UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2464
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MFS SERIES TRUST IX
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Stephen E. Cavan
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: April 30, 2003
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Date of reporting period: April 30, 2003
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds
ANNUAL REPORT 4/30/03
MFS(R) BOND FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) BOND FUND
The fund seeks as high a level of current income as is believed to be consistent
with prudent risk. Its secondary objective is to protect shareholders' capital.
TABLE OF CONTENTS
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LETTER FROM THE CHAIRMAN 1
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MFS ORIGINAL RESEARCH(R) 4
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MANAGEMENT REVIEW 5
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PERFORMANCE SUMMARY 8
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PORTFOLIO OF INVESTMENTS 12
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FINANCIAL STATEMENTS 24
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NOTES TO FINANCIAL STATEMENTS 37
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INDEPENDENT AUDITORS' REPORT 47
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TRUSTEES AND OFFICERS 48
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MONEY MANAGEMENT FOR ALL TYPES
OF INVESTORS 50
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MFS PRIVACY POLICY 51
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FEDERAL TAX INFORMATION 51
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CONTACT INFORMATION 52
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ASSET ALLOCATION 53
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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LETTER FROM THE CHAIRMAN
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Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers - no matter how
talented they may be - can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS' culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
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MFS ORIGINAL RESEARCH(R)
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THE HUMAN SIDE OF MONEY MANAGEMENT
For more than 75 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with insight
and care.
Our success, we believe, has to do with the fact that we see investors as people
with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain
first-hand knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
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MANAGEMENT REVIEW
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A TALE OF TWO HALVES
The year ended April 30, 2003 was a period of great volatility for U.S.
securities' markets, characterized by a sluggish U.S. economic recovery and
record low interest rates. For corporate bond investors, it was a tale of two
half-years.
In the first half of the period, the weak U.S. economy, corporate liquidity
concerns and accounting scandals at major U.S. corporations shook the market's
confidence and sent investors seeking safe havens in government and agency
bonds. This was one of the most difficult periods in the history of the
corporate bond market. During the second half of the period, beginning in
October 2002, companies began to address investor concerns about liquidity and
the amount of debt on their books. New government regulations were put in place
to restore investor confidence in the credibility of financial statements.
Finally, historically attractive corporate bond values began to attract investor
attention, leading to a late-year recovery in corporate issues that lasted
through the end of the period.
The second half of the period saw corporate bonds perform better than in any
six-month period on record. The fund, which was overweighted in corporate bonds
compared to its benchmarks, the Lehman Brothers Government/Credit Index (the
Lehman Index) and the Lipper BBB Corporate Bond Fund Index, outperformed both
benchmarks for the period. During the period, the fund also outperformed the
average corporate debt "BBB"-rated fund tracked by Lipper Inc., an independent
firm that reports mutual fund performance.
PORTFOLIO CONCENTRATION AS OF 4/30/03
PIE CHART
High Grade Corporates 54.8%
High Yield Corporates 10.4%
Mortgage Backed 8.9%
U.S. Treasuries 6.5%
Commercial Mortgage Backed Securities 6.5%
Government Agency 4.0%
Emerging Markets 3.9%
Municipals 1.9%
International 1.4%
Cash 1.0%
Asset Backed 0.7%
The portfolio is actively managed, and current holdings may be different.
PERFORMANCE POSITIVES
In our view, three main factors drive fixed-income returns: interest rates,
sector allocation, and individual security selection. Our strategy is to be
neutral on interest rates and to try to add value through sector allocation and
security selection, those areas where we believe we have the most control.
Our aim is to overweight sectors that our analysts believe will perform best,
using our in-house Original Research(SM) process to enhance individual security
selection. Our goal is to avoid issuers that may default or face other credit
pressures and 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 research process - which 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 overall market.
In the first half of the period, despite the significant decline in the
corporate bond market, we increased our corporate bond weightings in several key
sectors as it became apparent that big name corporate failures were not evidence
of structural economic weaknesses within various industries, but rather
company-specific crises resulting from accounting irregularities. Our
overweighted position in corporate debt, which hurt first-half performance, led
to significant gains after the rebound in corporate markets began in the fourth
quarter of 2002.
Early in the period, our research team identified the telecommunications sector
as what we felt was an area of opportunity. After WorldCom's accounting scandal
was revealed, we took a wait-and-see approach to the sector until it became
apparent that accounting issues were not as widespread in the sector as
originally thought. Then we acted aggressively, taking positions in bonds issued
by more traditional wireline telecommunication companies such as Verizon and
Telus (local phone service providers serving the Eastern U.S. and Western
Canada, respectively) or wireless and long distance companies such as Sprint,
which stood to improve its competitive position after WorldCom's decline.
We also owned a sizable stake in electric utility bonds, which suffered in
October from industry-wide liquidity concerns but later rebounded as companies
began addressing balance sheet issues. After the Enron crisis we took a fresh
look at the utility sector, seeking out bonds issued by more traditional gas and
electric providers, which were less dependent on energy trading operations.
Holdings such as PSEG Power and First Energy benefited greatly from the improved
conditions in the utilities sector.
DETRACTORS FROM PERFORMANCE
Although our exposure was small, we held some WorldCom bonds, which hurt
performance over the period. Our auto industry holdings also hurt performance
over the period. The auto sector weakened as we think the market began to worry
that unusually strong sales were sacrificing future demand and that the huge
incentives that stimulated demand were cutting into profits. The sector
recovered some lost ground as the corporate market improved, however, it remains
one of the more challenging sectors in the market.
/s/ William J. Adams
William J. Adams
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.
These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
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PERFORMANCE SUMMARY THROUGH 4/30/03
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The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmark. Performance results include
the deduction of the maximum applicable sales charge and reflect the percentage
change in net asset value, including reinvestment of dividends and capital gains
distributions. 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. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. (See
Notes to Performance Summary.)
LINE CHART
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
4/93 4/95 4/97 4/99 4/01 4/03
Lehman Brothers/Government Credit Index $10,000 $10,814 $12,539 $14,836 $16,791 $20,290
Lipper BBB Corporate Bond Fund Index 10,000 10,827 12,823 14,498 16,305 19,112
MFS Bond Fund - Class A 9,525 10,484 12,417 14,274 15,495 18,602
TOTAL RETURNS
Cumulative without sales charge
Class
Share inception
class date 1-yr 3-yr 5-yr 10-yr
A 5/8/74 12.84% 32.32% 34.52% 95.29%
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B 9/7/93 12.09% 29.63% 29.98% 82.10%
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C 1/3/94 12.02% 29.57% 29.84% 82.73%
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I 1/2/97 13.17% 33.42% 36.50% 99.22%
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R 12/31/02 12.77% 32.24% 34.43% 95.17%
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529A 7/31/02 12.68% 32.13% 34.33% 95.01%
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529B 7/31/02 12.00% 31.34% 33.52% 93.84%
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529C 7/31/02 12.01% 31.35% 33.53% 93.85%
Average annual without sales charge
Share
class 1-yr 3-yr 5-yr 10-yr
A 12.84% 9.79% 6.11% 6.92%
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B 12.09% 9.04% 5.38% 6.18%
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C 12.02% 9.02% 5.36% 6.21%
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I 13.17% 10.09% 6.42% 7.14%
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R 12.77% 9.76% 6.10% 6.92%
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529A 12.68% 9.73% 6.08% 6.91%
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529B 12.00% 9.51% 5.95% 6.84%
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529C 12.01% 9.52% 5.95% 6.84%
Average annual with sales charge
A 7.48% 8.02% 5.08% 6.40%
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B 8.09% 8.19% 5.07% 6.18%
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C 11.02% 9.02% 5.36% 6.21%
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529A 7.32% 7.97% 5.05% 6.39%
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529B 8.00% 8.67% 5.65% 6.84%
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529C 11.01% 9.52% 5.95% 6.84%
Class I and R shares have no sales charge. Please see the Notes to Performance
Summary for details.
Comparative benchmarks
Average Annual
Average Corporate Debt
"BBB"-Rated Fund+ 10.34% 8.81% 5.72% 6.89%
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Lehman Brothers
Government/Credit Index# 12.43% 10.65% 7.77% 7.33%
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Lipper BBB Corporate Bond
Fund Index+ 10.77% 8.90% 5.92% 6.69%
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX - Measures the performance of all debt
obligations of the U.S. Treasury, U.S. government agencies, and all
investment-grade domestic corporate debt.
LIPPER BBB CORPORATE BOND FUND INDEX - Measures the performance of investment-
grade bond funds.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A and 529A results, including sales charge, reflects the deduction of the
maximum 4.75% sales charge. Class B and 529B results, including sales charge,
reflects the deduction of the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C and 529C results,
including sales charge, redeemed within one year from the end of the calendar
month of purchase reflects the deduction of the 1% CDSC. Class I shares have no
sales charges and are available only to certain investors. Class R shares have
no sales charges and are available only to certain retirement plans. Class 529A,
529B, and 529C shares are only available in conjunction with qualified tuition
programs, such as the MFS 529 Savings Plan.
Performance for share classes offered after class A shares includes the
performance of the fund's class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences in
sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of blended
performance generally results in higher performance for share classes with
higher operating expenses than the initial share class, and lower performance
for share classes with lower operating expenses than the initial share class.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. All results
are historical and assume the reinvestment of dividends and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT THE
DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS
OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Interest Rate Risk: When interest rates rise, the prices of fixed income
securities in the fund's portfolio will generally fall. Conversely, when
interest rates fall, the prices of fixed income securities in the fund's
portfolio will generally rise.
Credit Risk: Credit risk is the risk that the issuer of a fixed income security
will not be able to pay principal and interest when due. Rating agencies assign
credit ratings to certain fixed income securities to indicate their credit risk.
The price of a fixed income security will generally fall if the issuer defaults
on its obligation to pay principal or interest, the rating agencies downgrade
the issuer's credit rating, or other news affects the market's perception of the
issuer's credit risk.
The portfolio may invest in mortgage-backed securities, which during times of
fluctuating interest rates, may increase or decrease more than other fixed-
income securities.
Investments in high yield or lower-rated securities may provide greater returns
but are subject to greater-than-average risk.
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
These risks may increase share price volatility. Please see the prospectus for
details.
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.
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PORTFOLIO OF INVESTMENTS 4/30/03
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The Portfolio of Investments is a list of all securities owned by your fund. It
is categorized by broad-based asset classes.
Bonds - 95.7%
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PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
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U.S. Bonds - 81.0%
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Aerospace & Defense - 1.6%
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BAE Systems Holdings, Inc., 6.4s, 2011## $7,006 $7,389,165
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Litton Industries, Inc., 8s, 2009 5,880 7,136,180
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Northrop Grumman Corp., 7s, 2006 2,654 2,955,622
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Raytheon Co., 8.2s, 2006 4,072 4,675,173
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Raytheon Co., 8.3s, 2010 5,650 6,720,257
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$28,876,397
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Airlines - 0.8%
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Airplane Pass-Through Trust, 10.875s, 2019 $1,482 $29,631
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Continental Airlines Pass-Through Trust, Inc.,
6.648s, 2017 1,122 958,638
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Continental Airlines Pass-Through Trust, Inc.,
6.545s, 2019 7,905 6,870,997
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Continental Airlines Pass-Through Trust, Inc.,
7.256s, 2020 2,901 2,478,497
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Delta Air Lines, Inc., 7.379s, 2010 4,299 4,200,637
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Jet Equipment Trust, 11.44s, 2014## 3,500 350
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$14,538,750
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Automotive - 4.4%
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DaimlerChrysler NA Holdings, 7.2s, 2009 $4,267 $4,869,074
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DaimlerChrysler NA Holdings, 8.5s, 2031 3,878 4,850,017
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Dana Corp., 9s, 2011 3,235 3,509,975
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Dura Operating Corp., 8.625s, 2012 2,505 2,598,938
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Ford Motor Co., 6.625s, 2028 8,266 6,741,733
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Ford Motor Credit Co., 6.875s, 2006 5,435 5,622,524
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Ford Motor Credit Co., 7.875s, 2010 8,888 9,203,168
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General Motors Acceptance Corp., 5.36s, 2004 4,856 4,993,808
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General Motors Acceptance Corp., 6.75s, 2006 8,314 8,767,013
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General Motors Acceptance Corp., 7.25s, 2011 8,400 8,665,591
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General Motors Acceptance Corp., 8s, 2031 7,951 8,281,269
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Lear Corp., 7.96s, 2005 3,952 4,228,640
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TRW Automotive, Inc., 9.375s, 2013## 3,830 4,184,275
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$76,516,025
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Banks & Finance - 4.9%
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Bank of America Corp., 7.4s, 2011 $4,807 $5,770,751
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Bank of America Corp., 4.875s, 2012 5,046 5,193,661
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Citigroup, Inc., 7.25s, 2010 4,756 5,638,186
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Countrywide Home Loans, Inc., 5.5s, 2006 5,987 6,443,401
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Credit Suisse First Boston USA, Inc., 4.625s, 2008 880 917,101
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Credit Suisse First Boston USA, Inc., 6.5s, 2012 11,174 12,299,110
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Goldman Sachs Group, Inc., 5.5s, 2014 4,283 4,479,615
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Household Finance Corp., 6.75s, 2011 2,384 2,686,222
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Household Finance Corp., 6.375s, 2012 1,519 1,675,762
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KFW International Finance, Inc., 9.4s, 2004 5,127 5,555,499
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Lehman Brothers Holdings, Inc., 8.25s, 2007 10,490 12,461,490
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Morgan Stanley Dean Witter, 6.1s, 2006 4,878 5,351,532
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Morgan Stanley Dean Witter, 6.6s, 2012 2,882 3,262,395
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Popular North America, Inc., 4.25s, 2008 7,630 7,717,898
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SLM Corp., 5.375s, 2013 6,401 6,764,180
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$86,216,803
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Building Materials - 1.5%
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American Standard, Inc., 7.375s, 2008 $5,600 $6,048,000
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Building Materials Corp., 8s, 2008 4,685 4,193,075
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CRH America, Inc., 6.95s, 2012 3,469 3,940,222
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Masco Corp., 5.875s, 2012 7,183 7,635,701
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Nortek, Inc., 9.25s, 2007 3,820 3,939,375
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$25,756,373
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Chemicals - 0.8%
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Dow Chemical Co., 5s, 2007 $4,002 $4,162,836
