<PAGE>
[Logo] M F S (R) ANNUAL REPORT
INVESTMENT MANAGEMENT APRIL 30, 2000
We invented the mutual fund(R)
MFS(R) HIGH QUALITY BOND FUND
MFS(R) LARGE CAP VALUE FUND
<PAGE>
<TABLE>
MFS(R) HIGH QUALITY BOND FUND
MFS(R) LARGE CAP VALUE FUND
<S> <C>
TRUSTEES SECRETARY
J. Atwood Ives+ -- Chairman and Chief Stephen E. Cavan*
Executive Officer, Eastern Enterprises
(diversified services company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ -- Partner, Hemenway &
Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ -- Adjunct Professor,
Harvard University Graduate School of AUDITORS
Business Administration Ernst & Young LLP
Charles W. Schmidt+ -- Private Investor INVESTOR INFORMATION
For information on MFS mutual funds, call your
Arnold D. Scott* -- Senior Executive Vice investment professional or, for an information
President, Director, and Secretary, kit, call toll free: 1-800-637-2929 any business
MFS Investment Management day from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Jeffrey L. Shames* -- Chairman and Chief
Executive Officer, MFS Investment Management INVESTOR SERVICE
MFS Service Center, Inc.
Elaine R. Smith+ -- Independent Consultant P.O. Box 2281
Boston, MA 02107-9906
David B. Stone+ -- Chairman, North
American Management Corp. (investment adviser) For general information, call toll free:
1-800-225-2606 any business day from 8 a.m. to
INVESTMENT ADVISER 8 p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or hearing-impaired,
Boston, MA 02116-3741 call toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. (To use this
DISTRIBUTOR service, your phone must be equipped with a
MFS Fund Distributors, Inc. Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, exchanges,
or stock and bond outlooks, call toll free:
CHAIRMAN AND PRESIDENT 1-800-MFS-TALK (1-800-637-8255) anytime
Jeffrey L. Shames* from a touch-tone telephone.
PORTFOLIO MANAGERS WORLD WIDE WEB
David M. Calabro* www.mfs.com
Peter C. Vaream*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
This spring, the U.S. stock market experienced record point drops and
volatility that have given many investors cause for concern. While the recent
market correction has rattled a lot of nerves, it's important to put the
current market environment in perspective. Throughout the history of the
market, investors have experienced numerous corrections (declines of more than
20%) and periods of extreme volatility. Of course, past performance is no
guarantee of future results; however, over the long term, stock and bond
investors have enjoyed returns that have solidly outpaced inflation.
From our perspective, as we look at the global investment climate at the
beginning of the new millennium, we see many reasons for optimism, as well as
the need to voice some words of caution.
Our reasons for being optimistic about both stock and bond markets include
o STRONG CORPORATE EARNINGS GROWTH: We believe that, over time, the most
important driver of stock prices is corporate earnings. Our research
indicates that the average earnings growth for U.S. companies could approach
15% in 2000, which would bode very well for U.S. equities. We are also
seeing encouraging signs that companies worldwide, and particularly in
Europe, are beginning to focus more on earnings and shareholder value --
that is, delivering stock price performance that will reward investors. As
we research companies around the globe, we are finding that specific areas
of opportunity include technology companies, especially those involved in
wireless telecommunications and in supplying infrastructure and services for
the Internet.
o LOW INFLATION WORLDWIDE: We believe accelerating inflation is one of the
chief factors that could end the current economic boom. While the U.S.
economy continues to grow rapidly, we have not experienced significant signs
of inflation. In our opinion, perhaps the major force keeping inflation at
bay is worldwide productivity increases, fueled by advancing technology. A
technological revolution based on computerization and the Internet appears
to be making it possible for companies to produce more products with fewer
employees, thereby enabling companies to increase earnings without raising
prices. A related factor keeping inflation down is the heightened
competition of an increasingly global marketplace, where, for example,
businesses are beginning to use computer networks and the Internet to shop
worldwide for the lowest prices from suppliers.
o STRONG GLOBAL ECONOMIES: Our outlook is that a majority of national
economies will continue to experience healthy growth with low inflation. In
late January, the current economic boom in the United States became the
longest in the nation's history. It appears to us that the U.S. Federal
Reserve Board's (the Fed's) program of gradual interest-rate increases will
eventually be successful in cooling the somewhat overheated U.S. economy
while prolonging the boom. In Europe, we see strong evidence that most
countries will continue on a moderate growth path with low inflation. A
major reason for this is that European companies have begun to adopt the
practices of downsizing, outsourcing, and consolidation that have helped
revitalize U.S. industry over the past decade. We are witnessing a similar
situation in Japan, as more firms merge, restructure, and invest in
technology. In the Pacific Rim, most economies have recovered from the
economic turmoil of late summer 1998 and are surging ahead. We believe
progress toward restructuring Asia's banking systems and other ailing
industries bodes well for stronger investor confidence in the region. While
business conditions have been less favorable in Latin America due to
relatively high inflation, increased exports and industrial production
suggest to us that the region's recession has ended.
