<PAGE>
[Logo] M F S (R) ANNUAL REPORT
INVESTMENT MANAGEMENT FOR THE YEAR ENDED
75 YEARS APRIL 30, 1999
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) INTERMEDIATE INVESTMENT
GRADE BOND FUND
MFS(R) RESEARCH BOND FUND
<PAGE>
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND
MFS(R) RESEARCH BOND FUND
<TABLE>
<S> <C>
TRUSTEES CUSTODIAN
Richard B. Bailey* - Private Investor; Former State Street Bank and Trust Company
Chairman and Director (until 1991), MFS Investment
Management(R) AUDITORS
Deloitte & Touche LLP
Peter G. Harwood - Private Investor
INVESTOR INFORMATION
J. Atwood Ives - Chairman and Chief Executive For MFS stock and bond market outlooks, call toll
Officer, Eastern Enterprises (diversified services free: 1-800-637-4458 anytime from a touch-tone
company) telephone.
Lawrence T. Perera - Partner, Hemenway & Barnes For information on MFS mutual funds, call your
(attorneys) financial adviser or, for an information kit, call
toll free: 1-800-637-2929 any business day from 9
William J. Poorvu - Adjunct Professor, Harvard a.m. to 5 p.m. Eastern time (or leave a message
University Graduate School of Business anytime).
Administration
INVESTOR SERVICE
Charles W. Schmidt - Private Investor MFS Service Center, Inc.
P.O. Box 2281
Arnold D. Scott* - Senior Executive Vice Boston, MA 02107-9906
President, Director, and Secretary, MFS Investment
Management For general information, call toll free:
1-800-225-2606 any business day from 8 a.m. to 8
Jeffrey L. Shames* - Chairman, Chief Executive p.m. Eastern time.
Officer, and Director, MFS Investment Management
For service to speech- or hearing-impaired, call
Elaine R. Smith - Independent Consultant toll free: 1-800-637-6576 any business day from 9
a.m. to 5 p.m. Eastern time. (To use this service,
David B. Stone - Chairman and Director, North your phone must be equipped with a
American Management Corp. (investment advisers) Telecommunications Device for the Deaf.)
INVESTMENT ADVISER For share prices, account balances, and exchanges,
Massachusetts Financial Services Company call toll free: 1-800-MFS-TALK (1-800-637-8255)
500 Boylston Street anytime from a touch-tone telephone.
Boston, MA 02116-3741
WORLD WIDE WEB
DISTRIBUTOR www.mfs.com
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
James J. Calmas*
DIRECTOR OF FIXED INCOME RESEARCH
Robert J. Manning*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
Over 75 years ago, MFS invented the mutual fund, giving Americans greater
access to the investment markets. Since then, we have been guided by a number
of fundamental principles, including diversification and professional
management backed by MFS(R) Original Research(SM), a process by which we seek
long-term investment opportunities.
We have found that these principles have matched those of our shareholders. In
a recent survey for MFS by Roper Starch Worldwide, Inc., a major consumer
research firm, over 60% of mutual fund shareholders said they are investing
for long-term goals such as retirement. The survey also showed that investors
realize that the extraordinary stock market gains of the past few years cannot
be sustained. These views certainly seem to have guided investors during last
year's market correction. Beginning with the collapse of Asian markets at the
end of 1997 and continuing with the volatility in U.S. markets through October
of 1998, only 7% of mutual fund investors took money out of the stock market.
We are even more pleased that MFS investors reacted calmly to last year's
market turmoil, indicating their commitment to diversification. As a result,
throughout the late summer and fall of 1998, daily purchases of MFS stock and
bond funds were well ahead of redemptions.
Over the past year or so, however, diversified investment programs have not
financially rewarded investors. A very narrow band of about 25 stocks
representing the largest U.S. growth companies has, until recently, vastly
outperformed the rest of the market. In 1998, for example, the return on the
Standard & Poor's 500 Composite Index (a popular, unmanaged index of common
stock total return performance) increased 28.58%. However, over half of the
stocks in the index returned less than 10%, including 198 stocks that posted
negative returns.
