<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) HIGH YIELD
OPPORTUNITIES FUND
ANNUAL REPORT o JANUARY 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 19
Notes to Financial Statements ............................................. 26
Independent Auditors' Report .............................................. 33
MFS' Year 2000 Readiness Disclosure ....................................... 35
Trustees and Officers ..................................................... 37
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that this
new communication medium is changing forever the way we work, play, and shop.
One might also argue that investing in this new technology represents the
investment opportunity of a lifetime. The question for any investor is whether
and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no doubt
that Internet-delivered information and brokerage services enable individual
investors to be well informed and to trade at bargain prices. But we believe the
numbers and facts argue that, for most of us, mutual funds purchased through an
investment professional will continue to be one of the best products for
long-term investing in this new millennium.
According to a survey by the Investment Company Institute, the national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of course
that doesn't tell us how well they did owning those funds or stocks, but another
statistic gives us a clue. In the third quarter of 1999, during a period of
volatility in the greatest bull market in history, a quarter of the 7,500 stocks
tracked by Morningstar, a popular rating service, lost more than 20% of their
value. But during the same period, less than 1% of the mutual funds tracked by
Morningstar -- 6 out of 10,000 funds -- were down by a similar amount.(2) So an
investor's chance of picking one of those losing stocks was about 25 times
greater than his or her chance of picking an equally losing fund.
The numbers also show that a majority of Americans seek professional advice when
buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through an investment professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful
investors -- those whose lives are enriched by the fruits of their investing
-- share two characteristics. They have a plan for reaching their monetary
goals, and they stick with that plan through up as well as down markets. And
for many investors, working with an investment professional may be the best
way to develop a plan. Although the Internet abounds with calculators for
developing all sorts of investment plans, none has your investment
professional's high level of experience and an understanding of your unique
situation. And no calculator can counsel you during a down market, when you
may be tempted to abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns
dozens or even hundreds of holdings is better positioned to survive a
disappointment in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull
market in history, it's easy to forget that market downturns are an almost
inevitable part of investing. Few mutual funds, of course, are going to be
up when the overall market is down. But as the numbers above from the third
quarter of 1999 demonstrate, mutual funds may be less likely to suffer the
extreme downturns experienced by a large number of individual holdings when
the market heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights.
The diversification and professional management of mutual funds help make
them inherently less risky than individual stock picking, and funds are
available in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
February 15, 2000
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(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore Sun's
Dollars and Sense Conference, 10/99. In the period 7/1/99 through 9/30/99,
of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or more; of the
10,000 mutual funds tracked by Morningstar, six lost 20% or more. Mutual
fund results are at net asset value; if sales charges had been reflected,
results would have been lower.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Robert J. Manning]
Robert J. Manning
For the 12 months ended January 31, 2000, Class A shares of the Fund provided a
total return of 14.17%, Class B shares 13.54%, Class C shares 13.45%, and Class
I shares 14.87%. These returns include the reinvestment of any distributions but
exclude the effects of any sales charges. During the same period, these results
compare to a 0.53% return for the Fund's benchmark, the Lehman Brothers High
Yield Bond Index (the Lehman Index), an unmanaged index of noninvestment-grade
corporate debt, and to a 2.29% return for the average high current yield fund,
tracked by Lipper Inc., an independent firm that reports mutual fund
performance.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S OUTPERFORMANCE OF ITS BENCHMARKS
DURING THE PERIOD?
A. There were three main factors that benefited the Fund's performance. First
and foremost, our bottom-up credit research helped lead to successful
avoidance of credit problems and bankruptcies across a variety of sectors in
the market. Strong security selection within the telecommunications, media,
and cable industries helped performance, and finally, favorable performance
from the Fund's holdings in emerging market economies contributed
significantly to total return.
Q. CAN YOU DESCRIBE WHAT THE MARKET ENVIRONMENT WAS LIKE FOR HIGH-YIELD
SECURITIES DURING THE PERIOD? HOW DID THIS ENVIRONMENT AFFECT PERFORMANCE?
A. During much of the period, the market environment for high-yield bonds was
difficult due to the heavy supply of new bonds, which exerted downward
pressure on the prices of existing issues. Credit problems within a variety
of sectors, including health care and energy, caused additional weakness.
Concerns over Medicare reforms and previously low oil prices cast a pall
over these sectors and the high-yield market in general. Recently, however,
the market rebounded significantly due to generally strong corporate
earnings and attractive yields, which have lured investors back to the
high-yield marketplace.
Q. COULD YOU PROVIDE SOME ADDITIONAL DETAILS REGARDING THE INDUSTRIES YOU'RE
EMPHASIZING AND WHICH SPECIFIC HOLDINGS PRODUCED STRONG PERFORMANCE?
A. In the telecommunications industry, consolidation and accelerating worldwide
earnings growth helped provide a strong boost to the Fund's relative
performance. The Fund's holdings in the media and cable industries
contributed positively to performance due to robust demand for data and
voice transmission and strong advertising spending, which is a key revenue
source for these companies. Given the strong demand for voice, data, and
wireless communications, we favored the issues of telecommunications
companies such as VoiceStream, Nextlink, and Nextel Communications. Our
position in Nextel rose considerably following Microsoft's announcement that
it planned to invest $600 million with the company. A core holding in the
cable and media industry was Charter Communications, which continued to
experience rapid earnings and customer growth fueled by the increased usage
of cable lines to access the Internet.
Q. WHAT DROVE THE FAVORABLE PERFORMANCE OF THE FUND'S HOLDINGS IN EMERGING
MARKETS DEBT?
A. Stock and bond markets in many emerging market economies staged impressive
recoveries following the financial crisis of 1997 and 1998. We believe these
strong returns can be attributed to the following factors: attractive
valuations (i.e., high yields), improving country fundamentals due to
increased corporate growth rates, and improvement in investor sentiment, all
of which resulted in larger capital inflows into emerging market economies.
Q. WHICH HOLDINGS DETRACTED FROM FUND PERFORMANCE?
A. While the Fund's exposure to supermarket operators was relatively small,
this highly defensive industry did not perform well during the period. Our
holdings in companies such as Pathmark and Jitney-Jungle Stores produced
weak results due to concerns about increasing competition from the likes of
Wal-Mart and a generally weak pricing environment.
