<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT SEMIANNUAL REPORT
We invented the mutual fund(R) OCTOBER 31, 2000
[Graphic Omitted]
MFS(R) INTERMEDIATE INVESTMENT
GRADE BOND FUND
MFS(R) RESEARCH BOND FUND
<PAGE>
<TABLE>
<CAPTION>
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND
MFS(R) RESEARCH BOND FUND
<S> <C>
TRUSTEES ASSISTANT TREASURERS
J. Atwood Ives+ -- Chairman and Chief Executive Mark E. Bradley*
Officer, Eastern Enterprises (diversified services Robert R. Flaherty*
company) Laura F. Healy*
Ellen Moynihan*
Lawrence T. Perera+ -- Partner, Hemenway & Barnes
(attorneys) SECRETARY
Stephen E. Cavan*
William J. Poorvu+ -- Adjunct Professor, Harvard
University Graduate School of Business ASSISTANT SECRETARY
Administration James R. Bordewick, Jr.*
Charles W. Schmidt+ -- Private Investor CUSTODIAN
State Street Bank and Trust Company
Arnold D. Scott* -- Senior Executive Vice
President, Director, and Secretary, MFS Investment INVESTOR INFORMATION
Management For information on MFS mutual funds, call your
investment professional or, for an information
Jeffrey L. Shames* -- Chairman and Chief Executive kit, call toll free: 1-800-637-2929 any business
Officer, MFS Investment Management day from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Elaine R. Smith+ -- Independent Consultant
INVESTOR SERVICE
David B. Stone+ -- Chairman, North American MFS Service Center, Inc.
Management Corp. (investment adviser) P.O. Box 2281
Boston, MA 02107-9906
INVESTMENT ADVISER
Massachusetts Financial Services Company For general information, call toll free:
500 Boylston Street 1-800-225-2606 any business day from 8 a.m. to 8
Boston, MA 02116-3741 p.m. Eastern time.
DISTRIBUTOR For service to speech- or hearing- impaired,
MFS Fund Distributors, Inc. call toll free: 1-800-637-6576 any business day
500 Boylston Street from 9 a.m. to 5 p.m. Eastern time. (To use
Boston, MA 02116-3741 this service, your phone must be equipped with
a Telecommunications Device for the Deaf.)
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames* For share prices, account balances, exchanges, or
stock and bond outlooks, call toll free:
ASSOCIATE DIRECTOR OF FIXED INCOME RESEARCH 1-800-MFS-TALK (1-800-637-8255) anytime from a
Michael W. Roberge* touch-tone telephone.
PORTFOLIO MANAGER WORLD WIDE WEB
James J. Calmas* www.mfs.com
TREASURER
James O. Yost*
</TABLE>
+ Independent Trustee
* MFS Investment Management
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company, one-
security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan
to be scaled up as the company grows, actual demand for the company's products
and services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with
the multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of
Original Research(SM) is doing our best to project a company's future earnings
and determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled
but that we believe still have the potential to be market leaders. For
example, a quarterly earnings shortfall of a few cents may cause the market to
temporarily lose confidence in a company. If we believe the business remains
fundamentally strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help
performance. In fixed-income investing this means, among other things, trying
to be better than our peers at avoiding bond issuers that may default. In
equity investing, avoiding mistakes means we strive to know a company and its
industry well enough to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form
of daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without
barriers between equity and fixed-income, international and domestic, or value
and growth investment areas. We believe this allows each of our portfolio
managers -- and thus each of our investors -- to potentially benefit from any
relevant item of Original Research.
John Ballen, our President and Chief Investment Officer, has often said that
the thought he hopes managers will have when they read the daily notes is, "I
could never perform as well at any other investment company, because nowhere
else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years
in the investment industry. Contributing to this continuity is our policy that
all equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the
company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group
of industries in a specific region of the globe. In pursuing their research,
our analysts and portfolio managers each year will visit more than 2,000
companies throughout the world, meet with representatives from more than 3,000
companies at one of our four worldwide offices, attend roughly 5,000 company
presentations sponsored by major Wall Street firms, and consult with over
1,000 analysts from hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on
a wide range of potential investments for all of our portfolios. In the end,
the goal of Original Research is to try to give our portfolio managers an
advantage over their peers -- to enable our managers to deliver competitive
performance by finding opportunities before they are generally recognized by
the market, and by avoiding mistakes whenever possible. Original Research
does, we believe, make a difference.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
November 16, 2000
A prospectus containing more complete information on any MFS product, including
charges and expenses, can be obtained from your investment professional. Please
read it carefully before you invest or send money. Investments in mutual funds
will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
MFS(R) Intermediate Investment Grade Bond Fund
Dear Shareholders,
For the six months ended October 31, 2000, Class A shares of the fund provided a
total return of 5.70% and Class I shares 5.59%. These returns include the
reinvestment of any distributions but exclude the effects of any sales charges,
and compare to a 5.33% return over the same period for the fund's benchmark, the
Lehman Brothers Intermediate Government/Corporate Bond Index (the Lehman Index),
an unmanaged, market-value-weighted index that includes U.S. Treasury and
government-agency securities (excluding mortgage-backed securities) and
investment-grade debt obligations of U.S. corporations. During the same period,
the average intermediate investment-grade debt fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance, returned 4.82%.
The fund's primary objective is to seek high current income consistent with
prudent risk, and its secondary objective is to protect shareholders' capital.
The fund invests in corporate bonds with ratings from "AAA" to "BBB" or in
unrated bonds that we consider to be investment quality. The fund also invests
in U.S. Treasury and mortgage- and asset-backed securities, which represent
pooled assets such as mortgage loans, car loans, and credit card receivables.
The maturities of bonds in the fund are normally 10 years or less.
The difficult interest rate environment that existed in the early part of the
six-month period dramatically reversed course in the third quarter and through
October, as short-term bond yields fell while longer-term rates were relatively
unchanged. This resulted in a yield curve that flattened and moved toward a more
normal shape. Short-term rates fell on evidence that economic growth was
slowing, causing expectations for further Federal Reserve Board (the Fed)
tightening to diminish.
