<PAGE>
[Logo] M F S (R) SEMIANNUAL REPORT
INVESTMENT MANAGEMENT OCTOBER 31, 1999
We invented the mutual fund(R)
[graphic omitted]
MFS(R) HIGH QUALITY BOND FUND
MFS(R) INTERMEDIATE INVESTMENT
GRADE BOND FUND
MFS(R) LARGE CAP VALUE FUND
MFS(R) RESEARCH BOND FUND
<PAGE>
MFS(R) HIGH QUALITY BOND FUND
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND
MFS(R) LARGE CAP VALUE FUND
MFS(R) RESEARCH BOND FUND
<TABLE>
<S> <C>
TRUSTEES SECRETARY
Stephen E. Cavan*
Richard B. Bailey - Private Investor;
Former Chairman and Director (until 1991), ASSISTANT SECRETARY
MFS Investment Management(R) James R. Bordewick, Jr.*
J. Atwood Ives - Chairman and Chief Executive Officer, CUSTODIAN
Eastern Enterprises (diversified services company) State Street Bank and Trust Company
Lawrence T. Perera - Partner, Hemenway & Barnes (attorneys) INVESTOR INFORMATION
For information on MFS mutual funds, call your financial
William J. Poorvu - Adjunct Professor, Harvard University consultant or, for an information kit, call toll free:
Graduate School of Business Administration 1-800-637-2929 any business day from 9 a.m. to 5 p.m.
Eastern time
(or leave a message anytime).
Charles W. Schmidt - Private Investor
INVESTOR SERVICE
Arnold D. Scott* - Senior Executive Vice President, MFS Service Center, Inc.
Director, and Secretary, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman and Chief Executive Officer, For general information, call toll free: 1-800-225-2606 any
MFS Investment Management business day from 8 a.m. to 8 p.m. Eastern time.
Elaine R. Smith - Independent Consultant For service to speech- or hearing-impaired, call toll free:
1-800-637-6576 any business day from 9 a.m. to 5 p.m.
David B. Stone - Chairman, Eastern time. (To use this service, your phone must be
North American Management Corp. (investment advisers) equipped with a Telecommunications Device for the Deaf.)
INVESTMENT ADVISER For share prices, account balances, exchanges, or MFS stock
Massachusetts Financial Services Company and bond market outlooks, call toll free: 1-800-MFS-TALK
500 Boylston Street (1-800-637-8255) 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
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
DIRECTOR OF FIXED INCOME RESEARCH
Robert J. Manning*
PORTFOLIO MANAGERS
David M. Calabro*
James J. Calmas*
Peter C. Vaream*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
(+) Independent Trustee
* MFS Investment Management
</TABLE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
The current investment and economic environment bears little resemblance to last
year's. One year ago, global economies were floundering, and the crisis in Asia
threatened an already weak U.S. economy. Corporate earnings were flat, and
economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low. Many
corporations are focused on improving their profitability, and investors have
been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999 will average 12% - 15%.
Global economies also are showing signs of strength, and the Asian crisis has
passed. In fact, Japan's economic woes seem to have reached bottom. Although the
process is in its infancy, some Japanese corporations not only are talking about
restructuring and cost cutting, they also are beginning to take action, looking
within to become more competitive and improve returns on equity. While still
lagging the United States, Europe is beginning to restructure and consolidate.
These signs of international growth have contributed to concerns that the U.S.
economy now may be too strong. In June, and again in August, the Fed raised
rates by one-quarter of a percentage point to help ward off the specter of
inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current market
many investors are taking on additional risk - whether through day trading or
investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago. We
believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top 25
stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged index
of common stock total return performance, are still the most overvalued. Such
extreme overvaluation makes the stock market sensitive to interest-rate news and
any negative earnings surprises. The Year 2000 (Y2K) computer problem is another
factor causing investor concern. While we believe corporate America is well
prepared to address any Y2K situations that may arise at year-end, no one can
predict investor behavior. In our opinion, it is investor behavior that has the
greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is through our
continuing commitment to MFS Original Research(R) and our fundamental investment
tenet of long-term investing. Whether markets are up or down, MFS analysts focus
on analyzing industries and visiting companies to determine the long-term
winners and the prices that will make them attractive opportunities. Because all
companies will not benefit equally from the improving international environment,
bottom-up research remains critical to identifying those that we believe are
successfully restructuring, consolidating, and gaining market share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid
companies at attractive prices. For this reason, we are continuing to expand our
domestic and international capabilities to ensure that MFS has primary, in-house
research on companies worldwide. We believe that we have built the right
investment team, backed by MFS Original Research, to take advantage of those
opportunities for our shareholders.
We appreciate 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)
November 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
MFS High Quality Bond Fund
Dear Shareholders,
The Fund, which commenced investment operations on May 3, 1999, seeks to provide
high current income consistent with prudent risk. The Fund invests, under normal
conditions, at least 65% of its total assets in fixed-income securities,
including high-quality corporate bonds, mortgage- and asset-backed securities,
and U.S. government securities. The Fund also may invest in high-yield and
derivative securities.
To select fixed-income investments, a large group of portfolio managers and
research analysts periodically assesses the total return outlook for the
fixed-income markets. This "horizon" outlook is a tool used to make and then
adjust the Fund's asset allocations to various segments of the fixed-income
markets. The research staff does its own independent credit analysis in addition
to considering the results of credit-rating agencies.
During the period, the trend of stronger economic growth caused interest rates
to rise, but strengthened the financial profile of many corporate-bond issuers.
About one-third of the portfolio's assets were allocated to investment-grade and
high-yield corporate bonds. Our research team favored telecommunications and
entertainment companies, such as Sprint Capital Corp. and Time Warner
Entertainment. Nearly one-half of the portfolio consisted of U.S. Treasury
obligations, with the remainder invested in mortgage-backed securities.
Looking ahead, we will compare U.S. Treasury securities, which we hold to
maintain quality and liquidity, with opportunities offered by other fixed-income
sectors. We will watch especially closely the high-yield market, which we
believe is poised for a rebound in the coming year.
Respectfully,
/s/ Peter C. Vaream
Peter C. Vaream
Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK - continued
MFS Intermediate Investment Grade Bond Fund
Dear Shareholders,
For the six months ended October 31, 1999, Class A shares of the Fund provided a
total return of 0.18% and Class I shares 0.28%. These returns include the
reinvestment of any distributions but exclude the effects of any sales charges.
Over the same period, these results compare to a -0.55% return for the Lehman
Brothers Government/Corporate Bond Index (the Lehman Index), 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, and to a -0.78% return for the average
intermediate investment-grade debt fund tracked by Lipper Analytical Services,
Inc., an independent firm that reports mutual fund performance.
The Fund's primary objective is to seek high current income consistent with
prudent risk, and its secondary objective is to protect shareholders' capital.
The Fund invests in corporate bonds with ratings from "AAA" through "BBB" or in
unrated bonds that we consider investment quality. The Fund also invests in U.S.
Treasury securities and mortgage- and asset-backed securities, which represent
pooled assets such as mortgage loans, car loans, and credit card receivables.
The maturities of bonds in the Fund are normally 10 years or less.
The telecommunications sector has benefited from the explosive growth of data
traffic on the Internet and the proliferation of cellular phones. In this
industry, we hold bonds from such corporations as AT&T Canada, Sprint, and Cable
& Wireless. Going forward, we believe that if inflation remains low, interest
rates will stay stable. Moreover, if the U.S. economy stays strong, confidence
in the overall bond market, and in corporate bonds specifically, should grow.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK - continued
MFS Large Cap Value Fund
Dear Shareholders,
The Fund, which commenced investment operations on May 3, 1999, seeks long-term
growth of capital and invests, under normal market conditions, at least 65% of
its total assets in common stocks and related securities of companies with large
market capitalizations that we believe are undervalued relative to their
long-term potential.
The equity securities of these companies may be undervalued based on their low
price-to-book, price-to-sales, and/or price-to-earnings ratios. The reasons for
the undervaluation may be a market decline, poor economic conditions, company-
or industry-related downturns, or market oversight. We use a bottom- up approach
to select and manage securities that is based on fundamental analysis by the
Fund's portfolio manager and equity analysts. They often find value stocks in
mature industries such as financial services, which saw some good value over the
period. Although higher interest rates and increased competition hurt stock
prices across the board, we believe that some of these financial companies in
particular offer strong prospects.
