<PAGE>
[Logo] SEMIANNUAL REPORT
INVESTMENT MANAGEMENT OCTOBER 31, 1996
MFS{R) BOND FUND
[Graphic Omitted]
AMERICA LEARNS HOW "WE INVENTED THE MUTUAL FUND", (see page 31)
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman ................................................... 1
Portfolio Manager's Overview ............................................... 3
Portfolio Manager's Profile ................................................ 4
Performance Summary ........................................................ 5
Fund Facts ................................................................. 6
Portfolio Concentration .................................................... 6
Portfolio of Investments ................................................... 7
Financial Statements ....................................................... 14
Notes to Financial Statements .............................................. 21
Independent Auditors' Report ............................................... 30
MFS Family of Funds ........................................................ 32
Trustees and Officers ...................................................... 33
HIGHLIGHTS
* FOR THE SIX MONTHS ENDED OCTOBER 31, 1996, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 6.41%, CLASS B SHARES
6.00%, AND CLASS C SHARES 6.05%.
* THE FUND HAS BENEFITED FROM ITS OVERWEIGHTING IN CORPORATE SECURITIES
AND A MODERATE EXPOSURE TO NON-DOLLAR FIXED-INCOME MARKETS.
* THE FUND'S WEIGHTINGS IN INVESTMENT-GRADE CORPORATE SECURITIES VARIED
FROM 40% TO 60% OF THE PORTFOLIO, MORE THAN 50% HIGHER THAN BOTH THE
COMPETITIVE UNIVERSE AND THE FUND'S NORMAL POSITION.
* AN OVERWEIGHTED POSITION IN THE AIRLINE SECTOR CONTRIBUTED TO THE
FUND'S STRONG PERFORMANCE, AS THIS WAS THE BEST PERFORMING SECTOR OF
THE INVESTMENT-GRADE CORPORATE BOND MARKET.
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
As we enter the final months of 1996, the U.S. economy appears to have settled
into a pattern of moderate growth and inflation -- two factors that we think can
be important contributors to a favorable long-term investment climate. During
the first quarter of 1996, real (inflation-adjusted) economic growth was 2.3% on
an annualized basis, followed by a rate of 4.7% in the second quarter. This
unexpectedly high level was followed by a more moderate 2.0% pace during the
third quarter. Overall, real growth in gross domestic product has surpassed our
expectations this year, and we now expect that growth for all of 1996 could
exceed 2.5%. Although individual consumers appear to be carrying an excessive
debt load, the consumer sector itself, which represents two-thirds of the
economy, continues to support the automobile and housing markets. Consumer
spending has also been positively impacted by widespread job growth and, more
recently, increasing wages. However, very recent statistics appear to show a
slowdown in consumer spending. This is particularly true when considering
overall retail sales, which have been flat for several months. Furthermore, the
economies of Europe and Japan continue to be in the doldrums, weakening U.S.
export markets, while subduing the capital spending plans of American
corporations. While economic growth should continue, we expect some slackening
toward the end of the year.
In the bond markets, persistent signs of economic weakness led to decreases in
short-term interest rates by the Federal Reserve Board in late 1995 and early
1996. Should signs of more rapid economic growth and, particularly, of higher
inflation resurface, we would expect the Fed to maintain its anti-inflationary
stance. Through the middle of the year, bond markets traded in a narrow range as
investors shifted between concern for the lack of a budget resolution in
Washington and hope that sluggish economic reports and low inflation might lead
to lower interest rates. Later, fixed-income markets began reacting to
conflicting signals regarding the economy's strength with more volatile trading
patterns marked by a downward bias in interest rates.
Finally, as you may notice, this report to shareholders incorporates a number
of changes which we hope you will find informative and useful. Following the
Portfolio Manager's Overview, we have added new information on the Fund's
holdings, including a chart illustrating the portfolio's concentration in the
types of investments that meet its criteria. Near the back of the report,
telephone numbers and addresses are listed if you would like to contact MFS.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/A. Keith Brodkin
-----------------------
A. Keith Brodkin
Chairman and President
November 12, 1996
<PAGE>
PORTFOLIO MANAGER'S OVERVIEW
[Photo of Geoffrey L. Kurinsky]
Dear Shareholders:
Following a sharp increase in interest rates earlier in 1996, interest rates
moved lower during the past six months, resulting in strong performance for the
fixed-income markets. After peaking at around 7% in May, interest rates on 10-
year Treasury notes fell to 6.25% by the end of October as the market's fears of
a runaway economy and resulting inflationary pressures receded.
For the six months ended October 31, 1996, Class A shares of the Fund provided
a total return of 6.41%, Class B shares 6.00%, and Class C shares 6.05%. 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 5.39% 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
performance of the Fund also compared favorably to the 5.73% average return of
other Corporate Debt BBB funds with similar objectives as defined by Lipper
Analytical Services, Inc., an independent firm that reports mutual fund
performance.
The Fund's strong performance during the past six months resulted from its
overweighting in corporate securities, and a moderate exposure to non-dollar
fixed-income markets. As is typical in periods of strong economic activity, the
6.14% return of investment-grade corporate securities outperformed Treasury
securities, which returned 5.05% during the period. (Note that principal value
and interest on Treasury securities are guaranteed by the U.S. government if
held to maturity.) The Fund's weightings in investment-grade corporate
securities varied from 40% to 60% of the portfolio, which is more than 50%
higher than both the competitive universe and the Fund's normal position. The
Fund was also helped by its 15% to 20% exposure to the high-yield corporate
market, which turned in a strong performance during the period.
In terms of specific sectors, the Fund's overweighted position in the airline
sector, the best performing sector of the investment-grade corporate bond
market, contributed to its strong performance. The three largest domestic
carriers, Delta Airlines, United Airlines, and AMR Corp., in all of which the
Fund has maintained significant exposures, continue to benefit from the pickup
in economic activity and a 10% to 20% increase in airline fares.
