MFS BOND FUND
(A SERIES OF MFS SERIES TRUST IX)
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
June 21, 1996
VIA EDGAR
- ---------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: MFS Series Trust IX (File No. 811-2464), on Behalf of
MFS Bond Fund
Ladies and Gentlemen:
Pursuant to the requirements of Section 30(b) of the Investment Company Act
of 1940 and Rule 30b2-1 thereunder, we hereby file a copy of the Annual
Report to Shareholders dated April 30, 1996 of MFS Bond Fund.
Very truly yours,
APRIL ANDERSON
April Anderson
Senior Production Editor
<PAGE>
[MFS LOGO] ANNUAL REPORT FOR
THE FIRST NAME IN MUTUAL FUNDS YEAR ENDED
APRIL 30, 1996
MFS [Register Mark] BOND FUND
[A photo of steel drums]
MFS [Register Mark] BOND FUND
TRUSTEES
A. Keith Brodkin* - Chairman and President
Richard B. Bailey* - Private Investor; Former Chairman and Director (until
1991), Massachusetts Financial Services Company; Director, Cambridge Bancorp;
Director, Cambridge Trust Company
Peter G. Harwood - Private Investor
J. Atwood Ives - Chairman and Chief Executive Officer, Eastern Enterprises
Lawrence T. Perera - Partner, Hemenway & Barnes
William J. Poorvu - Adjunct Professor, Harvard University Graduate School of
Business Administration
Charles W. Schmidt - Private Investor; Former Senior Vice President and Group
Executive (until 1990), Raytheon Company
Arnold D. Scott* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames* - President and Director, Massachusetts Financial Services
Company
Elaine R. Smith - Independent Consultant
David B. Stone - Chairman, North American Management Corp. (investment advisers)
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
Geoffrey L. Kurinsky*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
Investors Bank & Trust Company
AUDITORS
Deloitte & Touche LLP
INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
INVESTOR SERVICE
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For current account service, call toll free: 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.
TOP-RATED SERVICE
For the second year in a row, MFS earned a #1 ranking in DALBAR, Inc.'s
Broker/Dealer Survey, Main Office Operations Service Quality category. The firm
achieved a 3.49 overall score - on a scale of 1 to 4 - in the 1995 survey. A
total of 71 firms responded, offering input on the quality of service they
receive from 36 mutual fund companies nationwide. The survey contained questions
about service quality in 17 categories, including "knowledge of phone service
contacts," "accuracy of transaction processing," and "overall ease of doing
business with the firm."
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
Despite the rise in interest rates during the last three months of the Fund's
fiscal year, the past year was, on balance, positive for the fixed-income market
as interest rates on 10-year Treasury notes fell from 7% on May 1, 1995 to
around 6-1/2% on April 30, 1996. The market's performance was helped by the
slower rate of economic growth during the first part of the Fund's fiscal year
and good news on the inflation front. For the year, Class A shares of the Fund
provided a total return of 8.67%, Class B shares 7.90%, and Class C shares
7.90%. These returns assume the reinvestment of distributions but exclude the
effects of any sales charges. Although the returns of the Fund's Class B and
Class C shares underperformed the return of the Lehman Brothers
Government/Corporate Bond Index (the Lehman Index), which was 8.65% over the
same period, the return of the Fund's Class A shares essentially matched the
Index. The Lehman 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. Class A shares
ranked 34th, and Class B and Class C shares ranked 61st, out of the 86 funds
ranking based on NAV returns in the corporate bond fund category tracked by
Lipper Analytical Services, an independent firm which reports mutual fund
performance. For the five years ended April 30, 1996, the Fund's Class A shares
ranked 14th out of 27 funds in this Lipper category and, for the past 10 years,
ninth out of 18 funds. A discussion of the Fund's performance may be found in
the Portfolio Performance and Strategy section of this letter.
Economic Environment
We believe the U.S. economy will continue to show moderate growth in 1996,
although this growth may be somewhat uneven as we move from quarter to quarter.
Thus, while one quarter may experience an annualized rate of growth in gross
domestic product of less than 1%, another quarter may see annualized growth in
excess of 3% - but, for the year, we believe growth could stay within our
expected range of 2% to 2-1/2%. While some increase in consumer spending took
place in the early months of this year, consumers, who represent two-thirds of
the economy, remain in a somewhat weakened position, due in part to an increase
in consumer installment debt in excess of 30% over the past two years.
Meanwhile, growth is also being constrained by ongoing economic doldrums in
Europe and Japan, important markets for U.S. exports. Here again, we are seeing
a few tentative signs, particularly in Japan, of modest recoveries that could
lead to improved prospects for U.S. exporters. Also, the "lag effect" of
increases in short-term interest rates by the Federal Reserve Board in 1994 and
into 1995 is helping to keep growth in check. This lag effect can last up to two
years, and although the Fed did reduce short-term rates late last year and
earlier this year,
1
<PAGE>
LETTER TO SHAREHOLDERS - continued
we expect it to continue its diligent anti-inflationary policies. Finally, it
appears that inflation is likely to remain under control this year, due in part
to a continued moderation in wage pressures and the subdued level of economic
growth. At the same time, we believe the current upward pressure on energy
prices bears close scrutiny, as energy is an important component of the
inflation outlook.
Bond Markets
Persistent signs of economic weakness led to decreases in short-term interest
rates by the Federal Reserve in late 1995 and early 1996. However, should signs
of economic growth and, particularly, of higher inflation continue, we would
expect the Fed to maintain its anti-inflationary stance. This would likely mean
no further reductions in short-term interest rates, and could lead to some
modest increases. In the beginning of the year, bond markets were trading in a
narrow range, as investors shifted between concern about the lack of a budget
resolution in Washington and hopes that sluggish economic reports and low
inflation might lead to lower interest rates. Later, fixed-income markets began
reacting to conflicting signals regarding the strength of the economy with
more-volatile trading patterns marked by an upward bias in interest rates.
Interest rates may move even higher over the coming months, but we believe the
current rise in bond yields is reaching a point where fixed-income markets are
becoming attractively valued.
Portfolio Performance and Strategy
The Fund's strong performance over the past year resulted mainly from being
overweighted in investment grade corporate securities for most of the year.
These securities outperformed Treasury securities by approximately 100 basis
points (1%) during the Fund's fiscal year (although principal value and interest
on Treasury securities are guaranteed by the U.S. government if held to
maturity). As the U.S. economy entered its fifth year of growth in the current
economic cycle, the past year's performance by corporate bonds was consistent
with the general rule that corporate securities outperform Treasury securities
during periods of positive economic growth. Credit fundamentals of corporations
generally improve during periods of economic growth and deteriorate during
periods of recession. The Fund's weighting in investment-grade corporate
securities varied in a range of 50% to 70% of the portfolio, which is nearly
twice that of the average corporate debt BBB-rated fund and the Fund's normal
position.
Within sectors of the corporate bond market, the Fund benefited from an
overweighted position in the cable/media and airline sectors. Owning securities
in Time Warner, News America Holdings, and Telecommunications, Inc. allowed the
Fund to participate in a sector which had a total return of 12% for the period,
compared to a return of 9.65% for the corporate bond market as
2
<PAGE>
LETTER TO SHAREHOLDERS - continued
represented by the Lehman Brothers Corporate Bond Index, an unmanaged index of
investment-grade domestic corporate debt. While this sector is going through a
major technological evolution, the ability of these companies to reduce their
debt load has resulted in their debt status improving from the top tier of the
high-yield market to one of solid investment-grade securities. The Fund took
advantage of the 16-1/4% return of the airline sector through its holdings in
Delta Airlines, United Airlines, and Qantas Airways. These airlines benefited
from their ability to raise prices as the travel industry continued its strong
recovery, as well as from stable energy prices.