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Dow Chemical Co., 5.75s, 2008 8,505 9,164,750
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$13,327,586
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Commercial Mortgage & Other Asset-Backed - 7.2%
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Amresco Commercial Mortgage Funding I Corp., 7s, 2029## $4,595 $4,573,661
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BCF LLC, 7.75s, 2026## 1,332 1,059,159
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Chase Commercial Mortgage Securities Corp., 6.6s, 2012 4,040 3,873,893
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Chase Commercial Mortgage Securities Corp., 6.39s, 2030 4,435 5,015,239
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Citibank Credit Card Issuance Trust, 6.65s, 2008 3,966 4,326,613
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Commercial Mortgage Acceptance Corp., 1.204s, 2008 (Interest Only) 89,976 4,271,269
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Commercial Mortgage Acceptance Corp., 5.44s, 2030 4,362 3,666,587
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Commercial Mortgage Acceptance Corp., 6.04s, 2030 7,810 8,669,255
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Commercial Mortgage Acceptance Corp., 7.03s, 2031 5,600 6,514,784
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Commercial Mortgage Pass-Through Certificate,
0.82s, 2018 (Interest Only) 128,567 3,941,376
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Commercial Mortgage Pass-Through Certificate, 5.645s, 2032 3,417 3,207,442
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CPS Auto Trust, 3.52s, 2009## 4,000 4,061,240
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Criimi Mae Commercial Mortgage Trust, 7s, 2033## 4,668 5,200,338
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Falcon Auto Dealership LLC, 3.88s, 2023 (Interest Only) 22,157 4,237,570
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First Union Lehman Brothers Bank, 6.56s, 2035 5,731 6,508,340
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First Union Lehman Brothers Commercial, 7s, 2014 3,028 2,755,944
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GMAC Commercial Mortgage Security, Inc., 6.02s, 2033 4,140 3,632,850
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LB Commercial Conduit Mortgage Trust, 1.187s, 2028 63,176 2,384,416
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LB Commercial Conduit Mortgage Trust, 6.78s, 2031 3,960 4,536,366
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Morgan Stanley Capital I, Inc., 6.86s, 2010 6,327 6,291,690
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Morgan Stanley Capital I, Inc., 0.85s, 2030 (Interest Only)## 173,708 5,343,559
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Morgan Stanley Capital I, Inc., 6.01s, 2030 3,042 3,281,969
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Morgan Stanley Capital I, Inc., 6.48s, 2030 4,287 4,834,745
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Morgan Stanley Capital I, Inc., 7.642s, 2039 7,510 7,244,536
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Morgan Stanley Dean Witter Capital, 5.72s, 2032 6,146 6,741,386
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Mortgage Capital Funding, Inc., 1.098s, 2031 (Interest
Only) 78,867 2,742,346
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Residential Asset Mortgage Products, Inc., 3.49s, 2029 3,484 3,545,431
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TIAA Retail Commercial Real Estate Mortgage Trust,
7.17s, 2032## 2,888 3,190,270
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$125,652,274
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Conglomerates - 0.8%
- ---------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.7s, 2007 $1,244 $1,480,139
- ---------------------------------------------------------------------------------------------------
General Electric Capital Corp. Medium Term Note,
6.75s, 2032 2,591 2,998,331
- ---------------------------------------------------------------------------------------------------
Tyco International Group S.A., 5.8s, 2006 4,969 4,894,465
- ---------------------------------------------------------------------------------------------------
Tyco International Group S.A., 6.75s, 2011 4,277 4,277,000
- ---------------------------------------------------------------------------------------------------
$13,649,935
- ---------------------------------------------------------------------------------------------------
Consumer Goods & Services - 1.2%
- ---------------------------------------------------------------------------------------------------
Avery Dennison Corp, 4.875s, 2013 $2,052 $2,093,998
- ---------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 5,243 5,732,529
- ---------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2010 4,944 5,236,759
- ---------------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.5s, 2009 2,450 2,413,250
- ---------------------------------------------------------------------------------------------------
Newell Rubbermaid, Inc., 4.625s, 2009 3,428 3,517,659
- ---------------------------------------------------------------------------------------------------
Pliant Corp., 13s, 2010 3,040 2,812,000
- ---------------------------------------------------------------------------------------------------
$21,806,195
- ---------------------------------------------------------------------------------------------------
Energy - 4.3%
- ---------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 8.125s, 2011## $4,115 $4,444,200
- ---------------------------------------------------------------------------------------------------
Conocophillips, 5.9s, 2032 5,225 5,411,162
- ---------------------------------------------------------------------------------------------------
Devon Financing Corp. U L C, 7.875s, 2031 8,236 10,196,885
- ---------------------------------------------------------------------------------------------------
Dresser, Inc., 9.375s, 2011 4,215 4,341,450
- ---------------------------------------------------------------------------------------------------
Forest Oil Corp., 8s, 2008 4,920 5,215,200
- ---------------------------------------------------------------------------------------------------
Kern River Funding Corp., 4.893s, 2018## 4,578 4,572,232
- ---------------------------------------------------------------------------------------------------
Occidental Petroleum Corp., 7.65s, 2006 4,498 5,066,367
- ---------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.625s, 2005 3,772 4,207,534
- ---------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.25s, 2011 7,829 9,166,984
- ---------------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 8.875s, 2008 870 910,237
- ---------------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625s, 2008 3,224 3,385,200
- ---------------------------------------------------------------------------------------------------
Pioneer Natural Resources Co., 9.625s, 2010 1,635 2,010,839
- ---------------------------------------------------------------------------------------------------
Reliant Energy Resources Corp., 8.125s, 2005 5,793 6,256,440
- ---------------------------------------------------------------------------------------------------
Valero Energy Corp. New, 7.5s, 2032 5,601 6,383,482
- ---------------------------------------------------------------------------------------------------
XTO Energy, Inc., 6.25s, 2013## 3,814 3,976,095
- ---------------------------------------------------------------------------------------------------
$75,544,307
- ---------------------------------------------------------------------------------------------------
Environmental Services - 1.3%
- ---------------------------------------------------------------------------------------------------
Allied Waste Industries, Inc., 10s, 2009 $6,400 $6,840,000
- ---------------------------------------------------------------------------------------------------
USA Waste Services, Inc., 7s, 2004 9,665 10,544,114
- ---------------------------------------------------------------------------------------------------
WMX Technologies, Inc., 7.1s, 2026 4,577 5,105,506
- ---------------------------------------------------------------------------------------------------
$22,489,620
- ---------------------------------------------------------------------------------------------------
Food & Beverage Products - 1.8%
- ---------------------------------------------------------------------------------------------------
Anheuser Busch Cos., Inc., 6.5s, 2043 $4,140 $4,708,848
- ---------------------------------------------------------------------------------------------------
Coors Brewing Co., 6.375s, 2012 4,370 4,893,172
- ---------------------------------------------------------------------------------------------------
Dole Food, Inc., 8.625s, 2009 8,391 9,083,258
- ---------------------------------------------------------------------------------------------------
Nabisco, Inc., 6.375s, 2005 2,270 2,378,197
- ---------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 8.25s, 2011 8,627 10,006,932
- ---------------------------------------------------------------------------------------------------
$31,070,407
- ---------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.7%
- ---------------------------------------------------------------------------------------------------
Meadwestvaco Corp., 6.85s, 2012 $5,253 $5,942,981
- ---------------------------------------------------------------------------------------------------
Meadwestvaco Corp., 6.8s, 2032 6,805 7,201,480
- ---------------------------------------------------------------------------------------------------
$13,144,461
- ---------------------------------------------------------------------------------------------------
Gaming & Hotels - 1.0%
- ---------------------------------------------------------------------------------------------------
Harrahs Operating, Inc., 7.125s, 2007 $6,189 $6,794,321
- ---------------------------------------------------------------------------------------------------
MGM Grand, Inc., 6.95s, 2005 6,916 7,175,350
- ---------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.5s, 2010 2,847 3,188,640
- ---------------------------------------------------------------------------------------------------
$17,158,311
- ---------------------------------------------------------------------------------------------------
Healthcare - 1.0%
- ---------------------------------------------------------------------------------------------------
HCA - The Healthcare Co., 8.75s, 2010 $5,802 $6,785,364
- ---------------------------------------------------------------------------------------------------
HCA - The Healthcare Co., 7.875s, 2011 8,787 9,889,531
- ---------------------------------------------------------------------------------------------------
$16,674,895
- ---------------------------------------------------------------------------------------------------
Insurance - 1.4%
- ---------------------------------------------------------------------------------------------------
Metlife, Inc., 6.5s, 2032 $5,975 $6,627,733
- ---------------------------------------------------------------------------------------------------
Prudential Insurance Co., 7.65s, 2007## 4,623 5,259,375
- ---------------------------------------------------------------------------------------------------
Safeco Corp., 4.875s, 2010 4,145 4,218,109
- ---------------------------------------------------------------------------------------------------
Safeco Corp., 7.25s, 2012 2,351 2,706,401
- ---------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp. New, 3.75s, 2008## 3,184 3,205,877
- ---------------------------------------------------------------------------------------------------
Willis Corroon Corp., 9s, 2009 2,250 2,407,500
- ---------------------------------------------------------------------------------------------------
$24,424,995
- ---------------------------------------------------------------------------------------------------
Machinery - 1.2%
- ---------------------------------------------------------------------------------------------------
Ingersoll-Rand Co., 6.25s, 2006 $4,675 $5,156,015
- ---------------------------------------------------------------------------------------------------
Joy Global, Inc., 8.75s, 2012 2,595 2,802,600
- ---------------------------------------------------------------------------------------------------
Kennametal, Inc., 7.2s, 2012 5,246 5,584,745
- ---------------------------------------------------------------------------------------------------
New Terex Corp., 8.875s, 2008 2,595 2,698,800
- ---------------------------------------------------------------------------------------------------
Timken Co., 5.75s, 2010 4,813 4,905,116
- ---------------------------------------------------------------------------------------------------
$21,147,276
- ---------------------------------------------------------------------------------------------------
Media - Cable - Entertainment - 6.6%
- ---------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 7.7s, 2032 $2,837 $3,170,177
- ---------------------------------------------------------------------------------------------------
Belo Ah Corp., 7.75s, 2027 6,650 7,627,357
- ---------------------------------------------------------------------------------------------------
Chancellor Media Corp., 8s, 2008 5,140 5,885,300
- ---------------------------------------------------------------------------------------------------
Clear Channel Communications, 7.65s, 2010 3,552 4,156,913
- ---------------------------------------------------------------------------------------------------
Comcast Corp., 5.85s, 2010 3,997 4,253,124
- ---------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.75s, 2010 11,887 14,275,075
- ---------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.875s, 2007 5,024 5,287,760
- ---------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625s, 2011 5,557 5,848,743
- ---------------------------------------------------------------------------------------------------
Echostar DBS Corp., 9.125s, 2009 6,360 7,155,000
- ---------------------------------------------------------------------------------------------------
Granite Broadcasting Corp., 8.875s, 2008 4,000 3,760,000
- ---------------------------------------------------------------------------------------------------
Houghton Mifflin Co., 9.875s, 2013## 415 448,200
- ---------------------------------------------------------------------------------------------------
News America Holdings, Inc., 7.75s, 2024 6,693 7,613,066
- ---------------------------------------------------------------------------------------------------
News America Holdings, Inc., 8.5s, 2025 5,388 6,435,853
- ---------------------------------------------------------------------------------------------------
News America Holdings, Inc., 6.55s, 2033## 2,123 2,156,342
- ---------------------------------------------------------------------------------------------------
TCI Communications Financing III, 9.65s, 2027 16,336 18,176,430
- ---------------------------------------------------------------------------------------------------
TCI Communications, Inc, 9.8s, 2012 3,539 4,565,982
- ---------------------------------------------------------------------------------------------------
Time Warner, Inc., 10.15s, 2012 5,459 7,259,618
- ---------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.125s, 2013 3,564 4,356,078
- ---------------------------------------------------------------------------------------------------
Walt Disney Co., 6.75s, 2006 3,660 4,014,489
- ---------------------------------------------------------------------------------------------------
$116,445,507
- ---------------------------------------------------------------------------------------------------
Metals & Minerals - 0.1%
- ---------------------------------------------------------------------------------------------------
Phelps Dodge Corp., 8.75s, 2011 $1,042 $1,176,210
- ---------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.3%
- ---------------------------------------------------------------------------------------------------
Wyeth Corp., 5.25s, 2013 $4,749 $4,967,867
- ---------------------------------------------------------------------------------------------------
Railroads - 0.7%
- ---------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.34s, 2003 $3,024 $3,095,028
- ---------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.39s, 2004 5,585 5,928,349
- ---------------------------------------------------------------------------------------------------
Union Pacific Corp., 5.75s, 2007 2,620 2,861,061
- ---------------------------------------------------------------------------------------------------
$11,884,438
- ---------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 2.1%
- ---------------------------------------------------------------------------------------------------
EOP Operating Ltd., 6.625s, 2005 $6,569 $7,017,479
- ---------------------------------------------------------------------------------------------------
EOP Operating Ltd., 8.375s, 2006 4,920 5,600,401
- ---------------------------------------------------------------------------------------------------
EOP Operating Ltd., 6.8s, 2009 4,476 5,042,080
- ---------------------------------------------------------------------------------------------------
Simon Property Group LP, 6.375s, 2007 6,890 7,541,670
- ---------------------------------------------------------------------------------------------------
Simon Property Group LP, 6.35s, 2012 4,283 4,621,756
- ---------------------------------------------------------------------------------------------------
Vornado Reality Trust, 5.625s, 2007 6,252 6,437,284
- ---------------------------------------------------------------------------------------------------
$36,260,670
- ---------------------------------------------------------------------------------------------------
Retail & Supermarkets - 2.2%
- ---------------------------------------------------------------------------------------------------
Dollar General Corp., 8.625s, 2010 $2,580 $2,812,200
- ---------------------------------------------------------------------------------------------------
Gap, Inc., 10.55s, 2008 5,860 6,988,050
- ---------------------------------------------------------------------------------------------------
JC Penney Corp., Inc., 8s, 2010 3,552 3,774,000
- ---------------------------------------------------------------------------------------------------
Kroger Co., 7.8s, 2007 5,052 5,795,215
- ---------------------------------------------------------------------------------------------------
Limited, Inc., 6.125s, 2012 4,016 4,305,674
- ---------------------------------------------------------------------------------------------------
Sears Roebuck Acceptance Corp., 7s, 2032 4,212 4,301,652
- ---------------------------------------------------------------------------------------------------
Toys R Us, Inc., 7.875s, 2013 4,242 4,411,854
- ---------------------------------------------------------------------------------------------------
Tricon Global Restaurants, Inc., 8.875s, 2011 5,219 6,067,088
- ---------------------------------------------------------------------------------------------------
$38,455,733
- ---------------------------------------------------------------------------------------------------
Telecommunications - 4.4%
- ---------------------------------------------------------------------------------------------------
Alltel Corp., 7.875s, 2032 $6,237 $8,143,015
- ---------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.35s, 2006 5,954 6,632,935
- ---------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.75s, 2031 3,116 3,880,152
- ---------------------------------------------------------------------------------------------------
Citizens Communications Co., 8.5s, 2006 10,265 11,892,105
- ---------------------------------------------------------------------------------------------------
