<PAGE>
[Logo] M F S (R) ANNUAL REPORT
INVESTMENT MANAGEMENT APRIL 30, 2000
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) INTERMEDIATE INVESTMENT
GRADE BOND FUND
MFS(R) RESEARCH BOND FUND
<PAGE>
<TABLE>
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND
MFS(R) RESEARCH BOND 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 Deloitte & Touche 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.
DIRECTOR OF FIXED INCOME RESEARCH WORLD WIDE WEB
Robert J. Manning* www.mfs.com
PORTFOLIO MANAGER
James J. Calmas*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
+ Independent Trustee
* MFS Investment Manager
</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 Intermediate Investment Grade Bond Fund
Dear Shareholders,
For the 12 months ended April 30, 2000, Class A shares of the Fund provided a
total return of 1.62% and Class I shares 1.72%. 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 1.55% return for the
Fund's benchmark, the Lehman Brothers Intermediate 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 0.10% return for the average intermediate investment-grade debt fund
tracked by Lipper 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" to "BBB" or in
unrated bonds that we consider investment quality. The Fund also invests in
U.S. Treasury 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.
Rising interest rates and persistent inflation worries put pressure on nearly
all bonds, with the lone exception of long-term U.S. Treasury securities.
Swelling federal budget surpluses prompted the U.S. Treasury to limit the size
and frequency of its auctions of new debt, and to buy back nearly $30 billion
of Treasury bonds outstanding in the first four months of 2000. 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. That development and weak demand for corporate bonds
caused the difference in yield (the "spread") between Treasuries and corporate
securities to widen substantially during the year, pushing corporate bond
prices lower. (Principal value and interest of Treasury securities are
guaranteed by the U.S. government if held to maturity.) We believe that strong
economic conditions will help corporate fundamentals. In our view, good news
on the fundamental front eventually will overwhelm the negative market
backdrop stemming from the reduction in Treasury supply.
Our security selection within the corporate market aided performance. We
favored bonds issued by telecommunications and cable companies. The promise of
the Internet, the explosion in demand for cellular and data transmission, and
the ongoing convergence of telecom and cable companies has helped boost their
prospects.
Our holdings in asset-backed securities - which held up much better than
corporate bonds over the past year - also were a plus for performance. The
reasons that we own them were the same as those that helped their recent
performance: their high "AAA"-rate quality and attractive yields.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK -- continued
MFS Research Bond Fund
Dear Shareholders,
For the 12 months ended April 30, 2000, Class A shares of the Fund provided a
total return of 1.31% and Class I shares 1.41%. These returns assume the
reinvestment of any distributions but exclude the effects of any sales charges
and compare to a 0.95% return over the same period for the Fund's benchmark,
the Lehman Brothers Government/Corporate Bond Index (the Lehman Index) and to
a 1.06% return for the average general bond fund tracked by Lipper Inc. The
Lehman Index is an unmanaged, market-value-weighted index that includes U.S.
Treasury and government-agency securities (excluding mortgage-backed
securities) and investment-grade debt obligations of U.S. corporations.
The Fund is a total return portfolio seeking high current income and long-term
growth of capital and having at least, under normal market conditions, 65% of
its assets invested 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 may also invest in
derivative securities, including futures and forward contracts, options on
futures contracts, foreign currencies, securities, bond indices, structured
notes, and indexed securities.
In general, our bottom-up research and investment strategies worked well for
the Fund over the past year. In the third quarter of 1999, the corporate bond
sector was affected negatively by concern over an acceleration in the amount
of year 2000 (Y2K) related debt issuance. In addition, year-end tax-loss
selling hurt prices as investors sold corporate and other types of bonds in
order to lock in losses and offset capital gains incurred elsewhere in their
portfolios. During this time, we took advantage of price weakness in corporate
bonds to increase our holdings in this sector.
In the fourth quarter of 1999, the Fund benefited from its overweighting in
corporate bonds and mortgage-backed securities. As corporate debt issuance
proved to be less than expected, Y2K-related problems failed to materialize,
and the Federal Reserve Board's stance on interest rates became clearer,
corporate bonds and mortgage-backed securities led comparable-duration
Treasuries (Principal value and interest of Treasury securities are guaranteed
by the U.S. government if held to maturity. Duration is a measure of a bond's
interest-rate sensitivity).
In the first quarter of 2000, as corporate bonds and mortgage-backed
securities continued to recover, we decided to lock in some profits and
decrease our positions in these sectors. At the same time, we shifted some
assets into Treasuries as the outlook for government securities brightened.
Again, this strategy worked well for the Fund, especially following the
government's announcement of plans to buy back nearly $30 billion of longer-
maturity Treasuries during the year. The anticipated scarcity of long-term
Treasury bonds caused them to rally despite the increase in short-term
interest rates, even as other fixed-income investments lost ground.
