Dear Shareholders:
The past 12 months have been a good period for fixed-income markets, bringing
strong investment returns to the Trust. The Federal Reserve Board ended its
year-long string of tightening steps this past February and left interest
rates unchanged through the spring. The Fed subsequently lowered the federal
funds' target by 25 basis points (0.25%) to 5.75% on July 6, citing the
reduced threat of inflation moving higher. The fixed-income markets responded
positively to this, as well as to signs of economic slowdown and to evidence
that inflation pressures remained moderate. Two-year Treasury yields, which
were at 7.40% on November 30, 1994, declined to 5.35% by the end of November
1995, while yields on 10-year Treasuries declined from 7.90% to 5.74%. The
Trust was an active participant in this rally. The Trust's net asset value,
which stood at $6.90 on November 30, 1994, increased to $7.62 on November 30,
1995, while the market price of the Trust rose from $6.313 to $6.50,
representing a total return of +19.01% based on net asset value and +10.96%
based on market value.
The share repurchase program which the Trustees approved last year remains an
active program and one which we believe has enhanced shareholder value.
U.S. Government Sector
Moderate, but sustainable, growth appears to be the hallmark of the economic
expansion's fifth year. While initial estimates showed the U.S. economy
growing at an annual rate of 4.2% in the third quarter, this surprisingly
strong growth was mainly driven by a pickup in consumer spending and an
increase in business and government outlays. Although impressive, this growth
rate is not expected to continue in coming months. Recent retail sales have
been disappointing, in part because of rising levels of consumer debt. Growth
is not expected to get much help from the manufacturing sector, either, as
order flows from manufacturers have moderated. Export activity, meanwhile, is
also expected to remain modest as continued weakness abroad has limited
demand for many U.S. goods. However, the Fed's consistent and, so far,
successful efforts to fight inflation seem to be giving consumers and
businesses enough longer term confidence to help maintain modest growth in
real (adjusted for inflation) gross domestic product into 1996. Long-term
interest rates, meanwhile, have moved noticeably downward in recent months in
anticipation of more modest fourth-quarter growth with continued low
inflation.
The Trust's strong performance over the last 12 months was primarily a result
of its being properly positioned for a drop in U.S. interest rates. We
maintained approximately 72% of the portfolio's assets in the U.S. sector,
and positioned these in order to benefit from opportunities for capital
appreciation as the U.S. market rallied. The average duration of the U.S.
investments was increased to 6-1/4 years, approximately equivalent to that of
an eight-year Treasury. Also, the Trust has maintained a substantial position
in government-sponsored and agency securities, as we were able to add
attractive incremental yield to the portfolio in this sector. The Trust's
exposure to the mortgage sector, however, was reduced, as assets were
reallocated to intermediate-maturity Treasuries, which was among the best
performing Treasury sectors during this period.
The Trust's holdings of mortgage-backed pass-through securities consist
mostly of 30-year issues. These securities have a price sensitivity
equivalent to that of five-year Treasuries, with yield spreads which are
1.20% to 1.60% greater than comparable Treasuries (although principal value
and interest on Treasury securities are guaranteed by the U.S. Government if
held to maturity). The mortgage market has been an attractive segment
recently, given the wide yield spreads, low levels of issuance, and good call
protection, and we will likely increase exposure to this sector in the next
few months. Our ability to invest in both Treasuries and mortgage-backed
securities within a range of maturities has proven helpful in this rapidly
changing environment.
International Sector
Fueled by sluggish world economic growth, stable to lower inflation and
monetary easing by central banks, all international bond markets registered
positive returns for the year. In many cases these
1
<PAGE>
returns equaled and surpassed U.S. results when measured in local currency
terms.
Two of the best performing markets were found within the U.S. dollar bloc,
notably in Canada and Australia. Both countries have higher real interest
rates and lower inflation than the United States. For most of the year,
Canada has been plagued by political concerns surrounding the separatist
issue in Quebec. Following a narrow Federalist victory, the Trust increased
its Canadian holdings based on sound economic fundamentals and attractive
yield spreads compared to U.S. bonds. In addition, the Fund's performance was
enhanced by maintaining an overweight position in Australian bonds.
For most of the year, the Trust was positioned close to its maximum (35%)
allowed in foreign government bonds. The majority of our foreign-based
positions remains in Europe. The core markets, such as Germany and the
Netherlands, continue to provide solid returns against a backdrop of slow
growth, low inflation and declining official interest rates. Other European
markets, such as Denmark's, offer a combination of higher yields with
moderate growth and low inflation. The higher yielding European markets have
recovered during the past six months, and the Trust has benefited by
increasing the weighting and lengthening the duration in both Spain and
Italy.
In addition to these economic developments, many European governments are
entering into multi-year programs to reduce their budget deficits and debt
levels which are quite similar to those of the United States. These programs
are positive for bonds because lower government spending tends to reduce
inflationary pressures, and lower issuance of government debt reduces the
supply pressures in the bond market.
In currency terms, the dollar did recover some ground lost during the first
half of the year. The Japanese yen was especially strong over the first half
but gave back almost all those gains versus the U.S. dollar by year-end.