Citizens Communications Co., 7.625s, 2008 3,573 4,174,565
- ---------------------------------------------------------------------------------------------------
GTE Corp., 9.1s, 2003 5,934 5,966,227
- ---------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6.875s, 2028 14,155 13,093,375
- ---------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 2,794 2,981,114
- ---------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.8s, 2009 1,746 1,908,647
- ---------------------------------------------------------------------------------------------------
Verizon Global Funding Corp., 7.75s, 2030 12,921 15,970,706
- ---------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 3,132 3,375,103
- ---------------------------------------------------------------------------------------------------
$78,017,944
- ---------------------------------------------------------------------------------------------------
Tobacco - 0.7%
- ---------------------------------------------------------------------------------------------------
Altria Group, Inc., 7.75s, 2027 $2,973 $3,007,600
- ---------------------------------------------------------------------------------------------------
RJ Reynolds Tobacco Holdings, Inc., 7.25s, 2012 6,026 5,680,138
- ---------------------------------------------------------------------------------------------------
UST, Inc., 6.625s, 2012 3,605 4,074,821
- ---------------------------------------------------------------------------------------------------
$12,762,559
- ---------------------------------------------------------------------------------------------------
Transportation - 0.4%
- ---------------------------------------------------------------------------------------------------
Federal Express Corp., 9.65s, 2012 $5,930 $7,820,057
- ---------------------------------------------------------------------------------------------------
U.S. Government Agencies - 12.8%
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2006 $10,434 $11,476,075
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.875s, 2007 3,425 3,714,827
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 7.125s, 2005 14,620 16,056,576
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 6s, 2008 22,435 25,457,623
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 6.125s, 2012 11,611 13,346,519
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 6s, 2016 12,525 13,130,215
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 5.5s, 2017 15,067 15,684,865
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 6s, 2017 22,557 23,645,725
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 7.5s, 2030 5,590 5,960,338
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 7.5s, 2031 11,295 12,036,352
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 6.5s, 2032 51,193 53,487,778
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association TBA, 6s, 2021 7,000 7,284,375
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Association TBA, 5.5s, 2032 12,874 13,119,404
- ---------------------------------------------------------------------------------------------------
Government National Mortgage Association, 7.5s, 2023 267 285,530
- ---------------------------------------------------------------------------------------------------
Government National Mortgage Association, 6.5s, 2028 9,663 10,173,525
- ---------------------------------------------------------------------------------------------------
Government National Mortgage Association, 7.5s, 2028 157 167,847
- ---------------------------------------------------------------------------------------------------
$225,027,574
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 6.4%
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8s, 2021 $9,019 $12,651,610
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375s, 2031 23,248 25,367,566
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.375s, 2007 7,793 8,488,325
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 5.5s, 2008 6,071 6,815,645
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5s, 2010 23,918 28,474,570
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2012 7,970 8,559,854
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.875s, 2013 22,606 22,636,021
- ---------------------------------------------------------------------------------------------------
$112,993,591
- ---------------------------------------------------------------------------------------------------
Utilities - 8.4%
- ---------------------------------------------------------------------------------------------------
Beaver Valley Funding Corp. II, 9s, 2017 $7,774 $8,985,329
- ---------------------------------------------------------------------------------------------------
Centerpoint Energy Resources Corp., 7.875s, 2013## 6,888 7,903,980
- ---------------------------------------------------------------------------------------------------
DTE Energy Co., 7.05s, 2011 3,261 3,756,995
- ---------------------------------------------------------------------------------------------------
Entergy Mississippi, Inc., 6.2s, 2004 1,307 1,360,077
- ---------------------------------------------------------------------------------------------------
Exelon Generation Co. LLC, 6.95s, 2011 9,118 10,221,305
- ---------------------------------------------------------------------------------------------------
Firstenergy Corp., 6.45s, 2011 1,540 1,664,823
- ---------------------------------------------------------------------------------------------------
GGIB Funding Corp., 7.43s, 2011 3,056 3,223,065
- ---------------------------------------------------------------------------------------------------
Gulf States Utilities Co., 8.25s, 2004 658 694,497
- ---------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.4s, 2031 6,087 7,158,750
- ---------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.75s, 2032 6,032 7,393,978
- ---------------------------------------------------------------------------------------------------
Midamerican Energy Holdings Co., 5.875s, 2012 6,179 6,457,858
- ---------------------------------------------------------------------------------------------------
Midland Funding Corp., "B", 13.25s, 2006 925 1,042,938
- ---------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 0s to 2003, 8.5s to 2010 14,293 14,830,946
- ---------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375s, 2004 4,074 4,213,534
- ---------------------------------------------------------------------------------------------------
Nisource Finance Corp., 7.5s, 2003 3,099 3,195,537
- ---------------------------------------------------------------------------------------------------
Northeast Utilities, 8.58s, 2006 3,363 3,796,327
- ---------------------------------------------------------------------------------------------------
Oncor Electric Corp., 7s, 2022 5,631 6,200,953
- ---------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.85s, 2012 6,069 6,923,212
- ---------------------------------------------------------------------------------------------------
Progress Energy, Inc., 7s, 2031 4,691 5,259,455
- ---------------------------------------------------------------------------------------------------
PSEG Power, 7.75s, 2007## 3,518 3,685,105
- ---------------------------------------------------------------------------------------------------
PSEG Power, 7.75s, 2011 5,481 6,499,342
- ---------------------------------------------------------------------------------------------------
PSEG Power, 6.95s, 2012 1,852 2,113,019
- ---------------------------------------------------------------------------------------------------
PSEG Power, 8.625s, 2031 3,724 4,898,792
- ---------------------------------------------------------------------------------------------------
Toledo Edison Co., 7.875s, 2004 8,709 9,312,116
- ---------------------------------------------------------------------------------------------------
TXU Corp., 6.375s, 2006 9,312 9,917,280
- ---------------------------------------------------------------------------------------------------
Waterford 3 Funding Corp., 8.09s, 2017 6,431 6,917,467
- ---------------------------------------------------------------------------------------------------
$147,626,680
- ---------------------------------------------------------------------------------------------------
Total U.S. Bonds $1,421,433,440
- ---------------------------------------------------------------------------------------------------
Foreign Bonds - 14.7%
- ---------------------------------------------------------------------------------------------------
Australia - 0.3%
- ---------------------------------------------------------------------------------------------------
Burns Philip Capital Property Ltd., 9.75s, 2012 (Food &
Beverage Products)## $5,455 $5,455,000
- ---------------------------------------------------------------------------------------------------
Bulgaria - 0.2%
- ---------------------------------------------------------------------------------------------------
Republic of Bulgaria, 8.25s, 2015## $2,807 $3,159,131
- ---------------------------------------------------------------------------------------------------
Canada - 2.1%
- ---------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 6.95s, 2008 (Forest &
Paper Products) $4,281 $4,521,870
- ---------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 8.55s, 2010 (Forest &
Paper Products) 3,012 3,408,482
- ---------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 8.85s, 2030 (Forest &
Paper Products) 7,140 7,912,048
- ---------------------------------------------------------------------------------------------------
Anderson Exploration Ltd., 6.75s, 2011 (Oils) 2,572 2,905,182
- ---------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 7.875s, 2012 (Media) 5,413 5,791,910
- ---------------------------------------------------------------------------------------------------
Telus Corp., 8s, 2011 (Telecommunications) 10,737 12,132,810
- ---------------------------------------------------------------------------------------------------
$36,672,302
- ---------------------------------------------------------------------------------------------------
Chile - 0.1%
- ---------------------------------------------------------------------------------------------------
Codelco, Inc., 6.375s, 2012 (Metals & Minerals)## $2,308 $2,437,257
- ---------------------------------------------------------------------------------------------------
Denmark - 0.3%
- ---------------------------------------------------------------------------------------------------
Kingdom of Denmark, 6s, 2009 DKK 26,148 $4,421,403
- ---------------------------------------------------------------------------------------------------
Dominican Republic - 0.4%
- ---------------------------------------------------------------------------------------------------
Dominican Republic, 9.5s, 2006## $3,768 $3,984,660
- ---------------------------------------------------------------------------------------------------
Dominican Republic, 9.04s, 2013## 3,379 3,400,119
- ---------------------------------------------------------------------------------------------------
$7,384,779
- ---------------------------------------------------------------------------------------------------
Finland - 0.2%
- ---------------------------------------------------------------------------------------------------
Republic of Finland, 5.375s, 2013 EUR 3,539 $4,357,018
- ---------------------------------------------------------------------------------------------------
France - 2.7%
- ---------------------------------------------------------------------------------------------------
Crown European Holdings SA, 9.5s, 2011 (Containers)## $4,995 $5,319,675
- ---------------------------------------------------------------------------------------------------
France Telecom, 9.25s, 2011 (Telecommunications) 3,693 4,516,388
- ---------------------------------------------------------------------------------------------------
France Telecom, 10s, 2031 (Telecommunications) 4,192 5,575,846
- ---------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s, 2049 (Banks & Finance)## 15,382 18,242,898
- ---------------------------------------------------------------------------------------------------
Socgen Real Estate LLC, 7.64s, 2049 (Banks & Finance)## 12,658 14,086,455
- ---------------------------------------------------------------------------------------------------
$47,741,262
- ---------------------------------------------------------------------------------------------------
Germany - 0.5%
- ---------------------------------------------------------------------------------------------------
Deutsche Telekom International Finance, 8.5s, 2010
(Telecommunications) $6,613 $7,970,980
- ---------------------------------------------------------------------------------------------------
Ireland - 0.2%
- ---------------------------------------------------------------------------------------------------
Republic of Ireland, 5s, 2013 EUR 3,615 $4,321,670
- ---------------------------------------------------------------------------------------------------
Italy - 0.6%
- ---------------------------------------------------------------------------------------------------
Unicredito Italiano Capital Trust, 9.2s, 2049 (Banks &
Finance)## $8,744 $10,960,079
- ---------------------------------------------------------------------------------------------------
Malaysia - 0.4%
- ---------------------------------------------------------------------------------------------------
Petronas Capital Ltd., 7.875s, 2022 (Oil Services)## $6,000 $6,607,824
- ---------------------------------------------------------------------------------------------------
Mexico - 1.7%
- ---------------------------------------------------------------------------------------------------
BBVA Bancomer, 10.5s, 2011 (Banks & Finance)## $6,664 $7,596,960
- ---------------------------------------------------------------------------------------------------
Corp. Andina De Fomento, 6.875s, 2012 (Banks & Finance) 5,545 5,909,473
- ---------------------------------------------------------------------------------------------------
Pemex Finance Ltd., 9.69s, 2009 (Oil Services) 3,502 4,251,008
- ---------------------------------------------------------------------------------------------------
Pemex Finance Ltd., 10.61s, 2017 (Oil Services) 1,500 1,999,260
- ---------------------------------------------------------------------------------------------------
United Mexican States, 11.375s, 2016 1,013 1,448,590
- ---------------------------------------------------------------------------------------------------
United Mexican States, 11.5s, 2026 6,366 9,212,213
- ---------------------------------------------------------------------------------------------------
$30,417,504
- ---------------------------------------------------------------------------------------------------
Norway - 0.6%
- ---------------------------------------------------------------------------------------------------
Union Bank of Norway, 7.35s, 2049 (Banks & Finance)## $10,675 $10,769,260
- ---------------------------------------------------------------------------------------------------
Panama - 0.3%
- ---------------------------------------------------------------------------------------------------
Republic of Panama, 9.375s, 2029 $4,400 $4,895,000
- ---------------------------------------------------------------------------------------------------
Russia - 0.7%
- ---------------------------------------------------------------------------------------------------
Gazprom OAO, 9.625s, 2013 (Gas)## $2,490 $2,651,850
- ---------------------------------------------------------------------------------------------------
Mobile Telesystems Fin S A, 10.95s, 2004
(Telecommunications) 1,970 2,102,975
- ---------------------------------------------------------------------------------------------------
Mobile Telesystems Fin S A, 9.75s, 2008
(Telecommunications)## 3,758 4,002,270
- ---------------------------------------------------------------------------------------------------
OAO Siberian Oil Co., 10.75s, 2009 (Oils) 3,463 4,006,345
- ---------------------------------------------------------------------------------------------------
$12,763,440
- ---------------------------------------------------------------------------------------------------
Singapore - 0.3%
- ---------------------------------------------------------------------------------------------------
DBS Capital Funding Corp., 7.657s, 2049 (Banks &
Finance)## $4,304 $4,902,665
- ---------------------------------------------------------------------------------------------------
South Korea - 0.3%
- ---------------------------------------------------------------------------------------------------
Hanvit Bank, 12.75s, 2010 (Banks & Finance)## $4,108 $4,678,457
- ---------------------------------------------------------------------------------------------------
Spain - 0.3%
- ---------------------------------------------------------------------------------------------------
Telefonica Europe Bv, 8.25s, 2030 (Telecommunications) $4,322 $5,600,893
- ---------------------------------------------------------------------------------------------------
United Kingdom - 2.5%
- ---------------------------------------------------------------------------------------------------
Abbey National Capital Trust 1 Corp., 8.963s, 2049
(Banks & Finance) $4,214 $5,644,847
- ---------------------------------------------------------------------------------------------------
Barclays Bank PLC, 8.55s, 2049 (Banks & Finance)## 10,798 13,543,327
- ---------------------------------------------------------------------------------------------------
British Sky Broadcasting, 7.3s, 2006 (Media) 4,211 4,547,880
- ---------------------------------------------------------------------------------------------------
British Sky Broadcasting, 8.2s, 2009 (Media) 7,457 8,500,980
- ---------------------------------------------------------------------------------------------------
Orange PLC, 9s, 2009 (Telecommunications) 10,333 11,363,510
- ---------------------------------------------------------------------------------------------------
$43,600,544
- ---------------------------------------------------------------------------------------------------
Total Foreign Bonds $259,116,468
- ---------------------------------------------------------------------------------------------------
Municipal Bonds - 1.9%
- ---------------------------------------------------------------------------------------------------
Baltimore Maryland Project Revenue, 5.125s, 2042 $4,340 $4,473,542
- ---------------------------------------------------------------------------------------------------
Metropolitan Pier & Exposition Authority Illinois, 5s,
2028 9,540 9,732,708
- ---------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority New York Service
Contract, 5.5s, 2013 8,375 9,622,791
- ---------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority NY Rev., 5s, 2030 8,700 8,921,241
- ---------------------------------------------------------------------------------------------------
Total Municipal Bonds $32,750,282
- ---------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,610,918,605) $1,713,300,190
- ---------------------------------------------------------------------------------------------------
Repurchase Agreement - 2.9%
- ---------------------------------------------------------------------------------------------------
Goldman Sachs, dated 4/30/03, due 5/01/03, total to be received $50,837,864
(secured by various U.S. Treasury and federal Agency obligations in a jointly
traded account), at Cost $50,836 $50,836,000
- ---------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,661,754,605) $1,764,136,190
- ---------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.5)% (9,242,007)
- ---------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,754,894,183
- ---------------------------------------------------------------------------------------------------
##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.
