<PAGE>
Annual Report
[Logo] for Year Ended
INVESTMENT MANAGEMENT April 30, 1997
MFS(R) BOND FUND
[Graphic Omitted]
LEARNING FINANCIAL BASICS THE EASY WAY (see page 34)
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman ................................................... 1
A Discussion with the Portfolio Manager .................................... 3
Portfolio Manager's Profile ................................................ 6
Fund Facts ................................................................. 7
Performance Summary ........................................................ 7
Portfolio Concentration ....................................................10
Tax Form Summary ...........................................................10
Portfolio of Investments ...................................................11
Financial Statements .......................................................18
Notes to Financial Statements ..............................................25
Independent Auditors' Report ...............................................33
The ABCs of Investing ......................................................34
It's Easy to Contact Us ....................................................35
The MFS Family of Funds(R) .................................................36
Trustees and Officers ......................................................37
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HIGHLIGHTS
o FOR THE 12 MONTHS ENDED APRIL 30, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 8.99%, CLASS B SHARES
8.16%, CLASS C SHARES 8.27%, AND CLASS I SHARES 9.21%.
o THE FUND BENEFITED FROM ITS OVERWEIGHTINGS IN BOTH INVESTMENT-GRADE AND
HIGH-YIELD CORPORATE SECURITIES, WHICH WERE BOTH HELPED BY THE
CONTINUING STRENGTH OF THE U.S. ECONOMY.
o THE FUND HAD SIGNIFICANT OVERWEIGHTINGS IN THE AIRLINE AND UTILITY
SECTORS THAT CONTRIBUTED TO PERFORMANCE, AS RETURNS OF 8.97% FOR
UTILITIES AND 9.65% FOR AIRLINES MADE THEM THE BEST-PERFORMING SECTORS
IN THE INVESTMENT-GRADE CORPORATE MARKET.
o CURRENTLY, WE ARE EXPERIENCING A RELATIVELY STABLE, TRADITIONAL "CLIP-
THE-COUPON" ENVIRONMENT SIMILAR TO THE 1950S AND 1960S, WHEN INTEREST
RATES WERE MUCH LESS VOLATILE. IN SUCH AN ENVIRONMENT, THERE IS LITTLE
VALUE ADDED IN TRYING TO ANTICIPATE INTEREST-RATE MOVEMENTS.
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
A. Keith Brodkin
Dear Shareholders:
After more than six years of expansion, the U.S. economy is experiencing another
year of growth in 1997, although a few signs point to the possibility of a
modest rise in inflation during the year. On the positive side, the pattern of
moderate growth and inflation set over the past few years now seems fairly well
entrenched in the economy and, short of a major international or domestic
crisis, appears to have enough momentum to remain on track for some time. Also,
gains in such important sectors as housing, automobiles, industrial production,
and exports indicate a fair amount of underlying strength in the economy. Some
of that strength was seen in the first quarter, when the U.S. economy grew at an
annualized rate of 5.6% (based on preliminary estimates), a pace that would be
inflationary in the unlikely event that it were to continue. The ongoing
tightness in the labor market could also add some inflationary pressures to the
economy. At the same time, there is some reason for caution as a result of the
continuing high level of consumer debt and rising personal bankruptcies. Given
these somewhat conflicting indicators, we expect real (inflation-adjusted)
growth to revolve around 2% in 1997, with the strength of the first quarter
moderating as we move through the balance of the year.
In the bond markets, conflicting signals over the strength of the economy have
also created near-term volatility, and the Federal Reserve Board has begun
taking measured steps to control inflation by raising short-term interest rates.
Although we do not expect a repeat of the rapid growth in the first quarter, we
would expect the Fed to raise interest rates at least one more time in reaction
to the economic momentum that was built up during the period. While inflationary
forces largely remained in check in 1996, the continued strength in the labor
market suggests that a pickup in inflation is still possible. At the same time,
the U.S. budget deficit continues to decline and, as a percentage of gross
domestic product, is now approaching 1%, which we consider a positive
development for the bond markets. Although interest rates may remain volatile
over the coming months, we believe that, at current levels, fixed-income markets
remain equitably valued.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
May 14, 1997
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of Geoffrey L. Kurinsky]
Geoffrey L. Kurinsky
Following a sharp rise in interest rates in early 1996, rates remained
relatively stable over the 12 months ended April 30, 1997. Rates on 10-year
U.S. Treasury securities ended the period at 6.75%, just where they began it
on May 1, 1996. Volatility during this period was also low, with the 10-year
issue trading in a range of 6% to 7%. In this environment, Class A shares of
the Fund provided a total return of 8.99% during this period, Class B shares
8.16%, Class C shares 8.27%, and Class I shares 9.21%. These returns assume
the reinvestment of distributions but exclude the effects of any sales
charges. All classes of shares outperformed the Lehman Brothers Government/
Corporate Bond Index (the Lehman Index), which returned 6.72% over the same
period. 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.
The Fund's performance also compared favorably to the 7.42% average return of
other corporate debt "BBB"-rated funds with similar objectives, as tracked by
Lipper Analytical Services, Inc., an independent firm that reports mutual fund
performance.
Q. THE FUND HAS PERFORMED WELL AGAINST ITS BENCHMARK INDICES THIS YEAR. WHAT
DO YOU SEE AS SOME OF THE REASONS FOR THIS PERFORMANCE?
A. The Fund's strong performance resulted from its overweightings in both
investment-grade and high-yield corporate securities, as well as from its 5%
to 10% allocation to nondollar fixed-income securities. The Fund's average 60%
weighting in investment-grade corporates, which is roughly 50% higher than the
average fund in its Lipper peer group, helped the Fund, as this sector's 7.55%
return far outdistanced the 6.37% return of the Lehman Brothers Treasury Index
(an unmanaged index of U.S. Treasury securities). Also, the Fund's average 20%
weighting in high-yield securities, which is about 33% higher than the average
fund in its Lipper peer group, contributed to the strong performance as this
sector recorded a very solid 11.76% total return for the period. The
traditional pattern, in which corporates outperform Treasuries during periods
of strong economic activity, worked again in the past year as the U.S. economy
continues to roll along into its seventh year of economic recovery from the
1990-91 recession. (Principal value and interest on Treasury securities are
guaranteed by the U.S. government if held to maturity.)
Q. SO YOUR WEIGHTINGS IN INVESTMENT-GRADE AND HIGH-YIELD CORPORATES PAID OFF.
WHAT ABOUT SPECIFIC INDUSTRIES?
A. We had significant overweightings in the airline and utility sectors, which
contributed to the strong performance as well. Returns of 8.97% for utilities
and 9.65% for airlines made them the best-performing sectors of the
investment-grade corporate market. The Fund's utility holdings, such as Long
Island Lighting and Commonwealth Edison, are benefiting from prospects for
restructuring that could result in the elimination of much of their
outstanding debt in the next 12 to 18 months. Holdings in the "big three"
airlines -- Delta, American, and United -- benefited from the favorable
pricing environment in the airline business resulting from the strong economy.
These companies were able to generate strong cash flows, which they used to
purchase their outstanding debt securities in the open market, further
improving their credit profiles.
Q. IN GENERAL, HOW WOULD YOU DESCRIBE THE FIXED-INCOME ENVIRONMENT OVER THE
PAST YEAR?
A. It was a traditional "clip-the-coupon" environment like we used to have in
the 1950s and 1960s, when interest rates were much less volatile. With rates
remaining in a relatively tight range, there was little value to add by trying
to anticipate interest-rate movements. Most of the added value came from being
overweighted in the corporate sector and picking the sectors and companies
that we felt would thrive in that environment. We expect a similar environment
to dominate the scene in the coming year as economic activity appears likely
to continue growing and as inflationary pressures remain dormant.
