<PAGE>
[LOGO: M F S ANNUAL REPORT FOR
THE FIRST NAME IN MUTUAL FUNDS] YEAR ENDED
APRIL 30, 1995
MFS(R) BOND FUND
[GRAPHIC OMITTED: A 6 1/4" by 8 1/4" photo of gears.]
<PAGE>
MFS(R) BOND FUND
<TABLE>
<S> <C>
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and President Investors Bank & Trust Company
Richard B. Bailey* - Private Investor; AUDITORS
Former Chairman and Director (until 1991), Deloitte & Touche LLP
Massachusetts Financial Services Company
INVESTOR INFORMATION
Peter G. Harwood - Private Investor For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
J. Atwood Ives - Chairman and Chief Executive a touch-tone telephone.
Officer, Eastern Enterprises
For information on MFS mutual funds,
Lawrence T. Perera - Partner, Hemenway & Barnes call your financial adviser or, for an
information kit, call toll free:
William J. Poorvu - Adjunct Professor, Harvard 1-800-637-2929 any business day from
University Graduate School of Business 9 a.m. to 5 p.m. Eastern time (or leave
Administration a message anytime).
Charles W. Schmidt - Private Investor; INVESTOR SERVICE
Former Senior Vice President and Group Executive MFS Service Center, Inc.
(until 1990), Raytheon Company P.O. Box 2281
Boston, MA 02107-9906
Arnold D. Scott* - Senior Executive Vice President
and Secretary, Massachusetts Financial Services Company For current account service, call toll free:
1-800-225-2606 any business day from
Jeffrey L. Shames* - President, Massachusetts 8 a.m. to 8 p.m. Eastern time.
Financial Services Company
For service to speech- or hearing-impaired,
Elaine R. Smith - Independent Consultant call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time. (To use this
David B. Stone - Chairman, North American service, your phone must be equipped with a
Management Corp. (Investment Advisers) Telecommunications Device for the Deaf.)
INVESTMENT ADVISER For share prices, account balances and
Massachusetts Financial Services Company exchanges, call toll free: 1-800-MFS-TALK
500 Boylston Street (1-800-637-8255) anytime from a touch-tone
Boston, Massachusetts 02116-3741 telephone.
PORTFOLIO MANAGER
Geoffrey L. Kurinsky* -------------------------------------------
TOP-RATED SERVICE
TREASURER [SEAL] MFS was rated first when securities
W. Thomas London* firms evaluated the quality of
service they receive from 40
ASSISTANT TREASURER mutual fund companies. MFS got
James O. Yost* high marks for answering calls
quickly, processing transactions
SECRETARY accurately and sending statements
Stephen E. Cavan* out on time.
(Source: 1994 DALBAR Survey)
ASSISTANT SECRETARY -------------------------------------------
James R. Bordewick, Jr.*
Cover photo: Through their wide range of
investments, MFS mutual funds help you
*Affiliated with the Investment Adviser share in America's growth.
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
After moving higher through the fall of 1994, interest rates on long-term
fixed-income securities began a steady decline in early 1995 as fears that a
robust economy would spark inflationary pressures waned. As market
participants came to believe that the Federal Reserve Board's previous
tightening was successful in slowing the pace of economic growth, yields on
long-term U.S. Treasury bonds fell from 8% in late October 1994 to 7 1/4% by
the end of April of this year.
During the 12 months ended April 30, 1995, Class A shares of the Fund
provided a total return of +7.78%, Class B shares +6.90%, and Class C shares
+7.00%. These returns assume the reinvestment of distributions but exclude the
effects of any sales charges. The Fund's results exceeded (or in the case of
Class B shares, matched) the Lehman Brothers Government/Corporate Bond Index,
which returned +6.92% over the same period. This index is an unmanaged, market-
value-weighted index of U.S. Treasury and government agency securities
(excluding mortgage-backed securities) and investment-grade debt obligations of
domestic corporations. In addition, all classes of shares outperformed the
+6.41% average return of corporate bond funds rated BBB or higher tracked by
Lipper Analytical Services, Inc., an independent firm which reports mutual fund
performance. Class A shares ranked 10th, Class B shares ranked 24th and Class C
shares ranked 22nd out of the 74 funds in Lipper's corporate bond fund category.
Economic Outlook
As the economy enters its fifth year of expansion, it is evidencing a
decidedly decelerating trend from its robust pace of 1994, when gross domestic
product expanded by 4.1%. Estimated growth in this year's first quarter
diminished to an annual rate of 2.8%. Consumer spending slowed considerably
during the quarter and was accompanied by a correspondingly large increase in
inventories. As we begin the year's second quarter, the evidence suggests that
the economy has entered a phase of less-than-full-potential growth, as the
April unemployment rate showed a second consecutive monthly increase. We
expect the economy to continue to grow at this more subdued pace. We do not
anticipate that the slowdown will deteriorate into a recession and,
conversely, we remain mindful of the potential for a reliquified consumer
sector to reassert itself as the year progresses.
Interest Rates
As evidence of a slowdown has continued to mount, the fixed-income markets
have become increasingly convinced that the Federal Reserve has concluded its
monetary-tightening initiatives. Furthermore, as the economy has diminished in
its ability to create jobs and in its usage of available productive capacity,
apprehension concerning a cyclical upturn in inflation has receded. As a
result, long-term Treasury bond yields have declined to near 7.00% as of April
30, 1995, down from 7.87% at the beginning of the year and from their cyclical
peak of 8.15% in November 1994. Despite higher costs at the crude and
intermediate stages of production, prices have not increased appreciably at
the consumer level. For the 12 months ended in April of this year, the
Consumer Price Index, a popular measure of change in prices, increased by a
still moderate 3.1%. Continued benign growth in labor costs and the inability
of many businesses to effectively raise prices have combined to extend the
favorable price environment. Nevertheless, we do anticipate a minor cyclical
pickup in inflationary pressure this year to the 3% - 3 1/2% range.
The decline in interest rates has been particularly precipitious during the
past month, leaving the market potentially vulnerable to a near-term correction.
However, we believe continuing moderate growth will result in interest rates
trending near to, and possibly somewhat lower than, present levels during the
balance of this year.
Portfolio Performance and Strategy
Although interest rates fluctuated widely during the past 12 months, yields on
long-term U.S. government securities began and ended the fiscal year at
approximately 7%. As a result, the major portion of the Fund's total return
came from coupon income. During the past 12 months, the Fund benefited from
overweighted positions in the investment-grade and high-yield corporate
markets, both of which outperformed U.S. Treasury securities (although
principal value and interest on Treasury securities are guaranteed by the U.S.
government if held to maturity). The Fund's holdings in the airline sector had
a positive impact on performance as Delta, United and Qantas Airlines improved
in price versus other securities. The combination of ticket price increases,
fleet reductions and reduced commissions to travel agents resulted in an
improving cash flow for this sector. Other sectors in which the Fund benefited
from overweighted positions include tobacco (RJR Nabisco) and forest and paper
products (Georgia Pacific, Stone Container and Riverwood). In the non-dollar
area, performance was aided by a 4% position in Japanese and German bonds,
both of which benefited from the decline in interest rates in these markets as
well as from the appreciation of their currencies versus the U.S. dollar.
Looking forward, we have started to reduce our overweightings in both the
investment-grade and high-yield corporate sectors because we believe these
markets have reached speculative valuations. With these sectors trading at
historically small premiums compared to U.S. Treasuries, we believe there is
downside price potential if the economy begins to slow at a faster pace than we
anticipate. Thus, we are re-deploying these assets into the U.S. Treasury and
mortgage markets. Based on our view that much of the return to a lower interest
rate environment is reflected in the current level of interest rates, we are
maintaining an interest rate sensitivity of about an eight-year Treasury, which
we consider to be a neutral posture for the portfolio.
We appreciate your support and welcome any questions or comments you may
have.
- -------------------------- -----------------------
A 1 1/2" x 1 5/8" photo A 1 1/2" x 1 5/8" photo
of A. Keith Brodkin, of Geoffrey L. Kurinsky,
Chairman and President. Portfolio Manager.
