<PAGE>
[LOGO] M F S(SM) Semiannual Report
INVESTMENT MANAGEMENT October 31, 1997
MFS(R) BOND FUND
[Graphic Omitted]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Portfolio Manager's Overview .............................................. 2
Portfolio Manager's Profile ............................................... 3
Fund Facts ................................................................ 4
Performance Summary ....................................................... 4
Portfolio Concentration ................................................... 6
Portfolio of Investments .................................................. 7
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 23
Independent Auditors' Report .............................................. 32
Trustees and Officers ..................................................... 33
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HIGHLIGHTS
o FOR THE SIX MONTHS ENDED OCTOBER 31, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 7.95%, CLASS B SHARES 7.62%,
CLASS C SHARES 7.54%, AND CLASS I SHARES 8.10%. (SEE PERFORMANCE SUMMARY FOR
MORE INFORMATION.)
o THE PAST SIX MONTHS PROVIDED STRONG RETURNS FOR U.S. FIXED-INCOME SECURITIES,
AS THE PROSPECTS FOR CONTINUED STEADY ECONOMIC GROWTH AND LOW INFLATION
SPARKED A STRONG RALLY IN THIS ARENA.
o THE FUND'S STRONG PERFORMANCE WAS DRIVEN MAINLY BY THE SHARP DECLINE IN
INTEREST RATES DURING THE PERIOD, WHILE INCREMENTAL RETURN WAS PROVIDED BY
THE FUND'S SIGNIFICANT EXPOSURE TO BOTH THE INVESTMENT-GRADE AND HIGH-YIELD
CORPORATE BOND MARKETS.
o AMONG SECTORS, THE FUND'S LARGEST CURRENT HOLDINGS ARE IN UTILITY COMPANIES
THAT WE BELIEVE WILL SHORTLY BE UPGRADED TO INVESTMENT-GRADE STATUS FROM
THEIR CURRENT RATINGS AT THE HIGHER END OF THE HIGH-YIELD MARKET.
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still uncomfortably
high. The rapid pace of growth seen in the first quarter slowed to an annual
rate of 3.3% in the second quarter and 3.5% in the third. We believe economic
momentum will carry well into the first quarter of 1998, as the money supply is
increasing at a rapid rate, and it still appears that Christmas sales could be
quite good. Because economic growth continues to be impressive, markets are
likely to continue to focus on the Federal Reserve Board's (the Fed's)
willingness to raise interest rates.
The U.S. government bond market has benefited from the deflationary events in
Southeast Asia, while the high-yield and emerging-debt markets have come under
severe pressure. Inflation remains under control, and the Fed will most likely
take a wait-and-see attitude toward raising interest rates. As a result, our
near-term outlook for high-grade markets is neutral to moderately positive. At
the same time, high-yield markets, having gone through a substantial correction,
could offer reasonable value but require careful selection. Overall,
fixed-income markets appear to be reasonably 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
November 14, 1997
<PAGE>
PORTFOLIO MANAGER'S OVERVIEW
[Photo of Geoffrey L. Kurinsky]
Geoffrey L. Kurinsky
Dear Shareholders:
The past six months provided strong returns for U.S. fixed-income securities, as
the prospects for continued steady economic growth and low inflation sparked a
strong rally in this arena. Rates on 10-year U.S. Treasuries fell a full
percentage point during the period, from 6.75% on May 1 to 5.75% by the end of
October. This dramatic decline was sparked by positive inflation data, which
changed the markets' previous perceptions that the Fed would have to raise
interest rates. We believe the Fed will most likely take a wait-and-see attitude
toward raising rates, especially given the market sell-off in the Pacific Rim,
which could slow the pace of economic growth globally.
As a result of the market rally, all classes of the Fund's shares provided
strong returns during the six-month period ended October 31, 1997. Class A
shares provided a total return of 7.95%, Class B shares 7.62%, Class C shares
7.54%, and Class I shares 8.10%. These returns assume the reinvestment of
distributions but exclude the effects of any sales charges and compare to a
7.42% return for the Lehman Brothers Government/Corporate Bond Index (the Lehman
Index), 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 compares to a 7.65% return for investment-grade bond funds as
tracked by Lipper Analytical Services, Inc., an independent firm that reports
mutual fund performance. It is not possible to invest directly in an index.
The Fund's strong performance was driven mainly by the sharp decline in interest
rates during the period, while incremental return was provided by the Fund's
significant exposure to both the investment-grade and high-yield corporate bond
markets. The Fund had a larger composition than its peer group in the
investment-grade and high-yield sectors, which according to Lehman Brothers
provided returns of 7.86% and 9.12%, respectively, compared with a return of
7.29% for comparable-maturity U.S. Treasury securities. (Principal value and
interest on Treasury securities are guaranteed by the U.S. government if held to
maturity.)
During the period, we reduced investment-grade corporate positions from 46% to
40% of the portfolio and high-yield positions from 20% to 18%. The proceeds were
deployed mainly in U.S. Treasury securities, which increased from 4% to 11% of
the Fund's assets. Historically, the corporate markets generally fall under some
selling pressure in the latter months of the year because liquidity dries up in
anticipation of year-end. We will be looking for opportunities to redeploy
assets in the corporate market due to this anticipated year-end weakness. Among
sectors, the Fund's largest current holdings are in utility companies such as
Long Island Lighting and Cleveland Electric, both of which we believe will
shortly be upgraded to investment-grade status from their current ratings at the
higher end of the high-yield market.
Looking ahead, we believe the countervailing forces of strong economic growth
and low inflation will keep interest rates from moving significantly from
current levels. As a result, the portfolio's duration, or sensitivity to changes
in interest rates, is neutral, at 5.9 years. The recent collapse of markets in
Southeast Asia suggests a moderation of both global growth and inflation
expectations, but just how much of an impact these events would have on U.S.
growth and earnings remains debatable. They do, though, suggest that the Fed
will keep rates stable at least through the remainder of 1997, as officials
evaluate the impact on the U.S. economy.
