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 F. DesMarais
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
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Date of reporting period: February 28, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds 2/28/05
SEMIANNUAL REPORT
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY
MARKET FUND
A path for pursuing opportunity
[Graphic Omitted]
M F S(SM)
INVESTMENT MANAGEMENT(R)
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
Each fund seeks as high a level of current income as is considered consistent
with preservation of capital and liquidity.
THIS REPORT HAS BEEN PREPARED FOR THE GENERAL INFORMATION TO SHAREHOLDERS. IT
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
TABLE OF CONTENTS
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 4
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MANAGEMENT REVIEW 5
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PERFORMANCE SUMMARY 7
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EXPENSE TABLES 10
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PORTFOLIO OF INVESTMENTS 12
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FINANCIAL STATEMENTS 15
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NOTES TO FINANCIAL STATEMENTS 23
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PROXY VOTING POLICIES AND INFORMATION 31
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QUARTERLY PORTFOLIO DISCLOSURE 31
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MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 32
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CONTACT INFORMATION BACK COVER
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
Last summer and fall, I wrote to you about enhancements that MFS(R) was making
to its investment process. Our goal, as always, was to deliver strong
performance across all asset classes. I am now happy to report to you that
2004 was a very successful year for MFS, relative to our peers in the mutual
fund industry. While there will always be room for improvement, we believe the
enhancements we have made to our investment process resulted in significantly
improved performance across the MFS Family of Funds(R).
You may remember some of the enhancements I outlined last year.
They included
o increasing collaboration and information sharing among our investment
personnel across asset classes, through an Investment Management Committee
with members from our Domestic Equity, International Equity, Fixed Income,
and Quantitative Research teams
o increasing the number of analysts supporting our portfolio managers and
doubling the average investment experience of our domestic equity analyst
staff
o making additional use of our most-seasoned portfolio managers to mentor
research analysts
o combining more quantitative, top-down risk control and security analysis
with our traditional bottom-up research process
o opening a research office in Mexico City to complement our existing staff
in Boston, London, Singapore, and Tokyo
The effect of these enhancements, I believe, is evident in the 2004 performance
of our funds. For the 12 months ended December 31, 2004, 80% of MFS domestic
equity funds, 100% of MFS international equity funds, and 80% of MFS fixed-
income funds delivered results in the top half of their Lipper peer groups.
Our longer-term performance also benefited from our ongoing commitment to the
MFS Original Research(R) process: more than 75% of MFS funds were in the top
half of their respective Lipper categories over the 3-, 5-, and 10-year
periods ended December 31, 2004.
Of course, I cannot offer any guarantees that our performance will repeat
itself. Still, I am confident that the recent enhancements to our investment
process will continue to benefit shareholders in 2005 and beyond.
What I can tell you with certainty is that the way you manage your investments
will determine how well you take advantage of the performance that financial
markets deliver. Historically, individual investors have tended to underperform
the markets. For example, a 2003 study by DALBAR, Inc. showed that over the
nearly two decades from 1984 through 2002, the average U.S. stock investor
earned a 2.6% average annual return at a time when U.S. stocks, as measured by
the Standard & Poor's 500 Stock Index, delivered a 12.2% average annual
return.(1)
This huge discrepancy, in our view, occurred because nonprofessional investors
generally did not adhere to the basic principles followed by most professional
investors: allocate among asset classes, diversify within each asset class, and
rebalance one's portfolio on a routine schedule. I elaborated on this "ADR"
theme in fund reports over the last few months of 2004. For more information on
how to apply a Disciplined Diversification(SM) strategy to your portfolio using
the principles of ADR, I would urge you to contact your own investment
professional. You may also want to refer to information on the subject on our
Web site, MFS.COM.
As always, we appreciate your confidence in MFS, and you can be sure of our
continued commitment to do the best we can to help you pursue your long-term
financial goals.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management
April 15, 2005
It is not possible to invest directly in an index.
Lipper rankings and performance are based on historical average annual returns
of Class A shares, and do not include any sales charges. Past performance is
no guarantee of future results.
Asset allocation and diversification cannot guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
(1) Source: DALBAR July 2003 update to its Quantitative Analysis of Investment
Behavior; DALBAR, Inc., is a financial-services market research firm
headquartered in Boston, MA.
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PORTFOLIO COMPOSITION
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MFS(R) MONEY MARKET FUND
PORTFOLIO STRUCTURE*
[graphic omitted]
Commercial Paper 87.4%
Repurchase Agreements 5.1%
Government and Agency 3.9%
Certificates of Deposit 3.8%
Other Assets Less Liabilities -0.2%
SHORT TERM CREDIT**
Average Quality Short Term Bonds*** A-1
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All holdings are rated "A-1"
MATURITY BREAKDOWN*
0 to 29 Days 56.6%
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30 to 59 Days 25.2%
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60 to 89 Days 18.4%
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Other Assets Less Liabilities -0.2%
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MFS(R) GOVERNMENT MONEY MARKET FUND
PORTFOLIO STRUCTURE*
[graphic omitted]
Government and Agency 80.2%
Repurchase Agreements 19.7%
Other Assets Less Liabilities 0.1%
SHORT TERM CREDIT**
Average Quality Short Term Bonds*** A-1
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All holdings are rated "A-1"
MATURITY BREAKDOWN*
0 to 29 Days 52.1%
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30 to 59 Days 40.3%
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60 to 89 Days 7.5%
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Other Assets Less Liabilities 0.1%
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* Both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable, are included in this graphical
representation.
** Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. If not rated by any of the three
agencies, the security is considered Not Rated. U.S. Treasuries and U.S.
Agency securities are included in the "A-1"-rating category. Percentages
are based on the total market value of investments as of 2/28/05.
*** The Portfolio Average Credit Quality rating is based upon a market weighted
average of portfolio holdings.
From time to time, "Other Assets Less Liabilities" may be negative due to
timing of cash receipts.
Percentages are based on net assets as of 2/28/05, unless otherwise noted.
The portfolios are actively managed, and current holdings may be different.
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MANAGEMENT REVIEW
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SUMMARY OF RESULTS
For the six months ended February 28, 2005, the MFS Money Market Fund provided
a total return of 0.83%. At period-end, the fund's seven-day yields with and
without waiver were 1.88% and 1.59%, respectively. The yield quotation is based
on the latest seven days ended with dividends annualized, and more closely
reflects the fund's current earnings than does the total return quotation. The
fund's investment objective is to seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity. The fund
invests in U.S. dollar denominated money market instruments such as, U.S.
government securities, repurchase agreements collateralized by U.S. government
securities, certificates of deposit, bankers' acceptances and other bank
obligations, commercial paper, and other short-term obligations.
For the same period, the MFS Government Money Market Fund provided a total
return of 0.79%. At period-end, the fund's seven-day yields with and without
waiver were 2.02% and 1.67%, respectively. The fund's investment objective is
to seek as high a level of current income as is considered consistent with the
preservation of capital and liquidity. Under normal market conditions, the fund
invests at least 80% of its net assets in U.S. government securities, U.S.
Treasury obligations, and obligations issued or guaranteed by U.S. government
agencies, authorities or instrumentalities.
FACTORS IMPACTING PERFORMANCE
For the period as a whole, the U.S. yield curve flattened as interest rates on
the short end of the curve moved up while rates on the long end were flat to
down.
During the period, we maintained our weighted average maturity positions for
both funds, ending the period with a maturity of 33 days for MFS Money Market
Fund and 30 days for MFS Government Money Market Fund. Essentially, we
positioned the portfolios in such a way as to minimize our interest rate risk
as we anticipated that short-term rates would continue to rise for some time.
FUND POSITIONING
As of February 28, 2005, approximately 87% of the MFS Money Market Fund's net
assets were invested in high-quality commercial paper. The balance of the
portfolio was invested in repurchase agreements collateralized by U.S.
government agency notes, certificates of deposit, and discount agency notes.
At period-end, approximately 80% of the MFS Government Money Market Fund's net
assets were invested in U.S. government securities and obligations issued or
guaranteed by U.S. government agencies, authorities or instrumentalities. The
balance of the portfolio was invested in repurchase agreements collateralized
by U.S. government agency notes.
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 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 as 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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PERFORMANCE SUMMARY THROUGH 2/28/05
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Because mutual funds are designed for investors with long-term goals, we have
provided total returns as well as the current 7-day yield 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.)
An investment in either of the funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the funds seek to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in either of these funds.
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. HIGH
SHORT-TERM RETURNS FOR ANY PERIOD MAY BE AND LIKELY WERE ATTRIBUTABLE TO
FAVORABLE MARKET CONDITIONS DURING THAT PERIOD, WHICH MAY NOT BE REPEATABLE.
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 MFS GOVERNMENT MONEY MARKET FUND
6-month total return: 0.83% 6-month total return: 0.79%
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7-day current yield with waiver: 1.88% 7-day current yield with waiver: 2.02%
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7-day current yield without 7-day current yield without
waiver: 1.59% waiver: 1.67%
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Yields quoted are based on the latest seven days ended as of February 28, 2005,
with dividends annualized. The yield quotation more closely reflects the
current earnings of the portrfolios than a total return quotation would.
NOTES TO PERFORMANCE SUMMARY
Shares of the funds can be purchased at net asset value without a sales charge.
Unless otherwise indicated, performance results reflect any applicable expense
subsidies and waivers in effect during the periods shown. Subsidies and fee
waivers may be imposed to enhance a portfolio's yield during periods when the
portfolio's operating expenses have a significant impact on the portfolio's
yield due to lower interest rates. Without such subsidies and waivers the
portfolio's performance results would be less favorable. Please see the
prospectus and financial statements for complete details.
KEY RISK CONSIDERATIONS
MFS(R) MONEY MARKET FUND
Money market instruments provide opportunities for income with low credit risk,
but may result in a lower yield than would be available from debt obligations
of a lower quality or longer term. Investors should note that while securities
issued by certain U.S. government agencies or instrumentalities are guaranteed
by the U.S. government, securities issued by many U.S. government agencies are
not guaranteed by the U.S. government.
The portfolio may invest in foreign and/or emerging markets securities, which
are more susceptible to interest rate, currency exchange rate, economic, and
political risks.
The portfolio may invest in municipal bonds that are general obligations backed
by the full faith and credit of the municipal issuer. The portfolio may also
invest in municipal bonds called revenue obligations which are subject to a
higher degree of credit risk than general obligations. The prices of these
securities will decline when interest rates rise and increase when rates fall.
In addition, municipal securities are subject to credit (failure to make timely
principal or interest payments) and maturity (longer maturity dates increase
security price fluctuations) risks.
MFS(R) GOVERNMENT MONEY MARKET FUND
Money market instruments provide opportunities for income with low credit risk,
but may result in a lower yield than would be available from debt obligations
of a lower quality or longer term. Investors should note that while securities
issued by certain U.S. government agencies or instrumentalities are guaranteed
by the U.S. government, securities issued by many U.S. government agencies are
not guaranteed by the U.S. government.
As with any fixed-income security, securities issued by certain U.S. government
agencies or instrumentalities are subject to the risk that the issuer will
default on principal and interest payments. It may be difficult to enforce
rights against the assets underlying these securities in the case of default.
Investors should note that many U.S. government securities in which the fund
may invest are not supported by the full faith and credit of the United States
Government (including securities issued by government sponsored enterprises and
by certain U.S. federal agencies and instrumentalities) and involve increased
credit risk.
Please see the prospectus for further information regarding these and other
risk considerations.
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EXPENSE TABLES MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
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FUND EXPENSES BORNE BY SHAREHOLDERS DURING THE PERIOD,
SEPTEMBER 1, 2004, THROUGH FEBRUARY 28, 2005.
As a shareholder of the funds, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and
(2) ongoing costs, including management fees; distribution and service
(12b-1) fees; and other fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the funds and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period, September 1, 2004 through
February 28, 2005.
ACTUAL EXPENSES
The first line of the tables on the following page provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the tables on the following page provides information about
hypothetical account values and hypothetical expenses based on the fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the funds' actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the funds and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line of the table is
useful in comparing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
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Expenses
Annualized Beginning Ending Paid During
Expense Account Value Account Value Period**
Ratio 9/01/04 2/28/05 9/01/04-2/28/05
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MFS MONEY MARKET FUND
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Actual 0.43% $1,000 $1,008 $2.14
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Hypothetical* 0.43% $1,000 $1,023 $2.16
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Expenses
Annualized Beginning Ending Paid During
Expense Account Value Account Value Period**
Ratio 9/01/04 2/28/05 9/01/04-2/28/05
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MFS GOVERNMENT
MONEY MARKET FUND
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Actual 0.47% $1,000 $1,008 $2.34
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Hypothetical* 0.47% $1,000 $1,022 $2.36
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* 5% fund return per year before expenses.
** Expenses paid is equal to each fund's annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year. Expenses paid do not include any
applicable sales charges (loads) or redemption fees. If these transaction
costs had been included, your costs would have been higher.
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PORTFOLIO OF INVESTMENTS (unaudited) - 2/28/05
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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.
MFS(R) Money Market Fund
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ISSUER PAR AMOUNT $ VALUE
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Certificates of Deposit - 3.8%
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Societe Generale NA, Inc., 2.78%, due 5/23/05,
at Amortized Cost and Value $29,355,000 $29,355,000
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Commercial Paper - 87.4%<
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American Express Credit Corp., 2.48%, due 3/14/05 $10,000,000 $9,991,044
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American General Finance Corp., 2.52%, due 3/24/05 9,350,000 9,334,947
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Bank of America Corp., 2.62%, due 4/11/05 19,120,000 19,062,947
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Barton Capital LLC, 2.53%, due 3/07/05 17,063,000 17,055,805
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Barton Capital LLC, 2.54%, due 3/16/05 13,620,000 13,605,586
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Blue Ridge Asset Funding, 2.47%, due 3/07/05 31,073,000 31,060,208
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CRC Funding LLC, 2.48%, due 3/21/05 30,000,000 29,958,667
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Citibank Credit Card Issuance Trust, 2.55%, due 3/11/05 6,600,000 6,595,325
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Citibank Credit Card Issuance Trust, 2.53%, due 3/24/05 24,460,000 24,420,463
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Citicorp, 2.535%, due 3/10/05 31,040,000 31,020,328
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Dexia Delaware LLC, 2.34%, due 3/02/05 31,654,000 31,651,942
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FCAR Owner Trust, 2.46%, due 3/07/05 30,000,000 29,987,700
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Falcon Asset Securitization Corp., 2.6%, due 3/28/05 16,995,000 16,961,860
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General Electric Capital Corp., 2.6%, due 4/11/05 13,360,000 13,320,440
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General Electric Capital Corp., 2.75%, due 5/18/05 17,485,000 17,380,819
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Govco, Inc., 2.63%, due 4/25/05 14,100,000 14,043,345
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Govco, Inc., 2.75%, due 5/17/05 7,425,000 7,381,327
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HBOS Treasury Services PLC, 2.79%, due 5/24/05 30,710,000 30,510,078
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ING America Insurance Holdings, Inc., 2.57%,
due 4/05/05 9,635,000 9,610,926
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ING America Insurance Holdings, Inc., 2.47%,
due 4/14/05 21,425,000 21,360,320
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Jupiter Securitization Corp., 2.53%, due 3/09/05 5,152,000 5,149,103
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Jupiter Securitization Corp., 2.43%, due 3/15/05 20,504,000 20,484,624
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Jupiter Securitization Corp., 2.63%, due 4/11/05 5,090,000 5,074,754
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MetLife Funding, Inc., 2.75%, due 5/20/05 30,890,000 30,701,228
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Morgan Stanley, Inc., 2.53%, due 3/10/05 30,680,000 30,660,595
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Nestle Capital Corp., 2.66%, due 5/03/05 25,000,000 24,883,625
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New Center Asset Trust, 2.63%, due 4/12/05 $19,000,000 $18,941,702
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Pfizer, Inc., 2.51%, due 3/23/05 10,452,000 10,435,968
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SBC Communications, Inc., 2.47%, due 3/08/05 14,585,000 14,577,995
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SBC Communications, Inc., 2.48%, due 3/14/05 16,530,000 16,515,196
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Svenska Handelsbanken Inc., 2.6%, due 4/07/05 30,000,000 29,919,833
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Thunder Bay Funding LLC, 2.54%, due 3/15/05 - 3/22/05 11,658,000 11,644,678
- ----------------------------------------------------------------------------------------------
UBS Finance Delaware LLC, 2.63%, due 4/18/05 30,825,000 30,716,907
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Wells Fargo & Co., 2.53%, due 3/24/05 30,800,000 30,750,215
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Total Commercial Paper, at Amortized Cost and Value $664,770,500
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U.S. Government Agency Obligations - 3.9%
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Fannie Mae, 2.465%, due 4/20/05, at Amortized Cost
and Value< $30,000,000 $29,897,292
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Repurchase Agreement - 5.1%
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Goldman Sachs, 2.61%, dated 2/28/05, due 3/01/05, total to be
received $38,518,792 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account), at
Cost $38,516,000 $38,516,000
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Total Investments, at Amortized Cost and Value $762,538,792
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Other Assets, Less Liabilities - (0.2)% (1,586,186)
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Net Assets - 100.0% $760,952,606
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SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
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PORTFOLIO OF INVESTMENTS (unaudited) - 2/28/05
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MFS(R) Government Money Market Fund
- ----------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ----------------------------------------------------------------------------------------------
U.S. Government Agency Obligations - 80.2%<
- ----------------------------------------------------------------------------------------------
Fannie Mae, 2.28%, due 3/02/05 $1,200,000 $1,199,924
- ----------------------------------------------------------------------------------------------
Fannie Mae, 2.286%, due 3/03/05 1,200,000 1,199,848
- ----------------------------------------------------------------------------------------------
Fannie Mae, 2.287%, due 3/01/05 1,200,000 1,200,000
- ----------------------------------------------------------------------------------------------
Fannie Mae, 2.41%, due 3/15/05 900,000 899,157
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Fannie Mae, 2.44%, due 3/28/05 2,000,000 1,996,340
- ----------------------------------------------------------------------------------------------
Fannie Mae, 2.465%, due 4/20/05 1,000,000 996,577
- ----------------------------------------------------------------------------------------------
Fannie Mae, 2.74%, due 5/18/05 2,500,000 2,485,158
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Federal Home Loan Bank, 2.45%, due 3/02/05 1,500,000 1,499,898
- ----------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.51%, due 4/13/05 1,500,000 1,495,503
- ----------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.56%, due 4/20/05 2,000,000 1,992,889
- ----------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.58%, due 4/27/05 1,000,000 995,915
- ----------------------------------------------------------------------------------------------
Freddie Mac, 2.43%, due 3/22/05 1,650,000 1,647,661
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Freddie Mac, 2.44%, due 3/22/05 1,100,000 1,098,434
- ----------------------------------------------------------------------------------------------
Freddie Mac, 2.45%, due 4/26/05 1,500,000 1,494,283
- ----------------------------------------------------------------------------------------------
Freddie Mac, 2.52%, due 4/04/05 1,400,000 1,396,668
- ----------------------------------------------------------------------------------------------
Freddie Mac, 2.53%, due 4/04/05 1,900,000 1,895,460
- ----------------------------------------------------------------------------------------------
Freddie Mac, 2.57%, due 4/20/05 2,100,000 2,092,504
- ----------------------------------------------------------------------------------------------
Freddie Mac, 2.59%, due 4/25/05 1,000,000 996,043
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Total U.S. Government Agency Obligations, at Amortized Cost
and Value $26,582,262
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Repurchase Agreements - 19.7%
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Goldman Sachs, 2.61%, dated 2/28/05, due 3/01/05, total to be
received $3,302,239 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account) $3,302,000 $3,302,000
- ----------------------------------------------------------------------------------------------
Morgan Stanley, 2.61%, dated 2/28/05, due 3/01/05, total to be
received $3,238,235 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account) 3,238,000 3,238,000
- ----------------------------------------------------------------------------------------------
Total Repurchase Agreements, at Cost $6,540,000
- ----------------------------------------------------------------------------------------------
Total Investments, at Amortized Cost and Value $33,122,262
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.1% 30,958
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $33,153,220
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Portfolio Footnotes:
< The rates shown represent annualized yields at time of purchase.
SEE NOTES TO FINANCIAL STATEMENTS
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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 2/28/05
MFS MONEY MARKET FUND
ASSETS
Investments, at amortized cost and value $762,538,792
- --------------------------------------------------------------------------------------------------
Cash 607
- --------------------------------------------------------------------------------------------------
Receivable for fund shares sold 2,710,766
- --------------------------------------------------------------------------------------------------
Interest receivable 18,660
- --------------------------------------------------------------------------------------------------
Other assets 3,397
- --------------------------------------------------------------------------------------------------
Total assets $765,272,222
- --------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $25,112
- --------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 3,972,695
- --------------------------------------------------------------------------------------------------
Payable to affiliates
- --------------------------------------------------------------------------------------------------
Management fee 12,509
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 82,478
- --------------------------------------------------------------------------------------------------
Administrative fee 870
- --------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 225,952
- --------------------------------------------------------------------------------------------------
Total liabilities $4,319,616
- --------------------------------------------------------------------------------------------------
Net assets $760,952,606
- --------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Net assets (represented by paid-in capital) $760,952,606
- --------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 760,952,606
- --------------------------------------------------------------------------------------------------
Net asset value per share
(net assets of $760,952,606 / 760,952,606 shares
of beneficial interest outstanding) $1.00
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Statement of Assets and Liabilities (unaudited) - continued
AT 2/28/05
MFS GOVERNMENT MONEY MARKET FUND
ASSETS
Investments, at amortized cost and value $26,582,262
- --------------------------------------------------------------------------------------------------
Repurchase agreements, at value 6,540,000
- --------------------------------------------------------------------------------------------------
Total investments, at amortized cost and value $33,122,262
- --------------------------------------------------------------------------------------------------
Cash 464
- --------------------------------------------------------------------------------------------------
Receivable for fund shares sold 157,729
- --------------------------------------------------------------------------------------------------
Interest receivable 474
- --------------------------------------------------------------------------------------------------
Other assets 262
- --------------------------------------------------------------------------------------------------
Total assets $33,281,191
- --------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $1,617
- --------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 89,509
- --------------------------------------------------------------------------------------------------
Payable to affiliates
- --------------------------------------------------------------------------------------------------
Management fee 528
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 2,405
- --------------------------------------------------------------------------------------------------
Administrative fee 36
- --------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 33,876
- --------------------------------------------------------------------------------------------------
Total liabilities $127,971
- --------------------------------------------------------------------------------------------------
Net assets $33,153,220
- --------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Net assets (represented by paid-in capital) $33,153,220
- --------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 33,153,220
- --------------------------------------------------------------------------------------------------
Net asset value per share
(net assets of $33,153,220 / 33,153,220 shares
of beneficial interest outstanding) $1.00
- --------------------------------------------------------------------------------------------------
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 2/28/05
MFS MONEY MARKET FUND
NET INVESTMENT INCOME
Interest income $8,129,325
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $1,804,295
- --------------------------------------------------------------------------------------------------
Trustees' compensation 13,182
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 730,844
- --------------------------------------------------------------------------------------------------
Administrative fee 21,917
- --------------------------------------------------------------------------------------------------
Custodian fee 130,228
- --------------------------------------------------------------------------------------------------
Printing 1,383
- --------------------------------------------------------------------------------------------------
Postage 2,645
- --------------------------------------------------------------------------------------------------
Auditing fees 14,190
- --------------------------------------------------------------------------------------------------
Legal fees 14,157
- --------------------------------------------------------------------------------------------------
Miscellaneous 175,608
- --------------------------------------------------------------------------------------------------
Total expenses $2,908,449
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (113,060)
- --------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (1,214,598)
- --------------------------------------------------------------------------------------------------
Net expenses $1,580,791
- --------------------------------------------------------------------------------------------------
Net investment income $6,548,534
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Statement of Operations (unaudited) - continued
FOR SIX MONTHS ENDED 2/28/05
MFS GOVERNMENT MONEY MARKET FUND
NET INVESTMENT INCOME
Interest income $346,445
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $85,470
- --------------------------------------------------------------------------------------------------
Trustees' compensation 2,532
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 23,255
- --------------------------------------------------------------------------------------------------
Administrative fee 939
- --------------------------------------------------------------------------------------------------
Custodian fee 6,609
- --------------------------------------------------------------------------------------------------
Printing 245
- --------------------------------------------------------------------------------------------------
Postage 212
- --------------------------------------------------------------------------------------------------
Auditing fees 13,927
- --------------------------------------------------------------------------------------------------
Legal fees 1,297
- --------------------------------------------------------------------------------------------------
Miscellaneous 5,928
- --------------------------------------------------------------------------------------------------
Total expenses $140,414
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (5,294)
- --------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (59,623)
- --------------------------------------------------------------------------------------------------
Net expenses $75,497
- --------------------------------------------------------------------------------------------------
Net investment income $270,948
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS 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
2/28/05 8/31/04
(UNAUDITED)
MFS MONEY MARKET FUND
CHANGE IN NET ASSETS
FROM OPERATIONS
Net investment income declared as distributions
to shareholders $6,548,534 $5,864,552
- ---------------------------------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS
Net proceeds from sale of shares $272,656,526 $1,527,905,751
- ---------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
reinvestment of distributions 6,289,384 5,412,272
- ---------------------------------------------------------------------------------------------------
Cost of shares reacquired (346,915,074) (2,827,855,473)
- ------------------------------------------------------ ------------- ---------------
Change in net assets from fund share transactions $(67,969,164) $(1,294,537,450)
- ------------------------------------------------------ ------------- ---------------
NET ASSETS
At beginning of period $828,921,770 $2,123,459,220
- ---------------------------------------------------------------------------------------------------
At end of period $760,952,606 $828,921,770
- ---------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Statements of Changes in Net Assets - continued
SIX MONTHS ENDED YEAR ENDED
2/28/05 8/31/04
(UNAUDITED)
MFS GOVERNMENT MONEY MARKET FUND
CHANGE IN NET ASSETS
FROM OPERATIONS
Net investment income declared as distributions
to shareholders $270,948 $515,646
- ---------------------------------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS
Net proceeds from sale of shares $13,080,502 $691,127,677
- ---------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
reinvestment of distributions 256,819 467,294
- ---------------------------------------------------------------------------------------------------
Cost of shares reacquired (19,971,049) (784,696,137)
- ------------------------------------------------------ ------------- ---------------
Change in net assets from fund share transactions $(6,633,728) $(93,101,166)
- ------------------------------------------------------ ------------- ---------------
NET ASSETS
At beginning of period $39,786,948 $132,888,114
- ---------------------------------------------------------------------------------------------------
At end of period $33,153,220 $39,786,948
- ---------------------------------------------------------------------------------------------------
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 YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------
MFS MONEY MARKET FUND 2/28/05 2004 2003 2002 2001 2000
(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(S) $0.01 $0.01 $0.01 $0.02 $0.05 $0.05
- --------------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.01) $(0.01) $(0.01) $(0.02) $(0.05) $(0.05)
- --------------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 0.83++ 0.64 0.81 1.67 4.97 5.59
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 0.43+ 0.54 0.60 0.68 0.67 0.66
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.66+ 0.62 0.80 1.66 4.86 5.38
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000,000 Omitted) $761 $829 $2,123 $1,962 $1,461 $913
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If these fees had been
incurred by the fund, the net investment income per share and the ratios would have been:
Net investment income $0.01* $0.00+++ $-- $-- $-- $--
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 0.74+ 0.67 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.35+ 0.49 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
* The waiver impact per share was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
MFS GOVERNMENT ENDED -----------------------------------------------------------------------
MONEY MARKET FUND 2/28/05 2004 2003 2002 2001 2000
(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(S) $0.01 $0.01 $0.01 $0.01 $0.05 $0.05
- --------------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.01) $(0.01) $(0.01) $(0.01) $(0.05) $(0.05)
- --------------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 0.79++ 0.54 0.66 1.51 4.71 5.22
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 0.47+ 0.59 0.72 0.82 0.90 0.86
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.57+ 0.49 0.61 1.56 4.55 5.05
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $33,153 $39,787 $132,888 $54,741 $62,078 $44,038
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If these fees had been
incurred by the fund, the net investment income per share and the ratios would have been:
Net investment income $0.01* $0.00+++ $-- $-- $-- $--
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 0.82+ 0.74 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.22+ 0.34 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
* Waiver impact was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense 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 U.S.
