UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2594
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MFS SERIES TRUST IV
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
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: August 31
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Date of reporting period: February 28, 2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
SEMIANNUAL REPORT
MFS(R) MONEY MARKET FUND
MFS(R) GOVERNMENT MONEY MARKET FUND
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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STATEMENTS OF ASSETS AND LIABILITIES 9
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STATEMENTS OF OPERATIONS 11
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STATEMENTS OF CHANGES IN NET ASSETS 13
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FINANCIAL HIGHLIGHTS 15
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NOTES TO FINANCIAL STATEMENTS 17
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 23
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PROXY VOTING POLICIES AND INFORMATION 23
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QUARTERLY PORTFOLIO DISCLOSURE 23
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CONTACT INFORMATION BACK COVER
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THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
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NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
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2/28/07
MCM-SEM
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
MFS(R) MONEY MARKET FUND
PORTFOLIO STRUCTURE (u)
Commercial Paper 91.1%
Certificates of Deposit 8.6%
Other Assets Less Liabilities 0.3%
SHORT TERM CREDIT QUALITY (q)
Average Credit Quality
Short Term Bonds (a) A-1
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All holdings are rated "A-1"
MATURITY BREAKDOWN (u)
0 - 29 days 61.7%
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30 - 59 days 13.1%
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60 - 89 days 6.2%
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90 - 366 days 18.7%
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Other Assets Less Liabilities 0.3%
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MFS(R) GOVERNMENT MONEY MARKET FUND
PORTFOLIO STRUCTURE (u)
U.S. Government Agency Obligations 97.5%
Repurchase Agreements 2.5%
SHORT TERM CREDIT QUALITY (q)
Average Credit Quality
Short Term Bonds (a) A-1
------------------------------------------------
All holdings are rated "A-1"
MATURITY BREAKDOWN (u)
0 - 29 days 57.1%
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30 - 59 days 28.5%
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60 - 89 days 4.1%
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90 - 366 days 10.3%
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(a) The average credit quality is based upon a market weighted average of
portfolio holdings that are rated by public rating agencies.
(q) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. If not rated by any of the three
agencies, the security is considered Not Rated. U.S. Treasuries and U.S.
Agency securities are included in the "A-1"-rating category. Percentages
are based on the total market value of investments as of 2/28/07.
(u) For purposes of this presentation, accrued interest, where applicable, is
included.
Percentages are based on net assets as of 2/28/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLES
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the funds, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the funds and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period, September 1, 2006 through February
28, 2007.
ACTUAL EXPENSES
The first line of the following tables provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the following tables provide information about hypothetical
account values and hypothetical expenses based on each 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 funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line of the tables 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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Beginning Expenses
Annualized Account Ending Paid During
MFS MONEY Expense Value Account Value Period (p)
MARKET FUND Ratio 9/01/06 2/28/07 9/01/06-2/28/07
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Actual 0.34% $1,000.00 $1,025.30 $1.71
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Hypothetical (h) 0.34% $1,000.00 $1,023.11 $1.71
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Beginning Expenses
Annualized Account Ending Paid During
MFS GOVERNMENT Expense Value Account Value Period (p)
MONEY MARKET FUND Ratio 9/01/06 2/28/07 9/01/06-2/28/07
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Actual 0.69% $1,000.00 $1,023.30 $3.46
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Hypothetical (h) 0.69% $1,000.00 $1,021.37 $3.46
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(h) 5% fund return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund.
It is categorized by broad-based asset classes.
MFS(R) MONEY MARKET FUND
Certificates of Deposit - 8.5%
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ISSUER SHARES/PAR VALUE ($)
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Other Banks & Diversified Financials - 8.5%
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Natexis Banques Populaires, NY, 5.34%, due 8/13/07 $16,000,000 $ 16,000,000
Royal Bank of Canada, NY, 5.32%, due 6/21/07 40,250,000 40,250,000
UBS AG, Stamford CT Branch, 5.355%, due 3/06/07 37,768,000 37,768,000
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TOTAL CERTIFICATES OF DEPOSIT, AT AMORTIZED COST $ 94,018,000
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Commercial Paper - 91.1% (y)
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Asset Backed & Securitized - 3.6%
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Yorktown Capital LLC, 5.255%, due 3/07/07 (t) $40,184,000 $ 40,148,806
Yorktown Capital LLC, 5.25%, due 4/02/07 (t) 266,000 264,759
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$ 40,413,565
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Automotive - 0.5%
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Toyota Motor Credit Corp., 5.2%, due 7/27/07 $ 5,890,000 $ 5,764,085
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Brokerage & Asset Managers - 0.3%
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Morgan Stanley, Inc., 5.22%, due 5/04/07 $ 3,383,000 $ 3,351,606
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Electrical Equipment - 3.9%
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General Electric Co., 5.215%, due 6/29/07 $43,710,000 $ 42,950,175
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Financial Institutions - 48.8%
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Barton Capital Corp., 5.33%, due 3/01/07 (t) $29,727,000 $ 29,727,000
Barton Capital Corp., 5.25%, due 3/08/07 (t) 14,292,000 14,277,410
CAFCO LLC, 5.25%, due 3/02/07 (t) 1,150,000 1,149,832
CRC Funding LLC, 5.25%, due 3/09/07 - 3/28/07 (t) 34,190,000 34,105,687
CRC Funding LLC, 5.27%, due 3/16/07 (t) 4,900,000 4,889,240
Ciesco LLC, 5.25%, due 3/05/07 - 3/09/07 (t) 34,722,000 34,687,832
Citibank Credit Card Issuance Trust,
5.25%, due 3/13/07 - 3/16/07 (t) 42,151,000 42,063,642
Fairway Finance Corp., 5.26%, due 3/15/07 (t) 20,295,000 20,253,485
Falcon Asset Securitization Co. LLC, 5.32%, due 3/01/07 (t) 43,134,000 43,134,000
Govco LLC, 5.24%, due 3/07/07 (t) 9,312,000 9,303,868
Govco LLC, 5.25%, due 3/26/07 - 4/10/07 (t) 30,914,000 30,735,668
Jupiter Securitization Corp., 5.26%, due 3/08/07 - 3/19/07 (t) 22,928,000 22,903,008
Kitty Hawk Funding Corp., 5.25%, due 3/30/07 (t) 17,140,000 17,067,512
Kitty Hawk Funding Corp., 5.24%, due 5/10/07 (t) 23,690,000 23,448,625
Old Line Funding LLC, 5.255%, due 3/06/07 (t) 13,275,000 13,265,311
Old Line Funding LLC, 5.25%, due 3/15/07 (t) 10,204,000 10,183,167
Old Line Funding LLC, 5.26%, due 3/19/07 (t) 795,000 792,909
Ranger Funding Co. LLC, 5.25%, due 3/01/07 - 3/12/07 (t) 42,180,000 42,142,758
Regency Markets No. 1 LLC, 5.25%, due 4/16/07 (t) 42,255,000 41,971,539
Scaldis Capital LLC, 5.26%, due 3/12/07 (t) 2,341,000 2,337,237
Scaldis Capital LLC, 5.25%, due 3/27/07 (t) 700,000 697,346
Sheffield Receivables Corp., 5.25%, due 4/20/07 - 4/23/07 (t) 15,905,000 15,784,651
Thunder Bay Funding LLC, 5.26%, due 3/09/07 (t) 42,299,000 42,249,557
Windmill Funding Corp., 5.25%, due 3/01/07 (t) 40,949,000 40,949,000
Windmill Funding Corp., 5.24%, due 5/04/07 (t) 1,000,000 990,684
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$ 539,110,968
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Insurance - 3.8%
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MetLife, Inc., 5.25%, due 3/05/07 - 4/12/07 (t) $42,438,000 $ 42,221,203
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Major Banks - 14.0%
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Abbey National North America LLC, 5.32%, due 3/01/07 $29,017,000 $ 29,017,000
Barclays U.S. Funding Corp., 5.24%, due 3/26/07 4,425,000 4,408,898
Barclays U.S. Funding Corp., 5.21%, due 7/09/07 37,920,000 37,206,577
HBOS Treasury Services PLC, 5.245%, due 3/14/07 2,145,000 2,140,937
HBOS Treasury Services PLC, 5.25%, due 3/19/07 - 4/30/07 34,308,000 34,032,884
HBOS Treasury Services PLC, 5.24%, due 5/10/07 7,200,000 7,126,640
Societe Generale North America, 5.26%, due 3/12/07 5,800,000 5,790,678
Societe Generale North America, 5.23%, due 3/29/07 35,160,000 35,016,977
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$ 154,740,591
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Other Banks & Diversified Financials - 16.2%
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Citigroup Funding, Inc., 5.26%, due 3/20/07 $ 4,140,000 $ 4,128,507
Citigroup Funding, Inc., 5.25%, due 6/19/07 39,995,000 39,353,414
DEPFA Bank PLC, 5.25%, due 4/16/07 (t) 7,541,000 7,490,412
DEPFA Bank PLC, 5.24%, due 5/22/07 (t) 14,166,000 13,996,921
DEPFA Bank PLC, 5.22%, due 5/30/07 (t) 8,043,000 7,938,039
DEPFA Bank PLC, 4.98%, due 12/21/07 (t) 15,200,000 14,579,713
Deutsche Bank Financial LLC, 5.33%, due 3/01/07 44,005,000 44,005,000
ING America Insurance Holdings, Inc., 5.26%, due 3/14/07 42,000,000 41,920,225
Svenska Handelsbanken, Inc., 5.23%, due 4/04/07 946,000 941,327
UBS Finance Delaware LLC, 5.26%, due 3/07/07 2,000,000 1,998,247
UBS Finance Delaware LLC, 5.25%, due 4/20/07 - 5/30/07 765,000 755,630
UBS Finance Delaware LLC, 5.21%, due 7/05/07 1,633,000 1,603,222
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$ 178,710,657
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TOTAL COMMERCIAL PAPER, AT AMORTIZED COST AND VALUE $1,007,262,850
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TOTAL INVESTMENTS, AT AMORTIZED COST AND VALUE $1,101,280,850
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Other Assets, Less Liabilities - 0.4% 4,152,689
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NET ASSETS - 100.0% $1,105,433,539
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SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
Portfolio of Investments (unaudited) - continued
AT 2/28/07
MFS(R) GOVERNMENT MONEY MARKET FUND
U.S. Government Agency Obligations - 97.5% (y)
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ISSUER SHARES/PAR VALUE ($)
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Fannie Mae, 5.17%, due 3/01/07 - 3/30/07 $ 2,258,000 $ 2,253,368
Fannie Mae, 5.06%, due 3/07/07 335,000 334,717
Fannie Mae, 5.165%, due 3/07/07 916,000 915,211
Fannie Mae, 5.15%, due 3/08/07 - 3/28/07 1,345,000 1,341,507
Fannie Mae, 5.175%, due 3/12/07 700,000 698,893
Fannie Mae, 5.16%, due 3/14/07 - 5/09/07 632,000 627,428
Fannie Mae, 5.135%, due 4/04/07 - 6/01/07 2,000,000 1,982,027
Fannie Mae, 5.143%, due 4/11/07 1,000,000 994,143
Fannie Mae, 5.18%, due 5/09/07 361,000 357,416
Farmer Mac, 5.14%, due 4/05/07 395,000 393,026
Farmer Mac, 5.141%, due 4/05/07 1,000,000 995,002
Federal Home Loan Bank, 5.155%, due 3/14/07 - 3/20/07 1,808,000 1,803,940
Federal Home Loan Bank, 5.18%, due 3/21/07 489,000 487,593
Freddie Mac, 5.165%, due 3/06/07 450,000 449,677
Freddie Mac, 5.15%, due 3/09/07 - 4/09/07 1,045,000 1,041,365
Freddie Mac, 5.163%, due 3/20/07 1,000,000 997,275
Freddie Mac, 5.17%, due 3/20/07 - 5/31/07 869,000 862,071
Freddie Mac, 5.145%, due 4/16/07 1,000,000 993,426
Freddie Mac, 5.11%, due 6/22/07 700,000 688,772
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TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS,
AT AMORTIZED COST AND VALUE $ 18,216,857
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Repurchase Agreements - 2.5%
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Merrill Lynch & Co., Inc., 5.32%, dated 2/28/07, due 3/01/07,
total to be received $461,068 (secured by various U.S. Treasury
and Federal Agency obligations and Mortgage Backed securities in
a jointly traded account), at Cost $ 461,000 $ 461,000
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TOTAL INVESTMENTS, AT AMORTIZED COST AND VALUE $ 18,677,857
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Other Assets, Less Liabilities - 0% 4,679
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NET ASSETS - 100.0% $ 18,682,536
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(t) Security exempt from registration with the U.S. Securities and Exchange Commission under
Section 4(2) of the Securities Act of 1933.
(y) The rate shown represents an annualized yield at time of purchase.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
These statements represent your fund's balance sheet, which details the assets and liabilities
comprising the total value of each fund.
MFS MONEY MARKET FUND
ASSETS
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Investments, at amortized cost and value $1,101,280,850
Cash 232
Receivable for fund shares sold 11,537,121
Interest receivable 1,074,324
Other assets 18,467
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Total assets $1,113,910,994
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LIABILITIES
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Distributions payable $161,441
Payable for fund shares reacquired 7,894,426
Payable to affiliates
Management fee 9,018
Shareholder servicing costs 298,105
Administrative services fee 1,091
Payable for independent trustees' compensation 39,998
Accrued expenses and other liabilities 73,376
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Total liabilities $8,477,455
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Net assets $1,105,433,539
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NET ASSETS CONSIST OF
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Paid-in-capital $1,105,433,485
Accumulated net realized gain (loss) on investments (8,515)
Undistributed net investment income 8,569
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Net assets $1,105,433,539
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Shares of beneficial interest outstanding 1,105,433,537
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Net asset value per share (net assets of $1,105,433,539/
1,105,433,537 shares of beneficial interest outstanding) $1.00
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SEE NOTES TO FINANCIAL STATEMENTS
Statements of Assets and Liabilities (unaudited) - continued
AT 2/28/07
MFS GOVERNMENT MONEY MARKET FUND
ASSETS
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Investments, at amortized cost and value $18,677,857
Cash 931
Receivable for fund shares sold 55,564
Interest receivable 68
Other assets 768
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Total assets $18,735,188
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LIABILITIES
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Distributions payable $815
Payable for fund shares reacquired 3,090
Payable to affiliates
Management fee 153
Shareholder servicing costs 10,503
Administrative services fee 96
Payable for independent trustees' compensation 6,740
Accrued expenses and other liabilities 31,255
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Total liabilities $52,652
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Net assets $18,682,536
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NET ASSETS CONSIST OF
- ------------------------------------------------------------------------------------------------------
Paid-in-capital $18,690,209
Accumulated distributions in excess of net investment income (7,673)
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Net assets $18,682,536
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Shares of beneficial interest outstanding 18,682,492
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Net asset value per share (net assets of $18,682,536/18,682,492
shares of beneficial interest outstanding) $1.00
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SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF OPERATIONS
Six months ended 2/28/07 (unaudited)
These statements describe how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
MFS MONEY MARKET FUND
NET INVESTMENT INCOME
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Interest income $27,075,060
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Expenses
Management fee $2,263,868
Shareholder servicing costs 703,656
Administrative services fee 92,196
Independent trustees' compensation 12,914
Custodian fee 66,125
Shareholder communications 24,656
Auditing fees 12,890
Legal fees 12,679
Miscellaneous 39,185
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Total expenses $3,228,169
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Fees paid indirectly (43,209)
Reduction of expenses by investment adviser (1,507,728)
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Net expenses $1,677,232
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Net investment income $25,397,828
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SEE NOTES TO FINANCIAL STATEMENTS
Statements of Operations (unaudited) - continued
SIX MONTHS ENDED 2/28/07
MFS GOVERNMENT MONEY MARKET FUND
NET INVESTMENT INCOME
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Interest income $523,134
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Expenses
Management fee $49,517
Shareholder servicing costs 14,933
Administrative services fee 8,679
Independent trustees' compensation 1,237
Custodian fee 5,880
Shareholder communications 831
Auditing fees 13,618
Legal fees 97
Registration fees 5,477
Miscellaneous 3,189
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Total expenses $103,458
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Fees paid indirectly (4,027)
Reduction of expenses by investment adviser (34,715)
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Net expenses $64,716
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Net investment income $458,418
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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.
MFS MONEY MARKET FUND
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
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Net investment income $25,397,828 $35,348,307
Net realized gain (loss) on investments -- (35)
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Change in net assets from operations $25,397,828 $35,348,272
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DISTRIBUTIONS DECLARED TO SHAREHOLDERS
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From net investment income $(25,495,087) $(35,618,089)
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FUND SHARE (PRINCIPAL) TRANSACTIONS
- -------------------------------------------------------------------------------------------------------
Net proceeds from sale of shares $605,769,977 $940,606,600
Net asset value of shares issued to shareholders in
reinvestment of distributions 24,080,770 33,914,320
Cost of shares reacquired (466,004,932) (801,437,381)
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Change in net assets from fund share transactions $163,845,815 $173,083,539
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Total change in net assets $163,748,556 $172,813,722
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NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 941,684,983 768,871,261
At end of period (including undistributed net investment
income of $8,569 and $105,828, respectively) $1,105,433,539 $941,684,983
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SEE NOTES TO FINANCIAL STATEMENTS
Statements of Changes in Net Assets - continued
MFS GOVERNMENT MONEY MARKET FUND
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income $458,418 $852,761
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DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income $(460,656) $(860,483)
- -------------------------------------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS
- -------------------------------------------------------------------------------------------------------
Net proceeds from sale of shares $3,774,209 $19,045,123
Net asset value of shares issued to shareholders in
reinvestment of distributions 450,367 825,675
Cost of shares reacquired (7,596,765) (22,220,079)
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Change in net assets from fund share transactions $(3,372,189) $(2,349,281)
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Total change in net assets $(3,374,427) $(2,357,003)
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NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 22,056,963 24,413,966
At end of period (including accumulated distributions in
excess of net investment income of $7,673 and $5,435,
respectively) $18,682,536 $22,056,963
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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. The total returns in the table represent the rate by which an investor would have earned (or
lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
MFS MONEY MARKET FUND
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------------------------
2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.03 $0.04 $0.02 $0.01 $0.01 $0.02
Net realized gain (loss) on
investments -- (0.00)(w) (0.00)(w) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.03 $0.04 $0.02 $0.01 $0.01 $0.02
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.03) $(0.04) $(0.02) $(0.01) $(0.01) $(0.02)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 2.53(n) 4.36 2.16 0.64 0.81 1.67
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 0.64(a) 0.68 0.75 0.67 0.60 0.68
Expenses after expense
reductions (f) 0.34(a) 0.37 0.44 0.54 N/A N/A
Net investment income 5.02(a) 4.28 2.17 0.62 0.80 1.66
Net assets at end of period
(000 Omitted) $1,105,434 $941,685 $768,871 $828,921 $2,123,459 $1,962,159
- ------------------------------------------------------------------------------------------------------------------------------
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
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. The total returns in the table represent the rate by which an investor would have earned (or
lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
MFS GOVERNMENT MONEY MARKET FUND
Six months Years ended 8/31
ended -----------------------------------------------------------------
2/28/07 2006 2005 2004 2003 2002
(unaudited)
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.04 $0.02 $0.01 $0.01 $0.01
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.04) $(0.02) $(0.01) $(0.01) $(0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 2.33(n) 3.89 2.02 0.54 0.66 1.51
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.04(a) 1.10 0.87 0.74 0.72 0.82
Expenses after expense reductions (f) 0.69(a) 0.75 0.52 0.59 N/A N/A
Net investment income 4.63(a) 3.78 1.96 0.49 0.61 1.56
Net assets at end of period
(000 Omitted) $18,683 $22,057 $24,414 $39,787 $132,888 $54,741
- ------------------------------------------------------------------------------------------------------------------------------
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Money Market Fund and MFS Government Money Market Fund (the funds) are each
a series of MFS Series Trust IV (the trust). The trust is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVESTMENT VALUATIONS - Money market instruments are valued at amortized cost,
which approximates market value. Amortized cost involves valuing an instrument
at its cost as adjusted for amortization of premium or accretion of discount
rather than its current market value. Each money market fund's use of amortized
cost is subject to the fund's compliance with Rule 2a-7 under the Investment
Company Act of 1940. The amortized cost value of an instrument can be different
from the market value of an instrument.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management
is evaluating the application of the Statement to the fund, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - Each 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. Each fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The funds
monitor, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the funds
under each such repurchase agreement. The funds and other funds managed by
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
INDEMNIFICATIONS - Under each fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the funds. Additionally, in the
normal course of business, each fund enters into agreements with service
providers that may contain indemnification clauses. Each fund's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the funds that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized and accreted for financial statement purposes and tax
reporting purposes in accordance with generally accepted accounting principles
and federal tax regulations, respectively.
