[front cover]
[MFS logo]
MFS(SM)
INVESTMENT MANAGEMENT
MFS(R) Government Markets Income Trust
Annual Report
for Year Ended
November 30, 1997
<PAGE>
Dear Shareholders:
U.S. economic momentum remains firm, with almost all recent data still
suggesting a healthy combination of robust growth and low inflation. However, as
the upheavals in Southeast Asia have broadened to the entire region, at the very
least the data suggest a moderation of both global growth and inflation
expectations. In the very near term, we believe weaker Asian currencies will
help keep a lid on U.S. inflation and will slow export growth. Just how much of
an impact these events will have longer term on U.S. growth and earnings,
however, remains uncertain. They do, though, suggest that the Federal Reserve
Board (the Fed) will stay its hand, at least into 1998, as officials evaluate
the impact of these events on the U.S. real (inflation-adjusted) economy.
Clearly, the United States stands out as attractive given recent market turmoil
around the globe. Domestic fundamentals are strong, inflation remains subdued
and, on a relative basis, U.S. yields stand out as attractive. For this reason,
we have increased the Trust's U.S. allocation to approximately 90% of the
portfolio. Yield levels on 10-year-maturity U.S. Treasuries, which had climbed
to as high as 7.00% in April 1997, have more recently declined to approximately
5.80%, near their low for the year. (Principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity.) An
investment in 10-year Treasuries would have produced a total return of 7.57%
over the past 12 months. Similarly, yields on two-year Treasury securities,
which peaked at 6.50% during April, declined to 5.60% more recently and would
have produced a total return of 5.86%. Although many global trends continue to
provide a very positive backdrop for our market, we believe caution is still
warranted as our economy approaches full capacity.
The Trust's stock market price, which stood at $6.75 on November 30, 1996,
decreased to $6.69 on November 30, 1997, while its net asset value (NAV) price
decreased from $7.56 to $7.41, representing a total return of 6.91% based on
market price and 5.77% based on NAV. For comparative purposes, the Salomon
Brothers Treasury/Government Sponsored Index, an unmanaged index of medium-term
Treasury and government-agency securities, appreciated by 7.40% over this
period, while the J.P. Morgan Non-Dollar Government Bond Index, an unmanaged
index of actively traded government bonds issued by 12 countries (excluding the
United States) with remaining maturities of at least one year, declined by 3.39%
in local currency terms.
We believe the Trust continues to benefit from its innovative share repurchase
program. This program, which was implemented in April 1996 and reinstated in
March 1997, authorizes the Trust to repurchase up to 10% of its outstanding
shares annually. The Trust captures the difference between its NAV and its
market price when it repurchases shares and pays the captured value to its
shareholders with their regular monthly distributions.
U.S. Government Sector
Earlier in 1997, strong economic momentum led the Fed to raise short-term
interest rates slightly in order to forestall inflationary pressures. In
anticipation of the March tightening of monetary policy, our strategy has been
to de-emphasize intermediate-maturity Treasuries and increase our allocation to
very short-maturity Treasuries, offset by a slightly greater emphasis on
longer-maturity 10-year Treasuries. Although the extent of additional Fed action
over the next several months remains uncertain, we believe the Fed could
eventually see a need for further modest tightening. Should it choose to raise
interest rates, short- and intermediate-maturity securities will be the most
adversely affected. By repositioning our Treasury exposure between cash and
longer maturities, while reducing exposure to intermediate maturities, we
believe we can reduce the overall impact to the portfolio of a Fed move.
In this environment, the mortgage-backed pass-through sector posted strong
relative performance, and we anticipate a continuation of this trend in the
months ahead. An index, or average, allocation to this sector would be about
36%. Over the course of the year our weighting of this sector was neutral, but
we will add to it as opportunities present themselves.