More recently, as Treasuries have outperformed other sectors of the bond
market, we've started to look at corporate bonds, mortgage-backed securities,
and high-yield bonds because we believe they are again starting to offer
attractive values and yields.
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 these reports are those of the portfolio manager and
the Director of Fixed Income Research and are current only through the end of
the period of the report as stated on the cover. Their views are subject to
change at any time based on market and other conditions, and no forecasts can
be guaranteed.
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 INTERMEDIATE INVESTMENT GRADE BOND FUND GROWTH OF A HYPOTHETICAL
$10,000 INVESTMENT
(For the period from the commencement of the Fund's investment operations,
January 4, 1999, through April 30, 2000. Index information is from January 1,
1999.)
MFS Intermediate Lehman Brothers
Investment Grade Intermediate Government/
Bond Fund - Class A Corporate Bond Index
-----------------------------------------------------------
1/99 $9,525 $10,000
4/99 9,567 10,012
4/00 9,722 10,166
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH APRIL 30, 2000
CLASS A
<CAPTION>
1 Year Life*
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return Excluding Sales Charge +1.62% +2.07%
---------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +1.62% +1.55%
---------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -3.20% -2.10%
---------------------------------------------------------------------------------------------------------------------------
CLASS I
<CAPTION>
1 Year Life*
---------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +1.72% +2.06%
---------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +1.72% +1.55%
---------------------------------------------------------------------------------------------------------------------------
COMPARATIVE INDICES(+)
<CAPTION>
1 Year Life*
---------------------------------------------------------------------------------------------------------------------------
Average intermediate investment grade debt fund+ +0.10% -0.07%
---------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Government/Corporate Bond Index# +1.55% +1.25%
---------------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations, January 4, 1999, through April 30, 2000.
Index information is from January 1, 1999.
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
MFS RESEARCH BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the Fund's investment operations,
January 4, 1999, through April 30, 2000. Index information is from January 1,
1999.)
MFS Research Lehman Brothers
Bond Fund Government/Corporate
- Class A Bond Index
-----------------------------------------------------------
1/99 $9,525 $10,000
4/99 9,497 9,905
4/00 9,621 9,999
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH APRIL 30, 2000
CLASS A
<CAPTION>
1 Year Life*
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return Excluding Sales Charge +1.31% +1.01%
---------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +1.31% +0.76%
---------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -3.51% -2.86%
---------------------------------------------------------------------------------------------------------------------------
CLASS I
<CAPTION>
1 Year Life*
---------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +1.41% +0.91%
---------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +1.41% +0.68%
---------------------------------------------------------------------------------------------------------------------------
COMPARATIVE INDICES(+)
<CAPTION>
1 Year Life*
---------------------------------------------------------------------------------------------------------------------------
Average general bond fund+ +1.06% +1.33%
---------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Government/Corporate Bond Index# +0.95% -0.01%
---------------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations, January 4, 1999, through April 30, 2000.
Index information is from January 1, 1999.
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
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>
<TABLE>
PORTFOLIO OF INVESTMENTS - April 30, 2000
MFS INTERMEDIATE INVESTMENT GRADE BOND FUND
Bonds - 98.1%
<CAPTION>
-----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 83.0%
Aerospace and Defense - 0.8%
Raytheon Co., 5.7s, 2003 $ 9 $ 8,318
-----------------------------------------------------------------------------------------------------
Automotive - 2.8%
DaimlerChrysler NA Holding Corp., 6.63s, 2001 $13 $ 12,879
Ford Motor Credit Co., 6.7s, 2004 16 15,388
----------
$ 28,267
-----------------------------------------------------------------------------------------------------
Banks and Credit Companies - 2.0%