The Fund's exposure to the cable/media sector was a drag on performance during
the period. The sector had the worst returns of the investment-grade corporate
bond market. The Fund's largest holding, TeleCommunications Inc.,
underperformed, as the Standard & Poor's Rating Agency has threatened to return
its bond rating to below- investment-grade status. We have retained our position
in this company based on our view that a downgrade is already reflected in
current pricing. If the investment-grade ratings are affirmed, there is the
potential for significant price appreciation.
As the U.S. economy prospered, the economic fortunes of our major trading
partners overseas continued to stumble due to economic stagnation. The Fund
benefited from its 9% position in non- dollar securities as central banks
overseas provided the required remedy of lower interest rates. For the period,
the J.P. Morgan Non-Dollar Index (an unmanaged aggregate index of actively
traded government bonds issued from 12 countries, excluding the United States,
with remaining maturities of at least one year) provided a return of 6.57%.
Looking forward, we are maintaining our significant exposure to both the
investment-grade and high-yield corporate bond markets based on our outlook for
continued steady economic growth into 1997. With recent signs of a pickup in
economic activity among our major trading partners, we are currently reviewing
our exposure to the non-dollar fixed-income markets. If we see further signs of
strength, we will consider reducing our current 9% commitment to these markets.
Respectfully,
/s/Geoffrey L. Kurinsky
--------------------
Geoffrey L. Kurinsky
Portfolio Manager
PORTFOLIO MANAGER'S PROFILE
GEOFFREY L. KURINSKY IS A SENIOR VICE PRESIDENT OF MASSACHUSETTS FINANCIAL
SERVICES AND PORTFOLIO MANAGER OF MFS BOND FUND AND MFS LIMITED MATURITY
FUND. HE ALSO MANAGES THE U.S. HIGH-GRADE FIXED-INCOME PORTIONS OF MFS TOTAL
RETURN FUND AND MFS WORLD ASSET ALLOCATION FUND. HE JOINED MFS AS A PORTFOLIO
MANAGER IN THE FIXED INCOME DEPARTMENT IN 1987 AND WAS NAMED A VICE PRESIDENT
IN JANUARY 1990 AND A SENIOR VICE PRESIDENT IN 1993. HE IS A GRADUATE OF THE
UNIVERSITY OF MASSACHUSETTS AND HOLDS AN M.B.A. IN FINANCE FROM BOSTON
UNIVERSITY.
<PAGE>
PERFORMANCE SUMMARY
Because mutual funds like MFS Bond Fund are designed for investors with
long-term goals, we have provided cumulative results as well as the average
annual total returns for Class A, Class B, and Class C shares for the applicable
time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------
Cumulative Total Return +6.41% +5.84% +50.64% +533.30%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +5.84% + 8.54% + 8.70%
- -------------------------------------------------------------------------------
SEC Results -- +0.79% + 7.49% + 8.17%
- -------------------------------------------------------------------------------
CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------
Cumulative Total Return +6.00% +5.04% +47.00% +517.75%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +5.04% + 8.01% + 8.43%
- -------------------------------------------------------------------------------
SEC Results -- +1.11% + 7.73% + 8.43%
- -------------------------------------------------------------------------------
CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------
Cumulative Total Return +6.05% +5.05% +47.48% +522.90%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +5.05% + 8.08% + 8.47%
- -------------------------------------------------------------------------------
SEC Results -- +4.07% + 8.08% + 8.47%
- -------------------------------------------------------------------------------
All results represent past performance and are not an indication of future
results. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost.
Class A SEC results include the maximum 4.75% sales charge. Class B 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. As of April 1, 1996, Class C shares
redeemed within 12 months of purchase will be subject to a 1% CDSC. See the
prospectus for details.
Class B and Class C share performance includes the performance of the Fund's
Class A shares for periods prior to the commencement of offering of Class B
shares on September 7, 1993 and of Class C shares on January 3, 1994. Sales
charges and operating expenses for Class A, Class B, and Class C shares differ.
The Class A share performance, which is included within the Class B and Class C
share SEC performance, has been adjusted to reflect the CDSC generally
applicable to Class B and Class C shares rather than the initial sales charge
generally applicable to Class A shares. Class B and Class C share performance
has not been adjusted, however, to reflect differences in operating expenses
(e.g., Rule 12b-1 fees), which generally are lower for Class A shares.