While 1997 and 1998 were good years for large-company growth stocks, 1996 was
dominated by the mid-sized value category. Prices of value stocks do not fully
reflect the companies' underlying values or future prospects. In 1995, the
best-performing sector was small-company growth stocks. We believe this change
of market leadership shows that while diversification may not provide the best
performance in the short run, it should benefit investors over the long term.
In fact, as 1999 progresses, we are seeing signs of renewed strength from a
broader group of industries, including electric utilities and paper products
and chemical companies. We believe our diversified MFS Family of Funds(R),
supported by Original Research, is well positioned to benefit from a broader
market.
Most mutual fund investors refrain from trying to predict short-term trends.
Despite the large stock market gains of the past several years, the Roper
Starch survey shows that people do not see performance as the only reason to
invest. These investors also cite a desire to put investment decisions in the
hands of experts, a belief that mutual funds can be less risky than other
investments, and an appreciation of the convenience of mutual fund investing.
We appreciate the fact that our fund shareholders and their advisers share our
belief that mutual fund investing is not a way to speculate in the markets but
is a way to use the investment markets to help them work toward their long-term
goals. Our goal at MFS is to offer professionally managed investment products
with the potential to sustain returns over a variety of market cycles.
We thank you for your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
May 17, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
MFS Intermediate Investment Grade Bond Fund
Dear Shareholders,
The Fund, which commenced operations on January 4, 1999, seeks high current
income by investing in U.S. Treasury securities and investment-grade corporate
bonds. Currently, about 40% of portfolio assets are invested in corporate
bonds, with the rest in Treasuries. Sectors include financial services,
utilities, telecommunications, airlines, retailing, and energy. Consolidation
has benefited the financial services, utility, and telecommunications
industries, while the strong economy has helped airlines and retailers. The
energy sector, which has lagged, recently has performed well in response to
rising oil and gas prices.
Bond holdings include Ahold Finance USA, a Dutch company that owns Stop & Shop
supermarkets in the United States, Saks Fifth Avenue, and Delta Airlines.
These companies have benefited from the strong consumer sector. We also own
bonds from Time Warner and Sprint Spectrum, which is Sprint's mobile phone
division. Both companies have been helped by the rapid expansion of the
telecommunications industry, as well as by the consolidation in that business.
Going forward, we believe the strong economy should help corporate debt. We
believe the strength of the consumer sector and productivity gains are driving
the economy and, with inflation still low, interest rates may remain
relatively stable.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
<PAGE>
MFS Research Bond Fund
Dear Shareholders,
The Fund, which commenced operations on January 4, 1999, is a total return
portfolio seeking high current income and long-term growth of capital. The Fund
invests, under normal market conditions, at least 65% of its assets in
fixed-income securities.
The Fund seeks to incorporate the best ideas of our fixed-income analysts who
cover the U.S. government, mortgage-backed, corporate, and international bond
markets. We believe our MFS(R) Original Research(SM) process can help the Fund
equal or exceed the returns of the Lehman Brothers Government/Corporate Bond
Index (the Lehman Index). The Lehman Index is an unmanaged, market-value-
weighted index that includes U.S. Treasury and government-agency securities
(excluding mortgage-backed securities) and investment-grade debt obligations
of U.S. corporations.
We have the latitude to add high-yield corporate bonds to the Fund's portfolio
if the analysts are positive on the sector, which they are at this time. Since
the beginning of 1999, the high-yield market has continued to recover from the
turmoil following last summer's Russian bond default. This year's strong
economy has increased investor confidence in the high-yield market, which has
meant lower interest rates and higher prices for high-yield bonds.
The analysts also are positive on the mortgage market, because interest rate
increases since last fall have taken some of the steam out of last summer's
refinancing wave. Therefore, we do not expect prepayments to be a problem for
the mortgage market.