Fleet Boston Corp., 9.9s, 2001 $10 $ 10,282
Wells Fargo and Co., 7.2s, 2003 10 9,911
----------
$ 20,193
-----------------------------------------------------------------------------------------------------
Beverages - 2.2%
Coca-Cola Bottling Co., 8.56s, 2002 $14 $ 14,224
Coca-Cola Bottling Co., 6.375s, 2009 10 8,693
----------
$ 22,917
-----------------------------------------------------------------------------------------------------
Consumer Products - 0.5%
Hasbro Inc., 7.95s, 2003 $ 5 $ 4,976
-----------------------------------------------------------------------------------------------------
Corporate Asset Backed - 14.5%
Americredit Automobile Receivable Trust, 5.78s, 2003 $15 $ 14,728
Carco Auto Loan Master Trust, 5.65s, 2003 15 14,832
Chase Credit Card Master Trust, 6.39s, 2004 15 15,023
Citibank Credit Card Master Trust I, 5.5s, 2006 25 23,375
Discover Card Master Trust I, 5.85s, 2006 20 19,119
DLJ Mortgage Acceptance Corp., 8.1s, 2004 14 14,597
GE Capital Mortgage Services, Inc., 6.035s, 2020 20 19,281
GS Mortgage Secs Corp. II, 6.06s, 2030 9 8,397
Morgan (J.P.) Commercial Mortgage Finance Corp.,
6.613s, 2030 5 4,655
Morgan Stanley Capital, Inc., 6.01s, 2030 9 8,510
Peco Energy Transition Trust, 5.48s, 2003 6 5,587
----------
$ 148,104
-----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation - 0.9%
FHLMC, 5.83s, 2013 $ 9 $ 8,915
-----------------------------------------------------------------------------------------------------
Federal National Mortgage Association - 11.3%
FNMA, 5.25s, 2009 $ 4 $ 3,471
FNMA, 5.722s, 2009 30 26,451
FNMA, 7.25s, 2010 35 34,896
FNMA, 6s, 2014 28 25,959
FNMA, 7s, 2015 25 24,425
----------
$ 115,202
-----------------------------------------------------------------------------------------------------
Financial Institutions - 2.8%
Countrywide Home Loan, Inc., 6.85s, 2004 $12 $ 11,472
Lehman Brothers Holdings, Inc., 6.25s, 2003 18 17,240
----------
$ 28,712
-----------------------------------------------------------------------------------------------------
Financial Services - 3.6%
GE Capital Corp. Medium Term Note, 7.25s, 2005 $15 $ 14,911
Morgan Stanley Dean Witter, Inc., 7.125s, 2003 15 14,835
National Rural Utilities Cooperative Finance, 7.375s, 2003 7 6,982
----------
$ 36,728
-----------------------------------------------------------------------------------------------------
Food and Beverage Products - 2.5%
J. Seagram & Sons, Inc., 5.79s, 2001 $15 $ 14,728
Whitman Corp., 6s, 2004 12 11,265
----------
$ 25,993
-----------------------------------------------------------------------------------------------------
Insurance - 1.7%
Aflac, Inc., 6.5s, 2009 $20 $ 17,829
-----------------------------------------------------------------------------------------------------
Manufacturing - 1.0%
Eaton Corp., 6.95s, 2004 $10 $ 9,770
-----------------------------------------------------------------------------------------------------
Media - 2.5%
Time Warner Entertainment Co. LP, 9.625s, 2002 $25 $ 25,789
-----------------------------------------------------------------------------------------------------
Railroads - 1.0%
Union Pacific Corp., 5.78s, 2001 $11 $ 10,672
-----------------------------------------------------------------------------------------------------
Telecommunications - 2.6%
Bellsouth Capital Funding Corp., 7.75s, 2010 $15 $ 14,997
GTE Corp., 9.1s, 2003 11 11,402
----------
$ 26,399
-----------------------------------------------------------------------------------------------------
Telecommunications and Cable - 4.1%
Comcast Corp., 9.125s, 2006 $13 $ 13,465
Sprint Spectrum LP, 11s, 2006 15 16,149
Telecomunicaciones De Puerto Rico, 6.15s, 2002 13 12,478
----------
$ 42,092
-----------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 1.4%
AID - Israel, 6.6s, 2008 $15 $ 14,514
-----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 21.8%
U.S. Treasury Notes, 4.25s, 2003 $65 $ 60,298
U.S. Treasury Notes, 5.75s, 2002 30 29,353
U.S. Treasury Notes, 5.875s, 2004 25 24,340
U.S. Treasury Notes, 6s, 2004-2009 44 43,048
U.S. Treasury Notes, 6.125s, 2007 25 24,480
U.S. Treasury Notes, 6.5s, 2010 30 30,595
U.S. Treasury Notes, 7.875s, 2004 10 10,491
----------
$ 222,605
-----------------------------------------------------------------------------------------------------
Utilities - Electric - 3.0%
Connecticut Light & Power Co., 7.875s, 2001 $ 4 $ 3,994
Entergy Mississippi, Inc., 6.2s, 2004 10 9,409
Midamerican Funding LLC, 5.85s, 2001 15 14,804
Narragansett Electric Co., 7.83s, 2002 2 2,015
----------
$ 30,222
-----------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 848,217
-----------------------------------------------------------------------------------------------------
Foreign Bonds - 15.1%
Argentina - 1.0%
Republic of Argentina, 0s, 2001 $11 $ 10,120
-----------------------------------------------------------------------------------------------------