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: MAY 8, 1974
SIZE: $676.2 MILLION NET ASSETS AS OF OCTOBER 31, 1996
PORTFOLIO CONCENTRATION
AS OF OCTOBER 31, 1996
LARGEST SECTORS
Investment Grade Corporates 47%
Non-dollar 9%
Other 7%
U.S Treasuries 7%
Mortgage Backed 10%
High-Yield Corporates 20%
<PAGE>
PORTFOLIO OF INVESTMENTS - October 31, 1996
Bonds - 97.9%
- ------------------------------------------------------------------------------
S&P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------
U.S. Bonds - 88.8%
Aerospace - 1.1%
A- McDonnell Douglas Corp.,
6.875s, 2006 $ 5,000 $ 4,959,100
BBB- Northop-Grumman Corp.,
9.375s, 2024 2,200 2,469,500
------------
$ 7,428,600
- ------------------------------------------------------------------------------
Airlines - 5.5%
BB+ AMR Corp., 9.75s, 2021 $ 2,000 $ 2,433,380
BB Airplane Pass-Through
Trust (GPA Group Lease),
10.875s, 2019 1,500 1,627,500
BBB Continental Airlines,
Inc., 9.5s, 2013 4,500 5,058,810
NR Continental Airlines,
Inc., 10.22s, 2014## 1,500 1,765,888
BB+ Delta Airlines, Inc.,
8.5s, 2002 3,000 3,201,840
BB+ Delta Airlines, Inc.,
10.375s, 2022 3,250 4,116,092
A Jet Equipment Trust, "B",
8.64s, 2012## 2,066 2,255,925
BBB Jet Equipment Trust, "C",
10.69s, 2015## 2,390 2,903,730
BB+ Jet Equipment Trust, "D",
11.44s, 2014## 3,500 4,103,155
BBB+ Qantas Airways, Ltd.,
7.5s, 2003## 3,225 3,312,914
BB United Airlines, 9.125s, 2012 1,500 1,648,110
BB+ United Airlines, 7.27s, 2013 3,000 2,904,780
A+ USAir, Inc., 6.76s, 2008 1,948 1,906,679
------------
$ 37,238,803
- ------------------------------------------------------------------------------
Automotive - 2.3%
A- Auburn Hills Trust, 12s, 2020 $ 3,000 $ 4,524,720
BB- Lear Corp., 9.5s, 2006 6,500 6,825,000
BB+ Mark IV Industries, Inc.,
7.75s, 2006 4,500 4,235,625
------------
$ 15,585,345
- ------------------------------------------------------------------------------
Building - 1.9%
BBB- Owens-Corning Fiberglass
Corp., 8.875s, 2002 $ 5,650 $ 6,165,506
NR Owens-Corning Fiberglass
Corp. (Toledo),
9.9s, 2015## 1,500 1,663,125
BB USG Corp., 9.25s, 2001 4,440 4,689,750
------------
$ 12,518,381
- ------------------------------------------------------------------------------
Chemicals - 0.8%
BBB FMC Corp., 7.75s, 2011 $ 5,000 $ 5,200,000
- ------------------------------------------------------------------------------
Commercial Services - 2.1%
BB+ Loewen Group, Inc., 7.5s, 2001 $ 9,775 $ 9,858,870
BB+ Loewen Group, Inc., 7.75s, 2001## 4,000 4,065,000
------------
$ 13,923,870
- ------------------------------------------------------------------------------
Consumer Goods and Services - 0.6%
BBB- Fingerhut Cos., Inc.,
7.375s, 1999## $ 1,600 $ 1,614,000
BBB+ Tupperware Financial BV,
7.25s, 2006 2,200 2,238,500
------------
$ 3,852,500
- ------------------------------------------------------------------------------
Corporate Asset Backed - 1.6%
BBB BCF LLC, 7.75s, 2026+ $ 1,997 $ 1,937,412
NR Chevy Chase Trust, 5.619s, 2001 2,500 2,499,200
NR Merrill Lynch Mortgage
Investors, Inc.,
9.7s, 2008 124 124,738
NR Merrill Lynch Mortgage
Investors, Inc., 10.25s, 2009+ 261 260,976
NR Merrill Lynch Mortgage
Investors, Inc.,
8.3s, 2011 1,679 1,705,482
NR Merrill Lynch Mortgage
Investors, Inc., 9s, 2011 1,014 1,035,761
NR Merrill Lynch Mortgage
Investors, Inc.,
10s, 2011 1,469 1,550,211
NR Merrill Lynch Mortgage
Investors, 8.08s, 2022+ 2,000 1,660,000
------------
$ 10,773,780
- ------------------------------------------------------------------------------
Entertainment - 2.5%
BBB News America Holdings,
Inc., 10.125s, 2012 $ 6,825 $ 7,921,982
BBB- Time Warner, Inc., 7.95s, 2000 2,000 2,070,800
BBB- Time Warner, Inc., 8.375s, 2023 6,650 6,774,488
------------
$ 16,767,270
- ------------------------------------------------------------------------------
Financial Services - 6.9%
BB- Aames Financial Corp.,
9.125s, 2003 $ 1,750 $ 1,771,875
BBB- Advanta National Bank
Corp., 7.47s, 2001 5,500 5,637,500
BBB Alex Brown, Inc., 7.625s, 2005 2,925 2,995,902
BBB- American Life Holdings
Co., 11.25s, 2004 3,000 3,412,500
A Bear Stearns Cos., Inc.,
7.25s, 2006 2,500 2,528,125
BBB- Capital One Bank, 7.15s, 2006 4,000 4,067,880
BB+ Contifinancial Corp.,
8.375s, 2003 2,000 2,010,000
NR First Merchant Acceptance
Corp., 9.5s, 2006 1,500 1,500,000
NR First Nationwide Escrow,
10.625s, 2003## 1,500 1,575,000
BB+ Hubco, Inc., 8.2s, 2006## 2,000 2,077,780
A Lehman Brothers Holdings,
7.125s, 2003 3,000 3,013,620
A Lehman Brothers Holdings,
7.5s, 2026 8,800 9,053,000
BB+ PennCorp Financial Group,
Inc., 9.25s, 2003 2,380 2,487,100
BBB- Standard Federal Bancorp,
7.75s, 2006 4,465 4,622,748
------------
$ 46,753,030
- ------------------------------------------------------------------------------
Food and Beverage Products - 3.6%
BB+ Great Atlantic & Pacific
Tea Co., Inc., 9.125s, 1998 $ 6,480 $ 6,669,994
BBB Nabisco, Inc., 7.55s, 2015 7,850 7,737,353
BBB- RJR Nabisco, Inc., 8.75s, 2004 4,375 4,358,944
BBB- RJR Nabisco, Inc., 8.75s, 2007 5,705 5,601,511
------------
$ 24,367,802
- ------------------------------------------------------------------------------
Foreign - U.S. Dollar Denominated - 6.2%
BBB+ City of Naples, 7.52s, 2006 $ 2,485 $ 2,573,541
BBB- Financiara Ener Nacional-
Colombia, 6.625s, 1996## 3,040 3,040,000
BBB- Financiara Ener Nacional- Colombia,