Q. WHAT IS YOUR OUTLOOK FOR THE HIGH-YIELD MARKET IN THE COMING MONTHS?
A. We expect the high-yield market to perform relatively well in 2000. The
premiums -- that is, the yield difference that investors are being paid for
owning high-yield bonds versus U.S. Treasury bonds are at historically high
levels and, over the long term, we expect these premiums to more than
compensate for credit risks. In addition, we think the present environment
of healthy economic growth and low inflation is a favorable one for
high-yield bonds. Given the uncertainties in the world economies, however,
we believe that careful credit selection will remain crucial to the Fund's
performance.
/s/ Robert J. Manning
Robert J. Manning
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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ROBERT J. MANNING IS SENIOR VICE PRESIDENT, CHIEF FIXED INCOME STRATEGIST,
DIRECTOR OF FIXED INCOME RESEARCH, AND A MEMBER OF THE FIXED INCOME MANAGEMENT
GROUP OF MFS INVESTMENT MANAGEMENT(R). HE IS PORTFOLIO MANAGER OF MFS(R) HIGH
INCOME FUND, MFS(R) HIGH YIELD OPPORTUNITIES FUND, AND MFS(R) SPECIAL VALUE
TRUST, A CLOSED-END FUND.
MR. MANNING JOINED MFS IN 1984 AS A RESEARCH ANALYST IN THE HIGH YIELD BOND
DEPARTMENT. HE WAS NAMED VICE PRESIDENT IN 1988, PORTFOLIO MANAGER IN 1992,
SENIOR VICE PRESIDENT IN 1993, AND CHIEF FIXED INCOME STRATEGIST AND DIRECTOR OF
FIXED INCOME RESEARCH IN 1999. HE IS A GRADUATE OF THE UNIVERSITY OF LOWELL AND
EARNED A MASTER OF SCIENCE DEGREE IN FINANCE FROM BOSTON COLLEGE.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your investment professional, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS HIGH CURRENT INCOME BY INVESTING PRIMARILY IN A
DIVERSIFIED PORTFOLIO OF FIXED-INCOME SECURITIES.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JULY 1, 1998
CLASS INCEPTION: CLASS A JULY 1, 1998
CLASS B JULY 1, 1998
CLASS C JULY 1, 1998
CLASS I JULY 1, 1998
SIZE: $23.7 MILLION NET ASSETS AS OF JANUARY 31, 2000
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and reflect
the percentage change in net asset value, including reinvestment of dividends.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be greater than or less than the line
shown. (See Notes to Performance Summary.) It is not possible to invest directly
in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the Fund's investment operations,
July 1, 1998, through January 31, 2000. Index information is from July 1,
1998.)
MFS High Yield Lehman Brothers
Opportunities Fund High Yield
- Class A Bond Index
-------------------------------------------------------
7/98 $10,000 $10,000
1/99 8,624 9,824
1/00 9,846 9,876
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH JANUARY 31, 2000
CLASS A
1 Year Life*
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Cumulative Total Return Excluding Sales Charge +14.17% +3.37%
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Average Annual Total Return Excluding Sales Charge +14.17% +2.11%
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Average Annual Total Return Including Sales Charge + 8.74% -0.97%
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CLASS B
1 Year Life*
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Cumulative Total Return Excluding Sales Charge +13.54% +2.53%
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Average Annual Total Return Excluding Sales Charge +13.54% +1.59%
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Average Annual Total Return Including Sales Charge + 9.54% -0.63%
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CLASS C
1 Year Life*
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Cumulative Total Return Excluding Sales Charge +13.45% +2.23%
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Average Annual Total Return Excluding Sales Charge +13.45% +1.40%
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Average Annual Total Return Including Sales Charge +12.45% +1.40%
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CLASS I
1 Year Life*
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Cumulative Total Return Excluding Sales Charge +14.87% +4.57%
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Average Annual Total Return Excluding Sales Charge +14.87% +2.86%
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COMPARATIVE INDICES
1 Year Life*
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Average high current yield fund+ + 2.29% -0.81%
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Lehman Brothers High Yield Bond Index# + 0.53% -0.78%
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* For the period from the commencement of the Fund's investment operations,
July 1, 1998, through January 31, 2000. Index information is from
July 1, 1998.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
All performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Lower-rated securities may provide greater returns, but they are also associated
with greater-than-average risk. These risks may increase share price volatility.
See the prospectus for details.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably affected
by changes in interest rates and currency exchange rates, market conditions, and
the economic and political conditions of the countries where investments are
made. These risks may increase share price volatility. See the prospectus for
details.
PORTFOLIO CONCENTRATION AS OF JANUARY 31, 2000
PORTFOLIO STRUCTURE
High Yield Corporates 60.5%
Emerging Markets 29.8%
Cash 4.6%
Equity 4.0%
Municipal 0.8%
Yankee 0.3%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- January 31, 2000
Bonds - 87.8%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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U.S. Bonds - 48.1%
Aerospace - 0.9%
Argo Tech Corp., 8.625s, 2007 $ 120 $ 106,200