FEES PAID INDIRECTLY - Each fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. This amount, for the six months ended February 28, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - Each fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the funds in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
During the year ended August 31, 2006, there were no significant adjustments
due to differences between book and tax accounting for the MFS Money Market
Fund and MFS Government Money Market Fund, respectively.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
8/31/06 8/31/06
Ordinary income (including any
short-term capital gains) $35,618,089 $860,483
The federal tax cost and the tax basis components of distributable earnings
were as follows:
GOVERNMENT
MONEY MARKET MONEY MARKET
AS OF 2/28/07 FUND FUND
Cost of investments $1,101,280,850 $18,677,857
AS OF 8/31/06
Undistributed ordinary income $293,345 $2,346
Capital loss carryforwards (8,480) --
Post-October capital loss deferral (35) --
Other temporary differences (187,517) (7,781)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of August 31, 2006, the MFS Money Market Fund had capital loss carryforwards
available to offset future realized gains. Such losses expire as follows:
MONEY MARKET
FUND
8/31/11 $(8,329)
8/31/13 (151)
-------------------------------------------------
$(8,480)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. This Interpretation prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Management is
evaluating the application of the Interpretation to the fund, and has not at
this time determined the impact, if any, resulting from the adoption of this
Interpretation on each fund's financial statements.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - Each fund has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the funds.
Each fund's management fee is computed daily and paid monthly at the following
annual rates:
First $300 million of average daily net assets 0.50%
Next $400 million of average daily net assets 0.45%
Next $300 million of average daily net assets 0.40%
Average daily net assets in excess of $1 billion 0.35%
As part of a settlement agreement with the New York Attorney General concerning
market timing and related matters, MFS has agreed to reduce each fund's
management fee to 0.15% of the fund's average daily net assets for the period
March 1, 2004 through February 28, 2009. For the six months ended February 28,
2007, this waiver amounted to $1,505,078 and $34,662 for the MFS Money Market
Fund and MFS Government Money Market Fund, respectively, and is reflected as a
reduction of total expenses in the Statement of Operations.
DISTRIBUTOR - Certain shares acquired through an exchange may be subject to a
CDSC upon redemption depending on when the shares exchanged were originally
purchased. Contingent deferred sales charges imposed during the six months
ended February 28, 2007 for the MFS Money Market Fund and MFS Government Money
Market Fund were $3,484 and $252, respectively.
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from each fund for its services as
shareholder servicing agent calculated as a percentage of the average daily net
assets of each fund as determined periodically under the supervision of the
fund's Board of Trustees. For the six months ended February 28, 2007, the fees
were $383,927 and $7,625, which equated to 0.0759% and 0.0770% annually of each
fund's average daily net assets for the MFS Money Market Fund and MFS
Government Money Market Fund, respectively. Effective January 1, 2007, MFSC has
entered into a sub-accounting agreement with SunLife Retirement Services
(U.S.), Inc. (SRS), an affiliate of MFSC, on behalf of each fund to provide
omnibus account services to the funds. MFSC pays SRS both an asset based fee
and a per account charge of the assets held in the omnibus account. Each fund
then reimburses MFSC for the sub-accounting fees paid to SRS. For the six
months ended February 28, 2007, the sub-accounting fees for SRS were $70,768
and $1,108, which equated to 0.0140% and 0.0112% annually of each fund's
average daily net assets for the MFS Money Market Fund and MFS Government Money
Market Fund, respectively. MFSC also receives payment from each fund for
out-of-pocket and sub-accounting expenses. For the six months ended February
28, 2007, these out-of-pocket and sub-accounting costs amounted to $157,104 and
$4,004 for the MFS Money Market Fund and MFS Government Money Market Fund,
respectively. Each fund may also pay shareholder servicing related costs
directly to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to each fund.
Under an administrative services agreement, the funds partially reimburse MFS
the costs incurred to provide these services. Each fund is charged a fixed
amount plus a fee based on calendar year average net assets. Each fund's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended February 28,
2007 was equivalent to an annual effective rate of 0.0182% and 0.0876% of each
fund's average daily net assets for the MFS Money Market Fund and MFS
Government Money Market Fund, respectively.
TRUSTEES' AND OFFICERS' COMPENSATION - Each fund pays compensation to
independent trustees in the form of a retainer, attendance fees, and additional
compensation to Board and Committee chairpersons. The funds do not pay
compensation directly to trustees or officers of the funds who are also
officers of the investment adviser, all of whom receive remuneration for their
services to the funds from MFS. Certain officers and trustees of the funds are
officers or directors of MFS, MFD, and MFSC. The funds have an unfunded,
defined benefit plan for certain retired independent trustees which resulted in
a pension expense of $2,305 and $513 for the MFS Money Market Fund and MFS
Government Money Market Fund, respectively. The liability for deferred
retirement benefits payable to certain retired independent trustees amounted to
$39,882 and $6,598 for the MFS Money Market Fund and MFS Government Money
Market Fund, respectively, at February 28, 2007, and is included in payable for
independent trustees' compensation.
OTHER - These funds and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $4,077 and $80 for the MFS Money Market Fund and MFS
Government Money Market Fund, respectively. MFS has agreed to reimburse the
funds for a portion of the payments made by the funds to Tarantino LLC in the
amount of $2,650 and $53 for the MFS Money Market Fund and MFS Government Money
Market Fund, respectively, 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.
(4) PORTFOLIO SECURITIES
Purchases and sales of money market securities, exclusive of securities subject
to repurchase agreements, were as follows:
PURCHASES SALES
MFS Money Market Fund $4,231,437,486 $4,031,286,746
MFS Government Money Market Fund 196,842,772 199,117,000
(5) SHARES OF BENEFICIAL INTEREST
Each fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest.
The MFS Money Market Fund is one of several mutual funds in which the MFS
funds-of-funds may invest. The MFS funds-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 and MFS Moderate
Allocation Fund were the owners of record of approximately 6% and 10%,
respectively, of the value of outstanding voting shares. In addition, the MFS
Lifetime Retirement Income Fund, the MFS Lifetime 2010 Fund, and the MFS
Lifetime 2020 Fund were each the owners of record of less than 1% of the value
of outstanding voting shares.
(6) LINE OF CREDIT
Each fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, each fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally 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 committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the funds' commitment fees were $2,860 and $112 for
the MFS Money Market Fund and MFS Government Money Market Fund, respectively
and interest expense was $0 and $0 for the MFS Money Market Fund and MFS
Government Money Market Fund, respectively. These amounts are included in
miscellaneous expense on the Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (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 Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site 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 US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA 02205-5824
1-800-637-8255
24 hours a day OVERNIGHT MAIL
MFS Service Center, Inc.
ACCOUNT SERVICE AND 500 Boylston Street
LITERATURE Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Semiannual report
MFS(R) MID CAP GROWTH FUND
LETTER FROM THE CEO 1
- ---------------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------------
EXPENSE TABLE 3
- ---------------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ---------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 11
- ---------------------------------------------------------
STATEMENT OF OPERATIONS 14
- ---------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 15
- ---------------------------------------------------------
FINANCIAL HIGHLIGHTS 16
- ---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 25
- ---------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 36
- ---------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 36
- ---------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 36
- ---------------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------------
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
OTC-SEM
[Photo of Robert J. Manning]
LETTER FROM THE CEO
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Common Stocks 99.3%
Cash & Other Net Assets 0.7%
TOP TEN HOLDINGS
Williams Cos., Inc. 2.7%
-------------------------------------------------
Hess Corp. 2.4%
-------------------------------------------------
Phillips-Van Heusen Corp. 2.3%
-------------------------------------------------
International Game Technology 2.3%
-------------------------------------------------
Cognizant Technology
Solutions Corp., "A" 2.3%
-------------------------------------------------
Rockwell Automation, Inc. 2.2%
-------------------------------------------------
YUM! Brands, Inc. 2.2%
-------------------------------------------------
Humana, Inc. 2.1%
-------------------------------------------------
Kroger Co. 2.1%
-------------------------------------------------
Cummins, Inc. 2.0%
-------------------------------------------------
EQUITY SECTORS
Health Care 17.5%
-------------------------------------------------
Technology 12.1%
-------------------------------------------------
Retailing 10.8%
-------------------------------------------------
Special Products & Services 9.4%
-------------------------------------------------
Financial Services 8.6%
-------------------------------------------------
Utilities & Communications 7.8%
-------------------------------------------------
Leisure 7.7%
-------------------------------------------------
Industrial Goods & Services 7.5%
-------------------------------------------------
Energy 5.0%
-------------------------------------------------
Autos & Housing 4.6%
-------------------------------------------------
Consumer Staples 3.7%
-------------------------------------------------
Transportation 2.4%
-------------------------------------------------
Basic Materials 2.2%
-------------------------------------------------
Percentages are based on net assets as of 2/28/07.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period September 1, 2006 through
February 28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table 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 following table 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.
- -------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 1.28% $1,000.00 $1,125.70 $6.75
A --------------------------------------------------------------------------
Hypothetical (h) 1.28% $1,000.00 $1,018.45 $6.41
- --------------------------------------------------------------------------------
Actual 2.03% $1,000.00 $1,123.50 $10.69
B --------------------------------------------------------------------------
Hypothetical (h) 2.03% $1,000.00 $1,014.73 $10.14
- --------------------------------------------------------------------------------
Actual 2.03% $1,000.00 $1,122.50 $10.68
C --------------------------------------------------------------------------
Hypothetical (h) 2.03% $1,000.00 $1,014.73 $10.14
- --------------------------------------------------------------------------------
Actual 1.03% $1,000.00 $1,128.30 $5.44
I --------------------------------------------------------------------------
Hypothetical (h) 1.03% $1,000.00 $1,019.69 $5.16
- --------------------------------------------------------------------------------
Actual 1.53% $1,000.00 $1,125.70 $8.06
R --------------------------------------------------------------------------
Hypothetical (h) 1.53% $1,000.00 $1,017.21 $7.65
- --------------------------------------------------------------------------------
Actual 2.13% $1,000.00 $1,121.10 $11.20
R1 --------------------------------------------------------------------------
Hypothetical (h) 2.13% $1,000.00 $1,014.23 $10.64
- --------------------------------------------------------------------------------
Actual 1.78% $1,000.00 $1,123.20 $9.37
R2 --------------------------------------------------------------------------
Hypothetical (h) 1.78% $1,000.00 $1,015.97 $8.90
- --------------------------------------------------------------------------------
Actual 1.68% $1,000.00 $1,125.30 $8.85
R3 --------------------------------------------------------------------------
Hypothetical (h) 1.68% $1,000.00 $1,016.46 $8.40
- --------------------------------------------------------------------------------
Actual 1.43% $1,000.00 $1,126.00 $7.54
R4 --------------------------------------------------------------------------
Hypothetical (h) 1.43% $1,000.00 $1,017.70 $7.15
- --------------------------------------------------------------------------------
Actual 1.13% $1,000.00 $1,127.90 $5.96
R5 --------------------------------------------------------------------------
Hypothetical (h) 1.13% $1,000.00 $1,019.19 $5.66
- --------------------------------------------------------------------------------
Actual 1.63% $1,000.00 $1,124.90 $8.59
529A --------------------------------------------------------------------------
Hypothetical (h) 1.63% $1,000.00 $1,016.71 $8.15
- --------------------------------------------------------------------------------
Actual 2.28% $1,000.00 $1,122.00 $12.00
529B --------------------------------------------------------------------------
Hypothetical (h) 2.28% $1,000.00 $1,013.49 $11.38
- --------------------------------------------------------------------------------
Actual 2.28% $1,000.00 $1,122.30 $12.00
529C --------------------------------------------------------------------------
Hypothetical (h) 2.28% $1,000.00 $1,013.49 $11.38
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Common Stocks - 99.3%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
Aerospace - 0.8%
- ----------------------------------------------------------------------------------------------------
Precision Castparts Corp. 116,840 $ 10,628,935
- ----------------------------------------------------------------------------------------------------
Airlines - 2.4%
- ----------------------------------------------------------------------------------------------------
AMR Corp. (a) 628,107 $ 21,412,168
Continental Airlines, Inc. (a)(l) 102,770 4,069,692
UAL Corp. (a) 185,420 7,414,946
---------------
$ 32,896,806
- ----------------------------------------------------------------------------------------------------
Apparel Manufacturers - 4.1%
- ----------------------------------------------------------------------------------------------------
Coach, Inc. (a) 532,160 $ 25,117,952
Phillips-Van Heusen Corp. 563,492 30,901,901
---------------
$ 56,019,853
- ----------------------------------------------------------------------------------------------------
Automotive - 0.7%
- ----------------------------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (a)(l) 371,380 $ 9,143,376
- ----------------------------------------------------------------------------------------------------
Biotechnology - 1.8%
- ----------------------------------------------------------------------------------------------------
Genzyme Corp. (a) 141,080 $ 8,718,744
Millipore Corp. (a) 215,080 15,382,522
---------------
$ 24,101,266
- ----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 2.4%
- ----------------------------------------------------------------------------------------------------
Affiliated Managers Group, Inc. (a)(l) 20,782 $ 2,358,757
Chicago Mercantile Exchange Holdings, Inc., "A" 35,410 19,090,593
Investment Technology Group, Inc. (a) 87,010 3,561,319
Legg Mason, Inc. 73,880 7,590,431
---------------
$ 32,601,100
- ----------------------------------------------------------------------------------------------------
Business Services - 5.8%
- ----------------------------------------------------------------------------------------------------
Amdocs Ltd. (a) 640,500 $ 22,167,705
CheckFree Corp. (a) 215,404 8,168,120
Cognizant Technology Solutions Corp., "A" (a) 341,285 30,783,907
Corporate Executive Board Co. 211,213 16,434,483
Fidelity National Information Services, Inc. 19,450 893,727
---------------
$ 78,447,942
- ----------------------------------------------------------------------------------------------------
Cable TV - 0.4%
- ----------------------------------------------------------------------------------------------------
EchoStar Communications Corp., "A" (a) 147,580 $ 5,991,748
- ----------------------------------------------------------------------------------------------------
Chemicals - 0.5%
- ----------------------------------------------------------------------------------------------------
Celanese Corp. 234,440 $ 6,700,295
- ----------------------------------------------------------------------------------------------------
Computer Software - 3.3%
- ----------------------------------------------------------------------------------------------------
Akamai Technologies, Inc. (a) 15,460 $ 797,272
Compuware Corp. (a) 152,970 1,399,675
Hyperion Solutions Corp. (a) 76,250 3,266,550
McAfee, Inc. (a) 815,270 24,555,932
TIBCO Software, Inc. (a) 1,325,430 11,995,142
Transaction Systems Architects, Inc. (a) 74,327 2,623,743
---------------
$ 44,638,314
- ----------------------------------------------------------------------------------------------------
Construction - 3.9%
- ----------------------------------------------------------------------------------------------------
Masco Corp. 327,510 $ 9,776,173
NVR, Inc. (a) 35,784 24,225,768
Sherwin-Williams Co. 277,220 18,448,991
---------------
$ 52,450,932
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 6.6%
- ----------------------------------------------------------------------------------------------------
Avon Products, Inc. 405,130 $ 14,852,066
Estee Lauder Cos., Inc., "A" 534,468 25,590,328
ITT Educational Services, Inc. (a) 319,910 $ 25,586,402
Monster Worldwide, Inc. (a) 478,032 23,834,675
---------------
$ 89,863,471
- ----------------------------------------------------------------------------------------------------
Electrical Equipment - 3.3%
- ----------------------------------------------------------------------------------------------------
Rockwell Automation, Inc. (l) 485,750 $ 30,160,218
W.W. Grainger, Inc. 185,100 14,280,465
---------------
$ 44,440,683
- ----------------------------------------------------------------------------------------------------
Electronics - 5.0%
- ----------------------------------------------------------------------------------------------------
KLA-Tencor Corp. 184,520 $ 9,547,065
MEMC Electronic Materials, Inc. (a) 40,310 2,078,787
Novellus Systems, Inc. (a)(l) 499,120 16,071,664
On Semiconductor Corp. (a) 219,550 2,155,981
SanDisk Corp. (a) 393,885 14,345,292
Synopsys, Inc. (a) 149,930 3,835,209
Tessera Technologies, Inc. (a)(l) 129,873 5,249,467
Varian Semiconductor Equipment Associates, Inc. (a) 306,160 14,631,386
---------------
$ 67,914,851
- ----------------------------------------------------------------------------------------------------
Energy - Integrated - 2.4%
- ----------------------------------------------------------------------------------------------------
Hess Corp. 603,093 $ 31,994,084
- ----------------------------------------------------------------------------------------------------
Food & Beverages - 0.7%
- ----------------------------------------------------------------------------------------------------
Pepsi Bottling Group, Inc. 291,710 $ 9,043,010
- ----------------------------------------------------------------------------------------------------
Food & Drug Stores - 2.1%
- ----------------------------------------------------------------------------------------------------
Kroger Co. 1,102,732 $ 28,307,130
- ----------------------------------------------------------------------------------------------------
Gaming & Lodging - 4.5%
- ----------------------------------------------------------------------------------------------------
International Game Technology 746,280 $ 30,784,050
Penn National Gaming, Inc. (a)(l) 564,530 26,324,034
Royal Caribbean Cruises Ltd. 112,320 4,552,330
---------------
$ 61,660,414
- ----------------------------------------------------------------------------------------------------
General Merchandise - 0.3%
- ----------------------------------------------------------------------------------------------------
Family Dollar Stores, Inc. (l) 125,920 $ 3,647,902
- ----------------------------------------------------------------------------------------------------
Health Maintenance Organizations - 4.4%
- ----------------------------------------------------------------------------------------------------
AMERIGROUP Corp. (a) 550,119 $ 18,197,936
Humana, Inc. (a) 475,077 28,428,608
WellCare Health Plans, Inc. (a) 160,600 13,186,866
---------------
$ 59,813,410
- ----------------------------------------------------------------------------------------------------
Insurance - 3.3%
- ----------------------------------------------------------------------------------------------------
Ace Ltd. 250,210 $ 14,051,794
Genworth Financial, Inc., "A" 626,620 22,163,549
MGIC Investment Corp. 79,750 4,812,912
W.R. Berkley Corp. 34,620 1,128,612
XL Capital Ltd., "A" 36,870 2,617,770
---------------
$ 44,774,637
- ----------------------------------------------------------------------------------------------------
Internet - 1.1%
- ----------------------------------------------------------------------------------------------------
RealNetworks, Inc. (a)(l) 1,763,342 $ 14,388,871
- ----------------------------------------------------------------------------------------------------
Leisure & Toys - 0.2%
- ----------------------------------------------------------------------------------------------------
Marvel Entertainment, Inc. (a)(l) 70,380 $ 1,955,860
THQ, Inc. (a) 28,930 931,835
---------------
$ 2,887,695
- ----------------------------------------------------------------------------------------------------
Machinery & Tools - 3.4%
- ----------------------------------------------------------------------------------------------------
Cummins, Inc. 200,270 $ 26,972,364
Eaton Corp. 95,600 7,744,556
Parker Hannifin Corp. 54,490 4,489,431
Timken Co. 225,710 6,450,792
---------------
$ 45,657,143
- ----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 1.5%
- ----------------------------------------------------------------------------------------------------
Emdeon Corp. (a)(l) 748,554 $ 11,183,397
McKesson Corp. 80,670 4,498,159
VCA Antech, Inc. (a) 122,516 4,497,562
---------------
$ 20,179,118
- ----------------------------------------------------------------------------------------------------
Medical Equipment - 7.0%
- ----------------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc. (a)(l) 421,870 $ 16,258,870
Cooper Cos., Inc. 189,640 8,702,580
Cytyc Corp. (a) 682,549 20,681,235
DENTSPLY International, Inc. 410,650 12,951,901
Immucor, Inc. (a) 224,146 6,666,102
Mentor Corp. (l) 94,340 4,529,263
Waters Corp. (a) 457,174 24,806,261
---------------
$ 94,596,212
- ----------------------------------------------------------------------------------------------------
Metals & Mining - 0.5%
- ----------------------------------------------------------------------------------------------------
AK Steel Holding Corp. (a) 196,600 $ 4,547,358
Cleveland-Cliffs, Inc. 52,500 2,961,000
---------------
$ 7,508,358
- ----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 2.7%
- ----------------------------------------------------------------------------------------------------
Williams Cos., Inc. (l) 1,342,010 $ 36,194,010
- ----------------------------------------------------------------------------------------------------
Network & Telecom - 0.4%
- ----------------------------------------------------------------------------------------------------
InterDigital Communications Corp. (a)(l) 155,140 $ 5,386,461
- ----------------------------------------------------------------------------------------------------
Oil Services - 2.6%
- ----------------------------------------------------------------------------------------------------
Cameron International Corp. (a) 318,830 $ 18,074,473
GlobalSantaFe Corp. 181,860 10,480,592
Smith International, Inc. 150,460 6,168,860
---------------
$ 34,723,925
- ----------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 2.7%
