<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
MFS(R) BOND FUND
ANNUAL REPORT o APRIL 30, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 22
Notes to Financial Statements ............................................. 29
Independent Auditors' Report .............................................. 38
Trustees and Officers ..................................................... 41
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
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
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(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
[Photo of Geoffrey L. Kurinsky]
Geoffrey L. Kurinsky
For the 12 months ended April 30, 2000, Class A shares of the Fund provided a
total return of -1.51%, Class B shares -2.21%, Class C shares -2.21%, and Class
I shares -1.21%. These returns include 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). 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. During the same period, the average
corporate-debt "BBB"-rated fund tracked by Lipper Inc., an independent firm that
reports mutual fund performance, returned -1.16%.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING THE COURSE OF ITS FISCAL
YEAR?
A. The past year was historically tumultuous for the investment-grade corporate
bond market. Most of the problems were the result of company- specific
issues. We feel that there also has been much less liquidity in the
corporate market over the past few years, a residual effect of the credit
problems that plagued corporate bonds starting in 1998 when Russia
surprisingly defaulted on its debt obligations. Historically, "vulture"
investors on Wall Street provided buyers for the debt of companies that hit
a hard patch, but we believe that hasn't been the case recently. In
addition, we think the high-yield market has experienced net outflows, so
there hasn't been capital available to absorb some of these credit problems
from that traditional source.
The overall credit quality of the corporate market has been deteriorating as
well. While we've seen stock price growth in the technology sector,
companies there have been carrying very little debt. Elsewhere, despite
strong economic growth in the United States, the stocks of many companies --
especially those in cyclical sectors -- have been distressed to the point
where company managements have come under increasing pressure to enhance
value for shareholders. Consequently, we have found that many have issued
more debt to finance mergers and acquisitions or share buyback programs,
which help the shareholder but hurt the bondholder. These kinds of moves we
think have weakened many companies' credit fundamentals and caused a number
of credit downgrades.
The Fund has owned bonds that encountered these kinds of problems. For
example, drugstore chain Rite-Aid suffered difficulties executing its
expansion plans. Protection One Alarm Monitoring suffered as it became
overleveraged as a result of overpaying for new customers only to have those
customers leave for other providers. And oil service company McDermott moved
to put asbestos liability problems behind it by filing for bankruptcy.
Q. WHAT CHANGES DID YOU MAKE TO THE FUND IN RESPONSE TO THIS DIFFICULT
CLIMATE?
A. We increased the overall credit quality of the portfolio. In addition, we
reduced investments in domestic corporate industrial bonds because they
remain vulnerable to weakening credit fundamentals. Instead, we focused on
sectors that are not as prone to the risk that management will issue more
debt to finance leveraged buyouts or share buybacks. That has translated
into increased exposure to sectors like media and telecommunications. For
example, we retained our investment in Time Warner, whose merger with
America Online is creating a powerful conglomerate that we believe should
eventually experience a credit upgrade. We found other opportunities in
British Sky Broadcasting, a satellite network in Europe that we think has
tremendous growth prospects, and Seagram's, which is making a transition
from a spirits company to an entertainment conglomerate. We also invested
about 10% of the Fund in Yankee bonds, which are dollar-denominated bonds
issued in the United States by foreign countries such as Israel, that have
investment-grade credit ratings.
Q. WHICH INVESTMENTS HAVE WORKED OUT WELL FOR THE FUND?
A. A number of our higher-quality junk bonds benefited from crossing over into
investment-grade status, moves that led to significant price appreciation.
For example, Northeast Utilities crossed over into investment-grade
territory upon its purchase by Con Edison. Investments in AT&T Canada and
Comcast Corporation made similar moves. We also benefited from our position
in Cable & Wireless Communications. This U.K. telecommunications and cable
company was split into two companies, forcing management to tender bonds at
very attractive prices. Finally, the credit upgrades enjoyed by emerging
market countries South Korea and Mexico helped the Fund's performance.
Q. WHAT MOVES HAVE YOU MADE IN RESPONSE TO RISING INTEREST RATES?
A. The Federal Reserve Board's program of interest-rate hikes caused short-term
rates to back up significantly, while longer-term rates remained relatively
stable. As a result, the yield curve -- a representation of the difference
between short- and long-term rates -- flattened, then inverted, with
short-term rates actually reaching higher levels than long-term yields.
Fortunately, we structured the portfolio with such an occurrence in mind. We
pursued a barbell strategy by investing some of the Fund on the long end of
the curve, some on the short, and very little in between. As a result, the
Fund was not affected by the sharpest price declines that occurred in the
intermediate part of the yield curve.
As far as the Fund's duration (an indicator of interest-rate sensitivity) is
concerned, we've kept it neutral, not wanting to become either defensive or
aggressive. That said, we've maintained somewhat shorter durations for the
Fund's non-Treasury holdings because those sectors historically have been
more prone to rising yields and declining prices. On the other hand, we've
kept the Fund's Treasury duration longer than neutral in order to try to
benefit from the falling yields of longer-term Treasuries, a result of
increased demand.
Q. YOU HAVE MADE A NEW ALLOCATION TO AGENCY SECURITIES, ABOUT 6% OF PORTFOLIO
ASSETS, THROUGH THE END OF APRIL.
A. Yes, that's right. We typically do not own many agency securities, but
their yields relative to Treasuries have become very attractive for several
reasons. (Principal value and interest on Treasury securities are guaranteed
by the U.S. government if held to maturity.) Among them is the fact that
because of federal budget surpluses, the government plans to buy back some
of its outstanding debt and auction fewer securities going forward. In
contrast, agencies have been very active in issuing new supply. In addition,
increased congressional scrutiny of the agencies caused a scare in the
markets that the agencies may not enjoy their implicit government backing in
the future. However, we feel that these fears are unfounded and that
agencies like the Federal National Mortgage Association (Fannie Mae) should
continue to benefit from the same implied guarantee of their credit. As a
result, we've added a significant stake in 10-year Fannie Mae securities.
Q. WHAT IS YOUR OUTLOOK?
A. The economy remains very strong, so we anticipate that the Fed will keep
raising rates until it sees signs of some sort of slowdown. In this kind of
environment, we think short-term rates should keep rising. At the same time,
long-term rates reflect that the market has a relatively positive outlook
regarding inflation. As it stands now, we feel there appears to be very
little evidence of a protracted struggle against inflation. That opinion is
further strengthened by our discussions with company managements, who say
that they have very little pricing power. For our part, we intend to
continue moving our corporate holdings to those with shorter maturities
because they are less prone to price volatility. At the same time, we
anticipate extending the Treasury duration to try to take advantage of rate
declines that we believe will begin to occur when the economy begins to slow
as a result of the recent interest-rate increases.
/s/ Geoffrey L. Kurinsky
Geoffrey L. Kurinsky
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
His views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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GEOFFREY L. KURINSKY IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R).