Going forward, the analysts believe mortgage-backed, corporate, and select
international bonds should continue to outperform U.S. Treasury securities for
the rest of this year, at least. (Principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity.) We
believe the strong economy, low inflation, and economic recoveries in some
overseas markets should provide a favorable backdrop for the non-Treasury
market.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Director of Fixed Income Research
The committee of MFS fixed-income research analysts is responsible for the
day-to-day management of the Fund under the general supervision of Mr.
Manning.
The opinions expressed in this report are those of the portfolio manager and
the Director of Fixed Income Research and are current only through the end of
the period of the report as stated on the cover. Their views are subject to
change at any time based on market and other conditions, and no forecasts can
be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
PORTFOLIO OF INVESTMENTS - April 30, 1999
MFS INTERMEDIATE INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
Bonds - 99.0%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 93.3%
Airlines - 1.0%
Delta Airlines, 6.65s, 2004 $ 10 $ 10,096
- ------------------------------------------------------------------------------------------------------
Automotive - 2.5%
Federal Mogul Corp., 7.75s, 2006 $ 25 $ 25,048
- ------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 7.0%
Aristar, Inc., 5.85s, 2004 $ 20 $ 19,744
Capital One Bank Medium Term Note, 6.15s, 2001 25 25,065
GS Escrow Corp., 7s, 2003 25 25,096
----------
$ 69,905
- ------------------------------------------------------------------------------------------------------
Beverages - 4.1%
Coca-Cola Bottling Co., 6.375s, 2009 $ 10 $ 9,906
Pepsi Bottling Holdings, Inc., 5.625s, 2009## 20 19,074
Whitman Corp., 6s, 2004 12 11,934
----------
$ 40,914
- ------------------------------------------------------------------------------------------------------
Corporate Asset Backed - 7.9%
Carco Auto Loan Master Trust, 5.65s, 2003 $ 15 $ 15,035
Citibank Credit Card Master Trust I, 5.5s, 2006 25 24,578
Discover Card Master Trust I, 5.85s, 2006 20 19,931
GE Capital Mortgage Services, Inc., 6.035s, 2020 20 20,019
----------
$ 79,563
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation - 1.8%
FHLMC, 5.83s, 2013 $ 19 $ 18,474
- ------------------------------------------------------------------------------------------------------
Federal National Mortgage Association - 5.8%
FNMA, 5.722s, 2009 $ 30 $ 28,791
FNMA, 6s, 2014 30 29,718
----------
$ 58,509
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 3.6%
Bear Stearns Co., 6.15s, 2004 $ 10 $ 9,847
Lehman Brothers Holdings, 6.375s, 2001 11 11,047
Newcourt Credit Group, Inc., 6.875s, 2005## 15 15,357
----------
$ 36,251
- ------------------------------------------------------------------------------------------------------
Insurance - 2.9%
Aflac, Inc., 6.5s, 2009## $ 20 $ 19,697
Conseco, Inc., 6.4s, 2001 10 9,886
----------
$ 29,583
- ------------------------------------------------------------------------------------------------------
Media - 5.2%
J Seagram & Sons, Inc., 6.4s, 2003 $ 25 $ 24,992
Time Warner Entertainment Co. LP, 9.625s, 2002 25 27,521
----------
$ 52,513
- ------------------------------------------------------------------------------------------------------
Oils - 3.6%
Conoco, Inc., 5.9s, 2004 $ 20 $ 19,827
Oryx Energy Co., 8.375s, 2004 15 15,943
----------
$ 35,770
- ------------------------------------------------------------------------------------------------------
Retail - 5.6%
Ahold Finance USA, Inc., 6.25s, 2009 $ 20 $ 19,675
Rite Aid Corp., 6.7s, 2001 10 10,022
Saks Fifth Avenue, Inc., 8.25s, 2008 25 27,103
----------
$ 56,800
- ------------------------------------------------------------------------------------------------------
Telecommunications - 2.9%
Sprint Capital Corp., 5.875s, 2004 $ 12 $ 11,875
Sprint Spectrum LP, 11s, 2006 15 17,209
----------
$ 29,084