Q. AND HOW IS YOUR VIEW ON THE FIXED-INCOME MARKETS REFLECTED IN THE FUND'S
DURATION, OR INTEREST-RATE SENSITIVITY?
A. The Fund's current duration is six years, roughly equivalent to that of the
average fund in its Lipper peer group. A neutral outlook is consistent with
our view that rates will likely remain in a narrow range through the summer
months.
Q. MORE SPECIFICALLY, WHAT ABOUT THE CORPORATE BOND MARKET? HOW WOULD YOU
DESCRIBE THE ENVIRONMENT THERE?
A. Environments like the current one, that is, ones that feature steady growth
and low inflation, are ideal for the cash flows and credit quality of American
corporations. Despite the fact that the yield premium for corporate securities
is as low today as it has been in 10 years, we believe the corporate asset
class will continue to outperform Treasury and mortgage-backed securities in
the upcoming year.
Q. YOUR BIGGEST WEIGHTING IN THE INVESTMENT-GRADE SECTOR IS A 12% POSITION IN
ELECTRIC UTILITIES. WHAT IS IT THAT YOU LIKE ABOUT THIS SECTOR, AND ARE THERE
ANY UTILITIES YOU PARTICULARLY FAVOR?
A. Under various restructuring plans, many of the utility securities now rated
"BB" by Standard & Poor's will eventually become investment-grade credits.
When securities cross over to investment grade, or move from "BB," the top
high-yield rating, to "BBB," the lowest investment-grade rating, the universe
of buyers expands significantly. There is a limited set of buyers of high-
yield debt, but a vast arena of buyers of investment-grade securities. Our
favorite names within this optimistic scenario include Long Island Lighting,
Niagara Mohawk, and Cleveland Electric.
Q. YOU ALSO HAVE ABOUT 20% OF ASSETS IN HIGH-YIELD CORPORATE BONDS. WHY DO YOU
FEEL COMFORTABLE WITH THIS LEVEL, AND WHAT TYPES OF HIGH-YIELD BONDS ARE IN
THE PORTFOLIO?
A. We like high-yield bonds because the economy is strong and the credit
quality of this sector is improving as well. We focus on the higher end of the
sector, "BB"-rated bonds, and on issues that we believe will cross over to
investment-grade ratings in the next 12 to 18 months. Our largest holdings
include the utilities I mentioned before, as well as Tenet Healthcare, a large
hospital consolidator with an investment-grade credit profile, and Continental
Airlines, which is benefiting from strong pricing trends in the domestic
airline business.
Q. AT THE SAME TIME, YOU'VE CUT THE FUND'S POSITION IN NONDOLLAR MARKETS FROM
APPROXIMATELY 10% OF ASSETS TO 4% IN RECENT MONTHS. WHY?
A. With the tremendous decline in interest rates in Europe throughout 1996, we
feel this sector is less attractive than it was when rates were significantly
higher earlier in 1996. Given all the concern over European monetary
unification, we feel that this sector represents merely fair value.
Q. WE'VE TALKED ABOUT SOME SECTORS AND INDUSTRIES THAT HELPED THE FUND OVER
THE PAST YEAR; NOW, WOULD YOU MIND TALKING ABOUT ANY POSITIONS THAT DID NOT
PERFORM AS WELL AS YOU HOPED?
A. The Fund maintains positions in a couple of companies that have been
adversely affected by the deteriorating pattern in consumer delinquencies.
Advanta Corp., a credit-card company, had a significant pickup in
delinquencies that resulted in an unexpected loss in the first quarter of
1997. At the same time, First Merchants Acceptance Corp. had difficulty with
delinquencies in its auto-loan portfolio. Although we are very concerned about
these trends and talk with the companies frequently, we believe the securities
of both of these institutions represent good value at current prices.
Q. AS YOU LOOK AHEAD, WHAT CHANGES DO YOU SEE IN THE GENERAL ECONOMIC
ENVIRONMENT FOR YOUR MARKET, AND HOW ARE YOU POSITIONING THE FUND FOR THOSE
CHANGES?
A. We are watching the current pace of economic growth and inflation very
closely. While the economy has been growing at a steady pace, we are on the
lookout for signs of an economic slowdown. If we see any of these signs, we
will increase the duration of the portfolio to take advantage of a likely move
to lower interest rates. If we see signs of a protracted slowdown, we will
reduce our exposure to both investment-grade and high-yield corporate
securities. Finally, inflation is the enemy of every bond investor, and it has
failed to show up in the current cycle, despite the strong pace of growth and
resource utilization. If we begin to see signs of inflation, we will reduce
the duration of the portfolio to seek to protect the Fund against the
potential for lower bond prices that could result from higher interest rates.
/s/ Geoffrey L. Kurinsky
Geoffrey L. Kurinsky
Portfolio Manager
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PORTFOLIO MANAGER'S PROFILE
GEOFFREY L. 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. HE HAS MANAGED MFS(R) BOND FUND SINCE 1989.
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- --------------------------------------------------------------------------------
FUND FACTS
STRATEGY: THE FUND 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.
COMMENCEMENT OF
INVESTMENT OPERATIONS: CLASS A: MAY 8, 1974
CLASS B: SEPTEMBER 7, 1993
CLASS C: JANUARY 3, 1994
CLASS I: JANUARY 2, 1997
SIZE: $694.3 MILLION NET ASSETS AS OF APRIL 30, 1997
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PERFORMANCE SUMMARY
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. Class A share performance results reflect the deduction of the
4.75% maximum sales charge; benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown, based on differences in loads and
fees paid by shareholders investing in different classes. It is not possible
to invest in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 5-year period ended April 30, 1997)
MFS CONSUMER LEHMAN BROTHERS
BOND FUND PRICE INDEX GOVERNMENT/CORPORATE
CLASS A U.S. BOND INDEX
--------- ----------- --------------------
4/92 9,527 10,000 10,000
4/93 10,813 10,323 11,450
4/94 11,043 10,566 11,581
4/95 11,902 10,889 12,382
4/96 12,934 11,195 13,453
4/97 14,097 11,508 14,356
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended April 30, 1997)
MFS CONSUMER LEHMAN BROTHERS
BOND FUND PRICE INDEX GOVERNMENT/CORPORATE
CLASS A U.S. BOND INDEX
--------- ----------- --------------------
4/87 9,525 10,000 10,000
4/89 10,705 10,917 11,503
4/91 13,258 11,990 14,316
4/93 16,914 12,770 18,157
4/95 18,617 13,471 19,653
4/97 22,050 14,237 22,766
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF APRIL 30, 1997
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Bond Fund (Class A)
including 4.75% sales charge (SEC results) +3.82% +6.72% +7.10% +8.23%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Bond Fund (Class A) at net asset value +8.99% +8.48% +8.15% +8.76%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Bond Fund (Class B) with CDSC (SEC results) +4.16% +6.78% +7.26% +8.46%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Bond Fund (Class B) at net asset value +8.16% +7.65% +7.55% +8.46%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Bond Fund (Class C) with CDSC (SEC results) +7.27% +7.72% +7.62% +8.50%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Bond Fund (Class C) at net asset value +8.27% +7.72% +7.62% +8.50%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Bond Fund (Class I) with CDSC (SEC results) +9.21% +8.55% +8.19% +8.78%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Bond Fund (Class I) at net asset value +9.21% +8.55% +8.19% +8.78%
- ----------------------------------------------------------------------------------------------------------------------------------
Average corporate debt BBB-rated fund* +7.42% +7.80% +8.29% +8.53%
- ----------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Government/
Corporate Bond Index** +6.72% +7.42% +7.50% +8.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Price Index(+) +2.80% +2.89% +2.85% +3.60%
- ----------------------------------------------------------------------------------------------------------------------------------
* Source: Lipper Analytical Services.
