Dear Shareholders:
The past six months brought mixed results in the fixed-income markets of the
countries in which the Trust invests. While returns were generally negative
for U.S. Treasuries, particularly during the first four months of 1996,
returns for government securities in many European countries were positive as
yields there generally declined. In the United States, for example, two-year
Treasury yields, which were at 5.35% on November 30, 1995, increased to 6.24%
by the end of May 1996, while yields on 10-year Treasuries rose from 5.74% to
6.85%. Yields on 10-year government bonds in Italy, by comparison, declined
from 11.45% to 9.65% over the same period. The ability to allocate up to 35%
of its assets into international fixed-income markets greatly benefited the
Trust, helping to reduce the risk experienced in U.S. Treasuries as interest
rates increased.
The Trust's stock market price, which stood at $6.50 on November 30, 1995,
remained the same on May 31, 1996, while the net asset value decreased from
$7.62 to $7.30, representing a total return of 3.83% based on market price
and -0.6% based on net asset value. These returns are based on the closing
stock market prices in effect on those dates and assume the reinvestment of
all distributions paid during the period.
We believe the difference in the Trust's total return based on its market
price versus the return based on net asset value reflects investors' positive
response to a repurchase program announced by the Board of Trustees on April
10, 1996. Under this program, up to 10% of the outstanding shares of the
Trust are to be repurchased annually when the shares are trading at a
discount to net asset value. In addition, the Trustees voted to pay to
shareholders special distributions on a monthly basis throughout each year
based on the difference between the market price of any shares repurchased
under the program and the net asset value of such shares at the time of
repurchase. These special distributions of the captured economic value may
constitute a return of capital to shareholders for tax purposes. We believe
this plan to return the value of the discount to shareholders in the form of
higher monthly distributions may continue to have a positive effect on the
discount and should not disrupt the portfolio management of the Trust. This
plan replaces the existing share repurchase plan previously implemented by
the Trustees in November 1994.
U.S. Government Sector
Our overall portfolio strategy in the past six
months has been to reduce exposure to U.S. securities in favor of the
international markets. Our strategy has also been to shift the emphasis
within the funds allocated to the U.S. market away from Treasuries in favor
of agency and mortgage-backed securities, as we have been able to add
attractive incremental yield to the portfolio in these sectors.
Within the U.S. portion of the portfolio, the allocation to mortgage-backed
pass-through securities was increased from 36% to 40%. Mortgage- backed
securities enjoyed a substantial yield advantage over U.S. Treasuries and
favorable buying conditions moving into 1996. Also, mortgage- backed
pass-through securities have been yielding approximately 0.90% to 1.30% more
than Treasuries, with less price sensitivity. These factors have allowed
mortgage indices to outperform comparable Treasury indices over the period.
Issues held in the portfolio are mostly liquid Government National Mortgage
Association (GNMA) pass- through securities; 14% of the U.S. portion is held
in GNMA 30-year, 7% and 7.5% coupons, and 9% is held in 15-year 7.5% coupons.
Another 11% is held in Federal Home Loan Mortgage Corporation and Federal
National Mortgage Association 30-year mortgages with 6.5%, 7.0% and 7.5%
coupons. Our bias has been toward lower coupon issues because we feel that
the price of higher coupon issues reflects too much of a bearish outlook in
their implied prepayment future. As rates stabilize, the demand for lower
coupon securities could start to reemerge. Another positive element for this
sector is our continued expectation of limited issuance
1
<PAGE>
of new mortgage securities. This technical factor could allow the yield
spread between mortgage and Treasury securities to be stable to narrower over
the coming 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. The Trust will, however, continue to adhere to its policy of
avoiding any exposure to the more volatile mortgage-derivative securities.
International Sector
Foreign bond markets, measured in local currency terms, outperformed U.S.
bonds by a wide margin during the past six months. The best performance was
within the higher-yielding European markets (Italy, Spain, and Sweden).