For example, during the period, the Fund held shares in Lincoln National, a life
insurance company with a well-run asset management subsidiary, a solid
management team, and renewed earnings growth. We believe the company has
fundamental appeal and appears to be a valuable asset in an industry that is
consolidating.
Respectfully,
/s/ David M. Calabro
David M. Calabro
Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK - continued
MFS Research Bond Fund
Dear Shareholders,
For the six months ended October 31, 1999, Class A shares of the Fund provided a
total return of -0.95% and Class I shares -0.75%. These returns assume the
reinvestment of any distributions but exclude the effects of any sales charges,
and compare over the same period to a -0.55% return for the Lehman Brothers
Government/ Corporate Bond Index.
The Fund is a total return portfolio seeking high current income and long-term
growth of capital. Under normal market conditions, it has 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, using MFS Original Research(R) to
select individual securities.
The Fund's underperformance compared to the index was due to declining prices
that resulted from an oversupply of both high-yield and high-grade corporate
bonds. Because the index does not include high-yield bonds, our holdings of
these issues especially hurt our relative performance.
Looking ahead, we believe the strength of both domestic and international
economies bodes well for the bond markets. The telecommunications industry in
particular is booming, in large part from the growth of data traffic on the
Internet and the proliferation of cellular phones. In this industry, we hold
bonds from corporations such as Cox Communications.
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 managers 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.
The portfolios are actively managed, and current holdings may be different.
<PAGE>
PERFORMANCE SUMMARY
Currently, each Fund offers only Class A and Class I shares, which are available
for purchase at net asset value only by residents of the Commonwealth of
Massachusetts who are employees (or certain relatives of employees) of MFS and
its affiliates or members of the governing boards of the various funds sponsored
by MFS.
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results for the applicable time periods. Investment results
reflect the percentage change in net asset value, including reinvestment of
dividends. (See Notes to Performance Summary.)
CUMULATIVE TOTAL RATES OF RETURN THROUGH OCTOBER 31, 1999
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND
CLASS A INVESTMENT RESULTS
6 Months Life*
- -----------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +0.18% +0.61%
- -----------------------------------------------------------------------------
CLASS I INVESTMENT RESULTS
6 Months Life*
- -----------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +0.28% +0.61%
- -----------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
January 4, 1999, through October 31, 1999.
MFS(R) RESEARCH BOND FUND
CLASS A INVESTMENT RESULTS
6 Months Life*
- -----------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge -0.95% -1.24%
- -----------------------------------------------------------------------------
CLASS I INVESTMENT RESULTS
6 Months Life*
- -----------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge -0.75% -1.24%
- -----------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
January 4, 1999, through October 31, 1999.
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable 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. All results are
historical and include 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.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- October 31, 1999
MFS HIGH QUALITY BOND FUND
<TABLE>
<CAPTION>
Bonds - 96.3%
- -------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 90.7%
Airlines - 1.4%
Continental Airlines Pass-Through Trust, Inc., 6.648s, 2017 $ 5 $ 4,518
Continental Airlines Pass-Through Trust, Inc., 7.256s, 2020 10 9,678
----------
$ 14,196
- -------------------------------------------------------------------------------------------------
Automotive - 1.0%
Lear Corp., 7.96s, 2005## $ 10 $ 9,765
- -------------------------------------------------------------------------------------------------
Building - 0.9%
Nortek, Inc., 9.25s, 2007 $ 10 $ 9,700
- -------------------------------------------------------------------------------------------------
Business Services - 0.9%
First Data Corp., 6.75s, 2005 $ 9 $ 8,772
- -------------------------------------------------------------------------------------------------
Chemicals - 3.0%
Lyondell Chemical Co., 9.625s, 2007 $ 30 $ 30,075
- -------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.5%
RJ Reynolds Tobacco Holdings, 7.75s, 2006## $ 5 $ 4,703
- -------------------------------------------------------------------------------------------------
Containers - 0.9%
Gaylord Container Corp., 9.875s, 2008 $ 10 $ 8,700
- -------------------------------------------------------------------------------------------------
Entertainment - 4.3%
Seagram (Joseph E) & Sons, Inc., 5.79s, 2001 $ 10 $ 9,841
Seagram (Joseph E) & Sons, Inc., 7.5s, 2018 8 7,688
Time Warner Entertainment Co. LP, 8.375s, 2033 24 25,699
----------
$ 43,228
- -------------------------------------------------------------------------------------------------
Financial Institutions - 3.0%
Aristar, Inc., 7.25s, 2006 $ 10 $ 9,863
Ford Motor Credit Co., 7.375s, 2009 20 20,161
----------
$ 30,024
- -------------------------------------------------------------------------------------------------
Forest and Paper Products - 1.0%
Riverwood International Corp., 10.25s, 2006 $ 10 $ 10,050
- -------------------------------------------------------------------------------------------------
Machinery - 1.0%
Johnstown America Industries, 11.75s, 2005 $ 10 $ 10,225
- -------------------------------------------------------------------------------------------------
Metals and Minerals - 0.9%
P&L Coal Holdings Corp., 9.625s, 2008 $ 10 $ 9,550
- -------------------------------------------------------------------------------------------------
Oil Services - 0.2%
McDermott, Inc., 9.375s, 2002 $ 2 $ 2,065
- -------------------------------------------------------------------------------------------------
Railroads - 1.0%
Union Pacific Corp., 6.34s, 2003 $ 10 $ 9,719
- -------------------------------------------------------------------------------------------------
Supermarkets - 1.0%
Safeway, Inc., 7.25s, 2004 $ 10 $ 9,918
- -------------------------------------------------------------------------------------------------
Telecommunications - 9.6%
AT&T Corp., 6.5s, 2029 $ 17 $ 15,038
Cable & Wireless Communications, 6.75s, 2008 20 20,239
Comcast Corp., 9.125s, 2006 10 10,579
Cox Communications, Inc., 7.75s, 2006 10 10,186
ITC Deltacom, Inc., 11s, 2007 10 10,450
Qwest Communications International, Inc., 7.5s, 2008 6 5,953
Spectrasite Holdings, Inc., 0s to 2004, 11.125 to 2009 20 10,375
Sprint Capital Corp., 6.9s, 2019 15 13,986
----------
$ 96,806
- -------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 14.3%
Federal National Mortgage Assn., 7s, 2029 $ $147 $ 144,160
- -------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 44.2%
U.S. Treasury Bonds, 5.25s, 2029 $ 7 $ 6,050
U.S. Treasury Notes, 5.5s, 2000 180 180,056
U.S. Treasury Notes, 6s, 2004 5 5,012
U.S. Treasury Notes, 7.875s, 2004 5 5,387
U.S. Treasury Notes, 6s, 2009 249 248,649
----------
$ 445,154
- -------------------------------------------------------------------------------------------------
Utilities - Electric - 1.0%
Duke Capital Corp., 7.25s, 2004 $ 10 $ 10,064
- -------------------------------------------------------------------------------------------------
Utilities - Gas - 0.6%