K & F Industries, Inc., 9.25s, 2007 100 95,750
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$ 201,950
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Building - 2.6%
Formica Corp., 10.875s, 2009 $ 200 $ 175,000
MMI Products, Inc., 11.25s, 2007## 55 56,375
Nortek, Inc., 9.875s, 2004 225 221,062
Williams Scotsman, Inc., 9.875s, 2007 175 168,875
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$ 621,312
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Business Services - 1.0%
Anacomp, Inc., 10.875s, 2004 $ 150 $ 149,250
Pierce Leahy Corp., 11.125s, 2006 85 90,525
------------
$ 239,775
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Chemicals - 2.1%
Huntsman ICI Chemicals, Inc., 10.125s, 2009## $ 50 $ 50,500
Huntsman ICI Holdings LLC, 0s, 2009## 475 145,469
Lyondell Chemical Co., 9.875s, 2007 100 98,500
Sterling Chemicals, Inc., 11.75s, 2006 125 100,000
Sterling Chemicals, Inc., 12.375s, 2006 65 67,600
Sterling Chemicals, Inc., 0s to 2001, 13.5s to 2008 115 34,500
------------
$ 496,569
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Consumer Goods and Services - 2.2%
Remington Products Co. LLC, 11s, 2006 $ 115 $ 95,162
Revlon Consumer Products Corp., 8.125s, 2006 15 10,650
Samsonite Corp., 10.75s, 2008 230 195,500
Simmons Co., 10.25s, 2009 60 53,400
Synthetic Industries, Inc., 13s, 2000 175 172,375
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$ 527,087
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Container, Forest and Paper Products - 2.9%
Applied Extrusion Technologies, Inc., 11.5s, 2002 $ 150 $ 151,875
Consolidated Container Co., LLC, 10.125s, 2009## 50 50,000
Gaylord Container Corp., 9.75s, 2007 50 46,625
Gaylord Container Corp., 9.875s, 2008 280 239,400
Riverwood International Corp., 10.25s, 2006 50 49,750
Riverwood International Corp., 10.875s, 2008 150 144,750
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$ 682,400
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Energy - 1.5%
Cheasapeake Energy Corp., 9.625s, 2005 $ 260 $ 239,200
Continental Resources, Inc., 10.25s, 2008 25 21,500
P&L Coal Holdings Corp., 9.625s, 2008 100 94,625
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$ 355,325
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Financial Institutions - 0.3%
Willis Corroon Corp., 9s, 2009# $ 100 $ 81,250
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Gaming and Hotels - 1.2%
Boyd Gaming Corp., 9.5s, 2007(++) $ 75 $ 72,000
Coast Hotels & Casinos, Inc., 9.5s, 2009 125 115,625
Lady Luck Gaming Corp., 11.875s, 2001 15 15,000
Prime Hospitality Corp., 9.75s, 2007 50 47,500
Santa Fe Hotel, Inc., 11s, 2000 25 24,438
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$ 274,563
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General Industrial (Corporate Guarantee) - 0.8%
Mesa County, CO, 8.5s, 2006** $ 250 $ 187,500
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Industrial - 3.7%
Allied Waste North America, Inc., 10s, 2009## $ 75 $ 65,250
Blount, Inc., 13s, 2009## 50 52,812
Day International Group, Inc., 11.125s, 2005 42 42,682
International Knife & Saw, Inc., 11.375s, 2006 50 38,313
Johnstown America Industries, 11.75s, 2005 125 126,719
Metallurg Holdings, Inc., 0s to 2003,
12.75s to 2008 200 62,000
Motors & Gears, Inc., 10.75s, 2006 25 24,750
Numatics, Inc., 9.625s, 2008 275 217,250
Oxford Automotive, Inc., 10.125s, 2007 35 32,288
Simonds Industries, Inc., 10.25s, 2008 100 76,000
Thermadyne Holdings Corp., 0s to 2003,
12.5s to 2008 120 52,800
Thermadyne Manufacturing/Capital Corp.,
9.875s, 2008 100 84,625
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$ 875,489
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Media - 5.7%
Acme Television LLC, 0s to 2000, 10.875s to 2004 $ 75 $ 67,406
Avalon Cable Holdings LLC, 0s to 2003,
11.75s to 2008 100 65,750
CD Radio, Inc., 14.5s, 2009 100 94,500
Charter Communications Holdings, 0s to 2004,
9.92s to 2011 375 219,375
Cumulus Media, Inc., 10.375s, 2008 50 51,250
Frontiervision Holding LP, 0s to 2001,
11.87s to 2007 100 88,750
Frontiervision Operating Partnership LP, 11s, 2006 70 73,675
Granite Broadcasting Corp., 10.375s, 2005 25 25,375
LIN Holdings Corp., 0s to 2003, 10s to 2008 290 185,600
NTL Communications Corp., 0s to 2003,
12.375s to 2006 380 259,350
NTL, Inc., 0s to 2003, 9.75s to 2008 55 36,919
Telemundo Holdings, Inc., 0s to 2003,
11.5s to 2008 300 189,000
------------
$ 1,356,950
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Medical and Health Technology and Services - 0.1%
Alaris Medical, Inc., 0s to 2003, 11.125s to 2008 $ 75 $ 30,000
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Metals and Minerals - 4.5%
Algoma Steel, Inc., 12.375s, 2005 $ 120 $ 112,200
Doe Run Resources Corp., 11.25s, 2005 65 59,800
Haynes International, Inc., 11.625s, 2004 50 35,000
Jorgensen (Earle M.) Co., 9.5s, 2005 150 143,437
Kaiser Aluminum & Chemical Corp., 9.875s, 2002 50 48,750
Kaiser Aluminum & Chemical Corp., 12.75s, 2003 175 172,375
Metal Management, Inc., 10s, 2008 285 215,175
Northwestern Steel & Wire Co., 9.5s, 2001 150 82,500
NS Group, Inc., 13.5s, 2003 50 51,500
Renco Steel Holdings, Inc., 10.875s, 2005 75 66,750
WCI Steel, Inc., 10s, 2004 95 93,575
------------
$ 1,081,062
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Retail - 0.4%
J. Crew Group, Inc., 0s to 2002, 13.125s to 2008 $ 90 $ 47,475
J. Crew Operating Corp., 10.375s, 2007 50 42,375
------------
$ 89,850
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Supermarkets - 0.2%
Jitney-Jungle Stores of America, Inc., 12s, 2006** $ 45 $ 9,000
Pathmark Stores, Inc., 11.625s, 2002 75 18,000
Pathmark Stores, Inc. 0s to 1999, 10.75s to 2003 103 15,450
Penn Traffic Co., 11s, 2009 0 313
------------
$ 42,763
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Technology - 0.5%
Worldwide Fiber, Inc., 12s, 2009## $ 125 $ 130,000