- ----------------------------------------------------------------------------------------------------
Bank of Hawaii Corp. 16,880 $ 873,034
CapitalSource, Inc., REIT 183,960 4,744,328
Commerce Bancorp, Inc. 40,540 1,354,847
First Marblehead Corp. 463,145 20,906,365
IndyMac Bancorp, Inc. 215,629 7,402,543
Northern Trust Corp. 31,350 1,890,405
---------------
$ 37,171,522
- ----------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 2.3%
- ----------------------------------------------------------------------------------------------------
Lexmark International, Inc., "A" (a) 344,620 $ 20,870,187
Network Appliance, Inc. (a) 251,510 9,725,892
Nuance Communications, Inc. (a)(l) 67,123 945,763
---------------
$ 31,541,842
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals - 2.8%
- ----------------------------------------------------------------------------------------------------
Allergan, Inc. 62,860 $ 7,022,091
Endo Pharmaceuticals Holdings, Inc. (a) 785,627 24,519,419
Medicis Pharmaceutical Corp., "A" (l) 117,150 4,259,574
Warner Chilcott Ltd., "A" (a) 177,810 $ 2,645,813
---------------
$ 38,446,897
- ----------------------------------------------------------------------------------------------------
Real Estate - 0.2%
- ----------------------------------------------------------------------------------------------------
Corrections Corp. of America (a) 57,370 $ 3,003,893
- ----------------------------------------------------------------------------------------------------
Restaurants - 2.6%
- ----------------------------------------------------------------------------------------------------
Brinker International, Inc. 52,130 $ 1,772,941
Jack in the Box, Inc. (a) 64,620 4,416,131
YUM! Brands, Inc. 506,340 29,337,340
---------------
$ 35,526,412
- ----------------------------------------------------------------------------------------------------
Specialty Chemicals - 1.2%
- ----------------------------------------------------------------------------------------------------
Praxair, Inc. 266,620 $ 16,447,788
- ----------------------------------------------------------------------------------------------------
Specialty Stores - 4.3%
- ----------------------------------------------------------------------------------------------------
Advance Auto Parts, Inc. 33,540 $ 1,262,781
Aeropostale, Inc. (a) 555,273 20,345,203
Dick's Sporting Goods, Inc. (a) 70,350 3,682,119
Group 1 Automotive, Inc. 277,050 12,819,103
Limited Brands, Inc. (l) 142,000 3,930,560
OfficeMax, Inc. 170,610 8,854,659
Radioshack Corp. (l) 200,660 5,010,480
Urban Outfitters, Inc. (a) 90,890 2,255,890
---------------
$ 58,160,795
- ----------------------------------------------------------------------------------------------------
Telephone Services - 2.5%
- ----------------------------------------------------------------------------------------------------
American Tower Corp., "A" (a) 228,870 $ 8,866,424
Embarq Corp. 457,262 25,309,452
---------------
$ 34,175,876
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.6%
- ----------------------------------------------------------------------------------------------------
Constellation Energy Group, Inc. 239,540 $ 18,844,612
Mirant Corp. (a) 376,140 14,014,976
NRG Energy, Inc. (a) 41,680 2,760,883
---------------
$ 35,620,471
- ----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $1,205,764,722) $ 1,346,697,448
- ----------------------------------------------------------------------------------------------------
Short-Term Obligations - 0.9%
- ----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.32%, due 3/01/07,
at Amortized Cost and Value (y) $ 12,451,000 $ 12,451,000
- ----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 6.5%
- ----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 87,943,880 $ 87,943,880
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $1,306,159,602) $ 1,447,092,328
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (6.7)% (90,439,726)
- ----------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 1,356,652,602
- ----------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(l) All or a portion of this security is on loan.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in this report and are defined:
REIT Real Estate Investment Trust
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets and liabilities comprising
the total value of the fund.
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value, including $85,663,837 of securities
on loan (identified cost, $1,306,159,602) $1,447,092,328
Cash 347
Receivable for investments sold 20,782,307
Receivable for fund shares sold 3,284,836
Interest and dividends receivable 777,886
Other assets 375,385
- -------------------------------------------------------------------------------------------------------
Total assets $1,472,313,089
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Payable for investments purchased $21,062,767
Payable for fund shares reacquired 5,730,767
Collateral for securities loaned, at value 87,943,880
Payable to affiliates
Management fee 56,436
Shareholder servicing costs 497,067
Distribution and service fees 23,990
Administrative services fee 1,348
Program manager fees 16
Retirement plan administration and services fees 232
Payable for independent trustees' compensation 107,982
Accrued expenses and other liabilities 236,002
- -------------------------------------------------------------------------------------------------------
Total liabilities $115,660,487
- -------------------------------------------------------------------------------------------------------
Net assets $1,356,652,602
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- -------------------------------------------------------------------------------------------------------
Paid-in capital $2,394,220,447
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 140,932,726
Accumulated net realized gain (loss) on investments (1,180,135,362)
Undistributed net investment income 1,634,791
- -------------------------------------------------------------------------------------------------------
Net assets $1,356,652,602
- -------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 141,501,873
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- -------------------------------------------------------------------------------------------------------
Net assets $428,341,938
Shares outstanding 44,276,965
- -------------------------------------------------------------------------------------------------------
Net asset value per share $9.67
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share $10.26
- -------------------------------------------------------------------------------------------------------
Class B shares
- -------------------------------------------------------------------------------------------------------
Net assets $246,849,216
Shares outstanding 27,133,325
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.10
- -------------------------------------------------------------------------------------------------------
Class C shares
- -------------------------------------------------------------------------------------------------------
Net assets $72,593,453
Shares outstanding 8,163,901
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $8.89
- -------------------------------------------------------------------------------------------------------
Class I shares
- -------------------------------------------------------------------------------------------------------
Net assets $565,291,150
Shares outstanding 57,408,573
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.85
- -------------------------------------------------------------------------------------------------------
Class R shares
- -------------------------------------------------------------------------------------------------------
Net assets $4,929,736
Shares outstanding 514,844
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.58
- -------------------------------------------------------------------------------------------------------
Class R1 shares
- -------------------------------------------------------------------------------------------------------
Net assets $668,711
Shares outstanding 73,695
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.07
- -------------------------------------------------------------------------------------------------------
Class R2 shares
- -------------------------------------------------------------------------------------------------------
Net assets $410,569
Shares outstanding 44,994
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.12
- -------------------------------------------------------------------------------------------------------
Class R3 shares
- -------------------------------------------------------------------------------------------------------
Net assets $2,440,516
Shares outstanding 256,426
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.52
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R4 shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,928,584
Shares outstanding 199,913
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.65
- -------------------------------------------------------------------------------------------------------
Class R5 shares
- -------------------------------------------------------------------------------------------------------
Net assets $32,035,062
Shares outstanding 3,303,803
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.70
- -------------------------------------------------------------------------------------------------------
Class 529A shares
- -------------------------------------------------------------------------------------------------------
Net assets $703,891
Shares outstanding 73,741
- -------------------------------------------------------------------------------------------------------
Net asset value per share $9.55
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $10.13
- -------------------------------------------------------------------------------------------------------
Class 529B shares
- -------------------------------------------------------------------------------------------------------
Net assets $204,715
Shares outstanding 22,728
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.01
- -------------------------------------------------------------------------------------------------------
Class 529C shares
- -------------------------------------------------------------------------------------------------------
Net assets $255,061
Shares outstanding 28,965
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $8.81
- -------------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering prices of Class A and Class 529A shares are 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
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $10,387,518
Interest 471,703
Other 352,409
- ------------------------------------------------------------------------------------------------------
Total investment income $11,211,630
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $5,228,356
Distribution and service fees 2,316,946
Program manager fees 1,486
Shareholder servicing costs 1,368,279
Administrative services fee 124,709
Retirement plan administration and services fees 25,707
Independent trustees' compensation 33,976
Custodian fee 217,536
Shareholder communications 89,926
Auditing fees 21,988
Legal fees 22,122
Miscellaneous 96,071
- ------------------------------------------------------------------------------------------------------
Total expenses $9,547,102
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (57,409)
Reduction of expenses by investment adviser (5,447)
- ------------------------------------------------------------------------------------------------------
Net expenses $9,484,246
- ------------------------------------------------------------------------------------------------------
Net investment income $1,727,384
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Net realized gain (loss) on investments $45,002,745
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Net unrealized gain (loss) on investments $121,693,928
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments $166,696,673
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $168,424,057
- ------------------------------------------------------------------------------------------------------
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
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) $1,727,384 $(14,279,912)
Net realized gain (loss) on investments 45,002,745 150,147,104
Net unrealized gain (loss) on investments 121,693,928 (170,595,975)
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $168,424,057 $(34,728,783)
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(215,771,221) $(408,077,936)
- -------------------------------------------------------------------------------------------------------
Total change in net assets $(47,347,164) $(442,806,719)
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 1,403,999,766 1,846,806,485
At end of period (including undistributed net investment
income of $1,634,791 and accumulated net investment loss
of $92,593) $1,356,652,602 $1,403,999,766
- -------------------------------------------------------------------------------------------------------
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 life of a particular share class, if shorter). 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 share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $8.59 $8.88 $7.58 $7.43 $5.84 $10.50
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.02 $(0.07) $(0.07) $(0.08) $(0.05) $(0.08)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.06 (0.22) 1.37 0.23 1.64 (4.42)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.08 $(0.29) $1.30 $0.15 $1.59 $(4.50)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $-- $-- $(0.15)
From paid-in capital -- -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $-- $-- $-- $-- $-- $(0.16)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.67 $8.59 $8.88 $7.58 $7.43 $5.84
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 12.57(n) (3.27) 17.15 2.02(b) 27.23 (43.48)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.28(a) 1.29 1.29 1.26 1.34 1.39
Expenses after expense reductions(f) 1.28(a) 1.29 1.29 1.26 N/A N/A
Net investment income (loss) 0.33(a) (0.73) (0.84) (0.98) (0.76) (0.87)
Portfolio turnover 54 122 67 94 120 147
Net assets at end of period
(000 Omitted) $428,342 $515,048 $931,140 $1,092,443 $1,182,259 $946,866
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $8.10 $8.45 $7.26 $7.17 $5.68 $10.22
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.13) $(0.13) $(0.13) $(0.09) $(0.14)
Net realized and unrealized gain
(loss) on investments and
foreign currency 1.02 (0.22) 1.32 0.22 1.58 (4.32)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.00 $(0.35) $1.19 $0.09 $1.49 $(4.46)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $-- $-- $(0.07)
From paid-in capital -- -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $-- $-- $-- $-- $-- $(0.08)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.10 $8.10 $8.45 $7.26 $7.17 $5.68
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 12.35(n) (4.14) 16.39 1.26(b) 26.23 (43.94)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.03(a) 2.04 2.04 2.01 2.09 2.14
Expenses after expense reductions (f) 2.03(a) 2.04 2.04 2.01 N/A N/A
Net investment loss (0.41)(a) (1.48) (1.59) (1.73) (1.51) (1.60)
Portfolio turnover 54 122 67 94 120 147
Net assets at end of period
(000 Omitted) $246,849 $271,832 $384,712 $446,415 $498,021 $450,803
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $7.92 $8.26 $7.10 $7.01 $5.55 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.12) $(0.13) $(0.13) $(0.09) $(0.14)
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.99 (0.22) 1.29 0.22 1.55 (4.22)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.97 $(0.34) $1.16 $0.09 $1.46 $(4.36)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign
currency transactions $-- $-- $-- $-- $-- $(0.08)
From paid-in capital -- -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $-- $-- $-- $-- $-- $(0.09)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.89 $7.92 $8.26 $7.10 $7.01 $5.55
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 12.25(n) (4.12) 16.34 1.28(b) 26.31 (43.94)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.03(a) 2.04 2.04 2.01 2.09 2.14
Expenses after expense reductions (f) 2.03(a) 2.04 2.04 2.01 N/A N/A
Net investment loss (0.41)(a) (1.48) (1.59) (1.73) (1.51) (1.60)
Portfolio turnover 54 122 67 94 120 147
Net assets at end of period
(000 Omitted) $72,593 $80,563 $115,894 $139,797 $172,466 $176,786
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------------------
CLASS I 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $8.73 $9.01 $7.67 $7.49 $5.87 $10.55
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.03 $(0.04) $(0.05) $(0.06) $(0.03) $(0.05)
Net realized and unrealized gain
(loss) on investments and
foreign currency 1.09 (0.24) 1.39 0.24 1.65 (4.46)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.12 $(0.28) $1.34 $0.18 $1.62 $(4.51)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign
currency transactions $-- $-- $-- $-- $-- $(0.16)
From paid-in capital -- -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $-- $-- $-- $-- $-- $(0.17)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.85 $8.73 $9.01 $7.67 $7.49 $5.87
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.83(n) (3.11) 17.47 2.40(b) 27.60 (43.38)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.03(a) 1.04 1.04 1.01 1.11 1.14
Expenses after expense reductions (f) 1.03(a) 1.04 1.04 1.01 N/A N/A
Net investment income (loss) 0.58(a) (0.46) (0.58) (0.72) (0.53) (0.63)
Portfolio turnover 54 122 67 94 120 147
Net assets at end of period
(000 Omitted) $565,291 $485,841 $399,423 $270,934 $109,332 $31,798
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------
CLASS R 2/28/07 2006 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $8.51 $8.83 $7.55 $7.42 $5.64
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.00(w) $(0.09) $(0.09) $(0.10) $(0.05)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.07 (0.23) 1.37 0.23 1.83
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.07 $(0.32) $1.28 $0.13 $1.78
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.58 $8.51 $8.83 $7.55 $7.42
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.57(n) (3.62) 16.95 1.75(b) 31.56(n)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.53(a) 1.54 1.55 1.50 1.67(a)
Expenses after expense reductions (f) 1.53(a) 1.54 1.55 1.50 N/A
Net investment income (loss) 0.07(a) (0.99) (1.07) (1.22) (1.16)(a)
Portfolio turnover 54 122 67 94 120
Net assets at end of period (000 Omitted) $4,930 $5,978 $12,904 $5,177 $2,039
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $8.09 $8.44 $7.93
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.14) $(0.06)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.00 (0.21) 0.57(g)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.98 $(0.35) $0.51
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.07 $8.09 $8.44
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.11(n) (4.15) 6.43(n)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.23(a) 2.24 2.27(a)
Expenses after expense reductions (f) 2.13(a) 2.14 2.27(a)
Net investment loss (0.47)(a) (1.57) (1.77)(a)
Portfolio turnover 54 122 67
Net assets at end of period (000 Omitted) $669 $430 $210
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $8.12 $8.45 $7.93
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.01) $(0.10) $(0.05)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.01 (0.23) 0.57(g)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.00 $(0.33) $0.52
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.12 $8.12 $8.45
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.32(n) (3.91) 6.56(n)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.93(a) 1.93 1.98(a)
Expenses after expense reductions (f) 1.78(a) 1.80 1.98(a)
Net investment loss (0.20)(a) (1.21) (1.45)(a)
Portfolio turnover 54 122 67
Net assets at end of period (000 Omitted) $411 $382 $212
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------
CLASS R3 2/28/07 2006 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $8.46 $8.79 $7.54 $7.60
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.00)(w) $(0.10) $(0.11) $(0.09)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.06 (0.23) 1.36 0.03
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.06 $(0.33) $1.25 $(0.06)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.52 $8.46 $8.79 $7.54
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.53(n) (3.75) 16.58 (0.79)(b)(n)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.78(a) 1.79 1.80 1.74(a)
Expenses after expense reductions (f) 1.68(a) 1.69 1.80 1.74(a)
Net investment loss (0.06)(a) (1.10) (1.33) (1.47)(a)
Portfolio turnover 54 122 67 94
Net assets at end of period (000 Omitted) $2,441 $2,185 $1,126 $314
- -------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $8.57 $8.87 $8.31
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.01 $(0.07) $(0.03)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.07 (0.23) 0.59(g)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.08 $(0.30) $0.56
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.65 $8.57 $8.87
- -------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.60(n) (3.38) 6.74(n)
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.43(a) 1.43 1.45(a)
Expenses after expense reductions (f) 1.43(a) 1.43 1.45(a)
Net investment income (loss) 0.22(a) (0.79) (0.93)(a)
Portfolio turnover 54 122 67
Net assets at end of period (000 Omitted) $1,929 $1,899 $53
- -------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $8.60 $8.88 $8.31
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.02 $(0.05) $(0.02)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.08 (0.23) 0.59(g)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.10 $(0.28) $0.57
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.70 $8.60 $8.88
- -------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.79(n) (3.15) 6.86(n)
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.13(a) 1.14 1.15(a)
Expenses after expense reductions (f) 1.13(a) 1.14 1.15(a)
Net investment income (loss) 0.49(a) (0.54) (0.63)(a)
Portfolio turnover 54 122 67
Net assets at end of period (000 Omitted) $32,035 $38,641 $53
- -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------
CLASS 529A 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $8.49 $8.81 $7.54 $7.40 $5.83 $5.92
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.00)(w) $(0.10) $(0.10) $(0.11) $(0.07) $(0.00)(w)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.06 (0.22) 1.37 0.25 1.64 (0.09)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.06 $(0.32) $1.27 $0.14 $1.57 $(0.09)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.55 $8.49 $8.81 $7.54 $7.40 $5.83
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 12.49(n) (3.63) 16.84 1.89(b) 26.93 (1.52)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.63(a) 1.64 1.64 1.60 1.73 1.74(a)
Expenses after expense reductions (f) 1.63(a) 1.64 1.64 1.60 N/A N/A
Net investment loss (0.02)(a) (1.06) (1.18) (1.32) (1.18) (1.22)(a)
Portfolio turnover 54 122 67 94 120 147
Net assets at end of period (000 Omitted) $704 $667 $591 $345 $123 $5
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------
CLASS 529B 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $8.03 $8.39 $7.23 $7.16 $5.68 $5.76
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.03) $(0.15) $(0.15) $(0.15) $(0.11) $(0.01)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.01 (0.21) 1.31 0.22 1.59 (0.07)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.98 $(0.36) $1.16 $0.07 $1.48 $(0.08)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.01 $8.03 $8.39 $7.23 $7.16 $5.68
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 12.20(n) (4.29) 16.04 0.98(b) 26.06 (1.39)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.28(a) 2.29 2.29 2.25 2.36 2.39(a)
Expenses after expense reductions (f) 2.28(a) 2.28 2.29 2.25 N/A N/A
Net investment loss (0.65)(a) (1.71) (1.83) (1.97) (1.78) (1.85)(a)
Portfolio turnover 54 122 67 94 120 147
Net assets at end of period (000 Omitted) $205 $185 $158 $129 $55 $5
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------
CLASS 529C 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $7.85 $8.21 $7.07 $6.99 $5.55 $5.63
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.14) $(0.14) $(0.15) $(0.10) $(0.01)
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.98 (0.22) 1.28 0.23 1.54 (0.07)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.96 $(0.36) $1.14 $0.08 $1.44 $(0.08)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.81 $7.85 $8.21 $7.07 $6.99 $5.55
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 12.23(n) (4.38) 16.12 1.14(b) 25.95 (1.42)(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 2.28(a) 2.29 2.29 2.26 2.36 2.39(a)
Expenses after expense reductions (f) 2.28(a) 2.29 2.29 2.26 N/A N/A
Net investment loss (0.55)(a) (1.71) (1.82) (1.97) (1.78) (1.85)(a)
Portfolio turnover 54 122 67 94 120 147
Net assets at end of period
(000 Omitted) $255 $350 $329 $183 $86 $5
- -----------------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years resulted in a per share impact of less than $0.01.