Coastal Corp., 6.2s, 2004 $ 6 $ 5,711
- -------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 912,585
- -------------------------------------------------------------------------------------------------
Foreign Bonds - 5.6%
Canada - 1.0%
Province of Quebec, 7.5s, 2029 $ 10 $ 10,048
- -------------------------------------------------------------------------------------------------
France - 1.8%
Natexis AMBS Co. LLC, 8.44s, 2049 (Financial
Institutions)## $ 20 $ 18,700
- -------------------------------------------------------------------------------------------------
Luxembourg - 1.1%
Millicom International Cellular Communications Corp.,
0s to 2001,
13.5 to 2006 (Telecommunications) $ 15 $ 10,875
- -------------------------------------------------------------------------------------------------
United Kingdom - 1.7%
British Sky Broadcasting Group, 6.875s, 2009
(Telecommunications) $ 8 $ 7,119
Telewest PLC, 9.625s, 2006 (Telecommunications) 10 10,100
----------
$ 17,219
- -------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 56,842
- -------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $975,706) $ 969,427
- -------------------------------------------------------------------------------------------------
Short-Term Obligation - 2.0%
- -------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 11/01/99, at Amortized Cost $ 20 $ 20,000
- -------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $995,706) $ 989,427
Other Assets, Less Liabilities - 1.7% 17,265
- -------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,006,692
- -------------------------------------------------------------------------------------------------
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- October 31, 1999
MFS INTERMEDIATE INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
Bonds - 99.2%
- -------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 89.3%
Airlines - 0.7%
Delta Airlines, Inc., 6.65s, 2004 $ 7 $ 6,782
- -------------------------------------------------------------------------------------------------
Automotive - 2.8%
DaimlerChrysler NA Holding Corp., 6.63s, 2001 $ 13 $ 13,020
Ford Motor Credit Co., 6.7s, 2004 15 14,869
----------
$ 27,889
- -------------------------------------------------------------------------------------------------
Banks and Credit Companies - 1.0%
Fleet Boston Corp., 9.9s, 2001 $ 10 $ 10,493
- -------------------------------------------------------------------------------------------------
Beverages - 0.9%
Coca-Cola Bottling Co., 6.375s, 2009 $ 10 $ 9,078
- -------------------------------------------------------------------------------------------------
Conglomerates - 1.2%
General Electric Capital Corp., 8.625s, 2008 $ 11 $ 12,147
- -------------------------------------------------------------------------------------------------
Corporate Asset Backed - 11.5%
Americredit Automobile Receivables Trust, 5.78s, 2003 $ 15 $ 14,780
Carco Auto Loan Master Trust, 5.65s, 2003 15 14,890
Chase Credit Card Master Trust, 5.666s, 2004 15 15,014
Citibank Credit Card Master Trust I, 5.5s, 2006 25 23,820
Discover Card Master Trust I, 5.85s, 2006 20 19,343
GE Capital Mortgage Services, Inc., 6.035s, 2020 20 19,294
Peco Energy Transition Trust, 5.48s, 2003 8 8,202
----------
$ 115,343
- -------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation - 1.4%
FHLMC, 5.83s, 2013 $ 14 $ 13,809
- -------------------------------------------------------------------------------------------------
Federal National Mortgage Association - 7.3%
FNMA, 5.25s, 2009 $ 20 $ 17,997
FNMA, 5.722s, 2009 30 27,225
FNMA, 6s, 2014 29 27,811
----------
$ 73,033
- -------------------------------------------------------------------------------------------------
Financial Institutions - 6.5%
Aristar, Inc., 7.375s, 2004 $ 20 $ 20,119
Countrywide Home Loan, Inc., 6.85s, 2004 12 11,882
GS Escrow Corp., 7.125s, 2005 25 22,928
Lehman Brothers Holdings, Inc., 6.375s, 2001 11 10,960
----------
$ 65,889
- -------------------------------------------------------------------------------------------------
Food and Beverage Products - 2.6%
J Seagram & Sons, Inc., 5.79s, 2001 $ 15 $ 14,761
Whitman Corp., 6s, 2004 12 11,464
----------
$ 26,225
- -------------------------------------------------------------------------------------------------
Insurance - 2.8%
Aflac, Inc., 6.5s, 2009 $ 20 $ 18,773
Conseco, Inc., 6.4s, 2001 10 9,664
----------
$ 28,437
- -------------------------------------------------------------------------------------------------
Media - 2.6%
Time Warner Entertainment Co. LP, 9.625s, 2002 $ 25 $ 26,460
- -------------------------------------------------------------------------------------------------
Oils - 1.6%
Occidental Petroleum Corp., 10.125s, 2001 $ 15 $ 15,859
- -------------------------------------------------------------------------------------------------
Telecommunications and Cable - 7.8%
Cable & Wireless Communications, 6.75s, 2008 $ 15 $ 15,179
Comcast Corp., 9.125s, 2006 13 13,752
Cox Communications, Inc., 7.75s, 2006 15 15,279
Sprint Spectrum LP, 11s, 2006 15 16,840
Telecomunicaiones de Puerto Rico, 6.15s, 2002## 13 12,778
U.S. West Communications Inc., 7.2s, 2004## 5 5,039
----------
$ 78,867
- -------------------------------------------------------------------------------------------------
Tobacco - 0.5%
RJ Reynolds Tobacco Holding Co., 7.75s, 2006## $ 5 $ 4,703
- -------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 1.5%
AID - Israel, 6.6s, 2008 $ 15 $ 14,843
- -------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 32.0%
U.S. Treasury Notes, 4.25s, 2003 $ 65 $ 61,070
U.S. Treasury Notes, 5.75s, 2000 - 2002 191 191,047
U.S. Treasury Notes, 6s, 2004 - 2009 34 34,008
U.S. Treasury Notes, 6.125s, 2007 25 24,902
U.S. Treasury Notes, 7.875s, 2004 10 10,775
----------
$ 321,802
- -------------------------------------------------------------------------------------------------
Utilities - Electric - 4.6%
Connecticut Light & Power Co., 7.875s, 2001 $ 10 $ 10,145
Duke Capital Corp., 7.25s, 2004 10 10,064
Entergy Mississippi, Inc., 6.2s, 2004 10 9,572
Midamerican Funding LLC, 5.85s, 2001## 15 14,842
Narragansett Electric Co., 7.83s, 2002 2 2,055
----------
$ 46,678
- -------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 898,337
- -------------------------------------------------------------------------------------------------
Foreign Bonds - 9.9%
Canada - 1.5%
AT&T Canada, Inc., 7.65s, 2006 (Telecommunications)## $ 15 $ 15,109
- -------------------------------------------------------------------------------------------------
France - 1.4%
Natexis AMBS Co. LLC, 8.44s, 2049 (Financial
Institutions)## $ 15 $ 14,025
- -------------------------------------------------------------------------------------------------
Germany - 2.1%
KFW International Finance, Inc., 9.4s, 2004 (Agency) $ 5 $ 5,515
Landesbank Baden Wurttemberg, 7.875s, 2004 (Banks and
Credit Cos.) 15 15,610
----------
$ 21,125
- -------------------------------------------------------------------------------------------------
Israel - 1.0%
Israel Electric Corp. Ltd., 8.25s, 2009 (Utilities -
Electric)## $ 10 $ 10,039
- -------------------------------------------------------------------------------------------------
South Korea - 0.4%
Export-Import Bank Korea, 7.1s, 2007 (Banks and Credit Cos.) $ 4 3,946
- -------------------------------------------------------------------------------------------------
Spain - 2.0%
Kingdom of Spain, 9.125s, 2000 $ 20 $ 20,432
- -------------------------------------------------------------------------------------------------
United Kingdom - 1.5%
Abbey National PLC, 6.7s, 2049 (Banks and Credit Cos.) $ 9 $ 8,167
British Sky Broadcasting Group, 6.875s, 2009
(Telecommunications)## 8 7,120
----------
$ 15,287
- -------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 99,963
- -------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,020,222) $ 998,300