1
<PAGE>
International Sector
Over the past year, we have gradually reduced the Trust's exposure to foreign
markets from the 35% allowable maximum to roughly 5% as U.S. interest rates have
become increasingly attractive from a global perspective. Throughout this
process, we continued to emphasize the higher-yielding European and dollar-bloc
markets. According to the J.P. Morgan indices, these markets, such as Spain,
Italy, the United Kingdom, and Australia, provided the best local currency
performance among the major sovereign bond markets. Core Europe and Japan lagged
the U.S. market. The Trust also benefited from our decision to hedge most of its
foreign assets back into the U.S. dollar, which appreciated sharply against all
major currencies except the British pound. The Trust's 10% allocation to
emerging market instruments was a mixed blessing. For most of the year, the
Trust benefited from tightening spreads and high current income from this
sector. However, the Trust's holdings in Thailand suffered a sharp loss in value
at the beginning of the currency crisis that has spread throughout Asia in the
past few months.
The Asian crisis has created concern that global growth will slow sharply in
1998 and has reinforced the market's confidence that inflation will remain low,
if not decline. We believe there is little doubt that the recovery process in
Asia will be slow and painful, but the magnitude of its impact on the rest of
the world remains to be seen. Overall, the turmoil has changed our outlook for
the developed bond markets very little. In our view, slower global growth and
lower inflation will support core markets such as Germany and the United States
and provide the opportunity for a further rally if the downturn is more severe
than the market currently believes. We still believe European monetary union
will proceed on schedule with a broad group of participants, and that our
investments in Italy should therefore benefit from further spread tightening.
Since Australia and New Zealand are particularly vulnerable to a recession in
Asia, we remain quite positive on these markets. As the crisis unfolds, we will
be looking for opportunities to acquire assets at attractive valuations.
The U.S. dollar is currently subject to strong countervailing forces. It is
supported by the flight to quality, the productivity of U.S. assets, and strong
U.S. growth. However, concern over the impact of the Asian crisis on the
already large U.S. current-account deficit limits the potential for further
appreciation. For now, the Trust remains fully hedged back into the dollar.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
A. Keith Brodkin
A. Keith Brodkin
Chairman and President
Stephen C. Bryant
Stephen C. Bryant
Portfolio Manager
Steven E. Nothern
Steven E. Nothern
Portfolio Manager
December 15, 1997
-------------------------------------
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.
2
<PAGE>
Performance Summary
(For the year ended November 30, 1997)
Net Asset Value Per Share
November 30, 1996 $ 7.56
November 30, 1997 $ 7.41
New York Stock Exchange Price
November 30, 1996 $ 6.750
April 15, 1997 (low)* $ 6.375
November 14, 1997 (high)* $ 6.813
November 30, 1997 $ 6.688
*For the period December 1, 1996, through November 30, 1997.
Federal Income Tax Information
on Distributions
(For the year ended November 30, 1997)
Distribution Sources
The Trust made no long-term capital gain distributions for tax purposes during
the year ended November 30, 1997.
Tax Form Summary
In January 1998, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1997.
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, nondiversified,
management investment company and has no employees.
Number of Shareholders
As of November 30, 1997, our records indicate that there are 11,276 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
1-800-637-2300
New York Stock Exchange Symbol The New York Stock Exchange symbol is MGF.
Results of Shareholder Meeting
At the annual meeting of shareholders of MFS[RegTM] Government Markets Income
Trust, which was held on October 21, 1997, the following actions were taken:
Item 1. The election of A. Keith Brodkin, Richard B. Bailey, Arnold D. Scott,
and Jeffrey L. Shames as Trustees of the Trust.
<TABLE>
<CAPTION>
Number of Shares
Nominee For Withhold Authority
- ------------------- -------------------- -------------------
<S> <C> <C>
A. Keith Brodkin 58,716,677.9303 1,336,709.4033
Richard B. Bailey 58,559,236.3046 1,494,151.0290
Arnold D. Scott 57,713,319.4777 1,340,067.8559
Jeffrey L. Shames 58,595,810.1388 1,457,577.1948
</TABLE>
Trustees continuing in office who were not subject to re-election at this
meeting are Marshall N. Cohan, Lawrence H. Cohn, M.D., The Honorable Sir J.
David Gibbons, KBE, Abby M. O'Neill, Walter E. Robb, III, J. Dale Sherratt, and
Ward Smith.
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, 1998.