(a) Annualized.
(b) The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The
non-recurring accrual did not have a material impact on the net asset value per share based on the shares outstanding on the
day the proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) 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 per share amount of realized and unrealized gains and losses at such time.
(i) For the period from the class' inception, July 31, 2002 (Classes 529A, 529B, and 529C), December 31, 2002 (Class R), October
31, 2003 (Class R3) and April 1, 2005 (Classes R1, R2, R4, and R5) through the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Mid Cap Growth Fund (the fund) is a series of MFS Series Trust IV (the
trust). The trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-
end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
fund can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the
market or exchange on which they are primarily traded. For securities held
short for which there were no sales reported for the day, the position is
generally valued at the last quoted daily ask quotation as reported by an
independent pricing service on the market or exchange on which such securities
are primarily traded. Short-term instruments with a maturity at issuance of 60
days or less may be valued at amortized cost, which approximates market value.
Open-end investment companies are generally valued at their net asset value
per share. Securities and other assets generally valued on the basis of
information from an independent pricing service may also be valued at a
broker-dealer bid quotation. The values of foreign securities and other assets
and liabilities expressed in foreign currencies are converted to U.S. dollars
using the mean of bid and asked prices for rates reported by an independent
pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any
fair valuation) to the adviser pursuant to valuation policies and procedures
approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as
determined in good faith by the adviser in accordance with such procedures
under the oversight of the Board of Trustees. Under the fund's valuation
policies and procedures, market quotations are not considered to be readily
available for many types of debt instruments and certain types of derivatives.
These investments are generally valued at fair value based on information from
independent pricing services. In addition, investments may be valued at fair
value if the adviser determines that an investment's value has been materially
affected by events occurring after the close of the exchange or market on
which the investment is principally traded (such as foreign exchange or
market) and prior to the determination of the fund's net asset value, or after
the halting of trading of a specific security where trading does not resume
prior to the close of the exchange or market on which the security is
principally traded. Events that occur on a frequent basis after foreign
markets close (such as developments in foreign markets and significant
movements in the U.S. markets) and prior to the determination of the fund's
net asset value may be deemed to have a material affect on the value of
securities traded in foreign markets. Accordingly, the fund's foreign equity
securities may often be valued at fair value. The adviser may rely on
independent pricing services or other information (such as the correlation
with price movements of similar securities in the same or other markets; the
type, cost and investment characteristics of the security; the business and
financial condition of the issuer; and trading and other market data) to
assist in determining whether to fair value and at what value to fair value an
investment. The value of an investment for purposes of calculating the fund's
net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published
prices for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for
measuring fair value and expanded disclosures about fair value measurements.
Management is evaluating the application of the Statement to the fund, and
believes the impact will be limited to expanded disclosures resulting from the
adoption of this Statement in the fund's financial statements.
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 and other funds managed by
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - Purchases and sales of foreign investments,
income, and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions. Gains
and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized gains
and losses on investments. Gains and losses attributable to foreign exchange
rate movements on income and expenses are recorded for financial statement
purposes as foreign currency transaction gains and losses. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed.
SECURITY LOANS - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the fund to certain qualified
institutions (the "Borrowers") approved by the fund. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the fund with indemnification against Borrower default. The
fund bears the risk of loss with respect to the investment of cash collateral.
On loans collateralized by cash, the cash collateral is invested in a money
market fund or short-term securities. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder
is allocated between the fund and the lending agent. On loans collateralized
by U.S. Treasury securities, a fee is received from the Borrower, and is
allocated between the fund and the lending agent. Net income from securities
lending is included in interest income on the Statement of Operations. The
dividend and interest income earned on the securities loaned is accounted for
in the same manner as other dividend and interest income.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising out
of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with U.S. generally accepted accounting principles. All discount is accreted for
tax reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Certain dividends from
foreign securities will be recorded when the fund is informed of the dividend if
such information is obtained subsequent to the ex- dividend date. Dividend and
interest payments received in additional securities are recorded on the
ex-dividend or ex-interest date in an amount equal to the value of the security
on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received
from litigation involving its portfolio holdings are reflected in realized
gain/loss in the Statement of Operations, or in unrealized gain/loss if the
security is still held by the fund. Any other proceeds from litigation not
related to portfolio holdings are reflected as other income in the Statement of
Operations.
FEES PAID INDIRECTLY - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the fund. This amount, for the six months ended February 28, 2007, is shown as
a reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue
Code, and to distribute all of its taxable income, including realized capital
gains. Accordingly, no provision for federal income tax is required in the
financial statements. Foreign taxes, if any, have been accrued by the fund in
the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value per
share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions for
financial statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to net operating losses and wash sale
loss deferrals.
The fund declared no distributions for the year ended August 31, 2006.
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $1,306,777,887
-----------------------------------------------------------
Gross appreciation $ 174,611,698
Gross depreciation (34,297,257)
-----------------------------------------------------------
Net unrealized appreciation (depreciation) $ 140,314,441
AS OF 8/31/06
Capital loss carryforwards $(1,224,519,822)
Other temporary differences (92,593)
Net unrealized appreciation (depreciation) 18,620,513
The aggregate cost above includes prior fiscal year end tax adjustments.
As of August 31, 2006, the fund had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
8/31/11 $(1,224,519,822)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. On December 22, 2006, the SEC delayed the
implementation of the Interpretation for regulated investment companies for an
additional six months. This Interpretation prescribes a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - The fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B and Class
529B shares will convert to Class A and Class 529A shares, respectively,
approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the fund.
The management fee is computed daily and paid monthly at an annual rate of
0.75% of the fund's average daily net assets. The investment adviser has
agreed in writing to reduce its management fee to 0.70% of average daily net
assets in excess of $3.0 billion. This written agreement may be rescinded only
upon consent of the fund's Board of Trustees. For the six month ended February
28, 2007, the fund's average daily net assets did not exceed $3.0 billion and
therefore, the management fee was not reduced.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $15,685 and $128 for the six months ended
February 28, 2007, 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 MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.25% $590,823
Class B 0.75% 0.25% 1.00% 1.00% 1,312,751
Class C 0.75% 0.25% 1.00% 1.00% 384,652
Class R 0.25% 0.25% 0.50% 0.50% 13,510
Class R1 0.50% 0.25% 0.75% 0.75% 2,246
Class R2 0.25% 0.25% 0.50% 0.50% 1,004
Class R3 0.25% 0.25% 0.50% 0.50% 5,700
Class R4 -- 0.25% 0.25% 0.25% 2,533
Class 529A 0.25% 0.25% 0.50% 0.35% 1,194
Class 529B 0.75% 0.25% 1.00% 1.00% 984
Class 529C 0.75% 0.25% 1.00% 1.00% 1,549
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $2,316,946
(d) 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.
(e) The annual effective rates represent actual fees incurred under the
distribution plan for the six months ended February 28, 2007 based on each
class' average daily net assets. Payment of the 0.10% annual Class A
distribution fee is not yet in effect and will be implemented 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 in effect
and will be implemented on such date as the fund's Board of Trustees may
determine.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within 12
months of 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. All contingent deferred sales charges are paid to MFD and
during the six months ended February 28, 2007, were as follows:
AMOUNT
Class A $12,083
Class B $265,069
Class C $4,241
Class 529B $--
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% of the average daily net assets attributable to each
529 share class. The fee is based on average daily net assets and is currently
established at 0.25% annually of average daily 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 February 28, 2007, were as follows:
AMOUNT
Class 529A $853
Class 529B 246
Class 529C 387
--------------------------------------------------
Total Program Manager Fees $1,486
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as
shareholder servicing agent calculated as a percentage of the average daily
net assets of the fund as determined periodically under the supervision of the
fund's Board of Trustees. For the six months ended February 28, 2007, the fee
was $533,286, which equated to 0.0765% annually of the fund's average daily
net assets. Effective January 1, 2007, MFSC has entered into a sub-accounting
agreement with SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of
MFSC, on behalf of the fund to provide omnibus account services to the fund.
MFSC pays SRS both an asset based fee and a per account charge of the assets
held in the omnibus account. The fund then reimburses MFSC for the sub-
accounting fees paid to SRS. For the six months ended February 28, 2007, the
sub-accounting fee for SRS was $52,381, which equated to 0.0075% annually of
the fund's average daily net assets. MFSC also receives payment from the fund
for out-of-pocket and sub-accounting expenses. For the six months ended
February 28, 2007, these out-of-pocket and sub-accounting costs amounted to
$618,520. The fund may also pay shareholder servicing related costs directly
to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. The fund's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended February 28,
2007 was equivalent to an annual effective rate of 0.0179% 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 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. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services
fee to affiliated or unaffiliated third parties. For the six months ended
February 28, 2007, the fund paid MFS an annual retirement plan administration
and services fee up to the following annual percentage rates of each class'
average daily net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $1,348
Class R2 0.40% 0.25% 803
Class R3 0.25% 0.15% 2,850
Class R4 0.15% 0.15% 1,520
Class R5 0.10% 0.10% 19,186
- -------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $25,707
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $1,741 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' 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 or officers of the fund who are also
officers of the investment adviser, 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 certain retired independent
trustees which resulted in a pension expense of $1,059. The
fund also has an unfunded retirement benefit deferral plan for certain
independent trustees which resulted in an expense of $9,565. Both amounts are
included in independent trustees' compensation for the six months ended
February 28, 2007. The liability for deferred retirement benefits payable to
certain independent trustees under both plans amounted to $102,140 at February
28, 2007, and is included in payable for independent
trustees' compensation.
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. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $5,600. MFS has agreed to reimburse the fund for a portion
of the payments made by the funds to Tarantino LLC in the amount of $3,706,
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.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$747,478,341 and $958,005,704, respectively.
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 4,127,538 $38,211,574 15,088,929 $138,168,791
Class B 664,264 5,784,702 2,453,745 21,453,852
Class C 263,481 2,248,329 884,134 7,518,002
Class I 2,956,555 27,159,289 13,143,555 121,415,368
Class R 53,167 488,274 185,895 1,686,929
Class R1 83,506 746,158 53,385 457,017
Class R2 46,264 422,605 47,689 403,252
Class R3 268,654 2,605,970 220,731 1,939,319
Class R4 198,579 1,881,730 266,034 2,548,219
Class R5 288,042 2,657,907 5,245,943 45,341,084
Class 529A 3,561 33,317 20,626 185,820
Class 529B 1,658 14,128 4,539 38,888
Class 529C 2,169 18,925 8,503 73,287
- ----------------------------------------------------------------------------------------------------------
8,957,438 $82,272,908 37,623,708 $341,229,828
Shares reacquired
Class A (19,834,928) $(183,221,884) (59,944,257) $(549,759,400)
Class B (7,071,901) (61,814,165) (14,461,937) (125,061,771)
Class C (2,269,866) (19,305,606) (4,752,877) (40,330,365)
Class I (1,208,786) (11,472,139) (1,834,256) (16,811,569)
Class R (240,853) (2,188,138) (945,490) (8,534,962)
Class R1 (62,951) (574,771) (25,160) (220,287)
Class R2 (48,271) (439,997) (25,756) (212,893)
Class R3 (270,386) (2,616,772) (90,702) (830,890)
Class R4 (220,269) (2,090,005) (50,448) (473,965)
Class R5 (1,477,990) (14,075,089) (758,209) (6,954,615)
Class 529A (8,425) (76,284) (9,124) (80,205)
Class 529B (1,992) (17,094) (341) (2,921)
Class 529C (17,787) (152,185) (3,987) (33,921)
- -----------------------------------------------------------------------------------------------------------
(32,734,405) $(298,044,129) (82,902,544) $(749,307,764)
Net change
Class A (15,707,390) $(145,010,310) (44,855,328) $(411,590,609)
Class B (6,407,637) (56,029,463) (12,008,192) (103,607,919)
Class C (2,006,385) (17,057,277) (3,868,743) (32,812,363)
Class I 1,747,769 15,687,150 11,309,299 104,603,799
Class R (187,686) (1,699,864) (759,595) (6,848,033)
Class R1 20,555 171,387 28,225 236,730
Class R2 (2,007) (17,392) 21,933 190,359
Class R3 (1,732) (10,802) 130,029 1,108,429
Class R4 (21,690) (208,275) 215,586 2,074,254
Class R5 (1,189,948) (11,417,182) 4,487,734 38,386,469
Class 529A (4,864) (42,967) 11,502 105,615
Class 529B (334) (2,966) 4,198 35,967
Class 529C (15,618) (133,260) 4,516 39,366
- ----------------------------------------------------------------------------------------------------------
(23,776,967) $(215,771,221) (45,278,836) $(408,077,936)
The fund is one of several mutual funds in which the MFS funds-of-funds may
invest. The MFS funds-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 Growth Allocation Fund, MFS Aggressive Growth Allocation Fund and MFS
Moderate Allocation Fund were the owners of record of approximately 19%, 14%
and 8%, respectively, of the value of outstanding voting shares. In addition,
the MFS Lifetime 2020 Fund, the MFS Lifetime 2030 Fund and the MFS Lifetime
2040 Fund were each the owners of record of less than 1% of the value of
outstanding voting shares.
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally 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 committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense were
$4,687 and $2,331, respectively, and are included in miscellaneous expense on
the Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (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 Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is
available on the EDGAR database on the Commission's Internet Web site 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 US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA
1-800-637-8255 02205-5824
24 hours a day
OVERNIGHT MAIL
ACCOUNT SERVICE AND MFS Service Center, Inc.
LITERATURE 500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
SEMIANNUAL REPORT
MFS(R) MUNICIPAL BOND FUND
LETTER FROM THE CEO 1
- -------------------------------------------------------------
PORTFOLIO COMPOSITION 2
- -------------------------------------------------------------
EXPENSE TABLE 3
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- -------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 26
- -------------------------------------------------------------
STATEMENT OF OPERATIONS 28
- -------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 29
- -------------------------------------------------------------
FINANCIAL HIGHLIGHTS 30
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 32
- -------------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 41
- -------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 41
- -------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 41
- -------------------------------------------------------------
CONTACT INFORMATION BACK COVER
- -------------------------------------------------------------
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
MMB-SEM
LETTER FROM THE CEO
Dear Shareholders:
[Photo of Robert J. Manning]
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Bonds 105.6%
Cash & Other Net Assets (5.6)%
TOP FIVE INDUSTRIES (i)
Healthcare Revenue - Hospitals 17.1%
------------------------------------------------
General Obligations - General Purpose 13.0%
------------------------------------------------
Utilities - Municipal Owned 12.8%
------------------------------------------------
General Obligations - Schools 9.8%
------------------------------------------------
State & Local Agencies 9.6%
------------------------------------------------
CREDIT QUALITY OF BONDS (r)
AAA 59.3%
------------------------------------------------
A 17.3%
------------------------------------------------
AA 12.6%
------------------------------------------------
BBB 10.3%
------------------------------------------------
BB 0.3%
------------------------------------------------
Not Rated 0.2%
------------------------------------------------
PORTFOLIO FACTS
Average Duration (d)(i) 5.8
------------------------------------------------
Average Life (i)(m) 13.8 yrs.
------------------------------------------------
Average Maturity (i)(m) 15.5 yrs.
------------------------------------------------
Average Credit Quality of
Rated Securities (long-term) (a) AA
------------------------------------------------
Average Credit Quality of
Rated Securities (short-term) (a) A-1
------------------------------------------------
(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(d) Duration is a measure of how much a bond's price is likely to fluctuate
with general changes in interest rates, e.g., if rates rise 1.00%, a bond
with a 5- year duration is likely to lose about 5.00% of its value.
(i) For purposes of this presentation, the bond component includes both accrued
interest amounts and the equivalent exposure from any derivative holdings,
if applicable.
(m) 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 or pre-paid 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.
(r) 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 is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 2/28/07.
From time to time "Cash & Other Net Assets" may be negative due to timing of
cash receipts and/or equivalent exposure from any derivative holdings.
Percentages are based on net assets as of 2/28/07, 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,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period September 1, 2006 through
February 28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table 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 following table 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.
Expense table - continued
- --------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 0.72% $1,000.00 $1,026.30 $3.62
A ------------------------------------------------------------------------
Hypothetical (h) 0.72% $1,000.00 $1,021.22 $3.61
- --------------------------------------------------------------------------------
Actual 1.48% $1,000.00 $1,022.40 $7.42
B -------------------------------------------------------------------------
Hypothetical (h) 1.48% $1,000.00 $1,017.46 $7.40
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund.
It is categorized by broad-based asset classes.