Respectfully,
/s/ Geoffrey L. Kurinsky
Geoffrey L. Kurinsky
Portfolio Manager
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
GEOFFREY L. KURINSKY BEGAN HIS CAREER AT MFS IN 1987 IN THE FIXED INCOME
DEPARTMENT AND WAS NAMED ASSISTANT VICE PRESIDENT IN 1988, VICE PRESIDENT IN
1989, AND SENIOR VICE PRESIDENT IN 1993. A GRADUATE OF THE UNIVERSITY OF
MASSACHUSETTS AND THE BOSTON UNIVERSITY GRADUATE SCHOOL OF MANAGEMENT, HE HAS
MANAGED MFS(R) BOND FUND SINCE 1989.
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<PAGE>
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FUND FACTS
OBJECTIVE: THE FUND'S PRIMARY OBJECTIVE IS 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
CLASS INCEPTION: CLASS A MAY 8, 1974
CLASS B SEPTEMBER 7, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $802.4 MILLION NET ASSETS AS OF OCTOBER 31, 1997
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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, Class C, and Class I shares for the
applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN AS OF OCTOBER 31, 1997
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
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Cumulative Total Return +7.95% +10.57% +50.30% +154.93%
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Average Annual Total Return -- +10.57% + 8.49% + 9.81%
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SEC Results -- + 5.29% + 7.44% + 9.27%
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CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
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Cumulative Total Return +7.62% +9.81% +45.71% +147.14%
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Average Annual Total Return -- +9.81% + 7.82% + 9.47%
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SEC Results -- +5.81% + 7.53% + 9.47%
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CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
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Cumulative Total Return +7.54% +9.79% +46.19% +147.82%
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Average Annual Total Return -- +9.79% + 7.89% + 9.50%
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SEC Results -- +8.79% + 7.89% + 9.50%
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CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
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Cumulative Total Return +8.10% +10.95% +50.85% +155.63%
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Average Annual Total Return -- +10.95% + 8.57% + 9.84%
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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
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 inception 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 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 I 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 inception
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 within the Class I share performance has been adjusted to reflect the
fact that Class I shares have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 1997
LARGEST SECTORS
Corporates 40%
High Yield 18%
U.S. Treasuries 11%
Mortgage Backed 9%
Cash 6%
Asset Backed 6%
Emerging Markets 5%
International 4%
Yankee 1%
For a more complete breakdown, refer to the Portfolio of Investments.
<PAGE>
PORTFOLIO OF INVESTMENTS - October 31, 1997
Bonds -- 91.3%
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<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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<S> <C> <C>
U.S. Bonds - 61.7%
Aerospace - 0.8%
Northrup Grumman Corp., 9.375s, 2024 $ 2,200 $ 2,552,748
Raytheon Co., 6.75s, 2007 2,095 2,116,997
Raytheon Co., 7.2s, 2027 2,000 2,024,400
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$ 6,694,145
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Airlines - 5.2%
Airplane Pass-Through Trust, 10.875s, 2019 $ 1,500 $ 1,672,500
Continental Airlines, Inc., 7.461s, 2015 1,000 1,052,130
Continental Airlines, Inc., 9.5s, 2001 - 2013 8,662 9,532,963
Continental Airlines, Inc., 10.22s, 2014 5,347 6,499,845
Delta Air Lines, Inc., 8.5s, 2002 3,155 3,397,462
Jet Equipment Trust, 8.64s, 2015## 2,020 2,272,448
Jet Equipment Trust, 10.69s, 2015## 2,390 3,099,041
Jet Equipment Trust, 11.44s, 2014## 3,500 4,612,440
Northwest Airlines, Inc., 8.7s, 2007 1,000 1,060,130
Southwest Airlines Co., 7.375s, 2027 1,500 1,588,125
United Airlines Pass-Through Trust, 7.27s, 2013 6,550 6,761,060
------------
$ 41,548,144
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Apparel and Textiles - 0.2%
Burlington Industries, Inc., 7.25s, 2027 $ 1,500 $ 1,526,250
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Automotive - 0.4%
Ford Motor Co., 7.7s, 2097 $ 2,800 $ 3,006,500
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Banks and Finance - 9.5%
ADVANTA Corp., 6.9s, 1999 $ 9,475 $ 9,415,781
ADVANTA Corp., 6.925s, 2002 2,475 2,478,490
BT Institutional Capital Trust, 7.75s, 2026## 3,000 3,006,630
Capital One Financial Corp., 7.25s, 2003 2,675 2,690,515
Colonial Capital II, 8.92s, 2027 1,640 1,760,950
ContiFinancial Corp., 7.5s, 2002 3,320 3,378,100
First Chicago NBD Institutional Capital, 7.95s,
2026## 1,300 1,353,508
First Empire Capital Trust I, 8.234s, 2027 3,275 3,464,852
First Merchants Acceptance Corp., 9.5s, 2006** 1,200 480,000
Ford Motor Credit Co., 7.2s, 2007 1,300 1,351,415
Greenpoint Capital Trust I, 9.1s, 2027 1,250 1,348,438
HSBC America Capital Trust II, 8.38s, 2027## 4,550 4,646,687
Lehman Brothers, Inc., 7.125s, 2003 3,000 3,059,310
Lehman Brothers, Inc., 7.375s, 2004 400 413,028
Lehman Brothers, Inc., 7.5s, 2026 8,800 9,295,440
MBNA Capital, 8.278s, 2026 6,450 6,614,023
Riggs National Corp., 8.5s, 2006 1,250 1,300,000
Salomon, Inc., 7.2s, 2004 1,260 1,306,166
Salomon, Inc., 7.3s, 2002 5,990 6,204,562
Smith Barney Holdings Inc., 7.375s, 2007 4,999 5,228,954
State Street Institutional Capital, 7.94s, 2026## 2,450 2,548,000
United Cos. Financial Corp., 7.7s, 2004 1,300 1,302,691
Washington Mutual Capital I, 8.375s, 2027 3,000 3,206,250
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$ 75,853,790
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Building - 1.1%
Building Materials Corp., 8.625s, 2006 $ 1,000 $ 1,030,000
Owens Corning Fiberglass Corp., 8.875s, 2002 5,650 6,182,739
Owens Corning Fiberglass Corp., 9.9s, 2015## 1,475 1,650,379
------------
$ 8,863,118