generally accepted accounting principles 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.
Each fund's 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 - Each fund may enter into repurchase agreements with
institutions that the 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 fund 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 U.S. generally accepted accounting
principles and federal tax regulations, respectively.
FEES PAID INDIRECTLY - Each fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. These amounts, for the six months ended February 28, 2005, are shown as a
reduction of total expenses on each fund's Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - Each 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 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, 2004
and August 31, 2003 was as follows:
GOVERNMENT MONEY
MONEY MARKET FUND MARKET FUND
------------------------ ----------------------
8/31/04 8/31/03 8/31/04 8/31/03
Distributions declared
from ordinary income $5,864,552 $15,391,590 $515,646 $772,690
- -------------------------------------------------------------------------------
As of August 31,2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
GOVERNMENT MONEY
MONEY MARKET FUND MARKET FUND
------------------- ----------------------
8/31/04 8/31/04
Undistributed ordinary income $80,502 $2,209
- ------------------------------------------------------------------------------
Capital loss carryforward (8,329) --
- ------------------------------------------------------------------------------
Other temporary differences 72,173 (9,922)
- ------------------------------------------------------------------------------
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 the 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.
Each fund's 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 $300 million of average net assets 0.40%
----------------------------------------------------------
Average net assets in excess of $1 billion 0.35%
----------------------------------------------------------
As part of a settlement agreement with the New York Attorney General concerning
market timing and related matters (See Legal Proceedings footnote), 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, which is shown
as a reduction of total expenses in the Statement of Operations. 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.
Management fees incurred for the six months ended February 28, 2005 were an
effective rate of 0.15% of average daily net assets on an annualized basis for
each fund.
The funds pay compensation to their Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, 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 fund from MFS. Certain officers
and Trustees of the funds are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC). The funds have
an unfunded defined benefit plan for retired Independent Trustees. Included in
Trustees' compensation is a pension expense of $2,954 and $582 for retired
Independent Trustees for the six months ended February 28, 2005 for the MFS
Money Market Fund and MFS Government Money Market Fund, respectively.
These funds and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. The
funds paid MFS an administrative fee up to the following annual percentage
rates of the funds' average daily net assets:
9/01/04
THROUGH
EFFECTIVE DATE 2/28/05 3/01/05
First $2 billion 0.01120% 0.01626%
- ----------------------------------------------------------------------------
Next $2.5 billion 0.00832% 0.01206%
- ----------------------------------------------------------------------------
Next $2.5 billion 0.00032% 0.00056%
- ----------------------------------------------------------------------------
In excess of $7 billion 0.00000% 0.00000%
- ----------------------------------------------------------------------------
The March 1, 2005 rates were not effective during the current reporting period.
For the six months ended February 28, 2005, the MFS Money Market Fund and the
MFS Government Money Market Fund paid MFS $21,917 and $939, equivalent to
0.00556% and 0.00543% of average daily net assets, respectively, to partially
reimburse MFS for the costs of providing administrative services.
DISTRIBUTOR - Certain shares acquired through an exchange may be subject to a
CDSC upon redemption depending on when the shares exchanged were originally
purchased. Contingent deferred sales charges imposed during the six months
ended February 28, 2005 for the MFS Money Market Fund and MFS Government Money
Market Fund were $2,219 and $0, respectively.
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, which is calculated as a percentage of the funds'
average daily net assets is set periodically under the supervision of the
funds' Trustees. For the period September 1, 2004 through December 31, 2004,
each fund was charged up to 0.0861% of its average daily net assets. For the
period January 1, 2005 through February 28, 2005, each fund was charged up to
0.1035% of its average daily net assets. For the six months ended February 28,
2005, the funds paid MFSC a fee of $352,543 and $15,368 for shareholder
services which equated to 0.0894% and 0.0889% of the average daily net assets
for the MFS Money Market Fund and MFS Government Money Market Fund,
respectively. Effective March 1, 2005, each fund is charged up to 0.1159% of
its average daily net assets. Shareholder service costs include out of pocket
expenses and sub accounting services expenses paid by MFSC on behalf of the
funds and subsequently reimbursed to MFSC which amounted to $158,105 and $3,412
for the MFS Money Market Fund and the MFS Government Money Market Fund,
respectively, and other costs paid by the funds directly to unaffiliated
vendors for the six months ended February 28, 2005.
(4) PORTFOLIO SECURITIES
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements, for MFS Money Market Fund aggregated
$6,061,137,698 and $6,166,997,127 respectively.
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements, for MFS Government Money Market Fund
aggregated $229,511,546 and $231,576,000 respectively.
(5) SHARES OF BENEFICIAL INTEREST
Each fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest.
The MFS Money Market Fund is one of several MFS mutual funds in which the MFS
Asset Allocation Funds may invest. The MFS Asset Allocation Funds do not invest
in the underlying MFS funds for the purpose of exercising management or
control. At the end of the period, the MFS Conservative Allocation Fund and MFS
Moderate Allocation Fund were the owners of record of approximately 7% and 10%,
respectively, of the total outstanding shares.
(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 Federal
Reserve funds 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 MFS Money Market Fund and MFS Government Money Market Fund for
the six months ended February 28, 2005 was $2,405 and $86 respectively and is
included in miscellaneous expense. The funds had no significant borrowings
during the six months ended February 28, 2005.
(7) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). 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 developed by an
independent distribution consultant. The brokerage allocation practices which
were the subject of this proceeding were discontinued by MFS in November 2003.
The agreement with the SEC is reflected in an order of the SEC. The SEC
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 SEC
settlement order states that MFS had in place policies designed to obtain best
execution of all MFS fund trades. As part of the settlement, MFS retained an
independent compliance consultant to review the completeness of its current
policies and practices regarding disclosure to MFS fund trustees and to MFS
fund shareholders of strategic alliances between MFS or its affiliates and
broker-dealers and other financial intermediaries who support the sale of MFS
fund shares. Pursuant to the SEC order, on July 28, 2004, MFS transferred these
settlement amounts to the SEC, and those MFS funds entitled to these settlement
amounts accrued an estimate of their pro rata portion of these amounts. The
final distribution plan was approved by the SEC on January 21, 2005 and the
affected MFS funds received the payment on February 16, 2005.
In addition, in February, 2004, MFS reached agreement with the 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 open-end retail fund ("MFS
retail funds") prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS retail funds was false and misleading because, although the
prospectuses for those funds in the regulators' view indicated that they
prohibited market timing, MFS did not limit trading activity in 11 domestic
large cap stock, high grade bond and money market retail funds. MFS' former
Chief Executive Officer and former President also reached agreement with the
SEC in which they agreed to, among other terms, monetary fines and temporary
suspensions from association with any investment adviser or registered
investment company. These individuals have resigned their positions with, and
will not be returning to, MFS and the MFS funds. 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 MFS 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 Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with 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 retained $250,000 and $750,000 was contributed
to the North American Securities Administrators Association's Investor
Protection Trust). In addition, under the terms of the February Settlements,
MFS is in the process of adopting certain governance changes and reviewing its
policies and procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various
MFS funds, certain current and/or former 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 MFS funds during specified periods, as ERISA
actions by participants in certain retirement plan accounts on behalf of those
accounts, or as derivative actions on behalf of the MFS funds. The lawsuits
relating to market timing and related matters have been transferred to, and
consolidated before, the United States District Court for the District of
Maryland, as part of a multi-district litigation of market timing and related
claims involving several other fund complexes (In re Mutual Funds Investment
Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner),
No. 1:04-md-15863 (transfer began March 19, 2004)). The market timing cases
related to the MFS complex are Riggs v. MFS et al., Case No. 04-cv-01162-JFM
(direct), Hammerslough v. MFS et al., Case No. 04-md-01620 (derivative) and
Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA). The plaintiffs in
these consolidated lawsuits generally seek injunctive relief including removal
of the named Trustees, adviser and distributor, rescission of contracts and
12b-1 Plans, disgorgement of fees and profits, monetary damages, punitive
damages, attorney's fees and costs and other equitable and declaratory relief.
Two lawsuits alleging improper brokerage allocation practices and excessive
compensation are pending in the United States District Court for the District
of Massachusetts (Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584
(GAO) (a consolidated action) and Marcus Dumond, et al. v. Massachusetts
Financial Servs. Co., et al., No. 04cv11458 (GAO)). The plaintiffs in these
lawsuits generally seek compensatory damages, punitive damages, recovery of
fees, rescission of contracts, an accounting, restitution, declaratory relief,
equitable and/or injunctive relief and attorney's fees and costs. The various
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 (ii) received excessive compensation as fiduciaries to the MFS funds,
or (iii) permitted or acquiesced in the improper use of fund assets by MFS to
support the distribution of MFS 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. 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 MFS 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 certain MFS retail funds for damages that they
allegedly sustained as a result of market timing or late trading in certain of
the MFS retail funds, and distributed $50 million to affected MFS funds to
compensate those funds based upon the amount of brokerage commissions allocated
in recognition of MFS 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 MFS 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 MFS funds.
- -------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
- -------------------------------------------------------------------------------
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 Web site at
http://www.sec. gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
- -------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
- -------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
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.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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
- -------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MCM-SEM-04/05 50M
MFS(R) MID CAP GROWTH FUND 2/28/05
SEMIANNUAL REPORT
- -------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
THIS REPORT HAS BEEN PREPARED FOR THE GENERAL INFORMATION TO SHAREHOLDERS. IT
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
SEMIANNUAL REPORT
LETTER FROM THE CEO 1
------------------------------------------------------
PORTFOLIO COMPOSITION 4
------------------------------------------------------
MANAGEMENT REVIEW 5
------------------------------------------------------
PERFORMANCE SUMMARY 7
------------------------------------------------------
EXPENSE TABLE 11
------------------------------------------------------
PORTFOLIO OF INVESTMENTS 13
------------------------------------------------------
FINANCIAL STATEMENTS 18
------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 40
------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 53
------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 53
------------------------------------------------------
CONTACT INFORMATION BACK COVER
------------------------------------------------------
- -------------------------------------------------------------------------------
LETTER FROM THE CEO
- -------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Robert J. Manning]
Last summer and fall, I wrote to you about enhancements that MFS(R) was making
to its investment process. Our goal, as always, was to deliver strong
performance across all asset classes. I am now happy to report to you that
2004 was a very successful year for MFS, relative to our peers in the mutual
fund industry. While there will always be room for improvement, we believe the
enhancements we have made to our investment process resulted in significantly
improved performance across the MFS Family of Funds(R).
You may remember some of the enhancements I outlined last year. They included
o increasing collaboration and information sharing among our investment
personnel across asset classes, through an Investment Management Committee
with members from our Domestic Equity, International Equity, Fixed Income,
and Quantitative Research teams
o increasing the number of analysts supporting our portfolio managers and
doubling the average investment experience of our domestic equity analyst
staff
o making additional use of our most-seasoned portfolio managers to mentor
research analysts
o combining more quantitative, top-down risk control and security analysis
with our traditional bottom-up research process
o opening a research office in Mexico City to complement our existing staff
in Boston, London, Singapore, and Tokyo
The effect of these enhancements, I believe, is evident in the 2004 performance
of our funds. For the 12 months ended December 31, 2004, 80% of MFS domestic
equity funds, 100% of MFS international equity funds, and 80% of MFS fixed-
income funds delivered results in the top half of their Lipper peer groups.
Our longer-term performance also benefited from our ongoing commitment to the
MFS Original Research(R) process: more than 75% of MFS funds were in the top
half of their respective Lipper categories over the 3-, 5-, and 10-year periods
ended December 31, 2004.
Of course, I cannot offer any guarantees that our performance will repeat
itself. Still, I am confident that the recent enhancements to our investment
process will continue to benefit shareholders in 2005 and beyond.
What I can tell you with certainty is that the way you manage your investments
will determine how well you take advantage of the performance that financial
markets deliver. Historically, individual investors have tended to underperform
the markets. For example, a 2003 study by DALBAR, Inc. showed that over the
nearly two decades from 1984 through 2002, the average U.S. stock investor
earned a 2.6% average annual return at a time when U.S. stocks, as measured by
the Standard & Poor's 500 Stock Index, delivered a 12.2% average annual
return.(1)
This huge discrepancy, in our view, occurred because nonprofessional investors
generally did not adhere to the basic principles followed by most professional
investors: allocate among asset classes, diversify within each asset class, and
rebalance one's portfolio on a routine schedule. I elaborated on this "ADR"
theme in fund reports over the last few months of 2004. For more information on
how to apply a Disciplined Diversification(SM) strategy to your portfolio using
the principles of ADR, I would urge you to contact your own investment
professional. You may also want to refer to information on the subject on our
Web site, MFS.COM.
As always, we appreciate your confidence in MFS, and you can be sure of our
continued commitment to do the best we can to help you pursue your long-term
financial goals.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management
April 15, 2005
It is not possible to invest directly in an index.
Lipper rankings and performance are based on historical average annual returns
of Class A shares, and do not include any sales charges. Past performance is no
guarantee of future results.
Asset allocation and diversification cannot guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
(1) Source: DALBAR July 2003 update to its Quantitative Analysis of Investment
Behavior; DALBAR, Inc., is a financial-services market research firm
headquartered in Boston, MA.
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- -------------------------------------------------------------------------------
PORTFOLIO STRUCTURE
Stocks 98.7%
Cash & Other Net Assets 1.3%
TOP TEN HOLDINGS
Getty Images, Inc. 2.5%
------------------------------------------------
Legg Mason, Inc. 2.5%
------------------------------------------------
Amdocs Ltd. 2.1%
------------------------------------------------
Waters Corp. 2.1%
------------------------------------------------
Medicis Pharmaceutical Corp., "A" 2.0%
------------------------------------------------
Genzyme Corp. 2.0%
------------------------------------------------
Cytyc Corp. 2.0%
------------------------------------------------
American Tower Corp., "A" 1.8%
------------------------------------------------
VERITAS Software Corp. 1.7%
------------------------------------------------
Citadel Broadcasting Corp. 1.7%
------------------------------------------------
EQUITY SECTORS
Health Care 25.0%
------------------------------------------------
Technology 22.5%
------------------------------------------------
Leisure 17.1%
------------------------------------------------
Miscellaneous 12.1%
------------------------------------------------
Retailing 5.1%
------------------------------------------------
Financial Services 5.0%
------------------------------------------------
Utilities & Communications 3.6%
------------------------------------------------
Energy 3.1%
------------------------------------------------
Industrial Goods & Services 2.3%
------------------------------------------------
Transportation 1.5%
------------------------------------------------
Basic Materials 1.4%
------------------------------------------------
Percentages are based on net assets as of 2/28/05.
The portfolio is actively managed, and current holdings may be different.
- -------------------------------------------------------------------------------
MANAGEMENT REVIEW
- -------------------------------------------------------------------------------
SUMMARY OF RESULTS
For the six months ended February 28, 2005, Class A shares of the MFS Mid Cap
Growth Fund provided a total return of 12.93%, not including sales charges. In
comparison, the fund's benchmark, the Russell MidCap Growth Index, returned
17.94%. The fund's investment objective is long-term growth of capital. The
fund invests, under normal market conditions, at least 80% of its net assets in
common stocks and related securities, such as preferred stocks, convertible
securities and depositary receipts for those securities, of companies with
medium market capitalizations which MFS believes have reasonable valuations and
above-average growth potential.
MARKET ENVIRONMENT
Over the period, many measures of global economic growth, including employment
and corporate spending, continued to improve, although we feel that high oil
prices, rising short-term interest rates in the United States, a significant
decline in the value of the U.S. dollar against most major currencies, and
geopolitical uncertainty, impacted markets. But, oil prices pulled back from
their record levels toward the end of 2004 and, in our view, investors seemed
to turn their attention to strong corporate profits and economic growth.
DETRACTORS FROM PERFORMANCE
Stock selection and an overweighted position in the health care sector held
back relative performance. Medical testing company Cytyc Corp., drug company
Medicis Pharmaceutical, medical technology company Millipore, and biotech firms
Genzyme and Gilead Sciences, which is not in the index, were among the fund's
top detractors for the period.
Stock selection in the leisure sector also dampened relative returns. Citadel
Broadcasting was among the fund's top detractors. Stock selection and an
underweighted position in the energy sector also hurt investment results. Our
decision not to hold strong performing XTO Energy, which is in the index,
detracted from relative returns.
Stocks in other sectors that held back relative performance included personal
computer maker Apple Computer and electric power company AES Corp., both
strong-performing companies that we did not own. Our overweight position in
poor-performing JetBlue Airways also hurt performance.
CONTRIBUTORS TO PERFORMANCE
In the financial services sector, strong stock selection provided the greatest
contribution to the portfolio's overall relative performance. Legg Mason was
among the fund's top contributors for the period.
Not holding any stocks in the consumer staples sector boosted relative results,
as the sector underperformed the benchmark.
Stock selection in the basic materials sector also helped the fund's relative
performance. Our position in strong performing agribusiness firm Monsanto,
which is not in the index, aided results. Stocks in other sectors that
contributed to relative returns included technology companies Amdocs, F5
Networks*, and Marvell Technology, which are not in the index, Comverse
Technology, and VERITAS Software. Our overweighted positions in Monster
Worldwide and SpectraSite, an owner and operator of wireless towers, and our
avoidance of health care company Biomet, also helped boost relative
performance.
Respectfully,
/s/ Eric Fischman /s/ Camille Lee
Eric Fischman Camille Lee
Portfolio Manager Portfolio Manager
/s/ David Sette-Ducati
David Sette-Ducati
Portfolio Manager
*Security was not held in the portfolio at period-end.
The views expressed in this report are those of the portfolio management team
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 as 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.
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 2/28/05
- -------------------------------------------------------------------------------
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. (FOR THE MOST
RECENT MONTH-END PERFORMANCE FOR I SHARES, CALL 1-888-808-6374.) 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.
HIGH SHORT-TERM RETURNS FOR ANY PERIOD MAY BE AND LIKELY WERE ATTRIBUTABLE TO
FAVORABLE MARKET CONDITIONS DURING THAT PERIOD, WHICH MAY NOT BE REPEATABLE.
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
inception
Share class date 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 12/01/93 12.93% 2.39% -2.59% -8.75% 9.24%
- ------------------------------------------------------------------------------
B 12/01/93 12.53% 1.62% -3.32% -9.43% 8.41%
- ------------------------------------------------------------------------------
C 8/01/94 12.39% 1.53% -3.32% -9.45% 8.42%
- ------------------------------------------------------------------------------
I 1/02/97 13.04% 2.73% -2.31% -8.50% 9.46%
- ------------------------------------------------------------------------------
R1* 12/31/02 12.85% 2.16% -2.74% -8.83% 9.18%
- ------------------------------------------------------------------------------
R2* 10/31/03 12.60% 1.92% -3.20% -9.36% 8.45%
- ------------------------------------------------------------------------------
529A 7/31/02 12.73% 1.92% -2.81% -8.87% 9.16%
- ------------------------------------------------------------------------------
529B 7/31/02 12.45% 1.37% -3.47% -9.52% 8.35%
- ------------------------------------------------------------------------------
529C 7/31/02 12.45% 1.40% -3.44% -9.51% 8.38%
- ------------------------------------------------------------------------------
- ------------------------
Average annual
- ------------------------
Comparative benchmarks 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
Average mid-cap
growth fund+ 16.91% 7.25% 5.88% -7.13% 9.39%
- ------------------------------------------------------------------------------
Russell MidCap Growth
Index# 17.94% 9.71% 9.36% -7.01% 10.50%
- ------------------------------------------------------------------------------
- ------------------------
Average annual
with sales charge
- ------------------------
Share class
- ------------------------------------------------------------------------------
A 6.44% -3.50% -4.49% -9.82% 8.59%
- ------------------------------------------------------------------------------
B 8.53% -2.38% -4.29% -9.73% 8.41%
- ------------------------------------------------------------------------------
C 11.39% 0.53% -3.32% -9.45% 8.42%
- ------------------------------------------------------------------------------
529A 6.25% -3.94% -4.71% -9.95% 8.51%
- ------------------------------------------------------------------------------
529B 8.45% -2.63% -4.45% -9.82% 8.35%
- ------------------------------------------------------------------------------
529C 11.45% 0.40% -3.44% -9.51% 8.38%
- ------------------------------------------------------------------------------
I, RI and R2 Class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
- ------------------------
Cumulative without
sales charge
- ------------------------
- ------------------------------------------------------------------------------
A 12.93% 2.39% -7.56% -36.72% 141.90%
- ------------------------------------------------------------------------------
B 12.53% 1.62% -9.62% -39.05% 124.18%
- ------------------------------------------------------------------------------
C 12.39% 1.53% -9.63% -39.11% 124.42%
- ------------------------------------------------------------------------------
I 13.04% 2.73% -6.77% -35.85% 146.90%
- ------------------------------------------------------------------------------
R1** 12.85% 2.16% -7.99% -37.02% 140.77%
- ------------------------------------------------------------------------------
R2** 12.60% 1.92% -9.30% -38.83% 124.99%
- ------------------------------------------------------------------------------
529A 12.73% 1.92% -8.21% -37.16% 140.20%
- ------------------------------------------------------------------------------
529B 12.45% 1.37% -10.07% -39.35% 123.08%
- ------------------------------------------------------------------------------
529C 12.45% 1.40% -9.97% -39.34% 123.57%
- ------------------------------------------------------------------------------
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
* Effective April 1, 2005, Class R1 shares have been renamed "Class R shares,"
and Class R2 shares have been renamed "Class R3 shares." In addition, on
April 1, 2005, the fund launched the following new R Classes: R1, R2, R4, and
R5. All references herein to Class R1 and Class R2 shares are as of February
28, 2005 and do not reflect the renaming of Class R1 and Class R2 shares.