** Source: CDA/Wiesenberger.
(+) The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
</TABLE>
All results are historical and assume the reinvestment of dividends and
capital gains. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Past performance is no guarantee of future results.
Class A share SEC results include the maximum 4.75% sales charge. Class B
share SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%.
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 are subject to a 1% CDSC if redeemed within 12 months of purchase.
Class I shares, which became available on January 2, 1997, have no sales
charge or Rule 12b-1 fees and are only available to certain institutional
investors.
Class B and Class C share results include the performance and the operating
expenses (e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods
prior to the commencement of offering of Class B and Class C shares. Because
operating expenses attributable to Class B and Class C shares are higher than
those of Class A shares, Class B and Class C share performance generally would
have been lower than Class A share performance. The Class A share performance
included in the Class B and Class C share SEC performance with CDSC has been
adjusted to reflect the CDSC generally applicable to Class B and Class C
shares rather than the sales charge generally applicable to Class A shares.
Class I share results include the performance and operating expenses (e.g.,
Rule 12b-1 fees) of Class A shares for periods prior to the commencement of
offering of Class I shares. Because operating expenses attributable to Class A
shares are greater than those of Class I shares, Class I share performance
generally would have been higher than Class A share performance. The Class A
share performance included in the Class I share SEC performance has been
adjusted to reflect the fact that Class I shares have no initial sales charge.
These results represent the percentage change in net asset value.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies
and waivers may be discontinued at any time.
<PAGE>
PORTFOLIO CONCENTRATION AS OF APRIL 30, 1997
LARGEST SECTORS
High-Grade Corporates 46%
High-Yield Corporates 20%
Mortgage Backed 11%
Asset Backed 6%
Emerging Markets 6%
Nondollar 4%
U.S. Treasuries 4%
Miscellaneous 3%
For a more complete breakdown, refer to the Portfolio of Investments.
- --------------------------------------------------------------------------------
TAX FORM SUMMARY
IN JANUARY 1997, SHAREHOLDERS WERE MAILED A TAX FORM SUMMARY REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 1996.
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<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - April 30, 1997
Bonds - 97.4%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
S&P
Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Bonds - 93.3%
Aerospace - 0.3%
BBB- Northrup Grumman Corp., 9.375s, 2024 $ 2,200 $ 2,374,922
- ------------------------------------------------------------------------------------------------------------
Airlines - 7.6%
BB Airplane Pass-Through Trust,
10.875s, 2019 $ 1,500 $ 1,642,500
B Continental Airlines, Inc.,
9.5s, 2001 4,250 4,345,625
BBB Continental Airlines, Inc.,
9.5s, 2013 4,411 4,896,794
BBB Continental Airlines, Inc.,
10.22s, 2014 5,346 6,207,387
NR Continental Airlines, Inc.,
7.461s, 2016 1,000 992,978
BB+ Delta Airlines, Inc.,
8.5s, 2002 3,155 3,304,263
BB+ Delta Airlines, Inc.,
9.75s, 2021 12,330 14,476,283
A Jet Equipment Trust,
8.64s, 2012## 2,040 2,188,904
BB+ Jet Equipment Trust,
11.44s, 2014## 3,500 4,091,885
NR Jet Equipment Trust,
10.69s, 2015## 2,390 2,842,475
BB- Northwest Airlines, Inc.,
8.7s, 2007 1,000 990,820
A- Southwest Airlines Co.,
7.375s, 2027 1,500 1,431,000
BB United Airlines, Inc.,
9.125s, 2012 1,500 1,627,575
BB+ United Airlines, Inc.,
7.27s, 2013 3,978 3,831,488
------------
$ 52,869,977
- ----------------------------------------------------------------------------------------------------------
Automotive - 1.3%
BB- Lear Corp., 9.5s, 2006 $ 4,500 $ 4,657,500
BB+ Mark IV Industries, Inc.,
7.75s, 2006 4,500 4,263,750
------------
$ 8,921,250
- ----------------------------------------------------------------------------------------------------------
Bank and Finance - 10.1%
BB+ ADVANTA Corp., 7.07s, 1997 $10,000 $ 10,008,000
BB+ ADVANTA Corp., 6.925s, 2002 2,475 2,374,367
BBB+ AFC Capital Trust, 8.207s, 2027 3,775 3,779,643
A- BankAmerica Capital II, 8s,
2026 4,550 4,491,578
BB+ Bank United Corp., 8.875s, 2007 1,325 1,313,406
A Bear Stearns Cos., Inc., 7s,
2007 1,600 1,536,416
BBB+ BT Institutional Capital Trust,
8.09s, 2026## 3,000 2,858,340
BB+ Capital One Financial Corp.,
7.25s, 2003 2,675 2,586,974
BB Colonial Capital II,
8.92s, 2027 1,640 1,600,115
BB+ Contifinancial Corp., 8.375s,
2003 1,735 1,748,013
A+ Credit Suisse, 7.9s, 2007## 5,759 5,830,124
NR First Chicago, 7.95s, 2026## 1,300 1,243,944
BBB- First Empire Capital Trust,
8.234s, 2027 3,275 3,200,723
NR First Merchants Acceptance
Corp., 9.5s, 2006 1,500 1,200,000
BB- First USA Capital Trust,
9.33s, 2027## 2,400 2,635,032
BB+ Hubco Capital Trust,
8.98s, 2027## 2,000 1,972,500
A Lehman Brothers
Holdings, 7.125s, 2003 3,000 2,960,250
A Lehman Brothers
Holdings, 7.5s, 2003 8,800 8,955,672
BBB Leucadia Capital Trust,
8.65s, 2027 2,000 1,895,000
BBB- MBNA Capital, 8.278s, 2026 2,000 1,901,720
BB- Riggs National Corp.,
8.5s, 2006 1,250 1,262,500
BBB Salomon, Inc., 7.2s, 2004 1,260 1,236,035
A State Street Institutional
Capital,
7.94s, 2026## 2,450 2,361,188
BBB- UCFC, 7.7s, 2004 1,300 1,260,051