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Business Machines - 0.3%
International Business Machines Corp., 7.125s, 2096 $ 2,500 $ 2,505,275
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Cellular Telephones - 0.3%
U.S. Cellular Corp., 7.25s, 2007 $ 2,500 $ 2,535,525
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Chemicals - 1.4%
Solutia Inc., 7.375s, 2027 $ 11,150 $ 11,255,925
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Consumer Goods and Services - 1.1%
Fingerhut Cos., Inc., 7.375s, 1999 $ 1,600 $ 1,618,000
Philip Morris Cos. Inc., 7.75s, 2027 2,500 2,625,500
RJR Nabisco, Inc., 8.25s, 2004 1,000 1,040,520
RJR Nabisco, Inc., 8.75s, 2007 3,000 3,227,340
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$ 8,511,360
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Corporate Asset Backed - 5.3%
BCF LLC, 7.75s, 2026## $ 2,458 $ 2,342,476
Chevy Chase Master Credit Card Trust, 5.775s, 2005 2,500 2,497,650
Loewen Group Inc. Pass-Through Ctf., 6.7s, 1999 3,360 3,356,035
Master Credit Card Trust, 5.735s, 2006 30,000 29,934,300
Merrill Lynch Mortgage Investors Inc., 8.3s, 2011 1,179 1,176,194
Merrill Lynch Mortgage Investors, Inc., 8.103s, 2022+ 2,000 1,898,125
Merrill Lynch Mortgage Investors, Inc., 9s, 2011 502 508,373
Merrill Lynch Mortgage Investors, Inc., 10s, 2011 870 910,004
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$ 42,623,157
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Entertainment - 3.3%
Circus Circus Enterprises, Inc., 6.7s, 2096 $ 3,000 $ 2,983,230
Circus Circus Enterprises, Inc., 7s, 2036 4,774 4,850,336
Mirage Resorts, Inc., 6.75s, 2007 1,260 1,260,000
News America Holdings, Inc., 10.125s, 2012 6,825 7,917,410
Time Warner, Inc., 8.18s, 2007 3,300 3,606,306
Time Warner, Inc., 9.125s, 2013 2,000 2,363,340
Time Warner Pass-Through Asset Trust, 6.1s, 2001## 3,450 3,396,594
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$ 26,377,216
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Finance - 0.6%
Socgen Real Estate Co., 7.64s, 2049## $ 4,800 $ 5,022,000
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Forest and Paper Products - 2.4%
Boise Cascade Co., 7.43s, 2005 $ 5,000 $ 5,223,200
Boise Cascade Co., 9.85s, 2002 4,412 4,998,399
Georgia Pacific Corp., 9.875s, 2021 7,850 8,901,743
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$ 19,123,342
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Insurance - 5.1%
Conseco Finance Trust III, 8.796s, 2027 $ 1,600 $ 1,744,000
Equitable Life Assurance Society, 7.7s, 2015## 4,435 4,703,983
Leucadia Capital Trust, 8.65s, 2027 2,000 2,145,000
Nationwide Mutual Life Insurance Co., 7.5s, 2024## 6,440 6,539,562
Providian Capital I, 9.525s, 2027## 5,750 6,281,875
Safeco Capital Trust I, 8.072s, 2037## 12,525 12,963,375
Travelers Capital II, 7.75s, 2036 5,875 6,146,719
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$ 40,524,514
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Medical and Health Technology and Services - 0.6%
Tenet Healthcare Corp., 8.625s, 2003 - 2007 $ 2,125 $ 2,195,625
Tenet Healthcare Corp., 10.125s, 2005 2,615 2,850,350
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$ 5,045,975
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Oil Services - 0.9%
Clark Oil Refining Corp., 10.5s, 2001 $ 2,000 $ 2,070,000
Seacor Smit, Inc., 7.2s, 2009## 2,500 2,568,750
Ultramar Diamond Shamrock Corp., 7.2s, 2017 2,550 2,598,858
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$ 7,237,608
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Oils - 1.5%
Chesapeake Energy Corp., 7.875s, 2004 $ 1,800 $ 1,723,500
Enserch Exploration, Inc., 7.54s, 2009## 1,625 1,639,219
Gulf Canada, 9.25s, 2004 1,680 1,777,440
Louisiana Land & Exploration Co., 7.65s, 2023 4,700 5,002,398
Transocean Offshore, Inc., 8s, 2027 1,985 2,203,350
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$ 12,345,907
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Pollution Control - 0.1%
USA Waste Services, Inc., 7.125s, 2007 $ 1,000 $ 996,562
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Precious Metals and Minerals - 0.1%
Freeport McMoRan Copper & Gold, Inc., 7.5s, 2006 $ 850 $ 879,138
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Railroads - 0.3%
Norfolk Southern Corp., 7.05s, 2037 $ 1,950 $ 2,027,922
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Real Estate Investment Trusts - 0.4%
JDN Reality Corp., 6.95s, 2007 $ 3,300 $ 3,328,347
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Restaurants and Lodging - 1.2%
Hilton Hotels Corp., 7.95s, 2007 $ 9,300 $ 9,980,016
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Steel - 0.3%
AK Steel Holdings Corp., 9.125s, 2006 $ 2,500 $ 2,600,000
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Stores - 0.2%
Sears Roebuck Acceptance Corp., 6.7s, 2007 $ 1,270 $ 1,283,056
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Telecommunications - 7.3%
Continental Cablevision, Inc., 8.3s, 2006 $ 1,300 $ 1,400,451
Continental Cablevision, Inc., 11s, 2007 10,000 11,203,500
Fox/Liberty Networks LLC, Inc., 8.875s, 2007## 1,500 1,500,000
TCI Communications Financing III, 9.65s, 2027 4,650 5,126,625
TCI Communications Inc., 6.875s, 2006 10,000 9,904,300
TCI Communications, Inc., 7.385s, 2001 8,000 8,190,240
TCI Communications Inc., 8.75s, 2015 8,200 9,020,492
Tele-Communications, Inc., 7.38s, 2001 1,375 1,407,491
Tele-Communications, Inc., 8.25s, 2003 3,350 3,555,724
WorldCom, Inc., 7.75s, 2007 - 2027 4,565 4,853,481
WorldCom, Inc., 8.875s, 2006 2,500 2,726,775
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$ 58,889,079
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Transportation - 0.4%
Federal Express Corp., 7.65s, 2014 $ 3,000 $ 3,177,000
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Utilities - Electric - 9.9%
CalEnergy Company, Inc., 7.63s, 2007 $ 1,800 $ 1,806,480
Cleveland Electric Illuminating Co., 7.88s, 2017## 1,700 1,710,030
Cleveland Electric Illuminating Co., 9s, 2023 5,228 5,754,041
Comed Financing II, 8.5s, 2027 2,500 2,662,125
Commonwealth Edison Co., 6.4s, 2005 3,000 2,911,500
Commonwealth Edison Co., 7.375s, 2004 2,000 2,026,480
Commonwealth Edison Co., 7.625s, 2007 4,010 4,168,635
Edison Mission Energy, 7.33s, 2008## 725 753,862
Long Island Lighting Co., 7.5s, 2007 1,750 1,813,490
Long Island Lighting Co., 9s, 2022 14,503 16,609,416
Montana Power Co., 7.875s, 2026 1,000 1,055,000
Niagara Mohawk Power Corp., 6.875s, 2001 3,000 3,019,410
Niagara Mohawk Power Corp., 8.5s, 2023 2,300 2,413,735