Most sectors of the bond market performed strongly, and our significant exposure
to Treasuries benefited from a recent flight to quality. Overall, however, the
past four months were an exceptional time for non-Treasury securities, as all
spread sectors (corporate, mortgage-backed, and asset- backed bonds)
outperformed comparable-duration Treasuries. (Principal value and interest on
treasury securities are guaranteed by the U.S. government if held to maturity.)
Both sector and security selection drove the fund's outperformance of its
benchmark and Lipper category average. In particular, significant exposure to
commercial mortgage-backed securities (CMBS) and mortgage-backed securities
(MBS) were key contributors to performance. CMBS led most other sectors late in
the period, while MBS also performed strongly. Corporate security selection also
benefited fund performance, as holdings in financial services, banks, and
entertainment companies generally produced favorable performance due to
improving financial results.
Attractive yields and an improving interest rate outlook enticed investors back
to the bond market over the past six months. The near-term outlook for bond
investing depends largely on the direction of the economy in coming months,
however, a string of recent statistics suggests that the pace of economic
activity is slowing. If this continues, and if the Fed chooses to move to a more
neutral stance regarding interest rates, that could continue to bode well for
the recovery in the bond market.
Respectfully,
[Graphic Omitted]
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
<PAGE>
MFS(R) Research Bond Fund
Dear Shareholders,
For the six months ended October 31, 2000, Class A shares of the fund provided a
total return of 6.24% and Class I shares 6.14%. These returns assume the
reinvestment of any distributions but exclude the effects of any sales charges
and compare to a 5.53% 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 general bond fund tracked by Lipper Inc., an independent firm that
reports mutual fund performance, returned 3.49%.
In managing the fund, our committee of analysts utilizes sector allocation and
individual security selection to drive performance. We avoid trying to achieve
performance by predicting the direction of interest rates. In our experience,
few fund managers have been able to predict consistently the direction of
interest rates, so we feel that attempting to do so can be an overly risky fund
management strategy.
Our sector allocation is divided into two areas: sectors included in the Lehman
Index, such as Treasuries, government agencies, and high-grade corporate bonds;
and sectors not included in the index, such as mortgages and asset-backed,
commercial-backed, emerging market, and high-yield bonds. We hope to outperform
the Lehman Index by overweighting the sectors we believe will perform best
during any given period.
Security selection is the other major driver of performance. Our goals are to
avoid issuers that may default and to find bonds that may be upgraded to a
higher credit rating, as credit upgrades often cause the price of a bond to
appreciate. We believe the quality of our in-house Original Research(SM) process
-- which may include meetings with company managements, meetings with employees
and competitors, and intense financial and competitive analysis -- gives us an
edge in selecting individual securities with the potential to outperform the
market.
Over the past six months, securities in sectors outside the Lehman Index were
key factors in our performance; at the end of the period, our weighting in those
areas was about 21% of assets. Sectors that performed well due to the strong
U.S. economy included mortgages and asset-backed and commercial-backed bonds.
Asset-backed securities are generally company or organization receivables --
such as credit card debt or home equity loans -- packaged into a trust.
Commercial-backed bonds are trusts backed by a pool of commercial assets such as
hotels or office buildings. "AAA"-rated securities in these sectors have tended
to offer more yield than "AAA" government bonds, so these sectors can be a good
way to add yield to the portfolio with relatively low risk.
The emerging market sector, particularly our holdings in Brazil and South Korea,
did well for the portfolio early in the period. We sold most of those holdings
when we perceived that emerging market performance was about to decline; as a
result, we avoided most of the subsequent downturn in the sector.
Similarly, we owned a fairly big position in high-yield bonds early in the
period when the sector was relatively stable; at that time we could earn the
dividends on the bonds without much fear of our principal declining. Because our
analysts did a good job of anticipating upcoming problems, we were able to sell
off a large part of our high-yield position before prices fell dramatically
later in the year. The high-yield sector became the worst performing
fixed-income area in 2000 because the market began to expect a high default rate
as the U.S. economy slowed.
Another factor in our relative outperformance was our underweight position in
high-grade corporate bonds, a sector within the Lehman Index that performed
poorly throughout the period.
Looking ahead, our opinion is that inflation is not about to become a problem,
despite recent minor increases in the Consumer Price Index, a broad measure of
consumer prices for goods and services reported by the U.S. Department of Labor.
We think that the Federal Reserve Board is finished raising rates and will be
able to engineer a "soft landing" for the economy -- a slowdown without a
recession. All of this bodes well for credit risk and for bond investing in
general. Despite what we regard as a healthy outlook for fixed- income
investing, however, both the corporate high-yield and corporate high- grade
markets were quite depressed at the end of the period. We think that may create
opportunities in the near future for our research to potentially identify bonds
in these sectors that are selling at bargain prices and have the potential for
solid price appreciation.
Respectfully,
/s/ Michael W. Roberge
Michael W. Roberge
Associate Director of Fixed Income Research
The committee of MFS(R) fixed-income research analysts is responsible for the
day-to-day management of the fund under the general supervision of Mr.
Roberge, who began supervising the committee effective July 1, 2000.
The opinions expressed in these reports are those of the portfolio manager and
the Associate Director of Fixed Income Research and are current only through
the end of the period of the reports as stated on the cover. Their views are
subject to change at any time based on market and other conditions, and no
forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolios are actively managed, and current holdings may be different.
<PAGE>
PERFORMANCE SUMMARY
Currently, each fund offers only Class A and Class I shares, which are
available for purchase at net asset value only by residents of the
Commonwealth of Massachusetts who are employees (or certain relatives of
employees) of MFS and its affiliates or members of the governing boards of the
various funds sponsored by MFS.
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results include the maximum applicable
sales charge and reflect the percentage change in net asset value, including
the reinvestment of dividends. (See Notes to Performance Summary.)