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Telecommunications - 17.2%
Allegiance Telecommunications, Inc., 0s to 2003,
11.75s to 2008 $ 225 $ 160,875
Allegiance Telecommunications, Inc., 12.875s, 2008 155 175,150
AMSC Acquisition Co., Inc., 12.25s, 2008 155 118,575
Caprock Communications Corp., 11.5s, 2009 90 91,125
Centennial Cellular Operating Co., 10.75s, 2008 135 140,062
Cybernet Internet Services International, 14s, 2009 50 42,000
DTI Holdings, Inc., 0s to 2003, 12.5s to 2008 125 56,250
Exodus Communications, Inc., 11.25s, 2008 75 77,625
Exodus Communications, Inc., 10.75s, 2009## 150 153,000
Focal Communications Corp., 11.875s, 2010## 100 102,500
GCI, Inc., 9.75s, 2007 65 60,938
Globenet Communications Group, 13s, 2007## 60 58,200
Globix Corp., 12.5s, 2010## 70 70,700
Hyperion Telecommunication, Inc., 12s, 2007 95 98,562
ICG Holdings, Inc., 0s to 2001, 12.5s to 2006 200 161,000
Impsat Corp., 12.375s, 2008 50 46,500
Level 3 Communications, Inc., 9.125s, 2008 225 208,687
McCaw International Ltd., 0s to 2002, 13s to 2007 125 90,625
Metromedia Fiber Network, Inc., 10s, 2008 120 20,300
MJD Communications, Inc., 9.5s, 2008 60 57,150
Nextel Communications, Inc., 0s to 2003,
9.95s to 2008 125 86,563
Nextel International, Inc., 0s to 2003,
12.125 to 2008 15 9,375
Nextlink Communications, Inc., 10.75s, 2009 50 50,375
Nextlink Communications, Inc., 0s to 2004,
12.25s to 2009 325 195,000
Northeast Optic Network, 12.75s, 2008 35 36,925
Orbital Imaging Corp., 11.625s, 2005 25 16,875
Pagemart Wireless, Inc., 0s to 2003, 11.25s to 2008 5 2,000
PSINET, Inc., 11s, 2009 275 281,187
Rhythms Netconnections, Inc., 12.75s, 2009 75 71,250
SBA Communications Corp., 0s to 2003, 12s to 2008 250 170,000
Spectrasite Holdings, Inc., 0s to 2004,
11.25s to 2009 350 203,000
Teligent, Inc., 11.5s, 2007 75 72,000
Time Warner Telecommunications LLC, 9.75s, 2008 25 25,063
Triton PCS, Inc., 0s to 2003, 11s to 2008 65 45,988
United International Holdings 0s to 2003,
10.75s to 2008 315 207,900
Verio, Inc., 11.25s, 2008 120 125,700
Verio, Inc., 10.625s, 2009## 50 51,375
Viatel, Inc., 0s to 2003, 12.5s to 2008 275 159,500
Voicestream Wire, 10.375s, 2009## 165 169,125
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$ 4,069,025
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Utilities - Electric - 0.3%
International Utility Structures, 10.75s, 2008 $ 75 $ 59,813
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Total U.S. Bonds $ 11,402,683
- -------------------------------------------------------------------------------
Foreign Bonds - 39.7%
Algeria - 2.0%
Algeria Chase Manhattan, 6s, 2004 (Financial
Institutions) $ 465 $ 367,350
Algerian Repurchase Loan Agreement, 1s, 2010 JPY 19,250 104,074
------------
$ 471,424
- -------------------------------------------------------------------------------
Argentina - 4.2%
Acindar Industria Argentina de Acero S.A., 11.25s,
2004 (Metals and Minerals) $ 300 $ 230,250
Autopistas del Sol S.A., 10.25s, 2009
(Industrial)## 60 47,400
Cablevision S.A., 13.75s, 2009 (Media) 100 100,000
Mastellone Hermanos S.A., 11.75s, 2008 (Food and
Beverage Products) 165 140,250
Multicanal S.A., 10.5s, 2007 (Media) 90 81,000
Multicanal S.A., 13.125s, 2009 (Media) 115 115,287
Republic of Argentina, 6.813s, 2005 53 47,124
Republic of Argentina, 11.786s, 2005 45 40,219
Republic of Argentina, 3.114s, 2007 ARS 160 $ 111,619
Republic of Argentina, 6.875s, 2023 $ 110 84,975
------------
$ 998,124
- -------------------------------------------------------------------------------
Brazil - 5.9%
Bahia Sul Celulose S.A., 10.625s, 2004 (Container,
Forest & Paper Products)+ $ 40 $ 39,600
Banco Nacional de Desenvolvi, 12.193s, 2008
(Financial Institutions) 330 295,350
CSN Iron S.A., 9.125s, 2007 (Metals and Minerals)+ 100 80,500
Federal Republic of Brazil, 11.625s, 2004 90 86,220
Federal Republic of Brazil, 7s, 2009 440 320,738
Federal Republic of Brazil, 14.5s, 2009 170 177,710
Federal Republic of Brazil, 5s, 2014 107 73,933
Federal Republic of Brazil, 12.75s, 2020 310 293,725
Federal Republic of Brazil, 6.938s, 2024 55 41,029
------------
$ 1,408,805
- -------------------------------------------------------------------------------
Bulgaria - 1.6%
Hermes Europe Railtel B.V., 10.375s, 2009
(Telecommunications) $ 150 $ 145,500
National Republic of Bulgaria, 2.75s, 2012 55 39,187
National Republic of Bulgaria, 6.5s, 2024 245 193,244
------------
$ 377,931
- -------------------------------------------------------------------------------
Canada - 0.7%
GT Group Telecommunications, Inc., 0s to 2005,
13.25s to 2010 (Telecommunications)## $ 175 $ 92,750
PCI Chemicals Canada, Inc., 9.25s, 2007
(Chemicals) 35 26,775
Russel Metals, Inc., 10s, 2009
(Metals and Minerals) 50 49,375
------------
$ 168,900
- -------------------------------------------------------------------------------
Colombia - 0.7%
Republic of Colombia, 9.75s, 2009 $ 60 $ 53,250
Republic of Colombia, 8.375s, 2027 150 111,750
------------
$ 165,000
- -------------------------------------------------------------------------------
Hong Kong - 1.1%
Bangkok Bank PLC, 9.025s, 2029 (Financial
Institutions)## $ 340 $ 265,200
- -------------------------------------------------------------------------------
Indonesia - 0.3%
Indah Kiat Finance Mauritius Ltd., 10s, 2007
(Containers, Forest & Paper Products) $ 120 $ 84,000
- -------------------------------------------------------------------------------
Luxembourg - 0.8%
Millicom International Cellular
Communications Corp.,
0s to 2001, 13.5s to 2006
(Telecommunications) $ 210 $ 181,650
- -------------------------------------------------------------------------------
Mexico - 1.8%
Alestra S.A. de R.L. de CV, 12.625s, 2009
(Telecommunications) $ 65 $ 65,325
Nuevo Grupo Iusacell S.A., 14.25s, 2006
(Telecommunications)## 120 125,250
