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 811-3327
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MFS GOVERNMENT SECURITIES FUND
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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)
Susan S. Newton
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: February 28
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Date of reporting period: August 31, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) GOVERNMENT SECURITIES FUND 8/31/05
SEMIANNUAL REPORT
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LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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EXPENSE TABLE 3
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PORTFOLIO OF INVESTMENTS 5
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FINANCIAL STATEMENTS 9
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NOTES TO FINANCIAL STATEMENTS 24
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RESULTS OF SHAREHOLDER MEETING 36
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 37
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PROXY VOTING POLICIES AND INFORMATION 41
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QUARTERLY PORTFOLIO DISCLOSURE 41
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CONTACT INFORMATION BACK COVER
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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.
M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
Most investors are familiar with the basic principles of investing - focus on
the long term and keep your assets diversified across different investment
categories. Still, it is surprising how often we forget these basic lessons.
Certainly, the dot-com euphoria that overtook Wall Street in the late 1990s had
many people hoping they could become millionaires overnight. But the market
decline that started in the spring of 2000 taught everyone how misguided those
hopes had been.
Now, less than five years after the market taught a harsh lesson in the follies
of speculative investing, we are seeing a number of trends that suggest many
investors, including professionals, are hoping for overnight miracles again. We
see a steady stream of market "gurus" on television news shows, promising to
teach amateur investors the strategies that will allow them to get rich quick.
Hedge funds - which by their nature move in and out of investments rapidly -
have soared in popularity over the past five years. We are reminded every day
that we live in a "what have you done for me lately?" world, but this mindset
should not influence how we invest and manage our money. In fact, investors
often fall short of their goals because they trade in and out of investments too
frequently and at inopportune times.
Throughout our entire 80-year history, MFS" money management process has focused
on long-term investment opportunities. We firmly believe that one of the best
ways to realize long-term financial goals - be it a college education, a
comfortable retirement, or a secure family legacy - is to follow a three-pronged
approach that focuses on longer time horizons. Allocate holdings across the
major asset classes - including stocks, bonds, and cash. Diversify within each
class to take advantage of different market segments and investing styles. And
rebalance assets regularly to maintain a desired asset allocation.*
This long-term approach requires diligence and patience, two traits that in our
experience are essential to capitalizing on the many opportunities the financial
markets can offer.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
October 17, 2005
* Asset allocation, diversification, and rebalancing does not guarantee a profit
or protect against a loss. The opinions expressed in this letter are those of
MFS, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE*
Bonds 97.4%
Cash & Other Net Assets 2.6%
MARKET SECTORS*
Mortgage-Backed Securities 54.9%
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U.S. Government Agencies 33.6%
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U.S. Treasury Securities 8.8%
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Cash & Other Net Assets 2.6%
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Residential Mortgage-Backed Securities 0.1%
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CREDIT QUALITY OF BONDS**
AAA 99.2%
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Not Rated 0.8%
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PORTFOLIO FACTS
Average Duration 4.1
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Average Life*** 6.6 yrs.
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Average Maturity*** 15.7 yrs.
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Average Credit Quality**** AAA
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Average Short Term Quality A-1
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* For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
** 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. For those portfolios that hold a
security which is not rated by any of the three agencies, the security if
considered Not Rated. Holdings in U.S. Treasuries and mortgage-backed
securities, if any, are included in a "AAA"-rating category. Percentages
are based on market value of investments as of 8/31/05.
*** 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.
**** The Portfolio Average Credit Quality is based upon a market weighted
average of portfolio holdings.
Percentages are based on net assets as of 8/31/05, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD, MARCH 1, 2005 THROUGH
AUGUST 31, 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 March 1, 2005 through August 31, 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.
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Expenses
Paid During
Annualized Beginning Ending Period**
Share Expense Account Value Account Value 12/01/04-
Class Ratio 12/01/04 5/31/05 5/31/05
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Actual 0.79% $1,000.00 $1,026.70 $4.04
A -------------------------------------------------------------------
Hypothetical* 0.79% $1,000.00 $1,021.22 $4.02
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Actual 1.54% $1,000.00 $1,022.90 $7.85
B -------------------------------------------------------------------
Hypothetical* 1.54% $1,000.00 $1,017.44 $7.83
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Actual 1.54% $1,000.00 $1,022.90 $7.85
C -------------------------------------------------------------------
Hypothetical* 1.54% $1,000.00 $1,017.44 $7.83
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Actual 0.55% $1,000.00 $1,028.00 $2.81
I -------------------------------------------------------------------
Hypothetical* 0.55% $1,000.00 $1,022.43 $2.80
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R Actual 1.04% $1,000.00 $1,024.40 $5.31
(formerly R1)-------------------------------------------------------------------
Hypothetical* 1.04% $1,000.00 $1,019.96 $5.30
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Actual 1.73% $1,000.00 $1,022.10 $8.82
R1 -------------------------------------------------------------------
Hypothetical* 1.73% $1,000.00 $1,016.48 $8.79
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Actual 1.44% $1,000.00 $1,023.30 $7.34
R2 -------------------------------------------------------------------
Hypothetical* 1.44% $1,000.00 $1,017.95 $7.32
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R3 Actual 1.29% $1,000.00 $1,023.10 $6.58
(formerly R2)-------------------------------------------------------------------
Hypothetical* 1.29% $1,000.00 $1,018.70 $6.56
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Actual 0.94% $1,000.00 $1,026.10 $4.80
R4 -------------------------------------------------------------------
Hypothetical* 0.94% $1,000.00 $1,020.47 $4.79
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Actual 0.63% $1,000.00 $1,027.40 $3.22
R5 -------------------------------------------------------------------
Hypothetical* 0.63% $1,000.00 $1,022.03 $3.21
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Actual 1.14% $1,000.00 $1,023.90 $5.82
529A -------------------------------------------------------------------
Hypothetical* 1.14% $1,000.00 $1,019.46 $5.80
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Actual 1.78% $1,000.00 $1,020.60 $9.07
529B -------------------------------------------------------------------
Hypothetical* 1.78% $1,000.00 $1,016.23 $9.05
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Actual 1.79% $1,000.00 $1,020.60 $9.12
529C -------------------------------------------------------------------
Hypothetical* 1.79% $1,000.00 $1,016.18 $9.10
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* 5% class return per year before expenses.
** Expenses paid is equal to each class" annualized expense ratio, 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) - 8/31/05
The Portfolio of Investments is a complete list of all securities owned by your
fund. It is categorized by broad-based asset classes.