9.375s, 2006## 6,150 6,334,500
BB+ Gulf Canada Resources
Ltd., 8.35s, 2006 2,750 2,853,125
NR Hidroelectrica Alicura,
8.375s, 1999## 4,325 4,206,063
NR Peoples Republic of China,
7.75s, 2006 3,000 3,082,650
A+ Petroliam Nasional Berhad,
7.625s, 2026## 2,750 2,791,250
A+ Province of Quebec, 6.5s, 2006 1,875 1,817,361
NR Republic of Argentina-
Global, 9.25s, 2001 1,560 1,522,950
BBB- Republic of Colombia,
8.75s, 1999 110 114,675
BBB- Republic of Colombia,
8.7s, 2016 6,200 5,843,500
BB+ Republic of South Africa,
8.375s, 2006 2,975 2,986,811
NR United Mexican States,
9.75s, 2001## 2,500 2,502,000
BB United Mexican States,
11.375s, 2016 2,500 2,493,750
------------
$ 42,162,176
- ------------------------------------------------------------------------------
Forest and Paper Products - 3.1%
BBB- Boise Cascade Corp.,
7.43s, 2005 $ 5,000 $ 5,031,250
NR Canadian Pacific Forest
Products, 9.25s, 2002 6,730 7,237,846
BBB- Georgia Pacific Corp.,
9.875s, 2021 7,850 8,831,329
------------
$ 21,100,425
- ------------------------------------------------------------------------------
Insurance - 6.4%
BBB Arkwright CSN Trust, 9.625s, 2026## $ 3,000 $ 3,263,520
A Equitable Life Assurance,
6.95s, 2005 3,323 3,293,226
A Equitable Life Assurance,
7.7s, 2015 3,327 3,339,476
BBB+ Fairfax Financial Holdings
Ltd., 8.3s, 2026 2,750 2,877,958
A+ Liberty Mutual Insurance
Co., 8.2s, 2007## 10,375 11,158,312
A+ Liberty Mutual Insurance
Co., 7.875s, 2026## 1,500 1,505,505
AA- Metropolitan Life
Insurance Co., 7.7s, 2015## 3,000 3,035,880
A+ Nationwide Mutual
Insurance Co., 7.5s, 2024## 6,440 6,125,342
AA New York Life Insurance
Co., 7.5s, 2023 2,000 1,943,620
A+ Travelers Group, Inc.,
7.875s, 2025 6,540 6,854,574
------------
$ 43,397,413
- ------------------------------------------------------------------------------
Lodging - 0.5%
BBB RHG Financial Corp., 8.875s, 2005 $ 3,510 $ 3,720,600
- ------------------------------------------------------------------------------
Machinery - 0.4%
BBB Fisher Scientific
International, Inc.,
7.125s, 2005 $ 3,000 $ 2,962,350
- ------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.8%
BB Tenet Healthcare Corp.,
8.625s, 2003 $ 2,000 $ 2,115,000
B+ Tenet Healthcare Corp.,
10.125s, 2005 2,740 3,007,150
------------
$ 5,122,150
- ------------------------------------------------------------------------------
Oils - 4.4%
BB- Citgo Petroleum Corp.,
7.875s, 2006 $ 1,500 $ 1,535,235
BB+ Coastal Corp., 10.25s, 2004 3,835 4,575,423
BB+ Coastal Corp., 7.75s, 2035 2,675 2,661,625
BBB- Mitchell Energy &
Development, 9.25s, 2002 1,365 1,467,498
BB Oryx Energy Co., 10s, 1999 5,225 5,572,306
BB Oryx Energy Co., 10s, 2001 3,000 3,298,950
BB Oryx Energy Co., 8s, 2003 2,250 2,287,913
BB Oryx Energy Co., 8.375s, 2004 5,200 5,415,280
BBB- Tosco Corp., 7.625s, 2006 3,000 3,087,900
------------
$ 29,902,130
- ------------------------------------------------------------------------------
Real Estate Investment Trust - 0.7%
BBB Taubman Realty Group LP,
8s, 2001 $ 4,500 $ 4,740,345
- ------------------------------------------------------------------------------
Stores - 0.7%
A May Department Stores Co.,
7.45s, 2016 $ 2,000 $ 2,025,000
BBB Price/Costco Inc., 7.125s, 2005 2,500 2,488,725
------------
$ 4,513,725
- ------------------------------------------------------------------------------
Telecommunications - 7.1%
BBB- 360 Communications Co.,
7.5s, 2006 $ 1,000 $ 990,850
NR American Portable Telecom,
Inc., 0s, 2006## 6,775 2,994,550
BBB Continental Cablevision,
Inc., 11s, 2007 10,000 11,375,000
BB+ Lenfest Communications
Corp., 8.375s, 2005 3,745 3,436,038
BB+ Rogers Cantel, Inc.,
9.75s, 2016 3,000 2,970,000
BBB- Tele-Communications, Inc.,
7.375s, 2000 7,500 7,589,325
BBB- Tele-Communications, Inc.,
7.38s, 2001 2,750 2,787,208
BBB- Tele-Communications, Inc.,
10.125s, 2022 3,500 3,656,555
BBB- Tele-Communications, Inc.,
7.875s, 2026 10,830 9,098,391
BBB- Total Access Communication
Public Co. Ltd., 8.375s, 2006## 3,000 2,993,190
------------
$ 47,891,107
- ------------------------------------------------------------------------------
U.S. Government and Agency Obligations - 15.4%
GOV Federal Home Loan Mortgage
Corporation, 9.5s, 2001 $ 9 $ 9,925
GOV Federal Home Loan Mortgage
Corporation, 8.5s, 2025 5,651 5,858,081
GOV Federal National Mortgage
Association, 9s, 2004 3 2,723
GOV Federal National Mortgage
Association, 7.5s, 2010 - 2011 12,069 12,257,912
GOV Federal National Mortgage
Association, Stripped
Mortgage Backed
Security, 7s, 2023 6,997 2,329,701
GOV Government National
Mortgage Association,
7.5s, 2007 - 2011 8,356 8,522,912
GOV Government National
Mortgage Association,
8s, 2024 - 2026 25,124 25,689,389
GOV Government National
Mortgage Association,
13.25s, 2023 686 $ 779,254
GOV U.S. Treasury Bonds, 12s, 2005 16,800 22,987,104
GOV U.S. Treasury Bonds,
8.125s, 2019 8,250 9,558,367
GOV U.S. Treasury Bonds, 6s, 2026 4,985 4,547,267
GOV U.S. Treasury Bonds,
6.75s, 2026 11,750 11,889,472
------------
$104,432,107
- ------------------------------------------------------------------------------
Utilities - Electric - 11.4%
BBB Arkansas Power & Light
Co., 8.75s, 2026 $ 500 $ 516,695
BB Central Maine Power Co.,
7.45s, 1999 1,500 1,496,580
BB Cleveland Electric Co.,
8.68s, 2001 3,500 3,617,460
BB- El Paso Electric Co.,
8.9s, 2006 3,750 3,867,188
BBB+ Empresa Electric Co.