Amid this positive global outlook, however, we believe investors should also
heed some cautionary notes:
o IT IS HIGHLY UNLIKELY THAT U.S. EQUITY MARKETS WILL CONTINUE TO PERFORM AT
THE PACE OF THE LAST SEVERAL YEARS. Although our outlook for U.S. markets
this year is quite positive, we believe it is unrealistic for investors to
expect stock market returns, as measured by the Standard & Poor's 500
Composite Index,(1) to routinely exceed 20%, as they did for each of the
past four years.
o HIGH VALUATIONS, ESPECIALLY OF TECHNOLOGY STOCKS, HAVE MADE U.S. MARKETS
INCREASINGLY VOLATILE. Investor excitement over the past year has pushed
many technology-related stocks to very high relative prices, as expressed by
their price/earnings (P/E) ratios. In general, we believe these higher
valuations are largely supported by the strong earnings growth mentioned
earlier. However, as we've recently experienced, this backdrop has led to a
highly volatile environment, where the market is swift to punish companies
whose earnings are less than expected and where fear can rapidly overcome
the desire to invest for long-term goals.
o RISING INTEREST RATES MAY DAMPEN MARKETS IN THE SHORT TERM, PARTICULARLY IN
THE UNITED STATES AND EUROPE. The Fed's current program of raising interest
rates could potentially cool both stock and bond markets, and the European
Central Bank has tended to follow the lead of the Fed in adjusting its own
interest rates. It is our expectation, however, that in the long term
interest rates will trend down again, perhaps by the end of this year. We
believe that could be favorable for both equity and fixed-income
investments.
On balance, it appears to us that the current global investment climate is
well matched to MFS' research-oriented style of investing. In the equity
markets, where we believe earnings growth is the most reliable indicator of
long-term performance, we feel our research team is second to none in
determining the real value of a company and its long-term earnings potential.
To do that, our portfolio managers and our worldwide team of research analysts
spend extensive time visiting with companies, talking to their customers, and
investigating their competition. In fixed-income investing, we believe the
quality of our research gives us an advantage by helping us determine which
types of securities can add the most value to a fund and by helping us reduce
credit risk, which is the biggest danger to some higher-income bond funds. In
sum, MFS Original Research(R) is one of the most important factors in our
ongoing effort to deliver competitive performance to you, our investors.
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)
May 18, 2000
--------------
(1) The Standard & Poor's 500 Composite Index (the S&P 500) is a popular,
unmanaged index of common stock total return performance. It is not
possible to invest directly in an index.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
MFS High Quality Bond Fund
Dear Shareholders,
The Fund commenced investment operations on May 3, 1999, and from that date
through April 30, 2000, Class A shares provided a total return of 2.35% and
Class I shares 1.82%. These results include the reinvestment of any
distributions, but exclude the effects of any sales charges and compare over the
same period to a 1.26% return for the Fund's benchmark, the Lehman Brothers
Aggregate Bond Index, an unmanaged, market-value-weighted index that includes a
broad range of U.S. Treasury, government agency, mortgage-backed securities, and
investment-grade debt obligations of U.S. corporations. The Fund's results also
compare to a -0.67% return for the average corporate debt "A"-rated fund tracked
by Lipper Inc., an independent firm that reports mutual fund performance.
The Fund seeks to provide high current income consistent with prudent risk and
invests, under normal market 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 fine-tune the Fund's asset
allocations to various segments of the fixed-income markets. In addition, our
investment staff does its own bottom-up research and independent credit
analysis, and evaluates the results of credit-rating agencies.
Fears that the Federal Reserve Board (the Fed) may need to be more aggressive
in increasing interest rates over the next few months have caused yields to
rise across all sectors during the period. However, a couple of factors helped
U.S. Treasuries and the Fund absorb the negative interest-rate and inflation
news fairly well. First, the solid fiscal performance of the U.S. government
resulted in a federal budget surplus that prompted the U.S. Treasury to limit
the size and frequency of its auctions of new debt and to buy back nearly $7
billion of Treasury bonds in the first four months of 2000. Second, the
anticipated scarcity of long-term Treasury bonds caused them to rally even as
short-term interest rates kept climbing and most other fixed-income
investments lost ground. In addition, turbulence in the equity market caused
many investors to seek the relative stability of government securities. In
this environment, we favored 30-year Treasuries and tended to underweight the
intermediate part of the government market, which turned out to be a good
strategy for the Fund during the period. (Principal value and interest of
Treasury securities are guaranteed by the U.S. government if held to
maturity.)
More recently, we started to look closely at securities issued by federal
agencies such as the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation because we believe they have offered unusually
attractive values and yields. Yield spreads -- the yield difference between
U.S. Treasuries, agency bonds, and mortgage-backed securities -- were at
record levels, reflecting both the shrinking supply of Treasuries and
investors' concerns that legislative changes could affect the regulatory
treatment of government-sponsored institutions. However, we do not foresee any
changes that would alter the "AAA" ratings of existing agency securities or
that could jeopardize the ability of these agencies to make timely coupon or
principal payments.
At current levels, we believe yield spreads in the high-grade corporate bond
sector are high enough to provide a good opportunity to increase the yield of
the portfolio with relatively low risk. We particularly favor the
telecommunications and media sectors, which continue to experience rapid
growth and strong cash flow. While we think the bond market will most likely
remain cautious in the near term and experience continued volatility in
anticipation of further Fed interest-rate hikes, we think inflation and
interest-rate concerns are peaking. As a result, we believe we could start to
see evidence that economic growth is decelerating, which could calm inflation
worries and help the performance of fixed-income securities.
Respectfully,
/s/ Peter C. Vaream
Peter C. Vaream
Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK - continued
MFS Large Cap Value Fund
Dear Shareholders,
The Fund commenced investment operations on May 3, 1999, and from that date
through April 30, 2000, Class A shares provided a total return of 8.14% and
Class I shares 8.65%. These results include the reinvestment of any
distributions but exclude the effects of any sales charges and compare over the
same period to a -3.88% return for the Fund's benchmark, the Russell 1000 Value
Index, which measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth rates relative to the
companies in the Russell 1000 Growth Index, and to a 2.41% return for the
average large cap value fund tracked by Lipper Inc.
The Fund seeks long-term growth of capital. Under normal market conditions, it
invests 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 growth potential. The equity
securities of these companies may be undervalued based on their low price-to-
book, price-to-sales, and price-to-earnings ratios. The reasons for their
undervaluations may be a market decline, poor economic conditions, company- or
industry-related downturns, or market oversight. We use a bottom-up approach
that is based on fundamental analysis by the Fund's portfolio manager and our
equity analysts to select and manage securities.