Favorable U.S. short-term interest rate spreads, particularly compared to
those in Germany and Japan, central bank support for the dollar and the
likelihood of a budget resolution in the United States, all argue for a
long-term recovery for the dollar. As always, we will continue to maintain
our commitment to providing competitive and consistent returns over the long
term.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/A. Keith brodkin
A. Keith Brodkin
Chairman and President
/s/Stephen C. Bryant /s/Steven E. Nothern
Stephen C. Bryant and Steven E. Nothern
Portfolio Managers
December 13, 1995
2
<PAGE>
Investment Objective and Policy
The investment objective of MFS(R) Government Markets Income Trust is to
provide a high level of current income.
The Trust will attempt to achieve this objective by investing at least 65% of
its assets in U.S. Government securities and by engaging in transactions
involving related options. The Trust may invest up to 35% of its total assets
in foreign government securities. In pursuing its objective, the Trust will
consider the preservation of capital by balancing the yields of various
fixed-income securities against their attendant risks. However, the Trust
will not purchase securities with the goal of achieving capital appreciation.
For defensive purposes, the Trust may invest in cash (including foreign
currency) and cash equivalents. The Trust may also enter into options and
futures transactions and forward foreign currency exchange contracts and
purchase securities on a "when-issued" basis.
Number of Employees
The Trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as a closed-end,
non-diversified, management investment company and has no employees.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
Trust hereby gives notice that it may from time to time repurchase shares of
the Trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
Performance Summary
(For the year ended November 30, 1995)
Net Asset Value Per Share
November 30, 1994 $6.90
November 30, 1995 $7.62
New York Stock Exchange
Price
November 30, 1994 $6.313
June 7, 1995 (high)* $6.750
January 26, 1995 (low)* $6.000
November 30, 1995 $6.500
*For the period December 1, 1994 through November 30, 1995.
Number of Shareholders
As of November 30, 1995, our records indicate that there are 15,181
registered shareholders and approximately 48,600 shareholders owning Trust
shares in "street" name, such as through brokers, banks and other financial
intermediaries.
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MGF.
3
<PAGE>
Dividend Reinvestment and
Cash Purchase Plan
The Trust offers a Dividend Reinvestment and Cash Purchase Plan which allows
you to reinvest either all of the distributions or only the long-term capital
gains paid by the Trust. Unless the shares are trading at a premium
(exceeding net asset value), purchases are made at the market price.
Otherwise, purchases will be made at a discounted price of either the net
asset value or 95% of the market price, whichever is greater. You can also
buy shares of the Trust. Investments from $100 to $500 can be made in January
and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank or other nominee,
you can ask the firm or nominee to participate in the Plan on your behalf. If
the nominee does not offer the Plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the Trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. A service fee of $0.75
is charged for each cash purchase as well as a pro rata share of the
brokerage commissions, if any. The automatic reinvestment of distributions
does not relieve you of any income tax that may be payable (or required to be
withheld) on the distributions.
To enroll in or withdraw from the Plan or to receive a brochure providing a
complete description of the Plan, please contact the Dividend Disbursing
agent at the address and telephone number located on the back cover of this
report. Please have available the name of the Trust and your account and
Social Security numbers. For certain types of registrations, such as
corporate accounts, instructions must be submitted in writing. When you
withdraw from the Plan, you can receive the value of the reinvested shares in
one of two ways: a check for the value of the full and fractional shares, or
a certificate for the full shares and a check for the fractional shares.
Results of Shareholder Meeting
At the annual meeting of shareholders of MFS Government Markets Income Trust,
which was held on October 26, 1995, the following actions were taken:
Item 1. The election of Marshall N. Cohan, The Honorable Sir J. David
Gibbons, KBE, Abby M. O'Neill and Ward Smith as Trustees of the Trust.
Number of Shares
Nominee For Withold Authority
- --------------------- -------------- ---------------
Marshall N. Cohan 66,295,993.301 3,485,252.851
The Honorable Sir J.
David Gibbons, KBE 66,324,082.159 3,457,163.993
Abby M. O'Neill 66,333,491.071 3,447,755.081
Ward Smith 66,347,790.681 3,433,455.471
Trustees continuing in office who were not subject to re-election at this
meeting are A. Keith Brodkin, Richard B. Bailey, Lawrence H. Cohn, M.D.,
Walter E. Robb, III, Arnold D. Scott, Jeffrey L. Shames and J. Dale Sheratt.
Item 2. The ratification of the selection of Deloitte & Touche llp as the
independent public accountants to be employed by the Trust for the
fiscal year ending November 30, 1995.