<TABLE>
<CAPTION>
Number of Shares
--------------------
<S> <C>
For 58,672,356.9004
Against 595,806.5200
Abstain 785,223.9132
</TABLE>
3
<PAGE>
Investment Objective and Policy
The investment objective of the 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, futures
transactions, interest rate swaps, and forward foreign currency exchange
contracts and purchase securities on a "when-issued" basis.
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.
4
<PAGE>
Portfolio of Investments -- November 30, 1997
Bonds -- 87.0%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 78.9%
U.S. Treasury Obligations -- 25.8%
U.S. Treasury Bonds, 6.375s,
2027 $ 17,728 $ 18,434,284
U.S. Treasury Bonds, 6.625s,
2027 9,372 10,035,350
U.S. Treasury Bonds, 10.375s,
2009 6,200 7,720,922
U.S. Treasury Bonds, 11.25s,
2015 28,500 44,259,645
U.S. Treasury Notes, 3.375s,
2007 5,000 4,936,700
U.S. Treasury Notes, 9.125s,
1999 47,500 49,689,275
------------
$135,076,176
------------
U.S. Federal Agencies -- 32.3%
FHA (Kimberly Woods Project
Loan), 8.25s, 2027+ ................. $ 6,221 $ 6,158,843
FHA (USGI 986 Spring Hill),
10.375s, 2030+ ...................... 2,454 2,514,239
FICO, 9.8s, 2018 ...................... 5,000 6,925,800
FICO, 10.7s, 2017 ..................... 8,500 12,625,135
Federal Home Loan Mortgage
Corp., 6.79s, 2005 .................. 4,500 4,688,437
Federal Home Loan Mortgage
Corp., 7.5s, 2099[sec] .............. 43,000 43,913,750
Federal National Mortgage
Assn., 5s, 2023 ..................... 6,000 4,927,500
Federal National Mortgage
Assn., 6.55s, 2007 .................. 4,000 4,006,250
Federal National Mortgage
Assn., 7s, 2026 - 2027 .............. 30,824 30,717,122
Federal National Mortgage
Assn., 7.5s, 2003 ................... 10,404 10,603,836
Federal National Mortgage
Assn., 7.875s, 2006 ................. 30,000 30,806,250
Federal National Mortgage
Assn., 8.5s, 2027 ................... 10,100 11,584,902
------------
$169,472,064
------------
Government National Mortgage
Association -- 19.4%
GNMA, 7s, 2022 - 2024 ................. $ 18,519 $ 18,613,060
GNMA, 7.5s, 2007 - 2027 ............... 67,856 69,274,477
GNMA, 8.5s, 2026 ...................... 13,305 13,916,125
------------
$101,803,662
------------
Small Business
Administration -- 0.7%
SBA, 8.875s, 2011 ..................... $ 3,601 $ 3,922,152
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
U.S. Government Guaranteed -- 0.7%
Private Export Funding Corp.,
7.01s, 2004 ......................... $ 3,380 $ 3,555,861
------------
Total U.S. Bonds ..................................... $413,829,915
------------
Foreign Bonds -- 8.1%
Australia -- 0.7%
Commonwealth of Australia,
9.5s, 2003 .......................... AUD 2,555 $5 2,041,750
Commonwealth of Australia,
7.5s, 2005 .......................... 2,425 1,796,191
------------
$ 3,837,941
------------
Italy -- 0.5%
Republic of Italy, 8.5s, 2004 ......... ITL 3,890,000 $0,2,574,271
------------
Mexico -- 1.1%
United Mexican States, 6.25s,
2019 $7,000 $ 5,670,000
------------
New Zealand -- 1.2%
Government of New Zealand,
8s, 2001 - 2004 ..................... NZD 10,100 $106,518,045
------------
Poland -- 1.3%
Government of Poland,
6.688s, 2024 ........................ PLN 7,000 $0 6,632,500
------------
Russia -- 0.7%
City of Moscow, 9.5s, 2000 ............ $ 3,600 $ 3,605,400
------------
Thailand -- 0.7%
Total Access Communication,
10.4s, 2004 ......................... THB 200,000 $003,573,892
------------
United Kingdom -- 1.1%
United Kingdom Treasury, 10s,
2003 GBP 2,910 $0 5,647,760
------------
Venezuela -- 0.8%
Republic of Venezuela, 9.25s,
2027 $ 5,000 $ 4,387,500
------------
Total Foreign Bonds .................................. $ 42,447,309
------------
Total Bonds
(Identified Cost, $451,469,561)..................... $456,277,224
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
Warrants
Republic of Venezuela*
(Identified Cost, $0)......................... $37,500 $ 0
------------
Rights
United Mexican States*
(Identified Cost, $0)......................... $ 1,000 $ 0
------------
</TABLE>
5
<PAGE>
Portfolio of Investments -- continued
Short-Term Obligations -- 19.8%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Farm Credit Bank
Consolidated Discount Note,
due 1/05/98 ................. $9,000 $ 8,951,525
Federal Home Loan Bank
Consolidated Discount Note,
due 12/01/97 ................ 9,300 9,300,000
Federal Home Loan Mortgage
Discount Notes, due
12/11/97 - 12/22/97 74,700 74,560,833
Federal National Mortgage
Assn., due 12/23/97 ......... 10,900 10,863,497
------------
Total Short-Term Obligations,
at Amortized Cost ................................... $103,675,855
------------
Total Investments
(Identified Cost, $555,145,416)...................... $559,953,079
Call Option Written -- (0.1)%
Description/Expiration Month/ Principal Amount
of Contracts
Strike Price (000 Omitted)
Swiss Francs/Deutsche Marks/
March/0.847 (Premium
Received, $133,083)...CHF 19,084 (681,785)
Other Assets,
Less Liabilities -- (6.7)% ............................ (34,690,824)
------------
Net Assets -- 100.0% .................................... $524,580,470