TOTAL RATES OF RETURN THROUGH OCTOBER 31, 2000
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND(1)(2)(3)(4)
CLASS A
<TABLE>
<CAPTION>
6 Months 1 Year Life*
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +5.70% +7.23% +7.89%
---------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +7.23% +4.23%
---------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +2.13% +1.50%
---------------------------------------------------------------------------------------------------------------
CLASS I
6 Months 1 Year Life*
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +5.59% +7.11% +7.77%
---------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +7.11% +4.17%
---------------------------------------------------------------------------------------------------------------
*For the period from the commencement of the fund's investment operations,
January 4, 1999, through October 31, 2000.
MFS(R) RESEARCH BOND FUND(2)(3)(4)(5)(6)
CLASS A
6 Months 1 Year Life*
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +6.24% +8.67% +7.32%
---------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +8.67% +3.93%
---------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +3.51% +1.21%
---------------------------------------------------------------------------------------------------------------
CLASS I
6 Months 1 Year Life*
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +6.14% +8.45% +7.11%
---------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +8.45% +3.82%
---------------------------------------------------------------------------------------------------------------
*For the period from the commencement of the fund's investment operations,
January 4, 1999, through October 31, 2000.
</TABLE>
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable subsidies and waivers; without
these, the results would have been less favorable. See the prospectus for
details. All results are historical and include the reinvestment of dividends
and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
(1) Investments in foreign securities may be unfavorably affected by interest-
rate and currency-exchange-rate changes as well as by market, economic,
and political conditions of the countries where investments are made.
There may be greater returns but also greater risk than with U.S.
investments. These risks may increase share price volatility. Please see
the prospectus for details.
(2) The portfolio may invest in mortgage-backed securities, which are subject
to prepayments as homeowners pay their mortgages early by refinancing them
at lower rates. Therefore, the value of securities may not increase as
much as that of other fixed-income securities during periods of falling
rates. These risks may increase share price volatility. Please see the
prospectus for details.
(3) The portfolio may invest in derivative securities which may include
futures and options. These types of hedging instruments can increase price
fluctuation. These risks may increase share price volatility. Please see
the prospectus for details.
(4) This portfolio is nondiversified and has more risk than one that is
diversified. The portfolio invests in a limited number of companies and
may have more risk because a change in one security's value may have a
more significant effect on the portfolio's net asset value. An investment
in the portfolio is not a complete investment program. These risks may
increase share price volatility. Please see the prospectus for details.
(5) Investments in foreign and emerging market securities may be unfavorably
affected by interest-rate and currency-exchange-rate changes, as well as
market, economic, and political conditions of the countries where
investments are made. There may be greater returns but also greater risk
than with U.S. investments. These risks may increase share price
volatility. Please see the prospectus
for details.
(6) Investments in lower-rated securities may provide greater returns but may
have greater-than-average risk. These risks may increase share price
volatility. Please see the prospectus for details.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- October 31, 2000
MFS INTERMEDIATE INVESTMENT GRADE BOND FUND
Bonds - 96.3%
------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
------------------------------------------------------------------------------
U.S. Bonds - 83.5%
Aerospace and Defense - 1.1%
Boeing Capital Corp., 7.375s, 2010 $ 3 $ 3,040
Raytheon Co., 5.7s, 2003 9 8,596
-----------
$ 11,636
------------------------------------------------------------------------------
Automotive - 2.7%
DaimlerChrysler NA Holding Corp., 6.63s, 2001 $ 13 $ 12,944
Ford Motor Credit Co., 7.6s, 2005 16 16,085
-----------
$ 29,029
------------------------------------------------------------------------------
Banks and Credit Companies - 4.3%
Citigroup, Inc., 7.25s, 2010 $ 15 $ 14,904
FleetBoston Financial Corp., 9.9s, 2001 12 12,183
FleetBoston Financial Corp., 7.25s, 2005 9 9,047
Wells Fargo and Co., 7.2s, 2003 10 10,069
-----------
$ 46,203
------------------------------------------------------------------------------
Consumer Goods and Services - 0.4%
Hasbro, Inc., 7.95s, 2003 $
$ 5 4,623
------------------------------------------------------------------------------
Corporate Asset Backed - 14.7%
Americredit Automobile Receivable Trust,
5.78s, 2003 $ 15 $ 14,877
Carco Auto Loan Master Trust, 5.65s, 2003 15 14,937
Citibank Credit Card Master Trust I, 5.5s, 2006 25 24,125
Commercial Mortgage Loans, 7.271s, 2003 10 10,047
Discover Card Master Trust I, 5.85s, 2006 20 19,556
DLJ Commercial Mortgage Corp., 7.545s, 2005
(Interest Only) 100 3,301
DLJ Mortgage Acceptance Corp., 8.1s, 2004 12 12,608
GE Capital Mortgage Services, Inc., 6.035s, 2020 20 19,624
GS Mortgage Securities Corp. II, 6.06s, 2030 8 8,226
Morgan (J.P.) Commercial Mortgage Finance Corp.,
6.613s, 2030 5 4,855
Morgan Stanley Capital, 6.01s, 2030 9 8,413
Peco Energy Transition Trust, 5.48s, 2003 3 3,334
Residential Asset Security Mortgage, 7.735s, 2025 15 15,181