The Fund's performance was negatively affected by its holdings in Niagara
Mohawk Corp. and Long Island Lighting which, as a result of high electric rates,
are under pressure to reduce their high cost structures. We liquidated our
position in Niagara Mohawk given what we see as an uncertain outlook, but have
maintained our positions in Long Island Lighting based upon expectations of a
positive outcome from a likely takeover by the Long Island Power Authority.
Looking forward, we are maintaining our significant exposure to the
corporate bond market based on our outlook for continued economic growth through
the end of 1996. We have reduced the interest rate sensitivity of the portfolio,
however, as recent concerns of a potential pickup in inflation have given us a
more cautious outlook for the future of interest rates. The duration of the Fund
is currently around 5-3/8 years, compared to a normal position of around 5-3/4
years.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
[Signature of A. Keith Brodkin] [Signature of Geoffrey L. Kurinsky]
A. Keith Brodkin Geoffrey L. Kurinsky
Chairman and President Portfolio Manager
May 10, 1996
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.
3
<PAGE>
OBJECTIVE 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, under normal market
conditions, at least 65% of its total assets in convertible and non-convertible
debt securities and preferred stocks, securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities, and commercial paper,
repurchase agreements and cash equivalents. Up to 20% of the Fund's net 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.
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 in the graph reflect the deduction of the 4.75% maximum
sales charge; benchmark comparisons 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.
Please note that effective January 3, 1994, Class C shares were offered.
Information on Class C share performance appears on the next page.
Please note that the performance of other classes will be greater than or less
than the line shown, based on the differences in loads and fees paid by
shareholders investing in the different classes.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 5-Year Period Ended April 30, 1996)
Lehman Brothers
Days MFS Bond Fund-A Gov't/Corp Bond Index CPI
================================================================================
5/1/91 0 9,525 10,000 10,000
- --------------------------------------------------------------------------------
4/30/92 366 10,706 11,077 10,318
- --------------------------------------------------------------------------------
4/30/93 730 12,152 12,683 10,651
- --------------------------------------------------------------------------------
4/30/94 1095 12,410 12,828 10,902
- --------------------------------------------------------------------------------
4/30/95 1460 13,375 13,716 11,235
- --------------------------------------------------------------------------------
4/30/96 1826 14,535 14,902 11,561
- --------------------------------------------------------------------------------
4
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-Year Period Ended April 30, 1996)
Lehman Brothers
Days MFS Bond Fund-A Gov't/Corp Bond Index CPI
================================================================================
5/1/86 0 9,525 10,000 10,000
- --------------------------------------------------------------------------------
4/30/87 365 10,167 10,475 10,381
- --------------------------------------------------------------------------------
4/30/88 731 10,761 11,172 10,784
- --------------------------------------------------------------------------------
4/30/89 1095 11,426 12,049 11,336
- --------------------------------------------------------------------------------
4/30/90 1460 12,384 13,058 11,870
- --------------------------------------------------------------------------------
4/30/91 1825 14,151 14,996 12,450
- --------------------------------------------------------------------------------
4/30/92 2191 15,906 16,611 12,846
- --------------------------------------------------------------------------------
4/30/93 2556 18,053 19,019 13,261
- --------------------------------------------------------------------------------
4/30/94 2921 18,437 19,237 13,574
- --------------------------------------------------------------------------------
4/30/95 3286 19,871 20,568 13,988
- --------------------------------------------------------------------------------
4/30/96 3652 21,594 22,347 14,393
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
===========================================================================================
<S> <C> <C> <C> <C>
MFS Bond Fund (Class A) including
4.75% sales charge +3.54% +4.44% +7.77% +8.00%
- -------------------------------------------------------------------------------------------
MFS Bond Fund (Class A) at net asset value +8.67% +6.15% +8.83% +8.53%
- -------------------------------------------------------------------------------------------
MFS Bond Fund (Class B) with CDSC+ +3.90% -- -- +2.42%*
- -------------------------------------------------------------------------------------------
MFS Bond Fund (Class B) without CDSC +7.90% -- -- +3.34%*
- -------------------------------------------------------------------------------------------
MFS Bond Fund (Class C) with CDSC# +6.90% -- -- +4.26%##
- -------------------------------------------------------------------------------------------
MFS Bond Fund (Class C) without CDSC +7.90% -- -- +4.26%##
- -------------------------------------------------------------------------------------------
Average corporate debt BBB-rated fund** +8.95% +6.02% +9.11% +8.48%
- -------------------------------------------------------------------------------------------
Lehman Brothers Government/Corporate Bond Index** +8.65% +5.52% +8.30% +8.37%
- -------------------------------------------------------------------------------------------
Consumer Price Index[ss]** +2.90% +2.77% +2.94% +3.71%
- -------------------------------------------------------------------------------------------
<FN>
+ These returns reflect the current Class B contingent deferred sales charge (CDSC) of 4%
for the 1-year period and 3% for the period commencing September 7, 1993.
* For the period from the commencement of offering of Class B shares, September 7, 1993 to
April 30, 1996.
# Class C shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases made on or after
April 1, 1996, will be subject to a 1% CDSC if redeemed within 12 months of purchase.
## For the period from the commencement of offering of Class C shares, January 3, 1994 to
April 30, 1996.
** Source: Lipper Analytical Services, Inc.
[ss] The Consumer Price Index is a popular measure of change in prices.
</FN>
</TABLE>
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.
All results are historical and are not an indication of future results. The
investment return and principal value 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.