INDEX DEFINITION
Russell MidCap Growth Index - is constructed to provide a comprehensive
barometer for the growth securities in the mid-cap segment of the U.S. equity
universe. Companies in this index generally have higher price-to-book ratios
and higher forecasted growth values.
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 (assuming redemption within one year from the end of the
prior 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, 529C shares are only available in conjunction with
qualified tuition programs, such as the MFS 529 Savings Plan. There also is an
additional annual fee, which is detailed in the program description, on
qualified tuition programs. If this fee was reflected, the performance for
Class 529 shares would have been lower. This annual fee is waived for Oregon
residents and for those accounts with assets of $25,000 or more.
Performance for I, R1 and 529A shares includes the performance of the fund's
Class A shares for periods prior to their offering. Performance for R2 and 529B
shares includes the performance of the fund's Class B shares for periods prior
to their offering. Performance for Class 529C shares includes the performance
of the fund's Class C shares for periods prior to their offering. This 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 share class to which it is blended, and
lower performance for share classes with lower operating expenses than the
share class to which it is blended.
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.
The performance shown reflects a non-recurring accrual made to the fund on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
The proceeds were paid to the fund on February 16, 2005.
From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
KEY RISK CONSIDERATIONS
The portfolio may invest in foreign and/or emerging markets securities, which
are more susceptible to risks relating to interest rates, currency exchange
rates, economic, and political conditions.
The portfolio may invest in small-, mid-sized, or emerging companies, which are
susceptible to greater risk than is customarily associated with investing in
more established companies.
The portfolio has engaged and may engage in active and frequent trading to
achieve its principal investment strategies. This may result in the realization
and distribution to shareholders of higher capital gains, as compared to a
portfolio with less active trading policies, which would increase your tax
liability unless you hold your shares through a tax-deferred vehicle (such as
an IRA account). Frequent trading also increases transaction costs, which could
detract from the portfolio's performance.
Over-the-counter (OTC) transactions involve risks in addition to those
associated with transactions in securities traded on exchanges. OTC-listed
companies may have limited product lines, markets or financial resources. Many
OTC stocks trade less frequently and in smaller volume than exchange-listed
stocks. The values of these stocks may be more volatile than exchange-listed
stocks, and the portfolio may experience difficulty in buying and selling these
stocks at prevailing market prices.
The portfolio utilizes short sales as an investment technique and will suffer a
loss if it sells a security short and the value of that security rises.
Please see the prospectus for further information regarding these and other
risk considerations.
- -------------------------------------------------------------------------------
EXPENSE TABLE
- -------------------------------------------------------------------------------
FUND EXPENSES BORNE BY SHAREHOLDERS DURING THE PERIOD FROM
SEPTEMBER 1, 2004, THROUGH FEBRUARY 28, 2005.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period, September 1, 2004 through February
28, 2005.
ACTUAL EXPENSES
The first line for each share class in the table below provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table below provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the fund and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
- --------------
Share Class
- --------------
- -------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period**
Expense Account Value Account Value 9/01/04-
Ratio 9/01/04 2/28/05 2/28/05
- --------------------------------------------------------------------------------
Actual 1.27% $1,000 $1,129 $6.70
A ------------------------------------------------------------------------
Hypothetical* 1.27% $1,000 $1,018 $6.35
- --------------------------------------------------------------------------------
Actual 2.02% $1,000 $1,125 $10.64
B -------------------------------------------------------------------------
Hypothetical* 2.02% $1,000 $1,015 $10.09
- --------------------------------------------------------------------------------
Actual 2.02% $1,000 $1,124 $10.64
C ------------------------------------------------------------------------
Hypothetical* 2.02% $1,000 $1,015 $10.09
- --------------------------------------------------------------------------------
Actual 1.02% $1,000 $1,130 $5.39
I ------------------------------------------------------------------------
Hypothetical* 1.02% $1,000 $1,020 $5.11
- --------------------------------------------------------------------------------
Actual 1.52% $1,000 $1,129 $8.02
R1 ------------------------------------------------------------------------
Hypothetical* 1.52% $1,000 $1,017 $7.60
- --------------------------------------------------------------------------------
Actual 1.77% $1,000 $1,126 $9.33
R2 ------------------------------------------------------------------------
Hypothetical* 1.77% $1,000 $1,016 $8.85
- --------------------------------------------------------------------------------
Actual 1.62% $1,000 $1,127 $8.54
529A ------------------------------------------------------------------------
Hypothetical* 1.62% $1,000 $1,017 $8.10
- --------------------------------------------------------------------------------
Actual 2.27% $1,000 $1,125 $11.96
529B ------------------------------------------------------------------------
Hypothetical* 2.27% $1,000 $1,014 $11.34
- --------------------------------------------------------------------------------
Actual 2.26% $1,000 $1,125 $11.91
529C ------------------------------------------------------------------------
Hypothetical* 2.26% $1,000 $1,014 $11.29
- --------------------------------------------------------------------------------
* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year. Expenses paid do not include any
applicable sales charges (loads) or redemption fees. If these transaction
costs had been included, your costs would have been higher.
- ----------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) - 2/28/05
- ----------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 98.7%
- ----------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------
Airlines - 0.9%
- ----------------------------------------------------------------------------------------------
JetBlue Airways Corp.*^ 1,022,393 $18,423,522
- ----------------------------------------------------------------------------------------------
Banks & Credit Companies - 1.5%
- ----------------------------------------------------------------------------------------------
Investors Financial Services Corp. 359,200 $18,003,104
- ----------------------------------------------------------------------------------------------
Sovereign Bancorp, Inc. 450,900 10,343,646
- ----------------------------------------------------------------------------------------------
$28,346,750
- ----------------------------------------------------------------------------------------------
Biotechnology - 7.5%
- ----------------------------------------------------------------------------------------------
Celgene Corp.*^ 330,400 $9,044,700
- ----------------------------------------------------------------------------------------------
Gen-Probe, Inc.* 277,900 14,147,889
- ----------------------------------------------------------------------------------------------
Genzyme Corp.* 685,531 38,451,434
- ----------------------------------------------------------------------------------------------
Gilead Sciences, Inc.* 797,800 27,563,990
- ----------------------------------------------------------------------------------------------
ImClone Systems, Inc.*^ 485,000 21,466,100
- ----------------------------------------------------------------------------------------------
MedImmune, Inc.* 1,136,900 27,376,552
- ----------------------------------------------------------------------------------------------
Neurocrine Biosciences, Inc.*^ 186,100 7,449,583
- ----------------------------------------------------------------------------------------------
$145,500,248
- ----------------------------------------------------------------------------------------------
Broadcast & Cable TV - 9.1%
- ----------------------------------------------------------------------------------------------
Citadel Broadcasting Corp.* 2,362,050 $33,352,146
- ----------------------------------------------------------------------------------------------
EchoStar Communications Corp., "A" 649,621 19,326,225
- ----------------------------------------------------------------------------------------------
Gemstar-TV Guide International, Inc.* 2,941,400 13,118,644
- ----------------------------------------------------------------------------------------------
Grupo Televisa S.A., ADR* 404,200 26,050,690
- ----------------------------------------------------------------------------------------------
Interpublic Group of Cos., Inc.* 2,191,500 28,796,310
- ----------------------------------------------------------------------------------------------
NTL, Inc.* 291,747 18,931,463
- ----------------------------------------------------------------------------------------------
Omnicom Group, Inc.^ 116,600 10,618,762
- ----------------------------------------------------------------------------------------------
Radio One, Inc., "A"* 539,800 7,416,852
- ----------------------------------------------------------------------------------------------
Radio One, Inc., "D"*^ 189,100 2,584,997
- ----------------------------------------------------------------------------------------------
Univision Communications, Inc., "A"* 665,900 17,573,101
- ----------------------------------------------------------------------------------------------
$177,769,190
- ----------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 3.0%
- ----------------------------------------------------------------------------------------------
Ameritrade Holding Corp.* 798,500 $8,488,055
- ----------------------------------------------------------------------------------------------
Legg Mason, Inc. 609,650 49,162,176
- ----------------------------------------------------------------------------------------------
$57,650,231
- ----------------------------------------------------------------------------------------------
Business Services - 9.7%
- ----------------------------------------------------------------------------------------------
Alliance Data Systems Corp.* 645,000 $25,445,250
- ----------------------------------------------------------------------------------------------
Ceridian Corp.*^ 790,900 14,433,925
- ----------------------------------------------------------------------------------------------
Corporate Executive Board Co. 405,013 25,333,563
- ----------------------------------------------------------------------------------------------
DST Systems, Inc.*^ 522,600 24,818,274
- ----------------------------------------------------------------------------------------------
Getty Images, Inc.*^ 697,000 49,723,980
- ----------------------------------------------------------------------------------------------
Hewitt Associates, Inc., "A"* 224,800 6,910,352
- ----------------------------------------------------------------------------------------------
Manpower, Inc. 230,600 10,077,220
- ----------------------------------------------------------------------------------------------
Monster Worldwide, Inc.*^ 717,650 20,704,203
- ----------------------------------------------------------------------------------------------
Robert Half International, Inc.^ 398,600 11,627,162
- ----------------------------------------------------------------------------------------------
$189,073,929
- ----------------------------------------------------------------------------------------------
Chemicals - 1.0%
- ----------------------------------------------------------------------------------------------
Monsanto Co. 340,300 $20,002,834
- ----------------------------------------------------------------------------------------------
Computer Software - 9.1%
- ----------------------------------------------------------------------------------------------
Amdocs Ltd.* 1,407,500 $41,310,125
- ----------------------------------------------------------------------------------------------
Check Point Software Technologies Ltd.* 922,700 20,419,351
- ----------------------------------------------------------------------------------------------
Citrix Systems, Inc.* 807,200 18,162,000
- ----------------------------------------------------------------------------------------------
Mercury Interactive Corp.*^ 621,000 28,491,480
- ----------------------------------------------------------------------------------------------
NAVTEQ Corp.* 113,900 4,977,430
- ----------------------------------------------------------------------------------------------
Symantec Corp.* 1,402,100 30,860,221
- ----------------------------------------------------------------------------------------------
VERITAS Software Corp.* 1,403,500 33,992,770
- ----------------------------------------------------------------------------------------------
$178,213,377
- ----------------------------------------------------------------------------------------------
Consumer Goods & Services - 2.4%
- ----------------------------------------------------------------------------------------------
Apollo Group, Inc., "A"*^ 384,200 $28,292,488
- ----------------------------------------------------------------------------------------------
Career Education Corp.* 565,200 19,301,580
- ----------------------------------------------------------------------------------------------
$47,594,068
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 0.5%
- ----------------------------------------------------------------------------------------------
American Standard Cos., Inc.^ 217,800 $9,975,240
- ----------------------------------------------------------------------------------------------
Electronics - 9.2%
- ----------------------------------------------------------------------------------------------
Analog Devices, Inc. 641,400 $23,552,208
- ----------------------------------------------------------------------------------------------
Broadcom Corp., "A"* 623,600 20,111,100
- ----------------------------------------------------------------------------------------------
Integrated Circuit Systems, Inc.* 789,400 15,930,092
- ----------------------------------------------------------------------------------------------
KLA-Tencor Corp.^ 512,300 25,312,743
- ----------------------------------------------------------------------------------------------
Marvell Technology Group Ltd.*^ 349,700 12,795,523
- ----------------------------------------------------------------------------------------------
Novellus Systems, Inc.* 716,900 21,173,641
- ----------------------------------------------------------------------------------------------
PMC-Sierra, Inc.*^ 2,174,200 21,633,290
- ----------------------------------------------------------------------------------------------
Symbol Technologies, Inc. 490,700 8,700,111
- ----------------------------------------------------------------------------------------------
Xilinx, Inc.^ 980,100 29,599,020
- ----------------------------------------------------------------------------------------------
$178,807,728
- ----------------------------------------------------------------------------------------------
Gaming & Lodging - 3.5%
- ----------------------------------------------------------------------------------------------
Four Seasons Hotels, Inc.^ 123,000 $8,841,240
- ----------------------------------------------------------------------------------------------
International Game Technology^ 606,300 18,467,898
- ----------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd.^ 634,100 29,961,225
- ----------------------------------------------------------------------------------------------
WMS Industries, Inc.*^ 382,000 11,456,180
- ----------------------------------------------------------------------------------------------
$68,726,543
- ----------------------------------------------------------------------------------------------
General Merchandise - 2.1%
- ----------------------------------------------------------------------------------------------
99 Cents Only Stores*^ 1,397,800 $21,791,702
- ----------------------------------------------------------------------------------------------
Family Dollar Stores, Inc. 582,300 19,169,316
- ----------------------------------------------------------------------------------------------
$40,961,018
- ----------------------------------------------------------------------------------------------
Insurance - 0.5%
- ----------------------------------------------------------------------------------------------
Genworth Financial, Inc. 311,300 $8,766,208
- ----------------------------------------------------------------------------------------------
Internet - 1.3%
- ----------------------------------------------------------------------------------------------
IAC/InterActiveCorp*^ 1,126,289 $25,341,502
- ----------------------------------------------------------------------------------------------
Leisure & Toys - 1.4%
- ----------------------------------------------------------------------------------------------
Electronic Arts, Inc.* 431,300 $27,814,537
- ----------------------------------------------------------------------------------------------
Machinery & Tools - 1.8%
- ----------------------------------------------------------------------------------------------
Eaton Corp. 193,000 $13,461,750
- ----------------------------------------------------------------------------------------------
Roper Industries, Inc. 343,800 22,209,480
- ----------------------------------------------------------------------------------------------
$35,671,230
- ----------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.2%
- ----------------------------------------------------------------------------------------------
Community Health Systems, Inc.* 865,100 $28,003,287
- ----------------------------------------------------------------------------------------------
LifePoint Hospitals, Inc.*^ 246,900 9,888,345
- ----------------------------------------------------------------------------------------------
Province Healthcare Co.* 214,800 4,957,584
- ----------------------------------------------------------------------------------------------
$42,849,216
- ----------------------------------------------------------------------------------------------
Medical Equipment - 11.1%
- ----------------------------------------------------------------------------------------------
C.R. Bard, Inc. 386,500 $25,702,250
- ----------------------------------------------------------------------------------------------
Cytyc Corp.* 1,677,564 38,248,459
- ----------------------------------------------------------------------------------------------
DENTSPLY International, Inc. 538,500 29,601,345
- ----------------------------------------------------------------------------------------------
Fisher Scientific International, Inc.*^ 328,900 19,947,785
- ----------------------------------------------------------------------------------------------
Millipore Corp.* 542,700 24,562,602
- ----------------------------------------------------------------------------------------------
Thermo Electron Corp.* 540,300 14,836,638
- ----------------------------------------------------------------------------------------------
Thoratec Corp.*^ 1,058,200 12,433,850
- ----------------------------------------------------------------------------------------------
Waters Corp.* 840,300 41,048,655
- ----------------------------------------------------------------------------------------------
Zimmer Holdings, Inc.* 115,200 9,895,680
- ----------------------------------------------------------------------------------------------
$216,277,264
- ----------------------------------------------------------------------------------------------
Metals & Mining - 0.4%
- ----------------------------------------------------------------------------------------------
Aber Diamond Corp. 101,400 $3,395,484
- ----------------------------------------------------------------------------------------------
Aber Diamond Corp. 109,000 3,649,978
- ----------------------------------------------------------------------------------------------
$7,045,462
- ----------------------------------------------------------------------------------------------
Oil Services - 3.1%
- ----------------------------------------------------------------------------------------------
BJ Services Co. 552,400 $27,597,904
- ----------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 712,000 26,700,000
- ----------------------------------------------------------------------------------------------
Halliburton Co. 160,100 7,039,597
- ----------------------------------------------------------------------------------------------
$61,337,501
- ----------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 0.9%
- ----------------------------------------------------------------------------------------------
Lexmark International, Inc., "A"* 217,700 $17,444,301
- ----------------------------------------------------------------------------------------------
Pharmaceuticals - 4.2%
- ----------------------------------------------------------------------------------------------
Allergan, Inc. 347,000 $26,087,460
- ----------------------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc.*^ 738,400 16,636,152
- ----------------------------------------------------------------------------------------------
Medicis Pharmaceutical Corp., "A" 1,154,900 39,890,246
- ----------------------------------------------------------------------------------------------
$82,613,858
- ----------------------------------------------------------------------------------------------
Printing & Publishing - 1.2%
- ----------------------------------------------------------------------------------------------
Lamar Advertising Co., "A"* 112,000 $4,400,480
- ----------------------------------------------------------------------------------------------
Washington Post Co., "B"^ 21,300 19,127,400
- ----------------------------------------------------------------------------------------------
$23,527,880
- ----------------------------------------------------------------------------------------------
Restaurants - 1.9%
- ----------------------------------------------------------------------------------------------
Cheesecake Factory, Inc.*^ 798,199 $27,162,712
- ----------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. 226,000 10,149,660
- ----------------------------------------------------------------------------------------------
$37,312,372
- ----------------------------------------------------------------------------------------------
Specialty Stores - 3.0%
- ----------------------------------------------------------------------------------------------
PETsMART, Inc. 586,050 $17,874,525
- ----------------------------------------------------------------------------------------------
Tiffany & Co.^ 710,800 21,430,620
- ----------------------------------------------------------------------------------------------
TJX Cos., Inc. 777,100 18,976,782
- ----------------------------------------------------------------------------------------------
$58,281,927
- ----------------------------------------------------------------------------------------------
Telecommunications - Wireline - 2.0%
- ----------------------------------------------------------------------------------------------
Comverse Technology, Inc.*^ 1,327,200 $30,804,312
- ----------------------------------------------------------------------------------------------
Juniper Networks, Inc.*^ 423,022 9,111,894
- ----------------------------------------------------------------------------------------------
$39,916,206
- ----------------------------------------------------------------------------------------------
Telephone Services - 3.6%
- ----------------------------------------------------------------------------------------------
American Tower Corp., "A"*^ 1,947,646 $35,700,351
- ----------------------------------------------------------------------------------------------
Covad Communications Group, Inc.*^ 18,794 28,567
- ----------------------------------------------------------------------------------------------
Crown Castle International Corp.* 861,200 14,072,008
- ----------------------------------------------------------------------------------------------
SpectraSite, Inc.* 331,520 20,487,936
- ----------------------------------------------------------------------------------------------
$70,288,862
- ----------------------------------------------------------------------------------------------
Trucking - 0.6%
- ----------------------------------------------------------------------------------------------
Expeditors International of Washington, Inc.^ 219,900 $12,206,649
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,714,430,401) $1,927,739,653
- ----------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 8.9%
- ----------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 173,867,717 $173,867,717
- ----------------------------------------------------------------------------------------------
Repurchase Agreement - 2.0%
- ----------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ----------------------------------------------------------------------------------------------
Morgan Stanley, 2.61%, dated 2/28/05, due 3/01/05, total to
be received $39,181,840 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account), at Cost $39,179,000 $39,179,000
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,927,477,118)(S) $2,140,786,370
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (9.6)% (187,616,067)
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,953,170,303
- ----------------------------------------------------------------------------------------------
* Non-income producing security.
^ All or a portion of this security is on loan.
(S) As of February 28, 2005, the fund had one security representing $3,395,484 and 0.17% of
net assets that was fair valued in accordance with the policies adopted by the Board of
Trustees.
Abbreviation:
ADR = American Depository Receipt.
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 2/28/05
ASSETS
Investments, at value, including $169,790,010 of
securities on loan (identified cost, $1,927,477,118) $2,140,786,370
- ---------------------------------------------------------------------------------------------------
Cash 14,837
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 1,076,198
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 4,353,163
- ---------------------------------------------------------------------------------------------------
Interest and dividends receivable 348,485
- ---------------------------------------------------------------------------------------------------
Other assets 783
- ---------------------------------------------------------------------------------------------------
Total assets $2,146,579,836
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $12,339,704
- ---------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 5,956,661
- ---------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 173,867,717
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 121,347
- ---------------------------------------------------------------------------------------------------
Shareholder servicing costs 516,566
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 68,909
- ---------------------------------------------------------------------------------------------------
Administrative fee 631
- ---------------------------------------------------------------------------------------------------
Program manager fee 21
- ---------------------------------------------------------------------------------------------------
Administrative service fee 18
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 537,959
- ---------------------------------------------------------------------------------------------------
Total liabilities $193,409,533
- ---------------------------------------------------------------------------------------------------
Net assets $1,953,170,303
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $3,221,118,422
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 213,309,252
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (1,470,089,634)
- ---------------------------------------------------------------------------------------------------
Accumulated net investment loss (11,167,737)
- ---------------------------------------------------------------------------------------------------
Net assets $1,953,170,303
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 231,260,871
- ---------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $1,037,863,075
- ---------------------------------------------------------------------------------------------------
Shares outstanding 121,272,393
- ---------------------------------------------------------------------------------------------------
Net asset value per share $8.56
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$8.56) $9.08
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $434,226,262
- ---------------------------------------------------------------------------------------------------
Shares outstanding 53,152,467
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $8.17
- ---------------------------------------------------------------------------------------------------
Class C shares
Net assets $132,030,043
- ---------------------------------------------------------------------------------------------------
Shares outstanding 16,535,303
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $7.98
- ---------------------------------------------------------------------------------------------------
Class I shares
Net assets $337,190,162
- ---------------------------------------------------------------------------------------------------
Shares outstanding 38,904,322
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $8.67
- ---------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $9,965,211
- ---------------------------------------------------------------------------------------------------
Shares outstanding 1,170,298
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $8.52
- ---------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $885,524
- ---------------------------------------------------------------------------------------------------
Shares outstanding 104,270
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share $8.49
- ---------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class 529A shares
Net assets $587,644
- ---------------------------------------------------------------------------------------------------
Shares outstanding 69,115
- ---------------------------------------------------------------------------------------------------
Net asset value per share $8.50
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$8.50) $9.02
- ---------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $163,427
- ---------------------------------------------------------------------------------------------------
Shares outstanding 20,114
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $8.13
- ---------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $258,955
- ---------------------------------------------------------------------------------------------------
Shares outstanding 32,589
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $7.95
- ---------------------------------------------------------------------------------------------------
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 Class 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.