DKK = Danish Krone EUR = Euro
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 4/30/03
ASSETS
Investments, at value (identified cost, $1,661,754,605) $1,764,136,190
- ---------------------------------------------------------------------------------------------------
Cash 172,415
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 5,810,876
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 3,749,480
- ---------------------------------------------------------------------------------------------------
Interest receivable 27,481,574
- ---------------------------------------------------------------------------------------------------
Total assets $1,801,350,535
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $7,814,267
- ---------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 8,114,491
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased 9,851,716
- ---------------------------------------------------------------------------------------------------
Payable for TBA purchase commitments 20,227,624
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 18,632
- ---------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 5,306
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 25,258
- ---------------------------------------------------------------------------------------------------
Administrative fee 844
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 398,214
- ---------------------------------------------------------------------------------------------------
Total liabilities $46,456,352
- ---------------------------------------------------------------------------------------------------
Net assets $1,754,894,183
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $1,767,358,415
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 102,394,744
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (107,134,231)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income (7,724,745)
- ---------------------------------------------------------------------------------------------------
Net assets $1,754,894,183
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 134,847,698
- ---------------------------------------------------------------------------------------------------
Class A shares
Net assets $1,116,853,201
- ---------------------------------------------------------------------------------------------------
Shares outstanding 85,721,500
- ---------------------------------------------------------------------------------------------------
Net asset value per share $13.03
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$13.03) $13.68
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $474,881,508
- ---------------------------------------------------------------------------------------------------
Shares outstanding 36,568,474
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.99
- ---------------------------------------------------------------------------------------------------
Class C shares
Net assets $108,717,746
- ---------------------------------------------------------------------------------------------------
Shares outstanding 8,380,445
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.97
- ---------------------------------------------------------------------------------------------------
Class I shares
Net assets $53,249,314
- ---------------------------------------------------------------------------------------------------
Shares outstanding 4,085,722
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.03
- ---------------------------------------------------------------------------------------------------
Class R shares
Net assets $871,897
- ---------------------------------------------------------------------------------------------------
Shares outstanding 66,908
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.03
- ---------------------------------------------------------------------------------------------------
Class 529A shares
Net assets $140,223
- ---------------------------------------------------------------------------------------------------
Shares outstanding 10,751
- ---------------------------------------------------------------------------------------------------
Net asset value per share $13.04
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$13.04) $13.69
- ---------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $80,746
- ---------------------------------------------------------------------------------------------------
Shares outstanding 6,222
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.98
- ---------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $99,548
- ---------------------------------------------------------------------------------------------------
Shares outstanding 7,676
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.97
- ---------------------------------------------------------------------------------------------------
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, Class C, Class 529A, Class 529B and Class 529C shares.
See notes to financial statements.
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
FOR YEAR ENDED 4/30/03
NET INVESTMENT INCOME
Interest income $105,557,932
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $6,271,838
- --------------------------------------------------------------------------------------------------
Trustees' compensation 54,202
- --------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 1,635,720
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 3,135,366
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 4,387,403
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 1,092,221
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 286
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 100
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 281
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 302
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 72
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 71
- --------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 76
- --------------------------------------------------------------------------------------------------
Administrative fee 152,904
- --------------------------------------------------------------------------------------------------
Custodian fee 478,493
- --------------------------------------------------------------------------------------------------
Postage 211,561
- --------------------------------------------------------------------------------------------------
Printing 112,901
- --------------------------------------------------------------------------------------------------
Auditing fees 44,444
- --------------------------------------------------------------------------------------------------
Legal fees 7,317
- --------------------------------------------------------------------------------------------------
Miscellaneous 1,189,486
- --------------------------------------------------------------------------------------------------
Total expenses $18,775,044
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (35,339)
- --------------------------------------------------------------------------------------------------
Net expenses $18,739,705
- --------------------------------------------------------------------------------------------------
Net investment income $86,818,227
- --------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
- --------------------------------------------------------------------------------------------------
Investment transactions $(3,367,367)
- --------------------------------------------------------------------------------------------------
Futures contracts 1,957,220
- --------------------------------------------------------------------------------------------------
Foreign currency transactions (1,162,369)
- --------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions $(2,572,516)
- --------------------------------------------------------------------------------------------------
Change in unrealized appreciation
- --------------------------------------------------------------------------------------------------
Investments $111,659,902
- --------------------------------------------------------------------------------------------------
Futures contracts 28,126
- --------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies 13,159
- --------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation $111,701,187
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency $109,128,671
- --------------------------------------------------------------------------------------------------
Increase in net assets from operations $195,946,898
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting
from operations, any distributions, and any shareholder transactions.
YEARS ENDED 4/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $86,818,227 $85,604,988
- ---------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions (2,572,516) (7,862,814)
- ---------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation 111,701,187 5,310,337
- ----------------------------------------------------------- ------------ ------------
Increase in net assets from operations $195,946,898 $83,052,511
- ----------------------------------------------------------- ------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- ---------------------------------------------------------------------------------------------------
Class A $(63,802,266) $(57,886,635)
- ---------------------------------------------------------------------------------------------------
Class B (23,772,406) (20,914,707)
- ---------------------------------------------------------------------------------------------------
Class C (5,933,652) (6,012,877)
- ---------------------------------------------------------------------------------------------------
Class I (1,796,795) (1,023,655)
- ---------------------------------------------------------------------------------------------------
Class R (3,680) --
- ---------------------------------------------------------------------------------------------------
Class 529A (1,650) --
- ---------------------------------------------------------------------------------------------------
Class 529B (1,421) --
- ---------------------------------------------------------------------------------------------------
Class 529C (1,531) --
- ---------------------------------------------------------------------------------------------------
In excess of net investment income
- ---------------------------------------------------------------------------------------------------
Class A -- (6,135,478)
- ---------------------------------------------------------------------------------------------------
Class B -- (2,216,776)
- ---------------------------------------------------------------------------------------------------
Class C -- (637,313)
- ---------------------------------------------------------------------------------------------------
Class I -- (108,511)
- ----------------------------------------------------------- ------------ ------------
Total distributions declared to shareholders $(95,313,401) $(94,935,962)
- ----------------------------------------------------------- ------------ ------------
Net increase in net assets from fund share transactions $152,140,128 $210,307,812
- ----------------------------------------------------------- ------------ ------------
Total increase in net assets $252,773,625 $198,424,361
- ----------------------------------------------------------- ------------ ------------
NET ASSETS
At beginning of period $1,502,120,558 $1,303,696,197
- ---------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $7,724,745 and
$6,117,200, respectively) $1,754,894,183 $1,502,120,558
- ---------------------------------------------------------------------------------------------------
See notes to financial statements.
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights provide per share amounts and certain ratios to
summarize the effect of fund operations and any distributions to a shareholder
of each share class.
YEARS ENDED 4/30
CLASS A 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.27 $12.34 $12.02 $13.08 $13.57
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.70 $0.76 $0.85 $0.87 $0.88
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 0.82 0.01 0.34 (1.07) (0.46)
- ------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $1.52 $0.77 $1.19 $(0.20) $0.42
- ------------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.76) $(0.76) $(0.87) $(0.86) $(0.87)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- -- -- (0.03)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.08) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- (0.01)
- ------------------------------------------------- ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.76) $(0.84) $(0.87) $(0.86) $(0.91)
- ------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $13.03 $12.27 $12.34 $12.02 $13.08
- ------------------------------------------------- ------ ------ ------ ------ ------
Total return (%)(+) 12.84 6.39 10.22 (1.51) 3.22
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA
Expenses## 0.92 0.94 0.93 0.92 0.96
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 5.59 6.09 7.01 6.97 6.61
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 112 206 289 290 343
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $1,116,853 $975,849 $853,273 $738,936 $866,388
- ------------------------------------------------------------------------------------------------------------------------------
(+) 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.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended April 30, 2002 was to decrease net investment income
per share by $0.01, increase net realized gains and losses per share by
$0.01, and decrease the ratio of net investment income to average net
assets by 0.12%. Per share, ratios, and supplemental data for periods
prior to May 1, 2001 have not been restated to reflect this change in
presentation.
See notes to financial statements.
Financial Highlights - continued
YEARS ENDED 4/30
CLASS B 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.23 $12.30 $11.98 $13.04 $13.52
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.61 $0.67 $0.76 $0.78 $0.78
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 0.82 0.01 0.34 (1.07) (0.45)
- ------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $1.43 $0.68 $1.10 $(0.29) $0.33
- ------------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.67) $(0.68) $(0.78) $(0.77) $(0.77)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- -- -- (0.03)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.07) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- (0.01)
- ------------------------------------------------- ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.67) $(0.75) $(0.78) $(0.77) $(0.81)
- ------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $12.99 $12.23 $12.30 $11.98 $13.04
- ------------------------------------------------- ------ ------ ------ ------ ------
Total return (%) 12.09 5.62 9.49 (2.21) 2.54
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA
Expenses## 1.62 1.64 1.63 1.62 1.66
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.89 5.40 6.31 6.27 5.92
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 112 206 289 290 343
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $474,882 $401,988 $335,629 $278,030 $299,523
- ------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended April 30, 2002 was to decrease net investment income
per share by $0.01, increase net realized gains and losses per share by
$0.01, and decrease the ratio of net investment income to average net
assets by 0.12%. Per share, ratios, and supplemental data for periods
prior to May 1, 2001 have not been restated to reflect this change in
presentation.
See notes to financial statements.
Financial Highlights - continued
YEARS ENDED 4/30
CLASS C 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.22 $12.29 $11.97 $13.03 $13.52
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.61 $0.67 $0.76 $0.78 $0.78
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 0.81 0.01 0.34 (1.07) (0.46)
- ------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $1.42 $0.68 $1.10 $(0.29) $0.32
- ------------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.67) $(0.68) $(0.78) $(0.77) $(0.77)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- -- -- (0.03)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.07) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- (0.01)
- ------------------------------------------------- ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.67) $(0.75) $(0.78) $(0.77) $(0.81)
- ------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $12.97 $12.22 $12.29 $11.97 $13.03
- ------------------------------------------------- ------ ------ ------ ------ ------
Total return (%) 12.02 5.71 9.42 (2.21) 2.48
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA
Expenses## 1.62 1.64 1.63 1.62 1.66
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.91 5.40 6.31 6.27 5.92
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 112 206 289 290 343
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $108,718 $107,212 $100,334 $77,687 $88,173
- ------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended April 30, 2002 was to decrease net investment income
per share by $0.01, increase net realized gains and losses per share by
$0.01, and decrease the ratio of net investment income to average net
assets by 0.12%. Per share, ratios, and supplemental data for periods
prior to May 1, 2001 have not been restated to reflect this change in
presentation.
See notes to financial statements.
Financial Highlights - continued
YEARS ENDED 4/30
CLASS I 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.27 $12.35 $12.03 $13.09 $13.58
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.67 $0.79 $0.90 $0.91 $0.92
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 0.89 0.01 0.32 (1.08) (0.45)
- ------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $1.56 $0.80 $1.22 $(0.17) $0.47
- ------------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.80) $(0.80) $(0.90) $(0.89) $(0.92)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- -- -- (0.03)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.08) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- (0.01)
- ------------------------------------------------- ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.80) $(0.88) $(0.90) $(0.89) $(0.96)
- ------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $13.03 $12.27 $12.35 $12.03 $13.09
- ------------------------------------------------- ------ ------ ------ ------ ------
Total return (%) 13.17 6.64 10.55 (1.21) 3.56
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA
Expenses## 0.62 0.64 0.63 0.62 0.65
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 5.73 6.39 7.30 7.26 6.90
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 112 206 289 290 343
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $53,249 $17,071 $14,459 $6,873 $9,256
- ------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended April 30, 2002 was to decrease net investment income
per share by $0.01, increase net realized gains and losses per share by
$0.01, and decrease the ratio of net investment income to average net
assets by 0.12%. Per share, ratios, and supplemental data for periods
prior to May 1, 2001 have not been restated to reflect this change in
presentation.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
CLASS R 4/30/03*
Net asset value, beginning of period $12.65
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.11
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 0.51+++
- -----------------------------------------------------------------------------
Total from investment operations $0.62
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.24)
- -----------------------------------------------------------------------------
Net asset value, end of period $13.03
- -----------------------------------------------------------------------------
Total return (%) 4.77++
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA
Expenses## 1.12+
- -----------------------------------------------------------------------------
Net investment income 2.95+
- -----------------------------------------------------------------------------
Portfolio turnover 112
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $872
- -----------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002,
through April 30, 2003.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangement.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with net realized and unrealized
gain/loss for the period because of the timing of sales of the fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
CLASS 529A 4/30/03*
Net asset value, beginning of period $12.14
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.39
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 1.05+++
- -----------------------------------------------------------------------------
Total from investment operations $1.44
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.54)
- -----------------------------------------------------------------------------
Net asset value, end of period $13.04
- -----------------------------------------------------------------------------
Total return (%)(+) 12.94++
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA
Expenses## 1.22+
- -----------------------------------------------------------------------------
Net investment income 4.68+
- -----------------------------------------------------------------------------
Portfolio turnover 112
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $140
- -----------------------------------------------------------------------------
* For the period from the inception of Class 529A shares, July 31, 2002,
through April 30, 2003.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangement.
(+) Total returns for Class 529A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with net realized and unrealized
gain/loss for the period because of the timing of sales of the fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
CLASS 529B 4/30/03*
Net asset value, beginning of period $12.10
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.39
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 0.97+++
- -----------------------------------------------------------------------------
Total from investment operations $1.36
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.48)
- -----------------------------------------------------------------------------
Net asset value, end of period $12.98
- -----------------------------------------------------------------------------
Total return (%) 12.26++
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA
Expenses## 1.87+
- -----------------------------------------------------------------------------
Net investment income 4.30+
- -----------------------------------------------------------------------------
Portfolio turnover 112
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $81
- -----------------------------------------------------------------------------
* For the period from the inception of Class 529B shares, July 31, 2002,
through April 30, 2003.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangement.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with net realized and unrealized
gain/loss for the period because of the timing of sales of the fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
CLASS 529C 4/30/03*
Net asset value, beginning of period $12.09
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.36
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 1.00+++
- -----------------------------------------------------------------------------
Total from investment operations $1.36
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.48)
- -----------------------------------------------------------------------------
Net asset value, end of period $12.97
- -----------------------------------------------------------------------------
Total return (%) 12.27++
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA
Expenses## 1.87+
- -----------------------------------------------------------------------------
Net investment income 4.26+
- -----------------------------------------------------------------------------
Portfolio turnover 112
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $100
- -----------------------------------------------------------------------------
* For the period from the inception of Class 529C shares, July 31, 2002,
through April 30, 2003.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangement.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with net realized and unrealized
gain/loss for the period because of the timing of sales of the fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
See notes to financial statements.
- --------------------------------------------------------------------------------
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 accounting
principles generally accepted in the United States of America 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 - Bonds and other fixed income securities (other than
short-term obligations) of U.S. issuers in the fund's portfolio are valued at an
evaluated bid price on the basis of quotes from brokers and dealers or on the
basis of valuations furnished by a pricing service. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate 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 quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Forward Contracts will be valued using a
pricing model taking into consideration market data from an external pricing
source. Use of the pricing services has been approved by the Board of Trustees.
All other securities (other than short-term obligations) and futures contracts
in the fund's portfolio for which the principal market is one or more securities
or commodities exchanges (whether domestic or foreign) will be valued at the
last reported sale price or at the settlement price prior to the determination
(or if there has been no current sale, at the closing bid price) on the primary
exchange on which such securities and futures contracts are traded; but if a
securities exchange is not the principal market for securities, such securities
will, if market quotations are readily available, be valued at current bid
prices. Short-term obligations in the fund's portfolio are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Short-term obligations with a remaining maturity in excess of 60 days will be
valued upon dealer supplied valuations. Portfolio investments for which market
quotations are not readily available, or whose values have been materially
affected by events occurring after the close of their primary markets, are
valued at fair value as determined in good faith by or at the direction of the
Board of 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 result from fluctuations in foreign currency exchange rates is not
separately disclosed.