HE IS PORTFOLIO MANAGER OF MFS(R) BOND FUND, MFS(R) INSTITUTIONAL CORE FIXED
INCOME FUND, MFS(R) BOND SERIES (PART OF MFS(R) VARIABLE INSURANCE TRUST(SM)),
AND THE BOND SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS. MR.
KURINSKY IS ALSO A PORTFOLIO MANAGER OF MFS(R) TOTAL RETURN FUND, MFS(R) TOTAL
RETURN SERIES (PART OF MFS(R) VARIABLE INSURANCE TRUST(SM)), AND THE TOTAL
RETURN SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS.
HE JOINED THE MFS FIXED INCOME DEPARTMENT IN 1987 AND WAS NAMED PORTFOLIO
MANAGER IN 1989, VICE PRESIDENT IN 1989, AND SENIOR VICE PRESIDENT IN 1993. MR.
KURINSKY IS A GRADUATE OF THE UNIVERSITY OF MASSACHUSETTS AND EARNED AN M.B.A.
DEGREE IN FINANCE FROM BOSTON UNIVERSITY.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
--------------------------------------------------------------------------------
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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your investment professional, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS AS HIGH A LEVEL OF CURRENT INCOME AS IS BELIEVED
TO BE CONSISTENT WITH PRUDENT INVESTMENT RISK. AS A
SECONDARY OBJECTIVE, THE FUND STRIVES TO PROTECT
SHAREHOLDERS' CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: MAY 8, 1974
CLASS INCEPTION: CLASS A MAY 8, 1974
CLASS B SEPTEMBER 7, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $1.1 BILLION NET ASSETS AS OF APRIL 30, 2000
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and 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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended April 30, 2000)
MFS Bond Fund Lehman Brothers Government/
- Class A Corporate Bond Index
------------------------------------------------------
4/90 $ 9,525 $10,000
4/92 12,239 12,721
4/94 14,186 14,732
4/96 16,615 17,114
4/98 20,167 20,332
4/00 20,501 21,815
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH APRIL 30, 2000
<CAPTION>
CLASS A
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -1.51% +13.21% +34.08% +115.24%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -1.51% + 4.22% + 6.04% + 7.97%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -6.19% + 2.55% + 5.01% + 7.44%
--------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -2.21% +10.82% +29.33% +104.86%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -2.21% + 3.48% + 5.28% + 7.44%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -5.89% + 2.61% + 4.97% + 7.44%
--------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -2.21% +10.77% +29.40% +105.68%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -2.21% + 3.47% + 5.29% + 7.48%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -3.13% + 3.47% + 5.29% + 7.48%
--------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -1.21% +14.30% +35.65% +117.75%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -1.21% + 4.56% + 6.29% + 8.09%
--------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES(+)
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average corporate debt "BBB"-rated fund+ -1.16% + 4.58% + 6.40% + 8.33%
--------------------------------------------------------------------------------------------------------------
Lehman Brothers Government/Corporate Bond Index# +0.95% + 6.10% + 6.73% + 8.11%
--------------------------------------------------------------------------------------------------------------
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class B, C, and I share performance include the performance of the Fund's Class
A shares for periods prior to their inception (blended performance). Class B and
C blended performance has been adjusted to take into account the CDSC applicable
to Class B and C shares rather than the initial sales charge (load) applicable
to Class A shares. Class I share blended performance has been adjusted to
account for the fact that Class I shares have no sales charge. These blended
performance figures have not been adjusted to take into account differences in
class-specific operating expenses. Because operating expenses of Class B and C
shares are higher than those of Class A, the blended Class B and C share
performance is higher than it would have been had Class B and C shares been
offered for the entire period. Conversely, because operating expenses of Class I
shares are lower than those of Class A, the blended Class I share performance is
lower than it would have been had Class I shares been offered for the entire
period.
All performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of 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.
PORTFOLIO CONCENTRATION AS OF APRIL 30, 2000
QUALITY RATINGS
Source: Standard & Poor's and Moody's
Governemnts 18.2%
"AAA" 3.1%
"AA" 2.6%
"A" 23.5%
"BBB" 32.3%
"BB" 8.0%
"B" 9.4%
"CCC" 0.5%
"D" 0.1%
Not Rated 0.4%
Other 1.9%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- April 30, 2000
<TABLE>
<CAPTION>
Bonds - 95.8%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 54.1%
Airlines - 3.4%
Airplane Pass-Through Trust, 10.875s, 2019+ $ 1,482 $ 1,243,554
American Airlines Pass-Through Trust, 7.024s, 2009 5,678 5,338,569
Atlas Air, Inc., 7.2s, 2019 4,130 3,648,518
Continental Airlines Pass-Through Trust, Inc.,
6.648s, 2017 1,239 1,107,079
Continental Airlines Pass-Through Trust, Inc.,
6.545s, 2019 7,499 6,646,461
Continental Airlines Pass-Through Trust, Inc.,
7.256s, 2020 3,472 3,200,521
Continental Airlines, Inc., 9.5s, 2013 3,992 3,965,778
Jet Equipment Trust, 8.64s, 2012## 1,884 1,895,934
Jet Equipment Trust, 11.44s, 2014## 3,500 4,006,065
Jet Equipment Trust, 10.69s, 2015## 2,390 2,676,991
Northwest Airlines Pass-Through Trust, 7.575s, 2019 3,564 3,215,188
--------------
$ 36,944,658
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Apparel and Textiles - 0.3%
Hilfiger (Tommy) USA, Inc., 6.5s, 2003 $ 3,465 $ 2,752,665
--------------------------------------------------------------------------------------------------
Automotive - 0.1%
General Motors Corp., 9.4s, 2021 $ 1,000 $ 1,151,590
--------------------------------------------------------------------------------------------------