Bonds - 98.6%
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ISSUER PAR AMOUNT $ VALUE
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Agency - Other - 5.8%
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Financing Corp., 10.7%, 2017 $ 14,360,000 $ 22,569,813
Financing Corp., 9.4%, 2018 11,750,000 17,178,618
Financing Corp., 9.8%, 2018 14,975,000 22,497,766
Financing Corp., 10.35%, 2018 15,165,000 23,731,951
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$ 85,978,148
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Asset Backed & Securitized - 0.1%
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Freddie Mac, 3.108%, 2035 $ 1,226,848 $ 1,218,866
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Mortgage Backed - 54.6%
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Fannie Mae, 4.374%, 2013 $ 2,768,269 $ 2,752,945
Fannie Mae, 4.45%, 2014 3,222,565 3,209,243
Fannie Mae, 4.5%, 2019 73,125,175 72,570,075
Fannie Mae, 4.518%, 2014 2,483,314 2,488,968
Fannie Mae, 4.56%, 2015 2,429,422 2,434,187
Fannie Mae, 4.6%, 2014 1,882,922 1,892,641
Fannie Mae, 4.62%, 2015 3,472,108 3,493,220
Fannie Mae, 4.65%, 2013 3,689,943 3,694,107
Fannie Mae, 4.665%, 2015 1,638,874 1,653,974
Fannie Mae, 4.667%, 2014 9,496,513 9,608,648
Fannie Mae, 4.69%, 2015 1,335,814 1,350,371
Fannie Mae, 4.7%, 2015 1,879,898 1,901,640
Fannie Mae, 4.73%, 2012 2,888,959 2,925,304
Fannie Mae, 4.74%, 2015 1,810,000 1,831,057
Fannie Mae, 4.771%, 2014 7,844,835 7,988,487
Fannie Mae, 4.785%, 2012 935,804 952,032
Fannie Mae, 4.79%, 2012 11,265,251 11,155,633
Fannie Mae, 4.8%, 2013 1,334,859 1,356,969
Fannie Mae, 4.82%, 2014 - 2015 5,318,938 5,414,882
Fannie Mae, 4.845%, 2013 3,916,480 3,988,203
Fannie Mae, 4.846%, 2014 10,733,529 10,985,557
Fannie Mae, 4.85%, 2015 1,490,352 1,522,945
Fannie Mae, 4.87%, 2015 1,423,585 1,457,023
Fannie Mae, 4.88%, 2020 1,472,371 1,488,519
Fannie Mae, 4.89%, 2015 1,317,210 1,349,890
Fannie Mae, 4.92%, 2014 1,631,809 1,664,955
Fannie Mae, 4.925%, 2015 5,247,092 5,401,795
Fannie Mae, 4.996%, 2017 5,110,985 5,284,479
Fannie Mae, 5%, 2013 - 2019 69,960,849 70,578,583
Fannie Mae, 5.06%, 2013 1,564,508 1,611,022
Fannie Mae, 5.1%, 2014 2,036,366 2,112,197
Fannie Mae, 5.5%, 2017 - 2035 255,379,681 258,653,974
Fannie Mae, 6%, 2016 - 2034 74,205,657 76,170,541
Fannie Mae, 6.5%, 2016 - 2034 38,706,415 40,112,504
Fannie Mae, 6.8%, 2011 1,501,074 1,651,786
Fannie Mae, 6.984%, 2007 2,073,089 2,150,402
Fannie Mae, 7%, 2029 263,684 279,723
Fannie Mae, 7.5%, 2024 - 2031 1,058,051 1,123,165
Fannie Mae TBA, 5.5%, 2033 80,067,000 80,867,670
Freddie Mac, 4.375%, 2015 10,913,347 10,845,745
Freddie Mac, 4.5%, 2013 - 2015 9,061,525 9,090,476
Freddie Mac, 5.5%, 2033 16,170,584 16,365,121
Freddie Mac, 6%, 2017 - 2034 7,192,909 7,419,815
Freddie Mac, 6.5%, 2016 - 2029 4,101,764 4,250,486
Freddie Mac TBA, 6%, 2032 17,165,000 17,561,941
Ginnie Mae, 5.5%, 2033 - 2034 40,631,351 41,448,035
Ginnie Mae, 8.5%, 2006 - 2009 401,908 427,896
Ginnie Mae, 11.5%, 2010 - 2018 41,466 45,924
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$ 814,584,755
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U.S. Government Agencies - 27.4%
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Aid to Israel, 0%, 2024 $ 14,262,000 $ 5,933,270
Aid to Israel, 5.5%, 2023 16,567,000 18,395,483
Empresa Energetica Cornito Ltd., 6.07%, 2010 7,851,000 8,109,769
Fannie Mae, 3.125%, 2007 50,000,000 48,982,700
Fannie Mae, 3.41%, 2007 12,397,000 12,229,975
Fannie Mae, 4.25%, 2007 30,000,000 29,966,460
Fannie Mae, 4.625%, 2014 23,432,000 23,934,288
Fannie Mae, 5.5%, 2011 77,391,000 82,364,610
Freddie Mac, 4.2%, 2007 16,665,000 16,613,522
Freddie Mac, 4.875%, 2013 9,555,000 9,920,030
Freddie Mac, 5.05%, 2015 13,957,000 14,062,166
Overseas Private Investment Corp., 0%, 2007 6,813,434 6,869,243
Small Business Administration, 4.34%, 2024 4,382,509 4,353,168
Small Business Administration, 4.72%, 2024 7,755,860 7,851,586
Small Business Administration, 4.77%, 2024 6,592,171 6,689,588
Small Business Administration, 4.86%, 2024 - 2025 10,126,826 10,313,612
Small Business Administration, 4.87%, 2024 5,896,709 6,008,256
Small Business Administration, 4.88%, 2024 3,677,315 3,749,050
Small Business Administration, 4.89%, 2023 7,713,227 7,871,502
Small Business Administration, 4.98%, 2023 2,925,419 2,997,573
Small Business Administration, 4.99%, 2024 5,361,861 5,496,251
Small Business Administration, 5.11%, 2025 5,259,000 5,420,069
Small Business Administration, 5.18%, 2024 7,511,140 7,766,930
Small Business Administration, 5.19%, 2024 4,868,454 5,037,316
Small Business Administration, 5.52%, 2024 4,549,317 4,775,967
Small Business Administration, 6.07%, 2022 3,992,446 4,247,403
Small Business Administration, 6.34%, 2021 4,728,886 5,066,230
Small Business Administration, 6.35%, 2021 4,013,396 4,297,997
Small Business Administration, 6.44%, 2021 4,052,129 4,358,153
Small Business Administration, 6.625%, 2021 3,997,743 4,360,225
Small Business Administration, 8.625%, 2011 182,284 193,307
Small Business Administration, 8.8%, 2011 203,346 214,703
Small Business Administration, 9.05%, 2009 53,811 56,231
Small Business Administration, 9.1%, 2009 108,707 113,323
Small Business Administration, 9.25%, 2010 112,312 119,284
Small Business Administration, 9.3%, 2010 204,830 217,370
Small Business Administration, 9.5%, 2010 148,812 157,227
Small Business Administration, 9.65%, 2010 207,615 220,296
Small Business Administration, 9.7%, 2010 98,455 104,426
Small Business Administration, 9.9%, 2008 42,702 44,545
Small Business Administration, 10.05%, 2008 - 2009 20,284 21,340
Tennessee Valley Authority, 4.375%, 2015 14,553,000 14,572,821
U.S. Department of Housing & Urban Development, 6.36%, 2016 7,000,000 7,693,868
U.S. Department of Housing & Urban Development, 6.59%, 2016 6,599,000 6,991,086
---------------
$ 408,762,219
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U.S. Treasury Obligations - 10.7%
- ------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.875%, 2025 $ 1,307,000 $ 1,749,950
U.S. Treasury Bonds, 6%, 2026 12,246,000 15,017,613
U.S. Treasury Bonds, 5.25%, 2028 10,509,000 11,942,491
U.S. Treasury Bonds, 6.25%, 2030 6,166,000 7,989,064
U.S. Treasury Bonds, 5.375%, 2031 12,117,000 14,206,237
U.S. Treasury Notes, 5.5%, 2008 7,703,000 8,006,906
U.S. Treasury Notes, 5.625%, 2008 9,678,000 10,119,559
U.S. Treasury Notes, 6%, 2009 4,566,000 4,922,541
U.S. Treasury Notes, 6.5%, 2010 7,881,000 8,720,815
U.S. Treasury Notes, TIPS, 3.375%, 2007 27,311,867 28,308,313
U.S. Treasury Notes, TIPS, 3.625%, 2008### 23,819,359 25,260,621
U.S. Treasury Notes, TIPS, 2%, 2014 22,497,647 23,191,902
---------------
$ 159,436,012
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Total Bonds (Identified Cost, $1,448,236,172) $ 1,469,980,000
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Repurchase Agreements - 12.5%
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ISSUER PAR AMOUNT $ VALUE
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Goldman Sachs, 3.56%, dated 8/31/05, due 9/01/05, total to
be received $39,057,862 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded account) $ 39,054,000 $ 39,054,000
Morgan Stanley, 3.58%, dated 8/31/05, due 9/01/05, total to
be received $148,274,744 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded account) 148,260,000 148,260,000
- ------------------------------------------------------------------------------------------------
Total Repurchase Agreements, at Cost $ 187,314,000
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Total Investments (Identified Cost, $1,635,550,172) $ 1,657,294,000
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Other Assets, Less Liabilities - (11.1)% (166,052,291)
- ------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 1,491,241,709
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### All or a portion of the security has been segregated as collateral for an open futures contract.