(Pehuenche), 7.3s, 2003 2,385 2,425,378
BBB Empresa Electric del
Norte, 7.75s, 2006## 1,150 1,170,907
B+ First PV Funding Corp.,
10.3s, 2014 7,644 8,112,195
B+ First PV Funding Corp.,
10.15s, 2016 3,672 3,910,680
BB+ Long Island Lighting Co.,
7.5s, 2007 3,500 3,269,595
BB+ Long Island Lighting Co.,
8.9s, 2019 8,893 8,658,047
BB+ Long Island Lighting Co.,
9s, 2022 5,900 5,894,572
BBB- Long Island Lighting Co.,
9.625s, 2024 6,000 6,075,000
BBB- Louisiana Power & Light
Co., 10.67s, 2017 490 524,427
BBB- Louisiana Power & Light
Co., 10.67s, 2017 1,450 1,551,819
BBB Louisiana Power & Light
Co., 8.75s, 2026 567 581,175
BB- Midland Corp., 10.33s, 2002 2,832 2,994,561
BB Niagara Mohawk Power
Corp., 8s, 2004 5,205 4,970,463
BBB- Salton Sea Funding Corp.,
6.69s, 2000 3,193 3,203,213
BBB- Salton Sea Funding Corp.,
7.37s, 2005 2,655 2,634,583
BBB- Salton Sea Funding Corp.,
7.84s, 2010 3,775 3,814,109
BBB- Salton Sea Funding Corp.,
8.3s, 2011 1,500 1,557,465
BBB- System Energy Resources,
7.8s, 2000 3,990 4,051,366
B+ Texas & New Mexico Power
Co., 12.5s, 1999 2,200 2,408,560
------------
$ 77,306,038
- ------------------------------------------------------------------------------
Utilities - Gas - 2.2%
BBB- ANR Pipeline, 9.625s, 2021 $ 2,500 $ 3,042,800
BB- California Energy Co., 0s
to 1997, 10.25s to 2004 3,100 3,177,500
BB+ Louis Dreyfus Natural Gas,
9.25s, 2004 2,310 2,437,050
BBB+ NGC Corp., 6.75s, 2005 1,500 1,481,400
BBB+ NGC Corp., 7.625s, 2026 2,900 2,965,250
BBB PanEnergy Corp., 7s, 2006 1,500 1,506,300
------------
$ 14,610,300
- ------------------------------------------------------------------------------
Utilities - Telephone - 0.6%
AA GTE North Inc., 6.9s, 2008 $ 4,000 $ 3,995,480
- ------------------------------------------------------------------------------
Total U.S. Bonds $600,265,727
- ------------------------------------------------------------------------------
Foreign Bonds - 9.1%
Australia - 1.5%
AAA Commonwealth of Australia,
8.75s, 2001 AUD 10,300 $ 8,687,844
NR Commonwealth of Australia,
9.5s, 2003 1,700 1,507,295
------------
$ 10,195,139
- ------------------------------------------------------------------------------
Canada - 1.2%
AA+ Government of Canada,
7.5s, 2003 CAD 1,300 $ 1,049,978
AA- Province of Ontario,
7.5s, 2006 9,000 7,153,038
------------
$ 8,203,016
- ------------------------------------------------------------------------------
Denmark - 1.4%
NR Kingdom of Denmark,
6s, 1999 DKK 8,978 $ 1,586,409
AA+ Kingdom of Denmark, 9s, 2000 8,580 1,660,332
AA+ Kingdom of Denmark, 8s, 2001 29,519 5,540,098
AA+ Kingdom of Denmark, 7s, 2007 4,361 746,048
------------
$ 9,532,887
- ------------------------------------------------------------------------------
Germany - 1.5%
NR Federal Republic of
Germany, 6.875s, 1999 DEM 3,920 $ 2,746,324
NR Federal Republic of
Germany, 7.125s, 2002 4,505 3,221,461
AAA German Unity Fund, 8.75s, 2000 4,334 3,254,783
AAA Treuhandanstalt
Obligationen, 6.375s, 1999 1,713 1,191,652
------------
$ 10,414,220
- ------------------------------------------------------------------------------
Ireland - 0.7%
NR Government of Ireland,
6.25s, 1999 IEP 300 $ 489,621
NR Government of Ireland,
8s, 2000 2,615 4,514,782
------------
$ 5,004,403
- ------------------------------------------------------------------------------
Italy - 1.0%
AA Republic of Italy,
9.5s, 2001 ITL 7,340,000 $ 5,198,925
AA Republic of Italy,
9.5s, 2006 1,870,000 1,338,688
------------
$ 6,537,613
- ------------------------------------------------------------------------------
Spain - 0.8%
AA Kingdom of Spain,
8.3s, 1998 ESP 155,000 $ 1,247,635
AA Kingdom of Spain,
8.4s, 2001 314,040 2,582,297
AA Kingdom of Spain,
10.1s, 2001 160,000 1,391,087
------------
$ 5,221,019
- ------------------------------------------------------------------------------
Sweden - 0.3%
AA+ Kingdom of Sweden,
10.25s, 2000 SEK 11,700 $ 2,009,094
- ------------------------------------------------------------------------------
United Kingdom - 0.7%
NR United Kingdom Treasury,
9s, 2000 GBP 1,250 $ 2,151,941
NR United Kingdom Treasury,
9.75s, 2002 1,250 2,257,399
------------
$ 4,409,340
- ------------------------------------------------------------------------------
Total Foreign Bonds $ 61,526,731
- ------------------------------------------------------------------------------
Total Bonds $661,792,458
- ------------------------------------------------------------------------------
Preferred Stocks - 0.5%
- ------------------------------------------------------------------------------
S&P
Bond Rating
(Unaudited) Issuer Shares Value
- ------------------------------------------------------------------------------
Utilities - Electric
BB+ Long Island Lighting
Co., 7.95s 150,000 $ 3,750,000
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $654,522,031) $665,542,458
Other Assets, Less Liabilities - 1.6% 10,661,730
- ------------------------------------------------------------------------------
Net Assets - 100.0% $676,204,188
- ------------------------------------------------------------------------------
+ Restricted security.