Banks and Finance - 8.4%
Abbey National Capital Trust I, 8.963s, 2049 $ 10,324 $ 9,998,598
Bank United, 8s, 2009 6,265 5,382,951
Capital One Financial Corp., 7.25s, 2003 15,011 14,633,566
Colonial Capital II, 8.92s, 2027 2,140 1,918,234
Ford Motor Credit Co., 6.7s, 2004 2,352 2,261,966
General Electric Capital Corp., 8.7s, 2007 1,244 1,330,480
GS Escrow Corp., 6.75s, 2001 9,535 9,202,457
MBNA America Bank National Assoc., 6.875s, 2004 10,464 10,004,944
Natexis Ambs Co. LLC, 8.44s, 2049## 8,186 7,495,126
Norwest Financial, Inc., 7.6s, 2005 7,468 7,444,177
Providian Capital I, 9.525s, 2027## 6,389 4,981,376
Riggs National Corp., 9.65s, 2009 4,528 4,448,760
Socgen Real Estate LLC, 7.64s, 2049## 10,868 9,818,803
United Companies Financial Corp., 7.7s, 2004** 1,300 520,000
Washington Mutual Capital I, 8.375s, 2027 3,000 2,697,000
--------------
$ 92,138,438
--------------------------------------------------------------------------------------------------
Building - 0.6%
Building Materials Corp., 8.625s, 2006 $ 1,000 $ 937,500
Building Materials Corp., 8s, 2008 4,135 3,494,075
Nortek, Inc., 9.25s, 2007 2,110 1,967,575
--------------
$ 6,399,150
--------------------------------------------------------------------------------------------------
Chemicals - 0.3%
Lyondell Chemical Co., 9.625s, 2007 $ 3,340 $ 3,281,550
Lyondell Chemical Co., 9.875s, 2007 402 394,965
--------------
$ 3,676,515
--------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.8%
Anacomp, Inc., 10.875s, 2004 $ 4,650 $ 4,185,000
Seagate Technology, Inc., 7.45s, 2037 6,525 5,164,015
--------------
$ 9,349,015
--------------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.0%
Hasbro, Inc., 7.95s, 2003 $ 5,356 $ 5,329,863
Kindercare Learning Centers, Inc., 9.5s, 2009 3,450 3,148,125
Nabisco Holdings, 6.375s, 2035 2,270 1,952,926
Revlon Consumer Products Corp., 8.125s, 2006 1,170 836,550
--------------
$ 11,267,464
--------------------------------------------------------------------------------------------------
Corporate Asset Backed - 4.2%
Amresco Residential Securities Mortgage Loan,
5.94s, 2015 $ 6,098 $ 5,995,096
BCF LLC, 7.75s, 2026## 1,501 814,004
Commerce 2000 FL1, 7.41s, 2002## 3,190 3,162,247
Commercial Mortgage Asset Trust, 7.839s, 2020
(Interest only) 183,215 5,983,105
Contimortgage Home Equity Loan Trust, 6.19s, 2014 9,750 9,545,835
Criimi Mae Commercial Mortgage Trust, 7s, 2011 2,700 2,309,766
Ford Credit Auto Owner Trust, 7.5s, 2003## 1,890 1,843,341
Merrill Lynch Mortgage Investors, Inc., 8.437s,
2022+ 2,000 1,897,187
Morgan Stanley Capital I, 6.86s, 2010 6,327 4,950,877
Morgan Stanley Capital I, 7.781s, 2010 7,510 5,493,157
Morgan Stanley Capital I, 6.01s, 2030 4,833 4,546,871
--------------
$ 46,541,486
--------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.7%
Coca Cola Bottling Co., 6.375s, 2009 $ 8,346 $ 7,255,261
--------------------------------------------------------------------------------------------------
Forest and Paper Products - 3.0%
Gaylord Container Corp., 9.75s, 2007 $ 5,000 $ 4,612,500
Georgia Pacific Corp., 9.95s, 2002 8,738 9,087,957
Georgia Pacific Corp., 9.875s, 2021 14,278 14,944,925
Georgia Pacific Corp., 9.5s, 2022 250 259,263
Riverwood International Corp., 10.25s, 2006 2,000 1,950,000
U.S. Timberlands, 9.625s, 2007 2,000 1,760,000
--------------
$ 32,614,645
--------------------------------------------------------------------------------------------------
Insurance - 1.6%
Aflac, Inc., 6.5s, 2009 $ 10,000 $ 8,914,700
Atlantic Mutual Insurance Co., 8.15s, 2028## 4,864 3,806,956
The Mony Group, Inc., 8.35s, 2010 4,679 4,637,544
--------------
$ 17,359,200
--------------------------------------------------------------------------------------------------
Internet - 0.2%
PSINET, Inc., 11s, 2009 $ 2,340 $ 2,059,200
--------------------------------------------------------------------------------------------------
Media/Entertainment - 6.7%
Belo AH Corp., 7.75s, 2027 $ 3,321 $ 3,055,121
Chancellor Media Corp., 8.75s, 2007 1,500 1,496,250
Comcast Corp., 9.125s, 2006 2,811 2,911,493
Frontiervision Operating Partnership LP, 11s, 2006 2,110 2,152,200
Granite Broadcasting Corp., 8.875s, 2008 4,000 3,450,000
Harrahs Operating, Inc., 7.5s, 2009 17,153 15,881,105
Hearst Argyle Television, Inc., 7.5s, 2027 8,923 8,057,023
J Seagram & Sons, Inc., 7.5s, 2018 6,496 5,972,292
J Seagram & Sons, Inc., 7.6s, 2028 2,790 2,532,483
Liberty Media Group, 8.25s, 2030## 8,206 7,849,531
News America Holdings, Inc., 6.625s, 2008 4,498 4,068,171
News America Holdings, Inc., 10.125s, 2012 740 771,125
Outdoor Systems, Inc., 8.875s, 2007 1,500 1,451,490
Time Warner Entertainment Co., 8.375s, 2033 10,040 10,225,740
Time Warner, Inc., 10.15s, 2012 3,472 3,973,808
Time Warner, Inc., 8.375s, 2023 90 91,507
--------------
$ 73,939,339
--------------------------------------------------------------------------------------------------
Oil Services - 1.7%
McDermott, Inc., 9.375s, 2002 $ 10,778 $ 9,175,527
Occidental Petroleum Corp., 6.75s, 2002 3,771 3,659,077
Occidental Petroleum Corp., 6.4s, 2003 4,037 3,887,227
Ultramar Diamond Shamrock Corp., 7.2s, 2017 2,550 2,228,139
--------------
$ 18,949,970
--------------------------------------------------------------------------------------------------
Oils - 1.3%
Apache Corp., 7.95s, 2026 $ 9,480 $ 8,974,337
P&L Coal Holdings Corp., 9.625s, 2008 4,000 3,590,000
Pioneer Natural Resources Co., 9.625s, 2010 1,635 1,653,393
--------------
$ 14,217,730
--------------------------------------------------------------------------------------------------
Railroads - 0.2%
Union Pacific Corp., 6.34s, 2003 $ 2,746 $ 2,601,451
--------------------------------------------------------------------------------------------------
Retail - 1.4%
J. Crew Operating Corp., 10.375s, 2007 $ 4,310 $ 3,803,575
Jitney-Jungle Stores of America, Inc., 12s, 2006** 2,330 512,600
Kohls Corp., 7.25s, 2029 7,657 6,932,648
Musicland Group, Inc., 9s, 2003 5,000 4,481,250
--------------
$ 15,730,073
--------------------------------------------------------------------------------------------------
Steel - 0.7%