============
</TABLE>
* Non-income producing security.
+ Restricted security.
[sec] When-issued.
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.
<TABLE>
<S> <C> <C>
AUD = Australian Dollars
CAD = Canadian Dollars
CHF = Swiss Francs
DEM = Deutsche Marks
DKK = Danish Kroner
ESP = Spanish Pesetas
GBP = British Pounds
ITL = Italian Lire
NZD = New Zealand Dollars
PLN = Polish Zloty
THB = Thai Bahts
</TABLE>
See notes to financial statements
6
<PAGE>
Statement of Assets and Liabilities -- November 30, 1997
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $555,145,416) ................................. $559,953,079
Cash .................................................................................. 63,112
Net receivable for forward foreign currency exchange contracts to sell ................ 389,715
Net receivable for foreign currency exchange contracts closed or subject to master 2,103,970
netting agreements
Receivable for investments sold ....................................................... 2,299,583
Interest receivable ................................................................... 5,227,973
Receivable for interest rate swaps .................................................... 55,263
Other assets .......................................................................... 4,753
------------
Total assets ........................................................................ $570,097,448
------------
Liabilities:
Payable to dividend disbursing agent .................................................. $ 235,898
Payable for when-issued investments purchased ......................................... 43,860,000
Written options outstanding, at value (premiums received, $133,083) ................... 681,785
Net payable for forward foreign currency exchange contracts to purchase ............... 256,626
Payable to affiliates --
Management fee ....................................................................... 40,244
Transfer agent fee ................................................................... 17,060
Administrative fee ................................................................... 859
Accrued expenses and other liabilities ................................................ 424,506
------------
Total liabilities ................................................................... $ 45,516,978
------------
Net assets ............................................................................. $524,580,470
============
Net assets consist of:
Paid-in capital ....................................................................... $558,363,806
Unrealized appreciation on investments and translation of assets and liabilities in 6,516,027
foreign currencies
Accumulated net realized loss on investments and foreign currency transactions ........ (38,113,943)
Accumulated distributions in excess of net investment income .......................... (2,185,420)
------------
Total ............................................................................... $524,580,470
============
Shares of beneficial interest outstanding .............................................. 70,753,255
============
Net asset value per share (net assets [divided by] shares of beneficial interest $ 7.41
============
outstanding)
</TABLE>
See notes to financial statements
7
<PAGE>
Statement of Operations -- Year Ended November 30, 1997
<TABLE>
<S> <C>
Net investment income:
Interest Income ........................................................... $ 39,535,071
------------
Expenses --
Management fee ........................................................... $ 3,802,065
Trustees' compensation ................................................... 158,931
Transfer and dividend disbursing agent fee ............................... 202,783
Administrative fee ....................................................... 59,654
Custodian fee ............................................................ 281,205
Auditing fees ............................................................ 70,894
Postage .................................................................. 56,201
Printing ................................................................. 48,988
Legal fees ............................................................... 1,157
Miscellaneous ............................................................ 274,027
------------
Total expenses .......................................................... $ 4,955,905
Fees paid indirectly ..................................................... (81,112)
------------
Net expenses ............................................................ $ 4,874,793
------------
Net investment income .................................................. $ 34,660,278
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions .................................................. $(13,265,963)
Written option transactions .............................................. 120,888
Foreign currency transactions ............................................ 6,530,289
Interest rate swap transactions .......................................... 548,821