- ------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 35.9%
U.S. Treasury Notes, 5.5s, 2003 $ 73 $ 73,642
U.S. Treasury Notes, 5.75s, 2000 201 202,978
U.S. Treasury Notes, 6.125s, 2007 70 73,216
U.S. Treasury Notes, 7.25s, 2004 10 10,859
----------
$ 360,695
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 3.5%
Entergy Mississippi, Inc., 5.645s, 2004 $ 10 $ 9,900
Midamerican Funding LLC, 5.85s, 2001## 15 15,006
PECO Energy Transition Trust, 5.48s, 2003 10 9,987
----------
$ 34,893
- ------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 938,098
- ------------------------------------------------------------------------------------------------------
Foreign Bonds - 5.7%
Chile - 1.6%
Empresa Nacional De Electricid, 8.5s, 2009##
(Utilities - Electric) $ 15 $ 15,730
- ------------------------------------------------------------------------------------------------------
Germany - 1.6%
Landesbank Baden Wuerttemberg, 7.875s, 2004
(Banks and Credit Cos.) $ 15 $ 16,151
- ------------------------------------------------------------------------------------------------------
South Korea - 0.4%
Export-Import Bank Korea, 7.1s, 2007 (Banks and
Credit Cos.) $ 4 $ 3,999
- ------------------------------------------------------------------------------------------------------
Spain - 2.1%
Kingdom of Spain, 9.125s, 2000 $ 20 $ 20,877
- ------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 56,757
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,001,220) $ 994,855
Other Assets, Less Liabilities - 1.0% 10,173
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,005,028
- ------------------------------------------------------------------------------------------------------
##SEC Rule 144A restriction.See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - April 30, 1999
MFS RESEARCH BOND FUND
<CAPTION>
Bonds - 97.8%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 94.8%
Automotive - 2.0%
Federal Mogul Corp., 7.75s, 2006 $ 10 $ 10,019
Ford Motor Credit Co., 5.75s, 2004 10 9,866
----------
$ 19,885
- ------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 2.0%
Capital One Bank Medium Term Note, 6.15s, 2001 $ 10 $ 10,026
J.P. Morgan & Co., Inc., 5.75s, 2004 10 9,873
----------
$ 19,899
- ------------------------------------------------------------------------------------------------------
Chemicals - 2.1%
NL Industries, Inc., 11.75s, 2003 $ 20 $ 21,350
- ------------------------------------------------------------------------------------------------------
Energy - 1.0%
P&L Coal Holdings Corp., 9.625s, 2008 $ 10 $ 10,400
- ------------------------------------------------------------------------------------------------------
Entertainment - 1.0%
Regal Cinemas, Inc., 9.5s, 2008 $ 10 $ 9,950
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 4.0%
Ahold Finance USA, Inc., 6.25s, 2009 $ 10 $ 9,837
Bear Stearns Co., 6.15s, 2004 10 9,847
General Motors Acceptance Corp., 5.95s, 2003 10 9,980
GS Escrow Corp., 7s, 2003 10 10,039
----------
$ 39,703
- ------------------------------------------------------------------------------------------------------
Financial Services - 1.0%
Lehman Brothers Holdings, 6.375s, 2001 $ 10 $ 10,043
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - 3.4%
Fage Dairy Industries S.A., 9s, 2007 $ 10 $ 9,200
J Seagram & Sons, Inc., 6.4s, 2003 10 9,997
Pepsi Bottling Holdings, Inc., 5.625s, 2009## 10 9,537
Whitman Corp., 6.375s, 2009 5 4,943
----------
$ 33,677
- ------------------------------------------------------------------------------------------------------
Government National Mortgage Association - 9.2%
GNMA TBA, 7s, 2028 $ 90 $ 91,594
- ------------------------------------------------------------------------------------------------------
Industrial - 1.0%
Dura Operating Corp., 9s, 2009## $ 10 $ 10,175
- ------------------------------------------------------------------------------------------------------
Insurance - 2.0%
Aflac, Inc., 6.5s, 2009## $ 10 $ 9,848
Conseco, Inc., 6.4s, 2001 10 9,886
----------
$ 19,734