- -------------------------------------------------------------------------------------------------
Short-Term Obligations - 2.0%
- -------------------------------------------------------------------------------------------------
Federal Home Loan Bank Corp., due 11/01/99, at Amortized Cost $ 20 $ 20,000
- -------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,040,222) $1,018,300
Other Assets, Less Liabilities - (1.2)% (12,297)
- -------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,006,003
- -------------------------------------------------------------------------------------------------
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- October 31, 1999
MFS LARGE CAP VALUE FUND
Stocks - 88.8%
- ----------------------------------------------------------------------------
ISSUER SHARES VALUE
- ----------------------------------------------------------------------------
U.S. Stocks - 78.9%
Aerospace - 2.1%
Raytheon Co., "A" 56 $ 1,536
TRW, Inc. 178 7,632
United Technologies Corp. 30 1,815
--------
$ 10,983
- ----------------------------------------------------------------------------
Automotive - 1.4%
Delphi Automotive Systems Corp. 200 $ 3,287
Ford Motor Co. 72 3,951
--------
$ 7,238
- ----------------------------------------------------------------------------
Banks and Credit Companies - 3.2%
Bank America Corp. 88 $ 5,665
Bank of New York Co., Inc. 117 4,900
PNC Bank Corp. 98 5,843
--------
$ 16,408
- ----------------------------------------------------------------------------
Business Machines - 3.0%
Hewlett-Packard Co. 54 $ 3,999
International Business Machines Corp. 54 5,312
Seagate Technology, Inc.* 200 5,888
--------
$ 15,199
- ----------------------------------------------------------------------------
Cellular Telephones - 1.1%
Telephone & Data Systems, Inc. 49 $ 5,647
- ----------------------------------------------------------------------------
Chemicals - 1.8%
Engelhard Corp. 130 $ 2,291
PPG Industries, Inc. 30 1,819
Rohm & Haas Co. 133 5,087
--------
$ 9,197
- ----------------------------------------------------------------------------
Computer Software - Systems - 1.0%
BMC Software, Inc.* 80 $ 5,135
- ----------------------------------------------------------------------------
Conglomerates - 2.2%
AlliedSignal, Inc. 146 $ 8,313
Eastern Enterprises Co. 55 2,812
--------
$ 11,125
- ----------------------------------------------------------------------------
Consumer Goods and Services - 0.6%
Fortune Brands, Inc. 92 $ 3,260
- ----------------------------------------------------------------------------
Containers - 0.9%
Ivex Packaging Corp.* 500 $ 4,719
- ----------------------------------------------------------------------------
Electrical Equipment - 1.2%
Emerson Electric Co. 103 $ 6,186
- ----------------------------------------------------------------------------
Energy - 1.0%
BJ Services Co.* 143 $ 4,907
- ----------------------------------------------------------------------------
Entertainment - 3.0%
Disney (Walt) Co. 80 $ 2,110
Harrah's Entertainment, Inc.* 145 4,196
MediaOne Group, Inc.* 26 1,848
Time Warner, Inc. 102 7,108
--------
$ 15,262
- ----------------------------------------------------------------------------
Financial Institutions - 4.2%
American Express Co. 20 $ 3,080
Citigroup, Inc. 128 6,928
Edwards (A.G.), Inc. 164 4,930
Federal Home Loan Mortgage Corp. 50 2,703
Merrill Lynch & Co., Inc. 32 2,512
State Street Corp. 20 1,523
--------
$ 21,676
- ----------------------------------------------------------------------------
Financial Services - 1.9%
Axa Financial, Inc.* 138 $ 4,425
Mellon Financial Corp. 140 5,171
--------
$ 9,596
- ----------------------------------------------------------------------------
Food and Beverage Products - 4.2%
Archer-Daniels-Midland Co. 253 $ 3,115
Bestfoods Co. 30 1,763
General Mills, Inc. 37 3,226
Hershey Foods Corp. 35 1,767
McCormick & Co., Inc. 64 2,008
Quaker Oats Co. 65 4,550
Seagram Ltd. 100 4,944
--------
$ 21,373
- ----------------------------------------------------------------------------
Forest and Paper Products - 2.4%
Bowater, Inc. 94 $ 4,935
Champion International Corp. 96 5,550
International Paper Co. 30 1,579
--------
$ 12,064
- ----------------------------------------------------------------------------
Insurance - 8.7%
Allstate Corp. 103 $ 2,961
American International Group, Inc. 28 2,882
Chubb Corp. 80 4,390
CIGNA Corp. 77 5,756
Hartford Financial Services Group, Inc. 181 9,378
Lincoln National Corp. 170 7,841
ReliaStar Financial Corp. 114 4,895
St. Paul Cos., Inc. 195 6,240
--------
$ 44,343
- ----------------------------------------------------------------------------
Machinery - 0.7%
Deere & Co., Inc. 45 $ 1,631
W.W. Grainger, Inc. 50 2,119
--------
$ 3,750
- ----------------------------------------------------------------------------
Medical and Health Products - 1.6%
American Home Products Corp. 75 $ 3,919
Pharmacia & Upjohn, Inc. 82 4,423
--------
$ 8,342
- ----------------------------------------------------------------------------
Oil Services - 3.1%
Cooper Cameron Corp.* 118 $ 4,565
Halliburton Co. 140 5,276
Noble Drilling Corp.* 269 5,969
--------
$ 15,810
- ----------------------------------------------------------------------------
Oils - 7.3%
Apache Corp. 50 $ 1,950
Atlantic Richfield Co. 49 4,566
Chevron Corp. 40 3,653
Coastal Corp. 228 9,604
Conoco, Inc., "A" 220 6,036
Mobil Corp. 78 7,527
Texaco, Inc. 18 1,105
Unocal Corp. 90 3,105
--------
$ 37,546
- ----------------------------------------------------------------------------
Photographic Products - 0.6%
Eastman Kodak Co. 12 $ 827
Polaroid Corp. 100 2,231
--------
$ 3,058
- ----------------------------------------------------------------------------
Printing and Publishing - 2.4%
Gannett Co., Inc. 95 $ 7,327
New York Times Co. 129 5,192
--------
$ 12,519
- ----------------------------------------------------------------------------
Railroads - 0.4%
Burlington Northern Santa Fe Railway Co. 66 $ 2,104
- ----------------------------------------------------------------------------
Restaurants and Lodging - 1.6%
Hilton Hotels Corp. 100 $ 925
McDonald's Corp. 179 7,384
--------
$ 8,309
- ----------------------------------------------------------------------------
Special Products and Services - 0.6%
Xerox Corp. 102 $ 2,856
- ----------------------------------------------------------------------------
Stores - 0.5%
Dayton Hudson Corp. 39 $ 2,520
- ----------------------------------------------------------------------------
Supermarkets - 0.3%
Safeway, Inc.* 50 $ 1,766
- ----------------------------------------------------------------------------
Telecommunications - 8.4%
AT&T Corp. 38 $ 1,777
Bell Atlantic Corp. 43 2,792
GTE Corp. 202 15,150
Motorola, Inc. 100 9,744
SBC Communications, Inc. 181 9,220
Sprint Corp. 62 4,607
--------
$ 43,290
- ----------------------------------------------------------------------------
Utilities - Electric - 3.0%
Carolina Power & Light Co. 66 $ 2,277
CMS Energy Corp. 24 885
Duke Energy Corp. 70 3,955
FirstEnergy Corp. 40 1,042
NiSource, Inc. 72 1,476
Pinnacle West Capital Corp. 99 3,651
Texas Utilities Co. 47 1,821
--------
$ 15,107
- ----------------------------------------------------------------------------
Utilities - Gas - 4.5%
Columbia Energy Group 61 $ 3,965
El Paso Energy Corp. 204 8,364
National Fuel Gas Co. 80 3,910
Washington Gas Light Co. 163 4,431
Williams Cos., Inc. 58 2,175
--------
$ 22,845
- ----------------------------------------------------------------------------
Total U.S. Stocks $404,140
- ----------------------------------------------------------------------------
Foreign Stocks - 9.9%
France - 0.7%
Axa (Insurance) 50 $ 3,488
- ----------------------------------------------------------------------------
Japan - 1.5%
Hitachi Ltd., ADR (Electronics) 30 $ 3,262
Nippon Telegraph & Telephone Corp.