------------
Net realized loss on investments and foreign currency transactions ..... $ (6,065,965)
------------
Change in unrealized appreciation (depreciation) --
Investments .............................................................. $ (6,642,776)
Written options .......................................................... (548,702)
Translation of assets and liabilities in foreign currencies .............. 3,874,717
Interest rate swaps ...................................................... (531,049)
------------
Net unrealized loss on investments and foreign currency translation .... $ (3,847,810)
------------
Net realized and unrealized loss on investments and foreign currency .. $ (9,913,775)
------------
Increase in net assets from operations ............................... $ 24,746,503
============
</TABLE>
See notes to financial statements
8
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended November 30,
------------------------------
1997 1996
------------- ------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income ................................................................... $ 34,660,278 $ 38,132,996
Net realized gain (loss) on investments and foreign currency transactions ............... (6,065,965) 1,310,231
Net unrealized loss on investments and foreign currency translation ..................... (3,847,810) (8,205,983)
------------ ------------
Increase in net assets from operations ................................................. $ 24,746,503 $ 31,237,244
------------ ------------
Distributions declared to shareholders --
From net investment income .............................................................. $(34,660,278) $(38,132,996)
In excess of net investment income ...................................................... (2,305,112) (3,801,845)
------------ ------------
Total distributions declared to shareholders .......................................... $(36,965,390) $(41,934,841)
------------ ------------
Trust share (principal) transactions --
Cost of Treasury shares acquired ........................................................ $(17,696,661) $(40,941,119)
------------ ------------
Total decrease in net assets .......................................................... $(29,915,548) $(51,638,716)
Net assets:
At beginning of year .................................................................... 554,496,018 606,134,734
------------ ------------
At end of period (including accumulated distributions in excess of net investment income
of $2,185,420 and $3,035,917, respectively)............................................. $524,580,470 $554,496,018
============ ============
</TABLE>
See notes to financial statements
9
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended November 30,
Per share data (for a -----------------------------------------------------------------------
share outstanding 1997 1996 1995 1994 1993
throughout each period): ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value -- beginning of period ............... $ 7.56 $ 7.62 $ 6.90 $ 7.83 $ 7.59
------- ------- ------- ------- -------
Income from investment operations# --
Net investment income ............................... $ 0.49 $ 0.49 $ 0.49 $ 0.48 $ 0.52
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ....................................... (0.14) (0.07) 0.64 (0.88) 0.38
------- ------- ------- ------- -------
Total from investment operations ................... $ 0.35 $ 0.42 $ 1.13 $ (0.40) $ 0.90
------- ------- ------- ------- -------
Less distributions declared to shareholders --
From net investment income .......................... $ (0.49) $ (0.49) $ (0.49) $ (0.14) $ (0.44)
In excess of net investment income .................. (0.03) (0.05) -- (0.02) --
From net realized gain on investments and
foreign currency transactions ...................... -- -- -- (0.05) (0.22)
Tax return of capital ............................... -- -- -- (0.32) --
------- ------- ------- ------- -------
Total distributions declared to shareholders ....... $ (0.52) $ (0.54) $ (0.49) $ (0.53) $ (0.66)
------- ------- ------- ------- -------
Net increase from repurchase of capital shares ...... $ 0.02 $ 0.06 $ 0.08 $ -- $ --
------- ------- ------- ------- -------
Net asset value -- end of period .................... $ 7.41 $ 7.56 $ 7.62 $ 6.90 $ 7.83
======= ======= ======= ======= =======
Per share market value -- end of period ............. $ 6.688 $ 6.750 $ 6.500 $ 6.313 $ 7.125
Total return ........................................ 6.91% 12.61% 10.96% (3.90) % 7.32%
Ratios (to average net assets)/ Supplemental data:
Expenses## ......................................... 0.94% 1.00% 0.99% 0.97% 0.93%
Net investment income .............................. 6.56% 6.63% 6.84% 6.51% 6.61%
Portfolio turnover .................................. 248% 249% 318% 295% 453%
Net assets at end of period (000 omitted) ........... $524,580 $554,496 $606,135 $617,789 $744,448
</TABLE>
# Per share data for the periods subsequent to November 30, 1993, are 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.