- ------------------------------------------------------------------------------------------------------
Media - 1.6%
Time Warner Entertainment Co. LP, 9.625s, 2002 $ 15 $ 16,512
- ------------------------------------------------------------------------------------------------------
Oils - 2.1%
Conoco, Inc., 6.95s, 2029 $ 10 $ 9,775
Oryx Energy Co., 8.375s, 2004 10 10,629
----------
$ 20,404
- ------------------------------------------------------------------------------------------------------
Retail - 2.1%
J. Crew Operating Corp., 10.375s, 2007 $ 10 $ 9,725
Saks Fifth Avenue, Inc., 8.25s, 2008 10 10,841
----------
$ 20,566
- ------------------------------------------------------------------------------------------------------
Telecommunications - 3.1%
ITC Deltacom, Inc., 9.75s, 2008 $ 10 $ 10,650
Sprint Capital Corp., 6.9s, 2019 10 9,851
Time Warner Telecommunications LLC, 9.75s, 2008 10 10,800
----------
$ 31,301
- ------------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 11.5%
Federal National Mortgage Assn., 4.75s, 2003 $ 60 $ 57,825
Federal National Mortgage Assn., 5.25s, 2009 60 57,253
----------
$ 115,078
- ------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 44.7%
U.S. Treasury Bonds, 5.25s, 2028 - 2029 $107 $ 99,506
U.S. Treasury Notes, 4.25s, 2003 96 92,205
U.S. Treasury Notes, 4.5s, 2001 164 162,411
U.S. Treasury Notes, 4.75s, 2008 86 82,143
U.S. Treasury Notes, 7.25s, 2004 10 10,859
----------
$ 447,124
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 1.0%
Midamerican Funding LLC, 5.85s, 2001## $ 10 $ 10,004
- ------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 947,399
- ------------------------------------------------------------------------------------------------------
Foreign Bonds - 3.0%
Brazil - 1.0%
Republic of Brazil, 11.625s, 2004 $ 10 $ 9,750
- ------------------------------------------------------------------------------------------------------
Ireland - 1.0%
Smurfit Capital Funding PLC, 7.5s, 2025 (Containers) $ 10 $ 9,846
- ------------------------------------------------------------------------------------------------------
Mexico - 1.0%
United Mexican States, 10.375s, 2009 $ 10 $ 10,700
- ------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 30,296
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $991,515) $ 977,695
Other Assets, Less Liabilities - 2.2% 21,904
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 999,599
- ------------------------------------------------------------------------------------------------------
##SEC Rule 144A restriction.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
- ---------------------------------------------------------------------------------------------
INTERMEDIATE
INVESTMENT RESEARCH
GRADE BOND BOND
APRIL 30, 1999 FUND FUND
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $1,001,220 and
$991,515, respectively) $ 994,855 $ 977,695
Cash 15,246 3,172
Receivable for investments sold -- 9,664
Interest receivable 16,864 16,750
Receivable from investment advisor 20,481 18,699
---------- ----------
Total assets $1,047,446 $1,025,980
---------- ----------
Liabilities:
Payable for investments purchased $ 25,971 $ 9,970
Accrued expenses and other liabilities 16,447 16,411
---------- ----------
Total liabilities $ 42,418 $ 26,381
---------- ----------
Net assets $1,005,028 $ 999,599
========== ==========
Net assets consist of:
Paid-in capital $1,016,749 $1,019,559
Unrealized depreciation on investments (6,365) (13,820)
Accumulated net realized loss on investments (6,659) (6,743)
Accumulated undistributed net investment income 1,303 603
---------- ----------
Total $1,005,028 $ 999,599
========== ==========
Shares of beneficial interest outstanding:
101,691 101,984
========== ==========
Class A shares:
Net asset value per share
(net assets / shares of beneficial interest outstanding)
($1,004,878 / 101,676, $999,450 / 101,969) $ 9.88 $ 9.80
====== ======
Offering price per share (100 / 95.25 of net asset value per
share, respectively) $10.37 $10.29
====== ======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding)