Canada - 2.9%
AT&T Canada, Inc., 12s, 2007 (Telecommunications) $ 8 $ 8,990
Province of Quebec, 8.8s, 2003 11 11,390
Shaw Communications, Inc., 8.25s, 2010 (Telecommunications) 10 9,748
----------
$ 30,128
-----------------------------------------------------------------------------------------------------
Chile - 0.4%
Enersis S.A., 6.6s, 2026 (Utilities - Electric) $ 4 $ 3,796
-----------------------------------------------------------------------------------------------------
France - 1.3%
Natexis AMBS Co. LLC, 8.44s, 2049 (Banks and Credit Cos.)## $15 $ 13,734
-----------------------------------------------------------------------------------------------------
Germany - 2.0%
KFW International Finance, Inc., 9.4s, 2004 (Agency) $ 5 $ 5,372
Landesbank Baden Wurttemberg, 7.875s, 2004 (Banks and Credit Cos.) 15 15,103
----------
$ 20,475
-----------------------------------------------------------------------------------------------------
Israel - 1.9%
State of Israel, 7.75s, 2010 $20 $ 19,525
-----------------------------------------------------------------------------------------------------
Mexico - 0.5%
Pemex Finance Ltd., 9.69s, 2009 (Oils) $ 5 $ 5,307
-----------------------------------------------------------------------------------------------------
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 $ 20,114
-----------------------------------------------------------------------------------------------------
United Kingdom - 2.7%
Cable & Wireless Communications, 6.75s, 2008 (Telecommunications) $20 $ 20,030
British Sky Broadcasting, 6.875s, 2009 (Telecommunications) 8 7,081
----------
$ 27,111
-----------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 154,256
-----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,034,847) $1,002,473
Other Assets, Less Liabilities - 1.9% 19,183
-----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,021,656
-----------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - April 30, 2000
MFS RESEARCH BOND FUND
Bonds - 97.3%
<CAPTION>
-----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 86.7%
Aerospace and Defense - 0.9%
K & F Industries, Inc., 9.25s, 2007 $10 $ 9,250
-----------------------------------------------------------------------------------------------------
Airlines - 1.0%
Continental Airlines Pass-Through Trust, Inc., 6.648s, 2017 $ 6 $ 5,157
Continental Airlines Pass-Through Trust, Inc., 7.256s, 2020 5 4,572
----------
$ 9,729
-----------------------------------------------------------------------------------------------------
Asset Backed - 2.0%
Residential Funding Mortgage Secs II, Inc., 7.66s, 2012 $20 $ 19,884
-----------------------------------------------------------------------------------------------------
Automotive - 0.9%
Ford Motor Credit Co., 7.375s, 2009 $10 $ 9,666
-----------------------------------------------------------------------------------------------------
Building Products - 0.9%
Nortek, Inc., 9.25s, 2007 $10 $ 9,325
-----------------------------------------------------------------------------------------------------
Certified Mortgage Backed - 0.9%
Criimi Mae Corp., 6.701s, 2008## $10 $ 8,950
-----------------------------------------------------------------------------------------------------
Chemicals - 2.0%
Lyondell Chemical Co., 9.625s, 2007 $10 $ 9,825
NL Industries, Inc., 11.75s, 2003 10 10,275
----------
$ 20,100
-----------------------------------------------------------------------------------------------------
Computer Services - 0.8%
Seagate Technology, 7.45s, 2037 $10 $ 7,914
-----------------------------------------------------------------------------------------------------
Energy - 2.8%
Apache Corp., 7.95s, 2026 $10 $ 9,467
Ocean Energy, Inc., 8.875s, 2007 10 9,850
P&L Coal Holdings Corp., 9.625s, 2008 10 8,975
----------
$ 28,292
-----------------------------------------------------------------------------------------------------
Financial Services - 2.8%
Associates Corp., 5.5s, 2004 $10 $ 9,256
Lehman Brothers Holdings, Inc., 6.25s, 2003 10 9,578
Natexis Ambs Co. LLC, 8.44s, 2049## 10 9,156
----------
$ 27,990
-----------------------------------------------------------------------------------------------------
Forest and Paper Products - 1.0%
Riverwood International Corp., 10.25s, 2006 $10 $ 9,750
-----------------------------------------------------------------------------------------------------
Gaming and Hotels - 0.9%
Harrahs Operating, Inc., 7.5s, 2009 $10 $ 9,259
-----------------------------------------------------------------------------------------------------
Government National Mortgage Association - 7.4%
GNMA, 8s, 2030 $75 $ 75,197
-----------------------------------------------------------------------------------------------------
Insurance - 0.9%
Aflac, Inc., 6.5s, 2009 $10 $ 8,915