Municipal Bonds - 104.4%
- ----------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------------
Airport & Port Revenue - 3.1%
- ----------------------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport Rev., XLCA, 6%, 2029 (u) $ 6,000,000 $ 6,698,490
Chicago, IL, O'Hare International Airport Rev. (Second Lien
Passenger Facility D), AMBAC, 5.5%, 2019 1,845,000 1,974,888
Chicago, IL, O'Hare International Airport Rev. (Third Lien
Passenger Facility B), FSA, 5.75%, 2022 1,125,000 1,242,878
Chicago, IL, O'Hare International Airport Rev. (Third Lien
Passenger Facility B), FSA, 5.75%, 2022 (u) 5,000,000 5,523,900
Chicago, IL, O'Hare International Airport Rev., Third Lien,
"A", MBIA, 5%, 2029 3,395,000 3,632,073
Denver, CO, City & County Airport Rev., AMBAC, 6%, 2017 (u) 5,000,000 5,363,000
Indianapolis, IN, Local Public Improvement (Airport Authority
Project), "I", MBIA, 5%, 2034 700,000 731,269
Massachusetts Port Authority Rev., "C", 6.125%, 2010 (c) 1,500,000 1,612,575
Massachusetts Port Authority Rev., ETM, 13%, 2013 (c) 2,725,000 3,567,761
New York, NY, City Industrial Development Agency, Special
Facilities Rev. (Terminal One Group), 5.5%, 2024 680,000 741,424
Niagara, NY, Frontier Transportation Authority Rev. (Buffalo-
Niagara International Airport), MBIA, 5.875%, 2013 1,485,000 1,562,576
--------------
$ 32,650,834
- ----------------------------------------------------------------------------------------------------------
General Obligations - General Purpose - 12.8%
- ----------------------------------------------------------------------------------------------------------
Chicago, IL, FGIC, 6.125%, 2010 (c) $ 3,785,000 $ 4,112,667
Chicago, IL, AMBAC, 5.5%, 2018 (u) 11,800,000 13,317,244
Chicago, IL (Lakefront Millennium Parking Facilities), MBIA,
5.7%, 2012 (c) 2,355,000 2,607,244
Commonwealth of Massachusetts, 5.375%, 2011 (c)(u) 5,740,000 6,166,999
Commonwealth of Massachusetts, "B", ETM, FGIC, 7%, 2009 (c) 7,000,000 7,281,120
Commonwealth of Massachusetts, ETM, 6.5%, 2008 (c) 6,245,000 6,472,443
Commonwealth of Puerto Rico, XLCA, 5.5%, 2017 (u) 2,300,000 2,633,270
Commonwealth of Puerto Rico, Public Improvement, "A",
5.25%, 2027 800,000 872,576
Country Club Hills, IL, "N", MBIA, 5%, 2031 2,460,000 2,632,594
Cranston, RI, FGIC, 6.375%, 2009 (c) 830,000 896,126
Delaware County, OH, 6.25%, 2010 (c) 1,000,000 1,099,870
Detroit/Wayne County, MI, Stadium Authority, FGIC, 5.5%, 2017 6,000,000 6,128,820
Houston County, AL, AMBAC, 6.25%, 2009 (c) 3,315,000 3,592,300
Interlocken Metropolitan District, CO, Improvement, "C", XLCA,
0%, 2027 1,860,000 591,908
New York, NY, FGIC, 5.75%, 2007 (c) 8,500,000 8,697,455
New York, NY, Urban Development Corp., 5.5%, 2008 (c) 1,325,000 1,358,364
New York, NY, Urban Development Corp., 5.5%, 2016 13,365,000 13,574,430
Pittsfield, MA, MBIA, 5.5%, 2017 100,000 109,040
Schaumburg, IL, "B", FGIC, 5.25%, 2034 2,000,000 2,177,360
Southlake, TX, AMBAC, 0%, 2009 (c) 1,835,000 956,677
Southlake, TX, AMBAC, 0%, 2009 (c) 3,150,000 1,339,443
State of California, 5.5%, 2009 (c)(u) 11,650,000 12,324,652
State of California, XLCA, 5.75%, 2009 (c)(u) 10,230,000 10,916,126
State of California, 5.5%, 2013 5,000,000 5,482,450
State of California, XLCA, 5.75%, 2017 (u) 1,115,000 1,189,783
State of California, XLCA, 5.75%, 2017 (u) 2,405,000 2,566,303
State of California, 5.1%, 2034 5,000,000 5,113,600
State of Illinois, MBIA, 5.5%, 2025 390,000 407,889
State of Washington, 6.75%, 2010 3,880,000 4,201,885
State of Washington, 6%, 2012 4,360,000 4,828,962
--------------
$ 133,649,600
- ----------------------------------------------------------------------------------------------------------
General Obligations - Improvement - 3.1%
- ----------------------------------------------------------------------------------------------------------
Birmingham, AL, "B", 5.75%, 2009 (c) $ 910,000 $ 959,668
Birmingham, AL, "B", 5.75%, 2009 (c) 90,000 94,952
District of Columbia, MBIA, 6.5%, 2010 3,095,000 3,357,023
District of Columbia, ETM, MBIA, 6.5%, 2010 (c) 2,905,000 3,158,316
Massachusetts Bay Transportation Authority, General
Transportation Systems, "A", XLCA, 7%, 2021 10,185,000 12,726,565
Massachusetts Bay Transportation Authority, General
Transportation Systems, "C", XLCA, 6.1%, 2013 10,200,000 11,527,530
--------------
$ 31,824,054
- ----------------------------------------------------------------------------------------------------------
General Obligations - Schools - 9.8%
- ----------------------------------------------------------------------------------------------------------
Adams 12 Five Star Schools, CO, "B", FGIC, 0%, 2025 $ 1,700,000 $ 707,846
Chicago, IL, Board of Education, MBIA, 6.25%, 2009 5,160,000 5,385,750
Chicago, IL, Board of Education, MBIA, 6.25%, 2015 20,295,000 22,953,442
Chicago, IL, Board of Education, AMBAC, 5.4%, 2017 3,000,000 3,093,480
Chicago, IL, Board of Education, FGIC, 5.25%, 2019 (u) 10,000,000 11,344,600
Clark County, NV, School District, "A", MBIA, 7%, 2010 4,000,000 4,394,000
De Soto, TX, Independent School District, School Building,
PSF, 0%, 2031 1,345,000 401,509
De Soto, TX, Independent School District, School Building,
PSF, 0%, 2034 1,015,000 256,876
De Soto, TX, Independent School District, School Building,
PSF, 0%, 2036 1,250,000 283,688
Ennis, TX, Independent School District, Capital Appreciation,
"N", PSF, 0%, 2028 705,000 248,421
Ennis, TX, Independent School District, Capital Appreciation,
"N", PSF, 0%, 2029 1,350,000 461,660
Ennis, TX, Independent School District, Capital Appreciation,
"N", PSF, 0%, 2031 1,340,000 401,893
Ferris, TX, Independent School District, PSF, 5.5%, 2034 2,360,000 2,539,974
Florida Board of Education, Capital Outlay, 9.125%, 2014 1,735,000 2,066,836
Florida Board of Education, Capital Outlay, ETM, 9.125%, 2014 (c) 265,000 348,456
Forsyth County, GA, School District, 6%, 2010 (c) 865,000 936,345
Gilroy, CA, Unified School District, FGIC, 5%, 2027 1,000,000 1,060,040
Grand Blanc, MI, Community Schools (School Building & Site),
FSA, 5%, 2028 1,000,000 1,064,840
Irving, TX, Independent School District, Capital Appreciation,
PSF, 0%, 2026 2,505,000 995,888
Kane Cook & Dupage Counties, IL, FSA, 6.375%, 2011 (c) 1,245,000 1,365,865
Kane Cook & Dupage Counties, IL, FSA, 6.5%, 2011 (c) 1,345,000 1,481,518
Knox County, KY, XLCA, 5.625%, 2014 (c) 1,150,000 1,300,202
Lancaster, TX, Independent School District, "N", FSA, 4.5%, 2028 3,755,000 3,782,412
Lancaster, TX, Independent School District, "N", FSA, 4.5%, 2030 1,020,000 1,025,947
Lancaster, TX, Independent School District, Capital
Appreciation, FSA, 0%, 2014 (c) 1,765,000 656,121
Lancaster, TX, Independent School District, Capital
Appreciation, FSA, 0%, 2014 (c) 1,570,000 548,794
Lancaster, TX, Independent School District, Capital
Appreciation, FSA, 0%, 2025 970,000 412,260
Lancaster, TX, Independent School District, Capital
Appreciation, FSA, 0%, 2026 970,000 390,571
Lane County, OR, School District, 6.25%, 2010 (c) 1,150,000 1,241,874
Lane County, OR, School District, 6.25%, 2010 (c) 1,000,000 1,079,890
Leander, TX, Independent School District, PSF, 0%, 2018 4,885,000 2,541,470
Leander, TX, Independent School District, Capital
Appreciation, Refunding, School Building, FGIC, 0%, 2026 3,280,000 1,259,290
Leander, TX, Independent School District, Capital
Appreciation, Refunding, School Building, FGIC, 0%, 2031 3,320,000 950,184
Leander, TX, Independent School District, Capital
Appreciation, Refunding, School Building, "N", PSF, 0%, 2029 4,000,000 1,281,080
Manchester, NH, School Facilities Rev., MBIA, 5.5%, 2027 785,000 948,484
Manchester, NH, School Facilities Rev., MBIA, 5.5%, 2028 785,000 952,386
Palos Verdes Peninsula, CA, Capital Appreciation, "N", FSA,
0%, 2029 3,885,000 1,472,765
Prosper, TX, Independent School District, Capital Appreciation
School Building, "N", PSF, 0%, 2031 1,760,000 513,814
Rancho Santiago, CA, Community College District, Election of
2002, MBIA, 5%, 2013 (c) 2,200,000 2,383,436
Rockwall, TX, Independent School District, Unrefunded, Capital
Appreciation, "N", PSF, 0%, 2014 90,000 62,877
San Marcos, TX, Independent School District, PSF, 5.625%, 2014 (c) 2,000,000 2,251,460
San Marcos, TX, Independent School District, PSF, 5.625%, 2014 (c) 2,000,000 2,251,460
San Rafael, CA, Elementary School District, Election of 1999,
MBIA, 5%, 2028 2,500,000 2,634,025
Schertz-Cibolo-Universal City, TX, Independent School
District, Capital Appreciation, School Building, "A", PSF, 0%, 2027 2,050,000 789,312
Schertz-Cibolo-Universal City, TX, Independent School
District, Capital Appreciation, School Building, "A", PSF, 0%, 2029 775,000 268,290
Schertz-Cibolo-Universal City, TX, Independent School
District, Capital Appreciation, School Building, "A", PSF, 0%, 2030 1,130,000 370,380
Sunnyvale, TX, Independent School District, PSF, 5.25%, 2028 1,900,000 2,048,694
Sunnyvale, TX, Independent School District, PSF, 5.25%, 2031 2,000,000 2,152,740
Wylie, TX, Independent School District, PSF, 5.25%, 2029 3,955,000 4,212,550
--------------
$ 101,575,695
- ----------------------------------------------------------------------------------------------------------
Healthcare Revenue - Hospitals - 16.9%
- ----------------------------------------------------------------------------------------------------------
Akron Bath Copley, OH, Hospital Rev. (Children's Hospital),
FSA, 5.25%, 2025 $ 1,000,000 $ 1,073,930
Baxter County, AR, Hospital Rev., 5.375%, 2014 1,000,000 1,030,830
Baxter County, AR, Hospital Rev., 5.6%, 2021 1,750,000 1,810,253
Colorado Health Facilities Authority Rev. (Portercare
Adventist Health Systems), 6.625%, 2011 (c) 1,250,000 1,419,575
Denver, CO, Health & Hospital Authority Rev., "A",
5.375%, 2028 2,440,000 2,476,039
District of Columbia, Hospital Rev. (Medlantic Healthcare),
ETM, MBIA, 5.25%, 2019 (c) 6,750,000 6,927,323
Elkhart County, IN, Hospital Authority Rev. (Elkhart General
Hospital, Inc.), 5.25%, 2018 1,000,000 1,031,450
Elkhart County, IN, Hospital Authority Rev. (Elkhart General
Hospital, Inc.), 5.25%, 2020 4,345,000 4,443,936
Florence County, SC, Hospital Rev. (McLeod Regional Medical
Center), "A", FSA, 5.25%, 2034 5,000,000 5,398,150
Gainesville & Hall County, GA, Hospital Authority Rev.
(Northeast Georgia Health System, Inc.), 5.5%, 2031 1,555,000 1,627,028
Gulfport, MS, Hospital Facilities Rev. (Memorial Hospital),
5.75%, 2031 1,575,000 1,638,268
Harris County, TX, Health Facilities Development Corp. "A"
(Texas Children's Hospital), 5.375%, 2015 4,300,000 4,499,047
Harris County, TX, Health Facilities Development Corp.
Hospital Rev. (Memorial Herman Healthcare), 6.375%, 2011 (c) 2,000,000 2,229,260
Highlands County, FL, Health Facilities Authority Rev.
(Adventist Health Systems), "C", 5.25%, 2036 1,620,000 1,736,867
Highlands County, FL, Health Facilities Authority Rev.
(Adventist/Sunbelt Hospital), 6%, 2011 (c) 1,000,000 1,108,920
Huntsville, AL, Health Care Authority Rev., 5.625%, 2026 2,595,000 2,736,038
Illinois Development Finance Authority Rev. "A" (Provena
Health), MBIA, 5.25%, 2012 1,600,000 1,641,104
Illinois Educational Facilities Authority Rev. (Centegra
Health Systems), 5.25%, 2024 5,500,000 5,637,390
Illinois Health Facilities Authority Rev. (Advocate Health
Care Network), 6.375%, 2010 (c) 1,800,000 1,969,920
Illinois Health Facilities Authority Rev. (Condell Medical
Center), 6.35%, 2015 6,500,000 6,913,920
Illinois Health Facilities Authority Rev. (Decatur Memorial
Hospital), 5.75%, 2024 2,650,000 2,822,568
Illinois Health Facilities Authority Rev. (Passavant Memorial
Area Hospital Associates), 6%, 2010 (c) 1,165,000 1,256,359
Illinois Health Facilities Authority Rev. (Riverside Health
Systems), 5.75%, 2012 (c) 1,975,000 2,185,318
Illinois Health Facilities Authority Rev. (Sinai Health), FHA,
5.15%, 2037 2,400,000 2,535,816
Illinois Health Facilities Authority Rev., "A" (Advocate
Health), MBIA, 5.7%, 2011 660,000 678,368
Indiana Health Facilities Financing Authority, Hospital Rev.
(Clarian Health), "A", 5%, 2039 910,000 944,535
Indiana Health Facilities Financing Authority, Hospital Rev.
(Community Hospital Project), "N", AMBAC, 5%, 2025 5,980,000 6,353,870
Indiana Health Facilities Financing Authority, Hospital Rev.
(Deaconess Hospital) "A", AMBAC, 5.375%, 2034 2,075,000 2,248,761
Iowa Finance Authority, Health Care Facilities Rev. (Genesis
Medical Center), 6.125%, 2016 2,195,000 2,342,131
Kentucky Economic Development Finance Authority (Norton
Healthcare), "A", 6.5%, 2010 (c) 1,865,000 2,059,818
Kentucky Economic Development Finance Authority, Unrefunded
(Norton Healthcare), "A", 6.5%, 2020 2,885,000 3,128,754
Knox County, TN, Health Educational Hospital & Housing
Facilities Board Rev. (Covenant Health), "A", 0%, 2035 2,475,000 630,110
Knox County, TN, Health Educational Hospital & Housing
Facilities Board Rev. (Covenant Health), "A", 0%, 2036 1,550,000 374,511
Knox County, TN, Health Educational Hospital & Housing
Facilities Board Rev. (Covenant Health), "A", 0%, 2037 1,060,000 243,016
Marion County, FL, Hospital District Rev. (Monroe Hospital),
5.625%, 2019 2,610,000 2,721,212
Marshall County, AL, Health Care "A", 5.75%, 2015 1,000,000 1,078,320
Martin County, FL, Health Facilities (Martin Memorial Medical
Center) "B", 5.875%, 2032 2,200,000 2,362,800
Maryland Health & Higher Educational Facilities Authority Rev.
(Medstar Health), 5.5%, 2033 1,115,000 1,190,653
Maryland Health & Higher Educational Facilities Authority Rev.
(University of Maryland Medical System), 6.75%, 2010 (c) 1,000,000 1,105,300
Massachusetts Health & Educational Facilities Authority Rev.
(Caritas Christi), "A", 5.7%, 2015 2,550,000 2,649,476
Massachusetts Health & Educational Facilities Authority Rev.
(Partners Healthcare Systems), "C", 5.75%, 2021 1,500,000 1,629,480
Michigan Hospital Finance Authority Rev. (Mercy Mount
Clemens), MBIA, 5.75%, 2017 2,900,000 3,039,490
Michigan Hospital Finance Authority Rev. (Sisters of Mercy
Health System), ETM, MBIA, 5.375%, 2014 (c) 515,000 544,128
Michigan Hospital Finance Authority Rev., "A" (Crittenton),
5.625%, 2027 1,000,000 1,074,930
Monroe County, MI, Hospital Finance Authority, Hospital Rev.
(Mercy Memorial Hospital Corp.), 5.5%, 2035 2,325,000 2,453,526
Monroe County, PA, Hospital Authority Rev. (Pocono Medical
Center), 6%, 2043 750,000 809,468
Montgomery, AL, Medical Clinic Board Health Care Facility Rev.
(Jackson Hospital & Clinic), 5.25%, 2031 440,000 463,509
Mount Lebanon, PA, Hospital Authority Rev. (St. Clair Memorial
Hospital), 5.625%, 2032 1,335,000 1,415,661
New Hampshire Health & Education Facilities Rev. (Exeter
Hospital), 6%, 2016 1,000,000 1,098,160
New Jersey Health Care Facilities, Financing Authority Rev.
(Saint Barnabas Health) Capital Appreciation, "B", 0%, 2036 10,610,000 2,441,892
New Jersey Health Care Facilities, Financing Authority Rev.
(Saint Barnabas Health) Capital Appreciation, "B", 0%, 2037 7,070,000 1,542,533
North Central, TX, Health Facilities Development Corp. Rev.
(Texas Health Resources System), MBIA, 5%, 2017 5,000,000 5,145,400
North Texas Health Facilities Development Corp. Rev. (United
Regional Health Care System, Inc.), 6%, 2023 4,000,000 4,357,840
Orange County, FL, Health Facilities Authority Hospital Rev.
(Adventist Health Systems), 5.625%, 2012 (c) 1,490,000 1,647,255
Orange County, FL, Health Facilities Authority Hospital Rev
(Orlando Regional Healthcare), 5.75%, 2012 (c) 2,230,000 2,469,145
Peninsula Ports Authority, VA, Hospital Facility Rev.