Virtually all the yield curves within these markets steepened dramatically
over the period as most European central banks cut official interest rates
due to continued slow growth and low inflation. Within the dollar-bloc,
Canada and Australia also outperformed the United States, while New Zealand
suffered underperformance due to political concerns and a pickup in economic
growth.
The Trust continues to maintain near its maximum weighting (35%) in foreign
bonds; thus, performance has been additionally enhanced with this
diversification. Early in the year, as a result of selling its German and
French issues, the portfolio added to its overweighted positions in the
higher-yielding non-core European markets. Presently, 30% of the
international allocation is represented by Italy, Spain, and Sweden.
Recently, the Trust increased its U.K. holdings and added Ireland as a new
position. Within the dollar-bloc, Canada and Australia remain core positions
because we forecast further tightening spreads to the United States.
Meanwhile, during the past six months the U.S. dollar has appreciated versus
almost all European currencies and the Japanese yen, due primarily
to a pickup in economic growth in the United States and a favorable U.S.
interest rate scenario. Throughout the period, most of the portfolio's
foreign assets have been hedged back into the U.S. dollar, and we anticipate
maintaining a similar position going forward. The exception is Australia,
whose currency has strengthened versus the dollar, and the Trust has
benefited from its Australian portion having remained largely unhedged.
We anticipate that selective European bond markets will continue to offer the
best opportunities for capital appreciation. Efforts to meet the forced
austerity criteria of the proposed European Monetary Union are reinforcing
the tendency toward slower growth. Most continental central banks are
therefore expected to continue the process of cutting official interest
rates. In this environment, the shorter end of the higher-yielding markets
could continue to outperform, while the dollar could remain firm against
European currencies.
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
June 10, 1996
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 Shareholders
As of May 31, 1996, our records indicate that there are 13,777 registered
shareholders and approximately 48,600 shareholders owning Trust shares in
"street" name, such as through brokers, banks and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the Trust, please write or
call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
-----------------------------------------------------------------------------
Performance Summary
(For the period ended May 31, 1996)
<TABLE>
<CAPTION>
<S> <C>
Net Asset Value Per Share
November 30, 1995 $7.62
May 31, 1996 $7.30
New York Stock Exchange Price
November 30, 1995 $6.500
February 8, 1996 (high)* $6.750
April 9, 1996 (low)* $6.125
May 31, 1996 $6.500
</TABLE>
*For the period December 1, 1995 through May 31, 1996.
-----------------------------------------------------------------------------
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.
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.
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 Plan 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.
4
<PAGE>
Portfolio of Investments -- May 31, 1996
Bonds -- 91.1%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C> <C>
U.S. Bonds -- 63.3%
U.S. Federal Agencies -- 27.2%
FHA (Kimberly Woods Project Loan), 8.25s, 2027+ $ 6,283 $ 6,413,122
FHA (USGI 986 Spring Hill), 10.375s, 2030+ 2,465 2,739,685
Federal Home Loan Mortgage Corp., 6.5s, 2025 - 2026 13,091 12,146,022