SIX MONTHS ENDED 2/28/05
NET INVESTMENT LOSS
Income
- --------------------------------------------------------------------------------------------------
Dividends $2,949,954
- --------------------------------------------------------------------------------------------------
Interest 311,238
- --------------------------------------------------------------------------------------------------
Income on securities loaned 183,346
- --------------------------------------------------------------------------------------------------
Foreign taxes withheld (7,156)
- --------------------------------------------------------------------------------------------------
Total investment income $3,437,382
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $7,514,504
- --------------------------------------------------------------------------------------------------
Trustees' compensation 36,801
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 1,954,655
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 1,367,119
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 2,280,628
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 702,496
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 18,362
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class R2) 1,328
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 784
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 735
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 1,055
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 560
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 184
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 264
- --------------------------------------------------------------------------------------------------
Administrative service fee (Class R2) 664
- --------------------------------------------------------------------------------------------------
Administrative fee 54,233
- --------------------------------------------------------------------------------------------------
Custodian fee 214,083
- --------------------------------------------------------------------------------------------------
Printing 132,416
- --------------------------------------------------------------------------------------------------
Auditing fees 22,482
- --------------------------------------------------------------------------------------------------
Legal fees 26,154
- --------------------------------------------------------------------------------------------------
Miscellaneous 232,712
- --------------------------------------------------------------------------------------------------
Total expenses $14,562,219
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (43,174)
- --------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (4,591)
- --------------------------------------------------------------------------------------------------
Net expenses $14,514,454
- --------------------------------------------------------------------------------------------------
Net investment loss $(11,077,072)
- --------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
Investment transactions $159,991,139
- --------------------------------------------------------------------------------------------------
Foreign currency transactions (10,748)
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $159,980,391
- --------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $97,247,131
- --------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies (63)
- --------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $97,247,068
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $257,227,459
- --------------------------------------------------------------------------------------------------
Change in net assets from operations $246,150,387
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS 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
2/28/05 8/31/04
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
Net investment loss $(11,077,072) $(25,258,451)
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 159,980,391 267,474,662
- ---------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation 97,247,068 (199,507,246)
- ------------------------------------------------------ ------------- --------------
Change in net assets from operations $246,150,387 $42,708,965
- ------------------------------------------------------ ------------- --------------
Change in net assets from fund share transactions $(248,723,445) $(51,353,672)
- ------------------------------------------------------ ------------- --------------
Redemption fees $6,313 $1,174
- ------------------------------------------------------ ------------- --------------
Total change in net assets $(2,566,745) $(8,643,533)
- ------------------------------------------------------ ------------- --------------
NET ASSETS
At beginning of period $1,955,737,048 $1,964,380,581
- ---------------------------------------------------------------------------------------------------
At end of period (including accumulated net
investment loss of $11,167,737 and $90,665,
respectively) $1,953,170,303 $1,955,737,048
- ---------------------------------------------------------------------------------------------------
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 YEARS ENDED 8/31
ENDED -----------------------------------------------------------------------------
CLASS A 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value,
beginning of period $7.58 $7.43 $5.84 $10.50 $19.67 $11.34
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#
Net investment loss(S) $(0.04) $(0.08) $(0.05) $(0.08) $(0.07) $(0.10)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 1.02 0.23 1.64 (4.42) (6.35) 10.11
- ------------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.98 $0.15 $1.59 $(4.50) $(6.42) $10.01
- ------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $(0.15) $(1.90) $(1.68)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments and
foreign currency
transactions -- -- -- -- (0.85) --
- ------------------------------- ------ ------ ------ ------ ------ ------
From paid-in capital -- -- -- (0.01) -- --
- ------------------------------- ------ ------ ------ ------ ------ ------
Total distributions $-- $-- $-- $(0.16) $(2.75) $(1.68)
- ------------------------------- ------ ------ ------ ------ ------ ------
Redemption fees added to
paid-in capital# $0.00+++ $0.00+++ $-- $-- $-- $--
- ------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period $8.56 $7.58 $7.43 $5.84 $10.50 $19.67
- ------------------------------- ------ ------ ------ ------ ------ ------
Total return (%)(+)& 12.93++ 2.02^^ 27.23 (43.48) (35.42) 94.75
- -------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------------------
CLASS A (CONTINUED) 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.27+ 1.26 1.34 1.39 1.26 1.24
- -------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.92)+ (0.98) (0.76) (0.87) (0.50) (0.61)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94 120 147 109 132
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of
period (000 Omitted) $1,037,863 $1,092,443 $1,182,259 $946,866 $1,036,376 $526,748
- -------------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment loss per share and the ratios would have been:
Net investment loss $(0.04)** $(0.08)** $-- $-- $-- $--
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.27+** 1.26** -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.92)+** (0.98)** -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns do not include the applicable sales charge. If the charge had been included, the results would have been
lower.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. +
Annualized. ++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
The proceeds were paid to the fund on February 16, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------------
CLASS B 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning of
period $7.26 $7.17 $5.68 $10.22 $19.24 $11.16
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.07) $(0.13) $(0.09) $(0.14) $(0.17) $(0.22)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.98 0.22 1.58 (4.32) (6.19) 9.92
- ------------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.91 $0.09 $1.49 $(4.46) $(6.36) $9.70
- ------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $(0.07) $(1.84) $(1.62)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments and
foreign currency
transactions -- -- -- -- (0.82) --
- ------------------------------- ------ ------ ------ ------ ------ ------
From paid-in capital -- -- -- (0.01) -- --
- ------------------------------- ------ ------ ------ ------ ------ ------
Total distributions $-- $-- $-- $(0.08) $(2.66) $(1.62)
- ------------------------------- ------ ------ ------ ------ ------ ------
Redemption fees added to
paid-in capital# $0.00+++ $0.00+++ $-- $-- $-- $--
- ------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period $8.17 $7.26 $7.17 $5.68 $10.22 $19.24
- ------------------------------- ------ ------ ------ ------ ------ ------
Total return (%)& 12.53++ 1.26^^ 26.23 (43.94) (35.85) 93.37
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------------
CLASS B (CONTINUED) 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.02+ 2.01 2.09 2.14 2.01 1.99
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.67)+ (1.73) (1.51) (1.60) (1.25) (1.36)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94 120 147 109 132
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $434,226 $446,415 $498,021 $450,803 $781,652 $605,584
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment loss per share and the ratios would have been:
Net investment loss $(0.07)** $(0.13)** $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.02+** 2.01** -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.67)+** (1.73)** -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
The proceeds were paid to the fund on February 16, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------------
CLASS C 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning of
period $7.10 $7.01 $5.55 $10.00 $18.92 $11.01
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.06) $(0.13) $(0.09) $(0.14) $(0.16) $(0.22)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.94 0.22 1.55 (4.22) (6.08) 9.77
- ------------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.88 $0.09 $1.46 $(4.36) $(6.24) $9.55
- ------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $(0.08) $(1.85) $(1.64)
- -----------------------------------------------------------------------------------------------------------------------------
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)
- ------------------------------- ------ ------ ------ ------ ------ ------
Redemption fees added to
paid-in capital# $0.00+++ $0.00+++ $-- $-- $-- $--
- ------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period $7.98 $7.10 $7.01 $5.55 $10.00 $18.92
- ------------------------------- ------ ------ ------ ------ ------ ------
Total return (%)& 12.39++ 1.28^^ 26.31 (43.94) (35.87) 93.37
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------------
CLASS C (CONTINUED) 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.02+ 2.01 2.09 2.14 2.01 1.99
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.67)+ (1.73) (1.51) (1.60) (1.25) (1.36)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94 120 147 109 132
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $132,030 $139,797 $172,466 $176,786 $301,405 $178,008
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment loss per share and the ratios would have been:
Net investment loss $(0.06)** $(0.13)** $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.02+** 2.01** -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.67)+** (1.73)** -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
The proceeds were paid to the fund on February 16, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------------
CLASS I 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning of
period $7.67 $7.49 $5.87 $10.55 $19.73 $11.37
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.03) $(0.06) $(0.03) $(0.05) $(0.03) $(0.07)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 1.03 0.24 1.65 (4.46) (6.37) 10.12
- ------------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $1.00 $0.18 $1.62 $(4.51) $(6.40) $10.05
- ------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $(0.16) $(1.92) $(1.69)
- -----------------------------------------------------------------------------------------------------------------------------
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)
- ------------------------------- ------ ------ ------ ------ ------ ------
Redemption fees added to
paid-in capital# $0.00+++ $0.00+++ $-- $-- $-- $--
- ------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period $8.67 $7.67 $7.49 $5.87 $10.55 $19.73
- ------------------------------- ------ ------ ------ ------ ------ ------
Total return (%)& 13.04++ 2.40^^ 27.60 (43.38) (35.23) 95.21
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------------
CLASS I (CONTINUED) 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.02+ 1.01 1.11 1.14 1.01 0.99
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.67)+ (0.72) (0.53) (0.63) (0.26) (0.36)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94 120 147 109 132
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $337,190 $270,934 $109,332 $31,798 $30,490 $23,539
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment loss per share and the ratios would have been:
Net investment loss $(0.03)** $(0.06)** $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.02+** 1.01** -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.67)+** (0.72)** -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
The proceeds were paid to the fund on February 16, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED
CLASS R1 2/28/05 8/31/04 8/31/03*
(UNAUDITED)
Net asset value, beginning of period $7.55 $7.42 $5.64###
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.05) $(0.10) $(0.05)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.02 0.23 1.83
- ------------------------------------------------------ ------ ------ ------
Total from investment operations $0.97 $0.13 $1.78
- ------------------------------------------------------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++ $--
- ------------------------------------------------------ ------ ------ ------
Net asset value, end of period $8.52 $7.55 $7.42
- ------------------------------------------------------ ------ ------ ------
Total return (%)& 12.85++ 1.75^^ 31.56++###
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.52+ 1.50 1.67+
- -------------------------------------------------------------------------------------------------------------------
Net investment loss (1.17)+ (1.22) (1.16)+
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94 120
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $9,965 $5,177 $2,039
- -------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its
proportional share of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino
LLC. If this fee had been incurred by the fund, the net investment loss per share and the ratios would have
been:
Net investment loss $(0.05)** $(0.10)** $--
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.52+** 1.50** --
- -------------------------------------------------------------------------------------------------------------------
Net investment loss (1.17)+** (1.22)** --
- -------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through August 31, 2003.
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
### The net asset value and total return previously reported as $5.66 and 31.10%, respectively, have been revised
to reflect the net asset value from the day prior to the class' inception date. The net asset value and total
return previously reported were from inception date, the date the share class was first available to public
shareholders.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would
be lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a result
of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund
sales, as described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring
accrual did not have a material impact on the net asset value per share based on the shares outstanding on the
day the proceeds were recorded. The proceeds were paid to the fund on February 16, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS PERIOD
ENDED ENDED
CLASS R2 2/28/05 8/31/04*
(UNAUDITED)
Net asset value, beginning of period $7.54 $7.60###
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.06) $(0.09)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency 1.01 0.03
- ------------------------------------------------------------------------ ------ ------
Total from investment operations $0.95 $(0.06)
- ------------------------------------------------------------------------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $0.00+++
- ------------------------------------------------------------------------ ------ ------
Net asset value, end of period $8.49 $7.54
- ------------------------------------------------------------------------ ------ ------
Total return (%)& 12.60++ (0.79)++###^^
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.77+ 1.74+
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (1.43)+ (1.47)+
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $886 $314
- -----------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its
proportional share of substantially all of Independent Chief Compliance Officer service fees paid to
Tarantino LLC. If this fee had been incurred by the fund, the net investment loss per share and the ratios
would have been:
Net investment loss $(0.06)** $(0.09)**
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.77+** 1.74+**
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (1.43)+** (1.47)+**
- -----------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R2 shares, October 31, 2003, through August 31, 2004.
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
### The net asset value and total return previously reported as $7.61 and (0.92)%, respectively, have been
revised to reflect the net asset value from the day prior to the class' inception date. The net asset value
and total return previously reported were from inception date, the date the share class was first available
to public shareholders.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would
be lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a
result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection
with fund sales, as described in the Legal Proceedings and Transactions with Affiliates footnotes. The
non-recurring accrual did not have a material impact on the net asset value per share based on the shares
outstanding on the day the proceeds were recorded. The proceeds were paid to the fund on February 16, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------- PERIOD ENDED
CLASS 529A 2/28/05 2004 2003 8/31/02*
(UNAUDITED)
Net asset value, beginning of period $7.54 $7.40 $5.83 $5.92###
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.05) $(0.11) $(0.07) $(0.00)+++
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.01 0.25 1.64 (0.09)
- ----------------------------------------- ------ ------ ------ ------
Total from investment operations $0.96 $0.14 $1.57 $(0.09)
- ----------------------------------------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $0.00+++ $-- $--
- ----------------------------------------- ------ ------ ------ ------
Net asset value, end of period $8.50 $7.54 $7.40 $5.83
- ----------------------------------------- ------ ------ ------ ------
Total return (%)(+)& 12.73++ 1.89^^ 26.93 (1.52)###++
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------- PERIOD ENDED
CLASS 529A (CONTINUED) 2/28/05 2004 2003 8/31/02*
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.62+ 1.60 1.73 1.74+
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.27)+ (1.32) (1.18) (1.22)+
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94 120 147
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $588 $345 $123 $5
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment loss per share and the ratios would have been:
Net investment loss $(0.05)** $(0.11)** $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.62+** 1.60** -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.27)+** (1.32)** -- --
- -----------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529A shares, July 31, 2002, through August 31, 2002.
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
### The net asset value and total return previously reported as $5.84 and (0.17)%, respectively, have been revised to
reflect the net asset value from the day prior to the class' inception date. The net asset value and total return
previously reported were from inception date, the date the share class was first available to public shareholders.
(+) Total returns do not include the applicable sales charge. If the charge had been included, the results would have been
lower.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
The proceeds were paid to the fund on February 16, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------- PERIOD ENDED
CLASS 529B 2/28/05 2004 2003 8/31/02*
(UNAUDITED)
Net asset value, beginning of period $7.23 $7.16 $5.68 $5.76###
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.08) $(0.15) $(0.11) $(0.01)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.98 0.22 1.59 (0.07)
- ----------------------------------------- ------ ------ ------ ------
Total from investment operations $0.90 $0.07 $1.48 $(0.08)
- ----------------------------------------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $0.00+++ $-- $--
- ----------------------------------------- ------ ------ ------ ------
Net asset value, end of period $8.13 $7.23 $7.16 $5.68
- ----------------------------------------- ------ ------ ------ ------
Total return (%)& 12.45++ 0.98^^ 26.06 (1.39)###++
- ----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------- PERIOD ENDED
CLASS 529B (CONTINUED) 2/28/05 2004 2003 8/31/02*
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.27+ 2.25 2.36 2.39+
- ----------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.92)+ (1.97) (1.78) (1.85)+
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94 120 147
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000
Omitted) $163 $129 $55 $5
- ----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment loss per share and the ratios would have been:
Net investment loss $(0.08)** $(0.15)** $-- $--
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.27+** 2.25** -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.92)+** (1.97)** -- --
- ----------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529B shares, July 31, 2002, through August 31, 2002.
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
### The net asset value and total return previously reported as $5.69 and (0.18)%, respectively, have been revised to
reflect the net asset value from the day prior to the class' inception date. The net asset value and total return
previously reported were from inception date, the date the share class was first available to public shareholders.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
The proceeds were paid to the fund on February 16, 2005.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------- PERIOD ENDED
CLASS 529C 2/28/05 2004 2003 8/31/02*
(UNAUDITED)
Net asset value, beginning of period $7.07 $6.99 $5.55 $5.63###
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.07) $(0.15) $(0.10) $(0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.95 0.23 1.54 (0.07)
- ----------------------------------------- ------ ------ ------ ------
Total from investment operations $0.88 $0.08 $1.44 $(0.08)
- ----------------------------------------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $0.00+++ $-- $--
- ----------------------------------------- ------ ------ ------ ------
Net asset value, end of period $7.95 $7.07 $6.99 $5.55
- ----------------------------------------- ------ ------ ------ ------
Total return (%)& 12.45++ 1.14^^ 25.95 (1.42)###++
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------- PERIOD ENDED
CLASS 529C (CONTINUED) 2/28/05 2004 2003 8/31/02*
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.26+ 2.26 2.36 2.39+
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.92)+ (1.97) (1.78) (1.85)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28 94 120 147
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $259 $183 $86 $5
- ------------------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment loss per share and the ratios would have been:
Net investment loss $(0.07)** $(0.15)** $-- $--
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.26+** 2.26** -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.92)+** (1.97)** -- --
- ------------------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529C shares, July 31, 2002, through August 31, 2002.
** The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
### The net asset value and total return previously reported as $5.56 and (0.18)%, respectively, have been revised to
reflect the net asset value from the day prior to the class' inception date. The net asset value and total return
previously reported were from inception date, the date the share class was first available to public shareholders.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
^^ The fund's net asset value and total return calculation include a non- recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
The proceeds were paid to the fund on February 16, 2005.
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 U.S.
generally accepted accounting principles 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 - 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. 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
approximates 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. When
pricing service information or market quotations are not readily available,
securities are priced at fair value as determined under the direction of the
Board of Trustees. 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 quotations 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.
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.
SHORT TERM FEES - For purchases made on or after July 1, 2004 and before April
1, 2005, the fund will charge a 2% redemption fee (which is retained by the
fund) on proceeds from Class A, Class B, Class C, and Class I shares redeemed
or exchanged within 5 business days following their acquisition (either by
purchase or exchange). Effective April 1, 2005, the fund will no longer charge
a redemption fee. See the fund's prospectus for details. Any redemption fees
charged are accounted for as an addition to paid-in capital.
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 U.S. generally accepted accounting principles. 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.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss
in the Statement of Operations, or in unrealized gain/loss if the security is
still held by the fund.
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 28, 2005, the fund's custodian fees
were reduced by $19,352 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 28, 2005, the fund's miscellaneous
expenses were reduced by $23,822 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 foreign currency transactions and capital losses.
The fund paid no distributions for the years ended August 31, 2004 and August
31, 2003.
As of August 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Capital loss carryforward $(1,625,034,484)
----------------------------------------------------------
Unrealized appreciation 111,026,643
----------------------------------------------------------
Other temporary differences (90,665)
----------------------------------------------------------
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 as follows: on August 31, 2011, $
(1,625,034,484).
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
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 an annual rate of 0.75% of
the fund's average daily net assets.
MFS has agreed to a voluntary reduction in its management fee to an annual rate
of 0.70% on net assets in excess of $3.0 billion. This fee reduction
arrangement may only be changed with approval by the Board of Trustees which
oversees the fund.
The fund pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, 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 and an unfunded
retirement benefit deferral plan for certain current Independent Trustees.
Included in Trustees' compensation is a net increase of $9,925 as a result of
the change in the fund's unfunded retirement benefit deferral plan for certain
current Independent Trustees and a pension expense of $1,399 for retired
Independent Trustees for the six months ended February 28, 2005.
This fund and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
The fund's investment adviser, MFS, has been the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in connection
with fund sales, as described in the Legal Proceedings Footnote. On July 28,
2004, the fund accrued an estimate of the amount to be received pursuant to
this matter in the amount of $398,175, which did not have a material impact on
the net asset value per share based on the shares outstanding on the day the
proceeds were recorded. The proceeds were paid to the fund on February 16,
2005.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. The
fund paid MFS an administrative fee up to the following annual percentage rates
of the fund's average daily net assets:
BEGINNING OF
PERIOD
THROUGH
EFFECTIVE DATE 2/28/05 3/01/05
First $2 billion 0.01120% 0.01626%
- --------------------------------------------------------------------------------
Next $2.5 billion 0.00832% 0.01206%
- --------------------------------------------------------------------------------
Next $2.5 billion 0.00032% 0.00056%
- --------------------------------------------------------------------------------
In excess of $7 billion 0.00000% 0.00000%
- --------------------------------------------------------------------------------
The March 1, 2005 rates were not effective during the current reporting period.
For the six months ended February 28, 2005, the fund paid MFS $54,233
equivalent to 0.0054% of average daily net assets, to partially reimburse MFS
for the costs of providing administrative services.
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
$38,542 and $317 for the six months ended February 28, 2005, 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 as compensation for services provided by MFD and financial
intermediaries in connection with the distribution and servicing of its shares.
One component of the plan is a distribution fee and another is a service fee
paid by MFD to financial intermediaries that enter into sales or service
agreements with MFD or its affiliates based on the average daily net assets of
accounts attributable to such intermediaries. The 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 may retain all or a rtion of the service fee, including for accounts for
which there is no financial intermediary of record. Service fees retained by
MFD for the six months ended February 28, 2005 amounted to:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Service Fee Retained by
MFD $16,999 $2,513 $1,969 $9 $13
- --------------------------------------------------------------------------------
CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained by
MFD $172 $8 $34
- --------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will be implemented on
such 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 date as the Trustees of the Trust may
determine. The Class A service fee is currently being waived.
Fees incurred under the distribution plan during the six months ended February
28, 2005 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%
- --------------------------------------------------------------------------------
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 Class
529C shares, the first year 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 of purchase. MFD receives
all contingent deferred sales charges. Contingent deferred sales charges
imposed during the six months ended February 28, 2005 were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred
Sales Charges Imposed $22,539 $689,369 $26,640 $-- $24
- -------------------------------------------------------------------------------
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, which is calculated as a percentage of the fund's
average daily net assets is set periodically under the supervision of the
fund's Trustees. For the beginning of the period through December 31, 2004, the
fund was charged up to 0.0861% of its average daily net assets. For the period
January 1, 2005 through February 28, 2005, the fund is charged up to 0.1035% of
its average daily net assets. For the six months ended February 28, 2005, the
fund paid MFSC a fee of $903,237 for shareholder services which equated to
0.0902% of the fund's average daily net assets. Effective March 1, 2005, the
fund is charged up to 0.1159% of its average daily net assets. Shareholder
service costs include out of pocket expenses and sub accounting services
expenses paid by MFSC on behalf of the fund and subsequently reimbursed to MFSC
which amounted to $697,912, and other costs paid by the fund directly to
unaffiliated vendors for the six months ended February 28, 2005.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$549,005,532 and $800,283,261, 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 $1,932,512,659
-----------------------------------------------------------
Gross unrealized appreciation $293,595,751
-----------------------------------------------------------
Gross unrealized depreciation (85,322,040)
-----------------------------------------------------------
Net unrealized appreciation (depreciation) $208,273,711
-----------------------------------------------------------
(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 2/28/05 Year ended 8/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 15,884,168 $132,704,021 66,091,057 $521,863,634
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (38,745,343) (324,683,092) (81,105,255) (644,213,231)
- ---------------------------------------------------------------------------------------------------------
Net change (22,861,175) $(191,979,071) (15,014,198) $(122,349,597)
- ---------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 2,394,192 $19,129,146 11,092,159 $84,650,131
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (10,713,570) (85,816,442) (19,079,979) (145,779,647)
- ---------------------------------------------------------------------------------------------------------
Net change (8,319,378) $(66,687,296) (7,987,820) $(61,129,516)
- ---------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 739,915 $5,787,273 3,635,552 $26,761,537
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (3,900,292) (30,543,443) (8,549,423) (63,882,026)
- ---------------------------------------------------------------------------------------------------------
Net change (3,160,377) $(24,756,170) (4,913,871) $(37,120,489)
- ---------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 6,927,083 $58,917,484 22,568,363 $179,754,382
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (3,364,635) (29,111,214) (1,814,958) (14,403,292)
- ---------------------------------------------------------------------------------------------------------
Net change 3,562,448 $29,806,270 20,753,405 $165,351,090
- ---------------------------------------------------------------------------------------------------------
CLASS R1 SHARES
Shares sold 668,573 $5,614,367 819,370 $6,492,434
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (184,111) (1,533,186) (408,142) (3,346,275)
- ---------------------------------------------------------------------------------------------------------
Net change 484,462 $4,081,181 411,228 $3,146,159
- ---------------------------------------------------------------------------------------------------------
Six months ended 2/28/05 Period ended 8/31/04*
SHARES AMOUNT SHARES AMOUNT
CLASS R2 SHARES
Shares sold 121,148 $1,047,551 55,933 $447,796
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (58,483) (508,450) (14,328) (106,604)
- ---------------------------------------------------------------------------------------------------------
Net change 62,665 $539,101 41,605 $341,192
- ---------------------------------------------------------------------------------------------------------
Six months ended 2/28/05 Year ended 8/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 25,573 $218,324 30,618 $242,775
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (2,150) (18,022) (1,509) (11,840)
- ---------------------------------------------------------------------------------------------------------
Net change 23,423 $200,302 29,109 $230,935
- ---------------------------------------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 2,738 $21,892 10,337 $78,249
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (404) (3,245) (290) (2,127)
- ---------------------------------------------------------------------------------------------------------
Net change 2,334 $18,647 10,047 $76,122
- ---------------------------------------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 8,400 $66,914 14,060 $104,096
- ---------------------------------------------------------------------------------------------------------
Shares reacquired (1,698) (13,323) (499) (3,664)
- ---------------------------------------------------------------------------------------------------------
Net change 6,702 $53,591 13,561 $100,432
- ---------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R2 shares, October 31, 2003, through August 31, 2004.
The fund is one of several MFS mutual funds in which the MFS Asset Allocation
Funds may invest. The MFS Asset Allocation Funds do not invest in the
underlying MFS funds for the purpose of exercising management or control. At
the end of the period, the MFS Moderate Allocation Fund, MFS Growth Allocation
Fund and MFS Aggressive Growth Allocation Fund were the owners of record of
approximately 4%, 8% and 5%, respectively, of the total outstanding shares.
(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 Federal
Reserve funds 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 28, 2005 was $6,345,
and is included in miscellaneous expense. The fund had no significant
borrowings during the six months ended February 28, 2005.
(7) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). 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 developed by an
independent distribution consultant. The brokerage allocation practices which
were the subject of this proceeding were discontinued by MFS in November 2003.