Number of Shares
-----------------
For 67,319,646.785
Against 1,100,818.347
Abstain 1,360,781.020
4
<PAGE>
Portfolio of Investments -- November 30, 1995
Bonds -- 98.1%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C> <C>
U.S. Bonds -- 70.3%
U.S. Federal Agencies -- 18.3%
FHA (Kimberly Woods Project Loan), 8.25s, 2027+ $ 6,303 $ 7,167,599
FHA (USGI 986 Spring Hill), 10.375s, 2030+ 2,469 2,740,763
Federal Home Loan Mortgage Corp., 8.61s, 2004 30,000 31,645,200
Federal Home Loan Mortgage Corp., 9.5s, 2025 13,246 14,041,171
Federal National Mortgage Association, 7.8s, 2002 15,000 15,419,550
Federal National Mortgage Association, 0s, 2014 13,500 3,999,915
Federal National Mortgage Association, 7s, 2023 7,940 2,359,589
Financing Corp., 0s, 2014 10,153 2,967,316
Financing Corp., 0s, 2015 8,685 2,376,998
Financing Corp., 0s, 2015 26,962 7,201,820
Financing Corp., 10.7s, 2017 8,500 12,529,510
Financing Corp., 9.8s, 2018 5,000 6,867,950
Resolution Funding FBE Coupon Strips, 0s, 2023 10,100 1,680,135
-------------
$110,997,516
-------------
U.S. Government Guaranteed -- 52.0%
Government Guaranteed -- 23.6%
GNMA, 7s, 2022-2025 $45,090 $ 45,188,773
GNMA, 7.5s, 2022-2025 39,992 40,817,070
GNMA, 9s, 2017-2025 45,288 47,735,833
GNMA, 10.5s, 2020 8,417 9,377,349
-------------
$143,119,025
-------------
Small Business Administration -- 0.9%
SBA, 8.875s, 2011 $ 4,454 $ 5,035,335
-------------
U.S. Treasury Obligations -- 27.5%
U.S. Treasury Notes, 0s, 1999 $21,800 $ 18,327,478
U.S. Treasury Notes, 7.5s, 1999 20,000 21,371,800
U.S. Treasury Notes, 6.25s, 2000 15,000 15,421,800
U.S. Treasury Notes, 7.5s, 2005 15,000 16,800,000
U.S. Treasury Bonds, 7.125s, 2023 65,225 72,603,252
U.S. Treasury Bonds, 12.375s, 2004 15,500 22,249,785
-------------
$166,774,115
-------------
Total U.S. Government Guaranteed $314,928,475
-------------
Total U.S. Bonds $425,925,991
-------------
Foreign Bonds -- 27.8%
Australia -- 3.6%
Australian Government, 8.75s, 2001 AUD 8,500 $ 6,562,310
Australian Government, 9.75s, 2002 10,600 8,553,600
Queensland Treasury Corp., 8s, 2001 9,250 6,869,973
-------------
$ 21,985,883
-------------
Canada -- 2.1%
Canadian Government, 8.75s, 2005 CAD 15,300 $ 12,518,284
-------------
5
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
Foreign Bonds -- continued
Denmark -- 3.9%
Kingdom of Denmark, 9s, 1998 DKK 28,407 $ 5,490,177
Kingdom of Denmark 6s, 1999 38,000 6,776,966
Kingdom of Denmark, 9s, 2000 35,860 7,068,912
Kingdom of Denmark, 8s, 2001 22,053 4,184,183
-------------
$ 23,520,238
-------------
France -- 2.1%
Government of France, 7s, 1999 FRF 30,000 $ 6,216,650
Government of France, 7.75s, 2000 31,760 6,743,823
-------------
$ 12,960,473
-------------
Germany -- 6.2%
Deutschland Republic, 6.5s, 2003 DEM 11,970 $ 8,548,227
Deutschland Republic, 6.875s, 2005 22,000 15,946,768
German Unity Fund, 8.5s, 2001 16,790 13,249,765
-------------
$ 37,744,760
-------------
Ireland -- 2.4%
Republic of Ireland, 8s, 2000 IEP 8,750 $ 14,485,905
-------------
Italy -- 1.7%
Republic of Italy, 8.5s, 1999 ITL 9,815,000 $ 5,802,397
Republic of Italy, 9.5s, 1999 2,820,000 1,687,412
Republic of Italy, 8.5s, 2004 5,590,000 2,999,290
-------------
$ 10,489,099
-------------
Netherlands -- 2.3%
Dutch State Loan, 6.25s, 1998 NLG 1,330 $ 859,032
Dutch State Loan, 8.25s, 2007 18,004 12,824,249
-------------
$ 13,683,281
-------------
New Zealand -- 1.3%
New Zealand Government, 9s, 1996 NZD 12,000 $ 7,905,876
-------------
Spain -- 2.2%
Government of Spain, 10.5s, 2003 ESP 1,116,600 $ 9,221,370
Government of Spain, 8s, 2004 550,000 3,929,143
-------------
$ 13,150,513
-------------
Total Foreign Bonds $168,444,312
-------------
Total Bonds (Identified Cost, $579,314,180) $594,370,303
-------------
</TABLE>
See notes to financial statements
6
<PAGE>
Portfolio of Investments -- continued
Call Options Purchased
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
<S> <C> <C> <C>
Japanese Bonds/March/107.489 JPY 518,000 $ 76,146
Japanese Bonds/December/112.062 279,000 42,408
-----------
Total Call Options Purchased (Premiums Paid, $102,121) $ 118,554
-----------
Put Options Purchased
Australian Dollars/January/0.745 AUD 4,766 $ 65,074
Deutsche Marks/British Pounds/January/2.25 DEM 14,400 63,878
-----------
Total Put Options Purchased (Premiums Paid, $145,558) $ 128,952
-----------
Total Investments (Identified Cost, $579,561,859) $594,617,809
-----------
Call Options Written
Australian Dollars/February/0.763 AUD 3,672 $ (23,359)
Deutsche Marks/British
Pounds/January/2.1344 DEM 13,660 (29,765)
-----------
(Premiums Received, $106,224) $ (53,124)
-----------
Put Options Written
Australian Dollars/January/0.745 AUD 4,765 $ (65,073)
Australian Dollars/February/0.720 3,468 (21,190)
Japanese Bonds/March/107.489 JPY 518,000 (70,448)
Japanese Bonds/December/112.062 279,000 (4,185)
-----------
Total Put Options Written (Premium Received, $184,405) $ (160,896)
-----------
Other Assets, Less Liabilities -- 1.9% $ 11,730,945
-----------
Net Assets -- 100.0% $606,134,734
===========
</TABLE>
+Restricted security.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. dollar. A list of abbreviations is shown
below.