Despite the recent volatility and weakness in technology and
telecommunications stocks, these high-flying growth sectors continued to
outperform just about every other sector of the market during the period.
Although optimal conditions for value stocks have not existed for some time
now, we recently have seen how quickly investor sentiment can shift toward
value-oriented stocks. The recent volatility in technology stocks has
benefited the Fund's relatively large stake in financial services and energy
stocks as investors shifted their focus toward companies with attractive
valuations and steady earnings growth.
In recent months, two of the Fund's holdings in the financial services sector
performed exceptionally well. The Dutch financial services company ING Groep
recently agreed to buy the large life insurance company ReliaStar Financial
Corp., which caused our position in ReliaStar to nearly double. This news has
sparked a rally in the insurance group as investors began to recognize the
strong fundamental business outlook and the potential for further
consolidation among insurance companies. In response, the share price of
Hartford Financial, one of our largest positions in the Fund, also rallied
significantly during the past month.
Energy services and natural gas companies such as Noble Drilling and Coastal
Corp., two top holdings in the Fund, have performed very well in recent
months. Fueled by strong global demand and higher prices for oil and natural
gas, many of our energy holdings turned in better-than-expected earnings and
profit results.
While it's difficult to predict whether the recent upturn in value stocks will
persist, our feeling is that there is still plenty of upside for these more
reasonably priced stocks. Although growth stocks have outperformed value
stocks for a number of years, our belief is that this extremely narrow market
strength can't last forever. Regardless of market environment, we believe our
selective bottom-up approach of choosing companies that offer promising
business outlooks and strong earnings growth should produce favorable
performance over the long run.
Respectfully,
/s/ David M. Calabro
David M. Calabro
Portfolio Manager
The opinions expressed in these reports are those of the portfolio managers
and are current only through the end of the period of the report as stated on
the cover. The managers' views are subject to change at any time based on
market and other conditions, and no forecasts can be guaranteed.
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.
The following information illustrates the historical performance of each
Fund's Class A shares in comparison to various market indicators. Performance
results reflect the percentage change in net asset value, including
reinvestment of dividends. Benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown. (See Notes to Performance Summary.)
It is not possible to invest directly in an index.
MFS HIGH QUALITY BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the Fund's investment operations, May
3, 1999, through April 30, 2000.
Index information is from May 1, 1999.)
MFS High Quality Lehman Brothers
Bond Fund - Class A Aggregate Bond Index
-----------------------------------------------------
5/99 $9,525 $10,000
4/00 $9,749 $10,126
CUMULATIVE TOTAL RATES OF RETURN THROUGH APRIL 30, 2000
CLASS A
Life*
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +2.35%
------------------------------------------------------------------------------
Cumulative Total Return Including Sales Charge -2.51%
------------------------------------------------------------------------------
CLASS I
Life*
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +1.82%
------------------------------------------------------------------------------
COMPARATIVE INDICES
Life*
------------------------------------------------------------------------------
Average corporate debt "A"-rated fund+ -0.67%
------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index# +1.26%
------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
May 3, 1999, through April 30, 2000.
Index information is from May 1, 1999.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
<PAGE>
MFS LARGE CAP VALUE FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the Fund's investment operations, May
3, 1999, through April 30, 2000.
Index information is from May 1, 1999.)
MFS Large Cap Russell 1000
Value Fund - Class A Value Index
-----------------------------------------------------
5/99 $ 9,425 $10,000
4/00 $10,192 $ 9,612
CUMULATIVE TOTAL RATES OF RETURN THROUGH APRIL 30, 2000
CLASS A
Life*
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +8.14%
------------------------------------------------------------------------------
Cumulative Total Return Including Sales Charge +1.92%
------------------------------------------------------------------------------
CLASS I
Life*
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +8.65%
------------------------------------------------------------------------------
COMPARATIVE INDICES
Life*
------------------------------------------------------------------------------
Average large cap value fund+ +2.41%
------------------------------------------------------------------------------
Russell 1000 Value Index# -3.88%
------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
May 3, 1999, through April 30, 2000.