Abbreviations:
TBA = To Be Announced
TIPS = Treasury Inflation Protected Security
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 the fund.
AT 8/31/05
ASSETS
- -----------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $1,448,236,172) $1,469,980,000
Repurchase agreements, at value 187,314,000
- -----------------------------------------------------------------------------------------------------
Total investments, at value (identified cost,
$1,635,550,172) $1,657,294,000
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Receivable for fund shares sold 540,397
Receivable from investment adviser 144,441
Interest receivable 11,252,888
Other assets 8,580
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Total assets $1,669,240,306
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LIABILITIES
- -----------------------------------------------------------------------------------------------------
Payable to custodian $55,235
Distributions payable 955,490
Payable for daily variation margin on open futures
contracts 51,038
Payable for investments purchased 97,423,293
Payable for TBA purchase commitments 76,284,437
Payable for fund shares reacquired 2,532,575
Payable to affiliates
Management fee 11,452
Shareholder servicing costs 264,389
Distribution and service fees 13,108
Administrative services fee 420
Program manager fees 9
Retirement plan administration and service fees 12
Accrued expenses and other liabilities 407,139
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Total liabilities $177,998,597
- -----------------------------------------------------------------------------------------------------
Net assets $1,491,241,709
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NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Paid-in capital $1,542,990,009
Unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in foreign
currencies 21,647,210
Accumulated net realized gain (loss) on investments (68,814,647)
Accumulated distributions in excess of net investment
income (4,580,863)
- -----------------------------------------------------------------------------------------------------
Net assets $1,491,241,709
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 153,611,704
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Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- -----------------------------------------------------------------------------------------------------
Net assets $903,188,142
Shares outstanding 93,018,551
- -----------------------------------------------------------------------------------------------------
Net asset value per share $9.71
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$9.71) $10.19
- -----------------------------------------------------------------------------------------------------
Class B shares
- -----------------------------------------------------------------------------------------------------
Net assets $207,540,324
Shares outstanding 21,404,179
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.70
- -----------------------------------------------------------------------------------------------------
Class C shares
- -----------------------------------------------------------------------------------------------------
Net assets $42,166,975
Shares outstanding 4,330,492
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.74
- -----------------------------------------------------------------------------------------------------
Class I shares
- -----------------------------------------------------------------------------------------------------
Net assets $323,532,998
Shares outstanding 33,331,670
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $9.71
- -----------------------------------------------------------------------------------------------------
Class R shares (formerly Class R1)
- -----------------------------------------------------------------------------------------------------
Net assets $12,112,853
Shares outstanding 1,248,458
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $9.70
- -----------------------------------------------------------------------------------------------------
Class R1 shares
- -----------------------------------------------------------------------------------------------------
Net assets $103,106
Shares outstanding 10,631
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $9.70
- -----------------------------------------------------------------------------------------------------
Class R2 shares
- -----------------------------------------------------------------------------------------------------
Net assets $159,407
Shares outstanding 16,440
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $9.70
- -----------------------------------------------------------------------------------------------------
Class R3 shares (formerly Class R2)
- -----------------------------------------------------------------------------------------------------
Net assets $1,031,370
Shares outstanding 106,320
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $9.70
- -----------------------------------------------------------------------------------------------------
Class R4 shares
- -----------------------------------------------------------------------------------------------------
Net assets $231,974
Shares outstanding 23,893
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $9.71
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R5 shares
- -----------------------------------------------------------------------------------------------------
Net assets $51,552
Shares outstanding 5,310
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $9.71
- -----------------------------------------------------------------------------------------------------
Class 529A shares
- -----------------------------------------------------------------------------------------------------
Net assets $409,362
Shares outstanding 42,240
- -----------------------------------------------------------------------------------------------------
Net asset value per share $9.69
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$9.69) $10.17
- -----------------------------------------------------------------------------------------------------
Class 529B shares
- -----------------------------------------------------------------------------------------------------
Net assets $437,212
Shares outstanding 45,117
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.69
- -----------------------------------------------------------------------------------------------------
Class 529C shares
- -----------------------------------------------------------------------------------------------------
Net assets $276,434
Shares outstanding 28,403
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.73
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 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 8/31/05
NET INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------
Income
Interest $35,342,513
- -----------------------------------------------------------------------------------------------------
Expenses
Management fee $2,999,946
Distribution and service fees 2,510,482
Program manager fees 1,402
Shareholder servicing costs 1,344,065
Administrative services fee 109,129
Retirement plan administration and services fees 1,075
Trustees" compensation 22,140
Custodian fee 222,409
Printing 60,213
Postage 19,331
Auditing fees 26,837
Legal fees 25,624
Shareholder solicitation expenses 3,667
Miscellaneous 191,191
- -----------------------------------------------------------------------------------------------------
Total expenses $7,537,511
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly $(36,189)
Reduction of expenses by investment adviser (904,192)
- -----------------------------------------------------------------------------------------------------
Net expenses $6,597,130
- -----------------------------------------------------------------------------------------------------
Net investment income $28,745,383
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $(3,940,746)
Futures contracts 386,589
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments $(3,554,157)
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $13,326,693
Futures contracts (383,838)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments $12,942,855
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments $9,388,698
- -----------------------------------------------------------------------------------------------------
Change in net assets from operations $38,134,081
- -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements of Changes in Net Assets
These statements describe the increases and/or decreases in net assets resulting
from operations, any distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
8/31/05 2/28/05
(UNAUDITED)
CHANGE IN NET ASSETS
- -------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income $28,745,383 $48,264,077
Net realized gain (loss) on investments (3,554,157) 9,975,483
Net unrealized gain (loss) on investments 12,942,855 (35,099,066)
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $38,134,081 $23,140,494
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income
Class A $(18,537,818) $(30,710,051)
Class B (3,629,555) (7,063,974)
Class C (746,997) (1,577,976)
Class I (6,410,588) (9,120,541)
Class R (207,320) (250,685)
Class R1 (921) --
Class R2 (981) --
Class R3 (10,664) (5,374)
Class R4 (1,502) --
Class R5 (883) --
Class 529A (7,347) (11,688)
Class 529B (6,370) (12,638)
Class 529C (4,635) (8,125)
- -------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(29,565,581) $(48,761,052)
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(18,636,676) $228,335,829
- -------------------------------------------------------------------------------------------------------
Redemption fees $3,132 $4,544
- -------------------------------------------------------------------------------------------------------
Total change in net assets $(10,065,044) $202,719,815
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period $1,501,306,753 $1,298,586,938
At end of period (including accumulated distributions
in excess of net investment income of $4,580,863 and
$3,760,665, respectively) $1,491,241,709 $1,501,306,753
- -------------------------------------------------------------------------------------------------------