See notes to financial statements
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended November 30,
Per share data (for a -----------------------------------------------------------------------
share outstanding 1992 1991 1990 1989 1988
throughout each period): ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value -- beginning of period ............... $ 8.08 $ 8.41 $ 8.92 $ 9.18 $ 9.33
------- ------- -------- -------- -------
Income from investment operations --
Net investment income[sec] .......................... $ 0.61 $ 0.69 $ 0.78 $ 0.82 $ 0.94
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ....................................... (0.23) 0.16 (0.11) 0.09 0.12
-------- ------- ------- -------- -------
Total from investment operations ................... $ 0.38 $ 0.85 $ 0.67 $ 0.91 $ 1.06
------- ------- ------- -------- -------
Less distributions declared to shareholders --
From net investment income .......................... $ (0.57) $ (0.64) $ (0.68) $ (0.90) $ (0.88)
From net realized gain on investments and
foreign currency transactions ...................... -- -- -- -- (0.17)
From paid-in capital ................................ (0.30) (0.54) (0.50) (0.27) (0.16)
------- ------- ------- -------- -------
Total distributions declared to shareholders ....... $ (0.87) $ (1.18) $ (1.18) $ (1.17) $ (1.21)
------- ------- ------- -------- -------
Net asset value -- end of period .................... $ 7.59 $ 8.08 $ 8.41 $ 8.92 $ 9.18
======= ======= ======= ======== =======
Per share market value -- end of period ............. $ 7.250 $ 8.000 $ 8.125 $ 10.000 $10.125
Total return ........................................ 1.11% 13.73% (6.82)% 11.83% 15.77%
Ratios (to average net assets)/ Supplemental data[sec]:
Expenses ........................................... 1.03% 1.04% 1.05% 1.08% 1.11%
Net investment income .............................. 7.80% 8.38% 9.16% 9.23% 9.87%
Portfolio turnover .................................. 245% 805% 535% 640% 307%
Net assets at end of period (000 omitted) ........... $743,103 $785,992 $813,978 $857,252 $873,503
</TABLE>
[sec]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.
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
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, interest rate swaps,
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 foreign 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. The
Trust, along with other affiliated entities of Massachusetts Financial Services
Company (MFS), may utilize a joint trading account for the purpose of entering
into one or more repurchase agreements.
Foreign Currency Translation -- 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 result from fluctuations in foreign currency exchange rates is not
separately disclosed.
12
<PAGE>
Written Options -- The Trust may also write covered call or put options in
exchange for a premium. The premium is initially recorded as a liability which
is subsequently adjusted to the current value of the options contract. When a
written option expires, the Trust realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the premium
received is offset against the proceeds to determine the realized gain or loss.
When a written 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 received. Written options
may also be used as 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. Investments in equity index
contracts or contracts on related options for purposes other than hedging may be
made when the Trust has cash on hand and wishes to participate in anticipated
market appreciation while the cash is being invested. Should interest or
exchange rates or securities prices move unexpectedly, the 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 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. The Trust 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. On contract settlement date, the gains or losses are
recorded as realized gains or losses on foreign currency transactions.