5
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - April 30, 1996
<CAPTION>
BONDS - 97.9%
===========================================================================================
S & P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollar Denominated - 88.6%
Corporate Asset Backed - 0.5%
NR MBNA Credit Card Trust, 5.5875s, 2003 $ 3,000 $ 3,000,000
- -------------------------------------------------------------------------------------------
Financial Institutions - 12.4%
Financial Services - 7.7%
BBB Advanta National Bank Corp., 6.82s, 2001 $ 1,000 $ 986,810
BBB Advanta National Bank Corp., 6.88s, 2001 3,675 3,635,567
BBB Alex Brown, Inc., 7.625s, 2005 4,500 4,527,630
A- Bankers Trust of New York Corp., 7.375s, 2008 2,650 2,620,188
BBB- Capital One Bank, 6.875s, 2000 5,000 4,975,100
BB+ Centerbank Financial Corp., 8.375s, 2002 4,000 3,970,000
BB- Coastal Bancorp, Inc., 10s, 2002 450 443,813
BB+ First USA Bank Corp. (Bank of Wilmington),
7.65s, 2003 5,000 4,901,650
A+ Goldman Sachs Group L.P., 6.25s, 2003## 1,375 1,280,469
A+ Goldman Sachs Group L.P., 7.25s, 2005## 1,500 1,464,375
A Lehman Brothers Holdings, 8.5s, 2007 12,990 13,702,761
BB- Riggs National Corp. (Washington), 8.5s, 2006 4,000 4,040,000
BB+ Sovereign Bancorp, Inc., 6.75s, 2000 2,600 2,505,750
------------
$ 49,054,113
- ------------------------------------------------------------------------------------------
Insurance - 4.7%
BBB Arkwright CSN Trust, 9.625s, 2026## $ 3,000 $ 3,016,860
BBB+ Fairfax Financial Holdings Ltd., 8.3s, 2026 2,750 2,705,065
AA- Metropolitan Life Insurance Co., 7.7s, 2015## 3,000 2,872,044
A+ Nationwide Mutual Insurance Co., 7.5s, 2024## 6,440 5,805,724
A Prudential Insurance Co., 7.65s, 2007## 6,575 6,510,171
A Prudential Insurance Co., 8.3s, 2025 2,600 2,565,186
A Travelers-Aetna, Property and
Casualty Corp., 7.75s, 2026 2,300 2,279,617
A+ Travelers Group, Inc., 7.875s, 2025 4,240 4,250,812
------------
$ 30,005,479
- ------------------------------------------------------------------------------------------
Total Financial Institutions $ 79,059,592
- ------------------------------------------------------------------------------------------
Foreign - U.S. Dollar Denominated - 6.3%
AA- Export-Import Bank of Korea, 6.375s, 2006 $ 2,000 $ 1,847,500
BBB- Financiara Ener Nacional-Colombia,
6.625s, 1996## 3,040 3,040,000
A+ Hanson Overseas B.V., 6.75s, 2005 4,160 3,963,149
NR Hidroelectrica Alicura, 8.375s, 1999## 4,325 4,087,125
NR Republic of Argentina - Global, 9.25s, 2001 1,560 1,485,900
BBB- Republic of Colombia, 8.75s, 1999 110 113,575
BBB- Republic of Colombia, 7.25, 2004 7,230 6,760,050
BBB- Republic of Colombia, 8.7s, 2016 6,200 5,711,750
A+ Santander Financial Issuances, 7s, 2006+ 2,000 1,943,080
A+ Santander Financial Issuances, 6.375s, 2011 4,500 3,993,165
NR United Mexican States, 9.75s, 2001 6,875 6,780,469
------------
$ 39,725,763
- ------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - continued
<CAPTION>
BONDS - continued
===========================================================================================
S & P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollar Denominated - continued
Industrials - 39.9%
Airlines - 6.3%
BB Airplane Pass-Through Trust (GPA
Group Lease), 10.875s, 2019 $ 1,500 $ 1,530,000
BB+ Delta Airlines, 9.75s, 2021 1,000 1,148,050
BB+ Delta Airlines, 9.25s, 2022 5,000 5,500,300
A Jet Equipment Trust, "B", 8.64s, 2012## 2,091 2,228,636
BBB- Jet Equipment Trust, "C", 10.69s, 2015## 2,390 2,663,822
BB+ Jet Equipment Trust, "D", 11.44s, 2014## 3,500 3,802,330
AA Northwest Airlines Trust, 9.25s, 2014 2,317 2,583,427
BBB+ Qantas Airways Ltd., 7.5s, 2003## 5,000 5,010,300
BB United Airlines, 10.67s, 2004 4,815 5,581,596
BB United Airlines, 9.125s, 2012 1,500 1,613,745
BB+ United Airlines, 7.27s, 2013 3,000 2,842,410
BB United Airlines, 9.75s, 2021 3,000 3,399,660
A+ USAir, Inc., 6.76s, 2008 2,000 1,872,360
------------
$ 39,776,636
- -------------------------------------------------------------------------------------------
Automotive - 1.6%
A- Auburn Hills Trust (Chrysler Corp.), 12s, 2020 $ 3,000 $ 4,318,260
BB+ Mark IV Industries, Inc., 7.75s, 2006## 6,000 5,790,000
------------
$ 10,108,260
- -------------------------------------------------------------------------------------------
Building - 1.2%
BBB- Owens-Corning Fiberglass Corp., 8.875s, 2002 $ 5,650 $ 5,997,306
NR Owens-Corning Fiberglass Corp. (Toledo),
9.9s, 2015## 1,500 1,631,250
------------
$ 7,628,556
- -------------------------------------------------------------------------------------------
Consumer Goods and Services - 3.7%
BBB- Black & Decker Corp., 8.44s, 1999 $ 1,500 $ 1,575,660
BB+ Borden, Inc., 9.875s, 1997 3,000 3,118,020
BBB+ Laidlaw, Inc., 8.75s, 2025 5,000 5,307,250
BBB Nabisco, Inc., 7.55s, 2015 7,850 7,438,425
A Philip Morris Cos., Inc., 6.375s, 2006 3,000 2,778,750
BBB- RJR Nabisco, Inc., 8.75s, 2007 3,205 3,122,247
------------
$ 23,340,352
- -------------------------------------------------------------------------------------------
Entertainment - 4.6%
BBB News America Holdings, Inc., 10.125s, 2012 $ 6,825 $ 7,651,712
BBB News America Holdings, Inc., 8.875s, 2023 5,000 5,185,750
BBB News America Holdings, Inc., 7.75s, 2045 2,250 1,997,197
BBB- Time Warner, Inc., 8.11s, 2006 10,730 10,741,481
BBB- Time Warner, Inc., 8.18s, 2007 3,750 3,716,250
------------
$ 29,292,390
- -------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - continued
<CAPTION>
BONDS - continued
===========================================================================================
S & P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollar Denominated - continued
Industrials - continued
Forest and Paper Products - 4.5%
NR Canadian Pacific Forest Products, 9.25s, 2002 $ 7,500 $ 7,967,100
BBB- Georgia-Pacific Corp., 9.875s, 2021 7,850 8,630,683
BBB- Georgia-Pacific Corp., 8.125s, 2023 1,000 933,740
BBB- Georgia-Pacific Corp., 8.625s, 2025 5,000 4,943,700
BBB- James River Corp., 7.75s, 2023 5,500 5,139,970
B+ Stone Container Corp., 9.875s, 2001 1,250 1,196,875
------------
$ 28,812,068
- -------------------------------------------------------------------------------------------
Lodging - 0.7%
BBB RHG Financing Corp., 8.875s, 2005 $ 4,260 $ 4,389,248
- -------------------------------------------------------------------------------------------
Machinery - 2.4%
BBB- Case Corp., 7.25s, 2016 $ 10,145 $ 9,462,404
BBB- Case Credit Corp., 6.125s, 2003 3,500 3,290,980
BBB Fisher Scientific International, Inc.,
7.125s, 2005 3,000 2,835,540
------------
$ 15,588,924
- -------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.7%
A- Olsten Corp., 7s, 2006 $ 1,625 $ 1,587,739
B+ Tenet Healthcare Corp., 10.125s, 2005 2,740 2,931,800
------------
$ 4,519,539
- -------------------------------------------------------------------------------------------
Metals and Minerals - 1.0%
BBB Asarco, Inc., 8.5s, 2025 $ 4,200 $ 4,328,142
BB+ Cominco Ltd., 6.875s, 2006 2,000 1,849,060
------------
$ 6,177,202
- -------------------------------------------------------------------------------------------
Oil - 6.0%
BBB Apache Corp., 7.95s, 2026 $ 1,100 $ 1,078,902
BB+ Coastal Corp., 10.375s, 2000 5,905 6,640,113
BB+ Coastal Corp., 10.25s, 2004 3,835 4,470,498