Satelites Mexicanos S.A. de CV, 10.125s, 2004
(Telecommunications) 150 105,000
United Mexican States, 9.875s, 2010 15 14,775
United Mexican States, 11.375s, 2016 99 106,439
------------
$ 416,789
- -------------------------------------------------------------------------------
Netherlands - 7.7%
Completel Europe N.V. 0s to 2004, 14s to 2009
(Telecommunications) $ 225 $ 117,000
Cellco Finance N.V. Turkcell, 12.75s, 2005
(Financial Institutions)## 650 679,250
Netia Holdings B.V., 10.25s, 2007
(Telecommunications) 130 112,450
Tele Europe B.V., 13s, 2009 (Telecommunicaitons) 175 181,125
United Pan Europe Commerce NV, 10.875s,
2009 (Media) 175 171,063
United Pan Europe Commerce NV, 11.25s,
2010 (Media)## 85 85,425
United Pan Europe Commerce NV, 0s to 2005,
13.75s to 2010 (Media)## 500 265,000
Versatel Telecommunications B.V., 13.25s, 2008
(Telecommunications) 200 211,500
------------
1,822,813
- -------------------------------------------------------------------------------
Norway - 0.3%
Ocean Rig Norway AS, 10.25s, 2008 (Energy) $ 75 $ 61,875
- -------------------------------------------------------------------------------
Panama - 0.1%
Republic of Panama, 8.875s, 2027 $ 45 $ 36,956
- -------------------------------------------------------------------------------
Poland - 0.7%
PTC International Finance B.V., 0s to 2002,
10.75s to 2007 (Telecommunications) $ 115 $ 76,044
PTC International Finance B.V., 11.25s, 2009
(Telecommunications)## 100 99,500
------------
$ 175,544
- -------------------------------------------------------------------------------
Russia - 4.4%
Government of Russia, 11s, 2018+ $ 165 $ 103,950
Ministry of Finance, 10s, 2007 230 147,200
Ministry of Finance, 12.75s, 2028+ 650 468,000
Russia Principal Loans, 6.063s, 2020+** 1,635 253,425
Russian Federation, 8.75s, 2005 115 72,450
------------
$ 1,045,025
- -------------------------------------------------------------------------------
Singapore - 0.5%
Krung Thai Bank Public Co. Ltd., 6.534s, 2006
(Financial Institutions) $ 130 $ 108,550
- -------------------------------------------------------------------------------
Turkey - 0.4%
Republic of Turkey, 11.875s, 2030 $ 100 $ 102,250
- -------------------------------------------------------------------------------
United Kingdom - 4.5%
Dialog Corp. PLC, 11s, 2007 (Telecommunications) $ 200 $ 91,500
Dolphin Telecom PLC, 0s to 2003, 11.5s to 2008
(Telecommunications) 255 118,256
Esat Telecommunications Group PLC, 11.875s, 2008
(Telecommunications) 220 257,400
Espirit Telecommunications Group PLC,
10.875s, 2008 (Telecommunications) 75 70,500
Jazztel PLC, 13.25s, 2009 (Telecommunications)## 75 75,297
Jazztel PLC, 14s, 2009 (Telecommunications) 135 138,375
Ono Finance PLC, 13s, 2009 (Media) 175 183,750
Telewest Commerce New PLC, 9.875s, 2010 (Media)## 50 50,000
Telewest Commerce New PLC, 11.375s, 2010 (Media)## 125 73,750
------------
$ 1,058,828
- -------------------------------------------------------------------------------
Venezuela - 2.0%
Republic of Venezuela, 9.25s, 2027 $ 740 $ 469,900
- -------------------------------------------------------------------------------
Total Foreign Bonds $ 9,419,564
- -------------------------------------------------------------------------------
Total Bonds (Identified Cost, $20,921,196) $20,822,247
- -------------------------------------------------------------------------------
Stocks - 0.2%
- -------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------
Completel Holdings LLC, "B"
(Telecommunications)##* 2,250 $ 45,000
Classic Communications, Inc. (Media)##* 150 1,500
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $616) $ 46,500
- -------------------------------------------------------------------------------
Preferred Stock - 3.7%
- -------------------------------------------------------------------------------
Crown Castle International Corp., 12.75s
(Telecommunications) 168 $ 173,040
CSC Holdings, Inc., 11.125s (Media)#* 2,370 257,145
Global Crossings Holdings Ltd., 10.5s
(Telecommunications)# 1,000 99,000
Nextel Communications, Inc., 11.125s
(Telecommunications) 180 179,100
Paxon Communications Corp., 13.25s (Media) 10 101,000
Primedia, Inc., 8.625s (Media) 650 59,800
- -------------------------------------------------------------------------------
Total Preferred Stock (Identified Cost, $867,225) $ 869,085
- -------------------------------------------------------------------------------
Warrants - 1.2%
American Mobile Satellite Corp.
(Telecommunications)##* 155 $ 5,425
CD Radio, Inc. (Media)* 300 21,000
Cybernet Internet Services International
(Telecommunications)* 50 6,000
DTI Holdings, Inc. (Telecommunications)* 625 6
Jazztel PLC (Telecommunications)##* 675 135,000
Ono Finance PLC (Media)* 175 26,250
Orbital Imaging Corp. (Telecommunications)##* 25 500
Tele1 Europe B.V. (Telecommunications)* 125 23,750
Versatel Telecommunications B.V.
(Telecommunications)* 200 78,000
- -------------------------------------------------------------------------------
Total Warrants (Identified Cost, $57,711) $ 295,931
- -------------------------------------------------------------------------------
Short-Term Obligation - 6.1%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 2/01/00,
at Amortized Cost $ 1,450 $ 1,450,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $23,296,748) $23,483,763
Other Assets, Less Liabilities - 1.0% 231,691
- -------------------------------------------------------------------------------
Net Assets - 100.0% $23,715,454
- -------------------------------------------------------------------------------
* Non-income producing security.
** Non-income producing security-in default.
# Payment-in-kind security.
## SEC Rule 144A restriction.
+ Restricted security.
(++) Inverse floating rate 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.