Federal Home Loan Mortgage Corp., 7s, 2020 13,790 12,940,950
Federal Home Loan Mortgage Corp., 7.5s, 2023 - 2026 19,989 19,589,683
Federal National Mortgage Assn., 7s, 2023 12,500 11,917,875
Federal National Mortgage Assn., 7s, 2023 7,648 2,631,307
Federal National Mortgage Assn., 7.8s, 2002 15,000 15,028,050
Federal National Mortgage Assn., 7.85s, 2004 30,000 30,117,300
Federal National Mortgage Assn., 7.5s, 2010 22,768 22,760,618
Financing Corp., 10.7s, 2017 8,500 11,392,635
Financing Corp., 9.8s, 2018 5,000 6,251,550
------------
$153,928,797664
------------
U.S. Government Guaranteed -- 36.1%
Government National Mortgage Assn. -- 12.4%
GNMA, 7s, 2022 - 2025 $ 44,133 $ 41,995,519
GNMA, 7.5s, 2002 - 2007 12,133 12,208,642
GNMA, 7.5s, 2023 - 2025 12,972 12,684,586
GNMA, 9s, 2019 92 96,330
GNMA, 9s, 2019 3,038 3,189,790
------------
$ 70,174,867
------------
Small Business Administration -- 0.8%
SBA, 8.875s, 2011 $ 4,247 $ 4,531,993
------------
U.S. Treasury Obligations -- 22.9%
U.S. Treasury Notes, 7s, 1999 $ 6,000 $ 6,089,040
U.S. Treasury Notes, 8.5s, 2000 16,000 17,004,960
U.S. Treasury Bonds, 12.375s, 2004 15,500 20,687,695
U.S. Treasury Bonds, 12s, 2013 30,000 41,878,200
U.S. Treasury Bonds, 11.25s, 2015 30,900 43,897,158
------------
$ 129,557,053
------------
Total U.S. Government Guaranteed $ 204,263,913
------------
Total U.S. Bonds $ 358,192,710
------------
Foreign Bonds -- 27.8%
Australia -- 3.1%
Commonwealth of Australia, 7s, 2000 AUD 9,400 $ 7,128,997
Commonwealth of Australia, 8.75s, 2001 7,100 5,693,415
Commonwealth of Australia, 9.5s, 2003 6,000 4,964,533
------------
$ 17,786,945
------------
Canada -- 3.8%
Canadian Government, 7.5s, 2003 CAD 575 $ 418,869
Canadian Government, 9s, 2004 8,050 6,366,551
Canadian Government, 8.75s, 2005 18,550 14,487,956
------------
$ 21,273,376
------------
Denmark -- 4.7%
Kingdom of Denmark, 9s, 2000 DKK 35,860 $ 6,761,893
Kingdom of Denmark, 8s, 2001 108,804 19,738,778
------------
$ 26,500,671
------------
Ireland -- 1.5%
Republic of Ireland, 8s, 2000 IEP 5,300 $ 8,729,269
------------
</TABLE>
5
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C> <C>
Foreign Bonds -- continued
Italy -- 2.0%
Republic of Italy, 8.5s, 1999 ITL 5,145,000 $ 3,335,898
Republic of Italy, 9.5s, 1999 4,265,000 2,829,301
Republic of Italy, 8.5s, 2004 7,795,000 4,844,542
-----------
$ 11,009,741
-----------
New Zealand -- 3.1%
New Zealand Government, 9s, 1996 NZD 12,000 $ 8,118,771
New Zealand Government, 8s, 1998 4,800 3,190,506
New Zealand Government, 8s, 2001 9,600 6,231,177
-----------
$ 17,540,454
-----------
Spain -- 3.1%
Government of Spain, 10.5s, 2003 ESP 767,600 $ 6,432,359
Government of Spain, 10.9s, 2003 780,000 6,662,703
Government of Spain, 10s, 2005 550,000 4,476,894
-----------
$ 17,571,956
-----------
Sweden -- 3.2%
Kingdom of Sweden, 10.25s, 2000 SEK 111,800 $ 18,266,972
-----------
United Kingdom -- 3.3%
United Kingdom Treasury, 9s, 2000 GBP 7,400 $ 12,065,623
United Kingdom Treasury, 7s, 2001 4,200 6,324,901
-----------
$ 18,390,524
-----------
Total Foreign Bonds $157,069,908
-----------
Total Bonds (Identified Cost, $525,323,063) $515,262,618
-----------
Repurchase Agreement -- 4.2%
Investments in repurchase agreements with Goldman Sachs, in a joint trading
account ($361,806,000 par), dated 5/31/96, due 6/03/96, total to be received by
the Fund $23,837,524 collateralized by various U.S. Treasury and Federal Agency
obligations (with $499,229,000 par and valued at $361,806,927), at Cost $ 23,827 $ 23,827,000
-----------
Short-Term Obligations -- 3.3%
Eurolira Deposit, due 10/21/96 ITL 14,630,000 $ 9,500,000
Eurolira Deposit, due 11/11/96 14,120,000 9,168,832
-----------
Total Short-Term Obligations (Identified Cost, $18,402,193) $ 18,668,832