-----------
159,084
------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation - 0.4%
FHLMC, 5.83s, 2013 $ 4 $ 4,084
------------------------------------------------------------------------------
Federal National Mortgage Association - 11.0%
FNMA, 5.722s, 2009 $ 30 $ 27,964
FNMA, 7.25s, 2010 38 39,389
FNMA, 7s, 2015 24 23,490
FNMA, 7.5s, 2015 28 27,757
-----------
$ 118,600
------------------------------------------------------------------------------
Financial Services - 7.4%
Associates Corp. North America, 5.8s, 2004 $ 10 9,606
Countrywide Home Loan, Inc., 6.85s, 2004 16 15,740
GE Capital Corp., 7.5s, 2005 15 15,426
Lehman Brothers Holdings, Inc., 6.25s, 2003 18 17,585
Morgan Stanley Dean Witter, 7.125s, 2003 15 15,058
National Rural Utilities Cooperative Finance,
7.375s, 2003 7 7,099
-----------
$ 80,514
------------------------------------------------------------------------------
Food and Beverage Products - 4.6%
Coca-Cola Bottling Co., 8.56s, 2002 $ 14 $ 14,254
Coca-Cola Bottling Co., 6.375s, 2009 10 8,949
J. Seagram & Sons, Inc., 5.79s, 2001 15 14,873
Whitman Corp., 6s, 2004 12 11,400
-----------
$ 49,476
------------------------------------------------------------------------------
Insurance - 1.7%
Aflac, Inc., 6.5s, 2009 $ 20 $ 18,515
------------------------------------------------------------------------------
Media - 3.0%
News America Holdings, Inc., 6.625s, 2008 $ 7 $ 6,477
Time Warner Entertainment Company LP, 9.625s, 2002 25 25,922
-----------
$ 32,399
------------------------------------------------------------------------------
Oil Services - 2.8%
Alberta Energy Co. LTD, 7.65s, 2010 $ 10 $ 10,094
Apache Finance Ltd., 7s, 2009 10 9,683
Phillips Petroleum, 8.5s, 2005 10 10,538
-----------
$ 30,315
------------------------------------------------------------------------------
Railroads - 1.0%
Union Pacific Corp., 5.78s, 2001 $ 11 $ 10,819
------------------------------------------------------------------------------
Real Estate - 1.6%
EOP Operating Ltd., 8.1s, 2010 $ 17 $ 17,075
------------------------------------------------------------------------------
Restaurants and Lodging - 0.5%
MGM Mirage, Inc., 8.5s, 2010 $ 5 $ 4,946
------------------------------------------------------------------------------
Telecommunications - 5.2%
GTE Corp., 9.1s, 2003 $ 17 $ 17,787
Sprint Spectrum LP, 11s, 2006 15 16,152
Telecomunica De Puerto Rico, 6.15s, 2002 13 12,705
U.S. West Communications, Inc., 7.625s, 2003 9 9,116
-----------
$ 55,760
------------------------------------------------------------------------------
U.S. Federal Agencies - 1.4%
Aid-Israel, 6.6s, 2008 $ 15 $ 14,916
------------------------------------------------------------------------------
U.S. Treasury Obligations - 14.4%
U.S. Treasury Notes, 4.25s, 2003 $ 25 $ 23,871
U.S. Treasury Notes, 5.75s, 2010 49 48,954
U.S. Treasury Notes, 6s, 2004 - 2009 24 24,134
U.S. Treasury Notes, 6.125s, 2007 25 25,351
U.S. Treasury Notes, 6.5s, 2010 16 16,748
U.S. Treasury Notes, 6.75s, 2005 6 6,220
U.S. Treasury Notes, 7.875s, 2004 10 10,711
-----------
$ 155,989
------------------------------------------------------------------------------
Utilities - Electric - 5.3%
Allegheny Energy, Inc., 7.75s, 2005 $ 6 $ 6,066
Connecticut Light & Power Co., 7.875s, 2001 4 4,010
Connecticut Light & Power Co., 7.875s, 2024 6 6,022
Dominion Resources, Inc., 7.625s, 2005 15 15,149
Entergy Mississippi, Inc., 6.2s, 2004 10 9,483
Midamerican Funding LLC, 5.85s, 2001 15 14,935
Narragansett Electric Co., 7.83s, 2002 2 2,031
-----------
$ 57,696
------------------------------------------------------------------------------
Total U.S. Bonds $ 901,679
------------------------------------------------------------------------------
Foreign Bonds - 12.8%
Canada - 2.9%
AT&T Canada, Inc., 12s, 2007 (Telecommunications) $ 8 $ 8,935
Government of Canada, 5.25s, 2008 12 10,935
Province of Quebec, 8.8s, 2003 11 11,519
-----------
$ 31,389
------------------------------------------------------------------------------
Chile - 0.4%
Enersis S.A., 6.6s, 2026 (Electric - Utilities) $ 4 $ 3,863
------------------------------------------------------------------------------
France - 1.3%
Natexis AMBS Co. LLC, 8.44s, 2049 (Banks and
Credit Cos.)## $ 15 $ 14,332
------------------------------------------------------------------------------
Germany - 3.3%
Deutsche Telekom International Finance, 7.75s,
2005 (Telecommunications) $ 15 $ 15,249
KFW International Finance, Inc., 9.4s, 2004
(Agency of German Government) 5 5,455
Landesbank Baden Wurttemberg, 7.875s, 2004 (Banks
and Credit Cos.) 15 15,436
-----------
$ 36,140
------------------------------------------------------------------------------
Netherlands - 0.9%
KPN NV, 8s, 2010 (Telecommunications)## $ 10 $ 9,776
------------------------------------------------------------------------------
South Korea - 0.5%
Export-Import Bank Korea, 7.1s, 2007 (Banks and
Credit Cos.) $ 5 $ 4,952
------------------------------------------------------------------------------
Spain - 0.9%
Telefonica Europe BV, 7.35s, 2005
(Telecommunications) $ 10 $ 10,012
------------------------------------------------------------------------------
Supra-National - 1.0%
World Bank Republic of Argentina, 0s, 2001 $ 11 $ 10,648
------------------------------------------------------------------------------
United Kingdom - 1.6%
British Sky Broadcasting, 6.875s, 2009
(Telecommunications) $ 8 $ 6,825
Royal Bank Scotland, 8.817s, 2049 (Banks and
Credit Cos.) 10 10,403
-----------
$ 17,228
------------------------------------------------------------------------------
Total Foreign Bonds 138,340
------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,050,875) $ 1,040,019
Other Assets, Less Liabilities - 3.7% 39,834
------------------------------------------------------------------------------
Net Assets - 100.0% $ 1,079,853
------------------------------------------------------------------------------
##SEC Rule 144A restriction.
See notes to financial statements.