Index information is from May 1, 1999.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
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. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
<PAGE>
PORTFOLIO OF INVESTMENTS - April 30, 2000
MFS HIGH QUALITY BOND FUND
Bonds - 94.3%
-------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-------------------------------------------------------------------------------
U.S. Bonds - 82.2%
Automotive - 1.4%
DaimlerChrysler NA Holding Corp., 7.4s, 2005 $ 18 $ 17,749
-------------------------------------------------------------------------------
Banks and Credit Companies - 1.1%
Wells Fargo Co., 7.2s, 2003 $ 14 $ 13,876
-------------------------------------------------------------------------------
Chemicals - 1.1%
Lyondell Chemical Co., 9.625s, 2007 $ 15 $ 14,737
-------------------------------------------------------------------------------
Coal - 0.7%
P&L Coal Holdings Corp., 9.625s, 2008 $ 10 $ 8,975
-------------------------------------------------------------------------------
Computer Software - Services - 0.7%
First Data Corp., 6.75s, 2005 $ 9 $ 8,563
-------------------------------------------------------------------------------
Containers - 0.6%
Gaylord Container Corp., 9.875s, 2008 $ 10 $ 7,800
-------------------------------------------------------------------------------
Corporate Asset Backed - 4.3%
GS Mortgage Securities Corp. II, 6.06s, 2030 $ 27 $ 25,190
Morgan (J P) Commercial Mortgage Finance Corp.,
6.613s, 2030 8 7,448
Morgan Stanley Capital I, 6.01s, 2030 12 11,063
Residential Funding Mortgage Securities, Inc.,
7.66s, 2012 12 11,931
----------
$ 55,632
-------------------------------------------------------------------------------
Entertainment - 2.8%
Seagram (Joseph E) & Sons, Inc., 5.79s, 2001 $ 10 $ 9,819
Seagram (Joseph E) & Sons, Inc., 7.5s, 2018 5 4,597
Seagram (Joseph E) & Sons, Inc., 7.6s, 2028 2 1,815
Time Warner Entertainment Co. LP, 8.375s, 2033 19 19,352
----------
$ 35,583
-------------------------------------------------------------------------------
Financial Institutions - 3.8%
Ford Motor Credit Co., 7.375s, 2009 $ 24 $ 23,199
Morgan Stanley Dean Witter, 7.125s, 2003 13 12,857
Norwest Financial Inc., 7.6s, 2005 12 11,962
----------
$ 48,018
-------------------------------------------------------------------------------
Forest and Paper Products - 0.8%
Riverwood International Corp., 10.25s, 2006 $ 10 $ 9,750
-------------------------------------------------------------------------------
Gaming and Hotels - 0.4%
Harrahs Operating, Inc., 7.5s, 2009 $ 6 $ 5,555
-------------------------------------------------------------------------------
Oil Services - 1.1%
Apache Corp., 7.95s, 2026 $ 2 $ 1,893
McDermott, Inc., 9.375s, 2002 2 1,703
Pioneer Natural Resources Co., 9.625s, 2010 10 10,112
----------
$ 13,708
-------------------------------------------------------------------------------
Printing and Publishing - 2.9%
News America Holdings, Inc., 6.625s, 2008 $ 27 $ 24,420
News America Holdings, Inc., 7.3s, 2028 14 12,071
----------
$ 36,491
-------------------------------------------------------------------------------
Railroads - 0.7%
Union Pacific Corp., 6.34s, 2003 $ 10 $ 9,474
-------------------------------------------------------------------------------
Steel - 0.6%
USX Corp., 6.65s, 2006 $ 8 $ 7,335
-------------------------------------------------------------------------------
Telecommunications - 4.1%
Comcast Corp., 9.125s, 2006 $ 10 $ 10,357
ITC Deltacom, Inc., 11s, 2007 10 10,200
Liberty Media Group, 8.25s, 2030# 10 9,566
Qwest Communications International, Inc., 7.5s, 2008 23 21,864
----------
$ 51,987
-------------------------------------------------------------------------------
U.S. Federal Agencies - 43.0%
Federal Home Loan Mortgage Corp., 5s, 2004 $ 145 $ 134,555
Federal National Mortgage Assn., 6.625s, 2002 27 26,802
Federal National Mortgage Assn., 5.25s, 2009 76 65,954
Federal National Mortgage Assn., 7.25s, 2010 50 49,851
Government National Mortgage Assn., 7.5s, 2030 150 147,318
Government National Mortgage Assn, 8s, 2030 125 125,329
----------
$ 549,809
-------------------------------------------------------------------------------
U.S. Treasury Obligations - 11.2%
U.S. Treasury Bonds, 0s, 2023 $ 255 $ 64,974
U.S. Treasury Notes, 6.125s, 2000 78 78,021
----------
$ 142,995
-------------------------------------------------------------------------------
Utilities - Electric - 0.9%
Niagara Mohawk Power Corp., 7.75s, 2006 $ 12 $ 11,744
-------------------------------------------------------------------------------
Total U.S. Bonds $1,049,781
-------------------------------------------------------------------------------
Foreign Bonds - 12.1%
Brazil - 0.4%
Federal Republic of Brazil, 12.25s, 2030 $ 5 $ 4,575
-------------------------------------------------------------------------------
Canada - 1.8%
AT&T Canada, Inc., 0s to 2003, 9.95s to 2008
(Telecommunications) $ 9 $ 7,182
Province of Quebec, 7.5s, 2029 10 9,778
Shaw Communications, Inc., 8.25s, 2010
(Telecommunications) 6 5,849
----------
$ 22,809
-------------------------------------------------------------------------------
France - 2.4%
Natexis AMBS Co. LLC, 8.44s, 2049 (Banks and Credit
Cos.)# $ 20 $ 18,312
Socgen Real Estate Co., 7.64s, 2049 (Banks and
Credit Cos.)# 14 12,649
----------
$ 30,961
-------------------------------------------------------------------------------
Israel - 0.5%
State of Israel, 7.75s, 2010 $ 6 $ 5,857
-------------------------------------------------------------------------------
Mexico - 1.0%
United Mexican States, 11.375s, 2016 $ 2 $ 2,263
United Mexican States, 11.5s, 2026 9 10,620
----------
$ 12,883
-------------------------------------------------------------------------------