- -------------------------- -----------------------
Respectfully,
/s/ A. Keith Brodkin /s/ Geoffrey L. Kurinsky
A. Keith Brodkin Geoffrey L. Kurinsky
Chairman and President Portfolio Manager
May 17, 1995
PORTFOLIO MANAGER PROFILE
Geoffrey Kurinsky began his career at MFS in 1987 in the Fixed Income
Department. A graduate of the University of Massachusetts and Boston
University's Graduate School of Management, he was named Assistant Vice
President in 1988, Vice President in 1989 and Senior Vice President in 1993.
In 1992, he became Portfolio Manager of MFS Bond Fund. Mr. Kurinsky is a
Certified Public Accountant.
OBJECTIVES AND POLICIES
The Fund primarily seeks to provide as high a level of current income as is
believed to be consistent with prudent investment risk. The secondary
objective of the Fund is to protect shareholders' capital.
The Fund seeks to achieve its objectives by investing approximately 80% of its
net assets in non-convertible investment-grade debt securities, securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, non-convertible investment-grade debt securities issued or
guaranteed by national or state banks or bank holding companies, and
commercial paper, repurchase agreements, cash and cash equivalents. Up to 20%
of the Fund's assets may be invested in non-investment-grade debt securities.
The Fund may also enter into options and futures transactions and forward
foreign currency exchange contracts.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
PERFORMANCE
The information below and on the following page illustrates the historical
performance of MFS Bond Fund Class A shares in comparison to various market
indicators. Fund results reflect the deduction of the 4.75% maximum sales
charge; benchmark comparisions are unmanaged and do not reflect any fees or
expenses. You cannot invest in an index. All results reflect the reinvestment
of all dividends and capital gains.
Class B shares were offered effective September 7, 1993. Information on Class
B share performance appears on the next page.
Class C shares were offered effective January 3, 1994. Information on Class C
share performance appears on the next page.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 5-Year Period Ended April 30, 1995)
----------------------------------------------------------------------
Line graph representing the growth of a $10,000 investment for the
5-year period ended April 30, 1995. The graph is scaled from $8,000 to
$18,000 in $2,000 segments. The years are marked from 1990 to 1995.
There are three lines drawn to scale. One is a solid line representing
MFS Bond Fund (Class A), a second line of short dashes represents the
Lehman Brothers Government/Corporate Bond Index, and a third line of
long dashes represents the Consumer Price Index.
MFS Bond Fund (Class A) $15,286
Lehman Brothers Government/
Corporate Bond Index $15,752
Consumer Price Index $11,784
----------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-Year Period Ended April 30, 1995)
----------------------------------------------------------------------
Line graph representing the growth of a $10,000 investment for the
10-year period ended April 30, 1995. The graph is scaled from $5,000
to $30,000 in $5,000 segments. The years are marked from 1985 to 1995.
There are three lines drawn to scale. One is a solid line representing
MFS Bond Fund (Class A), a second line of short dashes represents the
Lehman Brothers Government/Corporate Bond Index, and a third line of
long dashes represents the Consumer Price Index.
MFS Bond Fund (Class A) $25,377
Lehman Brothers Government/
Corporate Bond Index $26,094
Consumer Price Index $14,216
----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
MFS Bond Fund (Class A) including
4.75% sales charge +2.63% +5.98% +8.86% + 9.76%
- -------------------------------------------------------------------------------
MFS Bond Fund (Class A) at
net asset value +7.78% +7.70% +9.93% +10.30%
- -------------------------------------------------------------------------------
MFS Bond Fund (Class B) with CDSC+ +2.91% -- -- - 1.39%*
- -------------------------------------------------------------------------------
MFS Bond Fund (Class B) without CDSC +6.90% -- -- + 0.67%*
- -------------------------------------------------------------------------------
MFS Bond Fund (Class C) +7.00% -- -- + 1.59%#
- -------------------------------------------------------------------------------
Average corporate debt BBB-rated fund +6.41% +7.84% +9.88% + 9.82%
- -------------------------------------------------------------------------------
Lehman Brothers Government/
Corporate Bond Index +6.92% +7.38% +9.51% +10.07%
- -------------------------------------------------------------------------------
Consumer Price Index +3.05% +2.88% +3.34% + 3.58%
- -------------------------------------------------------------------------------
* For the period from the commencement of offering of Class B shares,
September 7, 1993 to April 30, 1995.
+ These returns reflect the current maximum Class B contingent deferred sales
charge (CDSC) of 4%.
# For the period from the commencement of offering of Class C shares, January 3,
1994 to April 30, 1995. Class C shares have no initial sales charge or CDSC
but, along with Class B shares, have higher annual fees and expenses than
Class A shares.
In the above table, we have included the average annual total returns of all
corporate debt BBB-rated funds (including the Fund) tracked by Lipper
Analytical Services, Inc. for the applicable time periods (74, 34, 26 and 14
funds for the 1-, 3-, 5- and 10-year periods ended April 30, 1995,
respectively). Because these returns do not reflect any applicable sales
charges, we have also included the Fund's results at net asset value (no sales
charge) for comparison.
All results are historical and, therefore, are not an indication of future
results. The principal value and income return of an investment in a mutual
fund will vary with changes in market conditions, and shares, when redeemed,
may be worth more or less than their original cost.
All Class A share results reflect the applicable expense subsidy which is
explained in the Notes to Financial Statements. Had the subsidy not been in
effect, the results would have been less favorable. The subsidy may be
rescinded by MFS at any time.
<PAGE>
- ------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - April 30, 1995
Bonds - 85.5%
- ------------------------------------------------------------------------------
S&P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
U.S. Dollar Denominated - 82.0%
Corporate Asset Backed - 0.5%
A- Chase Manhattan Corp., 8.8s, 2000 $ 2,500 $ 2,576,550
- -------------------------------------------------------------------------------
Financial Institutions - 6.2%
Financial Services - 5.1%
BBB- Capital One Bank, 8.125s, 2000 $ 7,000 $ 7,088,480
A Citicorp, 8.8s, 2000 3,890 4,078,003
BB+ First USA Corp. (Bank of Wilmington),
7.65s, 2003 4,000 3,816,760
BBB+ General Motors Acceptance Corp., 5.95s, 1998 3,000 2,858,070
BBB+ General Motors Acceptance Corp.,
7.125s, 1998 5,000 4,965,200
BBB- Hartford National Corp., 9.85s, 1999 3,000 3,224,340
BB+ Sovereign Bancorp, Inc., 6.75s, 2000 2,600 2,411,110
------------
$ 28,441,963
- --------------------------------------------------------------------------------
Insurance - 1.1%
BB+ Americo Life, Inc., 9.25s, 2005# $ 250 $ 221,875
BBB CCP Insurance, Inc., 10.5s, 2004 3,000 3,014,670
BBB- Conseco, Inc., 8.125s, 2003 1,600 1,403,344
BBB- Markel Corp., 7.25s, 2003 1,537 1,404,126
--------------
$ 6,044,015
- --------------------------------------------------------------------------------
Total Financial Institutions $ 34,485,978
- --------------------------------------------------------------------------------