AUD = Australian Dollars
CAD = Canadian Dollars
CHF = Swiss Francs
DEM = Deutsche Marks
DKK = Danish Kroner
ESP = Spanish Pesetas
FIM = Finnish Markkaa
FRF = French Francs
IEP = Irish Punts
ITL = Italian Lire
JPY = Japanese Yen
NLG = Dutch Guilders
NZD = New Zealand Dollars
SEK = Swedish Kronor
See notes to financial statements
7
<PAGE>
Statement of Assets and Liabilities -- November 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments, at value (identified cost, $579,561,859) $594,617,809
Cash 42,491
Net receivable for forward foreign currency exchange contracts sold 5,139,113
Net receivable for closed forward foreign currency exchange contracts 363,331
Premium receivable on options written 44,548
Receivable for investments sold 2,618,736
Interest receivable 10,219,110
Other assets 8,343
-----------
Total assets $613,053,481
-----------
Liabilities:
Payable to dividend disbursing agent $ 261,658
Payable for investments purchased 3,999,915
Written options outstanding, at value (premiums received, $290,629) 214,020
Net payable for forward foreign currency exchange contracts purchased 2,014,904
Payable to affiliates --
Management fee 10,882
Transfer agent fee 22,761
Accrued expenses and other liabilities 394,607
-----------
Total liabilities $ 6,918,747
-----------
Net assets $606,134,734
===========
Net assets consist of:
Paid-in capital $617,001,586
Unrealized appreciation on investments and translation of assets and liabilities in foreign
currencies 18,569,820
Accumulated net realized loss on investments and foreign currency transactions (27,520,660)
Accumulated distributions in excess of net investment income (1,916,012)
-----------
Total $606,134,734
===========
Shares of beneficial interest outstanding 79,539,155
===========
Net asset value per share (net assets / shares of beneficial interest outstanding) $7.62
=====
</TABLE>
See notes to financial statements
8
<PAGE>
Statement of Operations -- Year Ended November 30, 1995
<TABLE>
<S> <C>
Net investment income:
Interest income $47,378,162
----------
Expenses --
Management fee $ 4,459,164
Trustees' compensation 155,570
Investor Communication expense 425,053
Custodian fee 322,801
Transfer and dividend disbursing agent fee 269,045
Auditing fees 84,025
Printing 71,537
Postage 44,737
Legal fees 15,529
Miscellaneous 160,096
----------
Total expenses $ 6,007,557
Fees paid indirectly (15,465)
----------
Net expenses $ 5,992,092
----------
Net investment income $41,386,070
----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions $13,921,147
Written option transactions 1,874,977
Foreign currency transactions (8,558,787)
Futures contracts 548,200
----------
Net realized gain on investments $ 7,785,537
----------
Change in unrealized appreciation (depreciation) --
Investments $40,385,872
Written options 199,893
Translation of assets and liabilities in foreign currencies 4,748,855
----------
Net unrealized gain on investments $45,334,620
----------
Net realized and unrealized gain on investments and foreign
currency $53,120,157
----------
Increase in net assets from operations $94,506,227
==========
</TABLE>
See notes to financial statements
9
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended November 30,
---------------------------
1995 1994
---------- -----------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income $ 41,386,070 $ 44,947,604
Net realized gain (loss) on investments and foreign currency transactions 7,785,537 (73,606,300)
Net unrealized gain (loss) on investments and foreign currency translation 45,334,620 (13,123,884)
---------- -----------
Increase (decrease) in net assets from operations $ 94,506,227 $ (41,782,580)
---------- -----------
Distributions declared to shareholders --
From net investment income $(40,982,400) $ (13,290,258)
Tax return of capital -- (30,501,844)
In excess of net investment income -- (1,520,830)
From net realized gain on investments and foreign currency transactions -- (4,648,130)
---------- -----------
Total distributions declared to shareholders $(40,982,400) $ (49,961,062)
---------- -----------
Trust share (principal) transactions --
Cost of Treasury shares acquired $(65,178,037) $ (34,915,018)
---------- -----------
Total decrease in net assets $(11,654,210) $(126,658,660)
Net assets:
At beginning of period 617,788,944 744,447,604
---------- -----------
At end of period (including accumulated distributions in excess of net
investment income of $(1,916,012) and $1,520,830, respectively) $606,134,734 $ 617,788,944
========== ===========
</TABLE>
See notes to financial statements
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Per share data (for a share
outstanding throughout
each period): 1995 1994 1993 1992 1991 1990 1989 1988 1987*
--- --- --- --- --- --- --- --- -----
Year Ended November 30,
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value --
beginning
of period $ 6.90 $ 7.83 $ 7.59 $ 8.08 $ 8.41 $ 8.92 $ 9.18 $ 9.33 $ 9.40
-------- -------- -------- ------- -------- -------- -------- -------- --------
Income from investment
operations+++ --
Net investment income $ 0.49 $ 0.48 $ 0.52 $ 0.61 $ 0.69 $ 0.78 $ 0.82 $ 0.94 $ 0.45
Net realized and unrealized
gain (loss) on
investments and foreign
currency transactions 0.72 (0.88) 0.38 (0.23) 0.16 (0.11) 0.09 0.12 (0.03)
-------- -------- -------- ------- -------- -------- -------- -------- --------
Total from investment
operations $ 1.21 $ (0.40) $ 0.90 $ 0.38 $ 0.85 $ 0.67 $ 0.91 $ 1.06 $ 0.42
-------- -------- -------- ------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders --
From net investment income $ (0.49) $ (0.14) $ (0.44)$ (0.57) $ (0.64) $ (0.68)$ (0.90)$ (0.88)$ (0.44)
In excess of net investment
income -- (0.02) -- -- -- -- -- -- --
From net realized gain on
investments and foreign
currency transactions -- (0.05) (0.22) -- -- -- -- (0.17) (0.05)
Tax return of capital -- (0.32) -- -- -- -- -- -- --
From paid-in capital -- -- -- (0.30) (0.54) (0.50) (0.27) (0.16) --
-------- -------- -------- ------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.49) $ (0.53) $ (0.66)$ (0.87) $ (1.18) $ (1.18) $ (1.17) $ (1.21) $(0.49)