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 foreign currency exchange 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 premium and
discount is amortized or accreted for financial statement purposes in accordance
with generally accepted accounting principles. All discount is accreted for tax
reporting purposes as required by federal income tax regulations. Interest
payments received in additional securities are recorded on the ex-interest date
in an amount equal to the value of the security on such date. Some securities
may be purchased on a "when-issued" or "forward delivery" basis, which means
that the securities will be delivered to the fund at a future date, usually
beyond customary settlement time. The fund may enter in "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a future
date. Although the unit price has been established, the principal value has not
been finalized. However, the principal amount of the commitments will not
fluctuate more than 1.0%. The fund holds, and maintains until settlement date,
cash or high-grade debt obligations in an amount sufficient to meet the purchase
price, or the fund may enter into offsetting contracts for the forward sale of
other securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which is in addition to the risk of
decline in the value of the fund's other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying securities,
according to the procedures described under "Investment Valuations" above.
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 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 fund
distinguishes between distributions on a tax basis and a financial reporting
basis and 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. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
defaulted bonds, capital losses, and amortization and accretion on debt
securities.
The tax character of distributions declared for the years ended April 30, 2003
and April 30, 2002 was as follows:
4/30/03 4/30/02
Distributions declared from:
- --------------------------------------------------------------------------------
Ordinary income $95,313,401 $94,935,962
- --------------------------------------------------------------------------------
During the year ended April 30, 2003, accumulated distributions in excess of net
investment income decreased by $6,887,629, accumulated undistributed net
realized loss on investments and foreign currency transactions increased by
$6,882,074, and paid-in capital decreased by $5,555 due to differences between
book and tax accounting for mortgage-backed securities, currency transactions
and amortization and accretion on debt securities. This change had no effect on
the net assets or net asset value per share.
As of April 30, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $238,936
---------------------------------------------------------------------
Undistributed long-term capital gain --
---------------------------------------------------------------------
Capital loss carryforward (99,051,725)
---------------------------------------------------------------------
Unrealized appreciation 96,904,363
---------------------------------------------------------------------
Other temporary differences (10,555,806)
---------------------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the earlier
of its utilization or expiration on April 30, 2011.
EXPIRATION DATE
April 30, 2007 $(12,839,198)
---------------------------------------------------------------------
April 30, 2008 (41,302,001)
---------------------------------------------------------------------
April 30, 2009 (14,236,036)
---------------------------------------------------------------------
April 30, 2010 (4,472,574)
---------------------------------------------------------------------
April 30, 2011 (26,201,916)
---------------------------------------------------------------------
Total $(99,051,725)
---------------------------------------------------------------------
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 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. Class B and Class 529B shares will convert to Class A and Class 529A
shares, respectively 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:
First $1.1 billion of average net assets 0.39%
---------------------------------------------------------------------
In excess of $1.1 billion 0.38%
---------------------------------------------------------------------
The fund pays compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and 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). On January
1, 2002, the Trustees terminated the Independent Trustee unfunded defined
benefit plan for active Trustees and converted it to an unfunded retirement
benefit deferral plan for active Trustees. Under the new plan, the unfunded
pension liability was converted into an equivalent value of notional shares of
the fund that will fluctuate with the performance of the fund. Included in
Trustees' compensation is a net increase of $5,926 as a result of the change in
the fund's pension liability under this plan and a pension expense of $12,134
for inactive trustees for the year ended April 30, 2003. Also included in
Trustees' compensation is a one-time settlement expense of $917 and a one-time
transition expense of $5,389.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
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First $2.5 billion 0.0130%
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Next $2.5 billion 0.0005%
---------------------------------------------------------------------
In excess of $7 billion 0.0000%
---------------------------------------------------------------------
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$192,709 and $1,051 the year ended April 30, 2003, as its portion of the sales
charge on sales of Class A and Class 529A shares of the fund, respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R, Class 529A, Class 529B and Class 529C 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 an annual
percentage of its average daily net assets attributable to certain share classes
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 based
on the average daily net assets of accounts attributable to such dealers. These
fees are calculated based on each class' average daily net assets. The maximum
distribution and service fees for each class of shares are as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.50% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the year ended April 30, 2003, amounted to:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained
by MFD $100,306 $2,940 $1,368 $0 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Fees incurred under the distribution plan during the year ended April 30, 2003,
were as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Total Distribution Plan 0.30% 1.00% 1.00% 0.50% 0.35% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within, for class
A shares, 12 months following the purchase, and, for class C and 529C shares,
the first year from the end of the calendar month of purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class B and Class
529B shares in the event of a shareholder redemption within six years from the
end of the calendar month of purchase. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
April 30, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred Sales Charges
Imposed $87,277 $1,122,156 $48,736 -- --
- ------------------------------------------------------------------------------------------------------------------------------
The fund has and may from time to time enter into contracts with program
managers and other parties which administer the tuition programs through which
an investment in the fund's 529 share classes is made. The fund has entered into
an agreement with MFD pursuant to which MFD receives an annual fee of up to
0.35% from the fund based solely upon the value of the fund's 529 share classes
attributable to tuition programs to which MFD or a third party which contracts
with MFD provides administrative services. The current fee has been established
at 0.25% annually of average net assets of the fund's 529 share classes
attributable to such programs. The fee may only be increased with the approval
of the board of trustees that oversees the fund. The services provided by MFD or
a third party with which MFD contracts include recordkeeping and tax reporting
and account services, as well as services designed to maintain the program's
compliance with the Internal Revenue Code and other regulatory requirements.
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 0.11%.
Prior to April 1, 2003, the fee was 0.10% of the fund's average daily net
assets.
(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 $853,026,063 $894,179,091
- -------------------------------------------------------------------------------
Investments (non-U.S. government securities) $1,067,500,323 $894,059,088
- -------------------------------------------------------------------------------
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 $1,667,244,986
-----------------------------------------------------------------------
Gross unrealized appreciation 108,459,534
-----------------------------------------------------------------------
Gross unrealized depreciation (11,568,330)
-----------------------------------------------------------------------
Net unrealized appreciation $96,891,204
-----------------------------------------------------------------------
(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:
Year ended 4/30/03 Year ended 4/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 53,583,571 $666,471,550 53,799,715 $668,549,616
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 4,239,071 52,704,901 3,853,511 47,897,625
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (51,653,643) (643,384,521) (47,253,864) (586,198,495)
- ------------------------------------------------------------------------------------------------------------
Net increase 6,168,999 $75,791,930 10,399,362 $130,248,746
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 15,036,570 $186,594,982 15,145,430 $187,958,052
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,446,005 17,923,585 1,261,742 15,638,156
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (12,788,436) (158,630,861) (10,828,117) (133,955,494)
- ------------------------------------------------------------------------------------------------------------
Net increase 3,694,139 $45,887,706 5,579,055 $69,640,714
- ------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 3,181,711 $39,389,428 3,666,296 $45,445,727
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 318,590 3,942,493 304,188 3,766,241
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (3,896,016) (48,242,113) (3,361,380) (41,545,105)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (395,715) $(4,910,192) 609,104 $7,666,863
- ------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 3,850,486 $48,720,670 439,676 $5,480,418
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 122,598 1,535,631 77,622 965,383
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (1,278,326) (16,051,738) (297,315) (3,694,312)
- ------------------------------------------------------------------------------------------------------------
Net increase 2,694,758 $34,204,563 219,983 $2,751,489
- ------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Shares sold 98,132 $1,255,845
- -------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 30 383
- -------------------------------------------------------------------------
Shares reacquired (31,254) (399,742)
- -------------------------------------------------------------------------
Net increase 66,908 $856,486
- -------------------------------------------------------------------------
CLASS 529A SHARES
Shares sold 10,839 $137,466
- -------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 83 1,059
- -------------------------------------------------------------------------
Shares reacquired (171) (2,141)
- -------------------------------------------------------------------------
Net increase 10,751 $136,384
- -------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 6,161 $76,789
- -------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 87 1,100
- -------------------------------------------------------------------------
Shares reacquired (26) (328)
- -------------------------------------------------------------------------
Net increase 6,222 $77,561
- -------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 7,603 $94,769
- -------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 90 1,136
- -------------------------------------------------------------------------
Shares reacquired (17) (215)
- -------------------------------------------------------------------------
Net increase 7,676 $95,690
- -------------------------------------------------------------------------
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million 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, 2003, was $11,817. 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 contract,
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.
There were no outstanding financial instruments with off-balance-sheet risk at
the end of the period.
(8) CHANGE IN ACCOUNTING PRINCIPLE
As required, effective May 1, 2001, the fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium
and accreting market discount on debt securities. Prior to May 1, 2001, the fund
did not amortize premium nor accrete market discount on debt securities. The
cumulative effect of this accounting change had no impact on total net assets of
the fund, but resulted in a $640,023 reduction in cost of securities and a
corresponding $640,023 increase in net unrealized depreciation, based on
securities held by the fund on April 30, 2002.
The effect of this change for the year ended April 30, 2002 was to decrease net
investment income by $1,683,861, decrease net unrealized appreciation by
$1,935,305 and increase realized gains by $251,444. The Statement of Changes in
Net Assets and Financial Highlights for prior periods has not been restated to
reflect this change in presentation.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees of MFS Series Trust IX and Shareholders of MFS Bond Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Bond Fund (a portfolio of MFS Series Trust
IX (the "Trust") as of April 30, 2003, and 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
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 2003 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Bond Fund as of April 30, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 11, 2003
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and
officers of MFS Series Trust IX, of which the fund is a series, including their
principal occupations, which, unless specific dates are shown, are of more than
five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other
directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Financial Services, Inc. (investment
Chairman advisers), Chairman and
Chief Executive Officer
JOHN W. BALLEN* (born 09/12/59)
Trustee and President LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Trustee
Company, Hemenway & Barnes (attorneys),
Chief Executive Officer and Director Partner
KEVIN R. PARKE* (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Private investor; Harvard University
Company, Graduate School of Business
President, Chief Investment Officer, and Administration, Class of 1961
Director Adjunct Professor in
Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc.
(real estate investment trust),
LAWRENCE H. COHN, M.D. (born 03/11/37) Director
Trustee
Brigham and Women's Hospital, Chief of J. DALE SHERRATT (born 09/23/38)
Cardiac Surgery; Harvard Medical School, Trustee
Professor of Surgery Insight Resources, Inc. (acquisition
planning specialists), President;
WILLIAM R. GUTOW (born 09/27/41) Wellfleet Investments (investor in
Trustee health care companies), Managing
Private investor and real estate General Partner (since 1993);
consultant; Cambridge Nutraceuticals
Capitol Entertainment Management Company (professional nutritional products),
(video franchise), Vice Chairman Chief Executive Officer (until May
2001)
J. ATWOOD IVES (born 05/01/36)
Trustee ELAINE R. SMITH (born 04/25/46)
Private investor; KeySpan Corporation Trustee
(energy related services), Director; Independent health care industry
Eastern Enterprises (diversified consultant
services company), Chairman, Trustee and
Chief Executive Officer (until November WARD SMITH (born 09/13/30)
2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
Trustees and Officers - continued
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) ROBERT R. FLAHERTY (born 09/18/63)
Chairman Assistant Treasurer
Massachusetts Financial Services Massachusetts Financial Services
Company, Chairman Company, Vice President (since
August 2000); UAM Fund Services,
JOHN W. BALLEN (born 09/12/59) Senior Vice President (prior to
Trustee and President August 2000)
Massachusetts Financial Services
Company, Chief Executive Officer and RICHARD M. HISEY (born 08/29/58)
Director Treasurer
Massachusetts Financial Services
JAMES R. BORDEWICK, JR. (born 03/06/59) Company, Senior Vice President
Assistant Secretary and Assistant Clerk (since July 2002); The Bank of New
Massachusetts Financial Services York, Senior Vice President
Company, Senior Vice President and (September 2000 to July 2002);
Associate General Counsel Lexington Global Asset Managers,
Inc., Executive Vice President and
STEPHEN E. CAVAN (born 11/06/53) Chief Financial Officer, General
Secretary and Clerk Manager, Mutual Funds (prior to
Massachusetts Financial Services September 2000)
Company, Senior Vice President, General
Counsel and Secretary ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer
STEPHANIE A. DESISTO (born 10/01/53) Massachusetts Financial Services
Assistant Treasurer Company,
Massachusetts Financial Services Vice President
Company, Vice President (since April
2003); Brown Brothers Harriman & Co., JAMES O. YOST (born 06/12/60)
Senior Vice President Assistant Treasurer
(November 2002 to April 2003); ING Groep Massachusetts Financial Services
N.V./Aeltus Investment Management, Company, Senior Vice President
Senior Vice President (prior to November
2002)
The Trust does not hold annual shareholder meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. This means that each
Trustee will be elected to hold office until his or her successor is chosen and
qualified or until his or her earlier death, resignation, retirement or removal.
Each officer will hold office until his or her successor is chosen and
qualified, or until he or she retires, resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their
capacity as Trustee of the Trust continuously since originally elected or
appointed. Messrs. Ballen and Gutow have each served as a Trustee of the Trust
since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were
elected by shareholders and have served as Trustees of the Trust since January
1, 2002. Mr. Parke has served as Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
DISTRIBUTOR AUDITORS
MFS Fund Distributors, Inc. Deloitte & Touche LLP
500 Boylston Street, Boston, MA 200 Berkeley Street
02116-3741 Boston, MA 02116
PORTFOLIO MANAGER
William J. Adams+
+MFS Investment Management
- ------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- ------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international equity and
fixed-income investment across the full risk spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for building and
preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products for
high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and risks
associated with investing. Read the prospectus carefully before investing or
sending money.
- --------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
- --------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
The fund has the option to use equalization, which is a tax basis dividends paid
deduction from earnings and profits distributed to shareholders upon redemption
of shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTACT INFORMATION
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from 8 a.m.
to 8 p.m. Eastern time.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances (1-800-637-8255)
exchanges or stock and touch-tone required 24 hours a day, 365 days a
bond outlooks year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send you
prospectuses, reports, and proxies electronically. You get timely information
without mailbox clutter (and help your fund save printing and postage costs).
SIGN-UP instructions: If your account is registered with us, go to www.mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available to
you.
[Logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116.
MFB-ANN-6/03 94M
[MFS LOGO]
INVESTMENT MANAGEMENT
MFS(R) EMERGING
OPPORTUNITIES FUND
MFS(R) LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
MFS(R) EMERGING OPPORTUNITIES FUND MFS(R) LARGE CAP VALUE FUND
The following tables present certain information regarding the Trustees and
officers of MFS Series Trust IX, of which the fund is a series, including
their principal occupations, which, unless specific dates are shown, are of
more than five years" duration, although the titles may not have been the same
throughout.