Niagara Mohawk Power Corp., 8.75s, 2022 3,650 3,848,122
Niagara Mohawk Power Corp., 8.77s, 2018 4,600 4,915,698
North Atlantic Energy, 9.05s, 2002 1,214 1,233,412
Salton Sea Funding Corp., 6.69s, 2000 2,226 2,234,607
Salton Sea Funding Corp., 7.37s, 2005 2,655 2,701,887
Salton Sea Funding Corp., 7.84s, 2010 3,775 3,979,681
Salton Sea Funding Corp., 8.3s, 2011 1,500 1,632,090
Southern Co. Capital Trust, 8.19s, 2037 3,660 3,882,455
Texas Utilities Electric Co., 7.17s, 2007 3,020 3,102,416
Waterford 3 Funding Corp., 8.09s, 2017 5,000 5,181,250
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$ 79,415,822
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Utilities - Gas - 1.5%
California Energy, Inc., 10.25s, 2004 $ 2,350 $ 2,574,566
Oryx Energy Co., 10s, 2001 102 112,454
Ras Laffan Liquefied Natural Gas, 7.628s, 2006## 1,500 1,518,750
Tennessee Gas Pipeline Co., 7.625s, 2037 4,000 4,270,000
Texas Gas Transmission Corp., 7.25s, 2027 3,645 3,763,462
------------
$ 12,239,232
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Total U.S. Bonds $495,415,925
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Foreign Bonds - 9.1%
Argentina - 0.5%
Hidroelectrica Alicura, 8.375s, 1999 (Utilities - Electric)## $ 4,325 $ 4,281,750
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Australia - 1.0%
Commonwealth of Australia, 9.5s, 2003 AUD 1,890 $ 1,566,012
Commonwealth of Australia, 9.75s, 2002 3,850 3,129,326
New South Wales Treasury Corp., 7s, 2004 4,010 2,968,561
------------
$ 7,663,899
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Chile - 0.4%
Empresa Nacional De Electric, 7.325s, 2037 (Utilities
- Electric) $ 2,367 $ 2,497,256
Empresa Electrica Del Norts, 7.75s, 2006 (Utilities -
Electric)## 1,150 1,142,387
------------
$ 3,639,643
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China - 0.3%
Dao Heng Bank Ltd., 7.75s, 2007 (Banks and Credit
Companies)## $ 2,500 $ 2,276,375
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Colombia
Republic of Colombia, 8.75s, 1999 $ 110 $ 113,451
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Indonesia - 0.5%
APP International Finance Co., 10.25s, 2000 (Finance) $ 560 $ 561,400
PT Indah Kiat Pulp & Paper Corp., 8.875s, 2000
(Paper Products)## 1,560 1,497,600
PT Polysindo Eka Perkasa, 13s, 2001 (Chemicals) 2,217 2,350,020
------------
$ 4,409,020
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Italy - 0.8%
Republic of Italy, 8.5s, 2004 ITL 4,755,000 $ 3,165,133
Republic of Italy, 9.5s, 1999 - 2006 4,790,000 3,176,717
------------
$ 6,341,850
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Japan - 0.1%
Japan Development Bank, 2.875s, 2006
(Banks and Credit Companies) JPY 90,000 $ 813,447
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Mexico - 0.4%
Banco Commercial S.A., 8.25s, 2007## $ 1,820 $ 1,792,700
United Mexican States, 11.5s, 2026 1,000 1,082,500
------------
$ 2,875,200
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New Zealand - 0.6%
Government of New Zealand, 8s, 2001 - 2004 NZD 6,840 $ 4,453,620
- -------------------------------------------------------------------------------------------------
Panama - 0.2%
Republic of Panama, 7.875s, 2002## $ 1,370 $ 1,308,350
- -------------------------------------------------------------------------------------------------
Russia - 0.9%
City of Moscow, 9.5s, 2000 $ 7,500 $ 7,312,500
- -------------------------------------------------------------------------------------------------
South Korea - 1.7%
Korea Development Bank, 6.75s, 2005
(Banks and Credit Companies) $ 7,000 $ 6,280,120
Korea Development Bank, 7.125s, 2001
(Banks and Credit Companies) 2,500 2,470,700
Korea Development Bank, 7.25s, 2006
(Banks and Credit Companies) 1,000 903,600
Korea Electric Power Corp., 7s, 2027 (Utilities -
Electric) 4,025 3,807,208
------------
$ 13,461,628
- -------------------------------------------------------------------------------------------------
Spain - 0.2%
Government of Spain, 7.35s, 2007 ESP 4,690 $ 35,240
Government of Spain, 10.5s, 2003 169,220 1,443,125
------------
$ 1,478,365
- -------------------------------------------------------------------------------------------------
Sweden - 0.3%
Kingdom of Sweden, 6s, 2005 SEK 6,500 $ 855,754
Kingdom of Sweden, 10.25s, 2000 10,700 1,580,401
------------
$ 2,436,155
- -------------------------------------------------------------------------------------------------
Thailand - 0.7%
Jasmine Submarine Telecom Ltd., 8.483s, 2011
(Telecommunications)## $ 3,500 $ 3,272,500
LCI International, Inc., 7.25s, 2007
(Telecommunications) 2,000 2,065,000
------------
$ 5,337,500
- -------------------------------------------------------------------------------------------------
United Kingdom - 0.5%
United Kingdom Treasury, 7.25s, 2007 GBP 940 $ 1,657,569
United Kingdom Treasury, 8s, 2003 1,540 2,743,010
------------
$ 4,400,579
- -------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 72,603,332
- -------------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 20.5%
Government National Mortgage Association - 8.2%
Government National Mortgage Assn., 7.5s, 2006 - 2027 $ 21,354 $ 21,834,742
Government National Mortgage Assn., 8s, 2024 - 2026 10,144 10,609,443
Government National Mortgage Assn., 8.5s, 2026 - 2027 31,449 32,971,696
Government National Mortgage Assn., 13.25s, 2023 683 776,900
------------
$ 66,192,781
- -------------------------------------------------------------------------------------------------
Federal National Mortgage Association - 1.3%
Federal Home Loan Pc, 9.5s, 2001 $ 6 $ 6,248
Federal National Mortgage Assn., 2.125s, 2007 280,000 2,366,361
Federal National Mortgage Assn., 7s, 2012 7,524 7,625,370
------------
$ 9,997,979
- -------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 11.0%
U.S. Treasury Bonds, 6.625s, 2027 $ 30,318 $ 32,146,479
U.S. Treasury Notes, 5.75s, 2000 23,100 23,114,322
U.S. Treasury Notes, 6.125s, 2007 14,339 14,650,443
U.S. Treasury Notes, 6.375s, 2027 14,250 14,686,335
U.S. Treasury Notes, 6.5s, 2006 92 95,695
U.S. Treasury Notes, 7.25s, 2004 3,640 3,916,422
------------
$ 88,609,696
- -------------------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $164,800,456
- -------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $713,922,403) $732,819,713
- -------------------------------------------------------------------------------------------------
Preferred Stocks - 1.2%
- -------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------------------