-------- -------- -------- ------- -------- -------- -------- -------- --------
Net asset value -- end of
period $ 7.62 $ 6.90 $ 7.83 $ 7.59 $ 8.08 $ 8.41 $ 8.92 $ 9.18 $ 9.33
========= ======== ======== ======= ======== ======== ======== ======= ========
Per share market value --
end of period $ 6.500 $ 6.313 $ 7.125 $ 7.250 $ 8.000 $ 8.125 $ 10.000 $ 10.125 $ 9.875
========= ======== ======== ======= ======== ======== ======== ======== =========
Total return 10.96% (3.90)% 7.32% 1.11% 13.73% (6.82)% 11.83% 15.77% 8.10%+
Ratios (to average net
assets)/Supplemental data:
Expenses 0.99% 0.97% 0.93% 1.03% 1.04% 1.05# 1.08% 1.11% 1.01%+
Net investment income 6.84% 6.51% 6.61% 7.80% 8.38% 9.16%# 9.23% 9.87% 9.91%+
Portfolio turnover 318% 295% 453% 245% 805% 535% 640% 307% 88%
Net assets at end of period
(000 omitted) $606,135 $617,789 $744,448 $743,103 $785,992 $813,978 $857,252 $873,503 $879,686
</TABLE>
* For the period from the commencement of investment operations, May 28, 1987
to November 30, 1987.
+ Annualized.
+++ Per share data for the periods subsequent to November 30, 1993 is based
on average shares outstanding.
# The investment adviser did not impose a portion of its adviser fee
amounting to $0.0013 per share for the year ended November 30, 1990. If
this fee had been incurred by the Trust, the ratio of expenses to average
net assets and net investment income to average net assets would have been
1.07% and 9.14%, respectively.
## For fiscal years ending after September 1, 1995, the Trust's expenses are
calculated without reduction for fees paid indirectly.
See notes to financial statements
11
<PAGE>
Notes to Financial Statements
(1) Business and Organization
MFS Government Markets Income Trust (the Trust) is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, closed-end management
investment company.
(2) Significant Accounting Policies
Investment Valuations -- Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues and forward
contracts, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data,
without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Non-U.S. dollar denominated
short-term obligations are valued at amortized cost as calculated in the
base currency and translated into U.S. dollars at the closing daily exchange
rate. Futures contracts, options and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices.
Over-the-counter options are valued by brokers through the use of a pricing
model which takes into account closing bond valuations, implied volatility
and short-term repurchase rates. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Trustees.
Repurchase Agreements -- The Trust may enter into repurchase agreements with
institutions that the Trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Trust
requires that the securities purchased in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the Trust to
obtain those securities in the event of a default under the repurchase
agreement. The Trust monitors, on a daily basis, the value of the securities
transferred to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is greater than amounts owed to
the Trust under each such repurchase agreement.
Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments and 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.
Written Options -- The Trust may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Trust. The Trust, as writer of an option, may have
no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable
change in the price of the securities underlying the written option. In
general, written call options may serve as a partial hedge against decreases
in value in the underlying securities to the extent of the premium
12
<PAGE>
received. Written options may also be used as a part of an income producing
strategy reflecting the view of the Trust's management on the direction of
interest rates.
Futures Contracts -- The Trust may enter into futures contracts for the
delayed delivery of securities, currency or contracts based on financial
indices at a fixed price on a future date. In entering such contracts, the
Trust is required to deposit either in cash or securities an amount equal to
a certain percentage of the contract amount. Subsequent payments are made or
received by the Trust each day, depending on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Trust. The Trust's investment
in futures contracts is designed to hedge against anticipated future changes
in interest or exchange rates or securities prices. Investments in interest
rate futures for purposes other than hedging may be made to modify the
duration of the portfolio without incurring the additional transaction costs
involved in buying and selling the underlying securities. Should interest or
exchange rates or securities prices move unexpectedly, the Trust may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss.
Forward Foreign Currency Exchange Contracts -- The Trust may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. The
Trust will enter into forward contracts for hedging purposes as well as for
non-hedging purposes. For hedging purposes, the Trust may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. It may also use contracts in a
manner intended to protect foreign currency-denominated securities from
declines in value due to unfavorable exchange rate movements. For non-hedging
purposes, the Trust may enter into contracts with the intent of changing the
relative exposure of the Trust's portfolio of securities to different
currencies to take advantage of anticipated changes. The forward foreign
currency exchange contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until the contract settlement date.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Fees Paid Indirectly -- The Trust's custodian bank calculates its fee based
on the Trust's average daily net assets. The fee is reduced according to a
fee arrangement, which provides for custody fees to be reduced based on a
formula developed to measure the value of cash deposited with the custodian
by the Trust. This amount is shown as a reduction of expenses on the
Statement of Operations.