(Utilities - Telephone) 58 4,488
--------
$ 7,750
- ----------------------------------------------------------------------------
Netherlands - 2.7%
Akzo Nobel N.V. (Chemicals) 110 $ 4,735
ING Groep N.V., ADR (Financial Services) 88 5,203
Royal Dutch Petroleum Co., ADR (Oils) 66 3,956
--------
$ 13,894
- ----------------------------------------------------------------------------
Switzerland - 0.7%
Nestle S.A. (Food and Beverage Products) 2 $ 3,859
- ----------------------------------------------------------------------------
United Kingdom - 4.3%
BP Amoco PLC, ADR (Oils) 246 $ 14,206
Diageo PLC (Food and Beverage Products)* 420 4,271
SmithKline-Beecham PLC, ADR
(Medical and Health Products) 52 3,328
--------
$ 21,805
- ----------------------------------------------------------------------------
Total Foreign Stocks $ 50,796
- ----------------------------------------------------------------------------
Total Stocks (Identified Cost, $459,221) $454,936
- ----------------------------------------------------------------------------
Preferred Stock - 0.8%
- ----------------------------------------------------------------------------
Utilities - Electric - 0.8%
CMS Energy Corp., 8.75% (Identified Cost $4,150) 100 $ 3,850
- ----------------------------------------------------------------------------
Convertible Preferred Stock - 1.3%
- ----------------------------------------------------------------------------
Consumer Goods and Services - 0.6%
Newell Financial Trust I, 5.25% 68 $ 2,954
- ----------------------------------------------------------------------------
Containers - 0.4%
Owens Illinois, Inc., 4.75% 60 $ 1,980
- ----------------------------------------------------------------------------
Oils - 0.3%
Apache Corp., 6.5% 50 $ 1,787
- ----------------------------------------------------------------------------
Total Convertible Preferred Stock
(Identified Cost, $7,924) $ 6,721
- ----------------------------------------------------------------------------
Convertible Bond - 2.1%
- ----------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ----------------------------------------------------------------------------
Conglomerates - 0.7%
Loews Corp., 3.125s, 2007 $ 4 $ 3,330
- ----------------------------------------------------------------------------
Financial Services - 1.4%
Bell Atlantic Financial Services, Inc.,
4.25s, 2005## $ 7 $ 7,333
- ----------------------------------------------------------------------------
Total Convertible Bond (Identified Cost, $11,024) $ 10,663
- ----------------------------------------------------------------------------
Rights - 0.4%
- ----------------------------------------------------------------------------
SHARES
- ----------------------------------------------------------------------------
CVS Corp.* (Identified Cost, $2,256) 30 $ 2,295
- ----------------------------------------------------------------------------
Short-Term Obligations - 10.7%
- ----------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ----------------------------------------------------------------------------
Federal Home Loan Bank Corp., due 11/01/99,
at Amortized Cost $ 55 $ 55,000
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $539,575) $533,465
Other Assets, Less Liabilities - (4.1)% (20,865)
- ----------------------------------------------------------------------------
Net Assets - 100.0% $512,600
- ----------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- October 31, 1999
MFS RESEARCH BOND FUND
Bonds - 96.5%
- --------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- --------------------------------------------------------------------------
U.S. Bonds - 92.1%
Airlines - 1.4%
Continental Airlines Pass-Through Trust, Inc.,
6.648s, 2017 $ 10 $ 9,035
Continental Airlines Pass-Through Trust, Inc.,
7.256s, 2020 5 4,839
--------
$ 13,874
- --------------------------------------------------------------------------
Automotive - 2.9%
Dura Operating Corp., 9s, 2009 $ 10 $ 9,275
Ford Motor Co., 7.45s, 2031 10 9,849
TRW, Inc., 7.125s, 2009## 10 9,617
--------
$ 28,741
- --------------------------------------------------------------------------
Chemicals - 2.1%
Lyondell Chemical Co., 9.625s, 2007 $ 10 $ 10,025
NL Industries, Inc., 11.75s, 2003 10 10,300
--------
$ 20,325
- --------------------------------------------------------------------------
Consumer Goods and Services - 0.5%
RJR Nabisco, Inc., 7.75s, 2006## $ 5 $ 4,703
- --------------------------------------------------------------------------
Energy - 1.0%
P&L Coal Holdings Corp., 9.625s, 2008 $ 10 $ 9,550
- --------------------------------------------------------------------------
Financial Institutions - 1.9%
Aristar, Inc., 7.25s, 2006 $ 10 $ 9,863
GS Escrow Corp., 7.125s, 2005 10 9,171
--------
$ 19,034
- --------------------------------------------------------------------------
Financial Services - 2.0%
Associates Corp., 5.5s, 2004 $ 10 $ 9,506
Lehman Brothers Holdings, Inc., 6.375s, 2001 10 9,963
--------
$ 19,469
- --------------------------------------------------------------------------
Food and Beverage Products - 1.0%
J Seagram & Sons, Inc., 6.4s, 2003 $ 10 $ 9,678
- --------------------------------------------------------------------------
Forest and Paper Products - 0.4%
Georgia Pacific Corp., 7.25s, 2028 $ 4 $ 3,659
- --------------------------------------------------------------------------
Government National Mortgage Association - 8.9%
GNMA, 7s, 2028 $ 90 $ 87,955
- --------------------------------------------------------------------------
Insurance - 1.9%
Aflac, Inc., 6.5s, 2009 $ 10 $ 9,387
Conseco, Inc., 6.4s, 2001 10 9,664
--------
$ 19,051
- --------------------------------------------------------------------------
Media - 1.6%
Time Warner Entertainment Co. LP, 9.625s, 2002 $ 15 $ 15,876
- --------------------------------------------------------------------------
Municipals - 4.6%
Massachusetts Port Authority Revenue, 5s, 2027 $ 25 $ 21,167
Tampa Bay Water, 5.75s, 2029 25 24,272
--------
$ 45,439
- --------------------------------------------------------------------------
Oils - 2.0%
Amerada Hess Corp., 7.875s, 2029 $ 10 $ 9,921
Ocean Energy, Inc., 8.875s, 2007 10 9,900
--------
$ 19,821
- --------------------------------------------------------------------------
Railroads - 1.0%
Union Pacific Corp., 6.34s, 2003 $ 10 $ 9,719
- --------------------------------------------------------------------------
Retail - 1.7%
J. Crew Operating Corp., 10.375s, 2007 $ 10 $ 9,000
Rite Aid Corp., 6s, 2003## 10 8,267
--------
$ 17,267
- --------------------------------------------------------------------------
Supermarkets - 1.0%
Safeway, Inc., 7.25s, 2004 $ 10 $ 9,918
- --------------------------------------------------------------------------
Telecommunications - 5.0%
Comcast Corp., 9.125s, 2006 $ 10 $ 10,579
Cox Communications, Inc., 7.75s, 2006 10 10,186
Sprint Capital Corp., 6.9s, 2019 10 9,324
Telecomunicaciones De Puerto Rico, 6.65s, 2006## 10 9,517
Time Warner Telecommunications LLC, 9.75s, 2008 10 10,200
--------
$ 49,806
- --------------------------------------------------------------------------
U.S. Federal Agencies - 11.6%
Federal National Mortgage Assn., 4.75s, 2003 $ 60 $ 56,494
Federal National Mortgage Assn., 6.375s, 2009 60 58,528
--------
115,022
- --------------------------------------------------------------------------
U.S. Treasury Obligations - 36.7%
U.S. Treasury Bonds, 8.125s, 2019 $ 25 $ 29,445
U.S. Treasury Bonds, 5.25s, 2028 31 26,655
U.S. Treasury Bonds, 5.25s, 2029 32 27,660
U.S. Treasury Notes, 4.5s, 2001 112 110,389
U.S. Treasury Notes, 5.5s, 2001 14 13,926
U.S. Treasury Notes, 4.25s, 2003 117 109,925
U.S. Treasury Notes, 6s, 2004 5 5,012
U.S. Treasury Notes, 7.875s, 2004 3 3,232
U.S. Treasury Notes, 4.75s, 2008 5 4,525
U.S. Treasury Notes, 6s, 2009 32 31,955
--------
$362,724
- --------------------------------------------------------------------------
Utilities - Electric - 2.0%
Connecticut Light & Power Co., 7.875s, 2001 $ 10 $ 10,145
Midamerican Funding LLC, 5.85s, 2001## 10 9,895
--------
$ 20,040
- --------------------------------------------------------------------------
Utilities - Telephone - 0.9%
AT&T Corp., 6.5s, 2029 $ 10 $ 8,846
- --------------------------------------------------------------------------
Total U.S. Bonds $910,517
- --------------------------------------------------------------------------
Foreign Bonds - 4.4%
France - 1.0%
Natexis AMBS Co. LLC, 8.44s, 2049
(Financial Institutions)## $ 10 $ 9,350