The agreement with the SEC is reflected in an order of the SEC. The SEC
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 SEC
settlement order states that MFS had in place policies designed to obtain best
execution of all MFS fund trades. As part of the settlement, MFS retained an
independent compliance consultant to review the completeness of its current
policies and practices regarding disclosure to MFS fund trustees and to MFS
fund shareholders of strategic alliances between MFS or its affiliates and
broker-dealers and other financial intermediaries who support the sale of MFS
fund shares. Pursuant to the SEC order, on July 28, 2004, MFS transferred these
settlement amounts to the SEC, and those MFS funds entitled to these settlement
amounts accrued an estimate of their pro rata portion of these amounts. The
final distribution plan was approved by the SEC on January 21, 2005 and the
affected MFS funds received the payment on February 16, 2005.
In addition, in February, 2004, MFS reached agreement with the 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 open-end retail fund ("MFS
retail funds") prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS retail funds was false and misleading because, although the
prospectuses for those funds in the regulators' view indicated that they
prohibited market timing, MFS did not limit trading activity in 11 domestic
large cap stock, high grade bond and money market retail funds. MFS' former
Chief Executive Officer and former President also reached agreement with the
SEC in which they agreed to, among other terms, monetary fines and temporary
suspensions from association with any investment adviser or registered
investment company. These individuals have resigned their positions with, and
will not be returning to, MFS and the MFS funds. 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 MFS 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 Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with 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 retained $250,000 and $750,000 was contributed
to the North American Securities Administrators Association's Investor
Protection Trust). In addition, under the terms of the February Settlements,
MFS is in the process of adopting certain governance changes and reviewing its
policies and procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various
MFS funds, certain current and/or former 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 MFS funds during specified periods, as ERISA
actions by participants in certain retirement plan accounts on behalf of those
accounts, or as derivative actions on behalf of the MFS funds. The lawsuits
relating to market timing and related matters have been transferred to, and
consolidated before, the United States District Court for the District of
Maryland, as part of a multi-district litigation of market timing and related
claims involving several other fund complexes (In re Mutual Funds Investment
Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner),
No. 1:04-md-15863 (transfer began March 19, 2004)). The market timing cases
related to the MFS complex are Riggs v. MFS et al., Case No. 04-cv-01162-JFM
(direct), Hammerslough v. MFS et al., Case No. 04-md-01620 (derivative) and
Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA). The plaintiffs in
these consolidated lawsuits generally seek injunctive relief including removal
of the named Trustees, adviser and distributor, rescission of contracts and
12b-1 Plans, disgorgement of fees and profits, monetary damages, punitive
damages, attorney's fees and costs and other equitable and declaratory relief.
Two lawsuits alleging improper brokerage allocation practices and excessive
compensation are pending in the United States District Court for the District
of Massachusetts (Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584
(GAO) (a consolidated action) and Marcus Dumond, et al. v. Massachusetts
Financial Servs. Co., et al., No. 04cv11458 (GAO)). The plaintiffs in these
lawsuits generally seek compensatory damages, punitive damages, recovery of
fees, rescission of contracts, an accounting, restitution, declaratory relief,
equitable and/or injunctive relief and attorney's fees and costs. The various
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 (ii) received excessive compensation as fiduciaries to the MFS funds,
or (iii) permitted or acquiesced in the improper use of fund assets by MFS to
support the distribution of MFS 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. 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 MFS 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 certain MFS retail funds for damages that they
allegedly sustained as a result of market timing or late trading in certain of
the MFS retail funds, and distributed $50 million to affected MFS funds to
compensate those funds based upon the amount of brokerage commissions allocated
in recognition of MFS 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 MFS 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 MFS funds.
- -------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
- -------------------------------------------------------------------------------
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 Web site at
http://www.sec. gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
- -------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
- -------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
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.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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
- -------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
OTC-SEM-04/05 175M
MFS(R) MUNICIPAL BOND FUND 2/28/05
SEMIANNUAL REPORT
- -------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
THIS REPORT HAS BEEN PREPARED FOR THE GENERAL INFORMATION TO SHAREHOLDERS. IT
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
SEMIANNUAL REPORT
LETTER FROM THE CEO 1
------------------------------------------------------
PORTFOLIO COMPOSITION 4
------------------------------------------------------
MANAGEMENT REVIEW 5
------------------------------------------------------
PERFORMANCE SUMMARY 7
------------------------------------------------------
EXPENSE TABLE 10
------------------------------------------------------
PORTFOLIO OF INVESTMENTS 12
------------------------------------------------------
FINANCIAL STATEMENTS 31
------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 39
------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 51
------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 51
------------------------------------------------------
CONTACT INFORMATION BACK COVER
------------------------------------------------------
- --------------------------------------------------------------------------------
LETTER FROM THE CEO
- --------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Robert J. Manning]
Last summer and fall, I wrote to you about enhancements that MFS(R) was making
to its investment process. Our goal, as always, was to deliver strong
performance across all asset classes. I am now happy to report to you that 2004
was a very successful year for MFS, relative to our peers in the mutual fund
industry. While there will always be room for improvement, we believe the
enhancements we have made to our investment process resulted in significantly
improved performance across the MFS Family of Funds(R).
You may remember some of the enhancements I outlined last year.
They included
o increasing collaboration and information sharing among our investment
personnel across asset classes, through an Investment Management Committee
with members from our Domestic Equity, International Equity, Fixed Income,
and Quantitative Research teams
o increasing the number of analysts supporting our portfolio managers and
doubling the average investment experience of our domestic equity analyst
staff
o making additional use of our most-seasoned portfolio managers to mentor
research analysts
o combining more quantitative, top-down risk control and security analysis
with our traditional bottom-up research process
o opening a research office in Mexico City to complement our existing staff
in Boston, London, Singapore, and Tokyo
The effect of these enhancements, I believe, is evident in the 2004 performance
of our funds. For the 12 months ended December 31, 2004, 80% of MFS domestic
equity funds, 100% of MFS international equity funds, and 80% of MFS fixed-
income funds delivered results in the top half of their Lipper peer groups.
Our longer-term performance also benefited from our ongoing commitment to the
MFS Original Research(R) process: more than 75% of MFS funds were in the top
half of their respective Lipper categories over the 3-, 5-, and 10-year periods
ended December 31, 2004.
Of course, I cannot offer any guarantees that our performance will repeat
itself. Still, I am confident that the recent enhancements to our investment
process will continue to benefit shareholders in 2005 and beyond.
What I can tell you with certainty is that the way you manage your investments
will determine how well you take advantage of the performance that financial
markets deliver. Historically, individual investors have tended to underperform
the markets. For example, a 2003 study by DALBAR, Inc. showed that over the
nearly two decades from 1984 through 2002, the average U.S. stock investor
earned a 2.6% average annual return at a time when U.S. stocks, as measured by
the Standard & Poor's 500 Stock Index, delivered a 12.2% average annual
return.(1)
This huge discrepancy, in our view, occurred because nonprofessional investors
generally did not adhere to the basic principles followed by most professional
investors: allocate among asset classes, diversify within each asset class, and
rebalance one's portfolio on a routine schedule. I elaborated on this "ADR"
theme in fund reports over the last few months of 2004. For more information on
how to apply a Disciplined Diversification(SM) strategy to your portfolio using
the principles of ADR, I would urge you to contact your own investment
professional. You may also want to refer to information on the subject on our
Web site, MFS.COM.
As always, we appreciate your confidence in MFS, and you can be sure of our
continued commitment to do the best we can to help you pursue your long-term
financial goals.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 15, 2005
It is not possible to invest directly in an index.
Lipper rankings and performance are based on historical average annual returns
of Class A shares, and do not include any sales charges. Past performance is no
guarantee of future results.
Asset allocation and diversification cannot guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
(1) Source: DALBAR July 2003 update to its Quantitative Analysis of Investment
Behavior; DALBAR, Inc., is a financial-services market research firm
headquartered in Boston, MA.
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- -------------------------------------------------------------------------------
PORTFOLIO STRUCTURE
Bonds 99.6%
Cash & Other Net Assets 0.4%
TOP FIVE BOND INDUSTRIES*
Municipal Owned Utilities 18.5%
------------------------------------------------
Healthcare/Hospitals 15.0%
------------------------------------------------
Municipal General Obligations/GP 13.8%
------------------------------------------------
State and Local Approp. 9.4%
------------------------------------------------
Municipal General Obligations/Schools 8.5%
------------------------------------------------
CREDIT QUALITY OF BONDS**
AAA 53.1%
------------------------------------------------
AA 10.4%
------------------------------------------------
A 24.1%
------------------------------------------------
BBB 12.1%
------------------------------------------------
BB 0.1%
------------------------------------------------
Not Rated 0.2%
------------------------------------------------
PORTFOLIO FACTS
Average Duration 6.2
------------------------------------------------
Average Life 14.3 yrs.
------------------------------------------------
Average Maturity*** 15.1 yrs.
------------------------------------------------
Average Quality AA
------------------------------------------------
Average Quality Short Term Bonds A-1
------------------------------------------------
* For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
** Credit quality ratings are based on a weighted average of each security's
rating from Moody's Investors Service. If not rated by Moody's, the rating
will be that assigned by Standard & Poor's. Likewise, if not assigned a
rating by Standard & Poor's, it will be based on the rating assigned by
Fitch, Inc. If not rated by any of the three agencies, the security is
considered not rated, except for U.S. Treasuries and mortgage-backed
securities, which are included in the "AAA"-rating category. Percentages
are based on market value of investments as of 2/28/05.
*** The average maturity shown is calculated using the final stated maturity
on the portfolio's holdings without taking into account any holdings which
have been pre-refunded to an earlier date or which have a mandatory put
date prior to the stated maturity. The average life shown takes into
account these
earlier dates.
Percentages are based on net assets as of 2/28/05, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
- -------------------------------------------------------------------------------
MANAGEMENT REVIEW
- -------------------------------------------------------------------------------
SUMMARY OF RESULTS
For the six months ended February 28, 2005, Class A shares of the MFS Municipal
Bond Fund provided a total return of 2.20%, not including sales charges. In
comparison, the fund's benchmark, the Lehman Brothers Municipal Bond Index,
returned 2.40%. The fund's investment objective is to provide 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. The
fund invests, under normal market conditions, at least 80% of its net assets in
securities and other investments, the interest on which is exempt from federal
income tax. The fund may invest in municipal securities, which are bonds or
other debt obligations of a U.S. state or political subdivision, such as a
county, city, town, village or authority.
MARKET ENVIRONMENT
At the start of the period, we believed that markets were concerned about the
sustainability of the economic recovery. Fixed income markets had finished
strongly in 2003. This bond-friendly environment was interrupted by strong U.S.
employment and economic data in the second quarter of 2004, which we believe
precipitated a bond market selloff. Accelerating domestic demand in the first
half of the period, coupled with rising inflation and a very accommodative
monetary stance caused the U.S. Federal Reserve to begin raising short-term
rates in June. Despite four more rate hikes in the second half of the year, we
believe U.S. economic conditions contributed to a decline in longer maturity
bond yields, while corporate and emerging bond yields narrowed to U.S.
Treasuries. Under this scenario the yield curve flattened - interest rates on
the short end of the curve moved up while rates on the long end decreased
slightly.
Compared to 2003, where we believed a large number of states and municipalities
issued debt in order to take advantage of historically low interest rates, the
rate of new bond issuance fell in 2004. However, demand for municipal bonds did
not decline with issuance. In our view, this supply- demand scenario aided
municipal bond performance over the period.
DETRACTORS FROM PERFORMANCE
Security selection in the credit enhanced (insured bonds) sector detracted from
performance. Our underweighted position, relative to the Lehman Brothers
Municipal Bond Index, in the tobacco sector modestly held back results for the
period. Our overweighting in pre-refunded bonds also hurt performance.
CONTRIBUTORS TO PERFORMANCE
The fund benefited from sector selection and our positioning on the yield
curve. Our overweighted position in the health care sector boosted relative
returns. Our relative underweighting in general obligation bonds also helped
results during the period.
Respectfully,
/s/ Geoffrey L. Schechter /s/ Michael L. Dawson
Geoffrey L. Schechter Michael L. Dawson
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 as 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.
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 2/28/05
- -------------------------------------------------------------------------------
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. HIGH
SHORT-TERM RETURNS FOR ANY PERIOD MAY BE AND LIKELY WERE ATTRIBUTABLE TO
FAVORABLE MARKET CONDITIONS DURING THAT PERIOD, WHICH MAY NOT BE REPEATABLE.
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
inception
Share class date 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 12/16/76 2.20% 2.57% 5.47% 7.00% 5.76%
- ------------------------------------------------------------------------------
B 9/07/93 1.81% 1.79% 4.64% 6.17% 4.90%
- ------------------------------------------------------------------------------
- ----------------------
Average annual
- ----------------------
Comparative benchmarks
- ------------------------------------------------------------------------------
Average general
municipal debt fund+ 2.14% 2.18% 4.81% 6.27% 5.50%
- ------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index# 2.40% 2.96% 5.62% 7.18% 6.51%
- ------------------------------------------------------------------------------
- ----------------------
Average annual
with sales charge
- ----------------------
Share class 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A -2.66% -2.30% 3.78% 5.97% 5.25%
- ------------------------------------------------------------------------------
B -2.18% -2.12% 3.72% 5.85% 4.90%
- ------------------------------------------------------------------------------
- ----------------------
Cumulative without
sales charge
- ----------------------
- ------------------------------------------------------------------------------
A 2.20% 2.57% 17.33% 40.28% 75.08%
- ------------------------------------------------------------------------------
B 1.81% 1.79% 14.57% 34.88% 61.40%
- ------------------------------------------------------------------------------
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
Periods less than one year are actual, not annualized.
INDEX DEFINITION
Lehman Brothers Municipal Bond Index - is a rules-based, market-value-weighted
index representative of the tax-exempt bond market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results including sales charge reflect the deduction of the maximum
4.75% sales charge. Class B results including sales charge reflect the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%.
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.
From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
KEY RISK CONSIDERATIONS
A 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.
The portfolio invests in municipal bonds that are general obligations backed by
the full faith and credit of the municipal issuer. The portfolio may also
invest in municipal bonds called revenue obligations which are subject to a
higher degree of credit risk than general obligations. The prices of these
securities will decline when interest rates rise, and increase when rates fall.
In addition, municipal securities are subject to credit (failure to make timely
principal or interest payments) and maturity (longer maturity dates increase
security price fluctuations) risks.
The fixed income securities purchased by the portfolio may be traded in the
over-the-counter market rather than on an organized exchange and are subject to
liquidity risk. This means that they may be harder to purchase or sell at a
fair price. The inability to purchase or sell these fixed income securities at
a fair price could have a negative impact on the portfolio's performance.
Speculative bonds are subject to a higher risk that the issuer will default on
payments of principal and interest than higher-rated investment grade bonds.
Although the issuer's ability to make interest and principal payments appears
adequate, an adverse change in economic conditions or other circumstances is
more likely to cause a default by the issuer of a speculative bond than the
issuer of a higher-rated investment grade bond. If a security purchased by the
fund is downgraded to below investment grade, the security will be sold only if
MFS believes it is advantageous to do so.
The portfolio's investment in municipal securities may include municipal lease
obligations. Municipal lease obligations are undivided interests issued by a
state or municipality in a lease or installment purchase which generally
relates to equipment or facilities. When a portfolio invests in municipal lease
obligations, it may have limited recourse in the event of default or
termination. In some cases, payments under municipal leases do not have to be
made unless the appropriate legislative body specifically approves money for
that purpose.
Please see the prospectus for further information regarding these and other
risk considerations.
- -------------------------------------------------------------------------------
EXPENSE TABLE
- -------------------------------------------------------------------------------
FUND EXPENSES BORNE BY SHAREHOLDERS DURING THE PERIOD FROM
SEPTEMBER 1, 2004, THROUGH FEBRUARY 28, 2005.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period, September 1, 2004 through February
28, 2005.
ACTUAL EXPENSES
The first line for each share class in the table on the next page provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table on the next page provides
information about hypothetical account values and hypothetical expenses based
on the fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
- --------------
Share Class
- --------------
- -------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period**
Expense Account Value Account Value 9/01/04-
Ratio 9/01/04 2/28/05 2/28/05
- --------------------------------------------------------------------------------
Actual 0.49% $1,000 $1,022 $2.46
A ------------------------------------------------------------------------
Hypothetical* 0.49% $1,000 $1,022 $2.46
- --------------------------------------------------------------------------------
Actual 1.25% $1,000 $1,018 $6.25
B -------------------------------------------------------------------------
Hypothetical* 1.25% $1,000 $1,019 $6.26
- --------------------------------------------------------------------------------
* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year. Expenses paid do not include any
applicable sales charges (loads) or redemption fees. If these transaction
costs had been included, your costs would have been higher.
- ----------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) - 2/28/05
- ----------------------------------------------------------------------------------------------
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 - 98.3%
- ----------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ----------------------------------------------------------------------------------------------
Airport & Port Revenue - 2.2%
- ----------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport Rev. (2nd Lien
Passenger Facility D), AMBAC, 5.5%, 2019 $1,845,000 $2,005,146
- ----------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport Rev. (3rd Lien
Passenger Facility B), FSA, 5.75%, 2022 1,125,000 1,250,685
- ----------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport Rev., RITES, FSA,
9.8047%, 2022+(+) 2,500,000 3,056,250
- ----------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport Rev., RITES,
XLCA, 10.3047%, 2029+(+) 3,000,000 3,688,080
- ----------------------------------------------------------------------------------------------
Denver, CO, City & County Airport Rev., RITES, AMBAC,
9.82%, 2017+(+) 2,500,000 3,017,350
- ----------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., 6%, 2011 955,000 1,062,829
- ----------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., 6%, 2012 250,000 276,938
- ----------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., 6.125%, 2017 1,500,000 1,688,250
- ----------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., ETM, 13%, 2013(++) 3,165,000 4,554,403
- ----------------------------------------------------------------------------------------------
Niagara, NY, Frontier Transportation Authority (Buffalo-
Niagara International Airport), MBIA, 5.875%, 2013 1,485,000 1,627,233
- ----------------------------------------------------------------------------------------------
Port of Seattle, WA, "A", FGIC, 5.5%, 2021 4,000,000 4,203,200
- ----------------------------------------------------------------------------------------------
$26,430,364
- ----------------------------------------------------------------------------------------------
General Obligations - General Purpose - 13.6%
- ----------------------------------------------------------------------------------------------
Allen County, IN, Jail Building Corp., First Mortgage,
5.75%, 2020 $2,750,000 $3,054,040
- ----------------------------------------------------------------------------------------------
Chicago IL, Lakefront Millenium Parking Facilities, MBIA,
0% to 2006, 5.7% to 2025 2,355,000 2,427,746
- ----------------------------------------------------------------------------------------------
Chicago, IL, FGIC, 6.125%, 2020 3,785,000 4,325,120
- ----------------------------------------------------------------------------------------------
Chicago, IL, RITES, AMBAC, 9.366%, 2018+(+) 5,900,000 7,685,694
- ----------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, "B", 5.25%, 2028 5,000,000 5,585,700
- ----------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, ETM, 6.5%, 2008(++) 6,300,000 6,997,725
- ----------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, FGIC, ETM, 7%, 2009 7,000,000 7,873,028
- ----------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, ROLs, 8.7793%, 2011(++),+(+) 2,870,000 3,522,351
- ----------------------------------------------------------------------------------------------
Commonwealth of Puerto Rico, ROLs, XLCA, 8.9628%, 2017+(+) 1,150,000 1,514,251
- ----------------------------------------------------------------------------------------------
Cranston, RI, FGIC, 6.375%, 2017 830,000 952,425
- ----------------------------------------------------------------------------------------------
Delaware County, OH, 6.25%, 2010(++) 1,000,000 1,170,030
- ----------------------------------------------------------------------------------------------
Detroit, MI, 6.25%, 2009 5,235,000 $5,304,626
- ----------------------------------------------------------------------------------------------
Detroit/Wayne County, MI, Stadium Authority, FGIC,
5.5%, 2017 6,000,000 6,403,740
- ----------------------------------------------------------------------------------------------
Hidalgo County, TX, AMBAC, 6%, 2016 1,005,000 1,134,504
- ----------------------------------------------------------------------------------------------
Houston County, AL, AMBAC, 6.25%, 2009(++) 3,315,000 3,843,278
- ----------------------------------------------------------------------------------------------
Interlocken Metropolitan District, CO, Improvement, "C",
XLCA, 0%, 2027 1,860,000 511,165
- ----------------------------------------------------------------------------------------------
New York City Urban Development Corp., 5.5%, 2016 14,690,000 15,533,794
- ----------------------------------------------------------------------------------------------
New York City, NY, "B", 7.5%, 2007 955,000 958,810
- ----------------------------------------------------------------------------------------------
New York City, NY, "B", 5.75%, 2015 5,850,000 6,564,519
- ----------------------------------------------------------------------------------------------
New York City, NY, FGIC, 5.75%, 2006(++) 11,085,000 11,568,749
- ----------------------------------------------------------------------------------------------
New York City, NY, FGIC, 5.75%, 2007(++) 8,500,000 9,265,850
- ----------------------------------------------------------------------------------------------
New York City, NY, FGIC, 5.75%, 2006(++) 9,500,000 9,914,580
- ----------------------------------------------------------------------------------------------
New York, NY, "J", 5%, 2030 1,180,000 1,222,256
- ----------------------------------------------------------------------------------------------
Pittsfield, MA, MBIA, 5.5%, 2017 100,000 112,071
- ----------------------------------------------------------------------------------------------
San Antonio, TX, 5%, 2020 2,990,000 3,115,251
- ----------------------------------------------------------------------------------------------
Schaumburg, IL, "B", FGIC, 5.25%, 2034 2,000,000 2,120,380
- ----------------------------------------------------------------------------------------------
Southlake, TX, AMBAC, 0%, 2009(++) 1,835,000 905,573
- ----------------------------------------------------------------------------------------------
Southlake, TX, AMBAC, 0%, 2009(++) 3,150,000 1,267,907
- ----------------------------------------------------------------------------------------------
State of California, 5.5%, 2012 350,000 386,414
- ----------------------------------------------------------------------------------------------
State of California, 5.5%, 2013 5,000,000 5,627,050
- ----------------------------------------------------------------------------------------------
State of California, 5.1%, 2034 5,000,000 5,108,100
- ----------------------------------------------------------------------------------------------
State of California, RITES, 9.2529%, 2012+(+) 5,825,000 7,127,703
- ----------------------------------------------------------------------------------------------
State of California, RITES, XLCA, 9.8507%, 2017+(+) 6,875,000 8,728,638
- ----------------------------------------------------------------------------------------------
State of Washington, 6.75%, 2010 3,880,000 4,503,167
- ----------------------------------------------------------------------------------------------
State of Washington, 6%, 2012 4,360,000 5,030,786
- ----------------------------------------------------------------------------------------------
$161,367,021
- ----------------------------------------------------------------------------------------------
General Obligations - Improvement - 2.8%
- ----------------------------------------------------------------------------------------------
Birmingham, AL, 5.75%, 2019 $1,000,000 $1,109,560
- ----------------------------------------------------------------------------------------------
District of Columbia, MBIA, 6.5%, 2010 3,095,000 3,576,242
- ----------------------------------------------------------------------------------------------
District of Columbia, MBIA, ETM, 6.5%, 2010(++) 2,905,000 3,376,452
- ----------------------------------------------------------------------------------------------
Massachusetts Bay Transportation Authority General
Transportation Systems, "A", XLCA, 7%, 2021 10,185,000 13,025,291
- ----------------------------------------------------------------------------------------------
Massachusetts Bay Transportation Authority, Transportation
Systems, "C", XLCA, 6.1%, 2013 10,200,000 11,981,022
- ----------------------------------------------------------------------------------------------
$33,068,567
- ----------------------------------------------------------------------------------------------
General Obligations - Schools - 8.4%
- ----------------------------------------------------------------------------------------------
Chicago, IL, Board of Education, AMBAC, 5.4%, 2017 $3,000,000 $3,244,290
- ----------------------------------------------------------------------------------------------
Chicago, IL, Board of Education, MBIA, 6.25%, 2009 5,160,000 5,761,914
- ----------------------------------------------------------------------------------------------
Chicago, IL, Board of Education, MBIA, 6.25%, 2015 20,295,000 23,863,876
- ----------------------------------------------------------------------------------------------
Chicago, IL, Board of Education, RITES, FGIC,
8.843%, 2019+(+) 5,000,000 6,333,200
- ----------------------------------------------------------------------------------------------
Clark County, NV, School District, "A", MBIA, 7%, 2010 4,000,000 4,711,320
- ----------------------------------------------------------------------------------------------
Ferris, TX, Independent School District, PSF, 5.5%, 2034 2,360,000 2,537,283
- ----------------------------------------------------------------------------------------------
Florida Board of Education, Capital Outlay, 9.125%, 2014 1,735,000 2,269,640
- ----------------------------------------------------------------------------------------------
Florida Board of Education, Capital Outlay, ETM,
9.125%, 2014(++) 265,000 357,178
- ----------------------------------------------------------------------------------------------
Forsyth County, GA, School District, 6%, 2010(++) 725,000 833,257
- ----------------------------------------------------------------------------------------------
Forsyth County, GA, School District, 6%, 2010(++) 865,000 994,162
- ----------------------------------------------------------------------------------------------
Gilroy, CA, Unified School District, FGIC, 5%, 2027 1,000,000 1,043,910
- ----------------------------------------------------------------------------------------------
Grand Blanc, MI, Community Schools (School Building &
Site), FSA, 5%, 2028 1,000,000 1,047,080
- ----------------------------------------------------------------------------------------------
Highland Park, TX, Independent School District,
5.125%, 2016 2,525,000 2,682,762
- ----------------------------------------------------------------------------------------------
Kane Cook & Dupage Counties, IL, 6.5%, 2011(++) 1,345,000 1,579,205
- ----------------------------------------------------------------------------------------------
Kane Cook & Dupage Counties, IL, FSA, 6.375%, 2011(++) 1,245,000 1,453,575
- ----------------------------------------------------------------------------------------------
Knox County, KY, XLCA, 5.625%, 2035 1,150,000 1,270,175
- ----------------------------------------------------------------------------------------------
Lancaster, TX, Independent School District, Capital
Appreciation, FSA, 0%, 2026 1,765,000 537,054
- ----------------------------------------------------------------------------------------------
Lancaster, TX, Independent School District, Capital
Appreciation, FSA, 0%, 2027 1,570,000 447,246
- ----------------------------------------------------------------------------------------------
Lane County, OR, School District, 6.25%, 2010(++) 1,150,000 1,317,981
- ----------------------------------------------------------------------------------------------
Lane County, OR, School District, 6.25%, 2010(++) 1,000,000 1,146,070
- ----------------------------------------------------------------------------------------------
Leander, TX, Independent School District, PSF, 0%, 2018 4,885,000 2,359,992
- ----------------------------------------------------------------------------------------------
Lewisville, TX, Independent School District, PSF, 5%, 2018 8,500,000 8,956,535
- ----------------------------------------------------------------------------------------------
Manchester, NH, School Facilities Rev., MBIA, 5.5%, 2027 785,000 909,109
- ----------------------------------------------------------------------------------------------
Manchester, NH, School Facilities Rev., MBIA, 5.5%, 2028 785,000 907,327
- ----------------------------------------------------------------------------------------------
Marshall, MI, Public School District, 5.5%, 2016 500,000 548,285
- ----------------------------------------------------------------------------------------------
Rancho Santiago, CA, Community College District, Election
of 2002, MBIA, 5%, 2027 2,200,000 2,305,424
- ----------------------------------------------------------------------------------------------
Rockwall, TX, Independent School District, PSF, 0%, 2014 2,000,000 1,290,720
- ----------------------------------------------------------------------------------------------
San Marcos, TX, Independent School District, PSF,
5.625%, 2025 2,000,000 2,239,400
- ----------------------------------------------------------------------------------------------
San Marcos, TX, Independent School District, PSF,
5.625%, 2026 2,000,000 2,231,120
- ----------------------------------------------------------------------------------------------
San Rafael, CA, Elementary School District, Election of
1999, MBIA, 5%, 2028 2,500,000 2,603,525
- ----------------------------------------------------------------------------------------------
Snohomish County, WA, School District 6, 6%, 2010(++) 1,690,000 1,936,419
- ----------------------------------------------------------------------------------------------
State Public School Building Authority, PA (Wattsburg),
Rev., MBIA, 0%, 2028 2,150,000 643,173
- ----------------------------------------------------------------------------------------------
State Public School Building Authority, PA (Wattsburg),
Rev., MBIA, 0%, 2030 2,150,000 571,148
- ----------------------------------------------------------------------------------------------
State Public School Building Authority, PA (Wattsburg),
Rev., MBIA, 0%, 2031 1,170,000 293,378
- ----------------------------------------------------------------------------------------------
Sunnyvale, TX, Independent School District, PSF,
5.25%, 2028 1,900,000 2,022,702
- ----------------------------------------------------------------------------------------------
Sunnyvale, TX, Independent School District, PSF,
5.25%, 2031 2,000,000 2,118,520
- ----------------------------------------------------------------------------------------------
Wylie, TX, Independent School District, PSF, 5.25%, 2029 3,955,000 4,181,938
- ----------------------------------------------------------------------------------------------
$99,549,893
- ----------------------------------------------------------------------------------------------
Healthcare Revenue - Hospitals - 14.9%
- ----------------------------------------------------------------------------------------------
Akron Bath Copley, OH, Hospital Rev. (Children's Hospital),
FSA, 5.25%, 2025 $1,000,000 $1,075,040
- ----------------------------------------------------------------------------------------------
Baxter County, AR, Hospital Rev., 5.375%, 2014 1,000,000 1,046,830
- ----------------------------------------------------------------------------------------------
Baxter County, AR, Hospital Rev., 5.6%, 2021 1,750,000 1,821,768
- ----------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Portercare
Adventist Health Systems), 6.625%, 2026 1,250,000 1,389,888
- ----------------------------------------------------------------------------------------------
Cullman, AL, Cullman Medical Park South, Medical Clinic
Board Rev. (Cullman Regional Medical Center), 6.5%, 2013 1,165,000 1,171,734
- ----------------------------------------------------------------------------------------------
Denver, CO, Health & Hospital Authority Rev., 5.375%, 2028 2,440,000 2,448,394
- ----------------------------------------------------------------------------------------------
District of Columbia, Hospital Rev. (Medlantic Healthcare),
MBIA, ETM, 5.25%, 2019(++) 6,750,000 7,122,735
- ----------------------------------------------------------------------------------------------
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital, Inc.), 5.25%, 2018 1,000,000 1,043,340
- ----------------------------------------------------------------------------------------------
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital, Inc.), 5.25%, 2020 4,345,000 4,438,287
- ----------------------------------------------------------------------------------------------
Florence County, SC, Hospital Rev. (McLeod Regional Medical
Center), "A", FSA, 5.25%, 2034 5,000,000 5,323,150
- ----------------------------------------------------------------------------------------------
Gainsville & Hall County, GA, Hospital Authority Rev.