BB+ Coastal Corp., 7.75s, 2035 5,900 5,693,500
BBB- Mitchell Energy & Development Corp., 8s, 1999 1,500 1,514,580
BBB- Mitchell Energy & Development Corp., 9.25s, 2002 1,665 1,728,120
BB Oryx Energy Co., 10s, 1999 3,500 3,714,235
BB Oryx Energy Co., 10s, 2001 6,500 7,051,070
BBB- Parker & Parsley Petroleum, 8.25s, 2007 5,900 6,118,418
------------
$ 38,009,436
- -------------------------------------------------------------------------------------------
Oil Services - 0.2%
B+ Chesapeake Energy Corp., 9.125s, 2006 $ 1,500 $ 1,500,000
- -------------------------------------------------------------------------------------------
Real Estate - 1.0%
BBB- Rouse Co., 8.5s, 2003 $ 2,970 $ 3,060,852
BBB- Rouse Co., 8.55s, 2005 2,890 3,109,207
------------
$ 6,170,059
- -------------------------------------------------------------------------------------------
Stores - 0.7%
BBB- Woolworth Corp., 7s, 2000 $ 4,545 $ 4,454,236
- -------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - continued
<CAPTION>
BONDS - continued
===========================================================================================
S & P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollar Denominated - continued
Industrials - continued
Telecommunications - 5.3%
BB+ Continental Cablevision, Inc., 8.875s, 2005 $ 2,000 $ 2,130,000
BB+ Continental Cablevision, Inc., 8.3s, 2006## 5,000 5,112,500
BB+ Lenfest Communications Corp., 8.375s, 2005 7,745 7,396,475
BBB- Tele-Communications, Inc., 7.38s, 2001 2,750 2,712,188
BBB- Tele-Communications, Inc., 10.125s, 2022 2,000 2,160,000
BBB- Tele-Communications, Inc., 9.25s, 2023 10,830 10,463,729
BBB- Tele-Communications, Inc., 7.875s, 2026 4,500 3,924,300
------------
$ 33,899,192
- -------------------------------------------------------------------------------------------
Total Industrials $253,666,098
- ------------------------------------------------------------------------------------------
Mortgage-Backed Pass-Throughs - 1.2%
NR Merrill Lynch Mortgage Investors, Inc.,
9.7s, 2008 $ 251 $ 254,654
NR Merrill Lynch Mortgage Investors, Inc.,
10.25s, 2009+ 702 707,159
NR Merrill Lynch Mortgage Investors, Inc.,
8.3s, 2011 1,972 2,000,212
NR Merrill Lynch Mortgage Investors, Inc.,
9s, 2011 1,307 1,337,915
NR Merrill Lynch Mortgage Investors, Inc.,
10s, 2011 1,725 1,796,576
NR Merrill Lynch Mortgage Investors, Inc.,
8.063s, 2022+ 2,000 1,485,625
------------
$ 7,582,141
- -------------------------------------------------------------------------------------------
U.S. Federal Agencies - 3.5%
Federal Home Loan Mortgage Corporation - 1.1%
GOV FHLMC, 9.5s, 2001 $ 11 $ 11,923
GOV FHLMC, 8.5s, 2025 6,370 6,545,411
------------
$ 6,557,334
- -------------------------------------------------------------------------------------------
Federal National Mortgage Association - 2.4%
GOV FNMA, 9s, 2004 $ 3 $ 3,126
GOV FNMA, 7.5s, 2010 7,324 7,369,888
GOV FNMA, 7.5s, 2011 5,601 5,634,666
GOV FNMA, Stripped Mortgage Backed Security,
240, 7s, 2023 7,335 2,458,407
------------
$ 15,466,087
- ------------------------------------------------------------------------------------------
Total U.S. Federal Agencies $ 22,023,421
- ------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 7.9%
Government National Mortgage Association - 1.5%
GOV GNMA, 7.5s, 2008 $ 757 $ 767,438
GOV GNMA, 7.5s, 2009 6,000 6,078,720
GOV GNMA, 7.5s, 2011 2,020 2,046,502
GOV GNMA, 13.25s, 2023 687 767,085
------------
$ 9,659,745
- -------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 6.4%
GOV U.S. Treasury Notes, 6.25s, 2001 $ 5,000 $ 4,968,750
GOV U.S. Treasury Notes, 5.625s, 2006 12,475 11,566,695
GOV U.S. Treasury Bonds, 12s, 2005 650 880,750
GOV U.S. Treasury Bonds, 12s, 2013 9,515 13,451,831
</TABLE>
9
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - continued
<CAPTION>
BONDS - continued
===========================================================================================
S & P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollar Denominated - continued
U.S. Government Guaranteed - continued
U.S. Treasury Obligations - continued
GOV U.S. Treasury Bonds, 6.875s, 2025 $ 9,050 $ 8,939,219
GOV U.S. Treasury Bonds, 6s, 2026 1,000 888,590
------------
$ 40,695,835
- -------------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 50,355,580
- -------------------------------------------------------------------------------------------
Utilities - 16.9%
Electric - 13.1%
BBB Arkansas Power & Light Co., 8.75s, 2026 $ 1,135 $ 1,109,054
BB Central Maine Power Co., 7.45s, 1999 1,500 1,464,330
BB Cleveland Electric Co., 8.68s, 2001 3,500 3,393,285
BBB Commonwealth Edison Co., 8.5s, 2022 2,000 1,972,280
BBB Commonwealth Edison Co., 8.375s, 2023 11,290 11,078,538
BBB+ Empresa Electric Co. (Pehuenche), 7.3s, 2003 3,385 3,357,582
BBB Empresa Electric del Norte, 7.75s, 2006## 1,150 1,131,313
B+ First PV Funding Corp., 10.3s, 2014 6,839 7,239,560
B+ First PV Funding Corp., 10.15s, 2016 3,508 3,683,400
BBB Illinois Power Co., 8.75s, 2021 5,000 5,299,200
BBB- Long Island Lighting Co., 7.85s, 1999 5,490 5,466,503
BB+ Long Island Lighting Co., 8.9s, 2019 5,410 4,927,699
BBB- Long Island Lighting Co., 9.75s, 2021 1,310 1,318,135
BBB- Long Island Lighting Co., 9.625s, 2024 9,500 9,480,715
BBB- Louisiana Power & Light Co., 10.67s, 2017 1,940 2,086,160
BBB Louisiana Power & Light Co., 8.75s, 2026 1,135 1,109,463
BB- Midland Corp., 10.33s, 2002 3,032 3,180,051
BBB- Ohio Edison Co., 7.375s, 2002 5,900 5,894,867
BBB+ PacifiCorp Holdings, Inc., 7.2s, 2006## 4,820 4,723,600
BBB- Salton Sea Funding Corp., 7.37s, 2005 2,655 2,597,811
BBB- Salton Sea Funding Corp., 7.84s, 2010 2,775 2,737,260
------------
$ 83,250,806
- -------------------------------------------------------------------------------------------
Gas - 3.8%
BBB- ANR Pipeline Co., 7.375s, 2024 $ 800 $ 741,848
BB- California Energy Co., 0s to 1997,
10.25s to 2004 3,100 2,976,000
BBB Louisiana Land & Exploration Co., 7.65s, 2023 4,425 4,248,044
BBB- NGC Corp., 6.75s, 2005 7,725 7,357,908
BBB- Panhandle Eastern Corp., 8.625s, 2025 1,875 1,893,431
BBB- Tenneco, Inc., 7.25s, 2025 4,980 4,457,100
BBB- Williams Holdings of Delaware, Inc., 6.25s, 2006 2,900 2,671,625
------------
$ 24,345,956
- -------------------------------------------------------------------------------------------
Total Utilities $107,596,762
- -------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated $563,009,357
- ------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
<TABLE>
PORTFOLIO OF INVESTMENTS - continued
<CAPTION>
BONDS - continued
===========================================================================================
S & P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign - Non-U.S. Dollar Denominated - 9.3%
Australia - 0.2%
AA Commonwealth of Australia, 7s, 1998 AUD 700 $ 537,682
AA Commonwealth of Australia, 7s, 2000 1,200 901,929
------------
$ 1,439,611
- -------------------------------------------------------------------------------------------
Canada - 6.2%
AA+ Government of Canada, 7.5s, 2003 CAD 5,500 $ 4,012,815
AA+ Government of Canada, 8.75s, 2005 43,520 33,989,513
A+ Province of Quebec, 6.5s, 2006 1,875 1,766,267
------------
$ 39,768,595
- -------------------------------------------------------------------------------------------