Tax Matters and Distributions -- The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Trust files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Trust's tax return
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported to shareholders on
Form 1099-DIV.
13
<PAGE>
Notes to Financial Statements -- continued (3)
Foreign taxes have been provided for on interest income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Trust distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or accumulated net
realized gains. During the year ended November 30, 1995, $798,852 was
reclassified from accumulated net realized loss to undistributed net
investment income, due to differences between book and tax accounting for
mortgage-backed securities and currency transactions. This change had no
effect on the net assets or net asset value per share.
At November 30, 1995, the Trust, for federal income tax purposes, had a
capital loss carryforward of $28,577,312, which may be applied against any
net taxable realized gains of each succeeding year until the earlier of its
utilization or expiration on November 30, 2002.
Transactions with Affiliates
Investment Adviser -- The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.32%
of average daily net assets and 5.33% of investment income.
The Trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain of the
officers and Trustees of the Trust are officers or directors of MFS and MFS
Service Center, Inc. (MFSC). The Trust has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $36,070 for the year ended
November 30, 1995.
Transfer Agent -- MFSC acts as a registrar and dividend disbursing agent for
the Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee and a dividend service fee and will reimburse MFSC for
reasonable out-of-pocket expenses. The account maintenance fee is computed as
follows:
Total Number of Accounts Annual Account Fee
- --------------------------- -------------------
Less than 75,000 .............. $9.00
75,000 and over .............. $8.00
The dividend service fee is $0.75 per dividend reinvestment and $0.75 per
cash infusion.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
Purchases Sales
- ------------------------------------------- ----------- -------------
U.S. Government securities $1,627,736,841 $1,673,622,175
============== ==============
Investments (non-U.S. Government securities) $ 271,907,519 $ 281,633,604
============== ==============
14
<PAGE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Trust, as computed on a federal income tax basis,
are as follows:
Aggregate cost $579,561,859
===========
Gross unrealized appreciation $ 17,214,761
Gross unrealized depreciation (2,158,811)
-----------
Net unrealized appreciation $ 15,055,950
===========
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Trust shares were as follows:
Year Ended November 30,
-------------------------------------------------
1995 1994
----------------------- -----------------------
Shares Amount Shares Amount
- -------------------------- --------- ---------- -------- -----------
Treasury shares reacquired 10,013,000 $65,178,037 5,496,100 $34,915,018
========== =========== ========= ===========
In accordance with the provisions of the Trust's prospectus, 10,013,000
shares of beneficial interest were purchased by the Trust during fiscal 1995
at an average price per share of $6.51 and a weighted average discount of
9.0% per share. During fiscal 1994, 5,496,100 shares of beneficial interest
were purchased by the Trust at an average price per share of $6.35 and a
weighted average discount from net asset value of 8.8% per share.
(6) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Realized and
Unrealized Net Increase (Decrease)
Net Investment Gain/(Loss) in Net Assets Resulting
Quarterly Period Investment Income Income on Investments from Operations
- ----------------- ------------------ ------------------ -------------------- -----------------------
Per Per Per Per
Fiscal 1995 Amount Share Amount Share Amount Share Amount Share
- ----------------- ---------- ---- ---------- ---- ------------ ---- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
February 28, 1995 $12,162,338 $0.13 $10,700,322 $0.12 $ 13,491,579 $ 0.25 $ 24,191,901 $ 0.37
May 31, 1995 12,446,705 0.15 10,938,166 0.13 25,867,253 0.26 36,805,419 0.39
August 31, 1995 11,733,564 0.15 10,233,221 0.13 (1,867,003) (0.02) 8,366,218 0.11
November 30, 1995 11,035,555 0.13 9,514,361 0.11 15,628,328 0.23 25,142,689 0.34
-------- -- -------- -- ---------- -- ---------- -----
$47,378,162 $0.56 $41,386,070 $0.49 $ 53,120,157 $ 0.72 $ 94,506,227 $ 1.21
======== == ======== == ========== == ========== =====
Fiscal 1994
- -----------------
February 28, 1994 $10,479,948 $0.11 $ 8,867,636 $0.09 $(15,186,319) $(0.15) $ (6,318,683) $(0.06)
May 31, 1994 14,319,848 0.15 12,618,191 0.14 (44,851,111) (0.45) (32,232,920) (0.31)
August 31, 1994 13,459,407 0.14 11,854,632 0.12 (13,730,483) (0.14) (1,875,851) (0.02)
November 30, 1994 13,376,874 0.15 11,607,145 0.13 (12,962,271) (0.14) (1,355,126) (0.01)
-------- -- -------- -- ---------- -- ---------- -----
$51,636,077 $0.55 $44,947,604 $0.48 $(86,730,184) $(0.88) $(41,782,580) $(0.40)
======== == ======== == ========== == ========== =====
</TABLE>
(7) Line of Credit
The Trust has entered into an agreement which enables it to participate with
other funds managed by MFS in an unsecured line of credit with a bank which
permits borrowings up to $350 million, collectively. Borrowings may be made
to temporarily finance the acquisition of treasury shares. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the Trust for the
year ended November 30, 1995 was $8,084.