U.S. Stocks - 1.2%
Oils - 0.2%
El Paso Tennessee Pipeline Co., 8.25% 30,000 $ 1,650,000
- -------------------------------------------------------------------------------------------------
Printing and Publishing - 0.5%
NB Capital Corp., 8.35% 4,000 $ 4,038,000
- -------------------------------------------------------------------------------------------------
Utilities - Electric - 0.5%
Long Island Lighting Co., 7.95% 150,000 $ 3,965,625
- -------------------------------------------------------------------------------------------------
Total Preferred Stock (Identified Cost, $9,164,500) $ 9,653,625
- -------------------------------------------------------------------------------------------------
Repurchase Agreement - 5.7%
- -------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------------------------
Goldman Sachs, dated 10/31/97, due 11/3/97, total to be
received $45,986,833 (secured by various U.S. Treasur
and Federal Agency obligations in a jointly
traded account), at cost $ 45,965 $ 45,965,000
- -------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $769,051,903) $788,438,338
Other Assets, Less Liabilities - 1.8% 13,969,405
- -------------------------------------------------------------------------------------------------
Net Assets - 100.0% $802,407,743
- -------------------------------------------------------------------------------------------------
** Non-income producing security-in default.
## SEC Rule 144A restriction.
+ Restricted security.
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown
below:
AUD = Australian Dollars GRD = Greek Drachmas
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
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------
OCTOBER 31, 1997
- --------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $769,051,903) $788,438,338
Cash 11,214
Net receivable for forward foreign currency exchange
contracts to purchase 182,274
Net receivable for foreign currency exchange contracts
closed or subject to master netting agreements 859,432
Receivable for Fund shares sold 3,077,341
Receivable for investments sold 17,415,667
Interest receivable 13,985,959
Other assets 46,994
------------
Total assets $824,017,219
------------
Liabilities:
Payable for Fund shares reacquired $ 1,001,255
Payable for investments purchased 20,111,321
Net payable for forward currency exchange contracts to
sell 66,302
Payable to affiliates -
Management fee 6,455
Administrative fee 314
Shareholder servicing agent fee 2,855
Distribution and service fee 209,737
Accrued expenses and other liabilities 211,237
------------
Total liabilities $ 21,609,476
------------
Net assets $802,407,743
============
Net assets consist of:
Paid-in capital $786,359,525
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 20,366,036
Accumulated net realized loss on investments and foreign
currency transactions (3,051,561)
Accumulated distributions in excess of net investment
income (1,266,257)
------------
Total $802,407,743
============
Shares of beneficial interest outstanding 59,079,423
==========
Class A shares:
Net asset value per share
(net assets of $615,818,449 / 45,306,653 shares of
beneficial interest outstanding) $13.59
======
Offering price per share (100 / 95.25) $14.27
======
Class B shares:
Net asset value and offering price per share
(net assets of $151,229,617 / 11,164,250 shares of
beneficial interest outstanding) $13.55
======
Class C shares:
Net asset value and offering price per share
(net assets of $26,568,157 / 1,962,240 shares of
beneficial interest outstanding) $13.54
======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $8,791,520 / 646,280
shares of beneficial interest outstanding) $13.60
======
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, 1997
- ------------------------------------------------------------------------------
Net investment income:
Income -
Interest $28,670,313
Dividends 210,935
-----------
Total investment income $28,881,248
-----------
Expenses -
Management fee $ 1,515,013
Trustees' compensation 27,124
Shareholder servicing agent fee 490,864
Distribution and service fee (Class A) 883,228
Distribution and service fee (Class B) 686,161
Distribution and service fee (Class C) 115,244
Administrative fee 56,623
Custodian fee 121,353
Postage 68,892
Auditing fees 36,359
Printing 26,536
Legal fees 2,843
Miscellaneous 279,375
-----------
Total expenses 4,309,615
Fees paid indirectly (53,635)
-----------
Net expenses 4,255,980
-----------
Net investment income $24,625,268
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 9,449,771
Written option transactions (3,707)
Futures contracts 729,666
Foreign currency transactions 1,162,302
-----------
Net realized gain on investment and foreign
currency transactions $11,338,032
-----------
Change in unrealized appreciation (depreciation) -
Investments $20,632,418
Translation of assets and liabilities in
foreign currencies (360,298)
------------
Net unrealized gain on investment and foreign
currency translation $20,272,120
-----------
Net realized and unrealized gain on
investments and foreign currency $31,610,152
-----------
Increase in net assets from operations $56,235,420
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 1997 APRIL 30, 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 24,625,268 $ 46,847,067
Net realized gain (loss) on investments and foreign
currency transactions 11,338,032 (1,867,678)
Net unrealized gain on investments and foreign currency
translation 20,272,120 11,478,331
------------- -------------
Increase in net assets from operations $ 56,235,420 $ 56,457,720
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (19,608,808) $ (37,940,150)
From net investment income (Class B) (4,030,279) (7,378,321)
From net investment income (Class C) (659,873) (1,163,047)
From net investment income (Class I) (326,308) (232,891)
In excess of net investment income (Class A) (570,458) --
In excess of net investment income (Class B) (117,248) --
In excess of net investment income (Class C) (19,197) --
In excess of net investment income (Class I) (9,493) --
------------- -------------
Total distributions declared to shareholders $ (25,341,664) $ (46,714,409)
------------- -------------
Net increase in net assets from Fund share transactions $ 77,207,505 $ 49,427,373
------------- -------------
Total increase in net assets $ 108,101,261 $ 59,170,684
Net assets:
At beginning of period 694,306,482 635,135,798
------------- -------------
