net assets 0.50%
-------------------------------------------------------
Next $400 million of average net assets 0.45%
-------------------------------------------------------
Next $400 million of average net assets 0.40%
-------------------------------------------------------
Average net assets in excess of $1 billion 0.35%
-------------------------------------------------------
Management fees incurred for the six months ended February 29, 2004 were 0.44%
and 0.50% of average daily net assets on an annualized basis for the MFS Money
Market Fund and the MFS Government Money Market Fund, respectively. As part of
the settlement agreement with the New York Attorney General concerning market
timing and related matters, MFS has agreed to reduce each fund's management fee
to 0.15% of average daily net assets for the period March 1, 2004 through
February 28, 2009. During this time period, the Board of Trustees will continue
to review the appropriateness of all advisory fees in accordance with their
oversight responsibilities. After February 28, 2009 the management fees will be
determined in accordance with then existing review policies approved by the
Board of Trustees overseeing the funds.
The funds pay compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pay no compensation directly
to their Trustees who are officers of the investment adviser, or to officers
of the funds, all of whom receive remuneration for their services to the funds
from MFS. Certain officers and Trustees of the funds are officers or directors
of MFS and MFS Service Center, Inc. (MFSC). The funds have an unfunded,
defined benefit plan for retired Trustees. Included in Trustees' compensation
is a pension expense of $2,991 and $590 for retired Trustees for the six
months ended February 29, 2004 for the MFS Money Market Fund and MFS
Government Money Market Fund, respectively.
ADMINISTRATOR - Each fund has an administrative services agreement with MFS to
provide the funds with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each fund pays MFS an administrative fee
up to the following annual percentage rates of each fund's average daily net
assets:
First $2 billion 0.0175%
-------------------------------------------------------
Next $2.5 billion 0.0130%
-------------------------------------------------------
Next $2.5 billion 0.0005%
-------------------------------------------------------
In excess of $7 billion 0.0000%
-------------------------------------------------------
SHAREHOLDER SERVICING AGENT - Included in shareholder servicing costs is a fee
paid to MFSC, a wholly owned subsidiary of MFS, for its services as
shareholder servicing agent. The fee is calculated as a percentage of each
fund's average daily net assets at an annual rate of 0.11%, which amounted to
$569,639 and $66,556 for the six months ended February 29, 2004 for the MFS
Money Market Fund and MFS Government Money Market Fund, respectively. Also
included in shareholder servicing costs are out-of-pocket expenses, paid to
MFSC, which amounted to $37,182 and $1,662 for the six months ended February
29, 2004 for the MFS Money Market Fund and MFS Government Money Market Fund,
respectively, as well as other expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements, for MFS Money Market Fund aggregated
$6,448,691,350 and $7,635,082,569 respectively.
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements, for MFS Government Money Market Fund
aggregated $1,584,034,000 and $1,586,880,000 respectively.
(5) SHARES OF BENEFICIAL INTEREST
The funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest.
(6) LINE OF CREDIT
The funds and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the funds for the six
months ended February 29, 2004, was $3,004 and $473 for the MFS Money Market
Fund and the MFS Government Money Market Fund, respectively. The funds had no
borrowings during the period.
(7) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding regarding
disclosure of brokerage allocation practices in connection with fund sales.
Under the terms of the settlement, in which MFS neither admitted nor denied
any wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50
million in penalty to certain MFS funds, pursuant to a plan to be approved by
an independent distribution consultant. The agreement with the SEC is
reflected in an order of the SEC. The settlement order states that MFS failed
to adequately disclose to the Boards of Trustees and to shareholders of the
MFS funds the specifics of its preferred arrangements with certain brokerage
firms selling MFS fund shares. The settlement order states that MFS had in
place policies designed to obtain best execution of all fund trades.
As part of the settlement, MFS also agreed to retain an independent compliance
consultant to review the completeness of its disclosure to fund trustees and
to fund shareholders of strategic alliances between MFS or its affiliates and
broker-dealers and other financial advisers who support the sale of fund
shares. The brokerage allocation practices which were the subject of this
proceeding were discontinued by MFS in November 2003.