Foreign - U.S. Dollar Denominated - 7.5%
BB+ BNCE 04 Global, 8s, 2000 $ 2,500 $ 1,965,625
NR Banco Nacional de Companie, 7.25s, 2004 3,000 2,010,000
A+ Banco Santander, 7.875s, 2005 4,890 4,871,663
NR Fen Colombia, 6.625s, 1996# 3,040 2,941,200
A+ Grand Metropolitan Investment Corp.,
7.45s, 2035 2,500 2,500,000
NR Hidroelectrica Alicura, 8.375s, 1999# 4,325 3,503,250
AA- Korea Electric Power Corp., 7.75s, 2013 7,550 6,881,372
NR Republic of Argentina, Discount Ltd., due
3/31/23 3,000 1,785,000
NR Republic of Argentina, FRB, due 3/31/23 4,000 1,740,000
BBB- Republic of Colombia, 8.75s, 1999 2,000 1,970,000
NR Republic of Greece, 9.75s, 1999 3,905 4,061,200
A Republic of Malta, 7.5s, 2009# 5,000 4,827,000
BB South Africa Global, 9.625s, 1999 3,000 2,970,000
------------
$ 42,026,310
- --------------------------------------------------------------------------------
Industrials - 33.7%
Building - 1.9%
B American Standard, Inc., 10.5s, 2005 $ 2,000 $ 1,465,000
CCC+ Nortek, Inc., 9.875s, 2004 500 471,875
BBB- Owens Corning Fiberglass Corp., 8.875s, 2002 5,650 5,897,018
NR Owens Corning Fiberglass Corp., 9.9s, 2015# 1,500 1,577,813
B+ USG Corp., 9.25s, 2001 1,250 1,237,500
------------
$ 10,649,206
- --------------------------------------------------------------------------------
Chemicals - 0.3%
BB- Huntsman Corp., 10.625s, 2001 $ 1,000 $ 1,052,500
B NL Industries, Inc., 11.75s, 2003 750 796,875
------------
$ 1,849,375
- --------------------------------------------------------------------------------
Conglomerates
B- Bell & Howell Co., 10.75s, 2002 $ 200 $ 210,000
- --------------------------------------------------------------------------------
Consumer Goods and Services - 2.1%
NR Black & Decker Corp., 8.44s, 1999 $ 1,500 $ 1,541,295
BBB+ Laidlaw, 8.75s, 2025 5,000 4,979,350
NR Rouse Co., 8.55s, 2005 2,890 2,895,419
B+ Sealy Corp., 9.5s, 2003 1,000 970,000
B+ Westpoint Stevens, Inc., 9.375s, 2005 1,500 1,425,000
------------
$ 11,811,064
- --------------------------------------------------------------------------------
Containers - 1.9%
B+ Container Corp. of America, 10.75s, 2002 $ 750 $ 787,500
B+ Container Corp. of America, 9.75s, 2003 250 251,250
BB Owens-Illinois, Inc., 11s, 2003 2,000 2,165,000
B+ Owens-Illinois, Inc., 9.75s, 2004 500 493,750
B+ Riverwood International Corp., 10.75s, 2000 1,000 1,055,000
B+ Stone Consolidated Corp., 10.25s, 2000 1,100 1,128,875
B Stone Container Corp., 9.875s, 2001 5,000 4,975,000
------------
$ 10,856,375
- --------------------------------------------------------------------------------
Entertainment - 1.1%
BB- SCI Television, Inc., 11s, 2005 $ 500 $ 520,000
BBB- Time Warner, Inc., 9.125s, 2013 6,000 5,858,760
------------
$ 6,378,760
- --------------------------------------------------------------------------------
Food and Beverage Products - 2.0%
BBB- Borden, Inc., 9.875s, 1997 $ 3,000 $ 3,134,760
B+ Canandaigua Wine, Inc., 8.75s, 2003 500 485,000
B Coca-Cola Bottling Group Southwest, Inc.,
9s, 2003 1,000 960,000
BBB- RJR Nabisco, Inc., 8.75s, 2005 6,500 6,414,980
------------
$ 10,994,740
- --------------------------------------------------------------------------------
Forest and Paper Products - 3.0%
BBB- Georgia-Pacific Corp., 9.875s, 2021 $ 7,850 $ 8,550,848
BBB- Georgia-Pacific Corp., 9.125s, 2022 2,500 2,570,425
BBB- Georgia-Pacific Corp., 8.125s, 2023 1,000 952,860
BBB- Georgia-Pacific Corp., 8.625s, 2025 5,000 4,976,550
------------
$ 17,050,683
- --------------------------------------------------------------------------------
Medical and Health Products - 0.5%
B+ National Medical Enterprises, 10.125s, 2005$ 2,740 $ 2,856,450
- ------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.4%
BBB- FHP International Corp., 7s, 2003 $ 5,000 $ 4,667,850
BBB- Foundation Health Corp., 7.75s, 2003 2,600 2,501,070
B- OrNda Healthcorp., 12.25s, 2002 750 817,500
------------
$ 7,986,420
- --------------------------------------------------------------------------------
Metals and Minerals - 0.2%
B+ Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 $ 1,000 $ 972,500
- --------------------------------------------------------------------------------
Oils - 2.9%
BBB Ashland Oil, Inc., 11.125s, 2017 $ 2,115 $ 2,371,084
BB+ Coastal Corp., 9.75s, 2003 1,540 1,683,004
BB+ Coastal Corp., 10.75s, 2010 5,000 5,983,550
B+ Gulf Canada, 9.25s, 2004 750 720,000
BBB- Parker & Parsley Petroleum, 8.875s, 2005 2,390 2,418,464
BBB Union Tex Pete Holdings, 8.5s, 2007 3,250 3,245,938
------------
$ 16,422,040
- --------------------------------------------------------------------------------
Printing and Publishing - 2.2%
BBB- News America Holdings, Inc., 7.5s, 2000 $ 3,200 $ 3,169,504
BBB- News America Holdings, Inc., 8.25s, 2018 2,760 2,613,416
BBB- NewsCorp, 7.75s, 2024 3,000 2,677,770
BB+ Valassis Inserts, 9.375s, 1999 3,650 3,727,891
------------
$ 12,188,581
- --------------------------------------------------------------------------------
Restaurants and Lodging - 0.2%
BB- Four Seasons Hotels, Inc., 9.125s, 2000# $ 1,000 $ 966,250
- --------------------------------------------------------------------------------
Special Products and Services - 0.3%
B- Eagle Industries, Inc., 0s, 2003 $ 1,000 $ 690,000
BB+ Mark IV Industries, Inc., 8.75s, 2003 400 394,000
BB- OSI Specialties, Inc., 9.25s, 2003 500 495,000
------------
$ 1,579,000
- --------------------------------------------------------------------------------
Steel - 1.1%
B+ AK Steel Holdings Corp., 10.75s, 2004 $ 2,000 $ 2,090,000
B Bayou Steel Corp., 10.25s, 2001 500 460,000
B+ Geneva Steel Co., 9.5s, 2004 1,000 850,000
B Weirton Steel Corp., 10.875s, 1999 2,000 2,020,000
BB Wheeling Pittsburgh, 9.375s, 2003 1,000 880,000
------------
$ 6,300,000
- --------------------------------------------------------------------------------
Stores - 1.9%
B Finlay Fine Jewelry, 10.625s, 2003 $ 1,000 $ 945,000
BBB K-Mart Corp., 8.8s, 2010 2,250 2,370,600
BBB K-Mart Corp., 9.78s, 2020 650 650,000
BBB K-Mart Corp., 8.25s, 2022 1,000 924,680
BBB K-Mart Corp., 7.95s, 2023 6,185 5,576,828
------------
$ 10,467,108
- --------------------------------------------------------------------------------
Supermarkets - 0.2%
BB+ Kroger Co., 9.25s, 2005 $ 450 $ 473,625
BB+ Safeway Stores, Inc., 9.65s, 2004 500 537,500
------------
$ 1,011,125
- --------------------------------------------------------------------------------
Telecommunications - 4.8%
B ACT III Broadcasting, 9.625s, 2003 $ 500 $ 482,500
BB- Cablevision Industries Corp., 9.25s, 2008 1,250 1,240,625
B Cablevision Systems Corp., 10.75s, 2004 1,000 1,040,000
BB- Century Communications Corp., 0s, 2003 2,500 1,125,000
B+ Jones Intercable, Inc., 10.5s, 2008 500 512,500
B MFS Communications, Inc., 0s, 2004 2,750 1,815,000
B Paging Network, Inc., 8.875s, 2006 1,500 1,327,500
BB+ Rogers Cablesystems Ltd., 9.625s, 2002 350 350,000
BBB- TCI Communications, Inc., 8.65s, 2004 1,375 1,371,521
BBB- Tele-Communications, 9.25s, 2023 18,115 17,335,149
CCC+ USA Mobile Communication, 9.5s, 2004 500 442,500
------------
$ 27,042,295
- --------------------------------------------------------------------------------
Transportation - 5.7%
BB Delta Air Lines, Inc., 9.75s, 2021 $ 4,644 $ 4,801,663
BB Delta Air Lines, Inc., 10.375s, 2022 2,890 3,116,807
A Jet Equipment Trust, "B", Notes, 10.91s,
2006# 7,500 7,940,775
BBB- Jet Equipment Trust, "C", Notes, 10.69s,
2015# 2,390 2,409,621
AA Northwest Airlines Trust, 9.25s, 2014 2,375 2,507,109
BBB+ Qantas Airways Ltd., 7.5s, 2003# 5,000 4,777,800
BB United Air Lines, Inc., 11.21s, 2014 2,890 3,251,539
BB United Air Lines, Inc., 9.75s, 2021 3,000 2,973,150
------------
$ 31,778,464
- --------------------------------------------------------------------------------