At end of period (including accumulated distributions in
excess of net investment income of $1,266,257, and $549,861 $ 802,407,743 $ 694,306,482
============= =============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
SIX MONTHS ENDED -----------------------------------------------------------------------
OCTOBER 31, 1997 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of
period $13.04 $12.85 $12.71 $12.75 $14.39 $13.70
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.45 $ 0.94 $ 0.95 $ 0.98 $ 1.02 $ 1.04
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 0.56 0.18 0.15 (0.05) (0.63) 0.74
------ ------ ------ ------ ------ ------
Total from investment
operations $ 1.01 $ 1.12 $ 1.10 $ 0.93 $ 0.39 $ 1.78
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.45) $(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 (0.01) -- -- -- (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 $(0.46) $(0.93) $(0.96) $(0.97) $(2.03) $(1.09)
------ ------ ------ ------ ------ ------
Net asset value - end of period $13.59 $13.04 $12.85 $12.71 $12.75 $14.39
====== ====== ====== ====== ====== ======
Total return(+) 7.95%++ 8.99% 8.67% 7.78% 2.12% 13.42%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.00%+ 1.02% 1.00% 1.00% 0.96% 0.88%
Net investment income 6.68%+ 7.12% 7.10% 7.91% 7.17% 7.82%
Portfolio turnover 130% 446% 377% 306% 410% 330%
Net assets at end of period
(000 omitted) $615,818 $541,710 $514,892 $477,056 $459,311 $490,417
+ Annualized.
++ Not annualized.
# 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% --
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
SIX MONTHS ENDED -----------------------------------------------------
OCTOBER 31, 1997 1997 1996 1995 1994*
- ----------------------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $12.99 $12.79 $12.69 $12.73 $14.99
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.40 $ 0.83 $ 0.85 $ 0.88 $ 0.56
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 0.57 0.19 0.13 (0.05) (1.30)
------ ------ ------ ------ ------
Total from investment operations $ 0.97 $ 1.02 $ 0.98 $ 0.83 $(0.74)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.40) $(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) -- (0.01) -- (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 $(0.41) $(0.82) $(0.88) $(0.87) $(1.52)
------ ------ ------ ------ ------
Net asset value - end of period $13.55 $12.99 $12.79 $12.69 $12.73
====== ====== ====== ====== ======
Total return 7.62%++ 8.16% 7.90% 6.90% (5.42)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.70%+ 1.76% 1.81% 1.84% 1.83%+
Net investment income 5.96%+ 6.39% 6.29% 7.17% 6.39%+
Portfolio turnover 130% 446% 377% 306% 410%
Net assets at end of period (000 omitted) $151,230 $123,000 $102,914 $75,451 $33,413
* For the period from the commencement of the Fund's offering of Class B shares, September 7, 1993, through 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.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
SIX MONTHS ENDED ----------------------------------------------------
OCTOBER 31, 1997 1997 1996 1995 1994**
- ----------------------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $12.98 $12.79 $12.68 $12.72 $13.57
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.39 $ 0.83 $ 0.85 $ 0.88 $ 0.29
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 0.57 0.20 0.15 (0.05) (0.90)
------ ------ ------ ------ ------
Total from investment operations $ 0.96 $ 1.03 $ 1.00 $ 0.83 $(0.61)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.39) $(0.84) $(0.85) $(0.80) $(0.22)
In excess of net investment income (0.01) -- (0.02) -- --
From paid-in capital -- -- (0.02) (0.07) (0.02)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.40) $(0.84) $(0.89) $(0.87) $(0.24)
------ ------ ------ ------ ------
Net asset value - end of period $13.54 $12.98 $12.79 $12.68 $12.72
====== ====== ====== ====== ======
Total return 7.54%++ 8.27% 7.90% 7.00% 4.57%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.70%+ 1.74% 1.74% 1.75% 1.80%+
Net investment income 5.91%+ 6.44% 6.35% 7.17% 6.57%+
Portfolio turnover 130% 446% 377% 306% 410%
Net assets at end of period (000 omitted) $26,568 $20,003 $17,330 $8,171 $7,627
** For the period from the commencement of the Fund's offering of Class C shares, January 3, 1994, through 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.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
OCTOBER 31, 1997 APRIL 30, 1997***
- -------------------------------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C>
Net asset value - beginning of period $13.05 $13.15
------ ------
Income from investment operations# -
Net investment income $ 0.48 $ 0.31
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.56 (0.09)
------ ------
Total from investment operations $ 1.04 $ 0.22
------ ------
Less distributions declared to shareholders -
From net investment income $(0.48) $(0.32)
In excess of net investment income (0.01) --
------ ------
Total distributions declared to shareholders $(0.49) $(0.32)
------ ------
Net asset value - end of period $13.60 $13.05
====== ======
Total return 8.10%++ 1.70%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.70%+ 0.69%+
Net investment income 7.08%+ 7.19%+
Portfolio turnover 130% 446%
Net assets at end of period (000 omitted) $8,792 $9,593
*** For the period from the commencement of the Fund's offering of Class I shares, January 2, 1997, through April 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
</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 foreign 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 reported at market value using
closing settlement prices. Over-the-counter options on securities are valued by
brokers. Over-the-counter currency options are valued through the use of a
pricing model which takes into account foreign currency exchange spot and
forward rates, implied volatility, and short-term repurchase rates. Equity
securities listed on securities exchanges or reported through the NASDAQ system
are reported at market value using last sale prices. Unlisted equity securities
or listed equity securities for which last sale prices are not available are
reported at market value using last quoted bid prices. 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 (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 result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - The Fund may also write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the options contract. When a written option