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 operations). 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 2/28 AND 2/29
ENDED ---------------------------------------------------------------------------
CLASS A 8/31/05= 2005=@ 2004 2003 2002 2001
(UNAUDITED)
Net asset value,
beginning of period $9.65 $9.84 $10.03 $9.73 $9.71 $9.15
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#(S)
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $0.19 $0.36 $0.29 $0.39 $0.50 $0.58
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.07 (0.19) (0.08) 0.42 0.12 0.56
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $0.26 $0.17 $0.21 $0.81 $0.62 $1.14
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.20) $(0.36) $(0.40) $(0.51) $(0.60) $(0.58)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.71 $9.65 $9.84 $10.03 $9.73 $9.71
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)*** 2.67++ 1.81 2.19 8.54 6.59 12.98
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions## 0.91+ 0.93 1.00 0.98 1.01 1.00
Expenses after expense
reductions## 0.79+ 0.83 0.95 0.93 0.96 0.93
Net investment income(S) 3.88+ 3.75 2.94 3.97 5.16 6.25
Portfolio turnover (%) 34 126 143 134 116 77
Net assets at end of period
(000 Omitted) $903,188 $932,879 $803,974 $927,886 $622,606 $392,457
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 2/28 AND 2/29
ENDED ---------------------------------------------------------------------------
CLASS B 8/31/05= 2005=@ 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of
period $9.64 $9.83 $10.02 $9.72 $9.69 $9.14
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#(S)
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $0.15 $0.29 $0.24 $0.33 $0.44 $0.52
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.07 (0.18) (0.09) 0.41 0.12 0.56
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $0.22 $0.11 $0.15 $0.74 $0.56 $1.08
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.16) $(0.30) $(0.34) $(0.44) $(0.53) $(0.53)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.70 $9.64 $9.83 $10.02 $9.72 $9.69
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)*** 2.29++ 1.12 1.53 7.84 5.98 12.20
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions## 1.66+ 1.62 1.64 1.63 1.66 1.65
Expenses after expense
reductions## 1.54+ 1.52 1.59 1.58 1.61 1.58
Net investment income(S) 3.14+ 3.03 2.42 3.32 4.52 5.60
Portfolio turnover (%) 34 126 143 134 116 77
Net assets at end of period
(000 Omitted) $207,540 $233,734 $255,512 $408,553 $263,964 $163,756
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 2/28 AND 2/29
ENDED ---------------------------------------------------------------------------
CLASS C 8/31/05= 2005=@ 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of
period $9.68 $9.87 $10.06 $9.76 $9.73 $9.18
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#(S)
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $0.15 $0.29 $0.25 $0.33 $0.44 $0.52
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.07 (0.18) (0.10) 0.41 0.12 0.56
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $0.22 $0.11 $0.15 $0.74 $0.56 $1.08
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.16) $(0.30) $(0.34) $(0.44) $(0.53) $(0.53)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.74 $9.68 $9.87 $10.06 $9.76 $9.73
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)*** 2.29++ 1.13 1.54 7.81 5.97 12.17
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions## 1.66+ 1.62 1.64 1.63 1.66 1.65
Expenses after expense
reductions## 1.54+ 1.52 1.59 1.58 1.61 1.58
Net investment income(S) 3.15+ 2.95 2.47 3.32 4.51 5.60
Portfolio turnover (%) 34 126 143 134 116 77
Net assets at end of period
(000 Omitted) $42,167 $44,692 $63,609 $110,096 $81,397 $36,603
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 2/28 AND 2/29
ENDED ------------------------------------------------------------------------
CLASS I 8/31/05= 2005=@ 2004 2003 2002 2001
(UNAUDITED)
Net asset value,
beginning of period $9.65 $9.84 $10.03 $9.73 $9.71 $9.15
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#(S)
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $0.21 $0.39 $0.25 $0.33 $0.53 $0.61
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.06 (0.19) (0.00)(ct)+++ 0.51 0.13 0.56
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.27 $0.20 $0.25 $0.84 $0.66 $1.17
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.21) $(0.39) $(0.44) $(0.54) $(0.64) $(0.61)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.71 $9.65 $9.84 $10.03 $9.73 $9.71
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%)*** 2.80++ 2.14 2.55 8.92 6.99 13.34
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions## 0.67+ 0.60 0.67 0.63 0.66 0.65
Expenses after expense
reductions## 0.55+ 0.50 0.62 0.58 0.61 0.58
Net investment income(S) 4.25+ 4.09 2.57 3.64 5.49 6.60
Portfolio turnover (%) 34 126 143 134 116 77
Net assets at end of period
(000 Omitted) $323,533 $279,080 $168,124 $33,682 $1,797 $4,821
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED
SIX MONTHS 2/28 AND 2/29 PERIOD
ENDED ------------------------------ ENDED
CLASS R (FORMERLY CLASS R1) 8/31/05= 2005=@ 2004 2/28/03**
(UNAUDITED)
Net asset value, beginning of period $9.65 $9.84 $10.03 $10.03
- ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income $0.18 $0.34 $0.18 $0.16
Net realized and unrealized gain (loss) on
investments and foreign currency 0.05 (0.18) 0.02(ct) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.23 $0.16 $0.20 $0.08
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.35) $(0.39) $(0.08)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.70 $9.65 $9.84 $10.03
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%)*** 2.44++ 1.63 2.05 0.78++
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.16+ 1.11 1.19 1.13+
Expenses after expense reductions## 1.04+ 1.01 1.14 1.08+
Net investment income 3.61+ 3.64 1.87 3.04+
Portfolio turnover (%) 34 126 143 134
Net assets at end of period (000 Omitted) $12,113 $9,411 $6,188 $79
- ---------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED
CLASS R1 8/31/05**
(UNAUDITED)
Net asset value, beginning of period $9.57
- ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income $0.12
Net realized and unrealized gain (loss) on investments and
foreign currency 0.13(ct)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.25
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.12)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.70
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%)*** 2.66++
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.85+
Expenses after expense reductions## 1.73+
Net investment income 2.93+
Portfolio turnover (%) 34
Net assets at end of period (000 Omitted) $103
- ---------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
PERIOD ENDED
CLASS R2 8/31/05**
(UNAUDITED)
Net asset value, beginning of period $9.57
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- -------------------------------------------------------------------------------------------------------------------
Net investment income $0.12
Net realized and unrealized gain (loss) on investments and
foreign currency 0.15(ct)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.27
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
From net investment income $(0.14)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.70
- -------------------------------------------------------------------------------------------------------------------
Total return (%)*** 2.79++
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.56+
Expenses after expense reductions## 1.44+
Net investment income 3.20+
Portfolio turnover (%) 34
Net assets at end of period (000 Omitted) $159
- -------------------------------------------------------------------------------------------------------------------
CLASS R3 (FORMERLY CLASS R2)
SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED
8/31/05= 2/28/05=@ 2/29/04**
(UNAUDITED)
Net asset value, beginning of period $9.65 $9.84 $9.69
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- -------------------------------------------------------------------------------------------------------------------
Net investment income $0.15 $0.38 $0.02
Net realized and unrealized gain (loss) on investments and
foreign currency 0.07 (0.25) 0.23(ct)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.22 $0.13 $0.25
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
From net investment income $(0.17) $(0.32) $(0.10)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.70 $9.65 $9.84
- -------------------------------------------------------------------------------------------------------------------
Total return (%)*** 2.31++ 1.38 2.58++
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.41+ 1.36 1.42+
Expenses after expense reductions## 1.29+ 1.26 1.37+
Net investment income 3.37+ 3.99 0.72+
Portfolio turnover (%) 34 126 143
Net assets at end of period (000 Omitted) $1,031 $422 $41
- -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
PERIOD ENDED
CLASS R4 8/31/05**
(UNAUDITED)
Net asset value, beginning of period $9.58
- -----------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- -----------------------------------------------------------------------
Net investment income $0.12
Net realized and unrealized gain (loss) on investments and
foreign currency 0.17(ct)
- -----------------------------------------------------------------------
Total from investment operations $0.29
- -----------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------
From net investment income $(0.16)
- -----------------------------------------------------------------------
Net asset value, end of period $9.71
- -----------------------------------------------------------------------
Total return (%)*** 3.00++
- -----------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------
Expenses before expense reductions## 1.06+
Expenses after expense reductions## 0.94+
Net investment income 3.65+
Portfolio turnover (%) 34
Net assets at end of period (000 Omitted) $232
- -----------------------------------------------------------------------
PERIOD ENDED
CLASS R5 8/31/05**
(UNAUDITED)
Net asset value, beginning of period $9.58
- -----------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- -----------------------------------------------------------------------
Net investment income $0.16