AK Steel Holdings Corp., 9.125s, 2006 $ 1,000 $ 980,000
USX Corp., 6.65s, 2006 7,905 7,248,332
--------------
$ 8,228,332
--------------------------------------------------------------------------------------------------
Supermarkets - 0.1%
Marsh Supermarkets, Inc., 8.875s, 2007 $ 1,410 $ 1,311,300
--------------------------------------------------------------------------------------------------
Telecommunications - 5.2%
Bellsouth Capital Funding Corp., 7.75s, 2010 $ 1,387 $ 1,386,695
Century Communications Corp., 0s, 2008 5,000 2,075,000
Charter Communications Holdings LLC, 8.25s, 2007 6,250 5,593,750
ITC Deltacom, Inc., 9.75s, 2008 5,000 4,850,000
Nextel Communications, 9.375s, 2009 5,000 4,737,500
Nextel International, Inc. 0s to 2003, 12.125s to
2008 2,000 1,240,000
Nextlink Communications, Inc., 10.75s, 2009 5,000 4,900,000
NTL Communications Corp. 0s to 2003, 12.375s to
2008 5,000 3,275,000
Sprint Spectrum LP, 11s, 2006 2,515 2,707,598
TCI Communications Financing III, 9.65s, 2027 8,590 9,863,038
Telecom de Puerto Rico, 6.65s, 2006 2,794 2,633,306
Telecom de Puerto Rico, 6.8s, 2009 6,622 6,088,770
WorldCom, Inc., 8.875s, 2006 7,920 8,234,741
--------------
$ 57,585,398
--------------------------------------------------------------------------------------------------
Utilities - Electric - 9.9%
Beaver Valley Funding Corp. II, 9s, 2017 $ 2,708 $ 2,723,057
CalEnergy Co., Inc., 7.23s, 2005 10 9,562
CE Generation LLC, 7.416s, 2018 4,807 4,319,330
Cleveland Electric Illuminating Co., 9s, 2023 7,252 7,350,265
CMS Energy Corp., 8.375s, 2003 4,720 4,509,025
CMS Energy Corp., 6.75s, 2004 4,782 4,518,990
CMS Energy Corp., 7.5s, 2009 8,415 7,316,321
Commonwealth Edison Co., 8.5s, 2022 1,853 1,832,580
Connecticut Light & Power Co., 7.875s, 2001 772 770,896
Connecticut Light & Power Co., 8.59s, 2003 4,000 3,945,760
Connecticut Light & Power Co., 7.875s, 2024 2,377 2,374,100
El Paso Electric Co., 8.9s, 2006 5,475 5,593,479
Entergy Mississippi, Inc., 6.2s, 2004 1,307 1,229,743
GGIB Funding Corp., 7.43s, 2011 3,699 3,449,528
Gulf States Utilities, 8.21s, 2002 10,575 10,661,715
Gulf States Utilities, 8.25s, 2004 658 655,769
Long Island Lighting Co., 8.2s, 2023 2,795 2,654,160
Midland Funding Corp., 10.33s, 2002 12,004 12,272,714
Niagara Mohawk Power Corp., 8.75s, 2022 825 828,094
Niagara Mohawk Power Corp., 8.5s, 2023 351 345,356
Northeast Utilities, 8.38s, 2005 3,327 3,299,093
Northeast Utilities, 8.58s, 2006 2,664 2,658,623
NRG Energy, Inc., 8.7s, 2005## 2,430 2,384,182
NRG Energy, Inc., 8.962s, 2016 3,352 3,339,430
RGS Aegco Funding Corp., 9.81s, 2022 3,548 3,993,806
Salton Sea Funding Corp., 6.69s, 2000 318 318,561
Salton Sea Funding Corp., 7.37s, 2005 2,093 2,019,033
Salton Sea Funding Corp., 7.84s, 2010 3,925 3,787,900
Salton Sea Funding Corp., 8.3s, 2011 1,221 1,206,377
Utilicorp United, Inc., 7s, 2004 1,696 1,606,027
Waterford 3 Funding Corp., 8.09s, 2017 7,188 6,665,881
--------------
$ 108,639,357
--------------------------------------------------------------------------------------------------
Utilities - Gas - 2.3%
Northern Natural Gas, 7s, 2011## $ 14,124 $ 13,171,478
Tennessee Gas Pipeline Co., 7.625s, 2037 2,600 2,343,926
Texas Gas Transmission Corp., 7.25s, 2027 10,265 9,330,464
--------------
$ 24,845,868
--------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 595,558,105
--------------------------------------------------------------------------------------------------
Foreign Bonds - 23.8%
Argentina - 1.2%
Republic of Argentina, 0s, 2001 $ 13,947 $ 12,831,240
--------------------------------------------------------------------------------------------------
Australia - 1.4%
Cable & Wireless Optus Ltd., 8.125s, 2009
(Telecommunications)## $ 15,100 $ 15,148,320
--------------------------------------------------------------------------------------------------
Bermuda - 0.6%
Global Crossing Holdings Ltd., 9.625s, 2008
(Telecommunications) $ 6,808 $ 6,671,840
--------------------------------------------------------------------------------------------------
Brazil - 1.0%
Banco Nacional De Desenvolvi, 12.693s, 2008
(Banks and Finance)+ $ 1,865 $ 1,676,262
Federal Republic of Brazil, 7.439s, 2009 190 155,563
Federal Republic of Brazil, 8s, 2014 1,779 1,273,898
Federal Republic of Brazil, 12.75s, 2020 1,925 1,845,112
Federal Republic of Brazil, 7.375s, 2024 2,800 2,124,500
Federal Republic of Brazil, 10.125s, 2027 1,763 1,375,140
Federal Republic of Brazil, 12.25s, 2030 3,430 3,138,450
--------------
$ 11,588,925
--------------------------------------------------------------------------------------------------
Canada - 1.2%
AT&T Canada 0s to 2003, 9.95s to 2008
(Telecommunications) $ 5,520 $ 4,404,849
AT&T Canada, 12s, 2007 (Telecommunications) 2,401 2,698,124
Shaw Communications, Inc., 8.25s, 2010
(Media/Entertainment) 6,535 6,370,449
--------------
$ 13,473,422
--------------------------------------------------------------------------------------------------
Chile - 2.7%
Empresa Electric Guacolda S.A., 7.6s, 2001
(Utilities - Electric)## $ 6,500 $ 6,337,370
Empresa Nacional de Electric, 7.75s, 2008
(Utilities - Electric) 9,386 8,618,291
Empresa Nacional de Electric, 8.5s, 2009
(Utilities - Electric)## 4,690 4,527,768
Empresa Nacional de Electric, 7.325s, 2037
(Utilities - Electric) 2,365 2,130,179
Enersis S.A., 7.4s, 2016 (Utilities - Electric) 9,289 8,057,743
--------------
$ 29,671,351
--------------------------------------------------------------------------------------------------
Israel - 2.1%
State of Israel, 7.75s, 2010 $ 23,368 $ 22,812,963
--------------------------------------------------------------------------------------------------
Luxembourg - 0.3%
Millicom Intl Cellular Corp. 0s to 2001, 13.5s to
2006 (Telecommunications) $ 3,600 $ 3,042,000
--------------------------------------------------------------------------------------------------
Mexico - 2.6%
Nuevo Grupo Iusacell S.A., 14.25s, 2006
(Telecommunications)## $ 2,500 $ 2,612,500
Pemex Finance Ltd., 9.69s, 2009 (Banks and Finance) 3,000 3,184,200
Pemex Finance Ltd., 10.61s, 2017 (Banks and
Finance) 3,500 3,992,450