In addition, in February, 2004, MFS reached agreement with the Securities and
Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the
Bureau of Securities Regulation of the State of New Hampshire ("NH") to settle
administrative proceedings alleging false and misleading information in certain
MFS fund prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS funds was false and misleading because, although the prospectuses
for those funds in the regulators' view indicated that the funds prohibited
market timing, MFS did not limit trading activity in 11 domestic large cap
stock, high grade bond and money market funds. MFS' former Chief Executive
Officer, John W. Ballen, and former President, Kevin R. Parke, have also
reached agreement with the SEC (Messrs. Ballen and Parke resigned their
director and officer positions with MFS on February 13, 2004). Under the terms
of the February Settlements, MFS and the executives neither admit nor deny
wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain of the MFS funds
offered to retail investors ("Retail Funds"), which has been funded by MFS and
of which $50 million is characterized as a penalty. This pool will be
distributed in accordance with a methodology developed by an independent
distribution consultant in consultation with MFS and the Boards of Trustees of
the Retail Funds, and acceptable to the SEC. MFS has further agreed with the
NYAG to reduce its management fees in the aggregate amount of approximately $25
million annually over the next five years, and not to increase certain
management fees during this period. MFS has also paid an administrative fine to
NH in the amount of $1 million, which will be used for investor education
purposes (NH will retain $250,000 and $750,000 will be contributed to the North
American Securities Administrators Association's Investor Protection Trust). In
addition, MFS and the Retail Funds will adopt certain governance changes.
Messrs. Ballen and Parke have agreed to temporary suspensions from association
with any registered investment company or investment adviser, will pay
approximately $315,000 each to the SEC, and resigned their positions as
trustees of all MFS funds, and Mr. Ballen resigned his position as President
of all MFS funds, effective February 6, 2004. Messrs. Ballen and Parke will
not be returning to MFS or the MFS funds after their suspensions.
Since December 2003, MFS, Sun Life Financial Inc., various MFS funds, the
Trustees of these MFS funds, and certain officers of MFS have been named as
defendants in multiple lawsuits filed in federal and state courts. The
lawsuits variously have been commenced as class actions or individual actions
on behalf of investors who purchased, held or redeemed shares of the funds
during specified periods, as class actions on behalf of participants in
certain retirement plan accounts, or as derivative actions on behalf of the
MFS funds. The lawsuits generally allege that some or all of the defendants
(i) permitted or acquiesced in market timing and/or late trading in some of
the MFS funds, inadequately disclosed MFS' internal policies concerning market
timing and such matters, and received excessive compensation as fiduciaries to
the MFS fund, or (ii) permitted or acquiesced in the improper use of fund
assets by MFS to support the distribution of fund shares and inadequately
disclosed MFS' use of fund assets in this manner. The actions assert that some
or all of the defendants violated the federal securities laws, including the
Securities Act of 1933 and the Securities Exchange Act of 1934, the Investment
Company Act of 1940 and the Investment Advisers Act of 1940, the Employee
Retirement Income Security Act of 1974, as well as fiduciary duties and other
violations of common law. The lawsuits seek unspecified compensatory damages.
Insofar as any of the actions is appropriately brought derivatively on behalf
of any of the MFS funds, any recovery will inure to the benefit of the funds.
The defendants are reviewing the allegations of the multiple complaints and
will respond appropriately. Additional lawsuits based on similar allegations
may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS
has established a restitution pool in the amount of $225 million to compensate
certain shareholders of the Retail Funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the
funds, and will pay $50 million to compensate certain MFS funds based upon the
amount of brokerage commissions allocated in recognition of fund sales. It is
not clear whether these amounts will be sufficient to compensate shareholders
for all of the damage they allegedly sustained, whether certain shareholders
or putative class members may have additional claims to compensation, or
whether the damages that may be awarded in any of the actions will exceed
these amounts. In the event the MFS funds incur any losses, costs or expenses
in connection with such lawsuits, the Boards of Trustees of the affected funds
may pursue claims on behalf of such funds against any party that may have
liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments will
not result in increased fund redemptions, reduced sales of fund shares, or
other adverse consequences to the funds.