-----------------------------------------------------------------------------------------------------
Manufacturing - 1.2%
Samsonite Corp., 10.75s, 2008 $15 $ 12,675
-----------------------------------------------------------------------------------------------------
Media - 4.3%
Comcast Corp., 9.125s, 2006 $10 $ 10,357
J Seagram & Sons, Inc., 6.4s, 2003 10 9,464
News America Holdings, Inc., 7.3s, 2028 10 8,622
Time Warner Entertainment Co. LP, 9.625s, 2002 15 15,474
----------
$ 43,917
-----------------------------------------------------------------------------------------------------
Railroads - 0.9%
Union Pacific Corp., 6.34s, 2003 $10 $ 9,474
-----------------------------------------------------------------------------------------------------
Retail - 1.8%
J. Crew Operating Corp., 10.375s, 2007 $10 $ 8,825
Musicland Group, Inc., 9s, 2003 10 8,962
----------
$ 17,787
-----------------------------------------------------------------------------------------------------
Steel - 1.0%
WCI Steel, Inc., 10s, 2004 $10 $ 9,800
-----------------------------------------------------------------------------------------------------
Telecommunications - 2.8%
Bellsouth Capital Funding Corp., 7.75s, 2010 $10 $ 9,998
Sprint Capital Corp., 6.9s, 2019 10 8,961
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 10 9,425
----------
$ 28,384
-----------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 14.5%
Federal National Mortgage Assn., 4.75s, 2003 $60 $ 55,387
Federal National Mortgage Assn., 6.375s, 2009 60 56,278
Federal National Mortgage Assn., 7.25s, 2010 35 34,896
----------
$ 146,561
-----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 33.6%
U.S. Treasury Bonds, 8.125s, 2019 $48 $ 57,675
U.S. Treasury Bonds, 5.25s, 2029 52 45,679
U.S. Treasury Bonds, 6.125s, 2029 23 23,053
U.S. Treasury Bonds, 6.25s, 2030 5 5,197
U.S. Treasury Notes, 4.5s, 2001 13 12,815
U.S. Treasury Notes, 5.5s, 2001 14 13,808
U.S. Treasury Notes, 5.875s, 2001 20 19,766
U.S. Treasury Notes, 6.125s, 2001 21 20,806
U.S. Treasury Notes, 6.5s, 2002 13 12,951
U.S. Treasury Notes, 4.25s, 2003 61 56,587
U.S. Treasury Notes, 5.875s, 2004 37 36,023
U.S. Treasury Notes, 6s, 2004 33 32,309
U.S. Treasury Notes, 6.875s, 2006 3 3,049
----------
$ 339,718
-----------------------------------------------------------------------------------------------------
Utilities - Electric - 1.4%
Connecticut Light & Power Co., 7.875s, 2001 $ 4 $ 3,994
Midamerican Funding LLC, 5.85s, 2001 10 9,870
----------
$ 13,864
-----------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 876,401
-----------------------------------------------------------------------------------------------------
Foreign Bonds - 10.6%
Argentina - 1.0%
Republic of Argentina, 6s, 2023 $15 $ 10,489
-----------------------------------------------------------------------------------------------------
Brazil - 1.0%
Federal Republic of Brazil, 14.5s, 2009 $10 $ 10,560
-----------------------------------------------------------------------------------------------------
Canada - 1.9%
AT&T Canada, Inc., 12s, 2007 (Telecommunications) $ 8 $ 8,990
Shaw Communications, Inc., 8.25s, 2010 (Media) 10 9,748
----------
$ 18,738
-----------------------------------------------------------------------------------------------------
Morocco - 0.9%
Morocco Tranche A, 6.844s, 2009+ $10 $ 8,925
-----------------------------------------------------------------------------------------------------
Poland - 0.5%
PTC International Finance BV, 11.25s, 2009 (Telecommunications)## $ 5 $ 5,200
-----------------------------------------------------------------------------------------------------
South Korea - 1.0%
Hanvit Bank, 12.75s, 2010 (Banks and Credit Cos.)## $10 $ 10,100
-----------------------------------------------------------------------------------------------------
Sweden - 1.0%
AB Spintab, 6.8s, 2049 (Banks and Credit Cos.)## $10 $ 9,574
-----------------------------------------------------------------------------------------------------
United Kingdom - 3.3%
British Sky Broadcasting, 6.875s, 2009 (Media) $ 5 $ 4,425
Cable & Wireless Communications, 6.75s, 2008 (Telecommunications) 20 20,030
Socgen Real Estate Co., 7.64s, 2049 (Financial Institutions)## 10 9,035
----------
$ 33,490
-----------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 107,076
-----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,005,174) $ 983,477
-----------------------------------------------------------------------------------------------------
Short-Term Obligation - 1.5%
-----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 5/01/00, at Amortized Cost $15 $ 15,000
-----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,020,174) $ 998,477
Other Assets, Less Liabilities - 1.2% 12,331
-----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,010,808
-----------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
Portfolio Footnotes:
## SEC Rule 144A restriction.
+ Restricted security.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
INTERMEDIATE INVESTMENT RESEARCH
APRIL 30, 2000 GRADE BOND FUND BOND FUND
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $1,034,847 and $1,020,174, respectively) $1,002,473 $ 998,477
Cash 3,658 2,204
Interest receivable 16,745 18,977
---------- ----------
Total assets $1,022,876 $1,019,658
---------- ----------
Liabilities:
Payable to investment adviser $ 1,220 $ --
Payable for investments purchased -- 8,850
---------- ----------
Total liabilities $ 1,220 $ 8,850
---------- ----------
Net assets $1,021,656 $1,010,808
========== ==========
Net assets consist of:
Paid-in capital $1,085,954 $1,085,330
Unrealized depreciation on investments (32,374) (21,697)
Accumulated net realized loss on investments (32,236) (52,990)
Accumulated undistributed net investment income 312 165
---------- ----------
Total $1,021,656 $1,010,808
========== ==========
Shares of beneficial interest outstanding:
Class A 108,941 108,987
Class I 15.543 15.572
---------- ----------
Total shares of beneficial interest outstanding 108,957 109,003
========== ==========
Net assets:
Class A $1,021,510 $1,010,664
Class I 145.83 144.16
---------- ----------
Total net assets $1,021,656 $1,010,808
========== ==========
Class A shares:
Net asset value per share
(net assets / shares of beneficial interest outstanding) $9.38 $9.27
===== =====
Offering price per share (100 / 95.25 of net asset value per share) $9.85 $9.73
===== =====
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $9.38 $9.26
===== =====
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.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Operations
<CAPTION>
---------------------------------------------------------------------------------------------------
INTERMEDIATE INVESTMENT RESEARCH
YEAR ENDED APRIL 30, 2000 GRADE BOND FUND BOND FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income:
Interest income $ 67,219 $ 67,321
-------- --------
Expenses -
Management fee $ 5,035 $ 5,958
Shareholder servicing agent fee 1,007 992
Distribution and service fee (Class A) 3,517 3,465
Administrative fee 180 129
Auditing fees 13,429 16,329
Custodian fee 4,984 4,709
Printing 7,808 7,128
Registration fees 2,298 2,283
Legal fees 2,069 2,079
Postage 114 93
Miscellaneous 739 616
-------- --------
Total expenses $ 41,180 $ 43,781
Fees paid indirectly (366) (330)
Reduction of expenses by investment adviser and distributor (40,814) (43,451)
-------- --------
Net expenses $ -- $ --
-------- --------
Net investment income $ 67,219 $ 67,321
-------- --------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) on investment transactions $(25,567) $(46,247)
Change in unrealized depreciation on investments (26,009) (7,877)
-------- --------
Net realized and unrealized loss on investments $(51,576) $(54,124)
-------- --------
Increase in net assets from operations $ 15,643 $ 13,197
======== ========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets
<CAPTION>
------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
INTERMEDIATE INVESTMENT GRADE BOND FUND APRIL 30, 2000 APRIL 30, 1999*
------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 67,219 $ 17,705
Net realized loss on investments (25,567) (6,658)
Net unrealized loss on investments (26,009) (6,365)
---------- ----------
Increase in net assets from operations $ 15,643 $ 4,682
---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (68,210) $ (16,400)
From net investment income (Class I) (10) (3)
---------- ----------
Total distributions declared to shareholders $ (68,220) $ (16,403)
---------- ----------
Net increase in net assets from Fund share transactions $ 69,205 $1,016,749
---------- ----------
Total increase in net assets $ 16,628 $1,005,028
Net assets:
At beginning of period 1,005,028 --
---------- ----------
At end of period (including accumulated undistributed net
investment income of $312 and $1,303, respectively) $1,021,656 $1,005,028
========== ==========
* For the period from the commencement of the Fund's investment operations, January 4, 1999,
through April 30, 1999.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets - continued
<CAPTION>
-------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
RESEARCH BOND FUND APRIL 30, 2000 APRIL 30, 1999*
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 67,321 $ 17,798
Net realized loss on investments (46,247) (6,743)
Net unrealized loss on investments (7,877) (13,820)
---------- ----------
Increase (decrease) in net assets from operations $ 13,197 $ (2,765)
---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (67,749) $ (17,192)
From net investment income (Class I) (10) (3)
---------- ----------
Total distributions declared to shareholders $ (67,759) $ (17,195)
---------- ----------
Net increase in net assets from Fund share transactions $ 65,771 $1,019,559
---------- ----------
Total increase in net assets $ 11,209 $ 999,599
Net assets:
At beginning of period 999,599 --
---------- ----------
At end of period (including accumulated undistributed net
investment income of $165 and $603, respectively) $1,010,808 $ 999,599
========== ==========
* For the period from the commencement of the Fund's investment operations, January 4, 1999,
through April 30, 1999.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 1999* 2000 1999*
--------------------------------------------------------------------------------------------------------------------------------
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) $ 0.64 $ 0.18 $ 0.65 $ 0.19
Net realized and unrealized loss on investments
and foreign currency (0.49) (0.14) (0.49) (0.16)
------ ------ ------ ------
Total from investment operations $ 0.15 $ 0.04 $ 0.16 $ 0.03
------ ------ ------ ------
Less distributions declared to shareholders from
net investment income $(0.65) $(0.16) $(0.65) $(0.16)
------ ------ ------ ------
Net asset value - end of period $ 9.38 $ 9.88 $ 9.38 $ 9.87
====== ====== ====== ======
Total return(+) 1.62% 0.44%++ 1.72% 0.33%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.04% 0.27%+ 0.04% 0.27%+
Net investment income 6.69% 5.53%+ 6.80% 5.43%+
Portfolio turnover 147% 155% 147% 155%
Net assets at end of period (000 omitted) $1,022 $1,005 $0+++ $0+++
(S) Effective February 1, 1999, MFS voluntarily agreed, under a temporary expense agreement, to pay all of the Fund's operating
expenses, exclusive of management and distribution and service fees. Prior to February 1, 1999, the Fund paid MFS a fee not
greater than 1.00% of average daily net assets. In addition, the investment adviser and the distributor voluntarily waived their
fees for the periods indicated. To the extent actual expenses were over these limitations and the waivers had not been in place,
the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.25 $(0.09) $ 0.30 $(0.09)
Ratios (to average net assets):
Expenses## 4.10% 8.60%+ 3.75% 8.25%+
Net investment income (loss) 2.63% (2.80)%+ 3.09% (2.55)%+
* 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 are based on average shares outstanding.