Denmark - 0.7%
AA+ Kingdom of Denmark, 9s, 2000 DKK 8,580 $ 1,623,911
AA+ Kingdom of Denmark, 8s, 2001 13,800 2,513,763
------------
$ 4,137,674
- -------------------------------------------------------------------------------------------
Germany - 1.1%
AAA German Unity Fund, 8.5s, 2001 DEM 2,662 $ 1,970,307
AAA Treuhandanstalt Obligationen, 6.375s, 1999 7,085 4,874,088
------------
$ 6,844,395
- -------------------------------------------------------------------------------------------
Italy - 0.3%
AA Republic of Italy, 8.5s, 1999 ITL 1,400,000 $ 891,895
AA Republic of Italy, 9.5s, 1999 500,000 326,024
AA Republic of Italy, 9.5s, 1999 725,000 471,111
AA Republic of Italy, 8.5s, 2004 415,000 250,940
------------
$ 1,939,970
- -------------------------------------------------------------------------------------------
New Zealand - 0.2%
AA+ Government of New Zealand, 8s, 2001 NZD 2,200 $ 1,458,728
- -------------------------------------------------------------------------------------------
Spain - 0.5%
AA Kingdom of Spain, 8.3s, 1998 ESP 200,000 $ 1,585,057
AA Kingdom of Spain, 10s, 2005 160,000 1,322,029
------------
$ 2,907,086
- -------------------------------------------------------------------------------------------
Sweden - 0.1%
AA+ Kingdom of Sweden, 10.25s, 2000 SEK 4,200 $ 680,819
- -------------------------------------------------------------------------------------------
Total Foreign - Non-U.S. Dollar Denominated $ 59,176,878
- -------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $635,678,783) $622,186,235
- -------------------------------------------------------------------------------------------
PREFERRED STOCK - 0.5%
===========================================================================================
Shares
- ------------------------------------------------------------------------------------------
BB+ Bank United, TX, Federal Savings Bank, 9.6s, "B"
(Identified Cost, $3,000,000) 120,000 $ 3,045,000
- -------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - continued
<CAPTION>
REPURCHASE AGREEMENT - 0.1%
===========================================================================================
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Goldman Sachs Group L.P., dated 4/30/96, due 5/01/96,
total to be received $600,089 (secured by $133,531 par,
FNMA at 7.58s, due 4/19/06, market value $133,480;
$80,579 par, FNMA at 6.17s, due 12/30/03, market value
$76,286; $59,568 par, FNMA at 5.3s, due 12/10/98, market
value $58,004; $288,904 par, FHLMC at 0s, due 5/23/96,
market value $287,900; and $51,853 par, FHLB at 7.65s, due
3/25/97, market value $52,757), at Amortized Cost and Value $ 600 $ 600,000
- -------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $639,278,783) $625,831,235
- -------------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - 1.5% 9,304,563
- -------------------------------------------------------------------------------------------
Net Assets - 100.0% $635,135,798
- -------------------------------------------------------------------------------------------
</TABLE>
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 DKK = Danish Kroner JPY = Japanese Yen
CAD = Canadian Dollars ESP = Spanish Pesetas NZD = New Zealand Dollars
CZK = Czech Republic Korunas ITL = Italian Lire SEK = Swedish Kronor
DEM = Deutsche Marks
+ Restricted security.
## SEC Rule 144A restriction.
See notes to financial statements
12
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
================================================================================
April 30, 1996
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $639,278,783) $625,831,235
Cash 95,927
Receivable for investments sold 28,445,580
Receivable for Fund shares sold 1,581,611
Net receivable for forward foreign currency
exchange contracts sold 298,144
Receivable for daily variation margin on
open futures contracts 335,875
Interest receivable 13,594,434
Other assets 24,344
------------
Total assets $670,207,150
------------
Liabilities:
Payable for investments purchased $ 33,011,709
Payable for Fund shares reacquired 1,420,231
Net payable for forward foreign currency
exchange contracts purchased 90,262
Net payable for forward foreign currency exchange contracts 91,131
Payable to affiliates -
Management fee 21,759
Shareholder servicing agent fee 8,636
Distribution fee 197,754
Accrued expenses and other liabilities 229,870
------------
Total liabilities $ 35,071,352
------------
Net assets $635,135,798
============
Net assets consist of:
Paid-in capital $659,724,647
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (11,384,415)
Accumulated net realized loss on investments and foreign
currency transactions (12,975,480)
Accumulated distributions in excess of net investment
income (228,954)
------------
Total $635,135,798
============
Shares of beneficial interest outstanding 49,465,896
============
Class A shares:
Net asset value and redemption price per share
(net assets of $514,892,352 / 40,067,641 shares of
beneficial interest outstanding) $ 12.85
=======
Offering price per share (100/95.25) $ 13.49
==== ===== =======
Class B shares:
Net asset value and offering price per share
(net assets of $102,913,572 / 8,043,577 shares of
beneficial interest outstanding) $ 12.79
=======
Class C shares:
Net asset value, redemption price, and offering price per share
(net assets of $17,329,874 / 1,354,678 shares of
beneficial interest outstanding) $ 12.79
=======
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
13
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
================================================================================
Year Ended April 30, 1996
- --------------------------------------------------------------------------------
Net investment income:
Interest income $ 50,999,182
------------
Expenses -
Management fee $ 2,531,652
Trustees' compensation 48,117
Shareholder servicing agent fee (Class A) 772,316
Shareholder servicing agent fee (Class B) 214,791
Shareholder servicing agent fee (Class C) 21,533
Distribution and service fee (Class A) 1,385,639
Distribution and service fee (Class B) 976,749
Distribution and service fee (Class C) 143,794
Custodian fee 316,621
Postage 188,916
Printing 82,755
Auditing fees 78,125
Legal fees 5,965
Miscellaneous 399,860
------------
Total expenses $ 7,166,833
------------
Fees paid indirectly (92,219)
------------
Net expenses $ 7,074,614
------------
Net investment income $ 43,924,568
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 20,730,035
Written option transactions (25,359)
Foreign currency transactions and forward foreign
currency exchange contracts and other transactions
denominated in foreign currency 873,737
Futures contracts (2,385,960)
------------
Net realized gain on investments $ 19,192,453
------------
Change in unrealized appreciation (depreciation) -
Investments $(16,879,986)
Written options 65,995
Foreign currency and forward foreign currency exchange
contracts and other transactions denominated
in foreign currency (318,714)
Futures contracts 1,955,578
------------
Net unrealized loss on investments $(15,177,127)
------------
Net realized and unrealized gain on
investments and foreign currency $ 4,015,326
------------