South Korea - 0.8%
Hanvit Bank, 12.75s, 2010 (Banks and Credit Cos.)# $ 10 $ 10,100
-------------------------------------------------------------------------------
United Kingdom - 5.2%
British Sky Broadcasting, 6.875s, 2009
(Telecommunications) $ 15 $ 13,276
Cable & Wireless Communications, 6.75s, 2008
(Telecommunications) 44 44,028
Telewest Communications PLC, 9.625s, 2006 (Cable
Television) 10 9,675
----------
$ 66,979
-------------------------------------------------------------------------------
Total Foreign Bonds $ 154,164
-------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,217,124) $1,203,945
-------------------------------------------------------------------------------
Short-Term Obligation - 5.5%
-------------------------------------------------------------------------------
Federal Home Loan Bank, due 5/01/00, at Amortized
Cost $ 70 $ 70,000
-------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,287,124) $1,273,945
Other Assets, Less Liabilities - 0.2% 3,040
-------------------------------------------------------------------------------
Net Assets - 100.0% $1,276,985
-------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS - April 30, 2000
MFS LARGE CAP VALUE FUND
Stocks - 90.3%
-------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------
U.S. Stocks - 80.7%
Aerospace - 4.4%
Boeing Co. 50 $ 1,985
Honeywell International, Inc. 81 4,536
TRW, Inc. 208 12,168
United Technologies Corp. 65 4,042
----------
$ 22,731
-------------------------------------------------------------------------------
Automotive - 2.0%
Delphi Automotive Systems Corp. 275 $ 5,260
Ford Motor Co. 95 5,195
----------
$ 10,455
-------------------------------------------------------------------------------
Banks and Credit Companies - 2.3%
Bank of America Corp. 108 $ 5,292
Bank of New York Co., Inc. 52 2,135
Bank One Corp. 40 1,220
PNC Bank Corp. 78 3,403
----------
$ 12,050
-------------------------------------------------------------------------------
Biotechnology - 2.3%
Abbott Laboratories, Inc. 141 $ 5,420
Pharmacia Corp. 126 6,292
----------
$ 11,712
-------------------------------------------------------------------------------
Business Machines - 1.8%
Hewlett-Packard Co. 10 $ 1,350
International Business Machines Corp. 14 1,563
Seagate Technology, Inc.* 100 5,081
Xerox Corp. 57 1,507
----------
$ 9,501
-------------------------------------------------------------------------------
Business Services - 0.8%
Automatic Data Processing, Inc. 65 $ 3,498
United Parcel Service, Inc. 10 665
----------
$ 4,163
-------------------------------------------------------------------------------
Cellular Telephones - 1.9%
Motorola, Inc. 45 $ 5,358
Telephone & Data Systems, Inc. 44 4,488
----------
$ 9,846
-------------------------------------------------------------------------------
Chemicals - 3.1%
Air Products & Chemicals, Inc. 177 $ 5,498
Eastman Chemical Co. 100 5,231
Rohm & Haas Co. 153 5,451
----------
$ 16,180
-------------------------------------------------------------------------------
Computer Software - Systems - 0.4%
BMC Software, Inc.* 40 $ 1,872
-------------------------------------------------------------------------------
Conglomerates - 0.4%
Eastern Enterprises Co. 35 $ 2,131
-------------------------------------------------------------------------------
Consumer Goods and Services - 0.4%
Fortune Brands, Inc. 92 $ 2,300
-------------------------------------------------------------------------------
Electrical Equipment - 1.9%
Emerson Electric Co. 178 $ 9,768
-------------------------------------------------------------------------------
Energy - 1.6%
Devon Energy Corp. 170 $ 8,192
-------------------------------------------------------------------------------
Entertainment - 2.2%
CBS Corp.* 20 $ 1,175
Disney (Walt) Co. 42 1,819
Harrah's Entertainment, Inc.* 205 4,215
Time Warner, Inc. 47 4,227
----------
$ 11,436
-------------------------------------------------------------------------------
Financial Institutions - 3.7%
Citigroup, Inc. 98 $ 5,825
Edwards (A.G.), Inc. 164 6,170
Federal Home Loan Mortgage Corp. 50 2,297
Merrill Lynch & Co., Inc. 30 3,058
State Street Corp. 17 1,647
----------
$ 18,997
-------------------------------------------------------------------------------
Financial Services - 2.4%
AXA Financial, Inc. 188 $ 6,133
Mellon Financial Corp. 198 6,361
----------
$ 12,494
-------------------------------------------------------------------------------
Food and Beverage Products - 3.9%
Anheuser-Busch Cos., Inc. 40 $ 2,822
Archer-Daniels-Midland Co. 253 2,514
General Mills, Inc. 109 3,965
Hershey Foods Corp. 40 1,815
McCormick & Co., Inc. 54 1,684
Quaker Oats Co. 115 7,497
----------
$ 20,297
-------------------------------------------------------------------------------
Forest and Paper Products - 0.9%
Bowater, Inc. 89 $ 4,895
-------------------------------------------------------------------------------
Insurance - 8.2%
Allstate Corp. 38 $ 898
Chubb Corp. 35 2,227
CIGNA Corp. 22 1,755
Hartford Financial Services Group, Inc. 231 12,055
Lincoln National Corp. 180 6,266
Marsh & McLennan Cos., Inc. 52 5,125
MetLife, Inc.* 100 1,656
ReliaStar Financial Corp. 124 5,340
St. Paul Cos., Inc. 200 7,125
----------
$ 42,447
-------------------------------------------------------------------------------
Machinery - 1.9%
Deere & Co., Inc. 140 $ 5,652
Ingersoll Rand Co. 75 3,520
W.W. Grainger, Inc. 20 868
----------
$ 10,040
-------------------------------------------------------------------------------
Medical and Health Products - 1.9%
American Home Products Corp. 95 $ 5,338
Bristol-Myers Squibb Co. 85 4,457
----------
$ 9,795
-------------------------------------------------------------------------------