-------------
$ 70,211,591
- ----------------------------------------------------------------------------------------------------------
Building - 1.9%
BB Building Materials Corp.,
8.625s, 2006 $ 1,000 $ 965,000
BBB- Owens Corning Fiberglass Corp., 8.875s,
2002 5,650 6,042,054
NR Owens Corning Fiberglass Corp.,
9.9s, 2015## 1,500 1,561,875
BB+ USG Corp., 9.25s, 2001 4,440 4,650,900
------------
$ 13,219,829
- ----------------------------------------------------------------------------------------------------------
Business Machines - 0.3%
A IBM Corp., 7.125s, 1997 $ 2,500 $ 2,273,650
- ----------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.1%
BBB- Fingerhut Cos., Inc.,
7.375s, 1999 $ 1,600 $ 1,600,000
A Philip Morris Cos., Inc.,
7.5s, 2004 6,189 6,187,700
------------
$ 7,787,700
- ----------------------------------------------------------------------------------------------------------
Corporate Asset Backed - 5.8%
BBB BCF LLC, 96-R1, 7.75s, 2026## $ 2,477 $ 2,338,275
AAA Chevy Chase Master Credit Card
Trust, 5.838s, 2005 2,500 2,500,000
AAA MBNA Master Credit Card Trust, 5.798s,
2006 30,000 29,981,100
NR Merrill Lynch Mortgage Investors, Inc.,
9.7s, 2008 12 11,990
NR Merrill Lynch Mortgage Investors, Inc.,
8.3s, 2011 1,427 1,440,697
NR Merrill Lynch Mortgage Investors, Inc.,
9s, 2011 751 765,065
NR Merrill Lynch Mortgage Investors, Inc.,
10s, 2011 1,172 1,228,643
B Merrill Lynch Mortgage Investors, Inc.,
8.10s, 2022+ 2,000 1,699,375
------------
$ 39,965,145
- ----------------------------------------------------------------------------------------------------------
Entertainment - 9.9%
BBB+ Circus Circus
Enterprises, 6.7s, 2020 $ 3,000 $ 2,870,070
BBB Continental Cablevision, Inc.,
11s, 2007 10,000 11,253,100
BBB News America Holdings, Inc.,
10.125s, 2012 6,825 7,585,100
BBB News America Holdings, Inc.,
9.5s, 2024 2,600 2,860,390
BBB News America Holdings, Inc.,
8.15s, 2036 3,250 3,098,388
BBB- NWCG Holdings Corp., 0s, 1999 5,060 4,364,250
BB+ TCI Communications, Inc.,
9.65s, 2027 4,650 4,580,250
BBB- Tele-Communications, Inc.,
7.38s, 2001 1,375 1,360,108
BBB- Tele-Communications, Inc.,
7.385s, 2001 9,500 9,398,920
BBB- Tele-Communications, Inc.,
9.25s, 2002 2,000 2,119,880
BBB- Time Warner, Inc., 6.1s, 2001## 7,000 6,629,770
BBB- Time Warner, Inc., 9.15s, 2023 10,354 11,060,143
B- World Com, Inc., 7.75s, 2009 1,600 1,600,096
------------
$ 68,780,465
- ----------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.4%
BBB- RJR Nabisco, Inc., 8.75s, 2007 $ 3,000 $ 2,890,470
- ----------------------------------------------------------------------------------------------------------
Foreign - U.S. Dollar Denominated - 8.0%
NR Banco Comercial S.A.,
8.25s, 2007## $ 1,820 $ 1,793,392
BBB Dao Heng Bank Ltd., 7.75s,
2007## 2,500 2,465,450
A- Empresa Nacional, 7.325s, 2037 2,367 2,336,679
A- Enersis S.A., 6.9s, 2006 1,200 1,146,000
BBB- Financiera Energetica Nacional, 9.375s,
2006## 6,150 6,365,250
NR Hidroelectrica Alicura,
8.375s, 1999## 4,325 4,325,000
NR Industrial Finance Corp.,
7.375s, 2007## 3,000 2,936,490
AA- Korea Development Bank,
6.75s, 2005 7,000 6,693,680
AA- Korea Electric Power, 7s, 2027 4,025 3,914,393
NR Montell America Finance Corp.,
7.6s, 2007## 1,250 1,250,000
BB Pepsi-Gemex S.A., 9.75s, 2004## 1,350 1,336,500
BBB- Petroleum Geo
Services, 7.5s, 2007 675 670,781
BB Polysindo Internationale
Finance, 13s, 2001 2,217 2,477,498
BB Republic of Argentina,
9.25s, 2001 1,560 1,612,650
BBB- Republic of Colombia,
8.75s, 1999 110 115,088
BBB- Republic of Colombia,
7.625s, 2007 1,950 1,829,724
BBB- Republic of Colombia,
8.7s, 2016 6,200 6,203,472
BB+ Republic of Panama,
7.875s, 2002## 1,370 1,311,775
BBB- Total Access Communications, 8.375s,
2006## 1,500 1,487,340
BBB- United Mexican States, Floating Rate,
2001## 2,500 2,525,000
BB United Mexican
States, 11.375s, 2016 2,500 2,637,500
------------
$ 55,433,662
- ----------------------------------------------------------------------------------------------------------
Forest and Paper Products - 3.0%
BBB- Boise Cascade Co., 9.85s, 2002 $ 4,412 $ 4,897,099
BBB- Boise Cascade Co., 7.43s, 2005 5,000 4,964,400
BBB- Georgia Pacific Corp., 9.875s,
2021 7,850 8,600,696
A Westvaco Corp., 7.65s, 2027 2,510 2,497,550
------------
$ 20,959,745
- ----------------------------------------------------------------------------------------------------------
Insurance - 5.0%
BBB- Conseco Financing Trust III,
8.796s, 2027 $ 1,600 $ 1,612,000
A Equitable Life Assurance,
7.7s, 2015## 4,435 4,289,310
BBB+ Fairfax Financial
Holdings, 8.3s, 2026 2,750 2,803,405
A+ Jackson National Life Insurance Co.,
8.15s, 2027## 3,000 2,994,810
A+ Liberty Mutual Insurance Co.,
8.2s, 2007## 5,375 5,652,350
A+ Nationwide Mutual Insurance Co., 7.5s,
2024## 6,440 5,836,701
AA- New York Life Insurance Co.,
7.5s, 2023## 2,000 1,844,360
NR Providian Capital, 9.525s, 2027 4,100 4,125,625
A Travelers Capital II,
7.75s, 2036 5,875 5,581,250
------------
$ 34,739,811
- ----------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.3%
BB Tenet Healthcare Corp.,
8.625s, 2003 $ 2,000 $ 2,030,000
BB Tenet Healthcare Corp.,
8s, 2005 3,950 3,871,000
B+ Tenet Healthcare Corp.,
10.125s, 2005 2,740 2,931,800
------------
$ 8,832,800
- ----------------------------------------------------------------------------------------------------------
Oil Services - 0.4%
BBB Transcontinental
Gas, 7.25s, 2026 $ 3,015 $ 2,796,413
- ----------------------------------------------------------------------------------------------------------
Oils - 2.6%
BB Chesapeake Energy Corp.