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TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust IV,
of which each fund is a series, including their principal occupations, which, unless specific dates are shown,
are of more than five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other directorships(1)
INTERESTED TRUSTEES
JOHN W. BALLEN(2)(5) (born 09/12/59) DAVID H. GUNNING(4) (born 05/30/42)
Trustee and President Trustee
Massachusetts Financial Services Company, Chief Cleveland-Cliffs Inc. (mining products and service
Executive Officer and Director (until February provider), Vice Chairman/Director (since April
2004) 2001); Encinitos Ventures (private investment
company), Principal (1997 to April 2001); Lincoln
ROBERT J. MANNING(2)(7) (born 10/20/63) Electric Holdings, Inc. (welding equipment
Trustee manufacturer), Director; Southwest Gas Corporation
Massachusetts Financial Services Company, Chief (natural gas distribution company), Director
Executive Officer, President, Chief Investment
Officer and Director WILLIAM R. GUTOW (born 09/27/41)
Trustee
KEVIN R. PARKE(2)(5) (born 12/14/59) Private investor and real estate consultant;
Trustee Capitol Entertainment Management Company (video
Massachusetts Financial Services Company, franchise), Vice Chairman
President, Chief Investment Officer and Director
(until February 2004) AMY B. LANE(4) (born 02/08/53)
Trustee
ROBERT C. POZEN(2)(7) (born 08/08/46) Retired; Merrill Lynch & Co., Inc., Managing
Trustee Director, Investment Banking Group (1997 to
Massachusetts Financial Services Company, Chairman February 2001); Borders Group, Inc. (book and
(since February 2004); Harvard Law School music retailer), Director; Federal Realty
(education), John Olin Visiting Professor (since Investment Trust (real estate investment trust),
July 2002); Secretary of Economic Affairs, The Trustee
Commonwealth of Massachusetts (January 2002 to
December 2002); Fidelity Investments, Vice ABBY M. O'NEILL(3) (born 04/27/28)
Chairman (June 2000 to December 2001); Fidelity Trustee
Management & Research Company (investment Private investor; Rockefeller Financial Services,
adviser), President (March 1997 to July 2001); The Inc. (investment advisers), Chairman and Chief
Bank of New York (financial services), Director; Executive Officer
Bell Canada Enterprises (telecommunications),
Director; Telesat (satellite communications), LAWRENCE T. PERERA (born 06/23/35)
Director Trustee
Hemenway & Barnes (attorneys), Partner
JEFFREY L. SHAMES(2)(6) (born 06/02/55)
Trustee WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Chairman Trustee
(until February 2004) Private investor; Harvard University Graduate
School of Business Administration, Class of 1961
INDEPENDENT TRUSTEES Adjunct Professor in Entrepreneurship Emeritus;
J. ATWOOD IVES (born 05/01/36) CBL & Associates Properties, Inc. (real estate
Co-Chair investment trust), Director
Private investor; KeySpan Corporation (energy
related services), Director; Eastern Enterprises J. DALE SHERRATT (born 09/23/38)
(diversified services company), Chairman, Trustee Trustee
and Chief Executive Officer (until November 2000) Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments
WARD SMITH (born 09/13/30) (investor in health care companies), Managing
Co-Chair General Partner (since 1993); Cambridge
Private investor Nutraceuticals (professional nutritional
products), Chief Executive Officer (until May
LAWRENCE H. COHN, M.D. (born 03/11/37) 2001)
Trustee
Brigham and Women's Hospital, Chief of Cardiac ELAINE R. SMITH (born 04/25/46)
Surgery; Harvard Medical School, Professor of Trustee
Surgery Independent health care industry consultant
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act) which is the principal federal law governing investment companies like the Trust. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
(3) Retired December 31, 2003.
(4) Appointed Trustee on January 27, 2004.
(5) Resigned February 6, 2004.
(6) Resigned on February 13, 2004.
(7) Appointed Trustee on February 24, 2004.
Trustees and Officers - continued
OFFICERS
JOHN W. BALLEN(1) (born 09/12/59) RICHARD M. HISEY (born 08/29/58)
Trustee and President Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Senior
Executive Officer and Director (until February Vice President (since July 2002); The Bank of New
2004) York, Senior Vice President (September 2000 to
July 2002); Lexington Global Asset Managers, Inc.,
JAMES R. BORDEWICK, JR. (born 03/06/59) Executive Vice President and Chief Financial
Assistant Secretary and Assistant Clerk Officer (prior to September 2000); Lexington
Massachusetts Financial Services Company, Senior Funds, Treasurer (prior to September 2000)
Vice President and Associate General Counsel
ROBERT J. MANNING(2) (born 10/20/63)
STEPHEN E. CAVAN (born 11/06/53) President
Secretary and Clerk Massachusetts Financial Services Company, Chief
Massachusetts Financial Services Company, Senior Executive Officer, President, Chief Investment
Vice President, General Counsel and Secretary Officer and Director
STEPHANIE A. DESISTO (born 10/01/53) ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer Assistant Treasurer
Massachusetts Financial Services Company, Vice Massachusetts Financial Services Company, Vice
President (since April 2003); Brown Brothers President
Harriman & Co., Senior Vice President (November
2002 to April 2003); ING Groep N.V./Aeltus JAMES O. YOST (born 06/12/60)
Investment Management, Senior Vice President Assistant Treasurer
(prior to November 2002) Massachusetts Financial Services Company, Senior
Vice President
ROBERT R. FLAHERTY (born 09/18/63)
Assistant Treasurer
Massachusetts Financial Services Company, Vice
President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
(1) Resigned on February 6, 2004.