($149.79 / 15.170, $148.58 / 15.193) $ 9.87 $ 9.78
====== ======
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 shares.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Operations
- ------------------------------------------------------------------------------------------------------
INTERMEDIATE
INVESTMENT RESEARCH
GRADE BOND BOND
PERIOD ENDED APRIL 30, 1999* FUND FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income:
Income -
Interest $ 18,473 $ 18,643
-------- --------
Expenses -
Management fee $ 1,601 $ 1,901
Shareholder servicing agent fee 363 346
Distribution and service fee (Class A) 1,120 1,109
Administrative fee 48 48
Auditing fees 9,500 9,500
Printing 6,967 7,053
Registration fees 3,500 3,500
Legal fees 1,913 1,895
Custodian fee 1,738 1,753
Postage 30 28
Miscellaneous 762 1,172
-------- --------
Total expenses $ 27,542 $ 28,305
Fees paid indirectly (105) (111)
Reduction of expenses by investment adviser and distributor (26,669) (27,349)
-------- --------
Net expenses $ 768 $ 845
-------- --------
Net investment income $ 17,705 $ 17,798
-------- --------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) -
Investment transactions $ (6,658) $ (6,743)
-------- --------
Change in unrealized depreciation -
Investments $ (6,365) $(13,820)
-------- --------
Net realized and unrealized loss on investments $(13,023) $(20,563)
-------- --------
Increase (decrease) in net assets from operations $ 4,682 $ (2,765)
======== ========
*For the period from the commencement of the Funds' investment operations, January 4, 1999, through
April 30, 1999.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------
INTERMEDIATE
INVESTMENT RESEARCH
GRADE BOND BOND
PERIOD ENDED APRIL 30, 1999* FUND FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 17,705 $ 17,798
Net realized loss on investments (6,658) (6,743)
Net unrealized loss on investments (6,365) (13,820)
---------- -----------
Increase (decrease) in net assets from operations $ 4,682 $ (2,765)
---------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (16,400) $ (17,192)
From net investment income (Class I) (3) (3)
---------- -----------
Total distributions declared to shareholders $ (16,403) $ (17,195)
---------- -----------
Net increase in net assets from Fund share transactions $1,016,749 $1,019,559
---------- -----------
Total increase in net assets $1,005,028 $ 999,599
Net assets:
At beginning of period -- --
---------- -----------
At end of period (including accumulated undistributed net
investment income of $1,303 and $603, respectively) $1,005,028 $ 999,599
========== ==========
*For the period from the commencement of the Funds' investment operations, January 4, 1999, through
April 30, 1999.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- ----------------------------------------------------------------------------------------------------------------
INTERMEDIATE INVESTMENT GRADE BOND FUND
- ----------------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
APRIL 30, 1999* APRIL 30, 1999*
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ----------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.18 $ 0.19
Net realized and unrealized loss on investments (0.14) (0.16)
------ ------
Total from investment operations $ 0.04 $ 0.03
------ ------
Less distributions declared to shareholders -
From net investment income $(0.16) $(0.16)
------ ------
Net asset value - end of period $ 9.88 $ 9.87
====== ======
Total return(+) 0.44%++ 0.33%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.27%+ 0.27%+
Net investment income 5.53%+ 5.43%+
Portfolio turnover 155% 155%
Net assets at end of period (000 omitted) $1,005 $ 0+++
* For the period from the commencement of the Fund's investment operations, January 4, 1999, through April 30, 1999.
+ Annualized.
++ Not annualized.
+++ At April 30, 1999, Class I net assets were less than $500.
# Per share data is based on average shares outstanding.
## The Fund had an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for this
expense offset arrangement.