United Mexican States, 9.875s, 2010 9,356 9,664,748
United Mexican States, 11.375s, 2016 695 786,219
United Mexican States, 11.5s, 2026 7,013 8,275,340
--------------
$ 28,515,457
--------------------------------------------------------------------------------------------------
Morocco - 0.3%
Kingdom of Morocco, 6.844s, 2009+ $ 3,730 $ 3,329,025
--------------------------------------------------------------------------------------------------
Netherlands - 0.6%
Hermes Europe Railtel BV, 10.375s, 2009
(Telecommunications) $ 6,860 $ 6,311,200
--------------------------------------------------------------------------------------------------
Norway - 0.9%
Union Bank Norway, 7.35s, 2049 (Banks and
Finance)## $ 10,000 $ 9,621,700
--------------------------------------------------------------------------------------------------
Poland - 0.2%
Netia Holdings BV 0s to 2001, 11.25s to 2007
(Consumer Goods and Services) $ 700 $ 493,500
Netia Holdings BV, 10.25s, 2007 (Consumer Goods and
Services) 2,260 1,904,050
--------------
$ 2,397,550
--------------------------------------------------------------------------------------------------
South Africa - 0.7%
Republic of South Africa, 9.125s, 2009 $ 8,405 $ 8,089,812
--------------------------------------------------------------------------------------------------
South Korea - 2.0%
Cho Hung Bank, 11.5s, 2010 (Banks and Finance)## $ 2,720 $ 2,665,600
Export-Import Bank Korea, 7.1s, 2007 (Banks and
Finance) 11,151 10,999,335
Hanvit Bank, 12.75s, 2010 (Banks and Finance)## 4,300 4,343,000
Korea Development Bank, 6.625s, 2003 (Banks and
Finance) 4,988 4,728,624
--------------
$ 22,736,559
--------------------------------------------------------------------------------------------------
Sweden - 1.1%
AB Spintab, 6.8s, 2049 (Banks and Finance)## $ 12,536 $ 12,001,490
--------------------------------------------------------------------------------------------------
Turkey - 0.3%
Republic of Turkey, 11.875s, 2030 $ 3,110 $ 3,362,688
--------------------------------------------------------------------------------------------------
United Kingdom - 4.6%
British Sky Broadcasting Group, 6.875s, 2009
(Telecommunications) $ 20,946 $ 18,539,095
Cable & Wireless Communications, 6.75s, 2008
(Telecommunications) 27,459 27,470,626
Colt Telecom Group PLC, 7.625s, 2008
(Telecommunications) DEM 3,400 1,508,862
Telewest PLC, 9.625s, 2006 (Media/Entertainment) $ 3,850 3,724,875
--------------
$ 51,243,458
--------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 262,849,000
--------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 5.4%
Federal Home Loan Pc, 9.5s, 2001 $ 8
$ 1 28
Federal National Mortgage Association, 7.25s, 2010 59,681 59,503,747
--------------------------------------------------------------------------------------------------
Total U.S. Federal Agencies $ 59,504,575
--------------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 12.5%
Government National Mortgage Association - 5.5%
GNMA, 7.5s, 2023 - 2025 $ 2,740 $ 2,700,240
GNMA, 8s, 2025 4,479 4,462,277
GNMA, 7.5s, 2026 4,390 4,320,163
GNMA, 8s, 2026 6,129 6,145,002
GNMA, 7.5s, 2027 15,120 14,880,820
GNMA, 7s, 2028 211 203,285
GNMA, 7.5s, 2028 379 373,333
GNMA, 6.5s, 2029 12,416 11,632,621
GNMA, 8s, 2029 16,159 16,201,172
--------------
$ 60,918,913
--------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 7.0%
U.S. Treasury Bonds, 6.125s, 2029 $ 39,898 $ 39,991,361
U.S. Treasury Bonds, 6.25s, 2030 17,591 18,283,558
U.S. Treasury Notes, 4.25s, 2010*** 1,966 2,007,485
U.S. Treasury Notes, 6.5s, 2010 15,959 16,275,626
--------------
$ 76,558,030
--------------------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 137,476,943
--------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,105,524,280) $1,055,388,623
--------------------------------------------------------------------------------------------------
Preferred Stock - 0.3%
--------------------------------------------------------------------------------------------------
SHARES
--------------------------------------------------------------------------------------------------
Media - 0.1%
Primedia, Inc., 8.625% 13,250 $ 1,219,000
--------------------------------------------------------------------------------------------------
Printing and Publishing - 0.2%
NB Capital Corp., 8.35% 100,741 $ 2,247,784
--------------------------------------------------------------------------------------------------
Total Preferred Stock (Identified Cost, $3,830,275) $ 3,466,784
--------------------------------------------------------------------------------------------------
Call Options Purchased
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
--------------------------------------------------------------------------------------------------
Euro/July/1.07 (Premiums Paid, $2,150,000) $ 107,000 $ 1,712
--------------------------------------------------------------------------------------------------
Repurchase Agreement - 2.1%
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED)
--------------------------------------------------------------------------------------------------
Goldman Sachs, dated 4/28/00, due 5/1/00, total to
be received $23,336,138 (secured by various U.S.
Treasury and Federal Agency obligations in a
jointly traded account), at Cost $ 23,325 $ 23,325,000
--------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,134,829,555) $1,082,182,119
--------------------------------------------------------------------------------------------------
Put Options Written
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
--------------------------------------------------------------------------------------------------
Euro/July/1.14 (Premiums Received, $710,000) EUR 114,000 $ 0
--------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.8% 19,342,297
--------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,101,524,416
--------------------------------------------------------------------------------------------------
** Non-income producing security, in default.
*** Securities held as futures collateral.
## SEC Rule 144A restriction.
+ Restricted security.