## Ratios do not reflect 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
Financial Highlights - continued
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
RESEARCH BOND FUND
--------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 1999* 2000 1999*
--------------------------------------------------------------------------------------------------------------------------------
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) $ 0.64 $ 0.18 $ 0.65 $ 0.18
Net realized and unrealized loss on investments (0.53) (0.21) (0.53) (0.23)
------ ------ ------ ------
Total from investment operations $ 0.11 $(0.03) $ 0.12 $(0.05)
------ ------ ------ ------
Less distributions declared to shareholders from
net investment income $(0.64) $(0.17) $(0.64) $(0.17)
------ ------ ------ ------
Net asset value - end of period $ 9.27 $ 9.80 $ 9.26 $ 9.78
====== ====== ====== ======
Total return(+) 1.31% (0.29)%++ 1.41% (0.49)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03% 0.30%+ 0.03% 0.30%+
Net investment income 6.82% 5.62%+ 6.92% 5.13%+
Portfolio turnover 209% 117% 209% 117%
Net assets at end of period (000 omitted) $1,011 $999 $0+++ $0+++
(S) Effective February 1, 1999, MFS voluntarily agreed, under a temporary expense agreement, to pay all of the Fund's operating
expenses, exclusive of management and distribution and service fees. Prior to February 1, 1999, the Fund paid MFS a fee not
greater than 1.10% of average daily net assets. In addition, the investment adviser and the distributor voluntarily waived their
fees for the periods indicated. To the extent actual expenses were over these limitations and the waivers had not been in place,
the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.23 $(0.09) $ 0.27 $(0.11)
Ratios (to average net assets):
Expenses## 4.43% 8.93%+ 4.08% 8.58%+
Net investment income (loss) 2.42% (3.01)%+ 2.87% (3.15)%+
* 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.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Intermediate Investment Grade Bond Fund and MFS Research Bond Fund (the
Funds) are non-diversified series of MFS Series Trust IX (the Trust). The
Trust is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market
value. Securities for which there are no such quotations or valuations are
valued in good faith, at fair value, by the Trustees.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Interest payments received in additional
securities are recorded on the ex-interest date in an amount equal to the
value of the security on such date. Some securities may be purchased on a
"when-issued" or "forward delivery" basis, which means that the securities
will be delivered to the Fund at a future date, usually beyond customary
settlement time.
Fees Paid Indirectly - The Funds' custody fees are reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Funds. This amount is shown as a reduction of total expenses on the
Statements 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 year ended April 30, 2000, the following were reclassified due to
differences between book and tax accounting for mortgage-backed securities.
These changes had no effect on the net assets or net asset value per share.
INTERMEDIATE
INVESTMENT GRADE RESEARCH
BOND FUND BOND FUND
-------------------------------------------------------------------------------
INCREASE (DECREASE):
Paid-in capital $ -- $ --
Accumulated net realized loss on investments (10) --
Accumulated undistributed net investment income 10 --
At April 30, 2000, the Funds, for federal income tax purposes, had capital
loss carryforwards which may be applied against any net taxable realized gains
of each succeeding year until the earlier of their utilization or expiration.
TOTAL CARRYOVER 2008
-------------------------------------------------------------------------------
Intermediate Investment Grade Bond Fund $22,462 $22,462
Research Bond Fund 31,155 31,155
Multiple Classes of Shares of Beneficial Interest - The Funds offer multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Funds based on the
value of settled shares outstanding of each class, without distinction between
share classes. Dividends are declared separately for each class. Differences
in per share dividend rates are generally due to differences in separate class
expenses.
(3) Transactions with Affiliates
Investment Adviser - The Funds have an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee for Intermediate Investment Grade Bond Fund and Research Bond
Fund is computed daily and paid monthly at an annual rate of 0.50% and 0.60%
of the Fund's average daily net assets, respectively. The investment adviser
has voluntarily agreed to waive its fee, which is shown as a reduction of
total expenses in the Statements of Operations.