-----------
Total Investments (Identified Cost, $567,552,256) $557,758,450
-----------
Put Option Written
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Date/Strike price (000 Omitted)
<S> <C> <C> <C>
Canadian Dollars/June/1.385 CAD 9,091 $ (4,736)
-----------
Other Assets, Less Liabilities -- 1.4% $ 8,094,477
-----------
Net Assets -- 100.0% $565,848,191
===========
</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 GBP = British Pounds
CAD = Canadian Dollars IEP = Irish Punts
CHF = Swiss Francs ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NZD = New Zealand Dollars
ESP = Spanish Pesetas SEK = Swedish Kronor
See notes to financial statements
6
<PAGE>
Statement of Assets and Liabilities -- May 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments, at value (identified cost, $567,552,256) $557,758,450
Cash 68,879
Receivable for interest rate swaps 158,517
Net receivable for closed forward foreign currency exchange contracts purchased 12,505
Receivable for daily variation margin on open futures contracts 290,625
Receivable for investments sold 24,425,781
Interest receivable 9,904,764
Other assets 6,606
-----------
Total assets $592,626,127
-----------
Liabilities:
Payable to dividend disbursing agent $ 274,279
Payable for investments purchased 24,130,859
Payable for Trust shares reacquired 1,044,800
Written options outstanding, at value (premiums received, $20,347) 4,736
Net payable for forward foreign currency exchange contracts sold 571,465
Net payable for forward foreign currency exchange contracts purchased 210,207
Payable to affiliates --
Management fee 11,602
Transfer agent fee 63,000
Accrued expenses and other liabilities 466,988
-----------
Total liabilities $ 26,777,936
-----------
Net assets $565,848,191
===========
Net assets consist of:
Paid-in capital $603,548,251
Unrealized depreciation on investments and translation of assets and liabilities
in foreign currencies (10,153,083)
Accumulated net realized loss on investments and foreign currency transactions (25,261,266)
Accumulated distributions in excess of net investment income (2,285,711)
-----------
Total $565,848,191
===========
Shares of beneficial interest outstanding 77,482,255
===========
Net asset value per share (net assets / shares of beneficial interest outstanding) $7.30
===========
</TABLE>
See notes to financial statements
7
<PAGE>
Statement of Operations -- Six Months Ended May 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Net investment income:
Interest income $ 22,215,964
------------
Expenses --
Management fee $ 2,143,768
Trustees' compensation 80,323
Transfer and dividend disbursing agent fee 123,822
Custodian fee 185,004
Broker communication fee 146,970
Auditing fees 35,107
Postage 31,428
Printing 30,997
Legal fees 3,835
Miscellaneous 168,968
------------
Total expenses $ 2,950,222
Fees paid indirectly (16,054)
------------
Net expenses $ 2,934,168
------------
Net investment income $ 19,281,796
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions $ (3,242,040)
Written option transactions 141,203
Foreign currency transactions 5,337,167
Futures contracts 23,064
------------
Net realized gain on investments and foreign
currency transactions $ 2,259,394
------------
Change in unrealized appreciation (depreciation) --
Investments $(24,849,756)
Written options (60,998)
Translation of assets and liabilities in foreign currencies (4,258,645)
Futures contracts 287,978
Interest rate swaps 158,518
------------
Net unrealized loss on investments $(28,722,903)
------------
Net realized and unrealized loss on investments and
foreign currency $(26,463,509)
------------
Decrease in net assets from operations $ (7,181,713)
============