Oil Services - 6.5%
BJ Services Co.* 63 $ 4,426
Cooper Cameron Corp.* 108 8,100
Halliburton Co. 205 9,058
Noble Drilling Corp.* 299 11,941
----------
$ 33,525
-------------------------------------------------------------------------------
Oils - 7.0%
Apache Corp. 70 $ 3,391
Chevron Corp. 15 1,277
Coastal Corp. 268 13,450
Conoco, Inc., "A" 220 5,239
Exxon Mobil Corp. 146 11,342
Transocean Sedco Forex, Inc. 30 1,410
----------
$ 36,109
-------------------------------------------------------------------------------
Photographic Products - 0.1%
Eastman Kodak Co. 12 $ 671
-------------------------------------------------------------------------------
Printing and Publishing - 3.3%
Gannett Co., Inc. 105 $ 6,707
New York Times Co. 174 7,166
Tribune Co. 90 3,499
----------
$ 17,372
-------------------------------------------------------------------------------
Railroads - 0.4%
Burlington Northern Santa Fe Railway Co. 96 $ 2,316
-------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.8%
Equity Residential Properties Trust 90 $ 4,095
-------------------------------------------------------------------------------
Restaurants and Lodging - 0.4%
McDonald's Corp. 59 $ 2,249
-------------------------------------------------------------------------------
Supermarkets - 1.3%
Kroger Co.* 145 $ 2,692
Safeway, Inc.* 90 3,971
----------
$ 6,663
-------------------------------------------------------------------------------
Telecommunications - 5.5%
AT&T Corp. 83 $ 3,875
Bell Atlantic Corp. 33 1,955
GTE Corp. 207 14,025
SBC Communications, Inc. 181 7,930
Sprint Corp. 12 738
----------
$ 28,523
-------------------------------------------------------------------------------
Telecommunications and Cable - 0.7%
Comcast Corp., "A"* 90 $ 3,606
-------------------------------------------------------------------------------
Utilities - Electric - 2.4%
Carolina Power & Light Co. 66 $ 2,413
CMS Energy Corp. 24 456
Duke Energy Corp. 80 4,600
NiSource, Inc. 72 1,332
Peco Energy Co. 40 1,668
Pinnacle West Capital Corp. 59 2,072
----------
$ 12,541
-------------------------------------------------------------------------------
Utilities - Gas - 3.9%
Columbia Energy Group 31 $ 1,945
El Paso Energy Corp. 64 2,720
National Fuel Gas Co. 120 5,692
Washington Gas Light Co. 163 4,177
Williams Cos., Inc. 153 5,709
----------
$ 20,243
-------------------------------------------------------------------------------
Total U.S. Stocks $ 419,215
-------------------------------------------------------------------------------
Foreign Stocks - 9.6%
Canada - 0.4%
Seagram Ltd. (Conglomerate) 35 $ 1,781
-------------------------------------------------------------------------------
France - 0.4%
Axa (Insurance) 25 $ 1,919
-------------------------------------------------------------------------------
Japan - 0.4%
Nippon Telegraph & Telephone Corp., ADR (Utilities -
Telephone) 35 $ 2,229
-------------------------------------------------------------------------------
Netherlands - 3.9%
Akzo Nobel N.V. (Chemicals) 210 $ 8,595
ING Groep N.V., ADR (Financial Services) 93 5,109
Royal Dutch Petroleum Co., ADR (Oils) 112 6,426
----------
$ 20,130
-------------------------------------------------------------------------------
Switzerland - 1.0%
Nestle S.A. (Food and Beverage Products) 3 $ 5,289
-------------------------------------------------------------------------------
United Kingdom - 3.5%
BP Amoco PLC, ADR (Oils) 256 $ 13,056
Diageo PLC (Food and Beverage Products)* 455 3,669
SmithKline-Beecham PLC, ADR (Medical and Health
Products) 23 1,581
----------
$ 18,306
-------------------------------------------------------------------------------
Total Foreign Stocks $ 49,654
-------------------------------------------------------------------------------
Total Stocks (Identified Cost, $461,739) $ 468,869
-------------------------------------------------------------------------------
Convertible Preferred Stocks - 2.3%
-------------------------------------------------------------------------------
Containers - 0.4%
Owens-Illinois, Inc., 4.75% 90 $ 2,194
-------------------------------------------------------------------------------
Oils - 0.4%
Apache Corp., 6.5% 40 $ 1,773
-------------------------------------------------------------------------------
Utilities - Electric - 1.5%
CMS Energy Corp., 8.75% 100 $ 2,650
NiSource, Inc., 7.75% 80 3,095
Texas Utilities Co., 9.25% 50 2,156
----------
$ 7,901
-------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost,
$14,480) $ 11,868
-------------------------------------------------------------------------------
Convertible Bond - 1.2%
-------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------
Conglomerates - 1.2%
Loews Corp., 3.125s, 2007 (Identified Cost, $5,936) $ 7 $ 6,151
-------------------------------------------------------------------------------
Right - 0.8%
-------------------------------------------------------------------------------
SHARES
-------------------------------------------------------------------------------
CVS Corp. (Identified Cost, $3,925) 55 $ 4,290
-------------------------------------------------------------------------------
Short-Term Obligation - 4.8%
-------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------
Federal Home Loan Bank, due 5/01/00, at Amortized
Cost $ 25 $ 25,000
-------------------------------------------------------------------------------
Total Investments (Identified Cost, $511,080) $ 516,178
Other Assets, Less Liabilities - 0.6% 2,965
-------------------------------------------------------------------------------
Net Assets - 100.0% $ 519,143
-------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
Portfolio Footnotes:
* Non-income producing security.