<PAGE>
MFS RESEARCH BOND FUND
Bonds - 98.0%
------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
------------------------------------------------------------------------------
U.S. Bonds - 92.4%
Aerospace and Defense - 0.4%
K & F Industries, Inc., 9.25s 2007 $ 5 $ 4,794
------------------------------------------------------------------------------
Airlines - 0.9%
Continental Airlines Pass-Through Trust, Inc.,
6.648s 2017 $ 6 $ 5,243
Continental Airlines Pass-Through Trust, Inc.,
7.256s 2020 5 4,603
-----------
$ 9,846
------------------------------------------------------------------------------
Automotive - 1.7%
Ford Credit Auto Owner Trust, 6.58s 2004 $ 10 9,999
Ford Motor Credit Co., 5.8s 2009 10 8,786
-----------
$ 18,785
------------------------------------------------------------------------------
Building Products - 0.4%
Nortek, Inc., 9.25s 2007 $ 5 $ 4,450
------------------------------------------------------------------------------
Chemicals - 0.9%
Lyondell Chemical Co., 9.625s 2007 $ 5 $ 4,850
NL Industries, Inc., 11.75s 2003 5 5,063
-----------
$ 9,913
------------------------------------------------------------------------------
Computer Services - 1.0%
Seagate Technology, 7.45s 2037 $ 10 $ 10,304
------------------------------------------------------------------------------
Corporate Asset Backed - 3.7%
Criimi Mae Corp., 6.701s 2008## $ 10 $ 9,384
DLJ Commercial Mortgage Corp., 0.91s 2005
(Interest only) 300 9,904
Residential Funding Mortgage Secs II, Inc.,
7.66s 2012 20 20,203
-----------
$ 39,491
------------------------------------------------------------------------------
Energy - 0.9%
Apache Corp., 7.95s 2026 $ 10 $ 10,247
------------------------------------------------------------------------------
Financial Services - 2.7%
Associates Corp., 5.5s 2004 $ 10 $ 9,545
Lehman Brothers Holdings, Inc., 6.25s 2003 10 9,769
Natexis AMBS Co. LLC, 8.44s 2049## 10 9,555
-----------
$ 28,869
------------------------------------------------------------------------------
Gaming and Hotels - 0.5%
MGM Mirage, Inc., 8.5s 2010 $ 5 $ 4,946
------------------------------------------------------------------------------
Government National Mortgage Association - 7.1%
GNMA, 8s 2030 $ 75 $ 75,974
------------------------------------------------------------------------------
Insurance - 0.9%
Aflac, Inc., 6.5s 2009 $ 10 $ 9,257
------------------------------------------------------------------------------
Media - 3.2%
J. Seagram & Sons, Inc., 6.4s 2003 $ 10 $ 9,999
News America Holdings, Inc., 7.3s 2028 10 8,486
Time Warner Entertainment Co. LP, 9.625s 2002 15 15,553
-----------
$ 34,038
------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.9%
Tenet Healthcare Corp., 8s 2005 $ 5 $ 4,931
The Healthcare Co., 8.75s 2010 5 5,063
-----------
$ 9,994
------------------------------------------------------------------------------
Oil Services - 1.0%
Phillips Petroleum Co., 8.75s 2010 $ 10 $ 10,906
------------------------------------------------------------------------------
Railroads - 0.9%
Union Pacific Corp., 6.34s 2003 $ 10 $ 9,729
------------------------------------------------------------------------------
Real Estate - 0.9%
Socgen Real Estate Co., 7.64s 2049## $ 10 $ 9,351
------------------------------------------------------------------------------
Retail - 0.4%
J.Crew Operating Corp., 10.375s 2007 $ 5 $ 4,400
------------------------------------------------------------------------------
Telecommunications - 1.8%
Sprint Capital Corp., 7.625s 2002 $ 10 $ 10,032
Telecomunicaciones de Puerto Rico, Inc.,
6.65s 2006 10 9,507
-----------
$ 19,539
------------------------------------------------------------------------------
U.S. Federal Agencies - 16.9%
Federal National Mortgage Assn., 4.75s 2003 $ 60 $ 57,207
Federal National Mortgage Assn., 6.375s 2009 60 58,678
Federal National Mortgage Assn., 7.25s 2010 35 36,280
Federal National Mortgage Assn. TBA, 7.5s 2099 30 29,963
-----------
$ 182,128
------------------------------------------------------------------------------
U.S. Treasury Obligations - 44.0%
U.S. Treasury Bonds, 8.125s 2019 $ 94 $ 116,148
U.S. Treasury Bonds, 6.25s 2023 16 16,505
U.S. Treasury Bonds, 5.25s 2029 30 27,305
U.S. Treasury Bonds, 6.125s 2029 25 25,891
U.S. Treasury Notes, 5.875s 2001 33 33,026
U.S. Treasury Notes, 6.25s 2002 28 28,096
U.S. Treasury Notes, 6.375s 2002 16 16,061
U.S. Treasury Notes, 6.5s 2002 9 9,034
U.S. Treasury Notes, 4.25s 2003 22 21,006
U.S. Treasury Notes, 5.5s 2003 41 40,615
U.S. Treasury Notes, 6s 2004 33 33,155
U.S. Treasury Notes, 6.75s 2005 37 38,359
U.S. Treasury Notes, 6.875s 2006 65 68,108
-----------
$ 473,309
-----------------------------------------------------------------------------
Utilities - Electric - 1.3%
Connecticut Light & Power Co., 7.875s 2001 $ 4 $ 4,010
Midamerican Funding LLC, 5.85s 2001 10 9,956
-----------
$ 13,966
------------------------------------------------------------------------------
Total U.S. Bonds $ 994,236
------------------------------------------------------------------------------
Foreign Bonds - 5.6%
Canada - 0.8%
AT&T Canada, Inc., 12s 2007 (Telecommunications) $ 8 $ 8,936
------------------------------------------------------------------------------
Mexico - 0.8%
Bepensa SA, 9.75s 2004 (Beverages) $ 10 $ 9,150
------------------------------------------------------------------------------
Netherlands - 1.3%
KPN NV, 8s 2010 (Telecommunications)## $ 10 $ 9,776
Slovak Wireless Finance Co., 11.25s 2007
(Telecommunications) EUR 5 3,945
-----------
$ 13,721
------------------------------------------------------------------------------
Qatar - 1.4%
State of Qatar 9.75s 2030## $ 15 $ 14,606
------------------------------------------------------------------------------
Sweden - 0.9%
AB Spintab, 6.8s 2049 (Banks and Credit Cos.)## $ 10 $ 9,796
------------------------------------------------------------------------------
United Kingdom - 0.4%
British Sky Broadcasting, 6.875s 2009
(Telecommunications) $ 5 $ 4,266
------------------------------------------------------------------------------
Total Foreign Bonds $ 60,475
------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,051,646) $ 1,054,711
Other Assets, Less Liabilities - 2.0% 21,631
------------------------------------------------------------------------------
Net Assets - 100.0% $ 1,076,342
------------------------------------------------------------------------------
##SEC Rule 144A restriction.