ARS = Argentine Pesos
JPY = Japanese Yen
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
JANUARY 31, 2000
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $23,296,748) $23,483,763
Cash 3,605
Net receivable for forward foreign currency exchange
contracts subject to master netting agreements 5,366
Receivable for Fund shares sold 730,772
Receivable for investments sold 165,884
Interest and dividends receivable 486,482
-----------
Total assets $24,875,872
-----------
Liabilities:
Distributions payable $ 117,617
Payable for Fund shares reacquired 80,644
Payable for investments purchased 959,471
Payable to affiliates -
Management fee 1,227
Distribution and service fee 1,459
-----------
Total liabilities $ 1,160,418
-----------
Net assets $23,715,454
===========
Net assets consist of:
Paid-in capital $23,794,661
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 192,217
Accumulated undistributed net realized loss on investment
and foreign currency transactions (293,359)
Accumulated undistributed net investment income 21,935
-----------
Total $23,715,454
===========
Shares of beneficial interest outstanding 2,695,419
=========
Class A shares:
Net asset value per share
(net assets of $8,028,355 / 913,158 shares of
beneficial interest outstanding) $8.79
=====
Offering price per share (100 / 95.25) $9.23
=====
Class B shares:
Net asset value and offering price per share
(net assets of $12,366,558 / 1,404,153 shares of
beneficial interest outstanding) $8.81
=====
Class C shares:
Net asset value and offering price per share
(net assets of $3,250,514 / 370,199 shares of
beneficial interest outstanding) $8.78
=====
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $70,027 / 7,909 shares of
beneficial interest outstanding) $8.85
=====
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- ------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2000
- ------------------------------------------------------------------------------
Net investment income:
Income -
Interest $1,556,523
Dividends 16,076
----------
Total investment income $1,572,599
----------
Expenses -
Management fee $ 88,145
Trustees' compensation 6,959
Shareholder servicing agent fee 13,739
Distribution and service fee (Class A) 14,303
Distribution and service fee (Class B) 75,856
Distribution and service fee (Class C) 18,831
Administrative fee 1,737
Custodian fee 11,379
Printing 24,035
Postage 1,795
Auditing fees 16,323
Legal fees 8,145
Registration fees 46,126
Miscellaneous 5,111
----------
Total expenses $ 332,484
Fees paid indirectly (2,761)
Reduction of expenses by investment adviser (132,586)
----------
Net expenses $ 197,137
----------
Net investment income $1,375,462
----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 73,469
Foreign currency transactions (368)
----------
Net realized gain on investments and foreign currency
transactions $ 73,101
----------
Change in unrealized appreciation -
Investments $ 252,728
Translation of assets and liabilities in foreign currencies 5,202
----------
Net unrealized gain on investments and foreign currency
translation $ 257,930
----------
Net realized and unrealized gain on investments and
foreign currency $ 331,031
----------
Increase in net assets from operations $1,706,493
==========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
JANUARY 31, 2000 JANUARY 31, 1999*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,375,462 $ 256,900
Net realized gain (loss) on investments and foreign
currency transactions 73,101 (363,260)
Net unrealized gain (loss) on investments and foreign
currency translation 257,930 (65,713)
------------ ------------
Increase (decrease) in net assets from operations $ 1,706,493 $ (172,073)
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (423,175) $ (111,834)
From net investment income (Class B) (731,925) (121,561)
From net investment income (Class C) (181,916) (23,497)
From net investment income (Class I) (541) (8)
In excess of net investment income (Class A) -- (2,505)
In excess of net investment income (Class B) -- (2,723)
In excess of net investment income (Class C) -- (526)
------------ ------------
Total distributions declared to shareholders $ (1,337,557) $ (262,654)
------------ ------------
Net increase in net assets from Fund share transactions $ 16,045,979 $ 7,735,266
------------ ------------
Total increase in net assets $ 16,414,915 $ 7,300,539
Net assets:
At beginning of period 7,300,539 --
------------ ------------
At end of period (including undistributed net investment
income and accumulated distributions in excess of net
investment income of $33,280 and $4,625, respectively) $ 23,715,454 $ 7,300,539
============ ============
* For the period from the commencement of the Fund's investment operations, July 1, 1998, through January 31, 1999.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
JANUARY 31, 2000 JANUARY 31, 1999*
- -------------------------------------------------------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 8.53 $ 10.00
--------- ---------
Income from investment operations# -
Net investment income(S) $ 0.91 $ 0.54
Net realized and unrealized gain (loss) on investments and
foreign currency 0.25 (1.50)
--------- ---------
Total from investment operations $ 1.16 $ (0.96)
--------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.90) $ (0.50)
In excess of net investment income -- (0.01)
--------- ---------
Total distributions declared to shareholders $ (0.90) $ (0.51)
--------- ---------
Net asset value - end of period $ 8.79 $ 8.53
========= =========
Total return(+) 14.17% (9.45)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.02% 1.00%+
Net investment income 10.62% 10.25%+
Portfolio turnover 158% 127%
Net assets at end of period (000 omitted) $ 8,028 $ 2,052
(S) MFS has voluntarily agreed under a temporary expense agreement to pay all of the Fund's operating expenses, exclusive
of management and distribution and service fees. To the extent that actual expenses were over this limitation, the net
investment income per share and the ratios would have been:
Net investment income $ 0.83 $ 0.33
Ratios (to average net assets):
Expenses 2.00% 4.90%+
Net investment income 9.64% 6.35%+
* For the period from the commencement of the Fund's investment operations, July 1, 1998, through January 31, 1999.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
JANUARY 31, 2000 JANUARY 31, 1999*
- --------------------------------------------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 8.54 $ 10.00
---------- ----------
Income from investment operations# -
Net investment income(S) $ 0.86 $ 0.47
Net realized and unrealized gain (loss) on investments and
foreign currency 0.25 (1.45)
---------- ----------
Total from investment operations $ 1.11 $ (0.98)
---------- ----------
Less distributions declared to shareholders -
From net investment income $ (0.84) $ (0.47)
In excess of net investment income -- (0.01)
---------- ----------
Total distributions declared to shareholders $ (0.84) $ (0.48)
---------- ----------
Net asset value - end of period $ 8.81 $ 8.54
========== ==========
Total return 13.54% (9.69)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.67% 1.65%+
Net investment income 9.94% 9.60%+
Portfolio turnover 158% 127%
Net assets at end of period (000 omitted) $ 12,367 $ 4,308
(S) MFS has voluntarily agreed under a temporary expense agreement to pay all of the Fund's operating expenses, exclusive
of management and distribution and service fees. To the extent that actual expenses were over this limitation, the net
investment income per share and the ratios would have been:
Net investment income $ 0.78 $ 0.28
Ratios (to average net assets):
Expenses 2.65% 5.55%+
Net investment income 8.96% 5.70%+
* For the period from the commencement of the Fund's investment operations, July 1, 1998, through January 31, 1999.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
JANUARY 31, 2000 JANUARY 31, 1999*
- --------------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 8.52 $ 10.00
--------- ---------
Income from investment operations# -
Net investment income(S) $ 0.85 $ 0.47
Net realized and unrealized gain (loss) on investments and
foreign currency 0.25 (1.47)
--------- ---------
Total from investment operations $ 1.10 $ (1.00)
--------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.84) $ (0.47)
In excess of net investment income -- (0.01)
--------- ---------
Total distributions declared to shareholders $ (0.84) $ (0.48)
--------- ---------
Net asset value - end of period $ 8.78 $ 8.52