Net realized and unrealized gain (loss) on investments and
foreign currency 0.14(ct)
- -----------------------------------------------------------------------
Total from investment operations $0.30
- -----------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------
From net investment income $(0.17)
- -----------------------------------------------------------------------
Net asset value, end of period $9.71
- -----------------------------------------------------------------------
Total return (%)*** 3.13++
- -----------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------
Expenses before expense reductions## 0.75+
Expenses after expense reductions## 0.63+
Net investment income 4.04+
Portfolio turnover (%) 34
Net assets at end of period (000 Omitted) $52
- -----------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED
SIX MONTHS 2/28 AND 2/29 PERIOD
ENDED ------------------------------ ENDED
CLASS 529A 8/31/05= 2005=@ 2004 2/28/03**
(UNAUDITED)
Net asset value, beginning of period $9.64 $9.83 $10.02 $9.81
- ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income $0.17 $0.33 $0.26 $0.28
Net realized and unrealized gain (loss) on
investments and foreign currency 0.06 (0.18) (0.07) 0.20
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.23 $0.15 $0.19 $0.48
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.34) $(0.38) $(0.27)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.69 $9.64 $9.83 $10.02
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)*** 2.39++ 1.53 1.94 4.97++
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.26+ 1.21 1.25 1.23+
Expenses after expense reductions## 1.14+ 1.11 1.20 1.18+
Net investment income 3.54+ 3.47 2.69 3.05+
Portfolio turnover (%) 34 126 143 134
Net assets at end of period (000 Omitted) $409 $388 $332 $312
- ---------------------------------------------------------------------------------------------------------------------------
YEARS ENDED
SIX MONTHS 2/28 AND 2/29 PERIOD
ENDED ------------------------------ ENDED
CLASS 529B 8/31/05= 2005=@ 2004 2/28/03**
(UNAUDITED)
Net asset value, beginning of period $9.64 $9.82 $10.01 $9.80
- ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income $0.14 $0.26 $0.20 $0.24
Net realized and unrealized gain (loss) on
investments and foreign currency 0.06 (0.17) (0.08) 0.21
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.20 $0.09 $0.12 $0.45
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.15) $(0.27) $(0.31) $(0.24)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.69 $9.64 $9.82 $10.01
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)*** 2.06++ 0.97 1.27 4.58++
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.90+ 1.87 1.90 1.88+
Expenses after expense reductions## 1.78+ 1.77 1.85 1.83+
Net investment income 2.89+ 2.71 2.07 2.53+
Portfolio turnover (%) 34 126 143 134
Net assets at end of period (000 Omitted) $437 $404 $524 $522
- ---------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED
SIX MONTHS 2/28 AND 2/29 PERIOD
ENDED ------------------------------ ENDED
CLASS 529C 8/31/05= 2005=@ 2004 2/28/03**
(UNAUDITED)
Net asset value, beginning of period $9.68 $9.87 $10.06 $9.84
- ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income $0.14 $0.26 $0.22 $0.20
Net realized and unrealized gain (loss) on
investments and foreign currency 0.06 (0.18) (0.10) 0.26
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.20 $0.08 $0.12 $0.46
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.15) $(0.27) $(0.31) $(0.24)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.73 $9.68 $9.87 $10.06
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)*** 2.06++ 0.88 1.28 4.66++
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.91+ 1.86 1.89 1.88+
Expenses after expense reductions## 1.79+ 1.76 1.84 1.83+
Net investment income 2.89+ 2.76 2.15 2.37+
Portfolio turnover (%) 34 126 143 134
Net assets at end of period (000 Omitted) $276 $297 $283 $383
- ---------------------------------------------------------------------------------------------------------------------------
** For the period from the class" inception, December 31, 2002 (Class R), July 31, 2002 (Classes 529A, 529B, and 529C),
October 31, 2003 (Class R3) and April 1, 2005 (Classes R1, R2, R4, and R5) through the stated period end.
*** Certain expenses have been reduced without which performance would have been lower. + 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.
(ct) The per share amount is not in accordance with the net realized and unrealized gain/loss for the period because of the
timing of sales of fund shares and the amount of per share realized and unrealized gains and losses at such time.
(+) Total returns do not include any applicable sales charges.
(S) Effective March 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing and accreting all premiums and discounts on debt securities. Per share data and ratios for periods
prior to March 1, 2001 have not been restated to reflect this change.
= Redemption fees charged by the fund during this period resulted in a per share impact of less than $0.01.
@ Due to a revision, certain amounts for the year ended February 28, 2005 have been changed from what was previously
reported. The impact of the revision was an increase to the ratio of net investment income to average net assets and a
corresponding decrease to the ratio of expenses to average net assets. Additionally, the revision resulted in rounding the
net asset value for certain classes up to the next cent, increasing total return for these classes. As a result of these
revised net asset values, no shareholder accounts were materially effected. The impact for each share class is summarized
as follows:
Financial Highlights - continued
INCREASE IN
INCREASE IN NET NET ASSET VALUE
INVESTMENT DECREASE IN PER SHARE INCREASE TO
SHARE CLASS INCOME RATIO EXPENSE RATIO (ROUNDED) TOTAL RETURN
Class A 0.04% 0.04% N/A N/A
Class B 0.03% 0.03% N/A N/A
Class C 0.03% 0.03% N/A N/A
Class I 0.05% 0.05% $0.01 0.11%
Class R (formerly Class R1) 0.05% 0.05% $0.01 0.10%
Class R3 (formerly Class R2) 0.10% 0.10% $0.01 0.11%
Class 529A 0.04% 0.04% $0.01 0.11%
Class 529B 0.03% 0.03% $0.01 0.10%
Class 529C 0.04% 0.04% $0.01 0.10%
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Government Securities Fund (the fund) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified 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 - 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. Futures contracts are valued at the
settlement price as reported by an independent pricing service on the primary
exchange on which they are traded. 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.
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.
FUTURES CONTRACTS - The fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the fund is required
to deposit with the broker, either in cash or securities, an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the fund each day, depending on the daily fluctuations in the value
of the contract, and are recorded for financial statement purposes as unrealized
gains or losses by the fund. The fund's investment in futures contracts is
designed to hedge against anticipated future changes in interest or exchange
rates or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio without
incurring the additional transaction costs involved in buying and selling the
underlying securities. Investments in currency futures for purposes other than
hedging may be made to change the fund's relative position in one or more
currencies without buying and selling portfolio assets. Investments in equity
index contracts or contracts on related options for purposes other than hedging,
may be made when the fund has cash on hand and wishes to participate in
anticipated market appreciation while the cash is being invested. Should
interest or exchange rates or securities prices move unexpectedly, the fund may
not achieve the anticipated benefits of the futures contracts and may realize a
loss.
SHORT TERM FEES - For purchases made on or after July 1, 2004 and before April
1, 2005, the fund charged 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 no longer charges 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. Some securities may be purchased on a "when-issued" or "forward
delivery" basis, which means that the securities will be delivered to the fund
at a future date, usually beyond customary settlement time. 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.
The fund may enter into "TBA" (to be announced) purchase commitments to purchase
securities for a fixed unit price at a future date. Although the unit price has
been established, the principal value has not been finalized. However, the
principal amount of the commitments will not fluctuate more than 0.01%. The fund
holds, and maintains until settlement date, cash or high-grade debt obligations
in an amount sufficient to meet the purchase price, or the fund may enter into
offsetting contracts for the forward sale of other securities it owns. Income on
the securities will not be earned until settlement date. TBA purchase
commitments may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to settlement
date, which is in addition to the risk of decline in the value of the fund's
other assets. Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities.
The fund may enter into "TBA" (to be announced) sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not received until
the contractual settlement date. During the time a TBA sale commitment is
outstanding, equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are held as
"cover" for the transaction.
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 August 31, 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 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 derivatives, amortization and accretion on debt securities, wash
sales, and non-deductible pension expense.
The tax character of distributions declared for the years ended February 28,
2005 and February 29, 2004 was as follows:
2/28/05 2/29/04
Distributions declared from:
Ordinary income $48,761,052 $55,327,053
As of February 28, 2005, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $1,528,214
Capital loss carryforward (57,454,896)
Unrealized appreciation (depreciation) 898,761
Other temporary differences (5,288,879)
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.