Total Industrials $189,370,436
- --------------------------------------------------------------------------------
Mortgage-Backed Pass-Throughs - 2.9%
NR Merrill Lynch Mortgage Investors, Inc.,
9.7s, 2008 $ 509 $ 518,131
NR Merrill Lynch Mortgage Investors, Inc.,
10.25s, 2009+ 1,812 1,842,660
NR Merrill Lynch Mortgage Investors, Inc.,
10.8s, 2009+ 582 585,286
NR Merrill Lynch Mortgage Investors, Inc.,
8.3s, 2011 2,543 2,539,492
NR Merrill Lynch Mortgage Investors, Inc.,
9s, 2011 1,976 2,010,905
NR Merrill Lynch Mortgage Investors, Inc.,
10s, 2011 2,292 2,383,786
NR Merrill Lynch Mortgage Investors, Inc.,
9.3s, 2016+ 4,500 4,544,055
B Merrill Lynch Mortgage Investors, Inc.,
8.238s, 2021+ 2,000 1,449,340
AAA Security Pacific National Bank, 8.5s, 2017(S) 145 145,896
------------
$ 16,019,551
- --------------------------------------------------------------------------------
U.S. Federal Agencies - 0.6%
GOV Federal Home Loan Mortgage Corp.,
9.5s, 2001 $ 15 $ 15,790
GOV Federal National Mortgage Assn., 9s, 2004 4 3,990
GOV Federal National Mortgage Assn., Stripped
Mortgage-Backed Security, "240", 7s, 2023 7,803 2,779,983
GOV Federal National Mortgage Assn., Stripped
Mortgage-Backed Security, "250", 7s, 2023 918 327,990
GOV Federal National Mortgage Assn., Stripped
Mortgage-Backed Security, "264", 8s, 2024 978 349,103
------------
$ 3,476,856
- --------------------------------------------------------------------------------
U.S. Government Guaranteed - 18.1%
Government National Mortgage Association - 0.1%
GOV GNMA, 9s, 2015 $ 125 $ 129,169
GOV GNMA, 13.25s, 2023 689 737,200
------------
$ 866,369
- --------------------------------------------------------------------------------
U.S. Treasury Obligations - 18.0%
GOV Stripped Principal Payments, 0s, 2018 $ 80,000 $ 13,557,600
GOV U.S. Treasury Notes, 11.25s, 1995 48,820 48,911,293
GOV U.S. Treasury Notes, 7.125s, 2000 2,690 2,715,635
GOV U.S. Treasury Notes, 7.75s, 2000 3,000 3,102,180
GOV U.S. Treasury Notes, 6.25s, 2003 1,615 1,537,786
GOV U.S. Treasury Notes, 7.25s, 2004 4,250 4,300,447
GOV U.S. Treasury Notes, 7.5s, 2005 6,000 6,184,680
GOV U.S. Treasury Bonds, 7.625s, 2025 19,896 20,570,673
------------
$100,880,294
- --------------------------------------------------------------------------------
Total U.S. Government Guaranteed $101,746,663
- --------------------------------------------------------------------------------
Utilities - 12.5%
Electric - 9.5%
BBB Commonwealth Edison, 9.5s, 2016 $ 1,700 $ 1,741,803
BBB Commonwealth Edison, 8.5s, 2022 2,000 1,860,000
BBB Commonwealth Edison, 8.625s, 2022 1,300 1,271,205
BBB DQU II Funding, 8.7s, 2016 5,000 4,993,700
B+ First PV Funding Corp., 10.3s, 2014 3,718 3,764,475
B+ First PV Funding Corp., 10.15s, 2016 2,000 1,990,000
BBB- Long Island Lighting Co., 7.85s, 1999 5,490 5,466,777
BBB- Long Island Lighting Co., 9.625s, 2024 4,100 3,941,904
BBB- Louisiana Power & Light Co., 10.67s, 2017 1,450 1,512,944
BB- Midland Funding Corp. I, 10.33s, 2002 3,344 3,335,838
BBB Mississippi Power & Light, 8.8s, 2005 4,340 4,335,703
BBB- Niagara Mohawk Power Co., 6.875s, 2001 3,000 2,837,760
BBB- Niagara Mohawk Power Co., 6.875s, 2003 3,000 2,706,390
BBB- Niagara Mohawk Power Co., 9.75s, 2005 1,890 2,071,194
BB+ PNPP II Funding, 9.12s, 2016 7,940 7,050,561
B Texas & New Mexico Power Co., 12.5s, 1999 3,868 4,201,653
------------
$ 53,081,907
- --------------------------------------------------------------------------------
Gas - 2.5%
BBB- ANR Pipeline Co., 7.375s, 2024 $ 3,100 $ 2,787,582
BB- California Energy Co., 0s, 2004 3,100 2,418,000
BBB- GG1B Funding Corp., 7.43s, 2011 3,010 2,592,121
BBB- Panhandle Eastern Corp., 8.625s, 2025 1,875 1,881,862
BBB Southern Union Co., 7.6s, 2024 5,000 4,513,850
------------
$ 14,193,415
- --------------------------------------------------------------------------------
Telephone - 0.5%
BBB+ Century Telephone Enterprises, 8.25s, 2024 $ 3,000 $ 2,923,800
- --------------------------------------------------------------------------------
Total Utilities $ 70,199,122
- --------------------------------------------------------------------------------
Total U.S. Dollar Denominated $459,901,466
- --------------------------------------------------------------------------------
Foreign - Non-U.S. Dollar Denominated - 3.5%
Australian Dollars - 0.3%
AA Commonwealth of Australia, 6.25s, 1999 AUD 500 $ 328,923
AA Commonwealth of Australia, 8.75s, 2001 1,000 703,979
AA Treasury Corp. of Victoria, 10.25s, 1999 850 634,507
------------
$ 1,667,409
- --------------------------------------------------------------------------------
British Pounds - 0.6%
AAA United Kingdom Treasury, 6s, 1999 GBP 1,125 $ 1,665,711
AAA United Kingdom Treasury, 9.5s, 1999 750 1,253,559
------------
$ 2,919,270
- --------------------------------------------------------------------------------
Danish Kroner - 0.3%
AA+ Kingdom of Denmark, 9s, 1998 DKK 4,300 $ 814,279
AA+ Kingdom of Denmark, 9s, 2000 4,130 782,087
------------
$ 1,596,366
- --------------------------------------------------------------------------------
Deutsche Marks - 1.1%
NR German Unity Fund, 8.5s, 2001 DEM 370 $ 290,000
AAA Republic of Germany, 8.5s, 2000 1,110 870,400
AAA Republic of Germany, 6.5s, 2003 1,485 1,035,486
AAA Republic of Germany, 6.75s, 2004 480 338,508
AAA Treuhandanstalt Obligationen, 6.375s, 1999 3,512 2,545,092
AAA Treuhandanstalt Obligationen, 7.75s, 2002 1,800 1,355,027
------------
$ 6,434,513
- --------------------------------------------------------------------------------
Dutch Guilders - 0.6%
AAA Dutch State Loan, 6.25s, 1998 NLG 270 $ 174,810
AAA Dutch State Loan, 7s, 1999 1,340 885,686
AAA Dutch State Loan, 7.5s, 1999 1,190 801,477
AAA Dutch State Loan, 7.75s, 2005 1,880 1,263,779
------------
$ 3,125,752
- --------------------------------------------------------------------------------
French Francs - 0.2%
AAA Government of France, 8s, 1998 FRF 3,020 $ 626,942
AAA Government of France, 7s, 1999 2,510 502,713
AAA Government of France, 7.75s, 2000 1,280 263,514
------------
$ 1,393,169
- --------------------------------------------------------------------------------
Irish Punts - 0.1%
AA- Republic of Ireland, 9s, 2001 IEP 480 $ 793,152
- --------------------------------------------------------------------------------
Italian Lire
AA Republic of Italy, 9.5s, 1999 ITL 500,000 $ 267,529
- --------------------------------------------------------------------------------
New Zealand Dollars - 0.3%
AA Government of New Zealand, 8s, 1995 NZD 2,120 $ 1,416,799
- --------------------------------------------------------------------------------
Total Foreign - Non-U.S. Dollar Denominated $ 19,613,959
- --------------------------------------------------------------------------------
Total Bonds (Identified Cost, $476,974,122) $479,515,425
- --------------------------------------------------------------------------------
Warrant - 0.1%
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Host Marriott Corp., Warrant (Identified Cost, $0) 183,598 $ 734,392
- --------------------------------------------------------------------------------
Call Options Purchased - 0.1%
- --------------------------------------------------------------------------------
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
- --------------------------------------------------------------------------------
Canadian Dollars/July/1.375 CAD 559 $ 6,426
Japanese Bonds/August/100.304 JPY 80,000 66,320
Japanese Bonds/August/100.97 229,000 172,208
Japanese Bonds/July/110.164 165,000 15,015
Japanese Bonds/June/110.154 151,000 1,661
Japanese Bonds/May/110.07 129,000 387
- --------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $91,462) $ 262,017
- --------------------------------------------------------------------------------