7.875s, 2004## $ 4,000 $ 3,880,000
NR Enserch Exploration,
7.54s, 2009## 1,625 1,586,715
BBB- Freeport-McMoRan Co.,
7.5s, 2006 850 832,575
BB+ Gulf Canada Resources Ltd.,
8.25s, 2017 2,000 1,965,000
BBB Husky Oil Ltd., 7.125s, 2006 3,000 2,924,550
BB Oryx Energy Co., 10s, 2001 102 110,928
BBB- Tosco Corp., 7.8s, 2027## 3,250 3,201,494
A- Transocean Offshore, Inc.,
8s, 2027 3,285 3,329,183
------------
$ 17,830,445
- ----------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.4%
BBB+ Hilton Hotels Corp.,
7.95s, 2007 $ 9,300 $ 9,376,353
- ----------------------------------------------------------------------------------------------------------
Steel - 0.4%
BB- AK Steel Corp., 9.125s, 2006 $ 2,500 $ 2,468,750
- ----------------------------------------------------------------------------------------------------------
Supermarkets - 1.5%
BBB- Great Atlantic & Pacific Tea,
9.125s, 1998 $ 6,480 $ 6,605,194
NR Great Atlantic & Pacific Tea,
7.75s, 2007## 3,850 3,859,625
------------
$ 10,464,819
- ----------------------------------------------------------------------------------------------------------
Telecommunications - 0.3%
BBB- 360 Communications Corp.,
7.5s, 2006 $ 1,000 $ 984,300
B- 360 Communications Corp.,
7.6s, 2009 1,000 985,340
------------
$ 1,969,640
- ----------------------------------------------------------------------------------------------------------
Transportation - 0.2%
NR Humpuss Funding Corp., 7.72s, 2009## $ 1,500 $ 1,477,062
- ----------------------------------------------------------------------------------------------------------
U.S. Government and Agency
Obligations - 15.0%
GOV Federal Home Loan Mortgage
Corp., 9.5s, 2001 $ 7 $ 7,813
GOV Government National Mortgage
Assn., 7.5s, 2007-2011 7,928 8,022,144
GOV Government National Mortgage
Assn., 8s, 2024-2026 41,993 49,582,149
GOV Government National Mortgage
Assn., 8.5s, 2026 - 2027 16,502 20,351,758
GOV Government National Mortgage
Assn., 13.25s, 2023 684 762,620
GOV U.S. Treasury Bonds, 6.5s, 2026 9,726 9,134,854
GOV U.S. Treasury Bonds, 6.625s, 2027 8,850 8,491,841
GOV U.S. Treasury Notes, 6.625s, 2002 3,250 3,257,605
GOV U.S. Treasury Notes, 6.25s, 2007 5,000 4,837,500
------------
$104,448,284
- ----------------------------------------------------------------------------------------------------------
Utilities - Electric - 12.0%
BBB Arkansas Power & Light Co.,
8.75s, 2026 $ 500 $ 493,550
B+ Beaver Valley II Funding, 9s, 2017 3,000 3,025,050
BB Central Maine Power Co.,
7.45s, 1999 1,500 1,482,795
BB Cleveland Electric
Illumination, 9.05s, 2001 2,300 2,432,917
BB Cleveland Electric
Illumination, 9.375s, 2017 4,163 4,276,609
BB Cleveland Electric
Illumination, 9s, 2023 4,677 4,799,631
BBB- Comed Financing II,
8.5s, 2027## 1,000 973,750
BBB Commonwealth Edison,
8.375s, 2006 800 844,208
BBB- Commonwealth Edison,
7.625s, 2007 2,460 2,425,954
NR Edison Mission Energy,
7.33s, 2008## 725 714,234
BB- El Paso Electric Co.,
8.9s, 2006 1,750 1,818,775
BBB+ Empresa Electrica, 7.3s, 2003 2,385 2,370,261
BBB Edelnor, 7.75s, 2006 1,150 1,134,786
BB- First PV Funding Corp.,
10.3s, 2014 1,598 1,693,880
BB- First PV Funding Corp.,
10.15s, 2016 826 879,690
BB+ Long Island Lighting Co.,
7.5s, 2007 1,500 1,473,435
BB+ Long Island Lighting Co.,
8.9s, 2019 7,393 7,659,296
BB+ Long Island Lighting Co.,
9s, 2022 6,215 6,735,009
BB+ Long Island Lighting Co.,
8.2s, 2023 125 125,765
BBB- Louisiana Power & Light Co.,
10.67s, 2017 490 524,256
BBB- Louisiana Power & Light Co.,
10.67s, 2017 1,450 1,551,312
BBB Louisiana Power & Light Co.,
8.75s, 2026 567 568,508
BB Midland Corp., 10.33s, 2002 2,686 2,874,716
BBB Montana Power Co., 7.875s, 2026 1,000 970,000
BB- Niagara Mohawk Power Co.,
6.875s, 2001 3,500 3,390,975
BB- Niagara Mohawk Power Co.,
8s, 2004 2,425 2,388,480
B+ North Atlantic Energy,
9.05s, 2002 4,378 4,322,618
BBB- Salton Sea Funding Corp.,
6.69s, 2000 2,779 2,773,521
BBB- Salton Sea Funding Corp.,
7.37s, 2005 2,655 2,615,679
BBB- Salton Sea Funding Corp.,
7.84s, 2010 3,775 3,708,749
BBB- Salton Sea Funding Corp.,
8.3s, 2011 1,500 1,535,325
A- Southern Co., Capital Trust,
8.19s, 2037## 3,660 3,641,700
BBB- System Energy Resources, 7.8s, 2000 3,990 3,991,077
B+ Texas & New Mexico Power Co.,
12.5s, 1999 2,700 2,904,741
------------
$ 83,121,252
- ----------------------------------------------------------------------------------------------------------
Utilities - Gas - 3.5%
BB+ California Energy Co., 0s, 2004 $ 2,350 $ 2,502,750
BBB- Coastal Corp., 7.42s, 2037 10,736 10,209,614
BB+ Louis Dreyfus Natural
Gas, 9.25s, 2004 4,055 4,288,163
BBB+ Ras Laffan Liquefied Natural
Gas, 7.628s, 2006## 1,500 1,503,750
BBB+ Ras Laffan Liquefied Natural
Gas, 8.294s, 2014## 2,075 2,077,594
BBB Tennessee Gas Pipeline,
7.625s, 2037 4,000 3,940,000
------------
$ 24,521,871
- ----------------------------------------------------------------------------------------------------------
Total U.S. Bonds $647,735,906
- ----------------------------------------------------------------------------------------------------------
Foreign Bonds - 4.1%
Australia - 0.7%
AAA Commonwealth of Australia,
8.75s, 2001 AUD 2,090 $ 1,718,384
NR Commonwealth of Australia,
10s, 2002 3,470 3,009,933
------------
$ 4,728,317
- ----------------------------------------------------------------------------------------------------------
Canada - 0.2%
AAA Government of Canada, 8.75s, 2005 CAD 1,890 $ 1,546,646
- ----------------------------------------------------------------------------------------------------------
Denmark - 0.2%
NR Danish Nykredit, 8s, 2026 DKK 9,164 $ 1,415,187
AAA Kingdom of Denmark, 8s, 2001 325 54,667
------------
$ 1,469,854
- ----------------------------------------------------------------------------------------------------------
Greece - 0.3%
NR Hellenic Republic, Floating
Rate, 2003 GRD 555,000 $ 2,118,760
- ----------------------------------------------------------------------------------------------------------
Ireland - 0.3%
NR Republic of Ireland,
6.25s, 1999 IEP 300 $ 450,972
NR Republic of Ireland, 8s, 2000 995 1,580,685
------------
$ 2,031,657
- ----------------------------------------------------------------------------------------------------------
Italy - 0.5%
AAA Republic of Italy, 9.5s, 1999 ITL 2,515,000 $ 1,534,731
AAA Republic of Italy, 9.5s, 2001 2,435,000 1,537,018
------------
$ 3,071,749
- ----------------------------------------------------------------------------------------------------------
Japan - 0.6%
AAA International Bank of
Reconstruction &
Development, 4.75s, 2004 JPY 464,000 $ 4,278,157
- ----------------------------------------------------------------------------------------------------------
New Zealand - 0.2%
AAA Government of New Zealand, 8s, 2001 NZD 2,210 $ 1,548,025
- ----------------------------------------------------------------------------------------------------------
Spain - 0.5%
NR Kingdom of Spain, 10.1s, 2001 ESP 187,490 $ 1,469,006
NR Kingdom of Spain, 10.5s, 2003 188,010 1,562,756
NR Kingdom of Spain, 7.35s, 2007 94,560 671,873
------------
$ 3,703,635
- ----------------------------------------------------------------------------------------------------------
Sweden - 0.2%
NR Kingdom of Sweden, 10.25s, 2000 SEK 9,800 $ 1,408,101
- ----------------------------------------------------------------------------------------------------------
United Kingdom - 0.4%
NR United Kingdom Conversion,
9.5s, 2004 GBP 1,200 $ 2,184,350
NR United Kingdom Treasury,
9.75s, 2002 180 323,819
------------
$ 2,508,169
- ----------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 28,413,070
- ----------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $677,750,459) $676,148,976
- ----------------------------------------------------------------------------------------------------------
Preferred Stocks - 0.8%
- ------------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------------
Oils - 0.2%
El Paso Tennessee Pipeline, "A" 30,000 $ 1,620,000
- ------------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.6%
Long Island Lighting Co., 7.95% 150,000 $ 3,900,000
- ----------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $5,164,500) $ 5,520,000
- ----------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $682,914,959) $681,668,976
Other Assets, Less Liabilities - 1.8% 12,637,506
- ------------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $694,306,482
- ------------------------------------------------------------------------------------------------------------
##SEC Rule 144A restriction.