EXPIRATION DATE
February 28, 2006 $(5,100,994)
February 28, 2007 (5,253,445)
February 29, 2008 (15,270,459)
February 28, 2009 (3,477,230)
February 28, 2011 (11,527,172)
February 29, 2012 (5,729,829)
February 28, 2013 (11,095,767)
----------------------------------------------------------
Total $(57,454,896)
The availability of a portion of the capital loss carryforwards, which were
acquired on November 19, 2004, in connection with the MFS Government Mortgage
Fund merger, may be limited in a given year.
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 and Class 529B shares will convert to Class A and Class 529A
shares, respectively, approximately eight years after purchase.
OTHER - Due to a revision to miscellaneous expenses, certain amounts on the
Statement of Changes in Net Assets and Financial Highlights for the year ended
February 28, 2005, have been changed from what was previously reported. The
impact of the revision was to reduce expenses related to this item and thereby
increase net investment income, changes in net assets from operations and net
assets at end of period for the year ended February 28, 2005, by $541,341.
(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 0.40% of
the fund's average daily net assets.
As part of a settlement agreement with the New York Attorney General concerning
market timing and related matters, MFS has agreed to reduce the management fee
to 0.30% of the fund's average daily net assets for the period March 1, 2004
through February 28, 2009. For the six months ended August 31, 2005, this waiver
is reflected as a reduction of total expenses in the Statement of Operations.
The management fee incurred for the six months ended August 31, 2005 was
equivalent to an annual effective rate of 0.30% of the fund's average daily net
assets.
The investment adviser has contractually agreed to pay a portion of the fund's
operating expenses, exclusive of management, distribution and service,
retirement plan administration and services, program manager, and certain other
fees and expenses, such that operating expenses do not exceed 0.25% annually of
the fund's average daily net assets. This is reflected as a reduction of total
expenses in the Statement of Operations. This contractual fee arrangement will
continue until June 30, 2006, unless the fund's Board of Trustees consents to an
earlier revision or termination of this agreement.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $29,823 and $156 for the six months ended August
31, 2005, as its portion of the initial sales charge on sales of Class A and
Class 529A shares of the fund, respectively.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the distribution
and servicing of certain share classes. One component of the plan is a
distribution fee paid to and retained by MFD. Another component of the plan is a
service fee paid to MFD which subsequently pays a portion of this fee 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.
Distribution Fee Plan Table:
TOTAL ANNUAL SERVICE FEE DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE RETAINED AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) BY MFD(3) FEE
Class A 0.10% 0.25% 0.35% 0.25% $44,194 $1,147,286
Class B 0.75% 0.25% 1.00% 1.00% 784 1,102,603
Class C 0.75% 0.25% 1.00% 1.00% 1,496 227,033
Class R 0.25% 0.25% 0.50% 0.50% -- 27,286
Class R1 0.50% 0.25% 0.75% 0.75% 94 223
Class R2 0.25% 0.25% 0.50% 0.50% 62 143
Class R3 0.25% 0.25% 0.50% 0.50% 89 1,497
Class R4 0.00% 0.25% 0.25% 0.25% 31 95
Class 529A 0.25% 0.25% 0.50% 0.35% 13 697
Class 529B 0.75% 0.25% 1.00% 1.00% 6 2,093
Class 529C 0.75% 0.25% 1.00% 1.00% 23 1,526
- -----------------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $2,510,482
(1) In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees up to these
annual percentage rates of each class" average daily net assets.
(2) The annual effective rates represent actual fees incurred under the distribution plan for the six months ended August
31, 2005 based on each class" average daily net assets. Payment of the 0.10% annual Class A distribution fee is not yet
implemented and will commence on such date as the fund's Board of Trustees may determine. 0.10% of the Class 529A
distribution fee is currently being paid by the fund. Payment of the remaining 0.15% of the Class 529A distribution fee
is not yet implemented and will commence on such date as the fund's Board of Trustees may determine.
(3) For the six months ended August 31, 2005, MFD retained these service fees.
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 12 months
following the purchase. Class B and Class 529B shares are subject to a
contingent deferred sales charge in the event of a shareholder redemption within
six years of purchase. MFD retained all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended August 31,
2005 were as follows:
AMOUNT
Class A $10,602
Class B $251,281
Class C $1,747
Class 529B $5
Class 529C $--
The fund has entered into 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. The fee may only be increased with the approval of the Board of
Trustees who 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. Program manager
fees for the six months ended August 31, 2005, were as follows:
AMOUNT
Class 529A $498
Class 529B $523
Class 529C $381
----------------------------------------------------------
Total Program Manager Fees $1,402
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS. MFSC
receives a fee from the fund, for its services as shareholder servicing agent,
set periodically under the supervision of the fund's Board of Trustees. For the
six months ended August 31, 2005, the fee was $861,071 which equated to 0.1145%
annually of the fund's average daily net assets. MFSC also receives payment from
the fund for out-of-pocket and sub-accounting expenses paid by MFSC on behalf of
the fund. For the six months ended August 31, 2005, these costs amounted to
$286,588.
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, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. Effective July 1, 2005, the fund's annual fixed amount is $10,000.
The administrative services fee incurred for the six months ended August 31,
2005 was equivalent to an annual effective rate of 0.0145% of the fund's average
daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain Class R shares. These
services include various administrative, recordkeeping, and communication/
educational services with respect to the retirement plans which invest in these
shares, and may be provided directly by MFS or by a third party. For the six
months ended August 31, 2005, the fund paid an annual retirement plan
administration and services fee up to the following annual percentage rates of
each class" average daily net assets:
AMOUNT
TOTAL RETAINED
FEE RATE AMOUNT BY MFS
Class R1 0.45% $134 $90
Class R2 0.40% 115 74
Class R3 (formerly Class R2) 0.25% 748 478
Class R4 0.15% 57 17
Class R5 0.10% 21 19
- ----------------------------------------------------------------------------------------------------------------
Total Retirement Plan Administration and Services Fees $1,075 $678
TRUSTEES" COMPENSATION - The fund pays compensation to Independent Trustees in
the form of a retainer, attendance fees, and additional compensation to Board
and Committee chairpersons. The fund does not pay compensation directly to
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, MFD,
and MFSC. The fund has an unfunded, defined benefit plan for retired Independent
Trustees which resulted in a pension expense of $5,349. The fund also has an
unfunded retirement benefit deferral plan for certain current Independent
Trustees which resulted in an expense of $2,348. Both amounts are included in
Trustees compensation for the six months ended August 31, 2005.
OTHER - 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 the fund
for a portion of the payments made by the funds to Tarantino LLC in the amount
of $3,585, which is shown as a reduction of total expenses in the Statement of
Operations. Additionally, MFS has agreed to bear all expenses associated with
office space, other administrative support, and supplies provided to the ICCO.