Put Option Purchased
- --------------------------------------------------------------------------------
Deutsche Marks/British Pounds/July/2.29
(Premiums Paid, $10,900) DEM 1,818 $ 9,127
- --------------------------------------------------------------------------------
Short-Term Obligations - 1.0%
- --------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
IFCT, 0s, 1995 $ 130,000 $ 5,210,292
New Zealand T-Bills, due 1995 NZD 240 221,114
- --------------------------------------------------------------------------------
Total Short-Term Obligations (Identified Cost, $5,443,445) $ 5,431,406
- --------------------------------------------------------------------------------
Repurchase Agreement - 5.3%
- --------------------------------------------------------------------------------
Lehman Brothers, dated 4/28/95, due 5/01/95,
total to be received $29,788,639
(secured by U.S. Treasury Notes, 4.625s and
5.9s, due 2/15/15, market value $30,369,582),
at Cost and Value $ 29,774 $ 29,774,000
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $512,293,929) $515,726,367
- --------------------------------------------------------------------------------
Call Options Written - (0.1)%
- --------------------------------------------------------------------------------
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
- --------------------------------------------------------------------------------
Japanese Bonds/August/100.35 JPY 80,000 (65,840)
Japanese Yen/July/84.0 290,813 (98,304)
Japanese Yen/March/78.0 108,811 (50,486)
Deutsche Marks/British Pounds/July/2.1139 DEM 1,678 (3,267)
Deutsche Marks/July/1.42 2,259 (56,351)
British Pounds/September/1.64 GBP 1,016 (19,094)
- --------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $226,199) $ (293,342)
- --------------------------------------------------------------------------------
Put Options Written
- --------------------------------------------------------------------------------
Japanese Bonds/May/110.07 JPY 129,000 (27,864)
Japanese Yen/March/93.0 129,736 (13,829)
British Pounds/September/1.53 GBP 947 (10,172)
- --------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $53,013) $ (51,865)
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities - 8.1% $ 45,296,496
- --------------------------------------------------------------------------------
Net Assets - 100.0% $560,677,656
- --------------------------------------------------------------------------------
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. dollar. A list of abbreviations is shown
below.
AUD = Australian Dollars ESP = Spanish Peseta JPY = Japanese Yen
CAD = Canadian Dollars FRF = French Francs NLG = Dutch Guilders
CHF = Swiss Francs GBP = British Pounds NZD = New Zealand Dollars
DEM = Deutsche Marks IEP = Irish Punts SEK = Swedish Kronor
DKK = Danish Kroner ITL = Italian Lire
#SEC Rule 144A restriction.
+Restricted security.
(S)Security valued by or at the direction of the Trustees.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
April 30, 1995
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $512,293,929) $515,726,367
Cash 25
Net receivable for forward foreign currency exchange contracts
purchased 1,852,383
Receivable for investments sold 50,907,209
Receivable for Fund shares sold 701,202
Interest receivable 11,961,614
Other assets 15,576
------------
Total assets $581,164,376
------------
Liabilities:
Payable for investments purchased $ 17,761,070
Payable for Fund shares reacquired 541,358
Written options outstanding, at value (premiums received,
$279,212) 345,207
Net payable for forward foreign currency exchange contracts
sold 1,423,035
Net payable for forward foreign currency exchange contracts 69,439
Payable to affiliates -
Management fee 22,720
Shareholder servicing agent fee 7,343
Distribution fee 124,577
Accrued expenses and other liabilities 191,971
------------
Total liabilities $ 20,486,720
------------
Net assets $560,677,656
------------
Net assets consist of:
Paid-in capital $589,505,543
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 3,792,712
Accumulated net realized loss on investments and foreign
currency transactions (31,689,131)
Accumulated distributions in excess of net investment income (931,468)
------------
Total $560,677,656
------------
Shares of beneficial interest outstanding 44,126,806
------------
Class A shares:
Net asset value and redemption price per share
(net assets of $477,055,594 / 37,534,683 shares of beneficial
interest outstanding) $12.71
------
Offering price per share (100/95.25) $13.34
------
Class B shares:
Net asset value, offering price, and redemption price per share
(net assets of $75,451,467 / 5,947,776 shares of beneficial
interest outstanding) $12.69
------
Class C shares:
Net asset value, offering price, and redemption price per share
(net assets of $8,170,595 / 644,347 shares of beneficial
interest outstanding) $12.68
------
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
and Class B shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended April 30, 1995
- --------------------------------------------------------------------------------
Net investment income:
Interest income $ 45,466,284
------------
Expenses -
Management fee $ 2,179,512
Trustees' compensation 43,089
Shareholder servicing agent fee (Class A) 677,154
Shareholder servicing agent fee (Class B) 113,851
Shareholder servicing agent fee (Class C) 11,431
Distribution and service fee (Class A) 1,586,158
Distribution and service fee (Class B) 516,264
Distribution and service fee (Class C) 76,241
Custodian fee 285,424
Postage 117,093
Auditing fees 76,000
Printing 75,641
Legal fees 9,045
Miscellaneous 282,150
------------
Total expenses $ 6,049,053
Reduction of expenses by distributor (450,041)
------------
Net expenses $ 5,599,012
------------
Net investment income $ 39,867,272
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(35,834,528)
Written option transactions 665,664
Foreign currency and forward foreign currency exchange
contracts and other transactions denominated in
foreign currency 221,573
Futures contracts (492,101)
------------
Net realized loss on investments $(35,439,392)
------------
Change in unrealized appreciation (depreciation) -
Investments $ 33,798,801
Written options (126,086)
Foreign currency and forward foreign currency exchange
contracts 1,126,006
------------
Net unrealized gain on investments $ 34,798,721
------------
Net realized and unrealized loss on investments
and foreign currency $ (640,671)
------------
Increase in net assets from operations $ 39,226,601
------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended April 30, 1995 1994
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 39,867,272 $ 36,765,499
Net realized gain (loss) on investments and
foreign currency transactions (35,439,392) 9,804,674
Net unrealized gain (loss) on investments and
foreign currency translation 34,798,721 (36,489,141)
------------ ------------
Increase in net assets from operations $ 39,226,601 $ 10,081,032
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $(32,067,842) $(36,774,502)
From net investment income (Class B) (3,235,246) (727,539)
From net investment income (Class C) (481,518) (87,368)
From net realized gain on investments and
foreign currency transactions -- (28,374,260)
In excess of net investment income (Class A) -- (742,918)
In excess of net investment income (Class B) -- (28,444)
In excess of net realized gain on investments
and foreign currency transactions -- (524,526)
From paid-in capital (3,268,079) (4,887,050)
------------ ------------
Total distributions declared to shareholders $(39,052,685) $(72,146,607)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $155,634,237 $168,550,753
Net asset value of shares issued to shareholders