- --------------------------------------------------------------------------
Greece - 0.9%
Fage Dairy Industries S.A., 9s, 2007
(Food and Beverage Products) $ 10 $ 9,000
- --------------------------------------------------------------------------
Sweden - 1.0%
AB Spintab, 6.8s, 2049 (Banks & Credit Cos.)## $ 10 $ 9,719
- --------------------------------------------------------------------------
Foreign Bonds - continued
United Kingdom - 1.5%
National Westminster Bank PLC, 7.375s, 2009
(Banks & Credit Cos.) $ 10 $ 9,932
British Sky Broadcasting Group, 6.875s, 2009
(Telecommunications) 5 4,450
--------
$ 14,382
- --------------------------------------------------------------------------
Total Foreign Bonds $ 42,451
- --------------------------------------------------------------------------
Total Bonds (Identified Cost, $979,874) 952,968
- --------------------------------------------------------------------------
Short-Term Obligations - 0.5%
- --------------------------------------------------------------------------
Federal Home Loan Bank Consolidated Discount
Note, due 11/01/99, at Amortized Cost $ 5 $ 5,000
- --------------------------------------------------------------------------
Total Investments (Identified Cost, $984,874) $957,968
Other Assets, Less Liabilities - 3.0% 30,132
- --------------------------------------------------------------------------
Net Assets - 100.0% $988,100
- --------------------------------------------------------------------------
## SEC Rule 144A restriction.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
MFS INTERMEDIATE
MFS HIGH QUALITY INVESTMENT GRADE
OCTOBER 31, 1999 BOND FUND BOND FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $995,706 and $1,040,222, respectively) $ 989,427 $1,018,300
Cash 387 2,791
Receivable for investments sold 2,976 5,016
Interest receivable 16,509 18,487
---------- ----------
Total assets $1,009,299 $1,044,594
---------- ----------
Liabilities:
Distributions payable
$ 2 $ --
Payable for investments purchased 2,605 22,981
Payable to investment adviser -- 15,610
---------- ----------
Total liabilities $ 2,607 $ 38,591
---------- ----------
Net assets $1,006,692 $1,006,003
---------- ----------
Net assets consist of:
Paid-in capital $1,031,706 $1,048,158
Unrealized depreciation on investments (6,279) (21,922)
Accumulated net realized loss on investments (19,393) (22,671)
Accumulated undistributed net investment income 658 2,438
---------- ----------
Total $1,006,692 $1,006,003
========== ==========
Shares of beneficial interest outstanding:
Class A 103,222 104,935
Class I 20 15.35
---------- ----------
Total shares of beneficial interest outstanding 103,242 104,950
Net assets:
Class A $1,006,497 $1,005,856
Class I 195 147.19
---------- ----------
Total net assets $1,006,692 $1,006,003
========== ==========
Class A shares:
Net asset value per share
(net assets/shares of beneficial interest outstanding) $ 9.75 $ 9.59
========== ==========
Offering price per share (100/95.25 of net asset value per share) $ 10.24 $ 10.06
========== ==========
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets/shares of beneficial interest outstanding) $ 9.75 $ 9.59
========== ==========
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>
Statements of Assets and Liabilities (Unaudited) - continued
- --------------------------------------------------------------------------------------------------------
MFS LARGE CAP MFS RESEARCH
OCTOBER 31, 1999 VALUE FUND BOND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $539,575 and
$984,874, respectively) $ 533,465 $ 957,968
Cash 1,857 2,965
Receivable for investments sold 783 15,718
Interest and dividends receivable 725 17,481
----------- -----------
Total assets $ 536,830 $ 994,132
----------- -----------
Liabilities:
Payable for Fund shares reacquired $ 8 $ --
Payable for investments purchased 24,180 --
Payable to investment adviser -- 6,032
Payable to affiliate for management fee 31 --
Accrued expenses and other liabilities 11 --
----------- -----------
Total liabilities $ 24,230 $ 6,032
----------- -----------
Net assets $ 512,600 $ 988,100
----------- -----------
Net assets consist of:
Paid-in capital $ 493,158 $ 1,049,056
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (6,110) (26,906)
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions 23,195 (35,487)
Accumulated undistributed net investment income 2,357 1,437
----------- -----------
Total $ 512,600 $ 988,100
=========== ===========
Shares of beneficial interest outstanding:
Class A 49,311 105,082
Class I 20 15.377
----------- -----------
Total shares of beneficial interest outstanding 49,331 105,097
Net assets:
Class A $ 512,392 $ 987,955
Class I 208 144.50
----------- -----------
Total net assets $ 512,600 $ 988,100
=========== ===========
Class A shares:
Net asset value per share
(net assets/shares of beneficial interest outstanding) $10.39 $ 9.40
====== ======
Offering price per share (100/95.25 of net asset value per share) $10.91 $ 9.87
====== ======
Class I shares:
Net asset value, offering price, and redemption price per
share
(net assets/shares of beneficial interest outstanding) $10.40 $ 9.40
====== ======
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>
Statements of Operations (Unaudited)
- ----------------------------------------------------------------------------------------------------------
MFS INTERMEDIATE
MFS HIGH QUALITY INVESTMENT GRADE
PERIOD ENDED OCTOBER 31, 1999 BOND FUND* BOND FUND**
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income:
Interest Income $ 31,831 $ 32,552
----------- -----------
Expenses -
Management fee $ 2,410 $ 2,513
Shareholder servicing agent fee 483 502
Distribution and service fee (Class A) -- 1,764
Administrative fee 72 76
Custodian fees 3,246 2,096
Printing 12,557 2,058
Postage 80 57
Auditing fees 6,600 4,765
Legal fees 2,073 2,027
Registration fees 4,000 2,424
Miscellaneous 777 53
----------- -----------
Total expenses $ 32,298 $ 18,335
Fees paid indirectly (156) (154)
Reduction of expenses by investment adviser and distributor (32,142) (18,181)
----------- -----------
Net expenses $ -- $ --
----------- -----------
Net investment income $ 31,831 $ 32,552
----------- -----------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) on investment transactions $ (19,393) $ (16,012)
Change in unrealized depreciation on investments (6,279) (15,557)
----------- -----------
Net realized and unrealized loss on investments $ (25,672) $ (31,569)
----------- -----------
Increase in net assets from operations $ 6,159 $ 983
=========== ===========
* For the period from the commencement of the Fund's investment operations, May 3, 1999, through October 31, 1999.
** For the six months ended October 31, 1999.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statements of Operations (Unaudited) - continued
- ----------------------------------------------------------------------------------------------------------
MFS LARGE CAP MFS REASEARCH
PERIOD ENDED OCTOBER 31, 1999 VALUE FUND* BOND FUND**
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income:
Income -
Dividends $ 3,887 $ --
Interest 582 32,320
Foreign taxes withheld (43) --
----------- -----------
Total investment income $ 4,426 $ 32,320
----------- -----------
Expenses -
Management fee $ 1,551 $ 2,976
Shareholder servicing agent fee 207 496
Distribution and service fee (Class A) -- 1,732
Administrative fee 31 74
Custodian fees 3,141 2,125
Printing 12,705 2,316
Postage 121 49
Auditing fees 2,500 4,779
Legal fees 2,918 1,625
Registration fees 4,000 2,433
Miscellaneous 587 51
----------- -----------
Total expenses $ 27,761 $ 18,656
Fees paid indirectly (65) (154)
Reduction of expenses by investment adviser and distributor (25,627) (18,502)
----------- -----------
Net expenses $ 2,069 $ --
----------- -----------
Net investment income $ 2,357 $ 32,320
----------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 23,205 $ (28,744)
Foreign currency transactions (10) --
----------- -----------
Net realized gain (loss) on investments and foreign
currency transactions $ 23,195 $ (28,744)
----------- -----------
Change in unrealized depreciation on investments $ (6,110) $ (13,086)
----------- -----------
Net realized and unrealized gain (loss) on
investments and foreign currency $ 17,085 $ (41,830)
----------- -----------
Increase (decrease) in net assets from operations $ 19,442 $ (9,510)
=========== ===========
* For the period from the commencement of the Fund's investment operations, May 3, 1999, through
October 31, 1999.