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
13
<PAGE>
Notes to Financial Statements -- continued
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
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 is amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Some
government securities may be purchased on a "when-issued" or "forward delivery"
basis, which means that the securities will be delivered to the Trust at a
future date, usually beyond customary settlement time.
Fees Paid Indirectly -- The Trust's custody fee is calculated as a percentage of
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 net 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 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 tax 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, 1997, $3,155,609 was reclassified from
accumulated net realized loss to accumulated distributions in excess of 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, 1997, the Trust, for federal income tax purposes, had a capital
loss carryforward of $37,592,355 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, ($28,577,312), November 30, 2004, ($196,662),
and November 30, 2005, ($8,818,381).
14
<PAGE>
(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 .32% of
average daily net assets and 5.33% of investment income.
Administrator -- Effective March 1, 1997, the Trust had an administrative
services agreement with MFS to provide the Trust with certain financial, legal,
shareholder servicing, compliance, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Trust pays
MFS an administrative fee at the following annual percentages of the Trust's
average daily net assets, provided that the administrative fee is not assessed
on Trust assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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 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 $43,211 for the year ended November 30, 1997.
Transfer Agent -- MFSC acts as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee and a dividend services fee and will reimburse MFSC for
reasonable out-of-pocket expenses. The account maintenance fee is computed as
follows:
<TABLE>
<CAPTION>
Total Number of Accounts Annual Account Fee
- --------------------------------- -------------------
<S> <C>
Less than 75,000 .......... $9.00
75,000 and over ........... $8.00
</TABLE>
The dividend services 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 ............................ $775,662,164 $737,032,989
============ ============
Investments (non-U.S. government securities) .......... $391,256,060 $476,687,137
============ ============
</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>
<S> <C>
Aggregate cost ........................ $555,503,228
============
Gross unrealized appreciation ......... $ 10,830,721
Gross unrealized depreciation ......... (6,380,870)
------------
Net unrealized appreciation .......... $ 4,449,851
============
</TABLE>
15
<PAGE>
Notes to Financial Statements -- continued
(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>
Year Ended November 30,
---------------------------------------------------------
1997 1996
-------------------------- --------------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Treasury shares reacquired ......... 2,631,200 $17,696,661 6,154,700 $40,941,119
========= =========== ========= ===========
</TABLE>
In accordance with the provisions of the Trust's prospectus, 2,631,200 shares of
beneficial interest were reacquired by the Trust during the year ended November
30, 1997, at an average price per share of $6.73 and a weighted average discount
of 9.6% per share. The Trust reacquired 6,154,700 shares of beneficial interest
during the year ended November 30, 1996, at an average price per share of $6.65
and a weighted average discount of 9.7% per share. Shares held in Treasury were
repurchased in an attempt to return the market value of the discount to
shareholders in the form of higher monthly distributions.
(6) Line of Credit
The Trust and other affiliated Trusts participate in a $400 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the acquisition of
Treasury shares. Interest is charged to each Trust, 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, 1997, was $685.
16
<PAGE>
(7) 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 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 November 30, 1997,
is as follows:
Written Option Transactions
<TABLE>
<CAPTION>
1997 Calls 1997 Puts
---------------------------------- ---------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
------------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period -- -- $ -- -- $ --
Options Written --
Australian Dollars ......................... 2,765 18,676 -- --
Deutsche Marks/British Pound ............... -- -- 6,960 14,642
Swiss Francs/Deutsche Marks ................ 19,084 133,083 -- --
United States Dollars ...................... 28,000 188,281 -- --
Options terminated in closing transactions --
Australian Dollars ......................... (2,765) (18,676) -- --
Deutsche Marks/British Pound ............... -- -- (6,960) (14,642)
Options exercised --
United States Dollars ...................... (28,000) (188,281) -- --
------- ---------- ------ --------
Outstanding, end of period 19,084 $ 133,083 -- $ --
======= ========== ====== ========
Options outstanding at end of period consist of:
Swiss Francs/Deutsche Marks ................ 19,084 $ 133,083 -- $ --
------- ---------- ------ --------
Outstanding, end of period ................. 19,084 $ 133,083 -- $ --
======= ========== ====== ========
</TABLE>
At November 30, 1997, the Trust had sufficient cash and/or securities at least
equal to the value of the written options.