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.
EUR = Euro
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
MFS INTERMEDIATE
INVESTMENT GRADE MFS RESEARCH
OCTOBER 31, 2000 BOND FUND BOND FUND
------------------------------------------------------------------------------------------------------
Assets:
<S> <C> <C>
Investments, at value (identified cost, $1,050,875 and
$1,051,646, respectively) $1,040,019 $1,054,711
Foreign currency, at value (identified cost $206) -- 202
Cash 24,162 32,850
Net receivable for forward foreign currency exchange
contracts closed or subject to master netting agreements -- 134
Interest receivable 16,893 18,466
---------- ----------
Total assets $1,081,074 $1,106,363
---------- ----------
Liabilities:
Payable to invesment adviser $ 1,221 --
Payable for investments purchased -- 30,021
---------- ----------
Total liabilities $ 1,221 $ 30,021
---------- ----------
Net assets $1,079,853 $1,076,342
========== ==========
Net assets consist of:
Paid-in-capital $1,123,214 $1,126,592
Unrealized depreciation (appreciation) on investments and
translation of assets and liabilities in foreign currencies (10,856) 3,194
Accumulated net realized loss on investments and foreign
currency transactions (32,855) (54,044)
Accumulated undistributed net investment income 350 600
---------- ----------
Total $1,079,853 $1,076,342
========== ==========
Shares of beneficial interest outstanding:
Class A 112,865 113,373
Class I 15.736 15.770
---------- ----------
Total shares of beneficial interest outstanding 112,881 113,389
Net assets:
Class A $1,079,702 $1,076,193
Class I 150.46 149.32
---------- ----------
Total net assets $1,079,853 $1,076,342
========== ==========
Class A shares:
Net asset value per share
(net assets / shares of beneficial interest outstanding) $ 9.57 $ 9.49
========== ==========
Offering price per share (100 / 95.25 of net asset value per
share) $ 10.05 $ 9.96
========== ==========
Class I shares:
Net asset value, offering price, and redemption price per
share (net assets / shares of beneficial interest outstanding) $ 9.56 $ 9.47
========== ==========
On sales of $100,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A
shares.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
MFS INTERMEDIATE
INVESTMENT GRADE MFS RESEARCH
SIX MONTHS ENDED OCTOBER 31, 2000 BOND FUND BOND FUND
------------------------------------------------------------------------------------------------------
Net investment income:
<S> <C> <C>
Interest Income $ 37,307 $ 39,194
---------- ----------
Expenses -
Management fee $ 2,641 $ 3,140
Shareholder servicing agent fee 529 524
Administrative fee 93 93
Auditing fees 6,200 8,346
Registration fees 3,050 2,000
Custodian fee 4,641 4,644
Printing 744 2,519
Legal fees 352 887
Postage 34 1
Miscellaneous 47 313
---------- ----------
Total expenses $ 18,331 $ 22,467
Fees paid indirectly (136) (167)
Reduction of expenses by investment adviser and distributor (18,195) (22,300)
---------- ----------
Net expenses $ -- $ --
---------- ----------
Net investment income $ 37,307 $ 39,194
---------- ----------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) -
Investment transactions $ (619) $ (1,051)
Foreign currency transactions -- (3)
---------- ----------
Net realized loss on investments and foreign currency
transactions $ (619) $ (1,054)
---------- ----------
Change in unrealized appreciation -
Investments $ 21,518 $ 24,761
Translation of assets and liabilities in foreign currencies -- 130
---------- ----------
Net unrealized gain on investments and foreign currency
transactions $ 21,518 $ 24,891
---------- -----------
Net realized and unrealized gain on investments and foreign
currency transactions $ 20,899 $ 23,837
---------- ----------
Increase in net assets from operations $ 58,206 $ 63,031
========== ==========
See notes to financial statements.