</TABLE>
See notes to financial statements
8
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Year Ended
Ended November 30,
May 31, 1996 1995
------------ --------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income $ 19,281,796 $ 41,386,070
Net realized gain on investments and foreign currency transactions 2,259,394 7,785,537
Net unrealized gain (loss) on investments and foreign currency translation (28,722,903) 45,334,620
---------- ------------
Increase (decrease) in net assets from operations $ (7,181,713) $ 94,506,227
---------- ------------
Distributions declared to shareholders --
From net investment income $(19,281,796) $(40,982,400)
In excess of net investment income (369,699) --
---------- ------------
Total distributions declared to shareholders $(19,651,495) $(40,982,400)
---------- ------------
Trust share (principal) transactions --
Cost of treasury shares acquired $(13,453,335) $ 65,178,037
---------- ------------
Total decrease in net assets $(40,286,543) $(11,654,210)
Net assets:
At beginning of period 606,134,734 617,788,944
---------- ------------
At end of period (including accumulated distributions in excess of
net investment income of $2,285,711 and $1,916,012, respectively) $565,848,191 $606,134,734
========== ============
</TABLE>
See notes to financial statements
9
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Six
Months
Per share data (for a share Ended Year Ended November 30,
outstanding throughout May 31, ---------------------------------------------------------------------------------------
each period): 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987*
------- ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value --
beginning of period $ 7.62 $ 6.90 $ 7.83 $ 7.59 $ 8.08 $ 8.41 $ 8.92 $ 9.18 $ 9.33 $ 9.40
------ ---- ---- ---- ---- ---- ---- ---- ---- -----
Income from investment
operations# --
Net investment incomeS. $ 0.24 $ 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 (0.33) 0.64 (0.88) 0.38 (0.23) 0.16 (0.11) 0.09 0.12 (0.03)
------ ---- ---- ---- ---- ---- ---- ---- ---- -----
Total from investment
operations $ (0.09) $ 1.13 $ (0.40) $ 0.90 $ 0.38 $ 0.85 $ 0.67 $ 0.91 $ 1.06 $ 0.42
------ ---- ---- ---- ---- ---- ---- ---- ---- -----
Less distributions declared
to shareholders --
From net investment
incomeS.S. $ (0.25) $ (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)
From paid-in capital -- -- -- -- (0.30) (0.54) (0.50) (0.27) (0.16) --
Tax return of capital -- -- (0.32) -- -- -- -- -- -- --
------ ---- ---- ---- ---- ---- ---- ---- ---- -----
Total distributions
declared to
shareholders $ (0.25) $ (0.49) $ (0.53) $ (0.66) $ (0.87) $ (1.18) $ (1.18) $ (1.17) $ (1.21) $ (0.49)
------ ---- ---- ---- ---- ---- ---- ---- ---- -----
Increase from repurchase of
capital shares $ 0.02 $ 0.08 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
------ ---- ---- ---- ---- ---- ---- ---- ---- -----
Net asset value -- end of
period $ 7.30 $ 7.62 $ 6.90 $ 7.83 $ 7.59 $ 8.08 $ 8.41 $ 8.92 $ 9.18 $ 9.33
====== ==== ==== ==== ==== ==== ==== ==== ==== =====
Per share market value at
end of period $ 6.500 $ 6.500 $ 6.313 $ 7.125 $ 7.250 $ 8.000 $ 8.125 $ 10.000 $ 10.125 $ 9.875
====== ==== ==== ==== ==== ==== ==== ==== ==== =====
Total return 3.83%+++ 10.96% (3.90)% 7.32% 1.11% 13.73% (6.82)% 11.83% 15.77% 8.10%+
Ratios (to average net
assets)/
Supplemental dataS.:
Expenses## 0.99%+ 0.99% 0.97% 0.93% 1.03% 1.04% 1.05% 1.08% 1.11% 1.01%+
Net investment income 6.49%+ 6.84% 6.51% 6.61% 7.80% 8.38% 9.16% 9.23% 9.87% 9.91%+
Portfolio turnover 138% 318% 295% 453% 245% 805% 535% 640% 307% 88%
Net assets at end of period
(000 omitted) $565,848 $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.