## SEC Rule 144A restriction.
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 GBP = British Pounds
CAD = Canadian Dollars IEP = Irish Punt
DEM = Deutsche Marks ITL = Italian Lire
DKK = Danish Kroner NZD = New Zealand Dollar
ESP = Spanish Pesetas SEK = Swedish Kronor
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
October 31, 1996
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $654,522,031) $665,542,458
Cash 483,528
Net receivable for foreign currency exchange contracts sold 11,938
Net receivable for forward foreign currency
exchange contracts purchased 4,201
Receivable for daily variation margin on open futures
contracts 54,688
Receivable for investments sold 37,772,789
Receivable for Fund shares sold 2,473,880
Interest and dividends receivable 14,291,377
Other assets 24,658
------------
Total assets $720,659,517
------------
Liabilities:
Payable for investments purchased $ 42,167,582
Payable for Fund shares reacquired 1,596,585
Net payable for closed forward foreign currency exchange
contracts 251,537
Payable to affiliates -
Management fee 7,356
Shareholder servicing agent fee 2,961
Distribution fee 149,870
Accrued expenses and other liabilities 279,438
------------
Total liabilities $ 44,455,329
------------
Net assets $676,204,188
============
Net assets consist of:
Paid-in capital $683,592,813
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 11,691,356
Accumulated net realized loss on investments and
foreign currency transactions (18,764,856)
Accumulated distributions in excess of net investment
income (315,125)
------------
Total $676,204,188
============
Shares of beneficial interest outstanding 51,346,377
============
Class A shares:
Net asset value per share (net assets of
$536,536,702 / 40,705,839 shares of beneficial
interest outstanding) $13.18
======
Offering price per share (100 / 95.25) $13.84
======
Class B shares:
Net asset value and offering price per share (net assets of
$121,117,827 / 9,226,506 shares of beneficial interest
outstanding) $13.13
======
Class C shares:
Net asset value and offering price per share (net assets of
$18,549,659 / 1,414,032 shares of beneficial interest
outstanding) $13.12
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Six Months Ended October 31, 1996
- ------------------------------------------------------------------------------
Net investment income:
Interest income $27,125,774
-----------
Expenses -
Management fee $ 1,339,593
Trustees' compensation 27,369
Shareholder servicing agent fee (Class A) 390,852
Shareholder servicing agent fee (Class B) 124,520
Shareholder servicing agent fee (Class C) 13,012
Distribution and service fee (Class A) 773,389
Distribution and service fee (Class B) 563,276
Distribution and service fee (Class C) 84,216
Custodian fee 147,647
Printing 86,697
Postage 76,341
Auditing fees 31,206
Legal fees 3,479
Miscellaneous 310,397
-----------
Total expenses $ 3,971,994
Fees paid indirectly (50,682)
-----------
Net expenses $ 3,921,312
-----------
Net investment income $23,204,462
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(6,727,098)
Foreign currency transactions (218,704)
Futures contracts 1,156,426
-----------
Net realized loss on investments and foreign
currency transactions $(5,789,376)
-----------
Change in unrealized appreciation (depreciation) -
Investments $24,467,975
Translation of assets and liabilities in foreign currencies (342,953)
Futures contracts (1,049,251)
-----------
Net unrealized gain on investments and foreign
currency translation $23,075,771
-----------
Net realized and unrealized gain on investments and
foreign currency $17,286,395
-----------
Increase in net assets from operations $40,490,857
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
October 31, 1996 April 30, 1996
- --------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 23,204,462 $ 43,924,568
Net realized gain (loss) on investments (5,789,376) 19,192,453
Net unrealized gain (loss) on investments 23,075,771 (15,177,127)
------------ ------------
Increase in net assets from operations $ 40,490,857 $ 47,939,894
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $(19,032,088) $(36,559,090)
From net investment income (Class B) (3,605,125) (6,140,409)
From net investment income (Class C) (567,248) (908,862)
In excess of net investment income (Class A) (70,677) --
In excess of net investment income (Class B) (13,388) (66,320)
In excess of net investment income (Class C) (2,107) (26,175)
From paid-in capital -- (835,015)
------------ ------------
Total distributions declared to
shareholders $(23,290,633) $(44,535,871)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $153,825,382 $345,474,743
Net asset value of shares issued to
shareholders in reinvestment
of distributions 16,149,771 30,698,182
Cost of shares reacquired (146,106,987) (305,118,806)
------------ ------------
Increase in net assets from Fund share
transactions $ 23,868,166 $ 71,054,119
------------ ------------
Total increase in net assets $ 41,068,390 $ 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 $315,125 and
$228,954, respectively) $676,204,188 $635,135,798
============ ============
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended April 30,
October 31, --------------------------------------------------------------
1996 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $13.25
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.47 $ 0.95 $ 0.98 $ 1.02 $ 1.04 $ 1.13
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 0.33 0.15 (0.05) (0.63) 0.74 0.45
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.80 $ 1.10 $ 0.93 $ 0.39 $ 1.78 $ 1.58
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders(++) -
From net investment income $(0.47) $(0.94) $(0.89) $(1.06) $(1.04) $(1.13)
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 $(0.47) $(0.96) $(0.97) $(2.03) $(1.09) $(1.13)
------ ------ ------ ------ ------ ------
Net asset value - end of period $13.18 $12.85 $12.71 $12.75 $14.39 $13.70
====== ====== ====== ====== ====== ======
Total return++ 6.41% 8.67% 7.78% 2.12% 13.42% 12.39%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.05% 1.00% 1.00% 0.96% 0.88% 0.91%
Net investment income 7.18% 7.10% 7.91% 7.17% 7.82% 8.39%
Portfolio turnover 234% 377% 306% 410% 330% 243%
Net assets at end of period (000 omitted) $536,537 $514,892 $477,056 $459,311 $490,417 $448,261