expires, the Fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as part of an income producing strategy reflecting the view of the
Fund's management on the direction of interest rates.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or 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 as unrealized until the contract
settlement date. On contract settlement date, the gains or losses are recorded
as realized gains or losses on foreign currency transactions.
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 is amortized or accreted for financial statement and tax
reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Dividend and interest
payments received in additional securities are recorded on the ex-dividend or
ex-interest date in an amount equal to the value of the security on such date.
The Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. 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 additions to the cost basis of the security. Costs
that are incurred to negotiate the terms or conditions of capital infusions or
that are expected to result in a plan of reorganization are reported as realized
losses. Ongoing costs incurred to protect or enhance an investment, or costs
incurred to pursue other claims or legal actions, are expensed.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's 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 net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV.
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, 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 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 the following annual rates:
BASED ON AVERAGE NET ASSETS BASED ON GROSS INCOME
- ------------------------------------ --------------------------------
First $200 million 0.225% First $20 million 2.75%
In excess of $200 million 0.191% In excess of $20 million 2.34%
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets,
provided that the administrative fee is not assessed on Fund assets that exceed
$3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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 $8,253 for the period ended
October 31, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$78,169 for the period ended October 31, 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
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum
(reduced to a maximum of 0.15% per annum for shares sold prior to March 1, 1991)
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. 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 Fund may
determine. MFD retains the service fee for accounts not attributable to a
securities dealer which amounted to $140,982 for the period ended October 31,
1997. Fees incurred under the distribution plan during the period ended October
31, 1997, were 0.30% of average daily net assets attributable to Class A shares
on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be additional consideration for
services rendered by the dealer with respect to Class B and Class C shares. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $15,286 and $7,082 for Class B and Class C shares,
respectively, for the period ended October 31, 1997. Fees incurred under the
distribution plan during the period ended October 31, 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 12 months of purchase. MFD receives
all contingent deferred sales charges. Contingent deferred sales charges imposed
during the period ended October 31, 1997, were $28,539, $124,444, and $1,943 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:
PURCHASES SALES
- ----------------------------------------------------------------------------
U.S. government securities $438,608,834 $387,524,602
------------ ------------
Investments (non-U.S. government securities) $527,529,278 $548,112,701
------------ ------------
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 $769,051,903
------------
Gross unrealized appreciation $ 22,961,081
Gross unrealized depreciation (3,574,646)
------------
Net unrealized appreciation $ 19,386,435
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED OCTOBER 31, 1997 YEAR ENDED APRIL 30, 1997
--------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,316,008 $ 124,215,546 19,892,064 $ 259,257,771
Shares issued to shareholders
in reinvestment of
distributions 1,088,024 14,443,043 2,100,680 27,188,616
Shares transferred to Class I -- -- (736,830) (9,689,294)
Shares reacquired (6,633,917) (88,479,700) (19,787,017) (257,602,400)
---------- ------------- ----------- -------------
Net increase 3,770,115 $ 50,178,889 1,468,897 $ 19,154,693
========== ============= =========== =============
<CAPTION>
Class B Shares
SIX MONTHS ENDED OCTOBER 31, 1997 YEAR ENDED APRIL 30, 1997
--------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,821,592 $ 50,974,256 7,303,701 $ 94,245,630
Shares issued to shareholders
in
reinvestment of
distributions 198,612 2,629,382 346,001 4,490,950
Shares reacquired (2,324,066) (30,996,274) (6,225,167) (80,626,350)
---------- ------------- ----------- -------------
Net increase 1,696,138 $ 22,607,364 1,424,535 $ 18,110,230
========== ============= =========== =============
<CAPTION>
Class C Shares
SIX MONTHS ENDED OCTOBER 31, 1997 YEAR ENDED APRIL 30, 1997
--------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 577,029 $ 7,693,065 783,293 $ 10,174,727
Shares issued to shareholders
in reinvestment of
distributions 28,999 384,238 49,134 633,359
Shares reacquired (185,410) (2,462,839) (645,483) (8,302,572)
---------- ------------- ----------- -------------
Net increase 420,618 $ 5,614,464 186,944 $ 2,505,514
========== ============= =========== =============
<CAPTION>
Class I Shares
SIX MONTHS ENDED OCTOBER 31, 1997 YEAR ENDED APRIL 30, 1997
--------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,856 $ 131,797 38,538 $ 501,079
Shares issued to shareholders
in reinvestment of
distributions 25,300 335,730 17,820 232,925
Shares transferred from Class A -- -- 736,830 9,689,294
Shares reacquired (123,951) (1,660,739) (58,113) (766,362)
---------- ------------- ----------- -------------
Net increase (decrease) (88,795) $ (1,193,212) 735,075 $ 9,656,936
========== ============= =========== =============
*For the period from commencement of the Fund's offering of Class I shares, January 2, 1997, through
April 30, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
period ended October 31, 1997, was $2,285.