</TABLE>
[S] [C] [C] [C] [C] [C] [C]
<PAGE>
FINANCIAL STATEMENTS -- continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE INVESTMENT
GRADE BOND FUND RESEARCH BOND FUND
------------------------------------- --------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 APRIL 30, 2000 OCTOBER 31, 2000 APRIL 30, 2000
(UNAUDITED) (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
<S> <C> <C> <C> <C>
Net investment income $ 37,307 $ 67,219 $ 39,194 $ 67,321
Net realized loss on investments and
foreign currency transactions (619) (25,567) (1,054) (46,247)
Net unrealized gain (loss) on
investments and foreign currency
transactions 21,518 (26,009) 24,891 (7,877)
---------- ---------- ---------- ---------
Increase in net assets from
operations $ 58,206 $ 15,643 $ 63,031 $ 13,197
---------- ---------- ---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (37,264) $ (68,210) $ (38,754) $ (67,749)
From net investment income (Class I) (5) (10) (5) (10)
---------- ---------- ---------- ----------
Total distributions declared to
shareholders $ (37,269) $ (68,220) $ (38,759) $ (67,759)
---------- ---------- ---------- ----------
Net increase in net assets from fund
share transactions $ 37,260 $ 69,205 $ 41,262 $ 65,771
---------- ---------- ---------- ----------
Total increase in net assets $ 58,197 $ 16,628 $ 65,534 $ 11,209
Net assets:
At beginning of period 1,021,656 1,005,028 1,010,808 999,599
---------- ---------- ---------- ----------
At end of period (including accumulated
undistributed net investment income
of $350, $312 and $600, $165,
respectively) $1,079,853 $1,021,656 $1,076,342 $1,010,808
=========- ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE INVESTMENT GRADE BOND FUND
----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED APRIL 30, ENDED YEAR ENDED APRIL 30,
OCTOBER 31 ------------------------------- OCTOBER 31 -------------------------
2000 2000 1999* 2000 2000 1999*
(UNAUDITED) (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
beginning of period $ 9.38 $ 9.88 $10.00 $ 9.38 $ 9.87 $10.00
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.34 $ 0.64 $ 0.18 $ 0.31 $ 0.65 $ 0.19
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.19 (0.49) (0.14) 0.21 (0.49) (0.16)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.53 $ 0.15 $ 0.04 $ 0.52 $ 0.16 $ 0.03
------ ------ ------ ------ ------ ------
Less distributions
declared to shareholders
from net investment
income $(0.34) $(0.65) $(0.16) $(0.34) $(0.65) $(0.16)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 9.57 $ 9.38 $ 9.88 $ 9.56 $ 9.38 $ 9.87
====== ====== ====== ====== ====== ======
Total return(+) 5.70%++ 1.62% 0.44%++ 5.59%++ 1.72% 0.33%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.04% 0.27%+ 0.03% 0.04% 0.27%+
Net investment income 7.07%+ 6.69% 5.53%+ 6.70% 6.87% 5.43%+
Portfolio turnover 62% 147% 155% 62% 147% 155%
Net assets at end of
period (000 Omitted) $1,080 $1,022 $1,005 $0+++ $0+++ $0+++
(S)Effective February 1, 1999, MFS has voluntarily agreed, under a temporary expense agreement, to pay all of the fund's
operating expenses, exclusive of management and distribution and service fees. Prior to February 1, 1999, the fund paid
MFS a fee not greater than 1.00% of average daily net assets. In addition, the investment adviser and the distributor
voluntarily waived their fees for the periods indicated. To the extent actual expenses were over these limitations and the
waivers had not been in place, the net investment income (loss) per share and the ratios would have been:
Net investment income
(loss) $ 0.17 $ 0.25 $(0.09) $ 0.15 $ 0.30 $(0.09)
Ratios (to average net assets):
Expenses## 3.48%+ 4.10% 8.60%+ 3.48%+ 3.75% 8.25%+
Net investment
income (loss) 3.62%+ 2.63% (2.80)%+ 3.25%+ 3.09% (2.55)%+
* For the period from the commencement of the fund's investment operations, January 4, 1999, through April 30, 1999.
+ Annualized.
++Not annualized.
+++Class I net assets were less than $500.
#Per share data are based on average shares outstanding.
##Ratios do not reflect reductions from certain expense offset arrangements.
(+)Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the result would have been lower.
</TABLE>
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
RESEARCH BOND FUND
----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED APRIL 30, ENDED YEAR ENDED APRIL 30,
OCTOBER 31 ------------------------------- OCTOBER 31 -------------------------
2000 2000 1999* 2000 2000 1999*
(UNAUDITED) (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
beginning of period $ 9.27 $ 9.80 $10.00 $ 9.26 $ 9.78 $10.00
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.35 $ 0.64 $ 0.18 $ 0.35 $ 0.65 $ 0.18
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.25 (0.53) (0.21) 0.24 (0.53) (0.23)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.60 $ 0.11 $(0.03) $ 0.59 $ 0.12 $(0.05)
------ ------ ------ ------ ------ ------
Less distributions
declared to shareholders
from net investment
income $(0.38) $(0.64) $(0.17) $(0.38) $(0.64) $(0.17)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 9.49 $ 9.27 $ 9.80 $ 9.47 $ 9.26 $ 9.78
====== ====== ====== ====== ====== ======
Total return(+) 6.24%++ 1.31% (0.29%)++ 6.14%++ 1.41% (0.49)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.03% 0.30%+ 0.03%+ 0.03% 0.30%+
Net investment income 7.49%+ 6.82% 5.62%+ 7.47% 6.92% 5.13%+
Portfolio turnover 57% 209% 117% 57% 209% 117%
Net assets at end of
period (000 Omitted) $1,076 $1,011 $999 $0+++ $0+++ $0+++
(S)Effective February 1, 1999, MFS has voluntarily agreed, under a temporary expense agreement, to pay all of the fund's
operating expenses, exclusive of management and distribution and service fees. Prior to February 1, 1999, the fund paid
MFS a fee not greater than 1.10% of average daily net assets. In addition, the investment adviser and the distributor
voluntarily waived their fees for the periods indicated. To the extent actual expenses were over these limitations and the
waivers had not been in place, the net investment income (loss) per share and the ratios would have been:
Net investment income
(loss) $ 0.15 $ 0.23 $(0.09) $ 0.15 $ 0.27 $(0.11)
Ratios (to average net assets):
Expenses## 4.29%+ 4.43% 8.93%+ 4.29%+ 4.08% 8.58%+
Net investment
income (loss) 3.23%+ 2.42% (3.01)%+ 3.21%+ 2.87% (3.15)%+
* For the period from the commencement of the fund's investment operations, January 4, 1999, through April 30, 1999.
+ Annualized.
++Not annualized.
+++Class I net assets were less than $500.
#Per share data are based on average shares outstanding.
##Ratios do not reflect reductions from certain expense offset arrangements.
+Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the result
would have been lower.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Intermediate Investment Grade Bond Fund and MFS Research Bond Fund (the
funds) are non-diversified series of MFS Series Trust IX (the trust). The
trust is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The funds
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues 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. Short-
term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no such
quotations or valuations are valued in good faith, at fair value, by the
Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Forward Foreign Currency Exchange Contracts - The funds 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 funds 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 funds 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 funds
may enter into contracts with the intent of changing the relative exposure of
the funds' 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. 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. Some securities may be
purchased on a "when-issued" or "forward delivery" basis, which means that the
securities will be delivered to the fund at a future date, usually beyond
customary settlement time.