in reinvestment of distributions 25,974,677 47,755,155
Cost of shares reacquired (121,456,901) (144,305,708)
------------ ------------
Increase in net assets from Fund share
transactions $ 60,152,013 $ 72,000,200
------------ ------------
Total increase in net assets $ 60,325,929 $ 9,934,625
Net assets:
At beginning of period 500,351,727 490,417,102
------------ ------------
At end of period (including accumulated
undistributed (distributions in excess of)
net investment income of $61,630 and
$(752,957), respectively) $560,677,656 $500,351,727
------------ ------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended April 30, 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $12.75 $14.39 $13.70 $13.25 $12.69 $12.80 $13.20 $14.04
------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations<F2> -
Net investment
income<F3> $ 0.98 $ 1.02 $ 1.04 $ 1.13 $ 1.14 $ 1.20 $ 1.15 $ 1.16
Net realized and unrealized gain
(loss) on investments (0.05) (0.63) 0.74 0.45 0.59 (0.14) (0.38) (0.42)
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.93 $ 0.39 $ 1.78 $ 1.58 $ 1.73 $ 1.06 $ 0.77 $ 0.74
------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment
income $(0.89) $(1.06) $(1.04) $(1.13) $(1.17) $(1.17) $(1.17) $(1.15)
In excess of net investment income -- (0.02) -- -- -- -- -- --
From net realized gain on
investments -- (0.80) (0.05) -- -- -- -- (0.43)
In excess of net realized gain on
investments -- (0.01) -- -- -- -- -- --
From paid-in capital (0.08) (0.14) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.97) $(2.03) $(1.09) $(1.13) $(1.17) $(1.17) $(1.17) $(1.58)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $12.71 $12.75 $14.39 $13.70 $13.25 $12.69 $12.80 $13.20
------ ------ ------ ------ ------ ------ ------ ------
Total return<F1> 7.78% 2.12% 13.42% 12.39% 13.65% 7.69% 5.49% 5.18%
Ratios (to average net assets)/
Supplemental data<F3>:
Expenses 1.00% 0.96% 0.88% 0.91% 0.79% 0.75% 0.83% 0.76%
Net investment income 7.91% 7.17% 7.82% 8.39% 8.82% 9.10% 8.93% 8.85%
Portfolio turnover 306% 410% 330% 243% 189% 186% 160% 287%
Net assets at end of period
(000 omitted) $477,056 $459,311 $490,417 $448,261 $315,722 $293,242 $299,485 $310,403
- --------------
<FN>
<F1> Total returns for Class A shares do not include the applicable sales charge
(except for reinvestment dividends prior to March 1, 1991). If the charge
had been included, the results would have been lower.
<F2> Per share data for the periods subsequent to April 30, 1993 are based on
average shares outstanding.
<F3> The distributor did not impose a portion of its distribution fee
attributable to Class A shares for the periods indicated. If this fee had
been incurred by the Fund, the net investment income per share and the
ratios would have been:
Net investment income $ 0.97 $ 1.01 -- -- -- -- -- --
Ratios (to average net assets):
Expenses 1.10% 1.02% -- -- -- -- -- --
Net investment income 7.81% 7.10% -- -- -- -- -- --
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year Ended April 30, 1987 1986 1995 1994<F1> 1995 1994<F2>
- -----------------------------------------------------------------------------------------------
Class A Class B Class C
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $14.62 $12.69 $12.73 $14.99 $12.72 $13.57
------ ------ ------ ------ ------ ------
Income from investment
operations<F6> -
Net investment income $ 1.24 $ 1.43 $ 0.88 $ 0.56 $ 0.88 $ 0.29
Net realized and
unrealized gain (loss)
on investments (0.27) 1.94 (0.05) (1.30) (0.05) (0.90)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.97 $ 3.37 $ 0.83 $(0.74) $ 0.83 $(0.61)
------ ------ ------ ------ ------ ------
Less distributions
declared to shareholders -
From net investment
income $(1.15) $(1.44) $(0.80) $(0.59) $(0.80) $(0.22)
------ ------ ------ ------ ------ ------
In excess of net
investment income -- -- -- (0.02) -- --
From net realized gain
on investments (0.40) -- -- (0.80) -- --
------ ------ ------ ------ ------ ------
In excess of net
realized gain on
investments -- -- -- (0.01) -- --
From paid-in capital -- -- (0.07) (0.10) (0.07) (0.02)
------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(1.55) $(1.44) $(0.87) $(1.52) $(0.87) $(0.24)
------ ------ ------ ------ ------ ------
Net asset value - end
of period $14.04 $14.62 $12.69 $12.73 $12.68 $12.72
------ ------ ------ ------ ------ ------
Total return<F5> 6.15% 26.73% 6.90% (5.42)%<F4> 7.00% (4.57)%<F4>
Ratios (to average net
assets)/Supplemental data:
Expenses 0.68% 0.79% 1.84% 1.83%<F3> 1.75% 1.80%<F3>
Net investment income 8.84% 10.29% 7.17% 6.39%<F3> 7.17% 6.57%<F3>
Portfolio turnover 334% 218% 306% 410% 306% 410%
Net assets at end of
period (000 omitted) $318,329 $319,316 $75,451 $33,413 $8,171 $7,627
- ---------
<FN>
<F1> For the period from the commencement of offering of Class B shares, September 7, 1993 to April 30, 1994.
<F2> For the period from the commencement of offering of Class C shares, January 3, 1994 to April 30, 1994.
<F3> Annualized.
<F4> Not annualized.
<F5> Total returns for Class A shares do not include the applicable sales charge (except for reinvestment dividends prior to
March 1, 1991). If the charge had been included, the results would have been lower.
<F6> Per share data for the periods subsequent to April 30, 1993 are based on average shares outstanding.
</FN>
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Bond Fund (the Fund) is a diversified series of MFS Fixed Income Trust
(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
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues and forward
contracts, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data,
without exclusive reliance upon exchange or over-the-counter prices. Short-
term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates value. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency
and translated into U.S. dollars at the closing daily exchange rate. Futures
contracts, options and options on futures contracts listed on commodities
exchanges are valued at closing settlement prices. Over-the-counter options
are valued by brokers through the use of a pricing model which takes into
account closing bond valuations, implied volatility and short-term repurchase
rates. Equity securities listed on securities exchanges or reported through
the NASDAQ system are valued at last sale prices. Unlisted equity securities
or listed equity securities for which last sale prices are not available are
valued at last quoted bid prices. 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 Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Fund requires
that the securities purchased in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the Fund to obtain those
securities in the event of a default under the repurchase agreement. The Fund
monitors, on a daily basis, the value of the securities transferred to ensure
that the value, including accrued interest, of the securities under each
repurchase agreement is greater than amounts owed to the Fund under each such
repurchase agreement.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments and income and expenses are converted into
U.S. dollars based upon currency exchange rates prevailing on the respective
dates of such transactions. Gains and losses attributable to foreign currency
exchange rates are recorded for financial statement purposes as net realized
gains and losses on investments. Gains and losses attributable to foreign
exchange rate movements on income and expenses are recorded for financial
statement purposes as foreign currency transaction gains and losses. That
portion of both realized and unrealized gains and losses on investments that
results from fluctuations in foreign currency exchange rates is not separately
disclosed.
Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, 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 a part of an income producing strategy reflecting the view
of the Fund's management on the direction of interest rates.
Futures Contracts - The Fund may enter into financial 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
Fund 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 Fund 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 Fund. The Fund's investment in
financial futures contracts is designed to hedge against anticipated future
changes in interest or exchange rates or securities prices. The Fund may also
invest in financial futures contracts for non-hedging purposes. For example,
interest rate futures may be used in modifying the duration of the portfolio
without incurring the additional transaction costs involved in buying and
selling the underlying securities. Should interest or exchange rates or
securities prices move unexpectedly, the Fund may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
Security Loans - The Fund may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. The loans are collateralized at all times by cash or
securities with a market value at least equal to the market value of
securities loaned. As with other extensions of credit, the Fund may bear the
risk of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. The Fund receives compensation
for lending its securities in the form of fees or from all or a portion of the
income from investment of the collateral. The Fund would also continue to earn
income on the securities loaned. At April 30, 1995, the Fund had no securities
on loan.
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 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 will enter
into forward contracts for 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. It may also use
contracts in a manner intended to protect foreign currency-denominated
securities from declines in value due to unfavorable exchange rate movements.
The forward foreign currency exchange contracts are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the contract settlement
date.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for both financial
statement and tax reporting purposes as required by federal income tax
regulations. Dividend income is recorded on the ex-dividend date for dividends
received in cash. 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, whereby interest income on PIK bonds is recorded
ratably by the Fund at a constant yield to maturity. 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, which are generally non-recurring, incurred to protect or
enhance the value of high-yield debt securities, are reported as an addition
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 considered workout expenses and 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 reported as
operating expenses.
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 net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund 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 Fund's tax return and,
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV.
Foreign taxes have been provided for on interest and dividend income earned on
foreign investments in accordance with the applicable country's tax rates and
to the extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The 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 are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or accumulated net
realized gains. During the year ended April 30, 1995, $4,261,177 was
reclassified from accumulated distributions in excess of net investment income
to paid-in capital and $4,274,787 was reclassified to accumulated net realized
loss on investments and foreign currency transactions from paid-in capital 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.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. Class B and Class C shares were first offered to
the public on September 7, 1993 and January 3, 1994, respectively. The three
classes of shares differ in their respective shareholder servicing agent,
distribution and service fees. Shareholders of each class also bear certain
expenses that pertain only to that particular class. All shareholders bear the
common expenses of the Fund pro rata based on the average daily net assets of
each class, without distinction between share classes. Dividends are declared
separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses, including distribution and shareholder service fees.
(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, computed daily and paid monthly at an effective annual rate of
0.20% of average daily net assets and 2.50% of investment income, amounted to
$2,179,512. 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 of the
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 its independent Trustees. Included in
Trustees' compensation is a net periodic pension expense of $17,173 for the
year ended April 30, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$135,514 as its portion of the sales charge on sales of Class A shares of the
Fund.
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Class A Distribution Plan provides that the Fund will pay MFD up to 0.35%
of its average daily net assets attributable to Class A shares annually 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
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, 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, commissions to dealers and payments to MFD
wholesalers for sales at or above a certain dollar level, and other such
distribution-related expenses that are approved by the Fund. MFD is waiving
the 0.10% distribution fees for an indefinite period. Fees incurred under the
distribution plan during the year ended April 30, 1995 were 0.25% of average
daily net assets attributable to Class A shares on an annualized basis, net of
waiver, and amounted to $1,136,117 (of which MFD retained $273,089).
The Class B and Class C Distribution Plans provide that the Fund will pay MFD
a monthly distribution fee, equal to 0.75% per annum, and a quarterly 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 additional consideration for services
rendered by the dealer with respect to Class B and Class C shares. Fees
incurred under the distribution plans during the year ended April 30, 1995
were 1.00% of average daily net assets attributable to Class B and Class C
shares on an annualized basis and amounted to $516,264 and $76,241,
respectively (of which MFD retained $7,004 and $2,751, respectively).
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within twelve months following the share 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 April 30, 1995 were
$3,369 and $145,665 for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
$677,154, $113,851 and $11,431 for Class A, Class B and Class C shares,
respectively, for its services as shareholder servicing agent. The fee is
calculated as a percentage of the average daily net assets of each class of
shares at an effective annual rate of up to 0.15%, up to 0.22% and up to 0.15%
attributable to Class A, Class B and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
Purchases Sales
- ------------------------------------------------------------------------------
U.S. government securities $672,255,486 $747,658,965
------------ ------------
Investments (non-U.S. government securities) $810,987,907 $719,182,591
------------ ------------
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $512,281,480
------------
Gross unrealized appreciation $ 9,364,991
Gross unrealized depreciation (5,920,104)
------------
Net unrealized appreciation $ 3,444,887
------------
At April 30, 1995, the Fund, for federal income tax purposes, had a capital
loss carryforward of $26,331,803, which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on April 30, 2003.
(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 (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares 1995 1994
Year Ended April 30, ---------------------------- ---------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,570,354 $93,377,941 7,914,447 $113,756,001
Shares issued to shareholders in
reinvestment of distributions 1,937,817 23,874,476 3,359,622 46,806,912
Shares reacquired (7,998,695) (98,722,760) (9,339,094) (133,331,602)
---------- ----------- ---------- ------------
Net increase 1,509,476 $18,529,657 1,934,975 $ 27,231,311
---------- ----------- ---------- ------------
Class B Shares 1995 1994<F1>
Year Ended April 30, ---------------------------- -----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
Shares sold 4,205,737 $51,952,884 3,260,832 $45,927,787
Shares issued to shareholders in
reinvestment of distributions 147,546 1,814,601 66,023 901,347
Shares reacquired (1,029,710) (12,650,424) (702,652) (10,169,421)
---------- ----------- --------- -----------
Net increase 3,323,573 $41,117,061 2,624,203 $36,659,713
---------- ----------- --------- -----------
<FN>
<F1>For the period from the commencement of offering of Class B shares, September
7, 1993 to April 30, 1994.
Class C Shares 1995 1994<F2>
Year Ended April 30, ---------------------------- -----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
Shares sold 835,445 $10,303,412 657,894 $ 8,866,965
Shares issued to shareholders in
reinvestment of distributions 23,176 285,600 3,564 46,896
Shares reacquired (813,659) (10,083,717) (62,073) (804,685)
-------- ----------- ------- -----------
Net increase 44,962 $ 505,295 599,385 $ 8,109,176
-------- ----------- ------- -----------
<FN>
<F2>For the period from the commencement of offering of Class C shares, January
3, 1994 to April 30, 1994.
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS, or an affiliate of MFS, in an unsecured line of credit
with a bank which permits borrowings up to $350 million, collectively.
Borrowings may be made to temporarily finance the repurchase of 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. The commitment fee allocated
to the Fund for the year ended April 30, 1995 was $6,040.