15
<PAGE>
Notes to Financial Statements -- continued
(8) Financial Instruments
The Trust trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates.
These financial instruments include written options, forward foreign currency
exchange contracts and futures contracts. The notional or contractual amounts
of these instruments represent the investment the Trust has in particular
classes of financial instruments and does not necessarily represent the
amounts potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and offsetting
transactions are considered. A summary of obligations under these financial
instruments at November 30, 1995, is as follows:
Written Option Transactions
<TABLE>
<CAPTION>
1995 Calls 1995 Puts
------------------------- ---------------------------
Principal Principal
Amounts Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ------------------------------------------- ------------- -------- ------------- ----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Australian Dollars 6,063 $ 42,444 -- $ --
Canadian Dollars -- -- 4,876 25,442
Deutsche Marks -- -- 29,035 161,926
Japanese Yen/Deutsche Marks -- -- 2,288,737 275,623
Options written --
Australian Dollars 23,419 221,566 21,739 235,645
British Pounds 4,930 85,065 4,599 85,065
Canadian Dollars 11,207 23,504 16,584 64,838
Deutsche Marks 139,426 961,672 62,615 407,942
Deutsche Marks/British Pounds 21,956 136,736 -- --
Finnish Markkaa/Deutsche Marks -- -- 20,841 15,244
Italian Lire/Deutsche Marks -- -- 21,491,973 229,986
Japanese Yen -- -- 5,471,379 432,581
Spanish Pesetas/Deutsche Marks -- -- 450,973 29,554
Swiss Francs/Deutsche Marks 8,961 37,729 -- --
U.S. Dollars 7,455 38,440 -- --
Options terminated in closing transactions
--
Australian Dollars (25,810) (240,652) (13,506) (153,362)
British Pounds (4,930) (85,065) -- --
Canadian Dollars (11,207) (23,504) (21,460) (90,280)
Deutsche Marks (26,034) (223,575) (57,063) (355,429)
Deutsche Marks/British Pounds (8,296) (53,870) -- --
Italian Lire/Deutsche Marks -- -- (4,816,462) (36,037)
Japanese Yen -- -- (4,674,379) (330,459)
Japanese Yen/Deutsche Marks -- -- (2,288,737) (275,623)
Spanish Pesetas/Deutsche Marks -- -- (450,973) (29,554)
Options exercised --
Italian Lire/Deutsche Marks -- -- (10,783,511) (146,631)
Swiss Francs/Deutsche Marks (8,961) (37,729) -- --
U.S. Dollars (7,455) (38,440) -- --
Options expired --
British Pounds -- -- (4,599) (85,065)
</TABLE>
16
<PAGE>
Written Option Transactions -- continued
<TABLE>
<CAPTION>
1995 Calls 1995 Puts
---------------------------- ----------------------------
Principal Principal
Amounts Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ---------------------------------------------- --------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period -- continued
Options expired -- continued
Deutsche Marks (113,392) $(738,097) (34,587) $(214,439)
Finnish Markkaa/Deutsche Marks -- -- (20,841) (15,244)
Italian Lire/Deutsche Marks -- -- (5,892,000) (47,318)
------------- ------- ----------- ---------
Outstanding, end of period 17,332 $ 106,224 805,233 $ 184,405
============= ======= =========== =========
Options outstanding at end of period consist
of:
Australian Dollars 3,672 $ 23,358 8,233 $ 82,283
------------- ------- ----------- ---------
Deutsche Marks/British Pounds 13,660 82,866 -- --
------------- ------- ----------- ---------
Japanese Yen -- -- 797,000 102,122
------------- ------- ----------- ---------
Outstanding, end of period 17,332 $ 106,224 805,233 $ 184,405
============= ======= =========== =========
</TABLE>
At November 30, 1995, the Trust had sufficient cash and/or securities at
least equal to the value of written options.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Contracts Net Unrealized
Contracts to at In Exchange Appreciation
Settlement Date Deliver/Receive Value for (Depreciation)
- -------- --------------------------- ----------------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Sales 12/01/95 -- 12/07/95 AUD 26,297,938 $ 19,527,715 $ 19,605,523 $ 77,808
1/30/96 -- 2/26/96 CAD 21,643,554 15,929,252 15,973,125 43,873
12/15/95 -- 5/31/96 CHF 20,564,923 17,669,266 17,923,711 254,445
12/01/95 -- 5/31/96 DEM 217,518,462 150,605,614 152,925,980 2,320,366
12/07/95 DKK 143,528,878 25,630,813 26,125,610 494,797
12/07/95 ESP 1,337,030,471 10,840,643 10,802,214 (38,429)
12/15/95 FIM 14,105,530 3,282,907 3,206,531 (76,376)
12/18/95 -- 4/12/96 FRF 65,730,621 13,173,074 13,320,170 147,096
12/06/95 -- 1/08/96 IEP 18,032,975 28,587,458 28,892,252 304,794
12/07/95 -- 12/21/95 ITL 47,723,930,557 29,825,733 29,474,016 (351,717)
12/07/95 -- 6/07/96 JPY 3,023,844,630 30,060,039 31,551,712 1,491,673
12/14/95 -- 1/22/96 NLG 29,278,596 18,133,169 18,679,693 546,524
12/20/95 NZD 3,869,000 2,520,827 2,528,493 7,666
12/14/95 SEK 82,453,820 12,566,869 12,483,462 (83,407)
--------- ---------- ------------