The funds can terminate the Agreement with Tarantino LLC at any time under the
terms of the Agreement.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
PURCHASES SALES
U.S. government securities $503,272,295 $480,889,670
Investments (non-U.S. government securities) 27,783,837 594,000
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 $1,644,362,431
----------------------------------------------------------
Gross unrealized appreciation $20,328,419
----------------------------------------------------------
Gross unrealized depreciation (7,396,850)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $12,931,569
(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 8/31/05 Year ended 2/28/05
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 5,982,469 $57,745,952 16,308,514 $158,080,874
Shares issued in connection with
acquisition of MFS Government
Mortgage Fund -- -- 43,483,744 422,661,943
Shares issued to shareholders in
reinvestment of distributions 1,396,816 13,511,618 2,742,230 26,585,292
Shares reacquired (10,988,766) (106,061,747) (47,574,507) (463,184,495)
- -----------------------------------------------------------------------------------------------------------
Net change (3,609,481) $(34,804,177) 14,959,981 $144,143,614
CLASS B SHARES
Shares sold 1,232,035 $11,890,037 2,350,771 $22,878,329
Shares issued in connection with
acquisition of MFS Government
Mortgage Fund -- -- 5,217,434 50,661,281
Shares issued to shareholders in
reinvestment of distributions 301,204 2,909,412 623,908 6,040,560
Shares reacquired (4,373,406) (42,140,748) (9,941,512) (96,185,082)
- -----------------------------------------------------------------------------------------------------------
Net change (2,840,167) $(27,341,299) (1,749,399) $(16,604,912)
CLASS C SHARES
Shares sold 749,766 $7,265,637 599,402 $5,839,934
Shares issued to shareholders in
reinvestment of distributions 59,421 576,569 132,437 1,287,771
Shares reacquired (1,094,876) (10,595,354) (2,559,242) (24,892,501)
- -----------------------------------------------------------------------------------------------------------
Net change (285,689) $(2,753,148) (1,827,403) $(17,764,796)
CLASS I SHARES
Shares sold 3,768,007 $36,364,620 11,066,890 $107,326,816
Shares issued to shareholders in
reinvestment of distributions 663,068 6,410,421 989,445 9,583,025
Shares reacquired (32,760) (317,454) (215,330) (2,076,073)
- -----------------------------------------------------------------------------------------------------------
Net change 4,398,315 $42,457,587 11,841,005 $114,833,768
CLASS R SHARES (FORMERLY CLASS R1)
Shares sold 371,944 $3,585,614 639,146 $6,203,334
Shares issued to shareholders in
reinvestment of distributions 20,294 196,211 26,173 253,587
Shares reacquired (119,243) (1,149,330) (318,931) (3,087,488)
- -----------------------------------------------------------------------------------------------------------
Net change 272,995 $2,632,495 346,388 $3,369,433
Period ended 8/31/05*
SHARES AMOUNT
CLASS R1 SHARES
Shares sold 13,031 $125,197
Shares issued to shareholders in
reinvestment of distributions 92 894
Shares reacquired (2,492) (24,037)
- ------------------------------------------------------------------------
Net change 10,631 $102,054
CLASS R2 SHARES
Shares sold 16,339 $156,810
Shares issued to shareholders in
reinvestment of distributions 102 981
Shares reacquired (1) (16)
- ------------------------------------------------------------------------
Net change 16,440 $157,775
Six months ended 8/31/05 Year ended 2/28/05
SHARES AMOUNT SHARES AMOUNT
CLASS R3 SHARES (FORMERLY CLASS R2)
Shares sold 81,488 $786,361 78,487 $763,365
Shares issued to shareholders in
reinvestment of distributions 1,085 10,485 556 5,380
Shares reacquired (20,020) (193,446) (39,439) (382,182)
- -----------------------------------------------------------------------------------------------------------
Net change 62,553 $603,400 39,604 $386,563
Period ended 8/31/05*
SHARES AMOUNT
CLASS R4 SHARES
Shares sold 23,739 $228,513
Shares issued to shareholders in
reinvestment of distributions 155 1,502
Shares reacquired (1) (2)
- ------------------------------------------------------------------------
Net change 23,893 $230,013
CLASS R5 SHARES
Shares sold 5,219 $50,000
Shares issued to shareholders in
reinvestment of distributions 91 883
- ------------------------------------------------------------------------
Net change 5,310 $50,883
Six months ended 8/31/05 Year ended 2/28/05
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 3,924 $37,865 11,540 $111,687
Shares issued to shareholders in
reinvestment of distributions 760 7,339 1,285 12,435
Shares reacquired (2,716) (26,172) (6,347) (61,446)
- -----------------------------------------------------------------------------------------------------------
Net change 1,968 $19,032 6,478 $62,676
CLASS 529B SHARES
Shares sold 3,127 $29,968 1,825 $17,703
Shares issued to shareholders in
reinvestment of distributions 660 6,368 1,401 13,549
Shares reacquired (578) (5,613) (14,658) (141,070)
- -----------------------------------------------------------------------------------------------------------
Net change 3,209 $30,723 (11,432) $(109,818)
CLASS 529C SHARES
Shares sold 2,078 $19,948 8,504 $83,637
Shares issued to shareholders in
reinvestment of distributions 478 4,631 890 8,649
Shares reacquired (4,820) (46,593) (7,381) (72,985)
- -----------------------------------------------------------------------------------------------------------
Net change (2,264) $(22,014) 2,013 $19,301
* For the period from the inception of Class R1, Class R2, Class R4, and Class R5 shares April 1, 2005 through
August 31, 2005.
The fund is one of several mutual funds in which the MFS fund-of-funds may
invest. The MFS fund-of-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, the MFS Moderate Allocation Fund and MFS Growth
Allocation Fund were the owners of record of approximately 4%, 11% and 6%
respectively, of the value of outstanding voting shares.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 0.35%. 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 August 31, 2005 was $7,660 and is included in
miscellaneous expense. The fund had no significant borrowings during the six
months ended August 31, 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 futures contracts. 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.
Futures Contracts
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
U.S. Treasury Notes 5 Year December 2005 625 Short $(212,542)
U.S. Treasury Notes 10 Year December 2005 344 Long 130,267
- --------------------------------------------------------------------------------------------------------------------
$(82,275)
At August 31, 2005, the fund had sufficient cash and/or securities to cover any
margin requirements under these contracts.
(8) ACQUISITIONS
At close of business on November 19, 2004, the fund acquired all of the assets
and liabilities of the MFS Government Mortgage Fund. The acquisition was
accomplished by a tax-free exchange of 48,701,178 shares of the fund (valued at
$473,323,224) for all of the assets and liabilities of the MFS Government
Mortgage Fund. MFS Government Mortgage Fund then converted all of its
outstanding shares for the shares of the fund and distributed those shares to
its shareholders. MFS Government Mortgage Fund's net assets on that date were
$473,323,224, including $3,693,881 of unrealized appreciation, $157,151 of
accumulated distributions in excess of net investment income, and $31,781,771 of
accumulated net realized loss on investments. These assets were combined with
those of the fund. The aggregate net assets of the fund after the acquisition
were $1,217,628,851.
RESULTS OF SHAREHOLDER MEETING (unaudited) - 8/31/05
At a special meeting of shareholders of the MFS Government Securities Fund,
which was held on March 23, 2005, the following action was taken:
ITEM 1. To elect a Board of Trustees:
NUMBER OF DOLLARS
------------------------------------------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
Lawrence H. Cohn, M.D. $ 998,802,150.65 $23,396,610.39
- ----------------------------------------------------------------------------
David H. Gunning 1,000,397,938.03 21,800,823.01
- ----------------------------------------------------------------------------
William R. Gutow 999,341,890.07 22,856,870.97
- ----------------------------------------------------------------------------
Michael Hegarty 1,000,027,066.80 22,171,694.24
- ----------------------------------------------------------------------------
J. Atwood Ives 999,871,484.96 22,327,276.08
- ----------------------------------------------------------------------------
Amy B. Lane 1,000,481,717.83 21,717,043.21
- ----------------------------------------------------------------------------
Robert J. Manning 999,034,850.61 23,163,910.43
- ----------------------------------------------------------------------------
Lawrence T. Perera 999,205,343.66 22,993,417.38
- ----------------------------------------------------------------------------
Robert C. Pozen 1,000,663,037.26 21,535,723.78
- ----------------------------------------------------------------------------
J. Dale Sherratt 999,220,497.66 22,978,263.38
- ----------------------------------------------------------------------------
Laurie J. Thomsen 999,766,179.69 22,432,581.35
- ----------------------------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of Trustees
and a majority of the non-interested ("independent") Trustees, voting
separately, annually approve the continuation of the Fund's investment advisory
agreement with MFS. The Trustees consider matters bearing on the Fund and its
advisory arrangements at their meetings throughout the year, including a review
of performance data at each regular meeting. In addition, the independent
Trustees met several times over the course of three months beginning in May and
ending in July, 2005 ("contract review meetings") for the specific purpose of
considering whether to approve the continuation of the investment advisory
agreement for the Fund and the other investment companies that the Board
oversees (the "MFS Funds"). The independent Trustees were assisted in their
evaluation of the Fund's investment advisory agreement by independent legal
counsel, from whom they received separate legal advice and with whom they met
separately from MFS during various contract review meetings. The independent
Trustees were also assisted in this process by the MFS Funds" Independent Chief
Compliance Officer, a full-time senior officer appointed by and reporting to the
independent Trustees.