# 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.
++ 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.
(++) For the period ended October 31, 1996, the per share distribution in excess of net investment income was $0.0017. (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% -- --
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
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 and foreign currency transactions 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 and foreign
currency transactions -- -- -- (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
(++) 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.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended April 30,
October 31, ------------------------------
1996 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 $ 0.42 $ 0.85 $ 0.88 $ 0.56
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.34 0.13 (0.05) (1.30)
------ ------ ------ ------
Total from investment operations $ 0.76 $ 0.98 $ 0.83 $(0.74)
------ ------ ------ ------
Less distributions declared to shareholders### -
From net investment income $(0.42) $(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 $(0.42) $(0.88) $(0.87) $(1.52)
------ ------ ------ ------
Net asset value - end of period $13.13 $12.79 $12.69 $12.73
====== ====== ====== ======
Total return 6.00% 7.90% 6.90% (5.42)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.82% 1.81% 1.84% 1.83%+
Net investment income 6.41% 6.29% 7.17% 6.39%+
Portfolio turnover 234% 377% 306% 410%
Net assets at end of period (000 omitted) $121,118 $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 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.
### For the period ended October 31, 1996, the per share distribution in excess of net investment income was $0.0015.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended April 30,
October 31, ------------------------------
1996 1996 1995 1994**
- --------------------------------------------------------------------------------------------------------
Class C
- --------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.42 $ 0.85 $ 0.88 $ 0.29
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.33 0.15 (0.05) (0.90)
------ ------ ------ ------
Total from investment operations $ 0.75 $ 1.00 $ 0.83 $(0.61)
------ ------ ------ ------
Less distributions declared to shareholders### -
From net investment income $(0.42) $(0.85) $(0.80) $(0.22)
In excess of net investment income -- (0.02) -- --
From paid-in capital -- (0.02) (0.07) (0.02)
------ ------ ------ ------
Total distributions declared to shareholders $(0.42) $(0.89) $(0.87) $(0.24)
------ ------ ------ ------
Net asset value - end of period $13.12 $12.79 $12.68 $12.72
====== ====== ====== ======
Total return 6.05% 7.90% 7.00% 4.57%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.74% 1.74% 1.75% 1.80%+
Net investment income 6.51% 6.35% 7.17% 6.57%+
Portfolio turnover 234% 377% 306% 410%
Net assets at end of period (000 omitted) $18,550 $17,330 $8,171 $7,627
** 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, 1994 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.
### For the period ended October 31, 1996, the per share distribution in excess of net investment income was $0.0015.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Bond Fund (the Fund) is a diversified series of MFS 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, political and economic environment.
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts, are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. 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.
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 (MFS), may utilize a joint trading account for the purpose of entering
into one or more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results 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. 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 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.
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 officers and Trustees of the Fund are
officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and MFS Service
Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan for all its
independent Trustees and Mr. Bailey. Included in Trustees' compensation is a net
periodic pension expense of $9,539 for the period ended October 31, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$66,234 for the period ended October 31, 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 service fee for accounts
not attributable to a securities dealer which amounted to $147,926 for the
period ended October 31, 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 period ended October 31, 1996
were 0.30% 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 $13,442 and $307 for Class B and Class C
shares, respectively, for the period ended October 31, 1996. Fees incurred under
the distribution plans during the period ended October 31, 1996 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 into
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 period ended
October 31, 1996 were $11,654, $114,041, and $1,487 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 $761,139,357 $755,605,514
============ ============
Investments (non-U.S. government securities) $756,343,981 $739,682,107
============ ============
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 $654,522,031
============
Gross unrealized appreciation $ 14,158,243
Gross unrealized depreciation (3,137,816)
------------
Net unrealized appreciation $ 11,020,427
============
(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:
Class A Shares
Six Months Ended Year Ended
October 31, 1996 April 30, 1996
--------------------------- ----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 7,038,527 $ 90,328,119 13,392,544 $177,853,643
Shares issued to
shareholders in
reinvestment of
distributions 1,069,587 13,656,652 1,990,650 26,407,792
Shares reacquired (7,469,916) (95,917,490) (12,850,236) (170,615,920)
---------- ------------- ------------ -------------
Net increase 638,198 $ 8,067,281 2,532,958 $ 33,645,515
========== ============= ============ =============
Class B Shares
Six Months Ended Year Ended
October 31, 1996 April 30, 1996
--------------------------- ----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,550,177 $ 58,111,150 10,686,248 $141,536,278
Shares issued to
shareholders in
reinvestment of
distributions 169,402 2,181,344 278,128 3,686,196
Shares reacquired (3,536,650) (45,252,361) (8,868,575) (117,295,920)
---------- ------------- ------------ -------------
Net increase 1,182,929 $ 15,040,133 2,095,801 $ 27,926,554
========== ============= ============ =============
Class C Shares
Six Months Ended Year Ended
October 31, 1996 April 30, 1996
--------------------------- ----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 421,910 $ 5,386,113 1,964,041 $ 26,084,822
Shares issued to
shareholders in
reinvestment of
distributions 24,528 311,775 45,429 604,194
Shares reacquired (387,084) (4,937,136) (1,299,139) (17,206,966)
---------- ------------- ------------ -------------
Net increase 59,354 $ 760,752 710,331 $ 9,482,050
========== ============= ============ =============
(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 period ended October
31, 1996 was $3,378.