+Restricted security.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown
below.
AUD = Australian Dollars IEP = Irish Punts
CAD = Canadian Dollars ITL = Italian Lire
DKK = Danish Kroner JPY = Japanese Yen
ESP = Spanish Pesetas NZD = New Zealand Dollars
GBP = British Pounds SEK = Swedish Kronor
GRD = Greek Drachmas
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------------------
April 30, 1997
- --------------------------------------------------------------------------------------------
Assets:
<S> <C>
Investments, at value (identified cost, $682,914,959) $681,668,976
Cash 97,574
Net receivable for forward foreign currency exchange contracts sold 1,135,358
Net receivable for masternetting agreements and closed foreign currency
exchange contracts purchased 884,204
Receivable for Fund shares sold 2,378,822
Receivable for investments sold 28,941,395
Interest and dividends receivable 13,153,242
Other assets 46,598
------------
Total assets $728,306,169
------------
Liabilities:
Payable for Fund shares reacquired $ 1,814,769
Payable for investments purchased 31,116,288
Net payable for forward foreign currency exchange contracts purchased 652,976
Payable to affiliates -
Management fee 7,499
Administrative fee 284
Shareholder servicing agent fee 2,462
Distribution and service fee 174,866
Accrued expenses and other liabilities 230,543
------------
Total liabilities $ 33,999,687
------------
Net assets $694,306,482
============
Net assets consist of:
Paid-in capital $709,152,020
Unrealized appreciation on investments and translation of assets and
liabilities in foreign currencies 93,916
Accumulated net realized loss on investments and foreign
currency transactions (14,389,593)
Accumulated distributions in excess of net investment income (549,861)
------------
Total $694,306,482
============
Shares of beneficial interest outstanding 53,281,347
==========
Class A shares:
Net asset value per share
(net assets of $541,709,680 / 41,536,538 shares of beneficial interest
outstanding) $13.04
======
Offering price per share (100 / 95.25) $13.69
======
Class B shares:
Net asset value and offering price per share
(net assets of $123,000,129 / 9,468,112 shares of beneficial interest
outstanding) $12.99
======
Class C shares:
Net asset value and offering price per share
(net assets of $20,003,387 / 1,541,622 shares of beneficial interest
outstanding) $12.98
======
Class I shares:
Net asset value, offering price and redemption price per share
(net assets of $9,593,286 / 735,075 shares of beneficial interest
outstanding) $13.05
======
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
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Operations
- --------------------------------------------------------------------------------------------
Year Ended April 30, 1997
- --------------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Interest $54,358,273
Dividends 257,770
-----------
Total investment income $54,616,043
-----------
Expenses -
Management fee $ 2,708,535
Trustees' compensation 53,179
Shareholder servicing agent fee 298,027
Shareholder servicing agent fee (Class A) 522,171
Shareholder servicing agent fee (Class B) 167,693
Shareholder servicing agent fee (Class C) 17,546
Distribution and service fee (Class A) 1,596,084
Distribution and service fee (Class B) 1,165,096
Distribution and service fee (Class C) 178,635
Administrative fee 17,658
Custodian fee 257,141
Postage 168,564
Printing 111,202
Auditing fees 68,919
Legal fees 7,031
Miscellaneous 505,785
-----------
Total expenses $ 7,843,266
Fees paid indirectly (74,290)
-----------
Net expenses $ 7,768,976
-----------
Net investment income $46,847,067
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(3,310,886)
Foreign currency transactions (470,892)
Futures contracts 1,914,100
-----------
Net realized loss on investments and foreign currency transactions $(1,867,678)
-----------
Change in unrealized appreciation (depreciation) -
Investments $12,201,565
Translation of assets and liabilities in foreign currencies 1,232,344
Futures contracts (1,955,578)
-----------
Net unrealized gain on investments and foreign currency translation $11,478,331
-----------
Net realized and unrealized gain on investments and foreign
currency $ 9,610,653
-----------
Increase in net assets from operations $56,457,720
===========
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------
Year Ended April 30, 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 46,847,067 $ 43,924,568
Net realized gain (loss) on investments and foreign
currency transactions (1,867,678) 19,192,453
Net unrealized gain (loss) on investments and foreign
currency translation 11,478,331 (15,177,127)
-------------- --------------
Increase in net assets from operations $ 56,457,720 $ 47,939,894
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (37,940,150) $ (36,559,090)
From net investment income (Class B) (7,378,321) (6,140,409)
From net investment income (Class C) (1,163,047) (908,862)
From net investment income (Class I) (232,891) --
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)
-------------- --------------
Total distributions declared to shareholders $ (46,714,409) $ (44,535,871)
-------------- --------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 373,868,501 $ 345,474,743
Net asset value of shares issued to shareholders in
reinvestment of distributions 32,545,850 30,698,182
Cost of shares reacquired (356,986,978) (305,118,806)
-------------- --------------
Increase in net assets from Fund share transactions $ 49,427,373 $ 71,054,119
-------------- --------------
Total increase in net assets $ 59,170,684 $ 74,458,142
Net assets:
At beginning of period 635,135,798 560,677,656
-------------- --------------
At end of period (including accumulated distributions in
excess of net investment income of $549,861 and $228,954,
respectively) $ 694,306,482 $ 635,135,798
============== ==============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Year Ended April 30, 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.85 $12.71 $12.75 $14.39 $13.70
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.94 $ 0.95 $ 0.98 $ 1.02 $ 1.04
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 0.18 0.15 (0.05) (0.63) 0.74
------ ------ ------ ------ ------
Total from investment operations $ 1.12 $ 1.10 $ 0.93 $ 0.39 $ 1.78
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.93) $(0.94) $(0.89) $(1.06) $(1.04)
From net realized gain on investments
and foreign currency transactions -- -- -- (0.80) (0.05)
In excess of net investment income -- -- -- (0.02) --
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.01) --
From paid-in capital -- (0.02) (0.08) (0.14) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.93) $(0.96) $(0.97) $(2.03) $(1.09)
------ ------ ------ ------ ------
Net asset value - end of period $13.04 $12.85 $12.71 $12.75 $14.39
====== ====== ====== ====== ======
Total return(+) 8.99% 8.67% 7.78% 2.12% 13.42%
Ratios (to average net assets)/Supplemental
data(S):
Expenses## 1.02% 1.00% 1.00% 0.96% 0.88%
Net investment income 7.12% 7.10% 7.91% 7.17% 7.82%
Portfolio turnover 446% 377% 306% 410% 330%
Net assets at end of period (000
omitted) $541,710 $514,892 $477,056 $459,311 $490,417
#Per share data for the periods subsequent to April 30, 1993, are 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.