(Northeast Georgia Health System), 5.5%, 2031 1,555,000 1,607,606
- ----------------------------------------------------------------------------------------------
Gulfport, MS, Hospital Facilities Rev. (Memorial Hospital),
5.75%, 2031 1,500,000 1,573,530
- ----------------------------------------------------------------------------------------------
Harris County, TX, Health Facilities Development Corp. "A"
(Texas Children's Hospital), 5.375%, 2015 4,300,000 4,542,004
- ----------------------------------------------------------------------------------------------
Harris County, TX, Health Facilities Development Corp.
Hospital Rev. (Memorial Herman Healthcare), 6.375%, 2029 2,000,000 2,212,540
- ----------------------------------------------------------------------------------------------
Highlands County, FL, Health Facilities Authority Rev.
(Adventist/Sunbelt Hospital), 6%, 2031 1,000,000 1,083,620
- ----------------------------------------------------------------------------------------------
Huntsville, AL, Health Care Authority Rev., 5.625%, 2026 2,595,000 2,711,567
- ----------------------------------------------------------------------------------------------
Illinois Development Finance Authority Rev. "A" (Provena
Health), MBIA, 5.25%, 2012 1,600,000 1,703,808
- ----------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev. (Advocate
Health Care Network), MBIA, 5.7%, 2011 3,005,000 3,242,155
- ----------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev. (Centegra
Health Systems), 5.25%, 2024 5,500,000 5,520,790
- ----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Advocate Health
Care Network), 6.375%, 2015 1,800,000 2,017,782
- ----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Condell Medical
Center), 6.35%, 2015 6,500,000 7,065,240
- ----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Decatur Memorial
Hospital), 5.75%, 2024 2,650,000 2,778,287
- ----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Passavant
Memorial Area Hospital Associates), 6%, 2024 1,165,000 1,270,223
- ----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Riverside Health
Systems), 5.75%, 2022 1,975,000 2,048,095
- ----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Sinai Health),
FHA, 5.15%, 2037 2,400,000 2,466,120
- ----------------------------------------------------------------------------------------------
Indiana Health Facilities Hospital Rev. (Deaconess
Hospital) "A", AMBAC, 5.375%, 2034 2,075,000 2,219,171
- ----------------------------------------------------------------------------------------------
Iowa Finance Authority, Health Care Facilities Rev.
(Genesis Medical Center), 6.125%, 2016 2,195,000 2,367,527
- ----------------------------------------------------------------------------------------------
Kentucky Economic Development Finance Authority, Health
Systems Rev. (Norton Healthcare, Inc.), 6.5%, 2020 4,750,000 5,174,840
- ----------------------------------------------------------------------------------------------
Marion County, FL, Hospital District Rev. (Monroe
Hospital), 5.625%, 2019 2,610,000 2,750,340
- ----------------------------------------------------------------------------------------------
Marshall County, AL, Health Care "A", 5.75%, 2015 1,000,000 1,088,090
- ----------------------------------------------------------------------------------------------
Martin County, FL, Health Facilities (Martin Memorial
Medical Center) "B", 5.875%, 2032 2,200,000 2,283,952
- ----------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities Authority
Rev. (Lifebridge Health), "A", 5.125%, 2034 1,000,000 1,024,900
- ----------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities Authority
Rev. (Medstar Health), 5.5%, 2033 1,115,000 1,163,380
- ----------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities Authority
Rev. (University of Maryland Medical System), 6.75%, 2030 1,000,000 1,135,720
- ----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev. (Caritas Christi), 5.7%, 2015 2,500,000 2,589,625
- ----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev. (Partners Healthcare Systems), 5.75%, 2021 1,500,000 1,666,830
- ----------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev. "A" (Crittenton),
5.625%, 2027 1,000,000 1,052,210
- ----------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev. (Mercy Mount
Clement), MBIA, 5.75%, 2017 2,900,000 3,192,030
- ----------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev. (Sisters of Mercy
Health System), MBIA, ETM, 5.375%, 2014(++) 515,000 550,751
- ----------------------------------------------------------------------------------------------
Monroe County, PA, Hospital Authority Rev. (Pocono Medical
Center), 6%, 2043 750,000 785,490
- ----------------------------------------------------------------------------------------------
Montgomery, AL, Special Care Facilities, Financing
Authority Rev. (Baptist Health), "A-2", MBIA, 0% to 2007,
5% to 2022 4,620,000 4,168,811
- ----------------------------------------------------------------------------------------------
Montgomery, AL, Special Care Facilities, Financing
Authority Rev. (Baptist Health), "A-2", MBIA, 0% to 2007,
5% to 2024 6,910,000 6,171,874
- ----------------------------------------------------------------------------------------------
Mount Lebanon, PA, Hospital Authority Rev. (St. Clair
Memorial Hospital), 5.625%, 2032 1,335,000 1,392,218
- ----------------------------------------------------------------------------------------------
New Hampshire Health & Education Facilities Rev. (Exeter
Hospital), 6%, 2016 1,000,000 1,093,200
- ----------------------------------------------------------------------------------------------
North Central, TX, Health Facilities Development Corp. Rev.
(Texas Health Resources System), MBIA, 5%, 2017 5,000,000 5,213,300
- ----------------------------------------------------------------------------------------------
North Texas Health Facilities Development Corp. Rev.
(United Regional Health Care System, Inc.), 6%, 2023 4,000,000 4,262,680
- ----------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority Hospital
Rev. (Adventist Health Systems), 5.625%, 2032 1,490,000 1,582,529
- ----------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority Hospital
Rev. (Orlando Regional Healthcare), 5.75%, 2032 2,230,000 2,390,828
- ----------------------------------------------------------------------------------------------
Palm Beach County, FL, Health Facilities Rev. (Boca Raton
Hospital), 5.5%, 2021 1,500,000 1,577,025
- ----------------------------------------------------------------------------------------------
Peninsula Ports Authority Rev. (Whittaker Memorial), FHA,
8.7%, 2023 1,560,000 1,867,070
- ----------------------------------------------------------------------------------------------
Pennsylvania Higher Educational Facilities Rev. (Alleghany
Delaware Valley), MBIA, 5.3%, 2006 1,975,000 2,041,005
- ----------------------------------------------------------------------------------------------
Pennsylvania Higher Educational Facilities Rev. (Allegheny
Delaware Valley), MBIA, 5.875%, 2016 5,000,000 5,297,750
- ----------------------------------------------------------------------------------------------
Rhode Island Health & Education Building Rev., Hospital
Financing (Lifespan Obligated Group), 6.375%, 2021 2,000,000 2,248,540
- ----------------------------------------------------------------------------------------------
Richland County, OH, Hospital Facilities Rev. (Medcentral
Health Systems), 6.375%, 2022 1,000,000 1,068,260
- ----------------------------------------------------------------------------------------------
Royston, GA, Hospital Authority Rev. (Ty Cobb Healthcare
Systems, Inc.), 6.7%, 2016 770,000 783,452
- ----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Hospital Facilities Board
Hospital Rev. (Methodist Healthcare), 6.375%, 2012(++) 1,255,000 1,497,428
- ----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Housing Facilities Board
Hospital Rev. (Methodist Healthcare), ETM, 6.375%, 2019(++) 745,000 883,116
- ----------------------------------------------------------------------------------------------
South Carolina Jobs & Economic Development Authority (Bon
Secours Health Systems, Inc.), "A", 5.625%, 2030 2,055,000 2,124,151
- ----------------------------------------------------------------------------------------------
South Carolina Medical University, Hospital Facilities Rev,
"A", MBIA, 5%, 2031 970,000 1,004,707
- ----------------------------------------------------------------------------------------------
Steubenville, OH, Hospital Rev. (Trinity Hospital),
6.375%, 2020 1,200,000 1,341,180
- ----------------------------------------------------------------------------------------------
Tallahassee, FL, Health Facilities Rev. (Tallahassee
Memorial Healthcare), 6.25%, 2020 2,000,000 2,072,820
- ----------------------------------------------------------------------------------------------
Tarrant County, TX, Health Facilities Development Corp.
(Fort Worth Osteopathic), MBIA, 6%, 2021 6,000,000 6,246,900
- ----------------------------------------------------------------------------------------------
Tarrant County, TX, Health Facilities Development Corp.
(Texas Health Resources), MBIA, 5.25%, 2018 8,605,000 9,226,539
- ----------------------------------------------------------------------------------------------
West Shore Pennsylvania, Hospital Authority Rev. (Holy
Spirit Hospital), 6.2%, 2026 1,250,000 1,333,525
- ----------------------------------------------------------------------------------------------
Wichita, KS, Hospital Authority Rev. (Via Christi Health
System), 6.25%, 2019 1,595,000 1,797,182
- ----------------------------------------------------------------------------------------------
Wichita, KS, Hospital Authority Rev. (Via Christi Health
System), 6.25%, 2020 2,465,000 2,769,773
- ----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Agnesian Healthcare, Inc.), 6%, 2017 520,000 561,610
- ----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Agnesian Healthcare, Inc.), 6%, 2021 650,000 690,625
- ----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Aurora Health Care, Inc.), 6.875%, 2030 2,000,000 2,308,100
- ----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Wheaton Franciscan Services), 5.75%, 2025 3,000,000 3,190,500
- ----------------------------------------------------------------------------------------------
$175,976,087
- ----------------------------------------------------------------------------------------------
Healthcare Revenue - Long Term Care - 0.2%
- ----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Corp. Rev.
(Buckner Retirement Facility), 5.25%, 2019 $2,500,000 $2,547,850
- ----------------------------------------------------------------------------------------------
Industrial Revenue - Chemicals - 0.3%
- ----------------------------------------------------------------------------------------------
Brazos River, TX, Harbor Navigation District (Dow Chemical
Co.), 5.7%, 2033 $3,500,000 $3,807,195
- ----------------------------------------------------------------------------------------------
Industrial Revenue - Environmental Services - 0.3%
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority, Solid Waste Rev.
(Waste Management, Inc.), 5.7%, 2018 $1,730,000 $1,852,795
- ----------------------------------------------------------------------------------------------
Nevada Department of Business (Republic Services, Inc.),
5.625%, 2026 1,500,000 1,614,030
- ----------------------------------------------------------------------------------------------
$3,466,825
- ----------------------------------------------------------------------------------------------
Industrial Revenue - Other - 1.4%
- ----------------------------------------------------------------------------------------------
Corpus Christi, TX, Nueces County General Rev. (Union
Pacific Corp.), 5.35%, 2010 $670,000 $690,797
- ----------------------------------------------------------------------------------------------
Lehigh County, PA, Industrial Development Authority
Pollution Control Rev., "A", (PP&L Electric Util. Corp.)
FGIC, 4.7%, 2029 1,180,000 1,171,504
- ----------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev., Resource
Recovery Rev. (Flour Corp.), 5.625%, 2019 8,650,000 9,125,837
- ----------------------------------------------------------------------------------------------
Shelby County, TN (FedEx Corp.), 5.05%, 2012 1,400,000 1,499,064
- ----------------------------------------------------------------------------------------------
Tooele County, UT, Hazardous Waste Treatment Rev. (Union
Pacific Corp.), 5.7%, 2026 3,640,000 3,781,996
- ----------------------------------------------------------------------------------------------
$16,269,198
- ----------------------------------------------------------------------------------------------
Industrial Revenue - Paper - 0.5%
- ----------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp., Environmental
Improvements Rev. (Mead Westvaco Escanaba), 6.25%, 2027 $1,500,000 $1,691,325
- ----------------------------------------------------------------------------------------------
Georgetown County, SC, Environmental Improvement
(International Paper Co.), 5.7%, 2014 1,400,000 1,545,978
- ----------------------------------------------------------------------------------------------
Jay, ME, Solid Waste Disposal Rev. "A" (International Paper
Co.), 5.125%, 2018 1,500,000 1,530,705
- ----------------------------------------------------------------------------------------------
Sabine River Authority Rev., Louisiana Water Facilities
(International Paper Co.), 6.2%, 2025 1,250,000 1,326,000
- ----------------------------------------------------------------------------------------------
$6,094,008
- ----------------------------------------------------------------------------------------------
Miscellaneous Revenue - Entertainment & Tourism - 0.1%
- ----------------------------------------------------------------------------------------------
Harris County-Houston, TX, Sports Authority Rev., MBIA,
0%, 2032 $5,835,000 $1,270,980
- ----------------------------------------------------------------------------------------------
Miscellaneous Revenue - Other - 1.0%
- ----------------------------------------------------------------------------------------------
Gallery Certificate Trust, PA, Parking Rev., FSA, 4.5%,
2013## $2,675,000 $2,676,766
- ----------------------------------------------------------------------------------------------
Kentucky Property & Buildings Commission Rev., FSA,
5.85%, 2010(++) 4,000,000 4,511,000
- ----------------------------------------------------------------------------------------------
Kentucky Property & Buildings Commission Rev., FSA,
5.9%, 2010(++) 4,500,000 5,085,090
- ----------------------------------------------------------------------------------------------
$12,272,856
- ----------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.6%
- ----------------------------------------------------------------------------------------------
California Statewide Communities Development Authority Rev.