(Whittaker Memorial), FHA, 8.7%, 2023 1,520,000 1,744,610
Pennsylvania Higher Educational Facilities Authority, Health
Services Rev. (Allegheny Delaware Valley), MBIA, 5.875%, 2016 5,000,000 5,107,100
Rhode Island Health & Educational Building Corp., Hospital
Financing (Lifespan Obligated Group), "A", FSA, 5%, 2032 3,945,000 4,186,513
Rhode Island Health & Educational Building Corp., Hospital
Financing (Lifespan Obligated Group), 6.375%, 2012 (c) 1,730,000 1,959,917
Rhode Island Health & Educational Building Corp., Hospital
Financing (Lifespan Obligated Group), 6.375%, 2021 270,000 300,807
Richland County, OH, Hospital Facilities Rev. (Medcentral
Health), "B", 6.375%, 2010 (c) 665,000 733,116
Richland County, OH, Hospital Facilities Rev. (Medcentral
Health), "B", 6.375%, 2022 335,000 364,343
Royston, GA, Hospital Authority Rev. (Ty Cobb Healthcare
Systems, Inc.), 6.7%, 2016 770,000 803,387
Shelby County, TN, Educational & Hospital Facilities Board
Hospital Rev., Refunded Balance (Methodist Healthcare),
6.375%, 2012 (c) 1,255,000 1,423,045
Shelby County, TN, Educational & Housing Facilities Board
Hospital Rev. (Methodist Healthcare), 6.375%, 2012 (c) 745,000 844,756
South Carolina Jobs & Economic Development Authority Rev. (Bon
Secours Health Systems, Inc.), "A", 5.625%, 2030 2,055,000 2,190,034
South Carolina Medical University, Hospital Facilities Rev.,
"A", MBIA, 5%, 2031 970,000 1,023,593
Steubenville, OH, Hospital Rev. (Trinity Hospital), 6.375%, 2020 1,200,000 1,307,292
Tallahassee, FL, Health Facilities Rev. (Tallahassee Memorial
Healthcare), 6.25%, 2020 2,000,000 2,120,460
Tarrant County, TX, Health Facilities Development Corp. (Texas
Health Resources), MBIA, 5.25%, 2018 8,605,000 8,874,939
West Shore, PA, Hospital Authority Rev. (Holy Spirit
Hospital), 6.2%, 2026 1,250,000 1,340,538
Wichita, KS, Hospital Authority Rev. (Via Christi Health
System), 6.25%, 2019 1,595,000 1,766,845
Wichita, KS, Hospital Authority Rev. (Via Christi Health
System), 6.25%, 2020 2,465,000 2,729,470
Wisconsin Health & Educational Facilities Authority Rev.
(Agnesian Healthcare, Inc.), 6%, 2017 520,000 554,284
Wisconsin Health & Educational Facilities Authority Rev.
(Agnesian Healthcare, Inc.), 6%, 2021 650,000 688,383
Wisconsin Health & Educational Facilities Authority Rev.
(Aurora Health Care, Inc.), 6.875%, 2030 2,000,000 2,306,560
Wisconsin Health & Educational Facilities Authority Rev.
(Wheaton Franciscan Healthcare), 5.25%, 2031 3,425,000 3,631,596
Wisconsin Health & Educational Facilities Authority Rev.
(Wheaton Franciscan Services), 5.75%, 2012 (c) 3,000,000 3,306,240
--------------
$ 175,701,189
- ----------------------------------------------------------------------------------------------------------
Healthcare Revenue - Long Term Care - 0.3%
- ----------------------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Corp. Rev.
(Buckner Retirement Facility), 5.25%, 2019 $ 2,500,000 $ 2,550,000
Iowa Finance Authority, Health Care Facilities Rev. (Care
Initiatives Project), "A", 5.5%, 2025 930,000 972,510
--------------
$ 3,522,510
- ----------------------------------------------------------------------------------------------------------
Industrial Revenue - Chemicals - 0.4%
- ----------------------------------------------------------------------------------------------------------
Brazos River, TX, Harbor Navigation District (Dow Chemical
Co.), 5.7%, 2033 $ 3,500,000 $ 3,734,080
- ----------------------------------------------------------------------------------------------------------
Industrial Revenue - Environmental Services - 0.7%
- ----------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, Solid Waste
Disposal Rev. (Waste Management, Inc.), "A-2", 5.4%, 2025 $ 785,000 $ 841,960
California Pollution Control Financing Authority, Solid Waste
Disposal Rev. (Waste Management, Inc.), "B", 5%, 2027 920,000 956,782
Colorado Housing & Finance Authority, Solid Waste Rev. (Waste
Management, Inc.), 5.7%, 2018 1,730,000 1,910,854
Gulf Coast Waste Disposal Authority, TX (Waste Management of
Texas), "A", 5.2%, 2028 665,000 700,923
Nevada Department of Business & Industry Rev. (Republic
Services, Inc.), 5.625%, 2026 1,500,000 1,646,070
New Hampshire Business Finance Authority, Solid Waste Disposal
Rev. (Waste Management, Inc.), 5.2%, 2027 665,000 697,864
--------------
$ 6,754,453
- ----------------------------------------------------------------------------------------------------------
Industrial Revenue - Other - 1.4%
- ----------------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev., Resource
Recovery (Flour Corp.), 5.625%, 2019 $ 8,650,000 $ 9,046,949
Memphis-Shelby County, TN (FedEx Corp.), 5.05%, 2012 1,400,000 1,472,506
Port Corpus Christi, TX, Nueces County General Rev. (Union
Pacific Corp.), 5.35%, 2010 670,000 672,312
Tooele County, UT, Hazardous Waste Treatment Rev. (Union
Pacific Corp.), 5.7%, 2026 3,640,000 3,788,112
--------------
$ 14,979,879
- ----------------------------------------------------------------------------------------------------------
Industrial Revenue - Paper - 0.6%
- ----------------------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp., Environmental
Improvements Rev. (Mead Westvaco Escanaba), "A",
6.25%, 2012 (c) $ 1,500,000 $ 1,675,830
Georgetown County, SC, Environmental Improvement
(International Paper Co.), 5.7%, 2014 1,400,000 1,528,184
Jay, ME, Solid Waste Disposal Rev., "A" (International Paper
Co.), 5.125%, 2018 1,500,000 1,537,275
Sabine River Authority Rev., Louisiana Water Facilities
(International Paper Co.), 6.2%, 2025 1,250,000 1,350,225
--------------
$ 6,091,514
- ----------------------------------------------------------------------------------------------------------
Miscellaneous Revenue - Other - 0.4%
- ----------------------------------------------------------------------------------------------------------
Baltimore, MD, Convention Center Hotel Rev., "A", XLCA, 5.25%, 2039 $ 1,945,000 $ 2,122,559
Gallery Certificate Trust, PA, Parking Rev., 4.5%, 2013 (n) 2,125,000 2,125,276
--------------
$ 4,247,835
- ----------------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.1%
- ----------------------------------------------------------------------------------------------------------
Bay County, FL, Housing Finance Authority, Multi-Family Rev.
(Andrews Place II Apartments), FSA, 5%, 2035 $ 395,000 $ 406,791
Bay County, FL, Housing Finance Authority, Multi-Family Rev.
(Andrews Place II Apartments), FSA, 5.1%, 2046 995,000 1,023,915
California Statewide Communities Development Authority Rev.
(Irvine Apartments), 5.25%, 2025 3,500,000 3,602,620
Indianapolis, IN, Multi-Family Rev. (Cambridge Station
Apartments II), FNMA, 5.25%, 2039 1,145,000 1,189,140
Michigan Housing Development Authority, GNMA, 5.2%, 2038 1,200,000 1,241,652
Newark, NJ, Housing Authority (Port Authority - Newark Marine
Terminal), MBIA, 5.5%, 2014 (c) 785,000 870,958
Seattle, WA, Housing Authority Rev., Capped Fund Program (High
Rise Rehab), "I", FSA, 5%, 2025 1,630,000 1,672,510
Tampa, FL, Housing Finance Authority, Multi-Family Rev.
(Meridian River Development Corp.), 4.75%, 2026 1,130,000 1,159,041
--------------
$ 11,166,627
- ----------------------------------------------------------------------------------------------------------
Parking - 0.1%
- ----------------------------------------------------------------------------------------------------------
Rail Connections, Inc., MA Rev., "B", 0%, 2009 (c) $ 375,000 $ 241,061
Rail Connections, Inc., MA Rev., "B", 0%, 2009 (c) 450,000 270,671
Rail Connections, Inc., MA Rev., "B", 0%, 2009 (c) 975,000 548,360
--------------
$ 1,060,092
- ----------------------------------------------------------------------------------------------------------
Sales & Excise Tax Revenue - 2.8%
- ----------------------------------------------------------------------------------------------------------
Illinois Sales Tax Rev., 0%, 2009 $ 8,965,000 $ 8,191,679
Illinois Sales Tax Rev., 6.5%, 2022 5,000,000 6,089,450
Metropolitan Atlanta, GA, Rapid Transit Authority Rev.,
6.25%, 2018 4,580,000 5,277,809
Metropolitan Pier & Expo, IL, McCormick Place Expansion, MBIA,
5.25%, 2042 3,120,000 3,324,422
Miami Dade County, FL, Transportation Systems, "N", XLCA,
5%, 2022 3,870,000 4,177,859
Wyandotte County-Kansas City, KS, Unified Government Rev.
(Sales Tax Second Lien Area B), 5%, 2020 2,165,000 2,252,964
--------------
$ 29,314,183
- ----------------------------------------------------------------------------------------------------------
Single Family Housing - Local - 4.3%
- ----------------------------------------------------------------------------------------------------------
Calcasieu Parish, LA, Public Trust Authority, Single Family
Mortgage Rev., "A", GNMA, 6.05%, 2032 $ 1,600,000 $ 1,709,216
California Rural Home Mortgage Finance Authority Rev., GNMA,
6.55%, 2030 345,000 355,233
California Rural Home Mortgage Finance Authority Rev., GNMA,
7.3%, 2031 45,000 45,190
California Rural Home Mortgage Finance Authority Rev., "A",
GNMA, 5.75%, 2044 760,000 819,645
Chicago, IL, Single Family Mortgage Rev., "A", GNMA,
5.5%, 2043 2,500,000 2,695,750
Chicago, IL, Single Family Mortgage Rev., "B", GNMA, 6%, 2033 575,000 592,158
Chicago, IL, Single Family Mortgage Rev., "C", GNMA,
7.05%, 2030 30,000 30,604
Chicago, IL, Single Family Mortgage Rev., "C", GNMA, 7%, 2032 80,000 80,801
Chicago, IL, Single Family Mortgage Rev., "N", GNMA,
5.75%, 2042 4,000,000 4,389,160
Denver, CO, Single Family Mortgage Rev., GNMA, 7.3%, 2031 85,000 85,609
Escambia County, FL, Single Family Housing Rev., GNMA,
6.95%, 2024 225,000 225,657
Jefferson Parish, LA, Single Family Mortgage Rev., "B-1",
GNMA, 6.625%, 2023 385,000 408,489
Jefferson Parish, LA, Single Family Mortgage Rev., "B-1",
GNMA, 6.75%, 2030 525,000 531,710
Jefferson Parish, LA, Single Family Mortgage Rev., "D-1",
GNMA, 7.5%, 2026 125,000 129,213
Lee County, FL, Housing Finance Authority Rev. (Multi-County
Program), "A-4", GNMA, 7%, 2031 50,000 50,028
Lubbock, TX, Housing Finance Corp. Rev., GNMA, 6.1%, 2030 1,330,000 1,344,391
Manatee County, FL, Housing Finance Mortgage Rev., Single
Family, Sub Series 3, GNMA, 6.5%, 2023 100,000 101,387
Manatee County, FL, Housing Finance Mortgage Rev., Single
Family, Sub Series 3, GNMA, 5.3%, 2028 665,000 684,172
Manatee County, FL, Housing Finance Mortgage Rev., Single
Family, Sub Series 3, GNMA, 5.4%, 2029 230,000 239,324
Maricopa County, AZ, Single Family Mortgage Rev., "B", GNMA,
6.2%, 2034 115,000 115,883
Nortex Housing Finance Corp., TX, Single Family Mortgage
Backed Securities Rev., "A", GNMA, 5.5%, 2038 2,715,000 2,906,760
Permian Basin Housing Finance Corp., TX, Single Family
Mortgage Backed Securities (Mortgage Backed Project) "A",
GNMA, 5.65%, 2038 1,825,000 1,954,174
Pima County, AZ, Industrial Development Authority Rev., "B-1",
GNMA, 7.05%, 2030 245,000 249,638
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A", GNMA, 6.45%, 2029 325,000 326,700
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A", GNMA, 5.9%, 2035 785,000 851,152
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A", GNMA, 6.25%, 2035 360,000 385,686
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A", GNMA, 5.8%, 2036 2,115,000 2,341,072
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A-1", GNMA, 6.875%, 2026 190,000 191,163
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A-1", GNMA, 5.75%, 2037 660,000 725,314
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A-3", GNMA, 6%, 2035 1,180,000 1,295,947
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A-3", GNMA, 5.5%, 2037 1,155,000 1,241,348
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A-5", GNMA, 5.8%, 2027 985,000 1,037,609
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A-5", GNMA, 5.7%, 2036 2,110,000 2,317,582
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A-5", GNMA, 5.9%, 2037 500,000 551,895
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A-6", GNMA, 5.65%, 2036 1,590,000 1,665,891
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"B", GNMA, 5.45%, 2027 1,145,000 1,195,300
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"B-2", GNMA, 6.45%, 2033 915,000 969,086
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"B-3", GNMA, 5.25%, 2038 1,545,000 1,644,683
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"B-4", GNMA, 5.55%, 2038 1,540,000 1,684,360
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"N", GNMA, 5.45%, 2038 4,820,000 5,161,497
St. Tammany Parish, LA, Single Family Mortgage Rev. (Home
Ownership Program), "A", GNMA, 5.25%, 2039 1,200,000 1,281,048
--------------
$ 44,611,525
- ----------------------------------------------------------------------------------------------------------
Single Family Housing - State - 3.6%
- ----------------------------------------------------------------------------------------------------------
Arkansas Development Finance Authority Rev., Mortgage Backed
Securities Program, "B", GNMA, 4.45%, 2034 $ 945,000 $ 945,000
California Housing Finance Agency Rev., Home Mortgage, FSA,
0%, 2019 7,470,000 3,524,122
California Housing Finance Agency Rev., Home Mortgage, MBIA,
0%, 2028 1,285,000 430,436
Colorado Housing & Finance Authority Rev., 6.05%, 2016 235,000 240,595
Colorado Housing & Finance Authority Rev., 7.45%, 2016 135,000 135,678
Colorado Housing & Finance Authority Rev., 6.8%, 2030 285,000 285,516
Colorado Housing & Finance Authority Rev., 7.25%, 2031 270,000 275,567
Colorado Housing & Finance Authority Rev., "A-1", 7.4%, 2027 45,000 45,803
Colorado Housing & Finance Authority Rev., "A-2", 7.15%, 2014 14,000 14,282
Colorado Housing & Finance Authority Rev., "A-2", AMBAC, 6.6%, 2028 805,000 848,188
Colorado Housing & Finance Authority Rev., "B-3", 6.55%, 2025 79,000 81,130
Colorado Housing & Finance Authority Rev., "C", 6.75%, 2021 145,000 148,387
Colorado Housing & Finance Authority Rev., "C-2", 5.9%, 2023 545,000 563,759
Colorado Housing & Finance Authority Rev., "C-2", FHA,
6.6%, 2032 475,000 508,934
Colorado Housing & Finance Authority Rev., "C-2", 8.4%, 2021 115,000 118,517
Delaware Housing Authority Rev. (Single Family), "C",
6.25%, 2037 2,000,000 2,172,460
Louisiana Housing Finance Agency, Single Family Mortgage Rev.,
GNMA, 6.4%, 2032 330,000 330,333
Louisiana Housing Finance Agency, Single Family Mortgage Rev.,
GNMA, 6.375%, 2033 620,000 620,775
Louisiana Housing Finance Agency, Single Family Mortgage Rev.,
"B-2", GNMA, 7.55%, 2031 190,000 193,215
Minnesota Housing Finance Agency Rev., Residential Housing
Finance, "B", 4.8%, 2023 745,000 752,182
Mississippi Home Corp. Rev., Single Family Rev., "A", GNMA,
6.1%, 2034 2,305,000 2,371,315
Mississippi Home Corp. Rev., Single Family Rev., "F", GNMA,
7.55%, 2027 211,000 222,495
Missouri Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), GNMA, 7.45%, 2031 115,000 119,176
Missouri Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), GNMA, 6.85%, 2032 250,000 255,188
Missouri Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), GNMA, 6.75%, 2034 300,000 314,580
Missouri Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), "B", GNMA, 6.7%, 2030 695,000 707,434
New Hampshire Housing Finance Authority Rev., 6.85%, 2030 610,000 636,773
New Hampshire Housing Finance Authority Rev., "B",
5.875%, 2030 315,000 315,186
New Hampshire Housing Finance Authority Rev., "B",
6.3%, 2031 245,000 252,960
New Mexico Mortgage Finance Authority Rev., GNMA,
7.1%, 2030 205,000 206,384
New Mexico Mortgage Finance Authority Rev., GNMA,
6.8%, 2031 575,000 575,000
New Mexico Mortgage Finance Authority Rev., GNMA,
6.25%, 2032 1,040,000 1,071,855
New Mexico Mortgage Finance Authority Rev., "B-2", GNMA,
6.35%, 2033 540,000 552,760
New Mexico Mortgage Finance Authority Rev., "I", GNMA, 5.75%, 2038 2,000,000 2,164,540
New Mexico Mortgage Finance Authority Rev., "N", GNMA, 5.95%, 2037 1,535,000 1,651,829
North Dakota Housing Finance Agency Rev., Housing Finance,
"A", 5%, 2033 1,015,000 1,015,132
Ohio Housing Finance Agency Mortgage Rev., Residential
Mortgage Backed, "C", GNMA, 5.9%, 2035 1,455,000 1,517,376
Oklahoma County Home Finance Mortgage Backed, "N", GNMA, 5.4%, 2038 1,935,000 2,061,104
Oklahoma Housing Finance Agency Rev., 6.8%, 2016 145,000 147,591
Oregon Health & Community Services (Single Family Mortgage),
"B", 6.25%, 2031 2,500,000 2,715,800
Texas Housing & Community Affairs, Residential Mortgage Rev.,
GNMA, 7.1%, 2021 4,120,000 4,248,544
Vermont Housing Finance Agency Rev., FSA, 4.95%, 2032 1,460,000 1,463,592
Washington Housing Finance Commission Rev., Single Family
Housing, GNMA, 5%, 2023 455,000 460,069
--------------
$ 37,281,562
- ----------------------------------------------------------------------------------------------------------
Solid Waste Revenue - 0.4%
- ----------------------------------------------------------------------------------------------------------
Central Wayne County, MI, Sanitation Rev., "VII", 4.75%, 2007 $ 500,000 $ 499,905
Delaware County, PA, Industrial Development Authority,
Resource Recovery Facilities Rev. (American Ref-Fuel Co.),
"A", 6.2%, 2019 1,250,000 1,293,963
Massachusetts Development Finance Agency, Resource Recovery
Rev. (Ogden Haverhill Associates), "A", 6.7%, 2014 2,400,000 2,602,872
--------------
$ 4,396,740
- ----------------------------------------------------------------------------------------------------------
State & Agency - Other - 1.4%
- ----------------------------------------------------------------------------------------------------------
Kentucky Property & Buildings Commission Rev., 5.85%, 2010 (c) $ 4,000,000 $ 4,241,480
Kentucky Property & Buildings Commission Rev., 5.9%, 2010 (c) 4,500,000 4,777,830
New York Dormitory Authority Rev. (City University),
5.75%, 2013 5,000,000 5,411,100
--------------
$ 14,430,410