$378,353,379 $383,492,492 $ 5,139,113
========= ========== ============
Purchases 12/01/95 AUD 4,028,220 $ 2,991,759 $ 3,014,196 $ (22,437)
2/26/96 CAD 7,523,059 5,535,075 5,559,458 (24,383)
12/14/95 -- 12/18/95 CHF 15,534,007 13,243,671 13,388,811 (145,140)
12/01/95 -- 5/31/96 DEM 197,462,015 136,750,906 138,992,340 (2,241,434)
2/29/96 DKK 59,706,631 10,679,426 10,982,570 (303,144)
12/07/95 ESP 115,118,874 933,384 921,283 12,101
12/14/95 FIM 13,775,266 3,205,917 3,209,566 (3,649)
5/31/96 FRF 43,910,400 8,786,866 8,952,025 (165,159)
12/06/95 IEP 9,016,487 14,291,655 14,312,772 (21,117)
12/07/95 -- 1/31/96 ITL 42,231,963,158 26,377,951 26,037,909 340,042
12/07/95 -- 3/27/96 JPY 3,031,816,307 29,957,869 30,120,635 (162,766)
12/14/95 NLG 7,036,860 4,350,454 4,493,697 (143,243)
12/20/95 NZD 3,208,655 2,090,583 2,104,236 (13,653)
12/15/95 SEK 141,183,519 21,516,227 20,637,149 879,078
--------- ---------- ------------
$280,711,743 $282,726,647 $(2,014,904)
========= ========== ============
</TABLE>
17
<PAGE>
Notes to Financial Statements -- continued
Forward foreign currency purchases and sales under master netting
arrangements and closed forward foreign currency exchange contracts excluded
above amounted to a net receivable of $363,331 at November 30, 1995.
At November 30, 1995, the Trust had sufficient cash and/or securities to
cover any commitments under these contracts.
(9) Restricted Securities
The Trust may invest not more than 10% of its total assets in securities
which are subject to legal or contractual restrictions on resale. At November
30, 1995, the Trust owned the following restricted securities (constituting
1.63% of net assets) which may not be publicly sold without registration
under the Securities Act of 1933 (the 1933 Act). The Trust does not have the
right to demand that such securities be registered. The value of these
securities is determined by valuations supplied by a pricing service or
brokers.
<TABLE>
<CAPTION>
Date of Principal
Description Acquisition Amount Cost Value
- ---------------------------------------------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
FHA (Kimberly Woods Project Loan), 8.25s, 2027 3/29/93 $6,302,516 $6,491,591 $7,167,599
FHA (USGI 986 Spring Hill), 10.375s, 2030 8/16/93 2,469,156 2,655,886 2,740,763
---------
$9,908,362
=========
</TABLE>
18
<PAGE>
Independent Auditors' Report
To the Trustees and Shareholders of MFS Government Markets Income Trust:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Government Markets Income
Trust as of November 30, 1995, the related statement of operations for the
year then ended, the statement of changes in net assets for the years ended
November 30, 1995 and 1994, and the financial highlights for each of the
years in the nine-year period ended November 30, 1995. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned at November 30, 1995 by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Government
Markets Income Trust at November 30, 1995, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 5, 1996
19
<PAGE>
MFS Government Markets Income Trust
Trustees
A. Keith Brodkin*
Chairman and President
Richard B. Bailey*(2)
Private Investor; Former Chairman and
Director (until 1991), Massachusetts Financial Services Company;
Director, Cambridge Bancorp;
Director, Cambridge Trust Company
Marshall N. Cohan(1)
Private Investor
Lawrence H. Cohn, M.D.(2)
Chief of Cardiac Surgery,
Brigham and Women's Hospital;
Professor of Surgery, Harvard
Medical School
The Hon. Sir J. David
Gibbons, KBE(2)
Chief Executive Officer,
Edmund Gibbons Ltd.;
Chairman, Bank of N.T.
Butterfield & Son Ltd.
Abby M. O'Neill(2)
Private Investor;
Director,
Rockefeller Financial Services, Inc.
(investment advisers)
Walter E. Robb, III(1)
President and Treasurer,
Benchmark Advisors, Inc.
(corporate financial consultants);
President, Benchmark Consulting
Group, Inc. (office services);
Trustee, Landmark Funds
(mutual funds)
Arnold D. Scott*
Senior Executive Vice President, Director and Secretary, Massachusetts
Financial Services Company
Jeffrey L. Shames*
President and Director, Massachusetts
Financial Services Company
J. Dale Sherratt(1)
President, Insight Resources, Inc.
(acquisition planning specialists)
Ward Smith(1)
Former Chairman (until 1994),
NACCO Industries;
Director, Sundstrand Corporation
Portfolio Managers
Stephen C. Bryant*
Steven E. Nothern*
Treasurer
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Transfer Agent,
Registrar and Dividend
Disbursing Agent
MFS Service Center, Inc.
P.O. Box 9024
Boston, MA 02205-9824
1-800-637-2304
Custodian
State Street Bank and
Trust Company
Auditors
Deloitte & Touche llp
Investment Adviser
Massachusetts Financial
Services Company
500 Boylston Street
Boston, MA 02116-3741
*Affiliated with the Investment Adviser
(1)Member of Audit Committee
(2)Member of Portfolio Trading Committee MGFCE-2 1/96 78M