** For the six months ended October 31, 1999.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
PERIOD ENDED
OCTOBER 31, 1999*
MFS HIGH QUALITY BOND FUND (UNAUDITED)
- ------------------------------------------------------------------------------
Increase in net assets:
From operations -
Net investment income $ 31,831
Net realized loss on investments (19,393)
Net unrealized loss on investments (6,279)
----------
Increase in net assets from operations $ 6,159
----------
Distributions declared to shareholders -
From net investment income (Class A) $ (31,167)
From net investment income (Class I) (6)
----------
Total distributions declared to shareholders $ (31,173)
----------
Net increase in net assets from Fund share transactions $1,031,706
----------
Total increase in net assets $1,006,692
Net assets:
At beginning of period --
----------
At end of period (including accumulated undistributed net
investment income of $658) $1,006,692
==========
* For the period from the commencement of the Fund's investment operations,
May 3, 1999, through October 31, 1999.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets - continued
- -------------------------------------------------------------------------------------------------------
SIX MONTH ENDED PERIOD ENDED
OCTOBER 31, 1999 APRIL 30, 1999*
MFS INTERMEDIATE INVESTMENT GRADE BOND (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 32,552 $ 17,705
Net realized loss on investments (16,012) (6,658)
Net unrealized loss on investments (15,557) (6,365)
----------- -----------
Increase in net assets from operations $ 983 $ 4,682
----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (31,412) $ (16,400)
From net investment income (Class I) (5) (3)
----------- -----------
Total distributions declared to shareholders $ (31,417) $ (16,403)
----------- -----------
Net increase in net assets from Fund share transactions $ 31,409 $ 1,016,749
----------- -----------
Total increase in net assets $ 975 $ 1,005,028
Net assets:
At beginning of period 1,005,028 --
----------- -----------
At end of period (including accumulated
undistributed net investment income of $2,438
and $1,303, respectively) $ 1,006,003 $ 1,005,028
=========== ===========
*For the period from the commencement of the Fund's investment operations, January 4, 1999, through April 30, 1999.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets - continued
- ------------------------------------------------------------------------------
PERIOD ENDED
OCTOBER 31, 1999*
MFS LARGE CAP VALUE FUND (UNAUDITED)
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 2,357
Net realized gain on investments and foreign currency
transactions 23,195
Net unrealized loss on investments and foreign currency
translation (6,110)
--------
Increase in net assets from operations $ 19,442
--------
Net increase in net assets from Fund share transactions $493,158
--------
Total increase in net assets $512,600
Net assets:
At beginning of period --
--------
At end of period (including accumulated undistributed net
investment income of $2,357) $512,600
========
*For the period from the commencement of the Fund's investment operations,
May 3, 1999, through October 31, 1999.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets - continued
- -------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
OCTOBER 31, 1999 APRIL 30, 1999*
MFS RESEARCH BOND FUND (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 32,320 $ 17,798
Net realized loss on investments (28,744) (6,743)
Net unrealized loss on investments (13,086) (13,820)
----------- -----------
Decrease in net assets from operations $ (9,510) $ (2,765)
----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (31,481) $ (17,192)
From net investment income (Class I) (5) (3)
----------- -----------
Total distributions declared to shareholders $ (31,486) $ (17,195)
----------- -----------
Net increase in net assets from Fund share transactions $ 29,497 $ 1,019,559
----------- -----------
Total increase (decrease) in net assets $ (11,499) $ 999,599
Net assets:
At beginning of period 999,599 --
----------- -----------
At end of period (including accumulated undistributed
net investment income of $1,437 and $603, respectively) $ 988,100 $ 999,599
=========== ===========
* For the period from the commencement of the Fund's investment operations, January 4, 1999, through April 30, 1999.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ----------------------------------------------------------------------------------------------------------------------
MFS HIGH QUALITY BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 1999* OCTOBER 31, 1999**
(UNAUDITED) (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.00 $ 10.01
----------- -----------
Income from investment operations# -
Net investment income(S) $ 0.31 $ 0.30
Net realized and unrealized loss on investments (0.25) (0.25)
----------- -----------
Total from investment operations $ 0.06 $ 0.05
----------- -----------
Less distributions declared to shareholders from net investment income $ (0.31) $ (0.31)
----------- -----------
Net asset value - end of period $ 9.75 $ 9.75
=========== ===========
Total return(+) 0.61%++ 0.49%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.03%+
Net investment income 6.58%+ 6.31%+
Portfolio turnover 574% 574%
Net assets at end of period (000 Omitted) $ 1,007 --
(S) MFS has voluntarily agreed, under a temporary expense agreement, to pay all of the Fund's operating expenses,
exclusive of management and distribution and service fees. In addition, the investment adviser voluntarily waived
its fee. To the extent actual expenses were over/under this limitation and the waivers had not been in place, the
net investment loss per share and the ratios would have been:
Net investment loss $ (0.01) $ (0.02)
Ratios (to average net assets):
Expenses## 6.68%+ 6.68%+
Net investment loss (0.07)%+ (0.34)%+
* For the period from the commencement of the Fund's investment operations, May 3, 1999, through October 31, 1999.
** For the period from the inception of Class I, May 5, 1999, through October 31, 1999.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------
MFS INTERMEDIATE INVESTMENT GRADE BOND FUND
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
OCTOBER 31, 1999 APRIL 30, 1999* OCTOBER 31, 1999 APRIL 30, 1999*
(UNAUDITED) (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 9.88 $10.00 $ 9.87 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.32 $ 0.18 $ 0.33 $ 0.19
Net realized and unrealized loss on
investments (0.31) (0.14) (0.31) (0.16)
------ ------ ------ ------
Total from investment operations $ 0.01 $ 0.04 $ 0.02 $ 0.03
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.30) $(0.16) $(0.30) $(0.16)
------ ------ ------ ------
Net asset value - end of period $ 9.59 $ 9.88 $ 9.59 $ 9.87
====== ====== ====== ======
Total return(+) 0.18%++ 0.44%++ 0.28%++ 0.33%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.27%+ 0.03%+ 0.27%+
Net investment income 6.49%+ 5.53%+ 6.75%+ 5.43%+
Portfolio turnover 75% 155% 75% 155%
Net assets at end of period (000 Omitted) $1,006 $1,005 $ 0+++ $ 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, and October 31, 1999, Class I net assets were less than $500. #Per share data is based on average
shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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) MFS has voluntarily agreed, under a temporary expense reimbursement agreement, to pay all of the Fund's operating expenses
exclusive of management and distribution and service fees. In addition, the investment adviser and distributor voluntarily
waived their fees for certain of the periods indicated. From the inception of the Fund, January 4, 1999, through
January 31, 1999, the Fund paid MFS a fee not greater than 1.00% of average daily net assets. To the extent actual expenses
were over these limitations and waivers had not been in place, the net investment income (loss) per share and the ratios
would have been:
Net investment income (loss) $ 0.14 $(0.09) $ 0.17 $(0.09)
Ratios (to average net assets):
Expenses## 3.66%+ 8.60%+ 3.31%+ 8.25%+
Net investment income (loss) 2.86%+ (2.80)%+ 3.47%+ (2.55)%+
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------------
MFS LARGE CAP VALUE FUND
- -------------------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 1999* OCTOBER 31, 1999*
(UNAUDITED) (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.00 $ 10.00
-------- --------
Income from investment operations# -
Net investment income(S) $ 0.06 $ 0.07
Net realized and unrealized gain on investments and foreign
currency 0.33 0.33
-------- --------
Total from investment operations $ 0.39 $ 0.40
-------- --------
Net asset value - end of period $ 10.39 $ 10.40
======== ========
Total return(+) 3.90%++ 4.20%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.03%+ 1.03%+
Net investment income 1.14%+ 1.97%+
Portfolio turnover 61% 61%
Net assets at end of period (000 Omitted) $ 512 $ 0+++
(S) Subject to reimbursement by the Fund, MFS has voluntarily agreed, under a temporary expense reimbursement agreement,
to pay all of the Fund's operating expenses, exclusive of management fees. In consideration, the Fund pays MFS a fee not
greater than 0.25% of average daily net assets. To the extent actual expenses were over this limitation and the waiver
had not been in place, the net investment loss per share and the ratios would have been:
Net investment loss $ (0.59) $ (0.55)
Ratios (to average net assets):
Expenses## 13.45%+ 13.45%+
Net investment loss (11.28)%+ (10.76)%+
* For the period from the commencement of the Fund's investment operations May 3, 1999, through October 31, 1999.
+ Annualized.
++ Not annualized.
+++ Class I net assets were less than $500.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ---------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
OCTOBER 31, 1999 APRIL 30, 1999* OCTOBER 31, 1999 APRIL 30, 1999*
(UNAUDITED) (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 9.80 $10.00 $ 9.78 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.31 $ 0.18 $ 0.33 $ 0.18
Net realized and unrealized loss on
investments (0.41) (0.21) (0.41) (0.23)
------ ------ ------ ------
$(0.10) $(0.03) $(0.08) $(0.05)
Total from investment operations
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.30) $(0.17) $(0.30) $(0.17)
------ ------ ------ ------
Net asset value - end of period $ 9.40 $ 9.80 $ 9.40 $ 9.78
====== ====== ====== ======
Total return(+) (0.95)%++ (0.29)%++ (0.75)%++ (0.49)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.30%+ 0.03%+ 0.30%+
Net investment income 6.53%+ 5.62%+ 6.80%+ 5.13%+
Portfolio turnover 50% 117% 50% 117%
Net assets at end of period (000 Omitted) $988 $999 $ 0+++ $ 0+++
* For the period from the commencement of the Fund's investment operations, January 4, 1999, through April 30, 1999.
+ Annualized.
++ Not annualized.