Fees Paid Indirectly - Each funds' 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 - Each funds' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The funds
distinguish between distributions on a tax basis and a financial reporting
basis and require that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
At April 30, 2000, the funds, for federal income tax purposes, had capital
loss carryforwards which may be applied against any net taxable realized gains
of each succeeding year until the earlier of its utilization or expiration.
<TABLE>
<CAPTION>
EXPIRATION
TOTAL CARRYFORWARD 2008
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Intermediate Investment Grade Bond Fund $22,462 $22,462
Research Bond Fund 31,155 31,155
</TABLE>
Multiple Classes of Shares of Beneficial Interest - The funds offer multiple
classes of shares that differ in their respective distribution and service
fees. All shareholders bear the common expenses of the funds based on the
value of settled shares outstanding of each class, without distinction between
share classes. Dividends are declared separately for each class. Differences
in per share dividend rates are generally due to differences in separate class
expenses.
(3) Transactions with Affiliates
Investment Adviser - The funds have an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee for Intermediate Investment Grade Bond Fund and Research Bond
Fund is computed daily and paid monthly at an annual rate of 0.50% and 0.60%
of the funds' average daily net assets, respectively. The investment adviser
has voluntarily agreed to waive its fee, which is shown as a reduction of
total expenses in the Statement of Operations.
The investment adviser has voluntarily agreed to pay each of the funds'
operating expenses exclusive of management and distribution and service fees
such that the funds' aggregate expenses do not exceed 0.00% of its average
daily net assets. This is reflected as a reduction of total expenses in the
Statement of Operations.
The funds pay no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the funds, all of whom receive
remuneration for their services to the funds from MFS. Certain officers and
Trustees of the funds are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trustees are currently
not receiving any payments for their services to the funds.
Administrator - The funds have an administrative services agreement with MFS
to provide the funds with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each fund incurs an administrative fee
at the following annual percentages of each funds' average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on the sales of Class A shares of the funds for the
period ended October 31, 2000.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
The funds' distribution plans provide that the funds will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the funds related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of each funds' average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.10% per annum of each funds' average daily
net assets attributable to Class A shares. All distribution and service fees
under Class A distribution plans are currently not being imposed for the
funds.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase.
There were no contingent deferred sales charges imposed on Class A shares
during the period ended October 31, 2000.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of each fund's average daily net assets at an annual rate of
0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
<TABLE>
<CAPTION>
INTERMEDIATE
INVESTMENT GRADE RESEARCH BOND
BOND FUND FUND
------------------------------------------------------------------------------------------------------------------
Purchases
--------
<S> <C> <C>
U.S. government securities $232,137 $435,433
-------- --------
Investments (non-U.S. government securities) $421,239 $187,259
-------- --------
Sales
-----
U.S. government securities $311,371 $264,010
-------- --------
Investments (non-U.S. government securities) $326,690 $312,225
-------- --------
</TABLE>
The cost and unrealized appreciation and depreciation in the value of the
investments owned by each fund, as computed on a federal income tax basis, are
as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
INVESTMENT GRADE RESEARCH BOND
BOND FUND FUND
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggregate cost $1,049,843 $1,054,991
--------- ----------
Gross unrealized appreciation $ 6,587 $ 13,205
Gross unrealized depreciation (16,411) (13,485)
---------- ----------
Net unrealized depreciation $ (9,824) $ (280)
========== ==========
</TABLE>
(5) Shares of Beneficial Interest
Each 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>
INTERMEDIATE INVESTMENT GRADE BOND FUND
----------------------------------------------------------------------
Class A shares SIX MONTHS ENDED OCTOBER 31, 2000 YEAR ENDED APRIL 30, 2000
--------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 106 $ 1,000
Shares issued to shareholders in
reinvestment of distributions 3,924 37,260 7,160 68,207
Shares reacquired -- -- (1) (16)
----- --------- ------- --------
Net increase 3,924 $ 37,260 7,265 $ 69,201
===== ========- ======- =======
INTERMEDIATE INVESTMENT GRADE BOND FUND
---------------------------------------------------------------------
Class I shares SIX MONTHS ENDED OCTOBER 31, 2000 YEAR ENDED APRIL 30, 2000
--------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------
Shares sold -- $ -- -- $ --
Shares issued to shareholders in
reinvestment of distributions+ -- -- 0 4
Shares reacquired -- -- -- --
----- --------- ------- -------
Net increase -- $ -- 0 $ 4
===== ========= ======= =======
RESEARCH BOND FUND
---------------------------------------------------------------------
Class A shares SIX MONTHS ENDED OCTOBER 31, 2000 YEAR ENDED APRIL 30, 2000
--------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------
Shares sold 265 $ 2,511 -- $ --
Shares issued to shareholders in
reinvestment of distributions 4,121 38,752 7,225 67,749
Shares reacquired+ (0) (3) (207) (1,982)
----- --------- ------- -------
Net increase 4,386 $ 41,260 7,018 $65,767
===== ========= ======= =======
RESEARCH BOND FUND
---------------------------------------------------------------------
Class I shares SIX MONTHS ENDED OCTOBER 31, 2000 YEAR ENDED APRIL 30, 2000
--------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------
Shares sold -- $ -- -- $ --
Shares issued to shareholders in
reinvestment of distributions+ 0 2 0 4
Shares reacquired -- -- -- --
----- --------- ------- -------
Net increase 0 $ 2 0 $ 4
===== ========= ======= =======
+Number of shares was less than 1.
</TABLE>
(6) Line of Credit
The funds and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the Intermediate
Investment Grade Bond Fund and Research Bond Fund for the period ended October
31, 2000, was $4 and $2, respectively. The funds had no significant borrowings
during the period.
(7) Financial Instruments
Research Bond 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, swap agreements, 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.
Forward Foreign Currency Exchange Contracts
At October 31, 2000, the Research Bond Fund had forward foreign currency
purchases and sales under master netting agreements amounted to a net
receivable of $134 with Deutsche Bank.
At October 31, 2000, Research Bond Fund had sufficient cash and/or securities
to cover any commitments under these contracts.
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND
MFS(R) RESERACH BOND FUND
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INVESTMENT MANAGEMENT
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(c)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
INC-3B 12/00 1MM