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
DEM = Deutsche Marks EUR = Euro
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
APRIL 30, 2000
------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,134,829,555) $1,082,182,119
Cash 123,622
Net receivable for forward foreign currency exchange
contracts to sell 108,421
Receivable for daily variation margin on open futures
contracts 171,875
Receivable for Fund shares sold 4,676,108
Receivable for investments sold 12,475,880
Interest receivable 22,652,530
Other assets 23,119
--------------
Total assets $1,122,413,674
--------------
Liabilities:
Payable for Fund shares reacquired $ 1,849,542
Payable for investments purchased 18,565,634
Written options outstanding, at value (premiums
received, $710,000) 0
Payable to affiliates -
Management fee 36,844
Shareholder servicing agent fee 9,062
Distribution and service fee 47,483
Administrative fee 1,586
Accrued expenses and other liabilities 379,107
--------------
Total liabilities $ 20,889,258
--------------
Net assets $1,101,524,416
==============
Net assets consist of:
Paid-in capital $1,231,002,447
Unrealized depreciation on investments and translation
of assets and liabilities in foreign currencies (51,050,222)
Accumulated net realized loss on investments and
foreign currency transactions (81,346,776)
Accumulated undistributed net investment income 2,918,967
--------------
Total $1,101,524,416
==============
Shares of beneficial interest outstanding 91,737,464
==========
Class A shares:
Net asset value per share
(net assets of $738,935,524 / 61,473,435 shares of
beneficial interest outstanding) $12.02
======
Offering price per share (100 / 95.25 of net asset
value per share) $12.62
======
Class B shares:
Net asset value and offering price per share
(net assets of $278,029,511 / 23,204,002 shares of
beneficial interest outstanding) $11.98
======
Class C shares:
Net asset value and offering price per share
(net assets of $77,686,790 / 6,488,575 shares of
beneficial interest outstanding) $11.97
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $6,872,591 / 571,452 shares of
beneficial interest outstanding) $12.03
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
-------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2000
-------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 93,563,751
Dividends 448,291
-------------
Total investment income $ 94,012,042
-------------
Expenses -
Management fee $ 4,643,773
Trustees' compensation 61,784
Shareholder servicing agent fee 1,200,914
Distribution and service fee (Class A) 2,420,861
Distribution and service fee (Class B) 2,979,298
Distribution and service fee (Class C) 876,275
Administrative fee 153,316
Custodian fee 312,213
Postage 158,109
Printing 105,407
Auditing fees 39,824
Legal fees 5,176
Miscellaneous 733,293
-------------
Total expenses $ 13,690,243
Fees paid indirectly (196,973)
-------------
Net expenses $ 13,493,270
-------------
Net investment income $ 80,518,772
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (58,984,533)
Written option transactions 191,520
Futures contracts 1,758,470
Foreign currency transactions 1,036,817
-------------
Net realized loss on investments and foreign
currency transactions $ (55,997,726)
-------------
Change in unrealized appreciation (depreciation) -
Investments $ (48,837,106)
Written options 544,688
Futures contracts 1,274,567
Translation of assets and liabilities in foreign
currencies (347,284)
-------------
Net unrealized loss on investments and foreign
currency translation $ (47,365,135)
-------------
Net realized and unrealized loss on investments
and foreign currency $(103,362,861)
-------------
Decrease in net assets from operations $ (22,844,089)
=============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 80,518,772 $ 72,237,750
Net realized loss on investments and foreign
currency transactions (55,997,726) (23,260,488)
Net unrealized loss on investments and foreign
currency translation (47,365,135) (15,750,017)
--------------- ---------------
Increase (decrease) in net assets from operations $ (22,844,089) $ 33,227,245
--------------- ---------------
Distributions declared to shareholders -
From net investment income (Class A) $ (55,462,421) $ (52,172,585)
From net investment income (Class B) (18,448,336) (14,082,874)
From net investment income (Class C) (5,453,077) (3,813,225)
From net investment income (Class I) (601,364) (641,314)
From net realized gain on investments and foreign
currency transactions (Class A) -- (1,754,351)
From net realized gain on investments and foreign
currency transactions (Class B) -- (563,728)
From net realized gain on investments and foreign
currency transactions (Class C) -- (160,932)
From net realized gain on investments and foreign
currency transactions (Class I) -- (20,261)
In excess of net realized gain on investments and
foreign currency transactions (Class A) -- (831,643)
In excess of net realized gain on investments and
foreign currency transactions (Class B) -- (267,233)
Inexcess of net realized gain on investments and
foreign currency transactions (Class C) -- (76,289)
Inexcess of net realized gain on investments and
foreign currency transactions (Class I) -- (9,605)
--------------- ---------------
Total distributions declared to shareholders $ (79,965,198) $ (74,394,040)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions $ (59,006,164) $ 357,103,160
--------------- ---------------
Total increase (decrease) in net assets $ (161,815,451) $ 315,936,365
Net assets:
At beginning of period 1,263,339,867 947,403,502
--------------- ---------------
At end of period (including undistributed net
investment income of $2,918,967 and $1,772,773,
respectively) $ 1,101,524,416 $ 1,263,339,867
=============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $13.08 $13.57 $13.04 $12.85 $12.71
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.87 $ 0.88 $ 0.89 $ 0.94 $ 0.95
Net realized and unrealized gain (loss)
on investments and foreign currency (1.07) (0.46) 0.55 0.18 0.15
------ ------ ------ ------ ------
Total from investment operations $(0.20) $ 0.42 $ 1.44 $ 1.12 $ 1.10
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.86) $(0.87) $(0.91) $(0.93) $(0.94)
From net realized gain on investments
and foreign currency transactions -- (0.03) -- -- --
In excess of net investment income+++ -- -- (0.00) -- --
In excess of net realized gain on
investments and foreign currency
transactions -- (0.01) -- -- --
From paid-in capital -- -- -- -- (0.02)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.86) $(0.91) $(0.91) $(0.93) $(0.96)
------ ------ ------ ------ ------
Net asset value - end of period $12.02 $13.08 $13.57 $13.04 $12.85
====== ====== ====== ====== ======
Total return(+) (1.51)% 3.22% 11.36% 8.99% 8.67%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.92% 0.96% 0.98% 1.02% 1.00%
Net investment income 6.97% 6.61% 6.61% 7.12% 7.10%
Portfolio turnover 290% 343% 333% 446% 377%
Net assets at end of period (000 omitted) $738,936 $866,388 $708,021 $541,710 $514,892
(+) 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.