(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 written options, forward foreign currency
exchange contracts and futures 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. A summary of obligations under these financial
instruments at April 30, 1995, is as follows:
Written
Option 1995 Calls 1995 Puts
Transactions -------------------------------- ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ------------------------------------------------------------------------------
OUTSTANDING, BEGINNING OF PERIOD -
Deutsche Marks 25,809 $292,684 8,053 $ 23,009
Japanese Yen 275,199 43,757 1,647,517 236,050
Swedish Kronor/
Deutsche Marks -- -- 16,125 21,432
Options written -
Australian Dollars 4,025 21,166 3,546 29,408
British Pounds 1,016 17,524 947 17,524
Canadian Dollars -- -- 1,913 7,764
Deutsche Marks 27,983 147,907 41,114 231,426
Deutsche Marks/
British Pounds 1,678 10,900 4,975 21,919
Italian Lire/
Deutsche Marks 3,265,343 21,836 3,816,574 15,416
Japanese Yen 1,041,183 233,624 1,842,381 145,962
Japanese Yen/
Deutsche Marks 224,976 51,744 -- --
Spanish Pesetas/
Deutsche Marks -- -- 421,123 29,613
Swedish Kronor/
Deutsche Marks 3,102 2,343 4,992 3,127
Swiss Francs/
Deutsche Marks 1,163 4,896 -- --
Options terminated in
closing transactions-
Australian Dollars (1,925) (15,122) (1,446) (16,700)
Canadian Dollars -- -- (1,913) (7,764)
Deutsche Marks (18,577) (208,262) (28,333) (197,175)
Deutsche Marks/
British Pounds -- -- (4,975) (21,919)
Italian Lire/
Deutsche Marks -- -- (2,728,920) (13,573)
Japanese Yen (561,559) (51,517) (2,793,884) (306,205)
Japanese Yen/
Deutsche Marks (224,976) (51,744) -- --
Spanish Pesetas/
Deutsche Marks -- -- (421,123) (29,613)
Swedish Kronor/
Deutsche Marks (3,102) (2,343) -- --
Options exercised -
Australian Dollars -- -- (2,100) (12,708)
Deutsche Marks (27,373) (155,020) -- --
Italian Lire/
Deutsche Marks -- -- (1,087,654) (1,843)
Swedish Kronor/
Deutsche Marks -- -- (16,125) (21,432)
Swiss Francs/
Deutsche Marks (1,163) (4,896) -- --
Options expired -
Australian Dollars (2,100) (6,044) -- --
Deutsche Marks (5,583) (61,641) (20,834) (57,260)
Italian Lire/
Deutsche Marks (3,265,343) (21,836) -- --
Japanese Yen (275,199) (43,757) (437,278) (40,318)
Swedish Kronor/
Deutsche Marks -- -- (4,992) (3,127)
------- -------- ------- --------
OUTSTANDING, END OF
PERIOD 484,577 $226,199 259,683 $ 53,013
------- -------- ------- --------
OUTSTANDING, END OF
PERIOD CONSISTS OF -
British Pounds 1,016 $ 17,524 947 $ 17,524
------- -------- ------- --------
Deutsche Marks 2,259 $ 15,668 -- $ --
------- -------- ------- --------
Japanese Yen 479,624 $182,107 258,736 $ 35,489
------- -------- ------- --------
Deutsche Marks/
British Pounds 1,678 $ 10,900 -- $ --
------- -------- ------- --------
<PAGE>
At April 30, 1995, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts Appreciation
Settlement Date Deliver/Receive In Exchange for at Value (Depreciation)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 6/09/95 - 7/05/95 AUD 2,470,001 $ 1,815,257 $ 1,789,608 $ 25,649
6/09/95 - 7/07/95 CAD 1,172,699 839,186 861,514 (22,328)
7/10/95 - 7/10/95 CHF 2,871,827 2,568,539 2,512,263 56,276
5/02/95 - 8/16/95 DEM 41,866,768 29,600,454 30,250,586 (650,132)
5/08/95 - 5/08/95 DKK 7,899,087 1,440,046 1,450,287 (10,241)
7/05/95 - 7/10/95 ESP 255,147,699 1,937,217 2,055,408 (118,191)
5/02/95 - 8/02/95 FRF 12,229,741 2,461,412 2,476,452 (15,040)
6/21/95 - 7/07/95 GBP 3,049,385 4,883,276 4,905,835 (22,559)
5/04/95 - 8/04/95 IEP 1,036,124 1,682,368 1,689,226 (6,858)
5/02/95 - 7/10/95 JPY 526,117,639 5,788,936 6,300,519 (511,583)
5/04/95 - 6/26/95 NLG 6,199,284 3,936,964 3,999,830 (62,866)
5/12/95 - 7/24/95 NZD 3,288,606 2,119,900 2,202,413 (82,513)
7/13/95 - 7/13/95 SEK 1,826,066 246,811 249,460 (2,649)
----------- ----------- -----------
$59,320,366 $60,743,401 $(1,423,035)
----------- ----------- -----------
Purchases 7/05/95 - 7/05/95 AUD 702,461 $ 534,081 $ 508,600 $ (25,481)
7/07/95 - 7/07/95 CAD 586,571 415,987 430,648 14,661
7/10/95 - 7/10/95 CHF 2,871,827 2,469,770 2,512,263 42,493
5/02/95 - 8/16/95 DEM 35,314,283 24,918,274 25,509,413 591,139
7/05/95 - 7/10/95 ESP 173,055,120 1,341,520 1,393,994 52,474
5/02/95 - 5/02/95 FRF 3,830,104 789,061 777,793 (11,268)
6/21/95 - 7/07/95 GBP 1,027,344 1,646,372 1,652,977 6,605
5/04/95 - 5/04/95 IEP 518,062 845,892 845,394 (498)
6/09/95 - 6/09/95 ITL 331,619,610 199,135 196,370 (2,765)
5/02/95 - 7/10/95 JPY 1,048,898,593 11,365,736 12,547,867 1,182,131
5/04/95 - 6/26/95 NLG 1,567,942 1,007,818 1,010,185 2,367
7/13/95 - 7/13/95 SEK 1,826,066 248,934 249,459 525
----------- ----------- -----------
$45,782,580 $47,634,963 $ 1,852,383
----------- ----------- -----------
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net payable of $69,439 at April 30, 1995.
At April 30, 1995, 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 10% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At April 30, 1995,
the Fund owned the following restricted securities (constituting 6.70% 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 supplied by a pricing service or brokers. Certain of these
securities may be offered and sold to "qualified institutional buyers" under
Rule 144A of the 1933 Act.
<PAGE>
<TABLE>
<CAPTION>
Description Date of Acquisition Par Amount Cost Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Americo Life, Inc., 9.25s, 2005 4/30/93 $ 250,000 $ 254,687 $ 221,875
Fen Columbia, 6.625s, 1996 3/22/95 3,040,000 2,918,400 2,941,200
Four Seasons Hotels, Inc., 9.125s, 2000 1/26/94 1,000,000 965,824 966,250
Hidroelectrica Alicura, 8.375s, 1999 4/12/94 4,325,000 4,070,906 3,503,250
Jet Equipment Trust, "B", Notes, 10.91s, 2006 12/21/94 - 4/25/95 7,500,000 7,649,175 7,940,775
Jet Equipment Trust, "C", Notes, 10.69s, 2015 4/07/95 2,390,000 2,390,000 2,409,621
Merrill Lynch Home Equity Loan, 9.3s, 2016 12/16/92 4,500,000 4,516,875 4,544,055
Merrill Lynch Mortgage Investors, Inc., 10.25s, 2009 4/07/92 1,812,412 1,864,518 1,842,660
Merrill Lynch Mortgage Investors, Inc., 10.8s, 2009 4/08/92 582,213 601,134 585,286
Merrill Lynch Mortgage Investors, Inc., 8.238s, 2021 6/22/94 2,000,000 1,386,250 1,449,340
Owens Corning Fiberglass, 9.9s, 2015 3/07/95 1,500,000 1,500,000 1,577,813
Qantas Airways Ltd., 7.5s, 2003 6/24/93 5,000,000 4,961,000 4,777,800
Republic of Malta, 7.5s, 2009 3/17/94 - 4/18/95 5,000,000 4,903,246 4,827,000
-----------
$37,586,925
-----------
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Fixed Income Trust and the Shareholders of MFS Bond
Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Bond Fund (one of the series
constituting MFS Fixed Income Trust) as of April 30, 1995, the related
statement of operations for the year then ended, the statement of changes in
net assets for the years ended April 30, 1995 and 1994, and the financial
highlights for each of the years in the ten-year period ended April 30, 1995.
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 April 30, 1995 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Bond Fund at
April 30, 1995, the results of its operations, the changes in its net assets,
and its financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 2, 1995
---------------------------------------------
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.
<PAGE>
MFS(R) BOND FUND NUMBER
1
500 Boylston Street DALBAR
TOP-RATED SERVICE
Boston, MA 02116
-------------
BULK RATE
U.S. POSTAGE
PAID
PERMIT #55638
BOSTON, MA
-------------
[Logo] MFS
THE FIRST NAME IN MUTUAL FUNDS
MFB-2 6/95/47.5M 11/211/311