17
<PAGE>
Notes to Financial Statements -- continued
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts Appreciation
Settlement Date Deliver/Receive at Value In Exchange for (Depreciation)
------------------- ----------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sales 01/07/98 .......... AUD 4,113,895 $ 2,813,803 $ 3,057,858 $ 244,055
01/07/98 .......... DEM 360,227 204,663 212,123 7,460
01/07/98 - 01/17/98 ESP 785,979,726 5,275,812 5,414,012 138,200
----------- ----------- ----------
$ 8,294,278 $ 8,683,993 $ 389,715
=========== =========== ==========
Purchases 01/07/98 .......... CAD 1,092,917 $ 769,689 $ 802,141 $ (32,452)
01/07/98 .......... CHF 17,448,054 12,290,758 12,371,931 (81,173)
01/07/98 .......... DKK 39,569,779 5,903,257 6,076,155 (172,898)
01/07/98 .......... GBP 3,353,606 5,638,300 5,608,403 29,897
----------- ----------- ----------
$24,602,004 $24,858,630 $ (256,626)
=========== =========== ==========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements and
closed forward foreign currency exchange contracts, excluded from above,
amounted to a net receivable of $1,070,052 with Bankers Trust, $1,774,252 with
Merrill Lynch, and $196,956 with Swiss Bank Corp., and a net payable of $274,811
with Deutschebank, and $662,479 with First Boston at November 30, 1997.
At November 30, 1997, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
Interest Rate Swaps
<TABLE>
<CAPTION>
Notional Principal Cash Flows Cash Flows Unrealized
Expiration Amount of Contract Paid by the Trust Received by the Trust Appreciation
- ------------ -------------------- ---------------------- ----------------------- -------------
<S> <C> <C> <C> <C>
ITL 7,170,000,000 ITL - Fixed - 5.685% $31,336
9/18/00 DEM (7,356,864) DEM - Fixed - 4.565% 23,927
-------
$55,263
=======
</TABLE>
At November 30, 1997, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) Restricted Securities
The Trust may invest not more than 10% of it's net assets in securities which
are subject to legal or contractual restrictions on resale. At November 30,
1997, the Trust owned the following restricted securities (constituting 1.65% of
its 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 or, if not
available, in good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
Date of Principal Amount
Description Acquisition (000 omitted) Cost Value
- -------------------------------------------------------- ------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
FHA (Kimberly Woods Project Loan), 8.25s, 2027 ......... 3/29/93 $6,221 $6,407,685 $6,158,843
FHA (USGI 986 Spring Hill), 10.375s, 2030 .............. 8/16/93 2,454 2,639,222 2,514,239
$8,673,082
==========
</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, 1997, the related statement of operations for the year then ended,
the statement of changes in net assets for the years ended November 30, 1997 and
1996, and the financial highlights for each of the years in the ten-year period
ended November 30, 1997. 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, 1997 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, 1997, 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 9, 1998
19
<PAGE>
[Back cover]
MFS[RegTM] Government Markets Income Trust
Trustees
A. Keith Brodkin*
Chairman and President;
Chairman and Director,
Massachusetts Financial
Services Company
Richard B. Bailey* (2)
Private Investor; Former Chairman and
Director (until 1991), Massachusetts
Financial Services 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.
Abby M. O'Neill(2)
Private Investor
Walter E. Robb, III(1)
President and Treasurer,
Benchmark Advisors, Inc.
(corporate financial consultants);
President, Benchmark Consulting
Group, Inc. (office services)
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;
(holding company)
Portfolio Managers
Stephen C. Bryant*
Steven E. Nothern*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Transfer Agent,
Registrar, Dividend
Disbursing Agent and
Plan Agent
State Street Bank
and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 9024
Boston, MA 02205-9824
1-800-637-2304
Custodian
State Street Bank and
Trust Company
Independent 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.
[Recycle symbol] This report is printed on recycled paper. MGFCE-2 1/98 62.5M