(Irvine Apartments), 5.25%, 2025 $3,500,000 $3,652,355
- ----------------------------------------------------------------------------------------------
Newark, NJ, Housing Authority Port Authority (Newark Marine
Terminal), MBIA, 5.5%, 2028 785,000 858,366
- ----------------------------------------------------------------------------------------------
Panhandle, TX, Regional Housing Finance Rev., 6.625%, 2020 670,000 707,312
- ----------------------------------------------------------------------------------------------
Panhandle, TX, Regional Housing Finance Rev., 6.75%, 2031 1,755,000 1,845,734
- ----------------------------------------------------------------------------------------------
$7,063,767
- ----------------------------------------------------------------------------------------------
Parking - 0.1%
- ----------------------------------------------------------------------------------------------
Rail Connections, Inc., MA Rev., 0%, 2009(++) $375,000 $227,914
- ----------------------------------------------------------------------------------------------
Rail Connections, Inc., MA Rev., 0%, 2009(++) 450,000 255,906
- ----------------------------------------------------------------------------------------------
Rail Connections, Inc., MA Rev., 0%, 2009(++) 975,000 518,447
- ----------------------------------------------------------------------------------------------
$1,002,267
- ----------------------------------------------------------------------------------------------
Sales & Excise Tax Revenue - 1.9%
- ----------------------------------------------------------------------------------------------
Illinois Sales Tax Rev., 0%, 2009 $8,965,000 $7,684,708
- ----------------------------------------------------------------------------------------------
Illinois Sales Tax Rev., 6.5%, 2022 5,000,000 6,140,850
- ----------------------------------------------------------------------------------------------
Metropolitan Atlanta, GA, Rapid Transit Authority Rev.,
6.25%, 2018 4,580,000 5,382,324
- ----------------------------------------------------------------------------------------------
Metropolitan Pier & Expo, IL, McCormick Place Expansion,
MBIA, 5.25%, 2042 2,340,000 2,456,766
- ----------------------------------------------------------------------------------------------
Metropolitan Pier & Expo, IL, McCormick Place, MBIA,
0%, 2032 4,000,000 1,001,640
- ----------------------------------------------------------------------------------------------
$22,666,288
- ----------------------------------------------------------------------------------------------
Single Family Housing - Local - 2.2%
- ----------------------------------------------------------------------------------------------
Calcasieu Parish, LA, Public Trust Authority, Single Family
Mortgage Rev. "A", GNMA, 6.05%, 2032 $2,000,000 $2,120,920
- ----------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority Rev.,
GNMA, 6.55%, 2030 760,000 801,063
- ----------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority Rev.,
GNMA, 7.3%, 2031 145,000 149,067
- ----------------------------------------------------------------------------------------------
Chicago, IL, Single Family Mortgage Rev. "B", GNMA,
6%, 2033 710,000 740,424
- ----------------------------------------------------------------------------------------------
Chicago, IL, Single Family Mortgage Rev. "C", GNMA,
7%, 2032 125,000 126,873
- ----------------------------------------------------------------------------------------------
Chicago, IL, Single Family Mortgage Rev., GNMA, 7.05%, 2030 115,000 115,834
- ----------------------------------------------------------------------------------------------
Denver, CO, Single Family Mortgage Rev., GNMA, 7.3%, 2031 195,000 199,990
- ----------------------------------------------------------------------------------------------
Escambia County, FL, Single Family Housing Rev., GNMA,
6.95%, 2024 390,000 410,842
- ----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
6.625%, 2023 570,000 608,173
- ----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
7.5%, 2026 260,000 271,879
- ----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
6.75%, 2030 825,000 877,544
- ----------------------------------------------------------------------------------------------
Lee County, FL, Housing Finance Authority Rev., "A", GNMA,
7%, 2031 170,000 171,970
- ----------------------------------------------------------------------------------------------
Lubbock, TX, Housing Finance Corp. Rev., GNMA, 6.1%, 2030 2,175,000 2,286,817
- ----------------------------------------------------------------------------------------------
Manatee County, FL, Housing Finance Mortgage Rev., Single
Family, Subordinated Series 3, GNMA, 6.5%, 2023 210,000 222,881
- ----------------------------------------------------------------------------------------------
Manatee County, FL, Housing Finance Mortgage Rev., Single
Family, Subordinated Series 3, GNMA, 5.4%, 2029 520,000 535,444
- ----------------------------------------------------------------------------------------------
Manatee County, FL, Housing Finance Mortgage Rev., Single
Family, Subordinated, "3", GNMA, 5.3%, 2028 1,465,000 1,507,954
- ----------------------------------------------------------------------------------------------
Maricopa County, AZ, Single Family Mortgage Rev. "B", GNMA,
6.2%, 2034 935,000 974,083
- ----------------------------------------------------------------------------------------------
Phoenix, AZ, Single Family Mortgage Rev., GNMA, 6.1%, 2028 5,000 5,064
- ----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority, GNMA,
7.05%, 2030 930,000 993,817
- ----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., "A", GNMA, FNMA, 4%, 2036 2,355,000 2,531,531
- ----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., "A-5", GNMA, FNMA, 3%, 2027 1,175,000 1,261,386
- ----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., "A-5", GNMA, FNMA, 4%, 2036 2,435,000 2,579,590
- ----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., "B", GNMA, 5.45%, 2027 1,485,000 1,566,304
- ----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., GNMA, 6.875%, 2026 840,000 867,905
- ----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., GNMA, 6.45%, 2029 575,000 605,038
- ----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., GNMA, 6.45%, 2033 1,610,000 1,712,364
- ----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., GNMA, 6%, 2035 1,815,000 1,964,175
- ----------------------------------------------------------------------------------------------
$26,208,932
- ----------------------------------------------------------------------------------------------
Single Family Housing - State - 3.8%
- ----------------------------------------------------------------------------------------------
Arkansas Finance Authority, Mortgage Backed Securities
Program, "B", GNMA, 4.45%, 2034 $1,610,000 $1,627,050
- ----------------------------------------------------------------------------------------------
California Housing Finance Agency Rev., Home Mortgage, FSA,
0%, 2019 16,170,000 7,035,567
- ----------------------------------------------------------------------------------------------
California Housing Finance Agency Rev., Home Mortgage,
MBIA, 0%, 2028 2,175,000 655,371
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.15%, 2014 44,000 44,621
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.05%, 2016 435,000 452,056
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.45%, 2016 215,000 215,965
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.75%, 2021 270,000 280,643
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 5.9%, 2023 790,000 815,683
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.55%, 2025 199,000 202,986
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.4%, 2027 140,000 140,528
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.8%, 2030 545,000 563,465
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.25%, 2031 430,000 436,953
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.6%, 2032 745,000 764,124
- ----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., "C-2",
8.4%, 2021 195,000 196,613
- ----------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family Mortgage
Rev., GNMA, 7.55%, 2031 725,000 776,801
- ----------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family Mortgage
Rev., GNMA, 6.4%, 2032 960,000 995,981
- ----------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family Mortgage
Rev., GNMA, 6.375%, 2033 1,450,000 1,540,002
- ----------------------------------------------------------------------------------------------
Minnesota Housing Finance Agency Rev., Residential Housing
Finance "B", 4.8%, 2023 1,425,000 1,450,436
- ----------------------------------------------------------------------------------------------
Mississippi Home Corp. Rev., GNMA, 6.1%, 2034 3,725,000 3,950,921
- ----------------------------------------------------------------------------------------------
Mississippi Home Corp. Rev., Single Family Rev., "F", GNMA,
7.55%, 2027 346,000 354,972
- ----------------------------------------------------------------------------------------------
Missouri State Housing Development Commission, Single
Family Mortgage Rev. (Home Loan Program), GNMA,
6.7%, 2030 1,210,000 1,241,037
- ----------------------------------------------------------------------------------------------
Missouri State Housing Development Commission, Single
Family Mortgage Rev. (Home Loan Program), GNMA,
7.45%, 2031 185,000 191,738
- ----------------------------------------------------------------------------------------------
Missouri State Housing Development Commission, Single
Family Mortgage Rev. (Home Loan Program), GNMA,
6.85%, 2032 380,000 398,023
- ----------------------------------------------------------------------------------------------
Missouri State Housing Development Commission, Single
Family Mortgage Rev. (Home Loan Program), GNMA,
6.75%, 2034 480,000 494,678
- ----------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., 5.875%, 2030 490,000 501,765
- ----------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., 6.85%, 2030 1,255,000 1,288,760
- ----------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., 6.3%, 2031 465,000 473,640
- ----------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Rev., 6.8%, 2031 925,000 986,254
- ----------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Rev., GNMA,
7.1%, 2030 375,000 394,298
- ----------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Rev., GNMA,
6.25%, 2032 1,625,000 1,694,339
- ----------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Rev., GNMA,
6.35%, 2033 745,000 774,040
- ----------------------------------------------------------------------------------------------
North Carolina Housing Finance Agency Rev., "13-A",
4.25%, 2028 1,605,000 1,626,266
- ----------------------------------------------------------------------------------------------
North Dakota Housing Finance Agency Rev., Housing Finance,
5%, 2033 1,660,000 1,676,550
- ----------------------------------------------------------------------------------------------
Oklahoma Housing Finance Agency Rev., 6.8%, 2016 305,000 313,574
- ----------------------------------------------------------------------------------------------
Texas Housing & Community Affairs, Residential Mortgage
Rev., GNMA, 7.1%, 2021 6,005,000 6,448,830
- ----------------------------------------------------------------------------------------------
Vermont Housing Finance Agency Rev., FSA, 4.95%, 2032 2,595,000 2,652,998
- ----------------------------------------------------------------------------------------------
Washington Housing Finance Commission Rev., Single Family
Housing, GNMA, 5%, 2023 720,000 739,202
- ----------------------------------------------------------------------------------------------
$44,396,730
- ----------------------------------------------------------------------------------------------
Solid Waste Revenue - 0.4%
- ----------------------------------------------------------------------------------------------
Central Wayne County, MI, Sanitation Rev., "VII",
4.75%, 2007 $500,000 $510,460
- ----------------------------------------------------------------------------------------------
Delaware County, PA, Industrial Development Authority Rev.,
Resource Recovery Facilities (American Ref-Fuel Co.), "A",
6.2%, 2019 1,250,000 1,300,613
- ----------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev. (Ogden
Haverhill Associates), 6.7%, 2014 2,400,000 2,563,296
- ----------------------------------------------------------------------------------------------
$4,374,369
- ----------------------------------------------------------------------------------------------
State & Agency - Other - 0.9%
- ----------------------------------------------------------------------------------------------
New York Dormitory Authority Rev. (City University),
5.75%, 2013 $5,000,000 $5,610,500
- ----------------------------------------------------------------------------------------------
Orange County, CA, California Recovery Certificates, MBIA,
6%, 2026 5,000,000 5,331,200
- ----------------------------------------------------------------------------------------------
$10,941,700
- ----------------------------------------------------------------------------------------------
State & Local Agencies - 9.3%
- ----------------------------------------------------------------------------------------------
Alabama Building Renovation Authority, AMBAC, 6%, 2015 $1,610,000 $1,831,053
- ----------------------------------------------------------------------------------------------
Alabama Building Renovation Authority, AMBAC, 6%, 2016 1,705,000 1,938,329
- ----------------------------------------------------------------------------------------------
Delaware Valley, PA, Regional Finance Authority, RITES,
AMBAC, 9.3639%, 2018(+) 16,250,000 21,517,275
- ----------------------------------------------------------------------------------------------
Fayette County, GA (Criminal Justice Center), 6.25%, 2010(++) 1,000,000 1,158,790
- ----------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., Enhanced, "B", 5.375%, 2028 4,000,000 4,190,880
- ----------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., Enhanced, "B", 5.5%, 2043 3,925,000 4,168,193
- ----------------------------------------------------------------------------------------------
Houston, TX, Certificates of Participation, 6.3%, 2020 5,000,000 5,429,450
- ----------------------------------------------------------------------------------------------
New York Dormitory Authority Rev. "B", 6%, 2007 1,495,000 1,585,433
- ----------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., Mental Health Services
Facilities, 5.75%, 2007(++) 10,000 10,811
- ----------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., Mental Health Services
Facilities, 5.75%, 2010 1,990,000 2,138,713
- ----------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., Mental Health Services
Facilities, ETM, 6%, 2007(++) 5,000 5,334
- ----------------------------------------------------------------------------------------------
Palm Springs, CA, Finance Lease Rev. (Convention Center),
"A", MBIA, 5.5%, 2035 7,000,000 7,762,510
- ----------------------------------------------------------------------------------------------
Pennsylvania Convention Center Authority Rev., FGIC, ETM,
6.7%, 2016(++) 26,195,000 31,626,533
- ----------------------------------------------------------------------------------------------
Philadelphia, PA, Municipal Authority, MBIA, 5.4%, 2017 5,000,000 5,336,700
- ----------------------------------------------------------------------------------------------
San Bernardino, CA, Joint Powers Financing Authority Lease
Rev. (California Department of Transportation), 5.5%, 2014 10,000,000 10,396,000
- ----------------------------------------------------------------------------------------------
Warren Township, IN (Vision 2005 School Building Corp.),
FGIC, 5.5%, 2011(++) 7,500,000 8,415,750
- ----------------------------------------------------------------------------------------------
West Valley City, Utah Municipal Building Lease Rev. "A",
AMBAC, 5.5%, 2027 2,000,000 2,182,660
- ----------------------------------------------------------------------------------------------
$109,694,414
- ----------------------------------------------------------------------------------------------
Student Loan Revenue - 0.5%
- ----------------------------------------------------------------------------------------------
Arizona Student Loan Acquisition Authority Rev., 5.8%, 2016 $2,500,000 $2,690,000
- ----------------------------------------------------------------------------------------------
Arizona Student Loan Acquisition Authority Rev.,
5.85%, 2017 2,800,000 3,011,260
- ----------------------------------------------------------------------------------------------
$5,701,260
- ----------------------------------------------------------------------------------------------
Tax - Other - 0.9%
- ----------------------------------------------------------------------------------------------
Illinois Dedicated Tax Rev. (Civic Center), AMBAC,
6.25%, 2011 $3,640,000 $4,239,544
- ----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.5%, 2024 910,000 944,726
- ----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.75%, 2029 1,640,000 1,722,049
- ----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.5%, 2031 730,000 749,863
- ----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.75%, 2034 1,095,000 1,142,359
- ----------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority Rev., "A",
5.5%, 2022 2,000,000 2,068,320
- ----------------------------------------------------------------------------------------------
$10,866,861
- ----------------------------------------------------------------------------------------------
Tobacco - 1.2%
- ----------------------------------------------------------------------------------------------
Badger Tobacco, WI (Asset Securitization Corp.),
6.125%, 2027 $2,225,000 $2,268,210
- ----------------------------------------------------------------------------------------------
Childrens Trust Fund, Settlement Rev., PR, 5.375%, 2033 2,820,000 2,845,577
- ----------------------------------------------------------------------------------------------
District of Columbia, Tobacco Settlement, 6.25%, 2024 1,050,000 1,066,191
- ----------------------------------------------------------------------------------------------
Iowa Tobacco Settlement Authority, Tobacco Settlement Rev.,
Asset Backed, "B", 5.3%, 2025 3,000,000 2,784,900
- ----------------------------------------------------------------------------------------------
Louisiana Tobacco Settlement Authority, 5.5%, 2030 1,235,000 1,211,868
- ----------------------------------------------------------------------------------------------
New Jersey Tobacco Settlement Authority, 5.75%, 2032 2,460,000 2,447,282
- ----------------------------------------------------------------------------------------------
South Carolina Tobacco Settlement Authority, 6.375%, 2028 1,500,000 1,530,450
- ----------------------------------------------------------------------------------------------
Washington Tobacco Settlement Authority, 6.5%, 2026 160,000 165,978
- ----------------------------------------------------------------------------------------------
$14,320,456
- ----------------------------------------------------------------------------------------------
Toll Roads - 1.6%
- ----------------------------------------------------------------------------------------------
E-470 Public Highway Authority Rev., Capital Appreciation
"B", MBIA, 0%, 2010(++) $5,000,000 $2,694,300
- ----------------------------------------------------------------------------------------------
Harris County, TX, Toll Road Subordinated Lien, 5%, 2024 3,860,000 3,955,805
- ----------------------------------------------------------------------------------------------
New Jersey Turnpike Authority Rev., RITES, MBIA,
9.1237%, 2020+(+) 5,000,000 5,684,800
- ----------------------------------------------------------------------------------------------
Northwest Parkway Public Highway Authority Co. Rev.,
Capital Appreciation "B", AMBAC, 0%, 2018 1,250,000 647,538
- ----------------------------------------------------------------------------------------------
Northwest Parkway Public Highway Authority Co. Rev.,
Capital Appreciation "B", AMBAC, 0%, 2019 2,000,000 968,400
- ----------------------------------------------------------------------------------------------
Northwest Parkway Public Highway Authority Co. Rev.,
Capital Appreciation "C", FSA, 0% to 2011, 5.35% to 2016 1,000,000 794,530
- ----------------------------------------------------------------------------------------------
Texas Turnpike Authority, Dallas Thruway Rev. (President
George Bush Highway), AMBAC, 5%, 2006(++) 2,885,000 3,004,785
- ----------------------------------------------------------------------------------------------
Texas Turnpike Authority, Dallas Thruway Rev. (President
George Bush Highway), AMBAC, 5%, 2016 1,615,000 1,678,227
- ----------------------------------------------------------------------------------------------
$19,428,385
- ----------------------------------------------------------------------------------------------
Transportation - Special Tax - 3.8%
- ----------------------------------------------------------------------------------------------
Illinois Regional Transportation Authority Rev., MBIA,
6.25%, 2018 $4,400,000 $5,425,068
- ----------------------------------------------------------------------------------------------
Jacksonville, FL, Transpotation Authority, ETM, 9.2%, 2015(++) 2,000,000 2,732,780
- ----------------------------------------------------------------------------------------------
Metropolitan Transportation Authority Rev., NY, 5.75%, 2013 5,600,000 6,332,592
- ----------------------------------------------------------------------------------------------
Metropolitan Transportation Authority Rev., NY "A", FSA,
5%, 2030 2,750,000 2,854,775
- ----------------------------------------------------------------------------------------------
Metropolitan Transportation Authority Rev., NY, AMBAC,
5%, 2030 5,000,000 5,182,700
- ----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev.,
Transportation Project Sublease "A", FSA, 6%, 2009(++) 1,325,000 1,483,748
- ----------------------------------------------------------------------------------------------
New Jersey Transportation Trust Fund Authority Rev., ROLs,
FSA, 9.0328%, 2011+(+) 7,500,000 9,364,650
- ----------------------------------------------------------------------------------------------
New Jersey Transportation Trust Fund Authority Rev.,
Transportation Systems "B", 5.25%, 2007(++) 8,500,000 9,162,065
- ----------------------------------------------------------------------------------------------
New York Thruway Authority Service Contract Rev.,
5.25%, 2013 2,420,000 2,578,897
- ----------------------------------------------------------------------------------------------
$45,117,275
- ----------------------------------------------------------------------------------------------
Universities - Colleges - 4.6%
- ----------------------------------------------------------------------------------------------
College of Charleston, SC, Academic & Administrative
Facilities Rev., "B", XLCA, 5.125%, 2034 $2,400,000 $2,538,192
- ----------------------------------------------------------------------------------------------
District of Columbia Rev. (Gonzaga College High School),
FSA, 5.25%, 2032 3,500,000 3,694,075
- ----------------------------------------------------------------------------------------------
Illinois Finance Authority Rev. (Univeristy of Chicago),
"A", 5%, 2034 785,000 812,765
- ----------------------------------------------------------------------------------------------
Los Angeles, CA, Community College "B", FSA, 5%, 2027 5,000,000 5,237,450
- ----------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev. (Boston
University), XLCA, 6%, 2059 4,975,000 5,926,966
- ----------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev.
(Massachusetts College of Pharmacy), 6.625%, 2010(++) 350,000 409,126
- ----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev., RITES (Harvard University), 10.817%, 2020+(+) 8,410,000 12,708,015
- ----------------------------------------------------------------------------------------------
Ohio State University, 6%, 2017 500,000 564,975
- ----------------------------------------------------------------------------------------------
Rhode Island State, Health & Educational Building Corp.,
(Higher Educational Facilities), "D", XLCA, 5.5%, 2035 9,140,000 10,021,370
- ----------------------------------------------------------------------------------------------
Texas A&M University, Permanent University Fund, "A",
0%, 2007 6,695,000 6,239,472
- ----------------------------------------------------------------------------------------------
University of Akron, OH, General Receipts, FGIC, 6%, 2015 1,000,000 1,141,060
- ----------------------------------------------------------------------------------------------
University of Arkansas, University Rev. (UAMS Campus), "B",
MBIA, 5%, 2034 810,000 840,116
- ----------------------------------------------------------------------------------------------
University of Hawaii, University Systems Rev. "A", FGIC,
5.5%, 2029 3,500,000 3,813,180
- ----------------------------------------------------------------------------------------------
University of New Mexico, MBIA, 5.75%, 2010(++) 500,000 563,140
- ----------------------------------------------------------------------------------------------
$54,509,902
- ----------------------------------------------------------------------------------------------
Universities - Dormitories - 0.1%
- ----------------------------------------------------------------------------------------------
Georgia Private College & University Authority Rev. (Mercer
Housing Corp.), "A", 6%, 2021 $1,000,000 $1,043,380
- ----------------------------------------------------------------------------------------------
Universities - Secondary Schools - 0.7%
- ----------------------------------------------------------------------------------------------
Clark County, NV, Economic Development Rev. (Alexander
Dawson School), 5.5%, 2020 $6,000,000 $6,361,740
- ----------------------------------------------------------------------------------------------
Maine Finance Authority (Waynflete School), 6.5%, 2024 1,500,000 1,639,875
- ----------------------------------------------------------------------------------------------
$8,001,615
- ----------------------------------------------------------------------------------------------
Utilities - Investor Owned - 1.2%
- ----------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (New Mexico Public
Service), 5.8%, 2022 $4,880,000 $4,985,066
- ----------------------------------------------------------------------------------------------
Michigan Strategic Fund, Limited Obligation Rev. (Detroit
Edison), MBIA, 7%, 2008 3,000,000 3,388,590
- ----------------------------------------------------------------------------------------------
New Hampshire Industrial Development Authority, Pollution
Control (CT Light and Power), 5.9%, 2016 3,500,000 3,647,945
- ----------------------------------------------------------------------------------------------
New Hampshire Industrial Development Authority, Pollution
Control Rev. (CT Light and Power), 5.9%, 2018 1,000,000 1,062,120
- ----------------------------------------------------------------------------------------------
Sabine River Authority, TX, Pollution (TXU Electric Co.),
5.75%, 2030 1,500,000 1,620,975
- ----------------------------------------------------------------------------------------------
$14,704,696
- ----------------------------------------------------------------------------------------------
Utilities - Municipal Owned - 18.4%
- ----------------------------------------------------------------------------------------------
Austin, TX, Utility Systems Rev., AMBAC, 6.75%, 2012 $2,500,000 $3,021,575
- ----------------------------------------------------------------------------------------------
California State Department Water Resources Power Supply
Rev. "A", 5.75%, 2017 2,750,000 3,091,413
- ----------------------------------------------------------------------------------------------
Georgia Municipal Electric Authority Power Rev., AMBAC,
6.5%, 2017 8,145,000 10,135,719
- ----------------------------------------------------------------------------------------------
Georgia Municipal Electric Authority Power Rev., AMBAC,
ETM, 6.5%, 2017(++) 365,000 441,916
- ----------------------------------------------------------------------------------------------
Hawaii State Department Budget & Finance Rev., "B"
(Electric Co. & Subsidiary), XLCA, 5%, 2022 4,000,000 4,158,800
- ----------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "A", 6.15%, 2014 16,380,000 17,472,382
- ----------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "A", AMBAC, 6%, 2009(++) 9,000,000 10,111,050
- ----------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "A", ETM, 6.15%, 2014(++) 28,220,000 30,522,188
- ----------------------------------------------------------------------------------------------
Intermountain Power Agency, UT, "B", MBIA, 6%, 2016 10,000,000 10,632,400
- ----------------------------------------------------------------------------------------------
Mercer County, ND, Pollution Control Rev. (Antelope Valley
Station), AMBAC, 7.2%, 2013 4,000,000 4,827,560
- ----------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power "A", MBIA,
5.7%, 2013 7,000,000 7,488,110
- ----------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power "A", MBIA,
5.625%, 2014 7,735,000 8,264,074
- ----------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power "A", MBIA,
6.5%, 2018 9,250,000 11,541,595
- ----------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency, Catawba Electric
Rev., 6.375%, 2013 1,500,000 1,684,140
- ----------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency, Catawba Electric
Rev., ROLs, MBIA, 8.5158%, 2019+(+) 3,500,000 4,172,560
- ----------------------------------------------------------------------------------------------
Northern California Transmission Agency, MBIA, 7%, 2013 4,000,000 4,848,320
- ----------------------------------------------------------------------------------------------
Piedmont, SC, Municipal Power Agency, FGIC, 6.25%, 2021 4,150,000 5,220,119
- ----------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority, RITES, FSA,
8.8358%, 2015+(+) 2,500,000 2,844,775
- ----------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority, RITES, FSA,
8.8358%, 2016+(+) 3,000,000 3,413,730
- ----------------------------------------------------------------------------------------------
South Carolina Public Service Authority, "B", FSA,
5.125%, 2037 8,500,000 8,864,650
- ----------------------------------------------------------------------------------------------
Southern California Public Power Authority Rev. (Magnolia
Power), AMBAC, 5%, 2036 4,200,000 4,350,150
- ----------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear Project
#1), FSA, 5.125%, 2014 8,000,000 8,539,680
- ----------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear Project
#1), MBIA, 5.75%, 2010 13,100,000 13,877,092
- ----------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear Project
#1), MBIA, 5.75%, 2011 7,500,000 7,944,900
- ----------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear Project
#2), MBIA, 5.7%, 2012 15,000,000 15,880,050
- ----------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear Project
#3), 7.125%, 2016 5,145,000 6,581,381
- ----------------------------------------------------------------------------------------------
Washington Public Power Supply System Rev. (Nuclear Project
#3), FGIC, 0%, 2005 6,895,000 6,844,942
- ----------------------------------------------------------------------------------------------
$216,775,271
- ----------------------------------------------------------------------------------------------
Water & Sewer Utility Revenue - 0.4%
- ----------------------------------------------------------------------------------------------
Augusta, GA, Water & Sewer Rev., FSA, 5.25%, 2039 $1,570,000 $1,682,208
- ----------------------------------------------------------------------------------------------
Forsyth County, GA, Water & Sewer Authority Rev.,
6.25%, 2010(++) 1,000,000 1,156,490
- ----------------------------------------------------------------------------------------------
Forsyth County, GA, Water & Sewer Authority Rev.,
6.25%, 2010(++) 1,055,000 1,220,097
- ----------------------------------------------------------------------------------------------
Spartanburg, SC, Water & Sewer Authority Rev., "B", MBIA,
5.25%, 2030 920,000 992,450
- ----------------------------------------------------------------------------------------------
West Wilson Utility District, TN, Waterworks Rev., MBIA,
5.25%, 2030 1,730,000 1,862,362
- ----------------------------------------------------------------------------------------------
$6,913,607
- ----------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $1,059,053,331) $1,165,852,019
- ----------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.0%
- ----------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority Rev.
(Presbyterian University Hospital), "B", 1.87%, due 3/03/05 $370,000 $370,000
- ----------------------------------------------------------------------------------------------
Bay Area Toll Authority, California Toll Bridge Rev., "A",
1.81%, due 3/03/05 800,000 800,000
- ----------------------------------------------------------------------------------------------
California Health Facilities Financing Authority Rev.
(Adventist Hospital), "B", 1.76%, due 3/01/05 100,000 100,000
- ----------------------------------------------------------------------------------------------
Harris County, TX, Health Facilities Development Corp.,
Special Facilities Rev. (Texas Medical Center), MBIA, 1.8%,
due 3/01/05 200,000 200,000
- ----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (University of
Chicago Hospital), 1.8%, due 3/01/05 100,000 100,000
- ----------------------------------------------------------------------------------------------
Irvine, CA, Improvement Building Act 1915, 1.83%, due 3/02/05 900,000 900,000
- ----------------------------------------------------------------------------------------------
Jefferson County, AL, Sewer Rev., Capital Improvement
Warrants, "A", 1.85%, due 3/03/05 100,000 100,000
- ----------------------------------------------------------------------------------------------
New York City, NY, 1.78%, due 3/01/05 200,000 200,000
- ----------------------------------------------------------------------------------------------
New York City, NY, Municipal Water & Sewer Finance
Authority Rev., 1.77%, due 3/01/05 200,000 200,000
- ----------------------------------------------------------------------------------------------
Oklahoma Industries Authority, Health System Rev. (Integris
Baptist Medical Center), "B", 1.10%, 1.8%, due 3/01/05 700,000 700,000
- ----------------------------------------------------------------------------------------------
Sacramento, CA, Unified School District, District
Certification Partnership, 1.83%, due 3/03/05 1,400,000 1,400,000
- ----------------------------------------------------------------------------------------------
San Francisco, CA, City & County Financial Corp. Lease Rev.
(Moscone Center Expansion), 1.81%, due 3/03/05 4,850,000 4,850,000
- ----------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, 1.84%,
due 3/01/05 35,000 35,000
- ----------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, 1.88%,
due 3/03/05 270,000 270,000
- ----------------------------------------------------------------------------------------------
State of California, Department of Water Resources, Power
Supply Rev., "C-2", 1.82%, due 3/03/05 1,700,000 1,700,000
- ----------------------------------------------------------------------------------------------
Sublette County, WY, Pollution Control Rev. (Exxon Mobile
Corp.), 1.75%, due 3/01/05 100,000 100,000
- ----------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at identified cost $12,025,000
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,071,078,331) $1,177,877,019
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.7% 7,823,775
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,185,700,794
- ----------------------------------------------------------------------------------------------
+ Restricted security.