# SEC Rule 144A restriction.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
<CAPTION>
Statements of Assets and Liabilities
--------------------------------------------------------------------------------------------------------
HIGH QUALITY LARGE CAP
APRIL 30, 2000 BOND FUND VALUE FUND
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $1,287,124 and
$511,080, respectively) $1,273,945 $516,178
Cash 9,436 1,914
Receivable for investments sold 74,675 1,380
Interest and dividends receivable 18,793 887
---------- --------
Total assets $1,376,849 $520,359
---------- --------
Liabilities:
Distributions payable $ 2 $ --
Payable for investments purchased 99,862 1,173
Payable to affiliates -
Management fee -- 32
Reimbursement fee -- 11
---------- --------
Total liabilities $ 99,864 $ 1,216
---------- --------
Net assets $1,276,985 $519,143
========== ========
Net assets consist of:
Paid-in capital $1,325,126 $501,649
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies (13,179) 5,094
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions (36,518) 10,563
Accumulated undistributed net investment income 1,556 1,837
---------- --------
Total $1,276,985 $519,143
========== ========
Shares of beneficial interest outstanding:
Class A 133,251 50,735
Class I 20 20
---------- --------
Total shares of beneficial interest outstanding 133,271 50,755
========== ========
Net assets:
Class A $1,276,794 $518,937
Class I 191 206
---------- --------
Total net assets $1,276,985 $519,143
========== ========
Class A shares:
Net asset value per share
(net assets / shares of beneficial interest outstanding) $ 9.58 $10.23
====== ======
Offering price per share (100 / 95.25 and 100 / 94.25,
respectively, of net asset value per share) $10.06 $10.85
====== ======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $ 9.54 $10.28
====== ======
On sales of $100,000 or more for MFS High Quality Bond Fund and on sales of $50,000 or more for MFS Large
Cap Value Fund, the price of Class A is reduced. A contingent deferred sales charge may be imposed on
redemptions of Class A shares.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Statements of Operations
--------------------------------------------------------------------------------------------------------
HIGH QUALITY LARGE CAP
PERIOD ENDED APRIL 30, 2000* BOND FUND VALUE FUND
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income:
Income -
Dividends $ -- $ 8,664
Interest 76,102 1,118
Foreign taxes withheld -- (78)
-------- --------
Total investment income $ 76,102 $ 9,704
-------- --------
Expenses -
Management fee $ 5,514 $ 3,407
Shareholder servicing agent fee 1,103 454
Administrative fee 142 59
Custodian fee 4,776 4,599
Printing 15,909 13,625
Postage 170 276
Auditing fees 5,600 5,000
Legal fees 2,441 2,606
Registration fees 4,000 4,000
Miscellaneous 3,813 1,229
-------- --------
Total expenses $ 43,468 $ 35,255
Fees paid indirectly (338) (166)
Reduction of expenses by investment adviser (43,130) (30,545)
-------- --------
Net expenses $ -- $ 4,544
-------- --------
Net investment income $ 76,102 $ 5,160
-------- --------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(36,454) $ 34,143
Foreign currency transactions -- 7
-------- --------
Net realized gain (loss) on investments and foreign currency
transactions $(36,454) $ 34,150
-------- --------
Change in unrealized appreciation (depreciation) -
Investments $(13,179) $ 5,098
Translation of assets and liabilities in foreign currencies -- (4)
-------- --------
Net unrealized gain (loss) on investments and foreign
currency translation $(13,179) $ 5,094
-------- --------
Net realized and unrealized gain (loss) on investments and
foreign currency $(49,633) $ 39,244
-------- --------
Increase in net assets from operations $ 26,469 $ 44,404
======== ========
* For the period from the commencement of each Fund's investment operations, May 3, 1999,
through April 30, 2000.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------------------------------
HIGH QUALITY LARGE CAP
PERIOD ENDED APRIL 30, 2000* BOND FUND VALUE FUND
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income $ 76,102 $ 5,160
Net realized gain (loss) on investments and foreign
currency transactions (36,454) 34,150
Net unrealized gain (loss) on investments and foreign
currency translation (13,179) 5,094
---------- --------
Increase in net assets from operations $ 26,469 $ 44,404
---------- --------
Distributions declared to shareholders -
From net investment income (Class A) $ (74,597) $ (3,257)
From net investment income (Class I) (13) (1)
From net realized gain on investments and foreign currency
transactions (Class A) -- (23,642)
From net realized gain on investments and foreign currency
transactions (Class I) -- (10)
---------- --------
Total distributions declared to shareholders $ (74,610) $(26,910)
---------- --------
Net increase in net assets from Fund share transactions $1,325,126 $501,649
---------- --------
Total increase in net assets $1,276,985 $519,143
Net assets:
At beginning of period -- --
---------- --------
At end of period $1,276,985 $519,143
---------- --------
Accumulated undistributed net investment income $ 1,556 $ 1,837
========== ========
* For the period from the commencement of each Fund's investment operations, May 3, 1999,
through April 30, 2000.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Financial Highlights
----------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
HIGH QUALITY BOND FUND APRIL 30, 2000* APRIL 30, 2000**
----------------------------------------------------------------------------------------------------------
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) $ 0.66 $ 0.67
Net realized and unrealized loss on investments (0.44) (0.50)
------ ------
Total from investment operations $ 0.22 $ 0.17
------ ------
Less distributions declared to shareholders from net investment
income $(0.64) $(0.64)
------ ------
Net asset value - end of period $ 9.58 $ 9.54
====== ======
Total return(+) 2.35%++ 1.82%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.03%+
Net investment income 6.85%+ 6.25%+
Portfolio turnover 831% 831%
Net assets at end of period (000 omitted) $1,277 $ -- +++
(S) Subject to reimbursement by the Fund, the investment adviser 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 voluntarily waived
its fee. To the extent actual expenses were over/under this limitation and the waiver had not been in
place, the net investment income per share and the ratios would have been:
Net investment income $ 0.29 $ 0.25
Ratios (to average net assets):
Expenses## 3.92%+ 3.92%+
Net investment income 2.96%+ 2.36%+
* For the period from the commencement of the Fund's investment operations, May 3, 1999, through
April 30, 2000.