(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 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 October 31, 1996, 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 2/20/97 AUD 5,884,888 $ 4,560,494 $ 4,645,288 $ (84,794)
11/01/96 - 2/20/97 CAD 10,393,304 7,779,419 7,813,561 (34,142)
11/25/96 DEM 9,630,613 6,590,668 6,354,499 236,169
2/03/97 DKK 57,405,511 10,063,727 9,896,886 166,841
11/06/96 GBP 2,473,861 3,860,955 4,023,205 (162,250)
2/24/97 IEP 3,166,686 5,088,263 5,150,713 (62,450)
11/06/96 ITL 9,773,696,971 6,395,230 6,435,865 (40,635)
2/03/97 SEK 13,115,553 1,991,731 1,998,533 (6,802)
----------- ----------- ---------
$46,330,487 $46,318,550 $ 11,937
=========== =========== =========
Purchases 11/25/96 DEM 4,259,168 $ 2,810,219 $ 2,813,528 $ 3,309
2/03/97 NLG 128,243 75,334 75,872 538
12/13/96 NZD 33,248 23,041 23,395 354
----------- ----------- ---------
$ 2,908,594 $ 2,912,795 $ 4,201
=========== =========== =========
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net receivable of $15,680 with Bankers Trust, a net payable of $22,383 with
First Boston, a net receivable of $3,778 with Deutschebank, a net receivable of
$51,711 with J.P. Morgan, a net payable of $313,299 with Merrill Lynch, and a
net receivable of $12,976 with Swiss Bank Corp.
At October 31, 1996 the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
Futures Contracts
Unrealized
Expiration Contracts Position Appreciation
- ------------------------------------------------------------------------------
December 1996 500 Treasury Notes Long $902,940
At October 31, 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. At October 31, 1996, the
Fund owned the following restricted securities (constituting 0.57% of net
assets) 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.
Date of
Description Acquisition Par Amount Cost Value
- --------------------------------------------------------------------------------
BCF LLC, 7.75s, 2026 10/10/96 $1,997,332 $1,911,821 $1,937,412
Merrill Lynch Mortgage
Investors, Inc.,
10.25s, 2009 4/07/92 260,650 268,144 260,976
Merrill Lynch Mortgage
Investors, Inc.,
8.08s, 2022 6/22/94 2,000,000 1,386,250 1,660,000
----------
$3,858,388
==========
<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 October 31, 1996, the related statement of operations
for the six months then ended, the statement of changes in net assets for the
six months then ended and the year ended April 30, 1996, and the financial
highlights for the six months ended October 31, 1996 and for each of the years
in the 10-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
October 31, 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
October 31, 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
November 29, 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.
<PAGE>
<TABLE>
<CAPTION>
MFS(R) BOND FUND
<S> <C>
TRUSTEES AUDITORS
A. Keith Brodkin* - Chairman and Deloitte & Touche LLP
President
INVESTOR INFORMATION
Richard B. Bailey* - Private Investor; For MFS stock and bond market outlooks
Former Chairman and Director call toll free: 1-800-637-4458
(until 1991), Massachusetts anytime from a touch-tone telephone
Financial Services Company; Director, For information on MFS mutual funds
Cambridge Bancorp; Director, call your financial adviser or, for
Cambridge Trust Company an information kit, call toll free:
1-800-637-2929 any business day from
Peter G. Harwood - Private Investor 9 a.m. to 5 p.m. Eastern time (or
leave a message anytime).
J. Atwood Ives - Chairman and Chief
Executive Officer, Eastern Enterprises INVESTOR SERVICE
MFS Service Center, Inc.
Lawrence T. Perera - Partner, P.O. Box 2281
Hemenway & Barnes Boston, MA 02107-9906
William J. Poorvu - Adjunct Professor, For general information, call toll free:
Harvard University Graduate School of 1-800-225-2606 any business day from
Business Administration 8 a.m. to 8 p.m. Eastern time.
Charles W. Schmidt - Private Investor For service to speech- or hearing-
impaired, call toll free: 1-800-637-
Arnold D. Scott* - Senior Executive 6576 any business day from 9 a.m. to
Vice President, Director and Secretary, 5 p.m. Eastern time.
Massachusetts Financial Services (To use this service, your phone must
Company be equipped with a Telecommunications
Device for the Deaf.)
Jeffrey L. Shames* - President and
Director, Massachusetts Financial For share prices, account balances,
Services Company and exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone telephone.
Elaine R. Smith - Independent
Consultant WORLD WIDE WEB
www.mfs.com
David B. Stone - Chairman, North
American Management Corp.
(investment advisers)
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
[DALBAR For the third year in a row,
DISTRIBUTOR LOGO] MFS earned a #1 ranking in
MFS Fund Distributors, Inc. TOP RATED DALBAR, Inc. Broker/Dealer
500 Boylston Street SERVICE Survey, Main Office Operations
Boston, MA 02116-3741 Service Quality Category. The
firm achieved a 3.48 overall score on a
PORTFOLIO MANAGER scale of 1 to 4 in the 1996 survey. A total
Geoffrey L. Kurinsky* of 110 firms responded, offering input on the
quality of service they received from 29
TREASURER mutual fund companies nationwide. The survey
W. Thomas London* contained questions about service quality in
15 categories, including "knowledge of phone
ASSISTANT TREASURER service contacts," "accuracy of transaction
James O. Yost* processing," and "overall ease of doing
business with the firm."
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
Investors Bank & Trust
</TABLE>