NAME, AGE, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION, AND OTHER
DIRECTORSHIPS(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) Chairman LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Company, Chairman Trustee
Hemenway & Barnes (attorneys), Partner
JOHN W. BALLEN* (born 09/12/59) Trustee and
President WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Chief Trustee
Executive Officer and Director Private investor; Harvard University
Graduate School of Business
Administration, Class of 1961 Adjunct
KEVIN R. PARKE* (born 12/14/59) Trustee Professor in Entrepreneurship Emeritus;
Massachusetts Financial Services Company, Chief CBL & Associates Properties, Inc. (real
Investment Officer, President and Director estate investment trust), Director
INDEPENDENT TRUSTEES
J. DALE SHERRATT (born 09/23/38) Trustee
LAWRENCE H. COHN, M.D. (born 03/11/37) Trustee Insight Resources, Inc. (acquisition
Brigham and Women's Hospital, Chief of Cardiac planning specialists), President;
Surgery; Harvard Medical School, Professor of Wellfleet Investments (investor in
Surgery health care companies), Managing General
Partner (since 1993); Cambridge
Nutraceuticals (professional nutritional
WILLIAM R. GUTOW (born 09/27/41) Trustee products), Chief Executive Officer
Private investor and real estate consultant; (until May 2001)
Capitol Entertainment Management Company (video
franchise), Vice Chairman
ELAINE R. SMITH (born 04/25/46) Trustee
Independent health care industry
J. ATWOOD IVES (born 05/01/36) Trustee consultant
Private investor; KeySpan Corporation (energy
related services), Director; Eastern Enterprises
(diversified services company), Chairman, Trustee WARD SMITH (born 09/13/30) Trustee
and Chief Executive Officer (until November 2000) Private investor
ABBY M. O'NEILL (born 04/27/28) Trustee
Private investor; Rockefeller Financial Services,
Inc. (investment advisers), Chairman and Chief
Executive Officer
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) Chairman
Massachusetts Financial Services Company, Chairman ROBERT R. FLAHERTY (born 09/18/63)
Assistant Treasurer
Massachusetts Financial Services
JOHN W. BALLEN (born 9/12/59) Trustee and Company, Vice President (since August
President 2000); UAM Fund Services, Senior Vice
Massachusetts Financial Services Company, Chief President (prior to August 2000)
Executive Officer and Director
RICHARD M. HISEY (born 08/29/58)
Treasurer
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant Massachusetts Financial Services
Secretary and Assistant Clerk Company, Senior Vice President (since
Massachusetts Financial Services Company, Senior July 2002); The Bank of New York, Senior
Vice President and Associate General Counsel Vice President (September 2000 to July
2002); Lexington Global Asset Managers,
Inc., Executive Vice President and Chief
STEPHEN E. CAVAN (born 11/06/53) Secretary and Financial Officer, General Manager,
Clerk Mutual Funds (prior to September 2000)
Massachusetts Financial Services Company, Senior
Vice President, General Counsel and Secretary ELLEN MOYNIHAN (born 11/13/57) Assistant
Treasurer
Massachusetts Financial Services
STEPHANIE A. DESISTO (born 10/01/53) Assistant Company, Vice President
Treasurer
Massachusetts Financial Services Company, Vice JAMES O. YOST (born 06/12/60) Assistant
President (since Treasurer
April 2003); Brown Brothers Harriman & Co., Senior Massachusetts Financial Services
Vice President (November 2002 to April 2003); ING Company, Senior
Groep N.V./Aeltus Investment Management, Senior Vice President
Vice President (prior to November 2002)
The Trust does not hold annual shareholder meetings for the purpose of
electing Trustees, and Trustees are not elected for fixed terms. This means
that each Trustee will be elected to hold office until his or her successor is
chosen and qualified or until his or her earlier death, resignation,
retirement or removal. Each officer will hold office until his or her
successor is chosen and qualified, or until he or she retires, resigns or is
removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their
capacity as Trustee of the Trust continuously since originally elected or
appointed. Messrs. Ballen and Gutow have each served as a Trustee of the Trust
since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were
elected by shareholders and have served as Trustees of the Trust since January
1, 2002. Mr. Parke has served as a Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
INVESTMENT ADVISER
CUSTODIAN
Massachusetts Financial Services Company
500 Boylston Street State Street Bank and Trust Company
Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110
DISTRIBUTOR AUDITORS
MFS Fund Distributors, Inc. Ernst & Young LLP
500 Boylston Street 200 Clarendon St., Boston, MA 02116
Boston, MA 02116-3741
PORTFOLIO MANAGERS
David M. Calabro+
Eric Fischman+
+ MFS Investment Management
- --------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY
At MFS(R), we are committed to protecting your privacy.
On behalf of the MFS Family of Funds(R), the MFS(R) Institutional Trusts, the
Vertex(SM) Funds, Massachusetts Financial Services Company, and certain
affiliates(1) (collectively, "MFS," "we," "us" or "our"), this privacy policy
outlines certain of our policies designed to maintain the privacy of your
nonpublic personal information.
Nonpublic personal information includes much of the information you provide to
us and the related information about you and your transactions involving your
MFS investment product or service. Examples of nonpublic personal information
include the information you provide on new account applications for MFS
investment products or services, your share balance or transactional history,
and the fact that you are a customer of MFS.
We may collect nonpublic personal information about you from the following
sources:
o information we receive from you on applications or other forms
o information about your transactions with us, our affiliates, or
others, and
o information we receive from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may disclose all of
the information we collect, as described above, to companies that perform
marketing services on our behalf or to other financial institutions with whom
we have joint marketing arrangements.
We restrict access to nonpublic personal information about you to personnel
who are necessary or appropriate to provide products or services to you. We
maintain physical, electronic, and procedural safeguards that comply with
federal regulations to guard your nonpublic personal information.
Our privacy policy applies only to individual MFS investors who have a direct
relationship with us. If you own MFS products or receive MFS investment
services in the name of a third-party broker/dealer, bank, investment adviser,
or other financial service provider, that third-party's privacy policies may
apply to you and our privacy policy may not.
If you have any questions with respect to MFS" privacy policy, please call
1-800-255-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
(1) MFS Institutional Advisors, Inc., Vertex Investment Management, Inc., MFS
Original Research Advisors, LLC, MFS Original Research Partners, LLC,
MFS(R) Heritage Trust Company(SM), and MFS Fund Distributors, Inc.
- --------------------------------------------------------------------------------
MANAGEMENT REVIEW
MFS(R) Emerging Opportunities Fund
Dear Shareholders,
For the 12 months ended April 30, 2003, Class A shares of the fund provided a
total return of -15.42% and Class I shares returned -15.08%. These returns
include the reinvestment of any dividends and capital gains distributions but
exclude the effects of any sales charge and compare to a return of -16.67% for
the fund's benchmark, the Russell Midcap Growth Index. The Russell Midcap Growth
Index measures the performance of U.S. mid-cap growth stocks. The average
mid-cap growth fund tracked by Lipper Inc., an independent firm that reports
mutual fund performance, returned -19.73%.
The portfolio represents what we believe to be the best selections for capital
growth across the entire spectrum of publicly traded small and mid-cap stocks.
Our focus is on companies that we believe are at the forefront of innovation and
are capitalizing on their competitive advantages. We also seek companies that we
believe are undervalued relative to their prospective growth outlooks.
The fund benefited over the period from holdings in the retailing, utilities &
communications, financial, and healthcare sectors, which helped the fund exceed
the returns of its index and its peer group. The fund received boosts to its
relative performance from holdings in the retailing sector such as Abercrombie &
Fitch and Guitar Center Management; in the utilities & communications sector
from holdings such as American Tower Corp. and Crown Castle International; in
the financial services sector from holdings such as The Willis Group and TGF
Financial; and in healthcare from holdings such as Pharmaceutical Products and
Caremark Rx. Several of these securities, including Abercrombie and Fitch,
Guitar Center Management, The Willis Group, TGF Financial, and Pharmaceutical
Products, were not held in the portfolio at the end of the period.
The fund's overweighting in the technology sector was among the greatest
detriments to the portfolio's overall performance. Holdings in this sector that
inhibited performance included Zarlink Semiconductor Inc., Inforte Corp., and
Networks Associates. Two of these securities, Zarlink Semiconductor and Inforte
Corp., were no longer in the portfolio at the end of the period.
Respectfully,
/s/ Eric Fischman
Eric Fischman
Portfolio Manager
MFS(R) Large Cap Value Fund
Dear Shareholders,
For the 12 months ended April 30, 2003, Class A shares of the fund provided a
total return of -11.28% and Class I shares -10.91%. These results, which include
the reinvestment of any dividends and capital gains distributions but exclude
the effects of any sales charges, compare to a -13.01% return for the fund's
benchmark, the Russell 1000 Value Index (the Russell Index). The Russell Index
measures the performance of large-cap U.S. value stocks. During the same period,
the average large value fund tracked by Lipper Inc., an independent firm that
reports mutual fund performance, returned -15.66%.
MARKET ENVIRONMENT
Investor sentiment, corporate earnings, worries of war, and economic news all
drove market performance during this period which was characterized by long
stretches of lackluster performance punctuated by short periods of dramatic
advances. During the first part of 2003, for example, the uncertainty preceding
the commencement of the Iraq War led to a downturn in the market, which lasted
until a market turnaround began about March 11 -- when uncertainty was replaced
by a general belief that war was imminent -- and continued through May 1, when
President Bush declared the military conflict virtually over.
DETRACTORS FROM PERFORMANCE
Relative to the Russell Index, the fund's performance was hurt by an
underweighted position and stock selection in financial services. Stock
selection in retailing also hurt performance as overall softness in the economy
finally reached consumers, who had been moving the economy forward virtually
single-handedly for a long time.
PERFORMANCE POSITIVES
Much of the portfolio's positive performance over the period can be attributed
to favorable stock selection in categories such as Industrial Goods and
Services, Leisure, Utilities and Communications and being underweighted in
several categories that failed to perform as expected, such as Autos, and
Housing and Retailing. The fund was also helped by specific holdings such as
global telecommunications company Vodafone Group PLC, which saw a post- WorldCom
increase when investors realized that accounting irregularities were not as
widespread as originally thought, and media giant Tribune Company, which
profited from increased advertising revenue.
In our view, the environment may remain very difficult for many companies going
forward. Persistently high unemployment continues while many companies are
cautious about capital spending. In this environment, we intend to pursue a
cautious approach to security selection, though we note that the universe of
value stocks has expanded somewhat, as many formerly high-flying technology and
health care growth stocks have valuations that may make them worthy of
consideration.
/s/ David M. Calabro
David M. Calabro
Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
The portfolios are actively managed and current holdings may be different.
PERFORMANCE SUMMARY
Currently, each fund offers only Class A and Class I shares, which are available
for purchase at net asset value only by residents of the Commonwealth of
Massachusetts who are employees (or certain relatives of employees) of MFS and
its affiliates or members of the governing boards of the various funds sponsored
by MFS.
The following information illustrates the historical performance of each fund's
Class A shares in comparison to their benchmarks. Performance results reflect
the maximum applicable sales charge and the percentage change in net asset
value, including reinvestment of any dividends and capital gains distributions.
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. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. (See Notes to
Performance Summary.) It is not possible to invest directly in an index.
MFS(R) EMERGING OPPORTUNITIES FUND(1)(2)(3)(4)(5)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations, May
2, 2000, through April 30, 2003. Index information is from May 1, 2000.)
MFS Emerging
Opportunities Russell
Fund -- Russell 2500 MidCap Growth
Class A Index Index
5/00 $9,425 $10,000 $10,000
4/01 7,905 9,949 7,053
4/02 8,422 10,483 5,994
4/03 7,123 8,699 4,995
TOTAL RATES OF RETURN THROUGH APRIL 30, 2003
CLASS A
1 Year Life*
- ------------------------------------------------------------------------------
Cumulative Total Return without Sales Charge -15.42% -24.42%
- ------------------------------------------------------------------------------
Average Annual Total Return without Sales Charge -15.42% - 8.93%
- ------------------------------------------------------------------------------
Average Annual Total Return with Sales Charge** -20.28% -10.71%
- ------------------------------------------------------------------------------
CLASS I
1 Year Life*
- ------------------------------------------------------------------------------
Cumulative Total Return (No Sales Charge) -15.08% -24.20%
- ------------------------------------------------------------------------------
Average Annual Total Return (No Sales Charge) -15.08% - 8.84%
- ------------------------------------------------------------------------------
COMPARATIVE RETURNS(+)
1 Year Life*
- ------------------------------------------------------------------------------
Average mid cap growth fund+ -19.73% -19.90%
- ------------------------------------------------------------------------------
Russell MidCap Growth Index# -16.67% -20.66%
- ------------------------------------------------------------------------------
Russell 2500 Index#*** -17.01% - 4.54%
- ------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
May 2, 2000, through April 30, 2003. Index information is from May 1, 2000.
** Takes into account the maximum sales charge of 5.75%.
(+) Average annual rates of return.
+ Source: Lipper Inc., an independent firm that tracks mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
*** Effective December 31, 2002, we no longer use the Russell 2500 Index as a
benchmark because we believe the Russell MidCap Growth Index better
reflects the fund's investment policies and objectives.
MFS(R) LARGE CAP VALUE FUND(1)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations, May
4, 1999, through April 30, 2003. Index information is from May 1, 1999.)
MFS Large
Cap Value Russell 1000
Fund -- Class A Value Index
5/99 $ 9,425 $10,000
4/00 10,192 9,612
4/01 11,864 10,230
4/02 11,396 9,830
4/03 10,110 8,551
TOTAL RATES OF RETURN THROUGH APRIL 30, 2003
CLASS A
1 Year 3 Years Life*
- --------------------------------------------------------------------------------
Cumulative Total Return without Sales Charge -11.28% -0.80% +7.27%
- --------------------------------------------------------------------------------
Average Annual Total Return without Sales Charge -11.28% -0.27% +1.77%
- --------------------------------------------------------------------------------
Average Annual Total Return with Sales Charge** -16.38% -2.22% +0.28%
- --------------------------------------------------------------------------------
CLASS I
1 Year 3 Years Life*
- --------------------------------------------------------------------------------
Cumulative Total Return (No Sales Charge) -10.91% +0.56% +9.27%
- --------------------------------------------------------------------------------
Average Annual Total Return (No Sales Charge) -10.91% +0.19% +2.25%
- --------------------------------------------------------------------------------
COMPARATIVE RETURNS(+)
1 Year 3 Years Life*
- --------------------------------------------------------------------------------
Average large cap value fund+ -15.66% -5.97% -5.32%
- --------------------------------------------------------------------------------
Russell 1000 Value Index# -13.01% -3.82% -3.84%
- --------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
May 4, 1999, through April 30, 2003. Index information is from May 1, 1999.
** Takes into account the maximum sales charge of 5.75%.
(+) Average annual rates of return.
+ Source: Lipper Inc., an independent firm that tracks mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable subsidies and waivers in effect
during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. All
results are historical and include the reinvestment of dividends and capital
gains distributions.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN ABOVE DOES NOT
REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN.
KEY RISK CONSIDERATIONS
(1) Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and
political conditions.
(2) Investing in small companies is riskier than investing in more-established
companies.
(3) The portfolio utilizes short sales as an investment technique and will
suffer a loss if it sells a security short and the value of that security
rises.
(4) Investing in mid-sized companies is riskier than investing in more-
established companies.
(5) When concentrating on one issuer, the portfolio is sensitive to changes in
the value of securities of these issuers.
These risks may increase share price volatility. Please see the prospectus for
these and other risks.