** For the period from the inception of Class I, May 5, 1999, through April 30, 2000.
+ 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.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Financial Highlights - continued
----------------------------------------------------------------------------------------------------------
LARGE CAP VALUE FUND PERIOD ENDED APRIL 30, 2000*
----------------------------------------------------------------------------------------------------------
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) $ 0.12 $ 0.11
Net realized and unrealized gain on investments and foreign
currency 0.66 0.72
------ ------
Total from investment operations $ 0.78 $ 0.83
------ ------
Less distributions declared to shareholders -
From net investment income $(0.07) $(0.07)
From net realized gain on investments and foreign currency
transactions (0.48) (0.48)
------ ------
Total distributions declared to shareholders $(0.55) $(0.55)
------ ------
Net asset value - end of period $10.23 $10.28
====== ======
Total return(+) 8.14%++ 8.65%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.04%+ 1.04%+
Net investment income 1.13%+ 1.12%+
Portfolio turnover 100% 100%
Net assets at end of period (000 omitted) $519 $ -- +++
(S) Subject to reimbursement by the Fund, the investment adviser 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 the investment adviser a fee not greater than 0.25%
of average daily net assets. To the extent actual expenses were over this limitation, the net
investment loss per share and the ratios would have been:
Net investment loss $(0.57) $(0.59)
Ratios (to average net assets):
Expenses## 7.74%+ 7.74%+
Net investment loss (5.57)%+ (5.58)%+
* For the period from the commencement of the Fund's investment operations, May 3, 1999, through April
30, 2000.
+ 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.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS High Quality Bond Fund and MFS Large Cap Value Fund (the Funds) are two
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. 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. 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. Short-term obligations, which mature in 60 days
or less, are valued at amortized cost, which approximates market value.
Securities for which there are no such quotations or valuations are valued in
good faith, at fair value, by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
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 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 total 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 net 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.
During the period ended April 30, 2000, the following amounts were
reclassified due to differences between book and tax accounting for mortgage-
backed securities, currency transactions and non-taxable dividends.
HIGH QUALITY LARGE CAP
BOND FUND VALUE FUND
-------------------------------------------------------------------------------
Increase (decrease):
Accumulated undistributed net realized
gain (loss) on investments and foreign
currency transactions $(64) $ 65
Accumulated undistributed net investment
income 64 (65)
These changes had no effect on the net assets or net asset value per share of
the Funds.
At April 30, 2000, MFS High Quality Bond Fund, for federal income tax
purposes, had a capital loss carryforward of $(17,664) which may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on April 30, 2008.
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 bear the common expenses
of the Fund based on the value of settled shares outstanding of each class,
without distinction between the 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 - Each Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.50%
and 0.75% of average daily net assets of the High Quality Bond Fund and Large
Cap Value Fund, respectively. For High Quality Bond Fund, the investment
adviser has voluntarily agreed to waive its fee, which is shown as a reduction
of total expenses in the Statement of Operations.
For the High Quality Bond Fund, the investment adviser has voluntarily agreed
to pay the Fund's operating expenses, exclusive of management and distribution
and service fees such that the Fund's aggregate expenses do not exceed 0.00%
of its average daily net assets. This is reflected as a reduction of total
expenses in the Statement of Operations.
The 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
April 30, 2000, aggregate unreimbursed expenses amounted to $30,545.
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 Massachusetts Financial
Services Company (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 incurs an administrative fee
at the following annual percentages of each Fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 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 April 30, 2000.
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 Fund 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 not 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 April 30, 2000.
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:
HIGH QUALITY LARGE CAP
BOND FUND VALUE FUND
-------------------------------------------------------------------------------
PURCHASES
U.S. government securities $8,636,249 $ 2,420
---------- --------
Investments (non-U.S. government securities) $1,345,681 $875,842
---------- --------
SALES
U.S. government securities $7,795,744 $ --
---------- --------
Investments (non-U.S. government securities) $ 937,289 $426,186
---------- --------
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:
HIGH QUALITY LARGE CAP
BOND FUND VALUE FUND
-------------------------------------------------------------------------------
Aggregate cost $1,287,124 $511,722
---------- --------
Gross unrealized depreciation $ (14,985) $(35,464)
Gross unrealized appreciation 1,806 39,920
---------- --------
Net unrealized appreciation (depreciation) $ (13,179) $ 4,456
========== ========
(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
PERIOD ENDED APRIL 30, 2000*
---------------------------------------------
HIGH QUALITY BOND FUND LARGE CAP VALUE FUND
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
Shares sold 125,545 $1,250,350 90,797 $899,818
Shares issued to shareholders in
reinvestment of distributions 7,706 74,581 2,772 26,888
Shares reacquired -- (5) (42,834) (425,257)
------- ---------- ------- --------
Net increase 133,251 $1,324,926 50,735 $501,449
======= ========== ====== ========
Class I Shares
PERIOD ENDED APRIL PERIOD ENDED APRIL
30, 2000** 30, 2000*
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HIGH QUALITY BOND FUND LARGE CAP VALUE FUND
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SHARES AMOUNT SHARES AMOUNT
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Shares sold 20 $ 200 20 $ 200
* For the period from the commencement of the Funds' investment operations,
May 3, 1999, through April 30, 2000.
** For the period from inception of Class I, May 5, 1999, through April 30,
2000.
(6) Line of Credit
The Funds and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The Funds had no significant borrowings during the
period.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust IX and Shareholders of MFS High Quality
Bond Fund and MFS Large Cap Value Fund:
We have audited the accompanying statements of assets and liabilities of the
MFS High Quality Bond Fund and the MFS Large Cap Value Fund (two of the
portfolios constituting MFS Series Trust IX), including the schedules of
portfolio investments, as of April 30, 2000, and the related statements of
operations and changes in net assets and the financial highlights for the
period from May 3, 1999 (commencement of operations) to April 30, 2000. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of April 30, 2000, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
MFS High Quality Bond Fund and the MFS Large Cap Value Fund at April 30, 2000,
and the results of their operations, the changes in their net assets and the
financial highlights for the period then ended in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
June 9, 2000
--------------------------------------------
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>
FEDERAL TAX INFORMATION
In January 2001, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2000.
For the period ended April 30, 2000, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 18.41%
for the MFS Large Cap Value Fund.
<PAGE>
MFS(R) HIGH QUALITY BOND FUND
MFS(R) LARGE CAP VALUE FUND
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
INC-2A 06/00 1.5M