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 its average
daily net assets. This is reflected as a reduction of total expenses in the
Statements of Operations.
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 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 charges on the 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 pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Funds' distribution plans provide that the Funds will pay MFD up to 0.35%
per annum of their average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of each of the Funds related to the
distribution and servicing of their shares. These expenses include a service
fee paid to each securities dealer that enters into a sales agreement with MFD
of up to 0.25% per annum of 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 the Funds.
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:
<TABLE>
<CAPTION>
INTERMEDIATE
INVESTMENT GRADE RESEARCH
BOND FUND BOND FUND
----------------------------------------------------------------------------------------------------
<S> <C> <C>
PURCHASES
U.S. government securities $ 492,803 $1,175,005
---------- ----------
Investments (non-U.S. government securities) $1,009,761 $ 909,160
---------- ----------
SALES
U.S. government securities $ 575,412 $1,279,544
---------- ----------
Investments (non-U.S. government securities) $ 869,429 $ 746,391
---------- ----------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Funds, as computed on a federal income tax basis, are
as follows:
<CAPTION>
INTERMEDIATE
INVESTMENT GRADE RESEARCH
BOND FUND BOND FUND
----------------------------------------------------------------------------------------------------
Aggregate cost $1,035,879 $1,023,540
---------- ----------
Gross unrealized depreciation $ (34,204) $ (28,160)
Gross unrealized appreciation 798 3,097
---------- ----------
Net unrealized depreciation $ (33,406) $ (25,063)
========== ==========
</TABLE>
(5) Shares of Beneficial Interest
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
Class A Shares
INTERMEDIATE INVESTMENT GRADE BOND FUND
----------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 PERIOD ENDED APRIL 30, 1999*
------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 106 $ 1,000 100,041 $1,000,410
Shares issued to shareholders in
reinvestment of distributions 7,160 68,207 1,656 16,391
Shares reacquired (1) (6) (21) (204)
----- ------- ------- ----------
Net increase 7,265 $69,201 101,676 $1,016,597
===== ======= ======= ==========
Class I Shares
<CAPTION>
----------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 PERIOD ENDED APRIL 30, 1999*
------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
Shares sold -- $ -- 15 $ 150
Shares issued to shareholders in
reinvestment of distributions+ 0 4 0 2
Shares reacquired -- -- -- --
----- ------- ------- ----------
Net increase 0 $ 4 15 $ 152
===== ======= ======= ==========
Class A Shares
<CAPTION>
RESEARCH BOND FUND
----------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 PERIOD ENDED APRIL 30, 1999*
------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
Shares sold -- $ -- 100,242 $1,002,420
Shares issued to shareholders in
reinvestment of distributions 7,225 67,749 1,747 17,191
Shares reacquired (207) (1,982) (20) (204)
----- ------- ------- ----------
Net increase 7,018 $65,767 101,969 $1,019,407
===== ======= ======= ==========
Class I Shares
<CAPTION>
----------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 PERIOD ENDED APRIL 30, 1999*
------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
Shares sold -- $ -- 15 $ 150
Shares issued to shareholders in
reinvestment of distributions+ 0 4 0 2
Shares reacquired -- -- -- --
----- ------- ------- ----------
Net increase 0 $ 4 15 $ 152
===== ======= ======= ==========
* 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>
(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 borrowings during the year.
(7) Restricted Securities
Each Fund may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At April 30, 2000,
the MFS Research Bond Fund owned the following restricted securities,
excluding securities issued under Rule 144A, constituting 0.9% of net assets
which may not be publicly sold without registration under the Securities Act
of 1933. The Fund does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations
furnished by dealers or by a pricing service, or if not available, in good
faith, at fair value, by the Trustees.
<TABLE>
<CAPTION>
DESCRIPTION DATE OF ACQUISITION SHARE/PAR AMOUNT COST VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Morocco Tranche A, 6.844s, 2009 4/17/2000 10,000 $8,850 $8,925
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Trustees and Shareholders of MFS Series Trust IX:
We have audited the accompanying statements of assets and liabilities,
including the portfolio of investments, of MFS Intermediate Investment Grade
Bond Fund and MFS Research Bond Fund (each a portfolio of MFS Series Trust IX
(the Trust)) as of April 30, 2000, and the related statements of operations
for the year then ended, the statements of changes in net assets and the
financial highlights for the year ends April 30, 2000 and 1999. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at April 30, 2000 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position
of MFS Intermediate Investment Grade Bond Fund and MFS Research Bond Fund at
April 30, 2000,
the results of its operations, the changes in its net assets, and its
financial highlights for the respective stated periods in conformity with
accounting principles generally accepted in the United States
of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 7, 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.
<PAGE>
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND
MFS(R) RESEARCH BOND FUND
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
INC-2B 06/00 1.5M