+++Not annualized.
#Per share data for the period subsequent to November 30, 1993 is based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, the Trust's expenses are
calculated without reduction for fees paid indirectly.
S.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.
S.S.For the six months ended May 31, 1996, the per share amount includes
distributions in excess of net investment income of $0.005.
See notes to financial statements
10
<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
General -- The preparation of financial statements in conformity with
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. 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 -- 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. Pursuant to an exemptive
order issued by the Securities and Exchange Commission, the Trust, along with
other affiliated entities of MFS, may utilize a joint trading account for the
purpose of entering into one or more repurchase agreements. These repurchase
agreements are collateralized by U.S. Treasury or Federal Agency obligations.
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, 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.
11
<PAGE>
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 security 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 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. Investments in
currency futures for purposes other than hedging may be made to change the
Trust's relative position in one or more currencies without buying and
selling portfolio assets. Should interest or exchange rates or securities
prices move unexpectedly, the Trust may not achieve the anticipated benefits
of the 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 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.
Swap Agreements -- The Trust may enter into swap agreements. A swap is an
exchange of cash payments between the Trust and another party which is based
on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual
basis. The value of the swap is adjusted daily and the change in value is
recorded as unrealized appreciation or depreciation. Risks may arise upon
entering into these agreements from the potential inability of counterparties
to meet the terms of their contract and from unanticipated changes in the
value of the financial index on which the swap agreement is based. The Trust
uses swaps for both hedging and non-hedging purposes. For hedging purposes,
the Trust may use
12
<PAGE>
swaps to reduce its exposure to interest and foreign exchange rate
fluctuations. For non-hedging purposes, the Trust may use swaps to take a
position on anticipated changes in the underlying financial index.
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. Foreign taxes have been provided for on interest and dividend
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.
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.
(3) 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 $20,823 for the period
ended May 31, 1996.
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:
13
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
<S> <C>
Total Number of Accounts Annual Account Fee
---------------------------------------------------- -------------------
Less than 75,000 ............................................... $9.00
75,000 and over ................................................ $8.00
</TABLE>
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:
<TABLE>
<CAPTION>
Purchases Sales
-------------------------------------------- ----------- -------------
<S> <C> <C>
U.S. government securities $590,799,159 $633,968,468
========= ===========
Investments (non-U.S. government securities) $199,542,455 $208,310,052
========= ===========
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost $567,552,256
============
Gross unrealized depreciation $(13,481,402)
Gross unrealized appreciation 3,687,596
------------
Net unrealized depreciation $ (9,793,806)
============
</TABLE>
(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:
<TABLE>
<CAPTION>
Six Months Ended May 31, 1996 Year Ended November 30, 1995
----------------------------- ----------------------------
Shares Amount Shares Amount
--------------------------- ------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Treasury shares reacquired 2,056,900 $13,453,335 10,013,000 $ 65,178,037
=========== =========== ========= ============
</TABLE>
In accordance with the provisions of the Trust's prospectus, 2,056,900 shares
of beneficial interest were purchased by the Trust during the period ended
May 31, 1996 at an average price per share of $6.54 and a weighted average
discount of 12.3% per share. The Trust purchased 10,013,000 shares of
beneficial interest during the year ended November 30, 1995, at an average
price per share of $6.51 and a weighted average discount of 9.0% per share.