(+)Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
(S)The distributor did not impose a portion of its distribution fee for
certain of 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% --
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Year Ended April 30, 1992 1991 1990 1989 1988
- -------------------------------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $13.25 $12.69 $12.80 $13.20 $14.04
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 1.13 $ 1.14 $ 1.20 $ 1.15 $ 1.16
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 0.45 0.59 (0.14) (0.38) (0.42)
------ ------ ------ ------ ------
Total from investment operations $ 1.58 $ 1.73 $ 1.06 $ 0.77 $ 0.74
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(1.13) $(1.17) $(1.17) $(1.17) $(1.15)
From net realized gain on investments
and foreign currency transactions -- -- -- -- (0.43)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.13) $(1.17) $(1.17) $(1.17) $(1.58)
------ ------ ------ ------ ------
Net asset value - end of period $13.70 $13.25 $12.69 $12.80 $13.20
====== ====== ====== ====== ======
Total return(+) 12.39% 13.65% 7.69% 5.49% 5.18%
Ratios (to average net assets)/Supplemental data:
Expenses 0.91% 0.79% 0.75% 0.83% 0.76%
Net investment income 8.39% 8.82% 9.10% 8.93% 8.85%
Portfolio turnover 243% 189% 186% 160% 287%
Net assets at end of period (000
omitted) $448,261 $315,722 $293,242 $299,485 $310,403
(+)Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to March 1, 1991). If the charge had
been included, the results would have been lower.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Year Ended April 30, 1997 1996 1995 1994*
- -----------------------------------------------------------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.79 $12.69 $12.73 $14.99
------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.83 $ 0.85 $ 0.88 $ 0.56
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.19 0.13 (0.05) (1.30)
------ ------ ------ ------
Total from investment operations $ 1.02 $ 0.98 $ 0.83 $(0.74)
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.82) $(0.85) $(0.80) $(0.59)
From net realized gain on investments and
foreign currency transactions -- -- -- (0.80)
In excess of net investment income -- (0.01) -- (0.02)
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (0.01)
From paid-in capital -- (0.02) (0.07) (0.10)
------ ------ ------ ------
Total distributions declared to
shareholders $(0.82) $(0.88) $(0.87) $(1.52)
------ ------ ------ ------
Net asset value - end of period $12.99 $12.79 $12.69 $12.73
====== ====== ====== ======
Total return 8.16% 7.90% 6.90% (5.42)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.76% 1.81% 1.84% 1.83%+
Net investment income 6.39% 6.29% 7.17% 6.39%+
Portfolio turnover 446% 377% 306% 410%
Net assets at end of period (000 omitted) $123,000 $102,914 $75,451 $33,413
*For the period from the commencement of offering of Class B shares, September 7, 1993, to
April 30, 1994.
+Annualized.
++Not annualized.
#Per share data are 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.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Period
Year Ended April 30, Ended
---------------------------------------------------- April 30,
1997 1996 1995 1994** 1997***
- --------------------------------------------------------------------------------------------------- ---------
Class C Class I
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.79 $12.68 $12.72 $13.57 $13.15
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.83 $ 0.85 $ 0.88 $ 0.29 $ 0.31
Net realized and unrealized gain
(loss)
on investments and foreign currency
transactions 0.20 0.15 (0.05) (0.90) (0.09)
------ ------ ------ ------ ------
Total from investment operations $ 1.03 $ 1.00 $ 0.83 $(0.61) $ 0.22
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.84) $(0.85) $(0.80) $(0.22) $(0.32)
In excess of net investment income -- (0.02) -- -- --
From paid-in capital -- (0.02) (0.07) (0.02) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.84) $(0.89) $(0.87) $(0.24) $(0.32)
------ ------ ------ ------ ------
Net asset value - end of period $12.98 $12.79 $12.68 $12.72 $13.05
====== ====== ====== ====== ======
Total return 8.27% 7.90% 7.00% 4.57%++ 1.70%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.74% 1.74% 1.75% 1.80%+ 0.69%+
Net investment income 6.44% 6.35% 7.17% 6.57%+ 7.19%+
Portfolio turnover 446% 377% 306% 410% 446%
Net assets at end of period (000 omitted) $20,003 $17,330 $8,171 $7,627 $9,593
**For the period from the commencement of offering of Class C shares, January 3, 1994, to
April 30, 1994.
***For the period from the commencement of offering of Class I shares, January 2, 1997, to
April 30, 1997.
+Annualized.
++Not annualized.
#Per share data are 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.
See notes to financial statements
</TABLE>
<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. The Fund, along with other affiliated entities of
Massachusetts Financial Services Company, may utilize a joint trading account
for the purpose of entering into one or more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that result from fluctuations in foreign currency
exchange rates is not separately disclosed.
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 into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Fund 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. The Fund may also use contracts in a manner
intended to protect foreign currency-denominated securities from declines in
value due to unfavorable exchange rate movements. 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 with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. 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 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, 1997, $453,565 was
reclassified to accumulated distributions in excess of net investment income
from accumulated net realized loss on investments 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, 1997, accumulated net realized loss on investments and
foreign currency transactions under book accounting were different from tax
accounting due to significant temporary differences in accounting for capital
losses.
At April 30, 1997, the Fund, for federal income tax purposes, had a capital
loss carryforward of $12,393,120 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, ($9,844,270) and April 30, 2005, ($2,548,850).
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B, Class C, and Class I shares. The four classes of shares differ in their
respective distribution and service fees. All shareholders bear the common
expenses of the Fund pro rata based on 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 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
$16,704 for the year ended April 30, 1997.
Administrator - Effective March 1, 1997, the Trust has an administrative
services agreement with MFS to provide the Trust with certain financial,
legal, compliance, shareholder communications, and other administrative
services. As a partial reimbursement for the cost of providing these services,
the Fund pays MFS an administrative fee up to 0.015% per annum of the Fund's
average daily net assets, provided that the administrative fee is not assessed
on Fund assets that exceed $3 billion.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$134,341 for the year ended April 30, 1997, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
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
service fee for accounts not attributable to a securities dealer which
amounted to $284,694 for the year ended April 30, 1997. The fund is currently
paying distribution fees of 0.05% per annum. Payment of the remaining portion
of the 0.10% per annum Class A distribution fee will commence on such date as
the Trustees of the Trust may determine. Fees incurred under the distribution
plan during the year ended April 30, 1997, were 0.30% of average daily net
assets attributable to Class A shares on an annualized basis.
The Trustees have adopted a distribution plan relating solely to Class B and
Class C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD 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 $27,709
and $16,107 for Class B and Class C shares, respectively, for the year ended
April 30, 1997. Fees incurred under the distribution plan during the year
ended April 30, 1997, were 1.00% of average daily net assets attributable to
Class B and Class C shares on an annualized basis.