- ----------------------------------------------------------------------------------------------------------
State & Local Agencies - 9.5%
- ----------------------------------------------------------------------------------------------------------
Alabama Building Renovation Authority, AMBAC, 6%, 2015 $ 1,610,000 $ 1,724,262
Alabama Building Renovation Authority, AMBAC, 6%, 2016 1,705,000 1,825,168
Allen County, IN, Jail Building Corp., First Mortgage,
5.75%, 2011 (c) 2,750,000 2,990,350
Delaware Valley, PA, Regional Finance Authority, RITES, AMBAC,
7.477%, 2018 (p) 16,250,000 20,171,775
Fayette County, GA (Criminal Justice Center), 6.25%, 2010 (c) 1,000,000 1,088,530
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., "A", FSA, 0% to 2010, 4.55% to 2022 3,415,000 3,019,372
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., "A-1", AMBAC, 0% to 2010, 4.6% to 2023 995,000 880,038
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., Enhanced, "A", 5%, 2045 2,150,000 2,235,506
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., Enhanced, "B", 5.375%, 2010 (c) 4,000,000 4,210,000
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., Enhanced, "B", 5.5%, 2013 (c) 3,925,000 4,322,053
New York Dormitory Authority Rev., Mental Health Services
Facilities, "A", 5.75%, 2010 605,000 618,056
Palm Springs, CA, Finance Lease Rev. (Convention Center), "A",
MBIA, 5.5%, 2035 7,000,000 7,888,650
Pennsylvania Convention Center Authority Rev., ETM, FGIC,
6.7%, 2016 (c) 26,195,000 30,048,285
Philadelphia, PA, Municipal Authority, MBIA, 5.4%, 2017 5,000,000 5,106,450
San Bernardino, CA, Joint Powers Financing Authority Lease
Rev. (California Department of Transportation), 5.5%, 2014 10,000,000 10,141,800
West Valley City, Utah Municipal Building Lease Rev., "A",
AMBAC, 5.5%, 2012 (c) 2,000,000 2,180,980
--------------
$ 98,451,275
- ----------------------------------------------------------------------------------------------------------
Student Loan Revenue - 0.5%
- ----------------------------------------------------------------------------------------------------------
Arizona Student Loan Acquisition Authority Rev., 5.8%, 2016 $ 2,500,000 $ 2,651,300
Arizona Student Loan Acquisition Authority Rev., 5.85%, 2017 2,800,000 2,972,200
--------------
$ 5,623,500
- ----------------------------------------------------------------------------------------------------------
Tax - Other - 1.0%
- ----------------------------------------------------------------------------------------------------------
Illinois Dedicated Tax Rev. (Civic Center), AMBAC, 6.25%, 2011 $ 3,640,000 $ 3,904,009
New Jersey Economic Development Authority Rev. Cigarette Tax,
5.5%, 2024 910,000 953,298
New Jersey Economic Development Authority Rev. Cigarette Tax,
5.75%, 2029 1,640,000 1,788,289
New Jersey Economic Development Authority Rev. Cigarette Tax,
5.5%, 2031 730,000 782,341
New Jersey Economic Development Authority Rev. Cigarette Tax,
5.75%, 2034 1,095,000 1,186,881
Virgin Islands Public Finance Authority Rev., "A", 5.5%, 2022 2,000,000 2,065,860
--------------
$ 10,680,678
- ----------------------------------------------------------------------------------------------------------
Tax Assessment - 0.2%
- ----------------------------------------------------------------------------------------------------------
Noblesville, IN, Redevelopment Authority Lease Rental,
5.25%, 2025 $ 1,545,000 $ 1,662,451
- ----------------------------------------------------------------------------------------------------------
Tobacco - 2.0%
- ----------------------------------------------------------------------------------------------------------
Badger, WI, Tobacco Asset Securitization Corp., 6.125%, 2027 $ 2,015,000 $ 2,155,869
California County, CA, Tobacco Securitization Agency, Capital
Appreciation Asset Backed (Gold Country), 0%, 2033 5,660,000 1,270,670
Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico,
"A", 0%, 2050 10,000,000 691,900
District of Columbia, Tobacco Settlement, 6.25%, 2024 955,000 1,017,342
District of Columbia, Tobacco Settlement, Capital
Appreciation, "A", 0%, 2046 7,515,000 710,468
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement, "A-1", 6.25%, 2033 2,800,000 3,143,896
Iowa Tobacco Settlement Authority, Tobacco Settlement Rev.,
Asset Backed, "B", 0% to 2007, 5.6% to 2034 2,455,000 2,491,457
Louisiana Tobacco Settlement Authority Rev., 5.5%, 2030 1,235,000 1,301,974
New Jersey Tobacco Settlement Financing Corp., "1-A",
5%, 2041 1,650,000 1,615,977
New Jersey Tobacco Settlement Authority, 5.75%, 2012 (c) 2,275,000 2,438,937
Northern Tobacco Securitization Corp., AK, Asset Backed, "A",
5%, 2046 1,545,000 1,523,834
Silicon Valley Tobacco Securitization Authority, CA, Tobacco
Settlement Rev. (Turbo-Santa Clara), "A", 0%, 2036 3,370,000 672,585
Silicon Valley Tobacco Securitization Authority, CA, Tobacco
Settlement Rev. (Turbo-Santa Clara), "A", 0%, 2041 2,775,000 412,254
South Carolina Tobacco Settlement Authority Rev., "B",
6.375%, 2028 1,500,000 1,607,940
Washington Tobacco Settlement Authority, 6.5%, 2026 155,000 169,992
--------------
$ 21,225,095
- ----------------------------------------------------------------------------------------------------------
Toll Roads - 1.9%
- ----------------------------------------------------------------------------------------------------------
E-470 Public Highway Authority Rev., Capital Appreciation "B",
MBIA, 0%, 2010 (c) $ 5,000,000 $ 2,868,650
Harris County, TX, Toll Road Subordinated Lien, 5%, 2024 3,860,000 3,918,440
New Jersey Turnpike Authority Rev., MBIA, 5.375%, 2010 (c)(u) 10,000,000 10,466,300
Northwest Parkway Public Highway Authority Co. Rev., Capital
Appreciation "B", AMBAC, 0%, 2018 1,250,000 722,200
Northwest Parkway Public Highway Authority Co. Rev., Capital
Appreciation "B", AMBAC, 0%, 2019 2,000,000 1,085,080
Northwest Parkway Public Highway Authority Co. Rev., Capital
Appreciation "C", FSA, 0% to 2011, 5.35% to 2016 1,000,000 903,830
--------------
$ 19,964,500
- ----------------------------------------------------------------------------------------------------------
Transportation - Special Tax - 4.4%
- ----------------------------------------------------------------------------------------------------------
Jacksonville, FL, Transportation Authority, ETM, 9.2%, 2015 (c) $ 2,000,000 $ 2,536,380
Metropolitan, NY, Transportation Authority Rev., AMBAC,
5%, 2030 5,000,000 5,251,950
Metropolitan, NY, Transportation Authority Rev., "A", FSA,
5%, 2030 2,750,000 2,897,235
Metropolitan, NY, Transportation Authority Rev., ETM,
5.75%, 2013 (c) 5,600,000 6,008,184
New Jersey Economic Development Authority Rev., Transportation
Project Sublease "A", FSA, 6%, 2009 (c) 1,325,000 1,390,309
New Jersey Transportation Trust Fund Authority Rev., FSA,
5.5%, 2011 (u) 15,000,000 16,185,150
New Jersey Transportation Trust Fund Authority Rev.,
Transportation Systems "B", 5.25%, 2007 (c) 8,500,000 8,707,145
New York Thruway Authority Service Contract Rev., 5.25%, 2013 2,420,000 2,470,989
--------------
$ 45,447,342
- ----------------------------------------------------------------------------------------------------------
Universities - Colleges - 5.6%
- ----------------------------------------------------------------------------------------------------------
Anderson, IN, Economic Development Rev. (Anderson University
Project), 5%, 2028 $ 580,000 $ 590,962
Anderson, IN, Economic Development Rev. (Anderson University
Project), 5%, 2032 400,000 405,956
Arkansas Technical University Rev., Housing Systems, "N",
AMBAC, 5%, 2036 575,000 611,547
College of Charleston, SC, Academic & Administrative
Facilities Rev., "B", XLCA, 5.125%, 2034 2,400,000 2,570,928
Illinois Finance Authority Rev. (University of Chicago), "A",
5%, 2034 785,000 828,238
Los Angeles, CA, Community College, "B", FSA, 5%, 2027 5,000,000 5,300,200
Massachusetts Development Finance Agency Rev. (Boston
University), XLCA, 6%, 2059 4,975,000 6,281,584
Massachusetts Development Finance Agency Rev. (Massachusetts
College of Pharmacy), "B", 6.625%, 2010 (c) 350,000 381,115
Massachusetts Health & Educational Facilities Authority Rev.
(Harvard University), 6.25%, 2020 (u) 16,820,000 21,093,626
Ohio Higher Educational Facilities Rev. (Mt. Union College
Project), 5%, 2031 700,000 739,788
Ohio State University, 6%, 2009 (c) 500,000 535,265
Oregon Facilities Authority Rev. (Linfield College), "A", 5%, 2030 605,000 630,229
Rhode Island, Health & Educational Building Corp. (Rhode
Island School of Design), "D", XLCA, 5.5%, 2035 9,140,000 10,120,356
San Mateo County, CA (Community College District, 2005
Election), "A", MBIA, 0%, 2026 5,100,000 2,217,276
University of Akron, OH, General Receipts, FGIC, 6%, 2010 (c) 1,000,000 1,072,280
University of Arkansas, University Construction Rev. (UAMS
Campus), "B", MBIA, 5%, 2034 810,000 860,180
University of Hawaii, University Systems Rev., "A", FGIC,
5.5%, 2012 (c) 3,500,000 3,814,300
University of New Mexico, MBIA, 5.75%, 2010 (c) 500,000 532,240
--------------
$ 58,586,070
- ----------------------------------------------------------------------------------------------------------
Universities - Dormitories - 0.1%
- ----------------------------------------------------------------------------------------------------------
Georgia Private College & University Authority Rev. (Mercer
Housing Corp.), "A", 6%, 2021 $ 1,000,000 $ 1,065,000
- ----------------------------------------------------------------------------------------------------------
Universities - Secondary Schools - 0.5%
- ----------------------------------------------------------------------------------------------------------
District of Columbia Rev. (Gonzaga College High School), FSA,
5.25%, 2032 $ 3,500,000 $ 3,739,470
Maine Finance Authority (Waynflete School), 6.5%, 2024 1,500,000 1,597,695
--------------
$ 5,337,165
- ----------------------------------------------------------------------------------------------------------
Utilities - Investor Owned - 2.1%
- ----------------------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (New Mexico Public
Service), "C", 5.8%, 2022 $ 4,880,000 $ 4,909,426
Forsyth, MT, Pollution Control Rev. (Northwestern Corp.),
AMBAC, 4.65%, 2023 2,285,000 2,380,376
Lehigh County, PA, Industrial Development Authority Pollution
Control Rev. (PPL Electric Utilities Corp.), "A", FGIC, 4.7%, 2029 1,180,000 1,226,999
Matagorda County, TX, District Pollution Control Rev. (AEP
Texas Central), "N", AMBAC, 4.4%, 2030 3,840,000 3,856,474
Michigan Strategic Fund, Limited Obligation Rev. (Detroit
Edison), MBIA, 7%, 2008 3,000,000 3,131,280
New Hampshire Industrial Development Authority, Pollution
Control Rev. (Connecticut Light & Power), 5.9%, 2016 3,500,000 3,563,525
New Hampshire Industrial Development Authority, Pollution
Control Rev. (Connecticut Light & Power), 5.9%, 2018 1,000,000 1,046,960
Sabine River Authority, TX, Pollution (TXU Electric Co.),
5.75%, 2030 1,500,000 1,542,975
--------------
$ 21,658,015
- ----------------------------------------------------------------------------------------------------------
Utilities - Municipal Owned - 12.7%
- ----------------------------------------------------------------------------------------------------------
Austin, TX, Utility Systems Rev., AMBAC, 6.75%, 2012 $ 2,500,000 $ 2,877,025
Easley, SC, Utility Rev., Refunding & Improvement, FSA,
5%, 2034 1,090,000 1,168,829
Georgia Municipal Electric Authority Power Rev., AMBAC,
6.5%, 2014 (c) 145,000 171,565
Georgia Municipal Electric Authority Power Rev., AMBAC,
6.5%, 2017 8,000,000 9,472,080
Georgia Municipal Electric Authority Power Rev., ETM, AMBAC,
6.5%, 2017 (c) 365,000 431,912
Hawaii Department Budget & Finance Rev., "B" (Electric Co. &
Subsidiary), XLCA, 5%, 2022 4,000,000 4,178,560
Intermountain Power Agency, UT, "A", AMBAC, 6%, 2009 (c) 9,000,000 9,476,550
Intermountain Power Agency, UT, "A", ETM, 6.15%, 2014 (c) 28,220,000 29,198,387
Intermountain Power Agency, UT, Rev., "A", 6.15%, 2014 230,000 234,078
Mercer County, ND, Pollution Control Rev. (Antelope Valley
Station), AMBAC, 7.2%, 2013 4,000,000 4,508,720
North Carolina Eastern Municipal Power "A", MBIA, 6.5%, 2018 9,250,000 11,346,883
North Carolina Municipal Power, MBIA, 5.25%, 2019 (u) 7,000,000 7,544,250
North Carolina Municipal Power Agency, Catawba Electric Rev.,
6.375%, 2013 1,500,000 1,615,830
Northern California Transmission Agency, MBIA, 7%, 2013 4,000,000 4,585,400
Piedmont, SC, Municipal Power Agency, FGIC, 6.25%, 2021 4,150,000 5,174,054
Puerto Rico Electric Power Authority, FSA, 5.25%, 2015 (u) 5,000,000 5,172,250
Puerto Rico Electric Power Authority, FSA, 5.25%, 2016 (u) 6,000,000 6,215,400
San Antonio, TX, Electric & Gas, "A", 5%, 2025 1,000,000 1,067,170
South Carolina Public Service Authority, "B", FSA, 5.125%, 2037 8,500,000 8,926,530
Southern California Public Power Authority Rev. (Magnolia
Power), AMBAC, 5%, 2036 4,200,000 4,429,950
Washington Public Power Supply System Rev. (Nuclear Project
#1), FSA, 5.125%, 2014 8,000,000 8,192,800
Washington Public Power Supply System Rev. (Nuclear Project
#3), 7.125%, 2016 5,145,000 6,431,044
--------------
$ 132,419,267
- ----------------------------------------------------------------------------------------------------------
Water & Sewer Utility Revenue - 0.7%
- ----------------------------------------------------------------------------------------------------------
Forsyth County, GA, Water & Sewer Authority Rev.,
6.25%, 2010 (c) $ 1,055,000 $ 1,143,768
Forsyth County, GA, Water & Sewer Authority Rev.,
6.25%, 2010 (c) 1,000,000 1,084,140
Massachusetts Water Resources Authority, "A", FSA, 4.5%, 2036 1,930,000 1,946,830
Spartanburg, SC, Water & Sewer Authority Rev., "B", MBIA,
5.25%, 2030 920,000 998,264
West Virginia Water Development Authority Loan Program, "B",
AMBAC, 4.75%, 2035 390,000 404,836
West Wilson Utility District, TN, Waterworks Rev., MBIA,
5.25%, 2014 (c) 1,730,000 1,902,291
--------------
$ 7,480,129
- ----------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $1,014,042,443) $1,086,593,269
- ----------------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.1%
- ----------------------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority Rev.
(Presbyterian University Hospital), "B", 3.7%, due 3/01/07 $ 200,000 $ 200,000
East Baton Rouge, LA, Pollution Control Rev. (Exxon Mobil
Corp.), 3.61%, due 3/01/07 100,000 100,000
Harris County, TX, Health Facilities Development Rev.
(University of Texas Medical Center), 3.64%, due 3/01/07 300,000 300,000
Jackson County, MS, Pollution Control Rev. (Chevron USA,
Inc.), 3.66%, due 3/01/07 100,000 100,000
Jefferson County, AL, Sewer Rev., Capital Improvement Warrants
Rev., "A", 3.68%, due 3/01/07 500,000 500,000
Lincoln County, WY, Pollution Control Rev. (Exxon Mobil
Corp.), 3.61%, due 3/01/07 1,600,000 1,600,000
Lincoln County, WY, Pollution Control Rev. (Exxon Mobil
Corp.), 3.66%, due 3/01/07 2,500,000 2,500,000
Lincoln County, WY, Pollution Control Rev. (Exxon Mobil
Corp.), "C", 3.66%, due 3/01/07 200,000 200,000
New York, NY, 3.63%, due 3/01/07 2,000,000 2,000,000
Petersburg, IN, Pollution Control Rev. (Indianapolis Power &
Light Co.), "B", 3.58%, due 3/07/07 2,600,000 2,600,000
Sevier County, TN, Public Building Authority, 3.64%, due 3/01/07 200,000 200,000
State of Oregon, "73G", 3.5%, due 3/07/07 900,000 900,000
Triborough Bridge & Tunnel Authority, NY, Rev., "F",
3.66%, due 3/01/07 400,000 400,000
- ----------------------------------------------------------------------------------------------------------
TOTAL FLOATING RATE DEMAND NOTES
(IDENTIFIED COST, $11,600,000) $ 11,600,000
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $1,025,642,443) (k) $1,098,193,269
- ----------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (5.5)% (56,842,240)
- ----------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $1,041,351,029
- ----------------------------------------------------------------------------------------------------------
(c) Refunded bond.
(k) As of February 28, 2007, the fund held securities fair valued in accordance with the policies adopted
by the Board of Trustees, aggregating $1,086,593,269 and 98.94% of market value. All of these security
values were provided by an independent pricing service using an evaluated bid.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be sold in the ordinary course of business in transactions exempt from registration, normally to
qualified institutional buyers. At period end, the aggregate value of these securities was $2,125,276,
representing 0.2% of net assets.
(p) Primary inverse floater.
(u) Underlying security deposited into special purpose trust ("the trust") by investment banker upon
creation of self-deposited inverse floaters.
SWAP AGREEMENTS AT 2/28/07
UNREALIZED
NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION
EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS
12/01/07 USD 27,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $ 201,174
7/23/22 USD 10,000,000 Merrill Lynch 7-Day BMA 3.889% (fixed rate) (140,120)
---------
$ 61,054
=========
At February 28, 2007, the fund had sufficient cash and/or securities to cover any commitments under these
derivative contracts.
The following abbreviations are used in this report and are defined:
BMA Bond Market Assn.
ETM Escrowed to Maturity
Insurers
- ----------------------------------------------
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Administration
FNMA Federal National Mortgage Assn.
FSA Financial Security Assurance Inc.
GNMA Government National Mortgage Assn.
MBIA MBIA Insurance Corp.
PSF Permanent School Fund
XLCA XL Capital Insurance Co.
Inverse Floaters
- ----------------------------------------------
RITES Residual Interest Tax-Exempt Security
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets and liabilities
comprising the total value of the fund.