(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, 1997, is as
follows:
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 1/07/98 AUD 1,930,632 $ 1,457,214 $ 1,355,033 $102,181
1/07/98 CAD 2,228,130 1,635,325 1,586,980 48,345
1/07/98 DEM 13,485,878 7,706,255 7,844,388 (138,133)
1/07/98 DKK 894,856 137,914 136,768 1,146
1/07/98 ESP 208,702,115 1,409,022 1,433,801 (24,779)
1/07/98 GBP 3,623,058 5,883,007 6,055,883 (172,876)
1/07/98 GRD 612,629,527 2,105,554 2,254,744 (149,190)
1/07/98 ITL 10,997,953,562 6,445,798 6,482,532 (36,734)
1/07/98 JPY 377,682,162 3,244,366 3,176,934 67,432
1/07/98 NZD 4,525,820 3,093,801 2,803,323 290,478
1/07/98 SEK 19,760,713 2,588,080 2,642,252 (54,172)
----------- ----------- --------
$35,706,336 $35,772,638 $(66,302)
=========== =========== ========
Purchases 1/07/98 CAD 2,252,414 $ 1,651,088 $ 1,604,276 $(46,812)
1/07/98 DEM 2,611,313 1,495,238 1,518,933 23,695
1/07/98 ESP 439,023,654 3,013,641 3,016,129 2,488
1/07/98 GBP 947,979 1,568,630 1,567,817 (813)
1/07/98 GRD 612,629,527 2,119,385 2,254,744 135,359
1/07/98 ITL 5,448,489,654 3,143,151 3,211,508 68,357
----------- ----------- --------
$12,991,133 $13,173,407 $182,274
=========== =========== ========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $416,254 with Bankers Trust and
$18,549 with CS First Boston at October 31, 1997. Closed forward foreign
currency exchange contracts excluded above amount to a net receivable of
$237,131 with Merrill Lynch, $74,647 with Swiss Bank, and $20,921 with Deutsche
Bank at October 31, 1997.
At October 31, 1997, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Restricted Securities
The Fund may invest not more than 10% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At October 31, 1997, the
Fund owned the following restricted securities (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., 8.103, 2022 6/22/94 $2,000,000 $1,386,250 $1,898,125
</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 October 31, 1997, 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, 1997, and the financial
highlights for the six months ended October 31, 1997 and 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
October 31, 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 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, 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
December 5, 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>
MFS(R) BOND FUND
<TABLE>
<S> <C>
Trustees Assistant Secretary
A. Keith Brodkin* - Chairman and President James R. Bordewick, Jr.*
Richard B. Bailey* - Private Investor; Custodian
Former Chairman and Director (until 1991), Investors Bank & Trust Company
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director, Investor Information
Cambridge Trust Company For MFS stock and bond market outlooks, call
toll free: 1-800-637-4458 anytime from a
Peter G. Harwood - Private Investor touch-tone telephone.
J. Atwood Ives - Chairman and Chief Executive For information on MFS mutual funds, call
Officer, Eastern Enterprises your financial adviser or, for an information
kit, call toll free: 1-800-637-2929 any
Lawrence T. Perera - Partner, Hemenway business day from 9 a.m. to 5 p.m. Eastern
& Barnes time (or leave a message anytime).
William J. Poorvu - Adjunct Professor, Investor Service
Harvard University Graduate School of MFS Service Center, Inc.
Business Administration P.O. Box 2281
Boston, MA 02107-9906
Charles W.Schmidt - Private Investor
For general information, call toll free:
Arnold D. Scott* - Senior Executive Vice 1-800-225-2606 any business day from
President, Director and Secretary, 8 a.m. to 8 p.m. Eastern time.
Massachusetts Financial Services Company
For service to speech- or hearing-impaired,
Jeffrey L. Shames* - President and Director, call toll free: 1-800-637-6576 any business
Massachusetts Financial Services Company day from 9 a.m. to 5 p.m. Eastern time. (To
use this service, your phone must be equipped
Elaine R. Smith - Independent Consultant with a Telecommunications Device for the
Deaf.)
David B. Stone - Chairman, North American
Management Corp. (investment advisers) For share prices, account balances, and
exchanges, call toll free: 1-800-MFS-TALK
Investment Adviser (1-800-637-8255) anytime from a touch-tone
Massachusetts Financial Services Company telephone.
500 Boylston Street
Boston, MA 02116-3741 World Wide Web
www.mfs.com
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street [Dalbar Logo] For the fourth year in a
Boston, MA 02116-3741 row, MFS earned a #1
ranking in the DALBAR, Inc. Broker/Dealer
Portfolio Manager Survey, Main Office Operations Service
Geoffrey L. Kurinsky* Quality Category. The firm achieved a 3.42
overall score on a scale of 1 to 4 in the
Treasurer 1997 survey. A total of 111 firms responded,
W. Thomas London* offering input on the quality of service they
received from 29 mutual fund companies
Assistant Treasurers nationwide. The survey contained questions
Mark E. Bradley* about service quality in 11 categories,
Ellen Moynihan* including "knowledge of operations contact,"
James O. Yost* "keeping you informed," and "ease of doing
business" with the firm.
Secretary
Stephen E. Cavan*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
-------------
MFS(R) BOND FUND BULK RATE
U.S. POSTAGE
PAID
MFS
-------------
500 Boylston Street
Boston, MA 02116-3741
[LOGO] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
[DALBAR
LOGO]
TOP-RATED SERVICE
(c)1997 MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116-3741
MFB-3 12/97 87M 11/211/311/811