(+) Total return 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 investment adviser and the distributor voluntarily waived their fees for the period. Effective February 1, 1999, the
investment adviser voluntarily agreed to maintain the expenses of the Fund, excluding management and distribution fees, at
not more than 0% of average daily net assets. If these fees had been incurred by the Fund, the net investment loss per share
and the ratios would have been:
Net investment loss $(0.09) $(0.09)
Ratios (to average net assets):
Expenses## 8.60% 8.25%
Net investment loss (2.80)% (2.55)%
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------
RESEARCH BOND FUND
- -----------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
APRIL 30, 1999* APRIL 30, 1999*
- -----------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -----------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.18 $ 0.18
Net realized and unrealized loss on investments (0.21) (0.23)
------ ------
Total from investment operations $(0.03) $(0.05)
------ ------
Less distributions declared to shareholders -
From net investment income $(0.17) $(0.17)
------ ------
Net asset value - end of period $ 9.80 $ 9.78
====== ======
Total return(+) (0.29)%++ (0.49)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.30%+ 0.30%+
Net investment income 5.62%+ 5.13%+
Portfolio turnover 117% 117%
Net assets at end of period (000 omitted) $999 $ 0+++
* For the period from the commencement of the Fund's investment operations, January 4, 1999, through April 30, 1999.
+ Annualized.
++ Not annualized.
+++ At April 30, 1999, Class I net assets were less than $500.
# Per share data is based on average shares outstanding.
## The Fund had an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for this
expense offset arrangement.
(+) Total return 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 investment adviser and the distributor voluntarily waived their fees for the period. Effective February 1, 1999, the
investment adviser voluntarily agreed to maintain the expenses of the Fund, excluding management and distribution fees, at not
more than 0% of average daily net assets. If these fees had been incurred by the Fund, the net investment loss per share and
the ratios would have been:
Net investment loss $(0.09) $(0.11)
Ratios (to average net assets):
Expenses## 8.93%+ 8.58%+
Net investment loss (3.01)%+ (3.15)%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Intermediate Investment Grade Bond Fund and MFS Research Bond Fund (the
Funds) are a non-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 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, 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. 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.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Interest payments received in additional
securities are recorded on the ex-interest date in an amount equal to the value
of the security on such date.
Fees Paid Indirectly - The Funds' custody fee is calculated as a percentage of
the Funds' month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Funds. This
amount is shown as a reduction of expenses on the Statements of Operations.
Tax Matters and Distributions - Each Funds' 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 Funds file tax returns 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 Funds' tax
returns 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 Funds
distinguish between distributions on a tax basis and a financial reporting basis
and require that only distributions in excess of tax basis earnings and profits
are reported in the financial statements as distributions from paid-in 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 net realized gains. At April
30, 1999, accumulated net realized loss on investments under book accounting
were different from tax accounting due to temporary differences in accounting
for capital losses.
Multiple Classes of Shares of Beneficial Interest - The Funds offer multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Funds based on the value
of settled shares outstanding 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 Funds have 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 for Intermediate Investment Grade Bond Fund and Research Bond
Fund is computed daily and paid monthly at an annual rate of 0.50% and 0.60% of
the Fund's average daily net assets, respectively. The investment adviser has
voluntarily agreed to waive its fee, which is reflected as a reduction of
expenses in the Statements of Operations.
Effective February 1, 1999, the investment adviser has voluntarily agreed to pay
each of the Fund's operating expenses exclusive of management, distribution, and
service fees such that the Funds' aggregate expenses do not exceed 0.00% of
their average daily net assets. This is reflected as a reduction of expenses in
the Statements of Operations. Prior to February 1, 1999, the Funds had a
temporary expense reimbursement agreement whereby MFS voluntarily agreed to pay
all of the Funds' operating expenses, exclusive of management, distribution, and
service fees. The Intermediate Investment Grade Bond Fund and Research Bond
Fund, in turn, paid MFS an expense reimbursement fee not greater than 1.00% and
1.10%, respectively.
The Funds pay no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Funds, all of whom receive
remuneration for their services to the Funds from MFS. Certain officers and
Trustees of the Funds are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trustees currently are not
receiving any payments for their services to the Funds.