(6) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Realized and Increase (Decrease)
Net Investment Unrealized Gain (Loss) in Net Assets Resulting
Quarterly Period Investment Income Income on Investments from Operations
-------------------- ------------------ ------------------ ---------------------- -----------------------
Per Per Per Per
Fiscal 1996 Amount Share Amount Share Amount Share Amount Share
-------------------- ---------- ---- ---------- ---- ------------ ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
February 29 $11,154,975 $0.13 $ 9,686,176 $0.12 $(11,159,323) $(0.14) $(1,473,147) $(0.02)
May 31 11,060,989 0.15 9,595,620 0.12 (15,304,186) (0.19) (5,708,566) (0.07)
-------- -- -------- -- ---------- ---- --------- ------
$22,215,964 $0.28 $19,281,796 $0.24 $(26,463,509) $(0.33) $(7,181,713) $(0.09)
======== == ======== == ========== ==== ========= ======
Fiscal 1995
--------------------
February 28 $12,162,338 $0.13 $10,700,322 $0.12 $ 13,491,579 $ 0.22 $24,191,901 $ 0.35
May 31 12,446,705 0.15 10,938,166 0.13 25,867,253 0.24 36,805,419 0.37
August 31 11,733,564 0.15 10,233,221 0.13 (1,867,003) (0.02) 8,366,218 0.09
November 30 11,035,555 0.13 9,514,361 0.11 15,628,328 0.20 25,142,689 0.32
-------- -- -------- -- ---------- ---- --------- ------
$47,378,162 $0.56 $41,386,070 $0.49 $ 53,120,157 $ 0.64 $94,506,227 $ 1.13
======== == ======== == ========== ==== ========= ======
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Net Realized and Increase (Decrease)
Net Investment Unrealized Gain (Loss) in Net Assets Resulting
Quarterly Period Investment Income Income on Investments from Operations
-------------------- ------------------ ------------------ ---------------------- ------------------------
Per Per Per Per
Fiscal 1994 Amount Share Amount Share Amount Share Amount Share
-------------------- ---------- ---- ---------- ---- ------------ ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
February 28 $10,479,948 $0.11 $ 8,867,636 $0.09 $(15,186,319) $(0.15) $ (6,318,683) $(0.06)
May 31 14,319,848 0.15 12,618,191 0.14 (44,851,111) (0.45) (32,232,920) (0.31)
August 31 13,459,407 0.14 11,854,632 0.12 (13,730,483) (0.14) (1,875,851) (0.02)
November 30 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 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 repurchase of Trust 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 period ended
May 31, 1996 was $3,328.
(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, futures contracts and interest rate swap agreements. 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 May 31, 1996, is as follows:
Written Option Transactions
<TABLE>
<CAPTION>
1996 Calls 1996 Puts
------------------------------------ --------------------------------------
Principal Amounts of Principal Amounts of
Contracts (000 Omitted) Premiums Contracts (000 Omitted) Premiums
- ----------------------------------------------- ----------------------- --------- ----------------------- -----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Australian Dollars 3,672 $ 23,358 8,233 $ 82,283
Deutsche Marks/British Pounds 13,660 82,866 -- --
Japanese Yen -- -- 797,000 102,122
Options written --
Australian Dollars 5,087 27,571 -- --
Canadian Dollars -- -- 9,091 20,347
Deutsche Marks/British Pounds 12,000 53,354 -- --
Japanese Yen -- -- 390,000 47,987
Options terminated in closing transactions --
Australian Dollars (8,759) (50,929) (3,467) (21,190)
Deutsche Marks/British Pounds (19,660) (109,543) -- --
Japanese Yen -- -- (1,187,000) (150,109)
Options expired --
Australian Dollars -- -- (4,766) (61,093)
Deutsche Marks/British Pounds (6,000) (26,677) -- --
------ ------- --------- ---------
Outstanding, end of period -- $ -- 9,091 $ 20,347
====== ======= ========= =========
Options outstanding at end of period
consist of --
Canadian Dollars -- $ -- 9,091 $ 20,347
------ ------- -------- ---------
</TABLE>
At May 31, 1996, the Trust had sufficient cash and/or securities at least
equal to the value of the written options.