In connection with their deliberations regarding the continuation of the
investment advisory agreement, the Trustees, including the independent Trustees,
considered such information and factors as they believed, in light of the legal
advice furnished to them and their own business judgment, to be relevant. The
investment advisory agreement for the Fund was considered separately, although
the Trustees also took into account the common interests of all MFS Funds in
their review. As described below, the Trustees considered the nature, quality,
and extent of the various investment advisory, administrative, and shareholder
services performed by MFS under the existing investment advisory agreement and
other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and
relied upon materials which included, among other items: (i) information
provided by Lipper Inc. on the investment performance of the Fund for various
time periods ended December 31, 2004 and the investment performance of a group
of funds with substantially similar investment classifications/objectives (the
"Lipper performance universe"), as well as the investment performance of a group
of funds identified by objective criteria suggested by MFS ("peer funds"), (ii)
information provided by Lipper Inc. on the Fund's advisory fees and other
expenses and the advisory fees and other expenses of comparable funds identified
by Lipper (the "Lipper expense group"), as well as the advisory fees and other
expenses of peer funds identified by objective criteria suggested by MFS, (iii)
information provided by MFS on the advisory fees of comparable portfolios of
other clients of MFS, including institutional separate account and other
clients, (iv) information as to whether and to what extent applicable expense
waivers, reimbursements or fee "breakpoints" are observed for the Fund, (v)
information regarding MFS" financial results and financial condition, including
MFS" and certain of its affiliates" estimated profitability from services
performed for the Fund and the MFS Funds as a whole, (vi) MFS" views regarding
the outlook for the mutual fund industry and the strategic business plans of
MFS, (vii) descriptions of various functions performed by MFS for the Funds,
such as compliance monitoring and portfolio trading practices, and (viii)
information regarding the overall organization of MFS, including information
about MFS" senior management and other personnel providing investment advisory,
administrative and other services to the Fund and the other MFS Funds. The
comparative performance, fee and expense information prepared and provided by
Lipper Inc. was not independently verified and the independent Trustees did not
independently verify any information provided to them by MFS.
The Trustees" conclusion as to the continuation of the investment advisory
agreement was based on a comprehensive consideration of all information provided
to the Trustees and not the result of any single factor. Some of the factors
that figured particularly in the Trustees" deliberations are described below,
although individual Trustees may have evaluated the information presented
differently from one another, giving different weights to various factors. It is
also important to recognize that the fee arrangements for the Fund and other MFS
Funds are the result of years of review and discussion between the independent
Trustees and MFS, that certain aspects of such arrangements may receive greater
scrutiny in some years than others, and that the Trustees" conclusions may be
based, in part, on their consideration of these same arrangements during the
course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed the
Fund's total return investment performance as well as the performance of peer
groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of the Fund's Class A shares in
comparison to the performance of funds in its Lipper performance universe over
the three-year period ended December 31, 2004, which the Trustees believed was a
long enough period to reflect differing market conditions. The Fund's
performance was in the 48th percentile relative to the other funds in the
universe for this three-year period (the 1st percentile being the best
performers and the 100th percentile being the worst performers). The total
return performance of the Fund's Class A shares was in the 40th percentile
for the one-year period and the 42nd percentile for the five-year period
ended December 31, 2004 relative to the Lipper performance universe. Because of
the passage of time, these performance results are likely to differ from the
performance results for more recent periods, including those shown elsewhere in
this report.
In the course of their deliberations, the Trustees took into account information
provided by MFS in connection with the contract review meetings, as well as
during investment review meetings conducted with portfolio management personnel
during the course of the year regarding the Fund's performance. After reviewing
these and related factors, the Trustees concluded, within the context of their
overall conclusions regarding the investment advisory agreement, that they were
satisfied with MFS" responses and efforts relating to investment performance.
In assessing the reasonableness of the Fund's advisory fee, the Trustees
considered, among other information, the Fund's advisory fee and the total
expense ratio of the Fund's Class A shares as a percentage of average net assets
and the advisory fee and total expense ratios of peer groups of funds based on
information provided by Lipper Inc. and MFS. The Trustees considered whether the
Fund was subject to any fee waivers or reductions or expense limitations. The
Trustees also considered that, according to the Lipper data, the Fund's
effective advisory fee rate was lower than the Lipper expense group median, and
the Fund's total expense ratio was approximately at the Lipper expense group
median.
The Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered information provided
by MFS as to the generally broader scope of services provided by MFS to the Fund
in comparison to institutional accounts, the higher demands placed on MFS"
investment personnel and trading infrastructure as a result of the daily cash
in-flows and out-flows of the Fund, and the impact on MFS and expenses
associated with the more extensive regulatory regime to which the Fund is
subject in comparison to institutional accounts.
The Trustees also considered whether the Fund is likely to benefit from any
economies of scale in the management of the Fund in the event of growth in
assets of the Fund. They noted that the Fund's advisory fee rate schedule is not
currently subject to any breakpoints. Taking into account fee waivers or
reductions or expense limitations, if any, the Trustees determined not to
recommend any advisory fee breakpoints for the Fund at this time.
The Trustees also considered information prepared by MFS relating to MFS" costs
and profits with respect to the Fund, the MFS Funds considered as a group, and
other investment companies and accounts advised by MFS, as well as MFS"
methodologies used to determine and allocate its costs to the MFS Funds, the
Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described herein, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that the advisory fees charged to the Fund
represent reasonable compensation in light of the nature and quality of the
services being provided by MFS to the Fund.
In addition, the Trustees considered MFS" resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Fund.
The Trustees also considered current and developing conditions in the financial
services industry, including the entry into the industry of large and
well-capitalized companies which are spending, and appear to be prepared to
continue to spend, substantial sums to engage personnel and to provide services
to competing investment companies. In this regard, the Trustees also considered
the financial resources of MFS and its ultimate parent, Sun Life Financial Inc.
The Trustees also considered the advantages and possible disadvantages to the
Fund of having an adviser which also serves other investment companies as well
as other accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative, transfer agency, and distribution services provided to the Fund
by MFS and its affiliates under agreements and plans other than the investment
advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund
Distributors, Inc., an affiliate of MFS. The Trustees also considered the
nature, extent and quality of certain other services MFS performs or arranges
for on the Fund's behalf, including securities lending programs, directed
expense payment programs, class action recovery programs, and MFS" interaction
with third-party service providers, principally custodians and sub-custodians.
The Trustees concluded that the various non-advisory services provided by MFS
and its affiliates on behalf of the Funds were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund's
portfolio brokerage commissions to pay for research and other similar services
(including MFS" general policy to pay directly for third-party research), and
various other factors. Additionally, the Trustees considered so-called "fall-
out benefits" to MFS such as reputational value derived from serving as
investment manager to the Fund.
Based on their evaluation of factors that they deemed to be material, including
those factors described above, the Board of Trustees, including a majority of
the independent Trustees, concluded that the Fund's investment advisory
agreement with MFS should be continued for an additional one-year period,
commencing August 1, 2005.
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement will be available on or before December 1, 2005 by
clicking on the fund's name under "Select a fund" on the MFS website (mfs.com).
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 Proxy Voting section of mfs.com or by visiting the SEC's Website 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 Website at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The trust 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 trust'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 trust'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 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
- --------------------------------------------------------------------------------
Share 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.
MFG-SEM-10/05 92M
ITEM 2. CODE OF ETHICS.
The Registrant has amended its Code of Ethics to reflect that the Registrant's
Principal Financial Officer has changed.
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 Investment Company Act of
1940 (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: Code of Ethics attached hereto.
(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 GOVERNMENT SECURITIES FUND
------------------------------------------------------------------
By (Signature and Title)* ROBERT J. MANNING
-----------------------------------------------------
Robert J. Manning, President
Date: October 24, 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: October 24, 2005
----------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: October 24, 2005
----------------
* Print name and title of each signing officer under his or her signature.