Administrator - The Funds have an administrative services agreement with MFS to
provide the Funds with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Funds pay MFS an administrative fee at
the following annual percentages of the Funds' average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales of Class A shares of the Funds for the
period ended April 30, 1999.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Funds' distribution plans provide that the Funds will pay MFD up to 0.35%
per annum of their average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of each of the Funds related to the
distribution and servicing of their shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of up
to 0.25% per annum of the Funds' average daily net assets attributable to Class
A shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.10% per annum of the Funds' average daily net assets
attributable to Class A shares. Distribution and service fees under the Class A
distribution plans are currently being waived.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following purchase. There
were no contingent deferred sales charges imposed on Class A shares during the
period ended April 30, 1999.
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 each Fund's average daily net assets at an effective annual rate
of 0.10%. Prior to April 1, 1999, the fee was calculated as a percentage of each
Fund's average daily net assets at an effective annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
<TABLE>
<CAPTION>
INTERMEDIATE
INVESTMENT GRADE RESEARCH
BOND FUND BOND FUND
- ----------------------------------------------------------------------------------------------------------
PURCHASES
<S> <C> <C>
U.S. government securities $1,669,446 $1,420,337
--------- ---------
Investments (non-U.S. government securities) $ 787,965 $ 709,471
--------- ---------
SALES
U.S. government securities $1,218,855 $ 736,406
--------- ---------
Investments (non-U.S. government securities) $ 230,762 $ 386,798
--------- ---------
The cost and unrealized appreciation and depreciation in the value of the investments owned by the Funds,
as computed on a federal income tax basis, are as follows:
<CAPTION>
INTERMEDIATE
INVESTMENT GRADE RESEARCH
BOND FUND BOND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggregate cost $1,001,394 $ 995,351
---------- ----------
Gross unrealized depreciation $ (9,268) $ (18,483)
Gross unrealized appreciation 2,729 827
---------- ----------
Net unrealized depreciation $ (6,539) $ (17,656)
========== ==========
</TABLE>
(5) Shares of Beneficial Interest
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions
in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
PERIOD ENDED APRIL 30, 1999**
----------------------------------------------------
INTERMEDIATE INVESTMENT GRADE RESEARCH
BOND FUND BOND FUND
----------------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 100,041 $1,000,410 100,242 $1,002,420
Shares issued to shareholders in reinvestment of distributions 1,656 16,391 1,747 17,191
Shares reacquired (21) (204) (20) (204)
------- ---------- ------- ----------
Net increase 101,676 $1,016,597 101,969 $1,019,407
======= ========== ======= ==========
<CAPTION>
Class I Shares
PERIOD ENDED APRIL 30, 1999**
----------------------------------------------------
INTERMEDIATE INVESTMENT GRADE RESEARCH
BOND FUND BOND FUND
----------------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 15 $ 150 15 $ 150
Shares issued to shareholders in
reinvestment of distributions* 0 2 0 2
Shares reacquired -- -- -- --
------- ---------- ------- ----------
Net increase 15 $ 152 15 $ 152
======= ========== ======= ==========
*Shares reinvested were less than 1 share.
**For the period from the commencement of the Funds' investment operations, January 4, 1999, through April 30, 1999.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of the MFS Series Trust IX:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of MFS Intermediate Investment Grade Bond Fund
and MFS Research Bond Fund (each a portfolio of MFS Series Trust IX (the Trust))
as of April 30, 1999, the related statements of operations, changes in net
assets, and the financial highlights for the period from the commencement of
investment operations, January 4, 1999, through April 30, 1999. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at April 30, 1999 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 audit provides 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 Intermediate
Investment Grade Bond Fund and MFS Research Bond Fund at April 30, 1999, the
results of its operations, the changes in its net assets, and its financial
highlights for the respective stated period from the commencement of investment
operations, January 4, 1999, through April 30, 1999 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 4, 1999
<PAGE>
FEDERAL TAX INFORMATION
In January 2000, shareholders will be mailed a Form 1099 reporting the federal
tax status of all distributions paid during the calendar year 1999.
--------------------------------------------
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) INTERMEDIATE INVESTMENT
GRADE BOND FUND
MFS(R) RESEARCH BOND FUND
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
INC-2APR 6/99 2M 77/78