Increase in net assets from operations $ 47,939,894
------------
See notes to financial statements
14
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
================================================================================
Year Ended April 30, 1996 1995
- --------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 43,924,568 $ 39,867,272
Net realized gain (loss) on investments and
foreign currency transactions 19,192,453 (35,439,392)
Net unrealized gain (loss) on investments and
foreign currency translation (15,177,127) 34,798,721
------------ ------------
Increase in net assets from operations $ 47,939,894 $ 39,226,601
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $(36,559,090) $(32,067,842)
From net investment income (Class B) (6,140,409) (3,235,246)
From net investment income (Class C) (908,862) (481,518)
In excess of net investment income (Class B) (66,320) --
In excess of net investment income (Class C) (26,175) --
From paid-in capital (835,015) (3,268,079)
------------ ------------
Total distributions declared to shareholders $(44,535,871) $(39,052,685)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $345,474,743 $155,634,237
Net asset value of shares issued to shareholders
in reinvestment of distributions 30,698,182 25,974,677
Cost of shares reacquired (305,118,806) (121,456,901)
------------ ------------
Increase in net assets from Fund share transact 71,054,119 $ 60,152,013
------------ ------------
Total increase in net assets $ 74,458,142 $ 60,325,929
------------ ------------
Net assets:
At beginning of period 560,677,656 500,351,727
------------ ------------
At end of period (including accumulated
distributions in excess of net investment
income of $228,954 and $931,468, respectively) $635,135,798 $560,677,656
============ ============
See notes to financial statements
15
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
===========================================================================================================
Year Ended April 30, 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.71 $ 12.75 $ 14.39 $ 13.70 $ 13.25
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[ss] $ 0.95 $ 0.98 $ 1.02 $ 1.04 $ 1.13
Net realized and unrealized gain (loss)
on investments 0.15 (0.05) (0.63) 0.74 0.45
-------- -------- -------- -------- --------
Total from investment operations $ 1.10 $ 0.93 $ 0.39 $ 1.78 $ 1.58
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.94) $ (0.89) $ (1.06) $ (1.04) $ (1.13)
In excess of net investment income -- -- (0.02) -- --
From net realized gain on investments -- -- (0.80) (0.05) --
In excess of net realized gain on
investments -- -- (0.01) -- --
From paid-in capital (0.02) (0.08) (0.14) -- --
-------- -------- -------- -------- --------
Total distributions declared
to shareholders $ (0.96) $ (0.97) $ (2.03) $ (1.09) $ (1.13)
-------- -------- -------- -------- --------
Net asset value - end of period $ 12.85 $ 12.71 $ 12.75 $ 14.39 $ 13.70
======== ======== ======== ======== ========
Total return+++ 8.67% 7.78% 2.12% 13.42% 12.39%
Ratios (to average net assets)/Supplemental data[ss]:
Expenses## 1.00% 1.00% 0.96% 0.88% 0.91%
Net investment income 7.10% 7.91% 7.17% 7.82% 8.39%
Portfolio turnover 377% 306% 410% 330% 243%
<S> <C> <C> <C> <C> <C>
Net assets at end of period (000 omitted) $514,892 $477,056 $459,311 $490,417 $448,261
<FN>
+++ 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.
# Per share data for the periods subsequent to April 30, 1993 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for
fees paid indirectly.
[ss] The distributor did not impose a portion of its distribution fee 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% -- --
</FN>
</TABLE>
See notes to financial statements
16
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
==============================================================================================================
Year Ended April 30, 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.69 $ 12.80 $ 13.20 $ 14.04 $ 14.62
-------- -------- -------- -------- --------
Income from investment operations -
Net investment income $ 1.14 $ 1.20 $ 1.15 $ 1.16 $ 1.24
Net realized and unrealized gain (loss)
on investments 0.59 (0.14) (0.38) (0.42) (0.27)
-------- -------- -------- -------- --------
Total from investment operations $ 1.73 $ 1.06 $ 0.77 $ 0.74 $ 0.97
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (1.17) $ (1.17) $ (1.17) $ (1.15) $ (1.15)
From net realized gain on investments -- -- -- (0.43) (0.40)
-------- -------- -------- -------- --------
Total distributions declared
to shareholders $ (1.17) $ (1.17) $ (1.17) $ (1.58) $ (1.55)
-------- -------- -------- -------- --------
Net asset value - end of period $ 13.25 $ 12.69 $ 12.80 $ 13.20 $ 14.04
-------- -------- -------- -------- --------
Total return+++ 13.65% 7.69% 5.49% 5.18% 6.15%
Ratios (to average net assets)/Supplemental data:
Expenses 0.79% 0.75% 0.83% 0.76% 0.68%
Net investment income 8.82% 9.10% 8.93% 8.85% 8.44%
Portfolio turnover 189% 186% 160% 287% 334%
Net assets at end of period (000 omitted) $315,722 $293,242 $299,485 $310,403 $318,329
<FN>
+++ 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.
</FN>
</TABLE>
See notes to financial statements
17
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
==========================================================================================================================
Year Ended April 30, 1996 1995 1994* 1996 1995 1994**
- --------------------------------------------------------------------------------------------------------------------------
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 $ 12.69 $ 12.73 $ 14.99 $ 12.68 $ 12.72 $ 13.57
-------- -------- -------- -------- -------- --------
Income from investment operations# -
Net investment income $ 0.85 $ 0.88 $ 0.56 $ 0.85 $ 0.88 $ 0.29
Net realized and unrealized gain
(loss) on investments 0.13 (0.05) (1.30) 0.15 (0.05) (0.90)
-------- -------- -------- -------- -------- --------
Total from investment
operations $ 0.98 $ 0.83 $ (0.74) $ 1.00 $ 0.83 $ (0.61)
-------- -------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.85) $ (0.80) $ (0.59) $ (0.85) $ (0.80) $ (0.22)
In excess of net investment income (0.01) -- (0.02) (0.02) -- --
From net realized gain on
investments -- -- (0.80) -- -- --
In excess of net realized gain on
investments -- -- (0.01) -- -- --
From paid-in capital (0.02) (0.07) (0.10) (0.02) (0.07) (0.02)
-------- -------- -------- -------- -------- --------
Total distributions declared
to shareholders $ (0.88) $ (0.87) $ (1.52) $ (0.89) $ (0.87) $ (0.24)
-------- -------- -------- -------- -------- --------
Net asset value - end of period $ 12.79 $ 12.69 $ 12.73 $ 12.79 $ 12.68 $ 12.72
-------- -------- -------- -------- -------- --------
Total return 7.90% 6.90% (5.42)%++ 7.90% 7.00% 4.57%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.81% 1.84% 1.83%+ 1.74% 1.75% 1.80%+
Net investment income 6.29% 7.17% 6.39%+ 6.35% 7.17% 6.57%+
Portfolio turnover 377% 306% 410% 377% 306% 410%
Net assets at end of period (000 omitted) $102,914 $ 75,451 $ 33,413 $ 17,330 $ 8,171 $ 7,627
<FN>
* For the period from the commencement of offering of Class B shares, September 7, 1993 to April 30, 1994.