Purchases over $1 million of Class A shares and certain purchases by retirement
plans are subject to a contingent deferred sales charge in the event of a
shareholder redemption within 12 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 purchases made on
or after April 1, 1996. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended April 30, 1997,
were $38,472, $245,479, and $5,977 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the fund's average daily net assets at an effective annual
rate of 0.13%. Prior to January 1, 1997, the fee was 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:
<TABLE>
<CAPTION>
Purchases Sales
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. government securities $1,486,064,546 $1,510,375,064
============== ==============
Investments (non-U.S. government securities) $1,440,708,102 $1,368,604,285
============== ==============
</TABLE>
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:
<TABLE>
<S> <C>
Aggregate cost $683,310,424
============
Gross unrealized depreciation $ (6,954,179)
Gross unrealized appreciation 5,312,731
------------
Net unrealized depreciation $ (1,641,448)
============
</TABLE>
(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>
Class A Shares
<CAPTION>
1997 1996
Year Ended April 30, ------------------------------ -----------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Shares sold 19,892,064 $259,257,771 13,392,544 $177,853,643
Shares issued to shareholders in
reinvestment of distributions 2,100,680 27,188,616 1,990,650 26,407,792
Shares transferred to Class I (736,830) (9,689,294)
Shares reacquired (19,787,017) (257,602,400) (12,850,236) (170,615,920)
----------- ------------ ----------- ------------
Net increase 1,468,897 $ 19,154,693 2,532,958 $ 33,645,515
=========== ============ =========== ============
Class B Shares
1997 1996
Year Ended April 30, ------------------------------ ------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------- ------------------------------
Shares sold 7,303,701 $ 94,245,630 10,686,248 $141,536,278
Shares issued to shareholders in
reinvestment of distributions 346,001 4,490,950 278,128 3,686,196
Shares reacquired (6,225,167) (80,626,350) (8,868,575) (117,295,920)
----------- ------------ ----------- ------------
Net increase 1,424,535 $ 18,110,230 2,095,801 $ 27,926,554
=========== ============ =========== ============
Class C Shares
1997 1996
Year Ended April 30, ------------------------------ ------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------- ------------------------------
Shares sold 783,293 $ 10,174,727 1,964,041 $ 26,084,822
Shares issued to shareholders in
reinvestment of distributions 49,134 633,359 45,429 604,194
Shares reacquired (645,483) (8,302,572) (1,299,139) (17,206,966)
----------- ------------ ----------- ------------
Net increase 186,944 $ 2,505,514 710,331 $ 9,482,050
=========== ============ =========== ============
Class I Shares
1997*
Period Ended April 30, ------------------------------
Shares Amount
- --------------------------------------------------------------------
Shares sold 38,538 $ 501,079
Shares issued to shareholders in
reinvestment of distributions 17,820 232,925
Shares transferred from Class A 736,830 9,689,294
Shares reacquired (58,113) (766,362)
----------- ------------
Net increase 735,075 $ 9,656,936
=========== ============
* For the period from commencement of offering of Class I shares, January 2,
1997, to April 30, 1997.
</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 $400 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,
1997, was $6,529.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts. The
notional or contractual amounts of these instruments represent the investment
the Fund has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered. A summary of obligations
under these financial instruments at April 30, 1997, is as follows:
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 6/30/97 AUD 11,799,249 $ 9,125,011 $ 9,196,131 $ (71,120)
6/30/97 CAD 12,328,908 9,126,536 8,864,775 261,761
8/26/97 DEM 19,638,099 11,943,694 11,413,320 530,374
9/30/97 DKK 9,952,404 1,569,953 1,525,062 44,891
1/15/98 ECU 1,906,344 2,262,122 2,177,617 84,505
8/26/97 ESP 631,567,013 4,433,055 4,334,534 98,521
6/30/97 GBP 1,921,357 3,164,279 3,114,648 49,631
6/30/97 IEP 1,430,470 2,240,116 2,141,413 98,703
9/30/97 ITL 5,348,274,180 3,137,257 3,115,203 22,054
9/30/97 NZD 2,264,718 1,548,614 1,561,081 (12,467)
9/30/97 SEK 12,039,529 1,573,801 1,545,296 28,505
----------- ----------- ------------
$50,124,438 $48,989,080 $ 1,135,358
=========== =========== ============
Purchases 6/30/97 CAD 7,615,129 $ 5,686,079 $ 5,472,257 $ (213,822)
6/30/97 DEM 14,588,582 8,857,028 8,457,278 (399,750)
9/30/97 ESP 159,690,951 1,120,717 1,094,880 (25,837)
6/30/97 ITL 624,853,500 367,992 364,550 (3,442)
6/30/97 NZD 743,519 510,924 513,906 2,982
6/30/97 SEK 895,396 127,546 114,439 (13,107)
----------- ----------- ------------
$16,670,286 $16,017,310 $ (652,976)
=========== =========== ============
</TABLE>
Forward foreign currency purchases and sales under masternetting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net receivable of $116,002 with First Boston, $169,692 with J.P. Morgan,
$426,524 with Merrill Lynch, $195,376 with Swiss Bank, and a net payable of
$21,037 with Bankers Trust and $2,353 with Deutsche Bank at April 30, 1997.
At April 30, 1997, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Restricted Security
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, 1997,
the Fund owned the following restricted security (constituting 0.24% 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
security be registered. The value of this security is determined by valuations
supplied by a pricing service or brokers.
<TABLE>
<CAPTION>
Date of
Description Acquisition Par Amount Cost Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Merrill Lynch Mortgage Investors, Inc.,
8.10s, 2022 6/22/94 $2,000,000 $1,386,250 $1,699,375
==========
</TABLE>
<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, 1997, the related statement
of operations for the year then ended, the statement of changes in net assets
for the years ended April 30, 1997 and 1996, and the financial highlights for
each of the years in the ten-year period ended April 30, 1997. 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, 1997, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Bond Fund at
April 30, 1997, the results of its operations, the changes in its net assets,
and its financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 30, 1997
--------------------------------------------
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>
<TABLE>
MFS(R) Bond Fund
<S> <C>
Trustees Auditors
A. Keith Brodkin* - Chairman and President Deloitte & Touche LLP
Richard B. Bailey* - Private Investor; Investor Information For MFS stock and bond market
Former Chairman and Director (until 1991), outlooks, call toll free: 1-800-637-4458 anytime
Massachusetts Financial Services Company; from a touch-tone telephone.
Director, Cambridge Bancorp; Director,
Cambridge Trust Company For information on MFS mutual funds, call your
financial adviser or, for an information kit, call
Peter G. Harwood - Private Investor toll free: 1-800-637-2929 any business day from 9
a.m. to 5 p.m. Eastern time (or leave a message
J. Atwood Ives - Chairman and Chief anytime).
Executive Officer, Eastern Enterprises
Investor Service
Lawrence T. Perera - Partner, Hemenway & MFS Service Center, Inc.
Barnes P.O. Box 2281
Boston, MA 02107-9906
William J. Poorvu - Adjunct Professor,
Harvard University Graduate School of For general information, call toll free:
Business Administration 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
Charles W. Schmidt - Private Investor
For service to speech- or hearing-impaired, call
Arnold D. Scott* - Senior Executive Vice toll free: 1-800-637-6576 any business day from 9
President, Director and Secretary, a.m. to 5 p.m. Eastern time. (To use this service,
Massachusetts Financial Services Company your phone must be equipped with a
Telecommunications Device for the Deaf.)
Jeffrey L. Shames* - President and Director,
Massachusetts Financial Services Company For share prices, account balances, and exchanges,
call toll free: 1-800-MFS-TALK (1-800-637-8255)
Elaine R. Smith - Independent Consultant anytime from a touch-tone telephone.
David B. Stone - Chairman, North American World Wide Web
Management Corp. (investment advisers) www.mfs.com
Investment Adviser
Massachusetts Financial Services Company [Dalbar Logo] For the third year in a row,
500 Boylston Street MFS earned a #1 ranking in
Boston, MA 02116-3741 the DALBAR, Inc. Broker/Dealer
Survey, Main Office Operations
Distributor Service Quality Category. The firm achieved
MFS Fund Distributors, Inc. a 3.48 overall score on a scale of 1 to 4 in
500 Boylston Street the 1996 survey. A total of 110 firms
Boston, MA 02116-3741 responded, offering input on the quality of
service they received from 29 mutual fund
Portfolio Manager companies nationwide. The survey contained
Geoffrey L. Kurinsky* questions about service quality in 15
categories, including "knowledge of phone
Treasurer service contacts," "accuracy of transaction
W. Thomas London* processing," and "overall ease of doing
business with the firm."
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
Investors Bank & Trust Company
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
------------
MFS(R) BOND [DALBAR Logo} Bulk Rate
FUND U.S. Postage
P A I D
500 Boylston Street MFS
Boston, MA 02116-3741 ------------
[MFS logo]
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(SM)
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MFB-2 6/97 74M 11/211/311/811