(2) Appointed President on February 6, 2004.
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. The Trust will hold a shareholders' meeting in 2005 and at least once every five
years thereafter to elect Trustees. Each Trustee and officer will hold office until his or her successor is
chosen and qualified or until his or her earlier death, resignation, retirement or removal.
Mr. Shames has served as a Trustee of the Trust continually since originally appointed until February 13,
2004. Messrs. Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Mr. Gutow has served as a Trustee of the Trust since
August 1, 2001. Messrs. Cohn, Sherratt and Smith, were elected by shareholders and have served as Trustees of
the Trust since January 1, 2002. Mr. Ballen was elected by shareholders and served as a Trustee from January
1, 2002, until February 6, 2004, and Mr. Parke served as a Trustee of the Trust from January 1, 2002, until
February 6, 2004. Ms. O'Neill retired on December 31, 2003. Mr. Gunning and Ms. Lane have served as Trustees
of the Trust since January 27, 2004, and Messrs. Manning and Pozen have served as Trustees of the Trust since
February 24, 2004.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 109 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
- --------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER PORTFOLIO MANAGERS
Massachusetts Financial Services Company Edward L. O'Dette
500 Boylston Street, Boston, MA Terri A. Vittozzi
02116-3741
CUSTODIAN
DISTRIBUTOR State Street Bank and Trust Company
MFS Fund Distributors, Inc. 225 Franklin Street, Boston, MA
500 Boylston Street, Boston, MA 02110
02116-3741
- -------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- -------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international
equity and fixed-income investment across the full risk
spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for
building and preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
A prospectus for any MFS product can be obtained from your investment
professional. The prospectus contains complete information on the fund's
investment objective(s), the risks associated with an investment in the fund,
the fees, charges and expenses involved, as well as other information about
the fund. The prospectus should be read carefully before investing.
Variable annuities are offered through MFS/Sun Life Financial Distributors,
Inc.
- -------------------------------------------------------------------------------
CONTACT INFORMATION
- -------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
A general description of the MFS Funds proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the About MFS section of mfs.com or by visiting the SEC's website at
http://www.sec. gov.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send
you prospectuses, reports, and proxies electronically. You get timely
information without mailbox clutter (and help your fund save printing and
postage costs).
SIGN-UP instructions: If your account is registered with us, go to mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up
options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available
to you.
[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2004 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
MCM-SEM-4/04 71M
ITEM 2. CODE OF ETHICS.
Applicable for semi-annual reports if the registrant has amended the code of
ethics during the period covered by the report or has granted a waiver,
including an implicit waiver, from a provision of the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable at this time. [Applicable for periods ending on or after July 9,
2004 (beginning with Form N-CSRs filed at the end of September, 2004 for July
31, 2004 reporting period.)]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's principal financial officer and principal executive
officer have concluded that those disclosure controls and procedures provide
reasonable assurance that the material information required to be disclosed
by the registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the registrant's last fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 11. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) [**An amendment to the code of ethics, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends
to satisfy the Item 2 requirements through filing of an exhibit: Not
Applicable.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r),
or otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, except to the extent that
the registrant specifically incorporates it by reference: Attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST IV
By (Signature and Title)* ROBERT J. MANNING
---------------------------------
Robert J. Manning, President
Date: April 23, 2004
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* ROBERT J. MANNING
---------------------------------
Robert J. Manning, President
(Principal Executive Officer)
Date: April 23, 2004
--------------
By (Signature and Title)* RICHARD M. HISEY
--------------------------------
Richard M. Hisey, Treasurer
(Principal Financial Officer and
Accounting Officer)
Date: April 23, 2004
--------------
* Print name and title of each signing officer under his or her signature.