** For the period from the commencement of offering of Class C shares, January 3, 1994 to April 30, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to April 30, 1993 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
</FN>
</TABLE>
See notes to financial statements
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Bond Fund (the Fund) is a diversified series of MFS Series Trust IX (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. 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 and economic environment.
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts, are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in 60
days or less, are valued at amortized cost, which approximates market value.
Non-U.S. dollar denominated short-term obligations are valued at amortized cost
as calculated in the base currency and translated into U.S. dollars at the
closing daily exchange rate. Futures contracts, options and options on futures
contracts listed on commodities exchanges are valued at closing settlement
prices. Over-the-counter options are valued by brokers through the use of a
pricing model which takes into account closing bond valuations, implied
volatility and short-term repurchase rates. 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.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
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.
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 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 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 futures contracts is designed to
hedge against anticipated future changes in interest or exchange rates or
securities prices. Investments in interest rate futures for purposes other than
hedging may be made to modify the duration of the portfolio without incurring
the additional transaction costs involved in buying and selling the underlying
securities. Investments in currency futures for purposes other than hedging may
be made to change the Fund's relative position in one or more currencies without
buying and selling portfolio assets. Should interest or exchange rates or
securities prices move unexpectedly, the Fund may not achieve the anticipated
benefits of the futures contracts and may realize a loss.
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
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
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.
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 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 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.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. This fee is reduced according to an expense
offset arrangement with State Street Bank, the dividend disbursing agent, which
provides for partial reimbursement of custody fees based on a formula developed
to measure the value of cash deposited by the Fund with the custodian and with
the dividend disbursing agent. 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. 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
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
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 tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended April 30, 1996, $478,802 and $835,015 was
reclassified from accumulated net realized gain on investments and paid-in
capital, respectively, to undistributed net investment income due to differences
between book and tax accounting for mortgage-backed securities and currency
transactions. This change had no effect on the net assets or net asset value per
share.
At April 30, 1996, the Fund, for federal income tax purposes, had a capital loss
carryforward of $9,844,270, 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.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B, and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. 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.
(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 effective annual rate of
0.20% of average daily net assets and 2.47% of investment income. 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 of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $12,177 for the year ended
April 30, 1996.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$172,391 for the year ended April 30, 1996, 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%
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
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 retains the servic fee for accounts
not attributable to a securities dealer which amounted to $270,406 for the year
ended April 30, 1996. A portion of the 0.10% distribution fee equal to 0.05% is
currently being paid by the Fund; payment of the remaining 0.05% will become
payable on such date as the Trustees of the Trust may determine. Fees incurred
under the distribution plan during the year ended April 30, 1996 were 0.27% of
average daily net assets attributable to Class A shares on an annualized basis.
The Class B and Class C distribution plans provide 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 additional
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 $15,898 and $2,463 for Class B and Class C
shares, respectively, for the year ended April 30, 1996. Fees incurred under the
distribution plans during the year ended April 30, 1996 were 1.00% of average
daily net assets attributable to Class B and Class C shares on an annualized
basis.
Purchases of over $1 million into Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within twelve months following such 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.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class C shares in the event of a shareholder redemption within twelve months of
purchase made on or after April 30, 1996. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
during the year ended April 30, 1996 were $4,707, $217,113 and $7 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 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 $1,103,103,221 $1,172,919,642
-------------- --------------
Investments (non-U.S. government securities) $1,333,241,878 $1,123,569,652
-------------- --------------
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 $ 639,823,909
=============
Gross unrealized depreciation $ (17,706,135)
Gross unrealized appreciation 3,713,461
-------------
Net unrealized depreciation $ (13,992,674)
=============
(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
Year Ended April 30, 1996 1995
------------------------------ ----------------------------
Shares Amount Shares Amount
=======================================================================================================
<S> <C> <C> <C> <C>
Shares sold 13,392,544 $ 177,853,643 7,570,354 $ 93,377,941
Shares issued to shareholders
in reinvestment of distributions 1,990,650 26,407,792 1,937,817 23,874,476
Shares reacquired (12,850,236) (170,615,920) (7,998,695) (98,722,760)
----------- ------------ ---------- -----------
Net increase 2,532,958 $ 33,645,515 1,509,476 $ 18,529,657
----------- ------------ ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
Year Ended April 30, 1996 1995
------------------------------ ----------------------------
Shares Amount Shares Amount
=======================================================================================================
<S> <C> <C> <C> <C>
Shares sold 10,686,248 $ 141,536,278 4,205,737 $ 51,952,884
Shares issued to shareholders
in reinvestment of distributions 278,128 3,686,196 147,546 1,814,601
Shares reacquired (8,868,575) (117,295,920) (1,029,710) (12,650,424)
---------- ------------- --------- ------------
Net increase 2,095,801 $ 27,926,554 3,323,573 $ 41,117,061
---------- ------------- --------- ------------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Class C Shares
Year Ended April 30, 1996 1995
------------------------------ ----------------------------
Shares Amount Shares Amount
=======================================================================================================
<S> <C> <C> <C> <C>
Shares sold 1,964,041 $ 26,084,822 835,445 $ 10,303,412
Shares issued to shareholders in
reinvestment of distributions 45,429 604,194 23,176 285,600
Shares reacquired (1,299,139) (17,206,966) (813,659) (10,083,717)
----------- ------------- ---------- ------------
Net increase 710,331 $ 9,482,050 44,962 $ 505,295
---------- ------------- --------- ------------
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of 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,
1996 was $7,683.
(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, 1996, is
as follows:
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Written Option Transactions 1996 Calls 1996 Puts
------------------------------ ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
=====================================================================================================
<S> <C> <C> <C> <C>
Outstanding, beginning of period -
British Pounds 1,016 $ 17,524 947 $ 17,524
German Marks 2,259 15,668 -- --
German Marks/British Pounds 1,678 10,900 -- --
Japanese Yen 479,624 182,108 258,736 35,489
Options written -
Japanese Yen 387,000 158,991 827,000 123,131
Options terminated in closing transactions -
British Pounds (1,016) -- --
German Marks/British Pounds (1,678) -- --
Japanese Yen (866,624) (341,099) (1,085,736) (158,620)
Options expired -
British Pounds -- -- (947) (17,524)
German Marks (2,259) -- --
-------- --------- ---------- ---------
Outstanding, end of period -- $ -- -- $ --
-------- --------- ---------- ---------
</TABLE>
At April 30, 1996, the Fund had no outstanding written options transactions.