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $1,025,642,443) $1,098,193,269
Cash 15,196
Receivable for investments sold 776,165
Receivable for fund shares sold 437,207
Interest and dividends receivable 13,292,059
Unrealized appreciation on interest rate swap agreements 201,174
Other assets 46,950
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Total assets $1,112,962,020
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LIABILITIES
- -------------------------------------------------------------------------------------------------------
Distributions payable $1,576,634
Payable for investments purchased 2,490,526
Payable to the holder of the floating rate certificate from
trust assets 65,530,000
Payable for fund shares reacquired 993,947
Unrealized depreciation on interest rate swap agreements 140,120
Payable to affiliates
Management fee 17,074
Shareholder servicing costs 52,530
Distribution and service fees 5,491
Administrative services fee 1,036
Payable for independent trustees' compensation 60,018
Payable for interest expense and fees 631,363
Accrued expenses and other liabilities 112,252
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Total liabilities $71,610,991
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Net assets $1,041,351,029
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NET ASSETS CONSIST OF
- -------------------------------------------------------------------------------------------------------
Paid-in capital $962,924,438
Unrealized appreciation (depreciation) on investments 72,611,880
Accumulated net realized gain (loss) on investments 3,857,012
Undistributed net investment income 1,957,699
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Net assets $1,041,351,029
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Shares of beneficial interest outstanding 99,348,002
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Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,003,641,388
Shares outstanding 95,746,781
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Net asset value per share $10.48
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Offering price per share (100/95.25Xnet asset value per share) $11.00
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Class B shares
- -------------------------------------------------------------------------------------------------------
Net assets $37,709,641
Shares outstanding 3,601,221
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Net asset value and offering price per share $10.47
- -------------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A shares is reduced. A contingent deferred
sales charge may be imposed on redemptions of Class A and Class B shares.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Interest $31,167,886
Other 27,877
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Total investment income $31,195,763
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Expenses
Management fee $2,090,369
Distribution and service fees 154,077
Shareholder servicing costs 537,907
Administrative services fee 95,040
Independent trustees' compensation 17,520
Custodian fee 129,151
Shareholder communications 32,245
Auditing fees 23,201
Legal fees 15,429
Interest expense and fees 1,274,653
Miscellaneous 73,897
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Total expenses $4,443,489
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Fees paid indirectly (90,606)
Reduction of expenses by investment adviser (525,380)
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Net expenses $3,827,503
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Net investment income $27,368,260
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $2,153,980
Swap transactions (879,937)
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Net realized gain (loss) on investments $1,274,043
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Change in unrealized appreciation (depreciation)
Investments $(1,363,997)
Swap transactions 136,749
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Net unrealized gain (loss) on investments $(1,227,248
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Net realized and unrealized gain (loss) on investments $46,795
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Change in net assets from operations $27,415,055
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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
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
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Net investment income $27,368,260 $53,971,557
Net realized gain (loss) on investments 1,274,043 7,576,834
Net unrealized gain (loss) on investments (1,227,248) (30,229,530)
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $27,415,055 $31,318,861
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DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income
Class A $(24,414,759) $(51,235,558)
Class B (826,608) (2,015,747)
From net realized gain on investments
Class A (5,821,976) (4,372,165)
Class B (235,831) (211,792)
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Total distributions declared to shareholders $(31,299,174) $(57,835,262)
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Change in net assets from fund share transactions $(21,950,071) $(59,309,355)
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Total change in net assets $(25,834,190) $(85,825,756)
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NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 1,067,185,219 1,153,010,975
At end of period (including undistributed net investment
income of $1,957,699 and accumulated distributions in
excess of net investment income of $169,194) $1,041,351,029 $1,067,185,219
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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.
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 share class (assuming
reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $10.52 $10.77 $10.81 $10.64 $10.87 $10.77
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.27 $0.52 $0.52 $0.53 $0.52 $0.53
Net realized and unrealized
gain (loss) on investments 0.00(w) (0.21) (0.04) 0.17 (0.22) 0.10
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.27 $0.31 $0.48 $0.70 $0.30 $0.63
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.25) $(0.52) $(0.52) $(0.53) $(0.53) $(0.53)
From net realized gain on
investments (0.06) (0.04) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(0.31) $(0.56) $(0.52) $(0.53) $(0.53) $(0.53)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.48 $10.52 $10.77 $10.81 $10.64 $10.87
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 2.63(n) 2.99 4.58 6.70 2.80 6.17
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.82(a) 0.80 0.72 0.65 0.65 0.67
Expenses after expense reductions (f) 0.72(a) 0.70 0.62 0.60 N/A N/A
Expenses after expense reductions
and excluding interest expense and
fees (f)(l) 0.48(a) 0.49 0.49 0.53 0.59 0.59
Net investment income 5.27(a) 4.96 4.87 4.92 4.76 5.01
Portfolio turnover 6 12 9 9 13 14
Net assets at end of period
(000 Omitted) $1,003,641 $1,023,965 $1,097,308 $1,147,174 $1,290,801 $1,308,191
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $10.51 $10.76 $10.80 $10.63 $10.86 $10.76
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.23 $0.44 $0.44 $0.45 $0.43 $0.45
Net realized and unrealized gain
(loss) on investments 0.00(w) (0.21) (0.04) 0.16 (0.22) 0.10
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.23 $0.23 $0.40 $0.61 $0.21 $0.55
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.21) $(0.44) $(0.44) $(0.44) $(0.44) $(0.45)
From net realized gain on investments (0.06) (0.04) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(0.27) $(0.48) $(0.44) $(0.44) $(0.44) $(0.45)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.47 $10.51 $10.76 $10.80 $10.63 $10.86
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 2.24(n) 2.21 3.80 5.86 1.96 5.33
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.58(a) 1.56 1.49 1.43 1.45 1.47
Expenses after expense reductions (f) 1.48(a) 1.46 1.39 1.38 N/A N/A
Expenses after expense reductions and
excluding interest expense and fees (f)(l) 1.24(a) 1.25 1.26 1.31 1.39 1.39
Net investment income 4.51(a) 4.20 4.10 4.12 3.96 4.20
Portfolio turnover 6 12 9 9 13 14
Net assets at end of period
(000 Omitted) $37,710 $43,220 $55,703 $66,927 $82,029 $83,990
- ------------------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years
resulted in a per share impact of less than $0.01.
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Municipal Bond Fund (the fund) is a series of MFS Series Trust IV which is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Municipal
securities backed by current or anticipated revenues from a specific project or
specific assets can be negatively affected by the discontinuance of the
taxation supporting the projects or assets or the inability to collect revenues
for the project or from the assets. If the Internal Revenue Service determines
an issuer of a municipal security has not complied with applicable tax
requirements, the security could decline in value, interest from the security
could become taxable and the fund may be required to issue Forms 1099-DIV.
INVESTMENT VALUATIONS - Debt instruments (other than short-term instruments),
including restricted debt instruments, are generally valued at an evaluated or
composite bid as reported by an independent pricing service. Short-term
instruments with a maturity at issuance of 60 days or less may be valued at
amortized cost, which approximates market value. Swaps are generally valued at
an evaluated bid as reported by an independent pricing service. Securities and
other assets generally valued on the basis of information from an independent
pricing service may also be valued at a broker-dealer bid quotation. Values
obtained from pricing services can utilize both dealer-supplied valuations and
electronic data processing techniques, which take into account 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.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any
fair valuation) to the adviser pursuant to valuation policies and procedures
approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as
determined in good faith by the adviser in accordance with such procedures
under the oversight of the Board of Trustees. Under the fund's valuation
policies and procedures, market quotations are not considered to be readily
available for many types of debt instruments and certain types of derivatives.
These investments are generally valued at fair value based on information from
independent pricing services. In addition, investments may be valued at fair
value if the adviser determines that an investment's value has been materially
affected by events occurring after the close of the exchange or market on which
the investment is principally traded (such as foreign exchange or market) and
prior to the determination of the fund's net asset value, or after the halting
of trading of a specific security where trading does not resume prior to the
close of the exchange or market on which the security is principally traded.
Events that occur on a frequent basis after foreign markets close (such as
developments in foreign markets and significant movements in the U.S. markets)
and prior to the determination of the fund's net asset value may be deemed to
have a material affect on the value of securities traded in foreign markets.
Accordingly, the fund's foreign equity securities may often be valued at fair
value. The adviser may rely on independent pricing services or other
information (such as the correlation with price movements of similar securities
in the same or other markets; the type, cost and investment characteristics of
the security; the business and financial condition of the issuer; and trading
and other market data) to assist in determining whether to fair value and at
what value to fair value an investment. The value of an investment for purposes
of calculating the fund's net asset value can differ depending on the source
and method used to determine value. When fair valuation is used, the value of
investments used to determine the fund's net asset value may differ from quoted
or published prices for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management
is evaluating the application of the Statement to the fund, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in the fund's financial statements.
DERIVATIVE RISK - The fund may invest in derivatives for hedging or non-
hedging purposes. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. When the fund uses derivatives as an investment to
gain market exposure, or for hedging purposes, gains and losses from derivative
instruments may be substantially greater than the derivative's original cost.
Derivative instruments include swap agreements and inverse floaters.
SWAP AGREEMENTS - The fund may enter into swap agreements. A swap is an
exchange of cash payments between the fund and another party. Net cash payments
are exchanged at specified intervals and are recorded as a realized gain or
loss in the Statement of Operations. The value of the swap is adjusted daily
and the change in value, including accruals of periodic amounts of interest to
be paid or received, is recorded as unrealized appreciation or depreciation in
the Statement of Operations. A liquidation payment received or made upon early
termination is recorded as a realized gain or loss in the Statement of
Operations. Collateral, in the form of cash or securities, may be required to
be held in segregated accounts with the fund's custodian in connection with
these agreements. Risk of loss may exceed amounts recognized on the Statement
of Assets and Liabilities. These risks include the possible lack of a liquid
market, failure of the counterparty to perform under the terms of the
agreements, and unfavorable market movement of the underlying instrument. All
swap agreements entered into by the fund with the same counterparty are
generally governed by a single master agreement, which provides for the netting
of all amounts owed by the parties under the agreement upon the occurrence of
an event of default, thereby reducing the credit risk to which such party is
exposed.
The fund holds interest rate swap agreements which involve the periodic
exchange of cash flows, such as the exchange of fixed rate interest payments
for floating rate interest payments based on a notional principal amount. The
interest rates may be based on a specific financial index or the exchange of
two distinct floating rate payments. The fund may enter into an interest rate
swap in order to manage its exposure to interest rate fluctuations.
INVERSE FLOATERS - The fund invests in municipal inverse floating rate
securities which are structured by the issuer (known as primary market inverse
floating rate securities) or by an investment banker utilizing municipal bonds
which have already been issued (known as secondary market inverse floating rate
securities) to have variable rates of interest which typically move in the
opposite direction of short term interest rates. A secondary market inverse
floating rate security is created when an investment banker transfers a fixed
rate municipal bond to a special purpose trust, and causes the trust to (a)
issue floating rate certificates to third parties, in an amount equal to a
fraction of the par amount of the deposited bonds (these certificates usually
pay tax-exempt interest at short-term interest rates that typically reset
weekly; and the certificate holders typically, on seven days notice, have the
option to tender their certificates to the investment banker or another party
for redemption at par plus accrued interest), and (b) issue inverse floating
rate certificates (sometimes referred to as "inverse floaters"). If the holder
of the inverse floater transfers the municipal bonds to an investment banker
for the purpose of depositing the municipal bonds into the special purpose
trust, the inverse floating rate certificates that are issued by the trust are
referred to as "self-deposited inverse floaters." If the bonds held by the
trust are purchased by the investment banker for deposit into the trust from
someone other than the purchasers of the inverse floaters, the inverse floating
rate certificates that are issued by the trust are referred to as "externally
deposited inverse floaters." Such self-deposited inverse floaters held by the
fund are accounted for as secured borrowings, with the municipal bonds
reflected in the investments of the fund and amounts owed to the holder of the
floating rate certificate under the provisions of the trust, which amounts are
paid solely from the assets of the trust, reflected as liabilities of the fund
in the Statement of Assets and Liabilities under the caption, "Payable to the
holder of the floating rate certificate from trust assets". At February 28,
2007, the fund's payable to the holder of the floating rate certificate from
trust assets was $65,530,000. The weighted average interest rate on the
floating rate certificates issued by the trust was 3.49%. Interest expense and
fees relate to payments made to the holder of the floating rate certificate
from trust assets in connection with self-deposited inverse floater
transactions. Interest expense and fees are recorded as incurred. For the year
ended February 28, 2007, interest expense and fees in connection with
self-deposited inverse floaters was $1,274,653. Primary and externally
deposited inverse floaters held by the fund are not accounted for as secured
borrowings.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All premium and
original issue discount is amortized or accreted for tax reporting purposes as
required by federal income tax regulations.
The fund may receive proceeds from litigation settlements. Any proceeds
received from litigation involving its portfolio holdings are reflected in
realized gain/loss in the Statement of Operations, or in unrealized gain/loss
if the security is still held by the fund. Any other proceeds from litigation
not related to portfolio holdings are reflected as other income in the
Statement of Operations.
FEES PAID INDIRECTLY - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. This amount, for the six months ended February 28, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable and tax-exempt income, including realized
capital gains. Accordingly, no provision for federal income tax is required in
the financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to amortization and accretion of debt
securities, secured borrowings, and treating a portion of the proceeds from
redemptions as a distribution for tax purposes.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
8/31/06
Ordinary income (including any short-term
capital gains) $234,209
Tax-exempt income 53,251,305
Long-term capital gain 4,349,748
----------------------------------------------------------
Total distributions $57,835,262
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $955,475,431
----------------------------------------------------------
Gross appreciation $77,915,785
Gross depreciation (727,947)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $77,187,838
AS OF 8/31/06
Undistributed ordinary income 3,011,042
Undistributed tax-exempt income 4,159,432
Undistributed long-term capital gain 3,044,715
Other temporary differences (4,461,211)
Net unrealized appreciation (depreciation) 76,556,732
The aggregate cost above includes prior fiscal year end tax adjustments.
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. This Interpretation prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Management is
evaluating the application of the Interpretation to the fund, and has not at
this time determined the impact, if any, resulting from the adoption of this
Interpretation on the fund's financial statements.
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - The fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. Differences in per
share dividend rates are generally due to differences in separate class
expenses. Class B shares will convert to Class A shares approximately eight
years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
management and related administrative services and facilities to the fund.
The management fee is computed daily and paid monthly at the following annual
rates:
First $1.3 billion of average daily net assets 0.40%
Next $0.7 billion of average daily net assets 0.37%
Average daily net assets in excess of $2 billion 0.35%
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 February 28, 2007, this
waiver amounted to $522,592 and is reflected as a reduction of total expenses
in the Statement of Operations.
The management fee incurred for the six months ended February 28, 2007 was
equivalent to an annual effective rate of 0.30% of the fund's average daily net
assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $39,333 for the six months ended February 28,
2007, as its portion of the initial sales charge on sales of Class A shares of
the fund.
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 MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class B 0.75% 0.25% 1.00% 0.76% $154,077
(d) 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.
(e) The annual effective rates represent actual fees incurred under the distribution plan for the six
months ended February 28, 2007 based on each class' average daily net assets. For one year from the
date of sale of Class B shares, assets attributable to such Class B shares are subject to the 0.25%
annual Class B service fee. On assets attributable to all other Class B shares, the service fee is not
currently in effect, but may be implemented on such date as the fund's Board of Trustees may determine.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months of purchase. Class B shares
are subject to a contingent deferred sales charge in the event of a shareholder
redemption within six years of purchase. All contingent deferred sales charges
are paid to MFD and during the six months ended February 28, 2007, were as
follows:
AMOUNT
Class A $7,974
Class B $46,223
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as shareholder
servicing agent calculated as a percentage of the average daily net assets of
the fund as determined periodically under the supervision of the fund's Board
of Trustees. For the six months ended February 28, 2007, the fee was $400,085,
which equated to 0.0766% annually of the fund's average daily net assets.
Effective January 1, 2007, MFSC has entered into a sub-accounting agreement
with SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of MFSC, on
behalf of the fund to provide omnibus account services to the fund. MFSC pays
SRS both an asset based fee and a per account charge of the assets held in the
omnibus account. The fund then reimburses MFSC for the sub- accounting fees
paid to SRS. For the six months ended February 28, 2007, the sub-accounting fee
for SRS was $28, which equated to less than 0.01% annually of the fund's
average daily net assets. MFSC also receives payment from the fund for
out-of-pocket and sub-accounting expenses. For the six months ended February
28, 2007, these out-of-pocket and sub-accounting costs amounted to $105,072.
The fund may also pay shareholder servicing related costs directly to
non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. The fund's annual
fixed amount is $17,500. The administrative services fee incurred for the six
months ended February 28, 2007 was equivalent to an annual effective rate of
0.0182% of the fund's average daily net assets.
TRUSTEES' AND OFFICERS' 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 or officers of the fund who are also officers
of the investment adviser, 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 certain retired independent
trustees which resulted in a pension expense of $2,395. This amount is included
in independent trustees' compensation for the six months ended February 28,
2007. The liability for deferred retirement benefits payable to certain retired
independent trustees amounted to $58,111 at February 28, 2007, and is included
in payable for independent trustees' compensation.
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. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $4,219. MFS has agreed to reimburse the fund for a portion of
the payments made by the funds to Tarantino LLC in the amount of $2,788, 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.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$60,509,394 and $93,172,651, respectively.
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 2,300,784 $24,124,919 4,431,648 $46,577,608
Class B 97,467 1,023,798 279,641 2,936,579
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2,398,251 $25,148,717 4,711,289 $49,514,187
Shares issued to shareholders in
reinvestment of distributions
Class A 1,828,105 $19,211,898 3,283,252 $34,528,092
Class B 61,344 644,189 126,124 1,325,579
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1,889,449 $19,856,087 3,409,376 $35,853,671
Shares reacquired
Class A (5,711,954) $(59,931,468) (12,282,330) $(129,197,060)
Class B (670,231) (7,023,407) (1,471,401) (15,480,153)
- -----------------------------------------------------------------------------------------------------------
(6,382,185) $(66,954,875) (13,753,731) $(144,677,213)
Net change
Class A (1,583,065) $(16,594,651) (4,567,430) $(48,091,360)
Class B (511,420) (5,355,420) (1,065,636) (11,217,995)
- -----------------------------------------------------------------------------------------------------------
(2,094,485) $(21,950,071) (5,633,066) $(59,309,355)
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally 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 committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense on the
line of credit were $3,255 and $0, respectively, and are included in
miscellaneous expense on the Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (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 Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site 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 US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA 02205-5824
1-800-637-8255
24 hours a day OVERNIGHT MAIL
MFS Service Center, Inc.
ACCOUNT SERVICE AND 500 Boylston Street
LITERATURE Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
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Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph (b)
of Item 2 of this Form N-CSR.
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 407(c)(2)(iv) of Regulation S-K (as required by Item
22(b)(15) of Schedule 14A), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness 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 report on 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 of the period covered by the report that have
materially affected, or are 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.
(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.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of The Commonwealth of Massachusetts and notice
is hereby given that this instrument is executed on behalf of the Registrant by
an officer of the Registrant as an officer and not individually and the
obligations of or arising out of this instrument are not binding upon any of the
Trustees or shareholders individually, but are binding only upon the assets and
property of the respective constituent series of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST IV
-------------------------------------------------------------------
By (Signature and Title)* MARIA F. DWYER
------------------------------------------------------
Maria F. Dwyer, President
Date: April 16, 2007
--------------
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)* MARIA F. DWYER
------------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: April 16, 2007
--------------
By (Signature and Title)* TRACY ATKINSON
------------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: April 16, 2007
--------------
* Print name and title of each signing officer under his or her signature.