========= =========
Total return 13.45% (9.89)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.67% 1.65%+
Net investment income 9.93% 9.60%+
Portfolio turnover 158% 127%
Net assets at end of period (000 omitted) $ 3,251 $ 941
(S) MFS has voluntarily agreed under a temporary expense agreement to pay all of the Fund's operating expenses, exclusive
of management and distribution and service fees. To the extent that actual expenses were over this limitation, the net
investment income per share and the ratios would have been:
Net investment income $ 0.77 $ 0.27
Ratios (to average net assets):
Expenses 2.65% 5.55%+
Net investment income 8.95% 5.54%+
* For the period from the commencement of the Fund's investment operations, July 1, 1998, through January 31, 1999
+ Annualized
++ Not annualized
# Per share data are based on average shares outstanding
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
JANUARY 31, 2000 JANUARY 31, 1999*
- --------------------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 8.56 $ 10.00
--------- ---------
Income from investment operations# -
Net investment income(S) $ 0.97 $ 0.64
Net realized and unrealized gain (loss) on investments and foreign
currency 0.25 (1.55)
--------- ---------
Total from investment operations $ 1.22 $ (0.91)
--------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.93) $ (0.53)
--------- ---------
Total distributions declared to shareholders $ (0.93) $ (0.53)
--------- ---------
Net asset value - end of period $ 8.85 $ 8.56
========= =========
Total return 14.87% (8.96)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.67% 0.65%+
Net investment income 10.43% 11.10%+
Portfolio turnover 158% 127%
Net assets at end of period (000 omitted) $ 70 $ --
(S) MFS has voluntarily agreed under a temporary expense agreement to pay all of the Fund's operating expenses, exclusive
of management and distribution and service fees. To the extent that actual expenses were over this limitation, the net
investment income per share and the ratios would have been:
Net investment income $ 0.78 $ 0.41
Ratios (to average net assets):
Expenses 1.65% 4.55%+
Net investment income 9.45% 7.20%+
* For the period from the commencement of the Fund's investment operations, July 1, 1998, through January 31, 1999.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS High Yield Opportunities Fund (the Fund) is a diversified series of MFS
Series Trust III (the Trust). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Fund can invest up to 100% of its portfolio in high-yield securities rated
below investment grade. Investments in high-yield securities involve greater
degrees of credit and market risk than investments in higher-rated securities
and tend to be more sensitive to economic conditions. The Fund can invest in
foreign securities. Investments in foreign securities are vulnerable to the
effects of changes in the relative values of the local currency and the U.S.
dollar and to the effects of changes in each country's legal, political, and
economic environment.
Investment Valuations - 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. Equity securities listed on securities
exchanges or reported through the NASDAQ system are reported at market value
using last sale prices. Unlisted equity securities or listed equity securities
for which last sale prices are not available are reported at market value using
last quoted bid prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. Options and
options on futures contracts listed on commodities exchanges are reported at
market value using closing settlement prices. Over-the-counter options on
securities are valued by brokers. Over-the-counter currency options are valued
through the use of a pricing model which takes into account foreign currency
exchange spot and forward rates, implied volatility, and short-term repurchase
rates. Securities for which there are no such quotations or valuations are
valued in good faith, at fair value, by the Trustees.
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.
Forward Foreign Currency Exchange Contracts - The Fund 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 Fund may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund 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 Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund'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 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.
Indexed Securities - The Fund may invest in indexed securities whose value may
be linked to foreign currencies, interest rates, commodities, indices, or other
financial indicators. Indexed securities are fixed-income securities whose
proceeds at maturity (principal-indexed securities) or interest rates
(coupon-indexed securities) rise and fall according to the change in one or more
specified underlying instruments. Indexed securities may be more volatile than
the underlying instrument itself.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date. The Fund uses the effective
interest method for reporting interest income on payment-in-kind (PIK) bonds.
Some securities may be purchased on a "when-issued" or "forward delivery" basis,
which means that the securities will be delivered to the Fund at a future date,
usually beyond customary settlement time.
Legal fees and other related expenses incurred to preserve and protect the value
of a security owned are added to the cost of the security; other legal fees are
expensed. Capital infusions made directly to the security issuer, which are
generally non-recurring, incurred to protect or enhance the value of high-yield
debt securities, are reported as additions to the cost basis of the security.
Costs that are incurred to negotiate the terms or conditions of capital
infusions or that are expected to result in a plan of reorganization are
reported as realized losses. Ongoing costs incurred to protect or enhance an
investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits be reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended January 31, 2000, $11,345 was reclassified from accumulated
undistributed net investment income and $2,071 from accumulated undistributed
net realized gain on investments and foreign currency transactions to paid-in
capital due to differences between book and tax accounting for defaulted
securities and currency transactions. This change had no effect on the net
assets or net asset value per share.
At January 31, 2000, the Fund, for federal income tax purposes, had a capital
loss carryforward of $260,091 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on January 31, 2007.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. Differences in per
share dividend rates are generally due to differences in separate class
expenses. Class B shares will convert to Class A shares approximately eight
years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65% of
the Fund's average daily net assets. The investment adviser has voluntarily
agreed to pay all of the Fund's operating expenses, exclusive of management and
distribution fees such that the Fund's expenses do not exceed 0.00% of its
average daily net assets. This is reflected as a reduction of expenses in the
Statement of Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund 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 $1,880 for the year ended
January 31, 2000.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$12,607 for the year ended Janauary 31, 2000, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and a distribution fee to MFD
of up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $2,133 for the year ended January 31, 2000.
Fees incurred under the distribution plan during the year ended January 31,
2000, were 0.35% of average daily net assets attributable to Class A shares on
an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be consideration for services
rendered by the dealer with respect to Class B and Class C shares. MFD retains
the service fee for accounts not attributable to a securities dealer, which
amounted to $8 and $0 for Class B and Class C shares, respectively, for the year
ended January 31, 2000. Fees incurred under the distribution plan during the
year ended January 31, 2000, were 1.00% of average daily net assets attributable
to Class B and Class C shares, on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended January 31,
2000, were $0, $21,411, and $1,248 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an annual rate of 0.10%.