(+) Inverse floating rate security.
(++) Refunded bond.
## SEC Rule 144A restriction.
The following abbreviations are used in the Portfolio of Investments and are
defined:
ETM= Escrowed to maturity
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
FNMA = Federal National Mortgage Assn.
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 2/28/05
ASSETS
Investments, at value (identified cost, $1,071,078,331) $1,177,877,019
- ---------------------------------------------------------------------------------------------------
Cash 64,732
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 1,626,004
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 235,192
- ---------------------------------------------------------------------------------------------------
Interest receivable 14,194,680
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on interest rate swap agreements 988,327
- ---------------------------------------------------------------------------------------------------
Other assets 10,654
- ---------------------------------------------------------------------------------------------------
Total assets $1,194,996,608
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $1,894,335
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased 4,604,161
- ---------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 2,122,591
- ---------------------------------------------------------------------------------------------------
Unrealized depreciation on interest rate swap agreements 273,421
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 13,111
- ---------------------------------------------------------------------------------------------------
Shareholder servicing costs 79,133
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 3,736
- ---------------------------------------------------------------------------------------------------
Administrative fee 367
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 304,959
- ---------------------------------------------------------------------------------------------------
Total liabilities $9,295,814
- ---------------------------------------------------------------------------------------------------
Net assets $1,185,700,794
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $1,074,213,040
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) on investments 107,513,594
- ---------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss)
on investments 4,603,458
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment
income (629,298)
- ---------------------------------------------------------------------------------------------------
Net assets $1,185,700,794
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 110,021,078
- ---------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $1,125,153,686
- ---------------------------------------------------------------------------------------------------
Shares outstanding 104,398,306
- ---------------------------------------------------------------------------------------------------
Net asset value per share $10.78
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$10.78) $11.32
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $60,547,108
- ---------------------------------------------------------------------------------------------------
Shares outstanding 5,622,772
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.77
- ---------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the offering 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.
SIX MONTHS ENDED 2/28/05
NET INVESTMENT INCOME
Interest income $32,381,698
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $2,369,517
- --------------------------------------------------------------------------------------------------
Trustees' compensation 18,187
- --------------------------------------------------------------------------------------------------
Shareholder servicing costs 696,117
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 243,126
- --------------------------------------------------------------------------------------------------
Administrative fee 32,752
- --------------------------------------------------------------------------------------------------
Custodian fee 154,626
- --------------------------------------------------------------------------------------------------
Printing 76,044
- --------------------------------------------------------------------------------------------------
Auditing fees 24,520
- --------------------------------------------------------------------------------------------------
Legal fees 23,368
- --------------------------------------------------------------------------------------------------
Miscellaneous 126,718
- --------------------------------------------------------------------------------------------------
Total expenses $3,764,975
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (5,635)
- --------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (590,987)
- --------------------------------------------------------------------------------------------------
Net expenses $3,168,353
- --------------------------------------------------------------------------------------------------
Net investment income $29,213,345
- --------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- --------------------------------------------------------------------------------------------------
Investment transactions $6,447,253
- --------------------------------------------------------------------------------------------------
Swap transactions (2,958,628)
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments $3,488,625
- --------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- --------------------------------------------------------------------------------------------------
Investments $(9,954,559)
- --------------------------------------------------------------------------------------------------
Swap transactions 3,274,472
- --------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments $(6,680,087)
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments $(3,191,462)
- --------------------------------------------------------------------------------------------------
Change in net assets from operations $26,021,883
- --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS 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
2/28/05 8/31/04
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
Net investment income $29,213,345 $63,270,786
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 3,488,625 11,213,532
- ---------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments (6,680,087) 9,613,171
- ------------------------------------------------------------------------ --------
Change in net assets from operations $26,021,883 $84,097,489
- ------------------------------------------------------------------------ --------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- ---------------------------------------------------------------------------------------------------
Class A $(27,904,206) $(60,067,941)
- ---------------------------------------------------------------------------------------------------
Class B (1,335,368) (3,121,074)
- ------------------------------------------------------ ------------- --------------
Total distributions declared to shareholders $(29,239,574) $(63,189,015)
- ------------------------------------------------------ ------------- --------------
Change in net assets from fund share transactions $(25,345,513) $(179,474,638)
- ------------------------------------------------------ ------------- --------------
Redemption fees $1 $10
- ------------------------------------------------------ ------------- --------------
Total change in net assets $(28,563,203) $(158,566,154)
- ------------------------------------------------------ ------------- --------------
NET ASSETS
At beginning of period $1,214,263,997 $1,372,830,151
- ---------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions
in excess of net investment income of $847,945 and
$603,069, respectively) $1,185,700,794 $1,214,263,997
- ---------------------------------------------------------------------------------------------------
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 YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------------
CLASS A 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning of
period $10.81 $10.64 $10.87 $10.77 $10.29 $10.35
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)(S)
Net investment income(S) $0.26 $0.53 $0.52 $0.53 $0.54 $0.54
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (0.02) 0.17 (0.22) 0.10 0.48 0.09
- -------------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.24 $0.70 $0.30 $0.63 $1.02 $0.63
- -------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.27) $(0.53) $(0.53) $(0.53) $(0.54) $(0.54)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments -- -- -- -- -- (0.06)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- -- (0.09)
- -------------------------------- ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.27) $(0.53) $(0.53) $(0.53) $(0.54) $(0.69)
- -------------------------------- ------ ------ ------ ------ ------ ------
Redemption fees added to paid-
in capital# $0.00+++ $0.00+++ $-- $-- $-- $--
- -------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $10.78 $10.81 $10.64 $10.87 $10.77 $10.29
- -------------------------------- ------ ------ ------ ------ ------ ------
Total return (%)(+)& 2.20++ 6.70 2.80 6.17 10.19 6.51
- -------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 8/31
SIX MONTHS
ENDED ----------------------------------------------------------------------------
CLASS A (CONTINUED) 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 0.49+ 0.53 0.59 0.59 0.59 0.58
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.94+ 4.92 4.76 5.01 5.16 5.32
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 4 9 13 14 12 25
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000,000 Omitted) $1,125 $1,147 $1,291 $1,308 $1,284 $1,257
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If these fees had been
incurred by the fund, the net investment income per share and the ratios would have been:
Net investment income $0.26* $0.53* $-- $-- $-- $--
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 0.59+ 0.58 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.84+ 4.87 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
(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.
* Waiver impact per share was less than $0.01.
+ 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.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(+) Total returns 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 YEARS ENDED 8/31
ENDED -----------------------------------------------------------------------
CLASS B 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning of
period $10.80 $10.63 $10.86 $10.76 $10.28 $10.34
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)(S)
Net investment income(S) $0.22 $0.45 $0.43 $0.45 $0.46 $0.46
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (0.03) 0.16 (0.22) 0.10 0.48 0.09
- -------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations $0.19 $0.61 $0.21 $0.55 $0.94 $0.55
- -------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.22) $(0.44) $(0.44) $(0.45) $(0.46) $(0.46)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments -- -- -- -- -- (0.06)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain
on investments -- -- -- -- -- (0.09)
- -------------------------------- ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.22) $(0.44) $(0.44) $(0.45) $(0.46) $(0.61)
- -------------------------------- ------ ------ ------ ------ ------ ------
Redemption fees added to
paid-in capital# $0.00+++ $0.00+++ $-- $-- $-- $--
- -------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $10.77 $10.80 $10.63 $10.86 $10.76 $10.28
- -------------------------------- ------ ------ ------ ------ ------ ------
Total return (%)& 1.81++ 5.86 1.96 5.33 9.35 5.70
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------------
CLASS B (CONTINUED) 2/28/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.25+ 1.31 1.39 1.39 1.38 1.37
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.19+ 4.12 3.96 4.20 4.37 4.55
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 4 9 13 14 12 25
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000,000 Omitted) $61 $67 $82 $84 $83 $70
- -----------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If these fees had been
incurred by the fund, the net investment income per share and the ratios would have been:
Net investment income $0.22* $0.44 $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.35+ 1.36 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.09+ 4.07 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(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.
* Waiver impact per share was less than $0.01.
+ 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.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
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 U.S.
generally accepted accounting principles 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 - 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. 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 approximates market value as determined by the Board of
Trustees. When pricing service information or market quotations are not readily
available, securities are priced at fair value as determined under the
direction of 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 and foreign exchange rate fluctuations. For
non-hedging purposes, the fund may use swaps to take a position on anticipated
changes in the underlying financial index.
INTEREST RATE SWAP AGREEMENTS - Interest rate swap agreements are agreements to
exchange cash flows periodically based on a notional principal amount, for
example the exchange of fixed rate interest payments for floating rate interest
payments which are based on a specific financial index, or the exchange of two
distinct floating rate payments. The net receivable or payable associated with
these payments is accrued daily and is recorded as net interest income or
expense. For financial statement purposes, the net interest income or expense
periodically recognized for an interest rate swap is recorded in the same line
item as any unrealized and realized gains or losses recognized for that
instrument. The primary risk associated with interest rate swap agreements is
that unfavorable changes in the fluctuation of interest rates could adversely
impact the fund.
SHORT TERM FEES - For purchases made on or after July 1, 2004 and before April
1, 2005, the fund will charge a 2% redemption fee (which is retained by the
fund) on proceeds from Class A and Class B shares redeemed or exchanged within
5 business days following their acquisition (either by purchase or exchange).
Effective April 1, 2005, the fund will no longer charge a redemption fee. See
the fund's prospectus for details. Any redemption fees charged are accounted
for as an addition to paid-in capital.
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 U.S. generally accepted accounting principles. All premium and
original issue discount is amortized or accreted for tax reporting purposes as
required by federal income tax regulations. The fund may receive proceeds from
litigation settlements involving its portfolio holdings. Any proceeds received
are reflected in realized gain/loss in the statement of operations, or in
unrealized gain/loss if the security is still held by the fund.
Legal fees and other related expenses incurred to preserve and protect the
value of a security owned are added to the cost of the security; other legal
fees are expensed. Capital infusions made directly to the security issuer,
which are generally non-recurring, incurred to protect or enhance the value of
high-yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization
are reported as realized losses. Ongoing costs incurred to protect or enhance
an investment, or costs incurred to pursue other claims or legal actions, are
expensed.
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 28, 2005 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, capital losses, and amortization and accretion on
debt securities.
The tax character of distributions declared for the years ended August 31, 2004
and August 31, 2003 was as follows:
8/31/04 8/31/03
Distributions declared from tax-exempt income: $63,189,015 $67,795,702
- -------------------------------------------------------------------------------
As of August 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed tax-exempt income $4,409,827
----------------------------------------------------------
Capital loss carryforward (761,962)
----------------------------------------------------------
Unrealized appreciation (depreciation) 116,069,197
----------------------------------------------------------
Other temporary differences (5,011,617)
----------------------------------------------------------
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, $(349,381) 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 $2.0 billion 0.35%
----------------------------------------------------------
As part of a settlement agreement with the New York Attorney General concerning
market timing and related matters (See Legal Proceedings footnote), 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, which is shown as a
reduction of total expenses in the Statement of Operations. 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.
Management fees incurred for the six months ended February 28, 2005 were an
effective rate of 0.30% of average daily net assets on an annualized basis.
The fund pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, 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 $3,131 for retired Independent
Trustees for the six months ended February 28, 2005.
This fund and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. The
fund paid MFS an administrative fee up to the following annual percentage rates
of the fund's average daily net assets:
9/01/04
THROUGH
EFFECTIVE DATE 2/28/05 3/01/05
First $2 billion 0.01120% 0.01626%
- -------------------------------------------------------------------------------
Next $2.5 billion 0.00832% 0.01206%
- -------------------------------------------------------------------------------
Next $2.5 billion 0.00032% 0.00056%
- -------------------------------------------------------------------------------
In excess of $7 billion 0.00000% 0.00000%
- -------------------------------------------------------------------------------
The March 1, 2005 rates were not effective during the current reporting period.
For the six months ended February 28, 2005, the fund paid MFS $32,752,
equivalent to 0.00549% of average daily net assets, to partially reimburse MFS
for the costs of providing administrative services.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$48,789 for the six months ended February 28, 2005, 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 as compensation for services provided by MFD and financial
intermediaries in connection with the distribution and servicing of its shares.
One component of the plan is a distribution fee and another is a service fee
paid by MFD to financial intermediaries that enter into sales or service
agreements with MFD or its affiliates based on the average daily net assets of
accounts attributable to such intermediaries. The 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 may retain all or a portion of the service fee, including for accounts for
which there is no financial intermediary of record. MFD received no portion of
the Class B service fee for the six months ended February 28, 2005.
Fees incurred under the distribution plan during the six months ended February
28, 2005 were as follows:
CLASS B
Effective Annual Percentage Rates 0.76%
----------------------------------------------------------
Certain Class A 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. A contingent deferred sales charge is imposed on
shareholder redemptions of Class B shares in the event of a shareholder
redemption within six years of purchase. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the six months
ended February 28, 2005 were as follows:
CLASS A CLASS B
Contingent Deferred Sales Charges
Imposed $2,888 $63,965
-----------------------------------------------------------
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, which is calculated as a percentage of the fund's
average daily net assets is set periodically under the supervision of the
fund's Trustees. For the period September 1, 2004 through December 31, 2004,
the fund was charged up to 0.0861% of its average daily net assets. For the
period January 1, 2005 through February 28, 2005, the fund is charged up to
0.1035% of its average daily net assets. For the six months ended February 28,
2005, the fund paid MFSC a fee of $537,058 for shareholder services which
equated to 0.0901% of the fund's average daily net assets. Effective March 1,
2005, the fund is charged up to 0.1159% of its average daily net assets.
Shareholder service costs include out of pocket expenses and sub accounting
services expenses paid by MFSC on behalf of the fund and subsequently
reimbursed to MFSC which amounted to $116,224, and other costs paid by the fund
directly to unaffiliated vendors for the six months ended February 28, 2005.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$44,635,822 and $72,674,225, 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 $1,069,793,686
----------------------------------------------------------
Gross unrealized appreciation $108,848,955
----------------------------------------------------------
Gross unrealized depreciation (765,622)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $108,083,333
----------------------------------------------------------
(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 2/28/05 Year ended 8/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 1,972,046 $21,330,091 7,315,777 $78,869,902
- --------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,829,522 19,766,390 3,403,570 36,743,600
- --------------------------------------------------------------------------------------------------------
Shares reacquired (5,568,382) (60,201,824) (25,826,781) (278,780,909)
- --------------------------------------------------------------------------------------------------------
Net change (1,766,814) $(19,105,343) (15,107,434) $(163,167,407)
- --------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 149,449 $1,613,995 588,974 $6,362,460
- --------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 86,092 929,301 177,404 1,913,727
- --------------------------------------------------------------------------------------------------------
Shares reacquired (812,886) (8,783,466) (2,280,227) (24,583,418)
- --------------------------------------------------------------------------------------------------------
Net change (577,345) $(6,240,170) (1,513,849) $(16,307,231)
- --------------------------------------------------------------------------------------------------------
(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 Federal
Reserve funds 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 28, 2005 was $137, and
is included in miscellaneous expense. The fund had no significant borrowings
during the six months ended February 28, 2005.
(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 and foreign currency exchange 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 OF CONTRACT BY THE FUND BY THE FUND (DEPRECIATION)
12/01/07 27,000,000 Fixed - 3 Year BMA Swap Floating - 7 day BMA Swap $49,401
Index - 2.795% Index
- ----------------------------------------------------------------------------------------------------------------
4/20/15 11,900,000 Fixed - 10 Year BMA Swap Floating - 7 day BMA Swap 120,872
Index - 3.568% Index
- ----------------------------------------------------------------------------------------------------------------
5/18/15 12,000,000 Fixed - 10 Year BMA Swap Floating - 7 day BMA Swap 219,703
Index - 3.484% Index
- ----------------------------------------------------------------------------------------------------------------
6/08/15 15,000,000 Fixed - 1 Year BMA Swap Floating - 7 day BMA Swap 85,570
Index - 3.657% Index
- ----------------------------------------------------------------------------------------------------------------
6/22/15 15,000,000 Fixed - 10 Year BMA Swap Floating - 7 day BMA Swap 129,430
Index - 3.628% Index
- ----------------------------------------------------------------------------------------------------------------
4/06/17 12,000,000 Fixed - 12 Year BMA Swap Floating - 7 day BMA Swap (86,855)
Index - 3.884% Index
- ----------------------------------------------------------------------------------------------------------------
4/20/17 23,000,000 Fixed - 12 Year BMA Swap Floating - 7 day BMA Swap 196,785
Index - 3.714% Index
- ----------------------------------------------------------------------------------------------------------------
$714,906
- ----------------------------------------------------------------------------------------------------------------
At February 28, 2005, the fund had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) RESTRICTED SECURITIES
At February 28, 2005, the fund owned the following securities which are subject
to legal or contractual restrictions on resale, excluding securities issued
under Rule 144A, constituting 6.99% 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.
DATE OF PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
Chicago, IL, Board of Education, RITES,
FGIC, 8.843%, 2019 2/9/2000 5,000,000 $3,984,600 $6,333,200
- ------------------------------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport
Rev., RITES, FSA,
9.8047%, 2022 8/21/2003 2,500,000 2,657,187 3,056,250
- ------------------------------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport
Rev., RITES, XLCA,
10.3047%, 2029 8/21/2003 3,000,000 3,267,915 3,688,080
- ------------------------------------------------------------------------------------------------------------------
Chicago, IL, RITES, AMBAC,
9.366%, 2018 3/20/2000 5,900,000 5,728,934 7,685,694
- ------------------------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, ROLs,
8.7793%, 2011 8/28/2001 2,870,000 3,099,697 3,522,351
- ------------------------------------------------------------------------------------------------------------------
Commonwealth of Puerto Rico, ROLs, XLCA,
8.9628%, 2017 10/22/2001 1,150,000 1,357,997 1,514,251
- ------------------------------------------------------------------------------------------------------------------
Denver, CO, City & County Airport Rev.,
RITES, AMBAC, 9.82%, 2017 8/28/2000 2,500,000 2,625,460 3,017,350
- ------------------------------------------------------------------------------------------------------------------
Massachusetts Health & Educational
Facilities Authority Rev., RITES (Harvard
University), 10.817%, 2020 11/8/1999 8,410,000 9,415,512 12,708,015
- ------------------------------------------------------------------------------------------------------------------
New Jersey Transportation Trust Fund
Authority Rev., ROLs, FSA,
9.0328%, 2011 1/7/2002 7,500,000 8,457,470 9,364,650
- ------------------------------------------------------------------------------------------------------------------
New Jersey Turnpike Authority Rev., RITES,
MBIA, 9.1237%, 2020 4/19/2000 5,000,000 4,654,747 5,684,800
- ------------------------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency,
Catawba Electric Rev., ROLs, MBIA, 8.5158%,
2019 3/3/2003 3,500,000 3,941,983 4,172,560
- ------------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority,
RITES, FSA, 8.8358%, 2015 9/16/1999 2,500,000 2,411,250 2,844,775
- ------------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority,
RITES, FSA, 8.8358%, 2016 9/16/1999 3,000,000 2,854,200 3,413,730
- ------------------------------------------------------------------------------------------------------------------
State of California, RITES,
9.2529%, 2012 11/8/1999 5,825,000 6,028,151 7,127,703
- ------------------------------------------------------------------------------------------------------------------
State of California, RITES, XLCA, 9.8507%, 2017 1/3/2000 6,875,000 7,003,975 8,728,638
- ------------------------------------------------------------------------------------------------------------------
$82,862,047
- ------------------------------------------------------------------------------------------------------------------
(9) CONCENTRATION OF CREDIT RISK
At February 28, 2005, 56.98% of securities in the portfolio of investments are
backed by letters of credit or bond insurance of various financial
institutions and financial guaranty assurance agencies. The percentage of
investments insured by or supported (backed) by a letter of credit from any
one institution or agency did not exceed 19.85% of total investments.
(10) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). 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 developed by an
independent distribution consultant. The brokerage allocation practices which
were the subject of this proceeding were discontinued by MFS in November 2003.
The agreement with the SEC is reflected in an order of the SEC. The SEC
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 SEC
settlement order states that MFS had in place policies designed to obtain best
execution of all MFS fund trades. As part of the settlement, MFS retained an
independent compliance consultant to review the completeness of its current
policies and practices regarding disclosure to MFS fund trustees and to MFS
fund shareholders of strategic alliances between MFS or its affiliates and
broker-dealers and other financial intermediaries who support the sale of MFS
fund shares. Pursuant to the SEC order, on July 28, 2004, MFS transferred these
settlement amounts to the SEC, and those MFS funds entitled to these settlement
amounts accrued an estimate of their pro rata portion of these amounts. The
final distribution plan was approved by the SEC on January 21, 2005 and the
affected MFS funds received the payment on February 16, 2005.
In addition, in February, 2004, MFS reached agreement with the 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 open-end retail fund ("MFS
retail funds") prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS retail funds was false and misleading because, although the
prospectuses for those funds in the regulators' view indicated that they
prohibited market timing, MFS did not limit trading activity in 11 domestic
large cap stock, high grade bond and money market retail funds. MFS' former
Chief Executive Officer and former President also reached agreement with the
SEC in which they agreed to, among other terms, monetary fines and temporary
suspensions from association with any investment adviser or registered
investment company. These individuals have resigned their positions with, and
will not be returning to, MFS and the MFS funds. 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 MFS 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 Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with 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 retained $250,000 and $750,000 was contributed
to the North American Securities Administrators Association's Investor
Protection Trust). In addition, under the terms of the February Settlements,
MFS is in the process of adopting certain governance changes and reviewing its
policies and procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various
MFS funds, certain current and/or former 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 MFS funds during specified periods, as ERISA
actions by participants in certain retirement plan accounts on behalf of those
accounts, or as derivative actions on behalf of the MFS funds. The lawsuits
relating to market timing and related matters have been transferred to, and
consolidated before, the United States District Court for the District of
Maryland, as part of a multi-district litigation of market timing and related
claims involving several other fund complexes (In re Mutual Funds Investment
Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner),
No. 1:04-md-15863 (transfer began March 19, 2004)). The market timing cases
related to the MFS complex are Riggs v. MFS et al., Case No. 04-cv-01162-JFM
(direct), Hammerslough v. MFS et al., Case No. 04-md-01620 (derivative) and
Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA). The plaintiffs in
these consolidated lawsuits generally seek injunctive relief including removal
of the named Trustees, adviser and distributor, rescission of contracts and
12b-1 Plans, disgorgement of fees and profits, monetary damages, punitive
damages, attorney's fees and costs and other equitable and declaratory relief.
Two lawsuits alleging improper brokerage allocation practices and excessive
compensation are pending in the United States District Court for the District
of Massachusetts (Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584
(GAO) (a consolidated action) and Marcus Dumond, et al. v. Massachusetts
Financial Servs. Co., et al., No. 04cv11458 (GAO)). The plaintiffs in these
lawsuits generally seek compensatory damages, punitive damages, recovery of
fees, rescission of contracts, an accounting, restitution, declaratory relief,
equitable and/or injunctive relief and attorney's fees and costs. The various
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 (ii) received excessive compensation as fiduciaries to the MFS funds,
or (iii) permitted or acquiesced in the improper use of fund assets by MFS to
support the distribution of MFS 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. 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 MFS 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 certain MFS retail funds for damages that they
allegedly sustained as a result of market timing or late trading in certain of
the MFS retail funds, and distributed $50 million to affected MFS funds to
compensate those funds based upon the amount of brokerage commissions allocated
in recognition of MFS 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 MFS 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 MFS funds.
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PROXY VOTING POLICIES AND INFORMATION
- -------------------------------------------------------------------------------
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 Web site at
http://www.sec. gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
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QUARTERLY PORTFOLIO DISCLOSURE
- -------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
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.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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
- -------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MMB-SEM-04/05 38M
ITEM 2. CODE OF ETHICS.
Not applicable.
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
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act) 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 second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, 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 22, 2005
--------------
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 22, 2005
--------------
By (Signature and Title)* RICHARD M. HISEY
---------------------------------------------
Richard M. Hisey, Treasurer (Principal
Financial Officer and Accounting Officer)
Date: April 22, 2005
--------------
* Print name and title of each signing officer under his or her signature.