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
In Net Unrealized
Contracts to Exchange Contracts Appreciation
Settlement Date Deliver/Receive for at Value (Depreciation)
==================================================================================================
<S> <C> <C> <C> <C> <C>
Sales 5/07/96 - 5/20/96 AUD 5,821,592 $ 4,508,666 $ 4,571,268 $ (62,602)
5/31/96 CAD 51,367,388 37,737,118 37,744,420 (7,302)
5/15/96 - 5/31/96 DEM 13,385,875 8,940,810 8,749,805 191,005
5/31/96 DKK 24,805,633 4,359,514 4,205,824 153,690
5/28/96 ESP 361,745,362 2,902,739 2,839,755 62,984
5/06/96 ITL 11,319,148,466 7,188,780 7,232,697 (43,917)
5/20/96 NZD 2,165,145 1,485,289 1,486,372 (1,083)
5/02/96 - 8/02/96 SEK 9,735,747 1,438,215 1,432,846 5,369
----------- ------------ ---------
$68,561,131 $ 68,262,987 $ 298,144
=========== ============ =========
Purchases 5/20/96 AUD 6,188,237 $ 4,875,507 $ 4,859,168 $ (16,339)
5/15/96 CZK 136,481,150 5,000,000 4,903,575 (96,425)
5/06/96 - 5/31/96 ITL 17,340,578,900 11,055,540 11,077,026 21,486
5/31/96 JPY 1,194,411 11,514 11,439 (75)
5/07/96 NZD 2,165,145 1,487,563 1,486,372 (1,191)
5/02/96 SEK 4,867,873 714,813 717,095 2,282
----------- ------------ ---------
$23,144,937 $ 23,054,675 $ (90,262)
=========== ============ =========
</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 $91,131 at April 30, 1996.
At April 30, 1996, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
Futures Contracts Unrealized
Appreciation/
Expiration Contracts Position (Depreciation)
================================================================================
June 1996 118 Treasury Notes Long $ (334,791)
June 1996 516 Treasury Notes Short 856,199
June 1996 250 Treasury Bonds Short 1,434,170
-----------
$ 1,955,578
At April 30, 1996, the Fund had sufficient cash and/or securities to cover
margin requirements on open futures 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, excluding securities
that are determined by the Board of Trustees to be liquid. At April 30, 1996,
the Fund owned the following restricted securities (constituting 9.34% of net
assets, excluding liquid securities) which may not be publicly sold without
registration under the Securities Act of 1933 (the 1933 Act). 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
or, if not available, in good faith by or at the direction of the Trustees.
Certain of these securities may be offered and sold to "qualified institutional
buyers" under Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
Date of
Description Acquisition Par Amount Cost Value
================================================================================================================
<S> <C> <C> <C> <C>
Arkwright CSN Trust, 9.625s, 2006 4/17/96 $3,000,000 $2,999,040 $ 3,016,860
Continental Cablevision, 8.3s, 2006 4/03/96 5,000,000 5,249,050 5,112,500
Empresa Electric del Norte, 7.75s, 2006 3/22/96 1,150,000 1,143,687 1,131,313
Financiara Ener National-Colombia, 6.625s, 1996 3/22/95 3,040,000 2,996,029 3,040,000
Goldman Sachs Group L.P., 6.25s, 2003 1/03/96 1,375,000 1,371,384 1,280,469
Goldman Sachs Group L.P., 7.25s, 2005 9/22/95 1,500,000 1,498,605 1,464,375
Hidroelectrica Alicura, 8.375s, 1999 4/12/94 4,325,000 4,176,652 4,087,125
Jet Equipment Trust, "B", 8.64s, 2012 02/02/96 2,090,535 2,377,524 2,228,636
Jet Equipment Trust, "C", 10.69s, 2015 4/07/95 2,390,000 2,390,000 2,663,822
Jet Equipment Trust, "D", 11.44s, 2014 02/09/96 3,500,000 4,051,635 3,802,330
Mark IV Industries, Inc., 7.75s, 2006 3/05/96 6,000,000 5,961,600 5,790,000
Merrill Lynch Mortgage Investors, Inc., 10.25s, 2009 4/07/92 701,679 721,852 707,159
Merrill Lynch Mortgage Investors, Inc., 8.063s, 2022 6/22/94 2,000,000 1,386,250 1,485,625
Metropolitan Life Insurance Co., 7.7s, 2015 11/08/95 3,000,000 2,989,560 2,872,044
Nationwide Mutual Insurance Co.,
7.5s, 2024 3/28/96 - 4/10/96 6,440,000 5,847,209 5,805,724
Owens Corning Fiberglass Corp. (Toledo),
9.9s, 2015 3/07/95 1,500,000 1,500,000 1,631,250
Pacificorp Holdings, Inc., 7.2s, 2006 3/28/96 4,820,000 4,792,912 4,723,600
Prudential Insurance Co., 7.65s, 2007 4/17/96 6,575,000 6,578,748 6,510,171
Qantas Airways Ltd., 7.5s, 2003* 6/24/93 5,000,000 4,961,000 5,010,300
Santander Financial Issuances, 7s, 2006 3/29/96 2,000,000 1,985,160 1,943,080
-----------
$64,306,383
===========
</TABLE>
*Liquid security.
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust IX and 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 Series Trust IX) as of April 30, 1996, the related statement of operations
for the year then ended, the statement of changes in net assets for the years
ended April 30, 1996 and 1995, and the financial highlights for each of the
years in the ten-year period ended April 30, 1996. 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, 1996 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Bond Fund at
April 30, 1996, the results of its operations, the changes in its net assets,
and its financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 7, 1996
------------------------------------------------------------
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.
28
<PAGE>
THE MFS FAMILY OF FUNDS [Registration Mark]
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-637-2929
any business day from 9 a.m. to 5 p.m. Eastern time (or leave a message
anytime). This material should be read carefully before investing or sending
money.
Stock
================================================================================
Massachusetts Investors Trust
- --------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Capital Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Emerging Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Gold & Natural Resources Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Growth Opportunities Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Managed Sectors Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] OTC Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Research Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Value Fund
- --------------------------------------------------------------------------------
Stock and Bond
================================================================================
MFS [Registration Mark] Total Return Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Utilities Fund
- --------------------------------------------------------------------------------
Bond
================================================================================
MFS [Registration Mark] Bond Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Mortgage Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Securities Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] High Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Intermediate Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Strategic Income Fund
- --------------------------------------------------------------------------------
Limited Maturity Bond
================================================================================
MFS [Registration Mark] Government Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal Limited Maturity Fund
- --------------------------------------------------------------------------------
World
================================================================================
MFS [Registration Mark]/Foreign & Colonial Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark]/Foreign & Colonial International Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark]/Foreign & Colonial International Growth and Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Asset Allocation Fund [Service Mark]
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Equity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Governments Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Total Return Fund
- --------------------------------------------------------------------------------
National Tax-Free Bond
================================================================================
MFS [Registration Mark] Municipal Bond Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal High Income Fund
(closed to new investors)
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal Income Fund
- --------------------------------------------------------------------------------
State Tax-Free Bond
================================================================================
Alabama, Arkansas, California, Florida, Georgia, Maryland, Massachusetts,
Mississippi, New York, North Carolina, Pennsylvania, South Carolina, Tennessee,
Virginia, West Virginia
- --------------------------------------------------------------------------------
Money Market
================================================================================
MFS [Registration Mark] Cash Reserve Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Money Market Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Money Market Fund
- --------------------------------------------------------------------------------
<PAGE>
MFS [Register Mark] BOND FUND [Dalbar Logo] BULK RATE
500 Boylston Street U.S. POSTAGE
Boston, MA 02116 PAID
PERMIT #55638
[MFS Logo] BOSTON, MA
The First Name in Mutual Funds
MFB-3 6/96 50M 11/211/311
<PAGE>