+++ For the year ended April 30, 1998, the per share distribution in excess of net investment income was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
CLASS B
-----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $13.04 $13.52 $12.99 $12.79 $12.69
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.78 $ 0.78 $ 0.79 $ 0.83 $ 0.85
Net realized and unrealized gain (loss)
on investments and foreign currency (1.07) (0.45) 0.54 0.19 0.13
------ ------ ------ ------ ------
Total from investment operations $(0.29) $ 0.33 $ 1.33 $ 1.02 $ 0.98
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.77) $(0.77) $(0.80) $(0.82) $(0.85)
From net realized gain on investments
and foreign currency transactions -- (0.03) -- -- --
In excess of net investment income+++ -- -- (0.00) -- (0.01)
In excess of net realized gain on
investments and foreign currency
transactions -- (0.01) -- -- --
From paid-in capital -- -- -- -- (0.02)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.77) $(0.81) $(0.80) $(0.82) $(0.88)
------ ------ ------ ------ ------
Net asset value - end of period $11.98 $13.04 $13.52 $12.99 $12.79
====== ====== ====== ====== ======
Total return (2.21)% 2.54% 10.52% 8.16% 7.90%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.62% 1.66% 1.68% 1.76% 1.81%
Net investment income 6.27% 5.92% 5.90% 6.39% 6.29%
Portfolio turnover 290% 343% 333% 446% 377%
Net assets at end of period (000 omitted) $278,030 $299,523 $187,905 $123,000 $102,914
+++ For the year ended April 30, 1998, the per share distribution in excess of net investment income was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
CLASS C
-----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $13.03 $13.52 $12.98 $12.79 $12.68
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.78 $ 0.78 $ 0.78 $ 0.83 $ 0.85
Net realized and unrealized gain (loss)
on investments and foreign currency (1.07) (0.46) 0.56 0.20 0.15
------ ------ ------ ------ ------
Total from investment operations $(0.29) $ 0.32 $ 1.34 $ 1.03 $ 1.00
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.77) $(0.77) $(0.80) $(0.84) $(0.85)
From net realized gain on investments
and foreign currency transactions -- (0.03) -- -- --
In excess of net investment income+++ -- -- (0.00) -- (0.02)
In excess of net realized gain on
investments and foreign currency
transactions -- (0.01) -- -- --
From paid-in capital -- -- -- -- (0.02)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.77) $(0.81) $(0.80) $(0.84) $(0.89)
------ ------ ------ ------ ------
Net asset value - end of period $11.97 $13.03 $13.52 $12.98 $12.79
====== ====== ====== ====== ======
Total return (2.21)% 2.48% 10.54% 8.27% 7.90%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.62% 1.66% 1.68% 1.74% 1.74%
Net investment income 6.27% 5.92% 5.89% 6.44% 6.35%
Portfolio turnover 290% 343% 333% 446% 377%
Net assets at end of period (000 omitted) $77,687 $88,173 $42,229 $20,003 $17,330
+++ For the year ended April 30, 1998, the per share distribution in excess of net investment income was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
-------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2000 1999 1998 1997*
-------------------------------------------------------------------------------------------------------------------------
CLASS I
-------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $13.09 $13.58 $13.05 $13.15
------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.91 $ 0.92 $ 0.94 $ 0.31
Net realized and unrealized gain (loss) on
investments and foreign currency (1.08) (0.45) 0.55 (0.09)
------ ------ ------ ------
Total from investment operations $(0.17) $ 0.47 $ 1.49 $ 0.22
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.89) $(0.92) $(0.96) $(0.32)
From net realized gain on investments and
foreign currency transactions -- (0.03) -- --
In excess of net investment income+++ -- -- (0.00) --
In excess of net realized gain on investments
and foreign currency transactions -- (0.01) -- --
------ ------ ------ ------
Total distributions declared to shareholders $(0.89) $(0.96) $(0.96) $(0.32)
------ ------ ------ ------
Net asset value - end of period $12.03 $13.09 $13.58 $13.05
====== ====== ====== ======
Total return (1.21)% 3.56% 11.72% 1.70%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.62% 0.65% 0.68% 0.69%+
Net investment income 7.26% 6.90% 6.95% 7.19%+
Portfolio turnover 290% 343% 333% 446%
Net assets at end of period (000 omitted) $6,873 $9,256 $9,249 $9,593
* For the period from the inception of Class I, January 2, 1997, through April 30, 1997.
+ Annualized.
++ Not annualized.
+++ For the year ended April 30, 1998, the per share distribution in excess of net investment income was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Bond Fund (the Fund) is a diversified series of MFS Series Trust IX (the
Trust). The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The Fund 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 and forward contracts are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data, without exclusive reliance upon
exchange or over-the-counter prices. 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. Futures
contracts and options listed on commodities exchanges are reported at market
value using closing settlement prices. Over-the-counter options on securities
are valued by brokers. Over- the-counter currency options are valued through the
use of a pricing model which takes into account foreign currency exchange spot
and forward rates, implied volatility, and short-term repurchase rates.
Securities for which there are no such quotations or valuations are valued in
good faith, at fair value, by the Trustees.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Fund requires that the
securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Fund to obtain those securities
in the event of a default under the repurchase agreement. The Fund monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the Fund under each such
repurchase agreement. The Fund, along with other affiliated entities of
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - The Fund may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the option contract. When a written option
expires, the Fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as part of an income producing strategy reflecting the view of the
Fund's management on the direction of interest rates.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit with the broker either in cash or securities an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the value
of the contract, and are recorded for financial statement purposes as unrealized
gains or losses by the Fund. The Fund's investment in futures contracts is
designed to hedge against anticipated future changes in interest or exchange
rates or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio without
incurring the additional transaction costs involved in buying and selling the
underlying securities. Investments in currency futures for purposes other than
hedging may be made to change the Fund's relative position in one or more
currencies without buying and selling portfolio assets. Investments in equity
index contracts or contracts on related options for purposes other than hedging,
may be made when the Fund has cash on hand and wishes to participate in
anticipated market appreciation while the cash is being invested. Should
interest or exchange rates or securities prices move unexpectedly, the Fund may
not achieve the anticipated benefits of the futures contracts and may realize a
loss.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All 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. The Fund uses the effective
interest method for reporting interest income on payment-in-kind (PIK) bonds.
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.
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 - The Fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of total expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its 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 Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits 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, $592,620 and $12,857 were reclassified from
accumulated net realized loss on investments and foreign currency transactions
to accumulated undistributed net investment income and paid-in capital,
respectively due to differences between book and tax accounting for
mortgage-backed securities and foreign currency transactions. This change had no
effect on the net assets or net asset value per share. At April 30, 2000,
accumulated undistributed net investment income and accumulated net realized
loss on investments and foreign currency transactions under book accounting were
different from tax accounting due to temporary differences in accounting for
capital losses and foreign currency transactions.
At April 30, 2000, the Fund, for federal income tax purposes, had a capital loss
carryforward of $(54,141,199) 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, 2007, $(12,839,198) and April 30, 2008, $(41,302,001).