+++ Class I net assets were less than $500.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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) MFS has voluntarily agreed, under a temporary expense agreement, to pay all of the Fund's operating expenses exclusive of
management and distribution and service fees. In addition, the investment adviser and the distributor voluntarily waived
their fees for certain of the periods indicated. From the inception of the Fund, January 4, 1999, through January 31, 1999,
the Fund paid MFS a fee not greater than 1.10% of average daily net assets. To the extent actual expenses were over these
limitations and waivers had not been in place, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.13 $(0.09) $ 0.17 $(0.11)
Ratios (to average net assets):
Expenses## 3.77%+ 8.93%+ 3.42%+ 8.58%+
Net investment income (loss) 2.79%+ (3.01)%+ 3.41%+ (3.15)%+
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS High Quality Bond Fund, MFS Intermediate Investment Grade Bond Fund, MFS
Large Cap Value Fund, and MFS Research Bond Fund (the Funds) are four separate
series of MFS Series Trust IX (the Trust). MFS High Quality Bond Fund and MFS
Large Cap Value Fund are diversified series of the Trust. MFS Intermediate
Investment Grade Bond Fund and MFS Research Bond Fund are nondiversified series
of 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. MFS High
Quality Bond Fund can invest up to 15% of its portfolio in high yield securities
rated below investment grade. Investments in high-yield securities involve
greater degrees of credit and market risk than investments in higher- rated
securities and tend to be more sensitive to economic conditions. The funds can
invest in foreign securities. 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, 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. 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 in good faith by 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. 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. MFS High Quality Bond 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 made directly to the security
issuer, 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 - Each Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by each Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - Each Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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
be 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.
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 of MFS High Quality Bond Fund, MFS Intermediate
Investment Grade Bond Fund, and MFS Research Bond Fund bear the common expenses
of the Funds based on the value of settled shares outstanding of each class,
without distinction between share classes. All shareholders of MFS Large Cap
Value Fund bear the common expenses of the Fund based on daily net assets of
each class, without distinction between share classes. Dividends are declared
separately for each class. 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 High Quality Bond Fund, Intermediate Investment Grade Bond
Fund, Large Cap Value Fund, and Research Bond Fund is computed daily and paid
monthly at an annual rate of 0.50%, 0.50%, 0.75%, and 0.60% of each Fund's
average daily net assets, respectively. For High Quality Bond Fund, Intermediate
Investment Grade Bond Fund, and Research Bond Fund, the investment adviser has
voluntarily agreed to waive its fee, which is shown as a reduction of expenses
in the Statement of Operations.
For High Quality Bond Fund, Intermediate Investment Grade Bond Fund, and
Research Bond Fund, the investment adviser has voluntarily agreed to pay each of
the Fund's operating expenses, exclusive of management and 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 Statement of Operations.
Large Cap Value Fund has a temporary expense reimbursement agreement whereby MFS
has voluntarily agreed to pay all of the Fund's operating expenses, exclusive of
management fees. The Fund in turn will pay MFS an expense reimbursement fee not
greater than 0.25% of average daily net assets. To the extent that the expense
reimbursement fee exceeds the Fund's actual expenses, the excess will be applied
to amounts paid by MFS in prior years. At October 31, 1999, aggregate
unreimbursed expenses amounted to $25,627.
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 are currently 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, each Fund pays MFS an administrative fee
at the following annual percentages of each Fund's 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 charge on sales of Class A shares of the Funds for the period
ended October 31, 1999.
The Trustees have adopted a distribution plan for Class A shares of each Fund
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 its 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 its 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 each Fund's 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 each Fund's average daily net assets
attributable to Class A shares. All distribution and service fees under Class A
distribution plans are currently being waived for MFS Intermediate Investment
Grade Bond Fund and MFS Research Bond Fund, and are currently not being imposed
by the Trustees for MFS High Quality Bond Fund and MFS Large Cap Value Fund.
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 October 31, 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 annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
<TABLE>
<CAPTION>
HIGH INTERMEDIATE
QUALITY INVESTMENT GRADE LARGE CAP RESEARCH
BOND FUND BOND FUND VALUE FUND BOND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
U.S. government securities $5,514,159 $ 243,219 $ -- $361,927
---------- ---------- --------- --------
Investments (non-U.S. government securities) $ 659,399 $ 519,890 $ 696,040 $496,527
---------- ---------- --------- --------
SALES
U.S. government securities $4,773,561 $ 263,768 $ -- $428,795
---------- ---------- --------- --------
Investments (non-U.S. government securities) $ 406,948 $ 464,699 $ 234,536 $413,320
---------- ---------- --------- --------
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>
HIGH INTERMEDIATE
QUALITY INVESTMENT GRADE LARGE CAP RESEARCH
BOND FUND BOND FUND VALUE FUND BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost $ 995,706 $1,040,396 $ 539,575 $988,710
---------- ---------- --------- --------
Gross unrealized depreciation $ (8,119) $ (23,449) $ (28,225) $(31,649)
Gross unrealized appreciation 1,840 1,353 22,115 907
---------- ---------- --------- --------
Net unrealized depreciation $ (6,279) $ (22,096) $ (6,110) $(30,742)
========== ========== ========= ========
</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:
Class A Shares
MFS HIGH QUALITY BOND FUND
------------------------------
PERIOD ENDED OCTOBER 31, 1999*
------------------------------
SHARES AMOUNT
- -----------------------------------------------------------------------
Shares sold 100,036 $ 1,000,348
Shares issued to shareholders in
reinvestment of distributions 3,186 31,158
------------ -----------
Net increase 103,222 $ 1,031,506
============ ===========
Class I Shares
MFS HIGH QUALITY BOND FUND
------------------------------
PERIOD ENDED OCTOBER 31, 1999**
------------------------------
SHARES AMOUNT
- -----------------------------------------------------------------------
Shares sold 20 $ 200
------------ -----------
<TABLE>
<CAPTION>
Class A Shares
MFS INTERMEDIATE INVESTMENT GRADE BOND FUND
---------------------------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, 1999 PERIOD ENDED APRIL 30, 1999***
------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 100,041 $ 1,000,410
Shares issued to shareholders in
reinvestment of distributions 3,259 31,407 1,656 16,391
Shares reacquired -- -- (21) (204)
----------- ----------- ----------- -----------
Net increase 3,259 $ 31,407 101,676 $ 1,016,597
=========== =========== =========== ===========
<CAPTION>
Class I Shares
MFS INTERMEDIATE INVESTMENT GRADE BOND FUND
---------------------------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, 1999 PERIOD ENDED APRIL 30, 1999***
------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 15 $ 150
Shares issued to shareholders in
reinvestment of distributions+ 0 2 0 2
----------- ----------- ----------- -----------
Net increase 0 $ 2 15 $ 152
=========== =========== =========== ===========
*For the period from the commencement of the Funds' investment operations, May 3, 1999, through October 31, 1999.
**For the period from inception of Class I, May 5, 1999, through October 31, 1999.
***For the period from the commencement of the Funds' investment operations, January 4, 1999, through April 30, 1999.
</TABLE>
Class A Shares
MFS LARGE CAP VALUE FUND
-------------------------------
PERIOD ENDED APRIL 30, 1999***
-------------------------------
SHARES AMOUNT
- ------------------------------------------------------------------
Shares sold 74,562 $ 750,422
Shares reacquired (25,251) (257,464)
----------- -----------
Net increase 49,311 $ 492,958
=========== ===========
Class I Shares
MFS LARGE CAP VALUE FUND
-------------------------------
PERIOD ENDED APRIL 30, 1999***
-------------------------------
SHARES AMOUNT
- ------------------------------------------------------------------
Shares sold 20 $ 200
----------- -----------
<TABLE>
<CAPTION>
Class A Shares
MFS RESEARCH BOND FUND
---------------------------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, 1999 PERIOD ENDED APRIL 30, 1999***
------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 100,242 $ 1,002,420
Shares issued to shareholders in
reinvestment of distributions 3,319 31,474 1,747 17,191
Shares reacquired (206) (1,979) (20) (204)
----------- ----------- ----------- -----------
Net increase 3,113 $ 29,495 101,969 $ 1,019,407
=========== =========== =========== ===========
<CAPTION>
Class I Shares
MFS RESEARCH BOND FUND
---------------------------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, 1999 PERIOD ENDED APRIL 30, 1999***
------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 15 $ 150
Shares issued to shareholders in
reinvestment of distributions+ 0 2 0 2
----------- ----------- ----------- -----------
Net increase 0 $ 2 15 $ 152
=========== =========== =========== ===========
* For the period from the commencement of the Funds' investment operations, May 3, 1999, through October 31, 1999.
*** For the period from the commencement of the Funds' investment operations, January 4, 1999, through April 30, 1999.
+ Shares reinvested were less than 1 share.
</TABLE>
--------------------------------------------
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' YEAR 2000 READINESS DISCLOSURE
[Graphic Omitted]
MFS Investment Management(R), as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at WWW.MFS.COM, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
MFS(R) High Quality Bond Fund
MFS(R) Intermediate Investment Grade Bond Fund
MFS(R) Large Cap Value 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 Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116. INC-2 12/99 2.7M