PORTFOLIO OF INVESTMENTS -- April 30, 2003
MFS EMERGING OPPORTUNITIES FUND
Stocks - 78.0%
- -------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------------------------
U.S. Stocks - 76.5%
Aerospace & Defense - 0.5%
Alliant Techsystems, Inc.* 90 $ 4,835
- -------------------------------------------------------------------------------------------------------
Biotechnology - 3.8%
Abbott Laboratories, Inc. 200 $ 8,126
Amgen, Inc.* 200 12,262
Molecular Devices Corp.* 300 3,765
Waters Corp.* 500 12,005
-----------
$ 36,158
- -------------------------------------------------------------------------------------------------------
Business Services - 3.1%
BISYS Group, Inc.*+ 750 $ 12,660
Manpower, Inc. 300 9,864
Robert Half International, Inc.* 400 6,512
-----------
$ 29,036
- -------------------------------------------------------------------------------------------------------
Computer Software - 0.4%
THQ, Inc.* 300 $ 4,239
- -------------------------------------------------------------------------------------------------------
Computer Software - Services - 2.0%
BEA Systems, Inc.*+ 500 $ 5,355
VERITAS Software Corp.* 600 13,206
-----------
$ 18,561
- -------------------------------------------------------------------------------------------------------
Computer Software - Systems - 1.6%
Network Associates, Inc.* 900 $ 10,287
Peoplesoft, Inc.* 300 4,509
-----------
$ 14,796
- -------------------------------------------------------------------------------------------------------
Consumer Products - 1.2%
Energizer Holdings, Inc.* 400 $ 11,528
- -------------------------------------------------------------------------------------------------------
Containers - 1.3%
Smurfit-Stone Container Corp.*+ 870 $ 12,241
- -------------------------------------------------------------------------------------------------------
Electronics - 5.5%
Altera Corp.* 400 $ 6,324
Analog Devices, Inc.*+ 400 13,248
Brooks Automation, Inc.* 800 6,776
Cymer, Inc.* 300 8,565
Maxim Integrated Products, Inc. 100 3,929
MKS Instruments, Inc.* 300 4,188
Novellus Systems, Inc.* 300 8,412
-----------
$ 51,442
- -------------------------------------------------------------------------------------------------------
Entertainment - 0.3%
Acme Communications, Inc* 500 $ 3,475
- -------------------------------------------------------------------------------------------------------
Financial Institutions - 3.3%
Goldman Sachs Group, Inc. 100 $ 7,590
Legg Mason, Inc. 200 10,860
Lehman Brothers Holdings, Inc. 200 12,594
-----------
$ 31,044
- -------------------------------------------------------------------------------------------------------
Financial Services - 0.7%
Investors Financial Services Corp. 300 $ 6,543
- -------------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.4%
Bowater, Inc. 100 $ 3,893
- -------------------------------------------------------------------------------------------------------
Healthcare - 2.9%
Caremark Rx, Inc.*+ 640 $ 12,742
Weight Watchers International, Inc.* 300 14,094
-----------
$ 26,836
- -------------------------------------------------------------------------------------------------------
Healthcare - Other - 0.3%
American Healthways, Inc.* 100 $ 2,469
- -------------------------------------------------------------------------------------------------------
Industrial - 1.0%
Rockwell Automation, Inc. 400 $ 9,120
- -------------------------------------------------------------------------------------------------------
Internet - 0.2%
Priceline.com, Inc.* 1,000 $ 2,220
- -------------------------------------------------------------------------------------------------------
Manufacturing - 1.2%
ITT Industries, Inc. 200 $ 11,660
- -------------------------------------------------------------------------------------------------------
Media - 2.4%
LIN TV Corp., "A"* 500 $ 11,955
Westwood One, Inc.* 300 10,470
-----------
$ 22,425
- -------------------------------------------------------------------------------------------------------
Medical & Health Products - 7.0%
CryoLife, Inc.* 700 $ 5,320
DENTSPLY International, Inc. 500 18,725
Inspire Phamaceutical, Inc.* 400 5,840
Mylan Laboratories, Inc. 300 8,481
Schering Plough Corp. 600 10,860
Thoratec Corp.* 1,200 16,500
-----------
$ 65,726
- -------------------------------------------------------------------------------------------------------
Medical & Health Technology Services - 8.9%
Apogent Technologies, Inc.* 300 $ 5,154
Cytyc Corp.*+ 1,000 13,200
Genzyme Corp.* 300 12,084
Hologic, Inc.*+ 1,600 14,400
Medimmune, Inc.* 260 9,170
Millipore Corp.*+ 500 17,075
NPS Pharmaceuticals, Inc.* 300 5,715
West Pharmaceutical Services, Inc. 300 7,155
-----------
$ 83,953
- -------------------------------------------------------------------------------------------------------
Oil Services - 4.7%
Baker Hughes, Inc. 200 $ 5,600
BJ Services Co.* 200 7,302
Cooper Cameron Corp.* 200 9,572
Grey Wolf, Inc.* 1,000 4,050
Lyondell Petrochemical Co. 300 4,365
Noble Corp.* 200 6,190
Smith International, Inc.* 200 7,112
-----------
$ 44,191
- -------------------------------------------------------------------------------------------------------
Oils - 0.4%
Newfield Exploration Co.* 100 $ 3,439
- -------------------------------------------------------------------------------------------------------
Printing & Publishing - 3.9%
E.W. Scripps Co., "A" 150 $ 11,888
Meredith Corp. 200 8,644
Playboy Enterprises, Inc., "B"* 700 6,804
Tribune Co. 200 9,796
-----------
$ 37,132
- -------------------------------------------------------------------------------------------------------
Restaurants & Lodging - 1.8%
Hilton Hotels Corp. 700 $ 9,324
Outback Steakhouse, Inc. 220 7,863
-----------
$ 17,187
- -------------------------------------------------------------------------------------------------------
Retail - 0.8%
PETsMART, Inc.* 470 $ 7,111
- -------------------------------------------------------------------------------------------------------
Special Products & Services - 2.4%
Carnival Corp. 400 $ 11,036
Concorde Career Colleges, Inc.* 300 6,309
Royal Caribbean Cruises Ltd. 300 5,571
-----------
$ 22,916
- -------------------------------------------------------------------------------------------------------
Telecommunications - 2.4%
Crown Castle International Corp.* 1,600 $ 10,192
EchoStar Communications Corp., "A"* 400 11,984
-----------
$ 22,176
- -------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 6.7%
American Tower Corp., "A"* 3,100 $ 20,584
Spectrasite, Inc.* 800 28,400
Symbol Technologies, Inc. 1,300 14,209
-----------
$ 63,193
- -------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 2.5%
Advanced Fibre Communications, Inc.*+ 530 $ 8,109
USA Interactive, Inc.* 500 14,975
-----------
$ 23,084
- -------------------------------------------------------------------------------------------------------
Transportation - 2.9%
Expeditors International of Washington, Inc. 200 $ 7,272
Heartland Express, Inc.* 200 4,600
Swift Transportation, Inc.* 330 5,979
Werner Enterprises, Inc. 400 9,036
-----------
$ 26,887
- -------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 719,516
- -------------------------------------------------------------------------------------------------------
Foreign Stocks - 1.5%
Mexico - 0.6%
Grupo Radio Centro S.A. de C.V., ADR (Advertising &
Broadcasting)* 1,500 $ 5,535
- -------------------------------------------------------------------------------------------------------
Netherlands - 0.9%
ASM Lithography Holding N.V. (Electronics)* 1,000 $ 8,810
- -------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 14,345
- -------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $668,962) $ 733,861
- -------------------------------------------------------------------------------------------------------
Short-Term Obligations - 16.8%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------------------------------
Cargill, Inc., due 5/01/03 $ 10 $ 10,000
Citigroup, Inc., due 5/01/03 37 37,000
Edison Asset Securitization LLC, due 5/01/03 37 37,000
General Electric Co., due 5/01/03 37 37,000
New Center Asset Trust, due 5/01/03 37 37,000
- -------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 158,000
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $826,962) $ 891,861
- -------------------------------------------------------------------------------------------------------
Securities Sold Short - (3.7)%
- -------------------------------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------------------------------
U.S. Stocks - (3.7)%
Automotive - (0.6)%
Cummins, Inc. (200) $ (5,422)
- -------------------------------------------------------------------------------------------------------
Biotechnology - (0.4)%
Cephalon, Inc.* (100) $ (4,084)
- -------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - (0.7)%
Drexler Technology Corp.* (400) $ (6,376)
- -------------------------------------------------------------------------------------------------------
Furniture & Home Appliances - (1.2)%
Whirlpool Corp. (215) $ (11,500)
- -------------------------------------------------------------------------------------------------------
Medical & Health Technology Services - (0.3)%
Oxford Health Plans, Inc.* (100) $ (2,927)
- -------------------------------------------------------------------------------------------------------
Retail - (0.5)%
Kenneth Cole Productions, Inc., "A"* (200) $ (4,610)
- -------------------------------------------------------------------------------------------------------
Total Securities Sold Short (Proceeds Received, $(33,122)) $ (34,919)
- -------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 8.9% 83,840
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 940,782
- -------------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- April 30, 2003
MFS LARGE CAP VALUE FUND
Stocks - 90.2%
- -------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------------------------
U.S. Stocks - 83.8%
Aerospace - 0.2%
Honeywell International, Inc. 25 $ 590
United Technologies Corp. 8 495
-----------
$ 1,085
- -------------------------------------------------------------------------------------------------------
Banks & Credit Cos. - 7.8%
Bank of America Corp. 135 $ 9,997
Bank One Corp. 95 3,425
FleetBoston Financial Corp. 210 5,569
SouthTrust Corp. 170 4,566
SunTrust Banks, Inc. 134 7,668
U.S. Bancorp 23 509
Wachovia Corp. 139 5,311
-----------
$ 37,045
- -------------------------------------------------------------------------------------------------------
Business Machines - 1.5%
Hewlett-Packard Co. 150 $ 2,445
International Business Machines Corp. 52 4,415
-----------
$ 6,860
- -------------------------------------------------------------------------------------------------------
Business Services - 0.3%
Automatic Data Processing, Inc. 40 $ 1,345
- -------------------------------------------------------------------------------------------------------
Cellular Phones - 0.4%
Telephone & Data Systems, Inc. 46 $ 1,982
- -------------------------------------------------------------------------------------------------------
Chemicals - 2.1%
Air Products & Chemicals, Inc. 28 $ 1,206
Dow Chemical Co. 147 4,798
E.I. DuPont de Nemours & Co. 28 1,191
PPG Industries, Inc. 60 2,911
-----------
$ 10,106
- -------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.4%
Intel Corp. 100 $ 1,840
- -------------------------------------------------------------------------------------------------------
Computer Software - 1.1%
Microsoft Corp. 168 $ 4,296
Oracle Corp.* 80 950
-----------
$ 5,246
- -------------------------------------------------------------------------------------------------------
Conglomerates - 1.2%
Altria Group, Inc. 77 $ 2,368
General Electric Co. 111 3,269
-----------
$ 5,637
- -------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 3.6%
Colgate-Palmolive Co. 57 $ 3,259
Gillette Co. 130 3,958
Kimberly-Clark Corp. 100 4,977
Procter & Gamble Co. 55 4,942
-----------
$ 17,136
- -------------------------------------------------------------------------------------------------------
Electronics - 1.6%
Texas Instruments, Inc. 401 $ 7,415
- -------------------------------------------------------------------------------------------------------
Energy - 1.9%
ConocoPhillips, Inc. 95 $ 4,779
TXU Corp. 220 4,382
-----------
$ 9,161
- -------------------------------------------------------------------------------------------------------
Entertainment - 2.4%
Viacom, Inc., "B"* 158 $ 6,859
Walt Disney Co. 240 4,478
-----------
$ 11,337
- -------------------------------------------------------------------------------------------------------
Financial Institutions - 8.0%
Citigroup, Inc. 365 $ 14,326
Federal Home Loan Mortgage Corp. 121 7,006
Federal National Mortgage Assn. 44 3,185
Franklin Resources, Inc. 117 4,081
Goldman Sachs Group, Inc. 21 1,594
Merrill Lynch & Co., Inc. 126 5,172
Morgan Stanley Dean Witter & Co. 61 2,730
-----------
$ 38,094
- -------------------------------------------------------------------------------------------------------
Financial Services - 3.0%
Mellon Financial Corp. 394 $ 10,421
T. Rowe Price Group, Inc. 120 3,663
-----------
$ 14,084
- -------------------------------------------------------------------------------------------------------
Food & Beverage Products - 3.0%
Archer-Daniels-Midland Co. 332 $ 3,678
Kellogg Co. 195 6,384
PepsiCo, Inc. 95 4,112
-----------
$ 14,174
- -------------------------------------------------------------------------------------------------------
Forest & Paper Products - 1.4%
International Paper Co. 185 $ 6,614
- -------------------------------------------------------------------------------------------------------
Industrial Gases - 0.9%
Praxair, Inc. 75 $ 4,356
- -------------------------------------------------------------------------------------------------------
Insurance - 3.9%
Allstate Corp. 128 $ 4,837
Chubb Corp. 117 6,188
Hartford Financial Services Group, Inc. 71 2,894
MetLife, Inc. 160 4,597
-----------
$ 18,516
- -------------------------------------------------------------------------------------------------------
Machinery - 1.4%
Deere & Co. 145 $ 6,384
- -------------------------------------------------------------------------------------------------------
Medical & Health Products - 4.8%
Bristol-Myers Squibb Co. 21 $ 536
Eli Lilly & Co. 88 5,616
Johnson & Johnson Co. 30 1,691
Merck & Co., Inc. 70 4,073
Pfizer, Inc. 202 6,211
Schering Plough Corp. 245 4,435
-----------
$ 22,562
- -------------------------------------------------------------------------------------------------------
Metals & Minerals - 1.9%
Alcoa, Inc. 220 $ 5,044
Phelps Dodge Corp.* 130 4,055
-----------
$ 9,099
- -------------------------------------------------------------------------------------------------------
Oil Services - 3.8%
GlobalSantaFe Corp. 60 $ 1,270
Noble Corp.* 211 6,530
Schlumberger Ltd. 245 10,273
-----------
$ 18,073
- -------------------------------------------------------------------------------------------------------
Oils - 6.8%
Apache Corp. 24 $ 1,374
Devon Energy Corp. 150 7,088
ExxonMobil Corp. 450 15,840
Occidental Petroleum Corp. 270 8,059
-----------
$ 32,361
- -------------------------------------------------------------------------------------------------------
Photographic Products - 0.4%
Eastman Kodak Co. 65 $ 1,944
- -------------------------------------------------------------------------------------------------------
Printing & Publishing - 3.6%
Gannett Co., Inc. 61 $ 4,619
New York Times Co. 135 6,261
Tribune Co. 126 6,172
-----------
$ 17,052
- -------------------------------------------------------------------------------------------------------
Railroads - 2.6%
Burlington Northern Santa Fe Railway Co. 265 $ 7,462
Norfolk Southern Corp. 236 5,006
-----------
$ 12,468
- -------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 1.6%
Equity Office Properties Trust 35 $ 909
Equity Residential Properties Trust 205 5,312
Starwood Hotels & Resorts Co. 50 1,342
-----------
$ 7,563
- -------------------------------------------------------------------------------------------------------
Restaurants & Lodging - 1.1%
Hilton Hotels Corp. 250 $ 3,330
McDonald's Corp. 100 1,710
-----------
$ 5,040
- -------------------------------------------------------------------------------------------------------
Retail - 1.0%
Home Depot, Inc. 91 $ 2,560
May Department Stores Co. 110 2,378
-----------
$ 4,938
- -------------------------------------------------------------------------------------------------------
Supermarkets - 0.8%
Kroger Co.* 280 $ 4,004
- -------------------------------------------------------------------------------------------------------
Telecommunications - 6.2%
AT&T Corp. 248 $ 4,228
BellSouth Corp. 448 11,419
Comcast Corp., "A"* 24 766
Comcast Corp.* 130 3,908
SBC Communications, Inc. 260 6,074
Verizon Communications, Inc. 81 3,028
-----------
$ 29,423
- -------------------------------------------------------------------------------------------------------
Utilities - Electric - 1.9%
Entergy Corp. 60 $ 2,797
Exelon Corp. 50 2,652
FPL Group, Inc. 32 1,948
NiSource, Inc. 45 850
Pinnacle West Capital Corp. 19 631
-----------
$ 8,878
- -------------------------------------------------------------------------------------------------------
Utilities - Gas - 1.2%
National Fuel Gas Co. 160 $ 3,753
WGL Holdings, Inc. 68 1,835
-----------
$ 5,588
- -------------------------------------------------------------------------------------------------------
Total U.S. Stocks $397,410
- -------------------------------------------------------------------------------------------------------
Foreign Stocks - 6.4%
Australia - 0.2%
Broken Hill Proprietary Co. Ltd. (Mining) 200 $ 1,132
- -------------------------------------------------------------------------------------------------------
Netherlands - 0.4%
Akzo Nobel N.V. (Chemicals)* 80 $ 1,782
- -------------------------------------------------------------------------------------------------------
Switzerland - 0.9%
Novartis AG (Medical & Health Products) 105 $ 4,147
- -------------------------------------------------------------------------------------------------------
United Kingdom - 4.9%
BP Amoco PLC, ADR (Oils) 267 $ 10,290
Reed Elsevier PLC (Publishing) 1,010 8,060
Vodafone Group PLC, ADR (Telecommunications) 263 5,197
-----------
$ 23,547
- -------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 30,608
- -------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $445,720) $ 428,018
- -------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 1.5%
- -------------------------------------------------------------------------------------------------------
U.S. Stocks - 1.5%
Insurance - 0.9%
Chubb Corp., 7s 50 $ 1,205
Hartford Financial Services Group, Inc., 6s 70 3,167
-----------
$ 4,372
- -------------------------------------------------------------------------------------------------------
Telecommunications - 0.6%
Motorola, Inc., 7s 100 $ 2,901
- -------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $9,252) $ 7,273
- -------------------------------------------------------------------------------------------------------
Convertible Bonds - 1.1%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------------------------------
U.S. Bonds - 1.1%
Computer Software - Systems - 0.9%
Analog Devices, Inc., 4.75s, 2005 $ 4 $ 4,050
- -------------------------------------------------------------------------------------------------------
Conglomerates - 0.2%
Loews Corp., 3.125s, 2007 $ 1 $ 896
- -------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $4,763) $ 4,946
- -------------------------------------------------------------------------------------------------------
Short-Term Obligations - 7.2%
- -------------------------------------------------------------------------------------------------------
Edison Asset Securitization LLC, due 5/01/03 $ 18 $ 18,000
New Center Asset Trust, due 5/01/03 16 16,000
- -------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 34,000
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $493,735) $ 474,237
Other Assets, Less Liabilities 92
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 474,329
- -------------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
Portfolio Footnotes:
* Non-income producing security.