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders 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. Class B shares will
convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at the following annual
rates:
BASED ON AVERAGE NET ASSETS BASED ON GROSS INCOME
---------------------------------------- ------------------------------------
First $200 million 0.225% First $20 million 2.75%
In excess of $200 million 0.191% In excess of $20 million 2.34%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees. Included in Trustees' compensation is a net
periodic pension expense of $21,226 for the year ended April 30, 2000.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund incurs an administrative fee at
the following annual percentages of the 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, received
$271,587 for the year ended April 30, 2000, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer (reduced to a maximum of 0.15%
per annum for the Fund shares sold prior to March 1, 1991) and a distribution
fee to MFD of up to 0.10% per annum of the Fund's average daily net assets
attributable to Class A shares. The Fund is currently paying distribution fees
in the amount of 0.05%. Payment of the remaining portion of the 0.10% per annum
will commence on such date as the Trustees of the Fund may determine. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $314,958 for the year ended April 30, 2000. Fees incurred
under the distribution plan during the year ended April 30, 2000, were 0.30% of
average daily net assets attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be consideration for services
rendered by the dealer with respect to Class B and Class C shares. MFD retains
the service fee for accounts not attributable to a securities dealer, which
amounted to $61,361 and $65,496 for Class B and Class C shares, respectively,
for the year ended April 30, 2000. Fees incurred under the distribution plan
during the year ended April 30, 2000, were 1.00% of average daily net assets
attributable to Class B and Class C shares, respectively, on an annualized
basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended April 30, 2000,
were $50,187, $809,023, and $51,118 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
PURCHASES SALES
------------------------------------------------------------------------------
U.S. government securities $1,676,671,973 $1,763,903,107
-------------- --------------
Investments (non-U.S. government securities) $1,685,506,183 $1,711,674,819
-------------- --------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $1,137,858,054
--------------
Gross unrealized depreciation $ (57,831,909)
Gross unrealized appreciation 2,155,974
--------------
Net unrealized depreciation $ (55,675,935)
=============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED APRIL 30, 2000 YEAR ENDED APRIL 30, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 27,601,486 $ 342,146,564 40,031,279 $ 531,351,372
Shares issued to shareholders
in reinvestment of
distributions 3,564,990 44,004,826 3,078,680 40,904,085
Shares reacquired (35,927,244) (444,307,562) (29,066,686) (384,382,947)
------------- ------------- ------------- -------------
Net increase (decrease) (4,760,768) $ (58,156,172) 14,043,273 $ 187,872,510
============= ============= ============= =============
<CAPTION>
Class B Shares
YEAR ENDED APRIL 30, 2000 YEAR ENDED APRIL 30, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,392,944 $ 103,939,608 15,199,199 $ 201,584,950
Shares issued to shareholders
in reinvestment of
distributions 1,052,675 12,949,701 766,154 10,143,630
Shares reacquired (9,207,578) (113,130,256) (6,895,533) (91,242,870)
------------- ------------- ------------- -------------
Net increase 238,041 $ 3,759,053 9,069,820 $ 120,485,710
============= ============= ============= =============
<CAPTION>
Class C Shares
YEAR ENDED APRIL 30, 2000 YEAR ENDED APRIL 30, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,423,107 $ 42,297,657 5,221,069 $ 69,212,937
Shares issued to shareholders
in reinvestment of
distributions 259,041 3,185,142 173,891 2,299,453
Shares reacquired (3,958,803) (48,445,961) (1,753,984) (23,115,757)
------------- ------------- ------------- -------------
Net increase (decrease) (276,655) $ (2,963,162) 3,640,976 $ 48,396,633
============= ============= ============= =============
<CAPTION>
Class I Shares
YEAR ENDED APRIL 30, 2000 YEAR ENDED APRIL 30, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 323,783 $ 3,976,631 24,684 $ 329,363
Shares issued to shareholders
in reinvestment of
distributions 47,733 589,946 50,434 671,204
Shares reacquired (507,284) (6,212,460) (49,100) (652,260)
------------- ------------- ------------- -------------
Net increase (decrease) (135,768) $ (1,645,883) 26,018 $ 348,307
============= ============= ============= =============
</TABLE>
(6) Line of Credit
The Fund 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 commitment fee allocated to the Fund for the year ended April 30,
2000, was $7,678. The Fund had no borrowings during the year.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange
contracts, and futures contracts. The notional or contractual amounts of these
instruments represent the investment the Fund has in particular classes of
financial instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these instruments
is meaningful only when all related and offsetting transactions are considered.
Written Option Transactions
NUMBER OF
CONTRACTS PREMIUMS
------------------------------------------------------------------------------
OUTSTANDING, BEGINNING OF PERIOD 1 $ 191,520
Options written 1 710,000
Options expired (1) (191,520)
- ---------
OUTSTANDING, END OF PERIOD 1 $ 710,000
= =========
At April 30, 2000, the Fund had sufficient cash and/or securities at least equal
to the value of the written options.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
CONTRACT TO CONTRACTS NET UNREALIZED
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE APPRECIATION
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 6/16/00 1,741,893 EUR $1,696,429 $1,588,008 $108,421
At April 30, 2000, the Fund had sufficient cash and/or securities to cover any commitments under this contract.
<CAPTION>
Futures Contracts
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Notes June 2000 1,000 Short $894,160
U.S. Treasury Bonds June 2000 200 Long (113,518)
--------
$780,642
========
At April 30, 2000, the Fund had sufficient cash and/or securities to cover any margin requirements under these contracts.
</TABLE>
(8) Restricted Securities
The Fund may invest not more than 10% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At April 30, 2000, the
Fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting 0.74% 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>
DATE OF SHARE/PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Merrill Lynch Mortgage Investors, Inc.,
8.437s, 2022 6/22/1994 $2,000,000 $ 1,386,250 $1,897,187
Airplane Pass-Through Trust,
10.875s, 2019 3/13/1996 1,481,550 1,481,550 1,243,554
Banco Nacional De Desenvolvi
12.693s, 2008 4/26/2000 1,865,000 1,671,045 1,676,262
Kingdom of Morocco
6.844s, 2009 4/27/2000 3,730,000 3,333,688 3,329,025
----------
$8,146,028
==========
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of the MFS Series Trust IX and the Shareholders of MFS Bond
Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Bond Fund (one of the series constituting
MFS Series Trust IX) as of April 30, 2000, the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
years in the five-year period ended April 30, 2000. 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 and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned at April 30, 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 and financial highlights present
fairly, in all material respects, the financial position of MFS 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
<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 YEAR ENDED APRIL 30, 2000, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS CAME TO
0.55%.
--------------------------------------------------------------------------------
<PAGE>
MFS(R) BOND FUND
<TABLE>
<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,
Arnold D. Scott* - Senior Executive call your investment professional or,
Vice President, Director, and Secretary, for an information kit, call toll
MFS Investment Management free: 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time (or
Jeffrey L. Shames* - Chairman and Chief leave a message anytime).
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
INVESTMENT ADVISER from 8 a.m. to 8 p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or
Boston, MA 02116-3741 hearing-impaired, call toll free:
1-800-637-6576 any business day from 9
DISTRIBUTOR a.m. to 5 p.m. Eastern time. (To use
MFS Fund Distributors, Inc. this service, your phone must be
500 Boylston Street equipped with a Telecommunications
Boston, MA 02116-3741 Device for the Deaf.)
CHAIRMAN AND PRESIDENT For share prices, account balances,
Jeffrey L. Shames* exchanges, or stock and bond outlooks,
call toll free: 1-800-MFS-TALK
PORTFOLIO MANAGER (1-800-637-8255) anytime from a
Geoffrey L. Kurinsky* touch-tone telephone.
TREASURER WORLD WIDE WEB
W. Thomas London* www.mfs.com
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
</TABLE>
+ Independent Trustee
*MFS Investment Management
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MFS(R) BOND FUND ------------
BULK RATE
U.S. POSTAGE
PAID
[Logo] M F S(R) MFS
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
MFB-2 06/00 136M 11/211/311/811