Prior to April 1, 1999, the fee was calculated as a percentage of the Fund's
average daily net assets at an annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$34,896,805 and $20,445,400, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $23,325,381
-----------
Gross unrealized appreciation $ 964,185
Gross unrealized depreciation (805,803)
-----------
Net unrealized appreciation $ 158,382
===========
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were
as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED JANUARY 31, 2000 PERIOD ENDED JANUARY 31, 1999*
------------------------------ ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 926,152 $ 8,065,844 472,706 $ 4,288,642
Shares issued to shareholders in
reinvestment of distributions 26,859 233,803 9,169 78,586
Shares reacquired (280,483) (2,426,245) (241,246) (1,993,787)
----------- ----------- ----------- -----------
Net increase 672,528 $ 5,873,402 240,629 $ 2,373,441
=========== =========== =========== ===========
<CAPTION>
Class B Shares
YEAR ENDED JANUARY 31, 2000 PERIOD ENDED JANUARY 31, 1999*
------------------------------ ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,133,503 $ 9,871,806 553,031 $ 4,823,469
Shares issued to shareholders in
reinvestment of distributions 26,955 234,925 3,552 30,138
Shares reacquired (260,485) (2,271,695) (52,403) (457,181)
----------- ----------- ----------- -----------
Net increase 899,973 $ 7,835,036 504,180 $ 4,396,426
=========== =========== =========== ===========
<CAPTION>
Class C Shares
YEAR ENDED JANUARY 31, 2000 PERIOD ENDED JANUARY 31, 1999*
------------------------------ ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 346,571 $ 3,033,411 127,217 $ 1,112,271
Shares issued to shareholders in
reinvestment of distributions 9,530 82,784 1,180 9,966
Shares reacquired (96,295) (848,660) (18,004) (157,003)
----------- ----------- ----------- -----------
Net increase 259,806 $ 2,267,535 110,393 $ 965,234
=========== =========== =========== ===========
<CAPTION>
Class I Shares
YEAR ENDED JANUARY 31, 2000 PERIOD ENDED JANUARY 31, 1999*
------------------------------ ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,892 $ 70,000 16 $ 160
Shares issued to shareholders in
reinvestment of distributions 1 6 1 5
----------- ----------- ----------- -----------
Net increase 7,893 $ 70,006 17 $ 165
=========== =========== =========== ===========
*For the period from the commencement of the Fund's investment operations, July 1, 1998, through January 31, 1999.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 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 repurchase of Fund
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. There was no commitment fee
allocated to the Fund for the year ended January 31, 2000. The Fund had no
borrowings during the period.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include forward foreign currency exchange contracts. The notional or
contractual amounts of these instruments represent the investment the Fund has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts - At January 31, 2000, forward
foreign currency sales under master netting agreements amounted to a net
receivable of $3,598 and $1,768 with Deustche Bank and Merrill Lynch,
respectively. At January 31, 2000, the Fund had sufficient cash and/or
securities to cover any commitments under these contracts
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At January 31, 2000, the
Fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting 4% of net assets, which may not be publicly sold
without registration under the Securities Act of 1933. The Fund does not have
the right to demand that such securities be registered. The value of these
securities is determined by valuations furnished by dealers or by a pricing
service, or if not available, in good faith, at fair value, by the Trustees.
<TABLE>
<CAPTION>
DATE OF SHARE/PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CSN Iron S.A. 11/12/99 $ 100,000 $ 77,833 $ 80,500
Bahia Sul Celulose S.A. 09/16/99 40,000 37,079 39,600
Government of Russia 01/10/00 165,000 111,817 103,950
Ministry of Finance, Russia 04/16/99 - 01/04/00 650,000 354,280 468,000
Russia Principal Loans 09/22/99 - 12/31/99 1,635,000 220,106 253,425
--------
$945,475
========
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust III and Shareholders of MFS High Yield
Opportunities Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS High Yield Opportunities Fund (one of the
series constituting MFS Series Trust III) as of January 31, 2000, the related
statement of operations for the year then ended, the statement of changes in net
assets and the financial highlights for the year ended January 31, 2000, and the
period ended January 31, 1999. These financial statements and financial
highlights are the responsibility of the Fund'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
January 31, 2000, 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 High Yield
Opportunities Fund at January 31, 2000, 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
March 9, 2000
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 1999.
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment
adviser and on behalf of the MFS funds, is committed
to the effective use of technology in managing our
portfolio investments, delivering high-quality service to [GRAPHIC OMITTED]
MFS fund shareholders, retirement plan participants,
and MFS' institutional clients, and supporting the
investment professionals who sell our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at WWW.MFS.COM, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
MFS(R) HIGH YIELD OPPORTUNITIES FUND
<TABLE>
<S> <C>
TRUSTEES SECRETARY
J. Atwood Ives+ - Chairman and Chief Stephen E. Cavan*
Executive Officer, Eastern Enterprises
(diversified services company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ - Partner, Hemenway
& Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ - Adjunct Professor,
Harvard University Graduate School of AUDITORS
Business Administration Deloitte & Touche LLP
Charles W. Schmidt+ - Private Investor INVESTOR INFORMATION
For information on MFS mutual funds, call
Arnold D. Scott* - Senior Executive your investment professional or, for an
Vice President, Director, and Secretary, information kit, call toll free: 1-800-637-2929
MFS Investment Management any business day from 9 a.m. to 5 p.m.
Eastern time (or leave a message anytime).
Jeffrey L. Shames* - Chairman and Chief
Executive Officer, MFS Investment INVESTOR SERVICE
Management MFS Service Center, Inc.
P.O. Box 2281
Elaine R. Smith+ - Independent Consultant Boston, MA 02107-9906
David B. Stone+ - Chairman, For general information, call toll free:
North American Management Corp. 1-800-225-2606 any business day from
(investment adviser) 8 a.m. to 8 p.m. Eastern time.
INVESTMENT ADVISER For service to speech- or hearing-impaired,
Massachusetts Financial Services Company call toll free: 1-800-637-6576 any business day
500 Boylston Street from 9 a.m. to 5 p.m. Eastern time. (To use
Boston, MA 02116-3741 this service, your phone must be equipped with
a Telecommunications Device for the Deaf.)
DISTRIBUTOR
MFS Fund Distributors, Inc. For share prices, account balances, exchanges,
500 Boylston Street or stock and bond outlooks, call toll free:
Boston, MA 02116-3741 1-800-MFS-TALK (1-800-637-8255) anytime
from a touch-tone telephone.
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames* WORLD WIDE WEB
www.mfs.com
PORTFOLIO MANAGER
Robert J. Manning*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
+ Independent Trustee
*MFS Investment Management
</TABLE>
<PAGE>
MFS(R) HIGH YIELD ------------
OPORTUNITIES FUND BULK RATE
U.S. POSTAGE
PAID
MFS
[Logo] M F S(R) ------------
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MHO-2 03/00 2M 70/270/370/870