15
<PAGE>
Notes to Financial Statements -- continued
Forward Foreign Currency Exchange Contracts
- -------------------------------------------
<TABLE>
<CAPTION>
Contracts to In Exchange Contracts at Net Unrealized
Settlement Date Deliver/Receive for Value Appreciation (Depreciation)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 8/30/96 CAD 32,722,216 $ 23,911,803 $ 23,934,593 $ (22,790)
8/14/96 CHF 21,750,512 17,479,083 17,542,854 (63,771)
11/04/96 DEM 54,508,348 35,943,212 36,158,385 (215,173)
9/09/96 DKK 160,031,675 27,096,457 27,350,373 (253,916)
8/13/96 ESP 344,049,414 2,675,762 2,670,512 5,250
8/09/96 GBP 12,177,967 18,391,593 18,868,263 (476,670)
8/22/96 IEP 5,793,011 9,050,798 9,201,897 (151,099)
8/06/96 ITL 42,853,948,101 27,188,941 27,640,797 (451,856)
6/07/96 JPY 1,511,922,315 15,253,454 14,010,983 1,242,471
10/18/96 NZD 25,028,333 16,757,299 16,722,205 35,094
6/24/96 -
8/02/96 SEK 136,168,917 20,060,374 20,279,379 (219,005)
------------- ------------- ----------
$213,808,776 $214,380,241 $ (571,465)
============= ============= ==========
Purchases 6/12/96 -
11/04/96 DEM 59,184,091 $ 39,186,561 $ 39,129,364 $ (57,197)
8/06/96 ITL 10,606,419,031 6,792,412 6,841,140 48,728
6/07/96 JPY 1,511,922,315 14,232,581 14,010,984 (221,597)
8/02/97 SEK 8,454,719 1,238,787 1,258,646 19,859
------------- ------------- ----------
$ 61,450,341 $ 61,240,134 $ (210,207)
============= ============= ==========
</TABLE>
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 $12,505 with Bankers Trust Company at
May 31, 1996. At May 31, 1996, the Trust had sufficient cash and/or
securities to cover any commitments under these contracts.
Futures Contracts
- -----------------
Unrealized
Expiration Contracts Position Appreciation
--------------------------------------------------
9/96 300 Short $287,978
========
At May 31, 1996, the Trust had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
Interest Rate Swaps
<TABLE>
<CAPTION>
Notional
Principal Cash Flows Cash Flows
Amount of Paid by the Received by the Unrealized
Expiration Contract Trust Trust Appreciation
- ----------- ----------------- -------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
4/20/99 ITL 14,630,000,000 ITL-Libor-BBA 9.535% Fixed $179,567
5/10/99 14,120,000,000 ITL-Libor-BBA 8.35% Fixed 36,486
-----------
$216,053
===========
</TABLE>
At May 31, 1996, the Trust had sufficient securities to cover margin
requirements on open interest rate swaps.
(9) Restricted Securities
The Trust may invest not more than 10% of its assets in securities which are
subject to legal or contractual restrictions on resale. At May 31, 1996, the
Trust owned the following restricted securities (constituting 1.62% of net
assets) which may not be publicly sold without registration under the
Securities Act of 1933. 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 or, if not available, in
good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
Date of Par
Description Acquisition Amount Cost Value
- ------------------------------------------------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
FHA (Kimberly Woods Project Loan), 8.25s, 2027 3/29/93 $6,282,508 $6,470,984 $6,413,122
FHA (USGI 986 Spring Hill), 10.375s, 2030 8/16/93 2,465,409 2,651,855 2,739,685
---------
$9,152,807
=========
</TABLE>
16
<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 May 31, 1996, the related statement of operations for the six
months then ended, the statement of changes in net assets for the six months
ended May 31, 1996 and the year ended November 30, 1995, and the financial
highlights for the six months ended May 31, 1996 and 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 May 31, 1996 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 May 31, 1996, 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
July 5, 1996
17
<PAGE>
[FRONTCOVER]
[MFS LOGO]
MFS(R) Government Markets Income Trust
Semiannual Report
May 31, 1996
[BACKCOVER]
MFS(R) 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)
PrivateInvestor
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-3 7/96 66.5M