^ 4(2) paper.
+ Security or a portion of the security was pledged to cover collateral
requirements for securities sold short. At April 30, 2003, the value of
securities pledged amounted to $95,387.
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
- -----------------------------------------------------------------------------------------------------
MFS EMERGING MFS LARGE
OPPORTUNITIES CAP VALUE
APRIL 30, 2003 FUND FUND
- -----------------------------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $826,962, and $493,735,
respectively) $ 891,861 $ 474,237
Cash 8,636 30
Deposits with brokers for securities sold short 33,122 --
Receivable for investments sold 147,025 2,573
Interest and dividends receivable 138 986
---------- ----------
Total assets $1,080,782 $ 477,826
---------- ----------
Liabilities:
Securities sold short, at value (proceeds received, $33,122 and
$0, respectively) $ 34,919 $ --
Payable for investments purchased 103,755 3,483
Payable to broker for securities sold short 1,300 --
Payable to affiliates -
Management fee 19 10
Reimbursement fee 7 4
---------- ----------
Total liabilities $ 140,000 $ 3,497
---------- ----------
Net assets $ 940,782 $ 474,329
---------- ----------
Net assets consist of:
Paid-in capital $1,393,996 $ 533,121
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 63,102 (19,481)
Accumulated net realized loss on investments and foreign
currency transactions (516,316) (41,177)
Accumulated undistributed net investment income -- 1,866
---------- ----------
Total $ 940,782 $ 474,329
---------- ----------
Shares of beneficial interest outstanding
Class A 64,684 54,102
Class I 69,138 20
---------- ----------
Total shares of beneficial interest outstanding 133,822 54,122
---------- ----------
Net assets:
Class A $ 454,142 $ 474,151
Class I 486,640 178.54
---------- ----------
Total net assets $ 940,782 $ 474,329
---------- ----------
Class A shares:
Net asset value per share
(net assets / shares of beneficial interest outstanding) $7.02 $8.76
----- -----
Offering price per share (100 / 94.25 of net asset value per
share) $7.45 $9.29
----- -----
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $7.04 $8.93
----- -----
On sales of $50,000 or more, the price of Class A is reduced. A contingent
deferred sales charge may be imposed on redemptions of Class A shares.
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statements of Operations
- ------------------------------------------------------------------------------------------------------
MFS EMERGING MFS LARGE
OPPORTUNITIES CAP VALUE
YEAR ENDED APRIL 30, 2003 FUND FUND
- ------------------------------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 3,356 $ 10,889
Interest 1,008 1,275
Foreign taxes withheld (66) (113)
--------- -----------
Total investment income $ 4,298 $ 12,051
--------- -----------
Expenses -
Management fee $ 5,564 $ 3,540
Shareholder servicing agent fee 748 476
Administrative fee 72 45
Custodian fee 4,290 438
Printing 11,366 1,490
Postage -- 43
Auditing fees 17,980 26,520
Registration fees 2,654 2,663
Dividend expense on securities sold short 98 --
Professional services 2,750 2,750
Miscellaneous 217 2,719
--------- -----------
Total expenses $ 45,739 $ 40,684
Fees paid indirectly (105) (177)
Reduction of expenses by investment adviser (38,117) (35,787)
--------- -----------
Net expenses $ 7,517 $ 4,720
--------- -----------
Net investment income (loss) $ (3,219) $ 7,331
--------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (11,746) $ (29,843)
Securities sold short (168,480) --
Foreign currency transactions 40 14
--------- -----------
Net realized loss on investments and foreign
currency transactions $(180,186) $ (29,829)
--------- -----------
Change in unrealized appreciation (depreciation) -
Investments $ 47,740 $ (37,086)
Securities sold short (1,797) --
Translation of assets and liabilities in foreign currencies (7) 13
--------- -----------
Net unrealized gain (loss) on investments and foreign
currency translation $ 45,936 $ (37,073)
--------- -----------
Net realized and unrealized loss on investments and
foreign currency $(134,250) $ (66,902)
--------- -----------
Decrease in net assets from operations $(137,469) $ (59,571)
--------- -----------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
----------------------------------------
MFS EMERGING OPPORTUNITIES FUND 2003 2002
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment loss $ (3,219) $ (4,116)
Net realized loss on investments and foreign currency
transactions (180,186) (83,038)
Net unrealized gain on investments and foreign currency
translation 45,936 133,590
--------- -----------
Increase (decrease) in net assets from operations $(137,469) $ 46,436
--------- -----------
Net increase (decrease) in net assets from fund share
transactions $ 138,419 $ (404,318)
--------- -----------
Total increase (decrease) in net assets $ 950 $ (357,882)
Net assets:
At beginning of period 939,832 1,297,714
--------- -----------
At end of period $ 940,782 $ 939,832
--------- -----------
Accumulated net investment loss $ -- $ --
--------- -----------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statements of Changes in Net Assets - continued
- --------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
------------------------------------
MFS LARGE CAP VALUE FUND 2003 2002
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,331 $ 5,934
Net realized loss on investments and foreign currency
transactions (29,829) (4,537)
Net unrealized loss on investments and foreign currency
translation (37,073) (23,274)
-------- ----------
Decrease in net assets from operations $(59,571) $ (21,877)
-------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (6,930) $ (5,650)
From net investment income (Class I) (3) (2)
From net realized gain on investments and foreign currency
transactions
(Class A) -- (13,167)
From net realized gain on investments and foreign currency
transactions
(Class I) -- (5)
In excess of net realized gain on investments and foreign
currency transactions (Class A) -- (6,969)
In excess of net realized gain on investments and foreign
currency transactions (Class I) -- (3)
-------- ----------
Total distributions declared to shareholders $ (6,933) $ (25,796)
-------- ----------
Net increase in net assets from fund share transactions $ 9,025 $ 46,001
-------- ----------
Total decrease in net assets $(57,479) $ (1,672)
Net assets:
At beginning of period 531,808 533,480
-------- ----------
At end of period (including accumulated undistributed net
investment income of $1,866 and $1,792, respectively) $474,329 $ 531,808
-------- ----------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, PERIOD ENDED
----------------------------------- APRIL 30, 2001*
MFS EMERGING OPPORTUNITIES FUND 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 8.30 $ 7.79 $10.00
------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.03) $(0.03) $(0.03)
Net realized and unrealized gain (loss) on investments
and foreign currency (1.25) 0.54 (1.51)
------ ------ ------
Total from investment operations $(1.28) $ 0.51 $(1.54)
------ ------ ------
Less distributions declared to shareholders -
In excess of net realized gain on investments and
foreign currency transactions $ -- $ -- $(0.67)
------ ------ ------
Net asset value - end of period $ 7.02 $ 8.30 $ 7.79
------ ------ ------
Total return (%)(+) (15.42) 6.55 (16.13)++
Ratios (%) (to average net assets)/Supplemental data(S):
Expenses## 1.02 1.04 1.03+
Net investment loss (0.42) (0.36) (0.35)+
Portfolio turnover (%) 252 129 169
Net assets at end of period (000 Omitted) $454 $387 $503
(S) Subject to reimbursement by the fund, the investment adviser has
voluntarily agreed under a temporary expense reimbursement agreement to
pay all of the fund's operating expenses, exclusive of management fees. In
consideration, the fund pays the investment adviser a reimbursement fee
not greater than 0.25% of average daily net assets. To the extent actual
expenses were over this limitation, the net investment loss per share and
ratios would have been:
Net investment loss $(0.37) $(0.44) $(0.27)
Ratios (%) (to average net assets):
Expenses## 6.16 6.50 3.45+
Net investment loss (5.56) (5.82) (2.77)+
* For the period from the commencement of the fund's investment operations, May 2, 2000, through April 30,
2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, PERIOD ENDED
----------------------------------- APRIL 30, 2001*
MFS EMERGING OPPORTUNITIES FUND 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
CLASS I
- -----------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 8.29 $ 7.79 $10.00
------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.03) $(0.03) $(0.04)
Net realized and unrealized gain (loss) on investments
and foreign currency (1.22) 0.53 (1.50)
------ ------ ------
Total from investment operations $(1.25) $ 0.50 $(1.54)
------ ------ ------
Less distributions declared to shareholders -
In excess of net realized gain on investments and
foreign currency transactions $ -- $ -- $(0.67)
------ ------ ------
Net asset value - end of period $ 7.04 $ 8.29 $ 7.79
------ ------ ------
Total return (%) (15.08) 6.42 (16.13)++
Ratios (%) (to average net assets)/Supplemental data(S):
Expenses## 1.02 1.04 1.03+
Net investment loss (0.44) (0.38) (0.36)+
Portfolio turnover (%) 252 129 169
Net assets at end of period (000 omitted) $487 $552 $795
(S) Subject to reimbursement by the fund, the investment adviser has
voluntarily agreed under a temporary expense reimbursement agreement to
pay all of the fund's operating expenses, exclusive of management fees. In
consideration, the fund pays the investment adviser a reimbursement fee
not greater than 0.25% of average daily net assets. To the extent actual
expenses were over this limitation, the net investment loss per share and
ratios would have been:
Net investment loss $(0.38) $(0.46) $(0.30)
Ratios (%) (to average net assets):
Expenses## 6.16 6.50 3.45+
Net investment loss (5.58) (5.84) (2.77)+
* For the period from the inception of Class I shares, June 1, 2000, through April 30, 2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
--------------------------------------------------- PERIOD ENDED
MFS LARGE CAP VALUE FUND 2003 2002 2001 APRIL 30, 2000*
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.02 $11.01 $10.23 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.14 $ 0.11 $ 0.12 $ 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency (1.27) (0.56) 1.54 0.66
------ ------ ------ ------
Total from investment operations $(1.13) $(0.45) $ 1.66 $ 0.78
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.13) $(0.12) $(0.14) $(0.07)
From net realized gain on investments and
foreign currency transactions -- (0.27) (0.74) (0.48)
In excess of net realized gain on investments
and foreign currency transactions -- (0.15) -- --
------ ------ ------ ------
Total distributions declared to
shareholders $(0.13) $(0.54) $(0.88) $(0.55)
------ ------ ------ ------
Net asset value - end of period $ 8.76 $10.02 $11.01 $10.23
------ ------ ------ ------
Total return (%)(+) (11.28) (3.94) 16.40 8.14++
Ratios (%) (to average net assets)/Supplemental data(S):
Expenses## 1.04 1.04 1.04 1.04+
Net investment income 1.55 1.17 1.13 1.13+
Portfolio turnover (%) 61 58 67 100
Net assets at end of period (000 Omitted) $474 $532 $533 $519
(S) Subject to reimbursement by the fund, the investment adviser voluntarily
agreed under a temporary expense reimbursement agreement to pay all of the
fund's operating expenses, exclusive of management fees. In consideration,
the fund pays the investment adviser a reimbursement fee not greater than
0.25% of average daily net assets. To the extent actual expenses were over
this limitation, the net investment loss per share and the ratios would
have been:
Net investment loss $(0.53) $(0.63) $(0.38) $(0.57)
Ratios (%) (to average net assets):
Expenses## 8.62 9.09 5.69 7.74+
Net investment loss (6.03) (6.63) (3.52) (5.57)+
* For the period from the commencement of the fund's investment operations, May 4, 1999, through April 30,
2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
--------------------------------------------------- PERIOD ENDED
MFS LARGE CAP VALUE FUND 2003 2002 2001 APRIL 30, 2000*
- --------------------------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.17 $11.13 $10.28 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.11 $ 0.15 $ 0.20 $ 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency (1.22) (0.57) 1.53 0.72
------ ------ ------ ------
Total from investment operations $(1.11) $(0.42) $ 1.73 $ 0.83
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.13) $(0.12) $(0.14) $(0.07)
From net realized gain on investments and
foreign currency transactions -- (0.27) (0.74) (0.48)
In excess of net realized gain on investments
and foreign currency transactions -- (0.15) -- --
------ ------ ------ ------
Total distributions declared to
shareholders $(0.13) $(0.54) $(0.88) $(0.55)
------ ------ ------ ------
Net asset value - end of period $ 8.93 $10.17 $11.13 $10.28
------ ------ ------ ------
Total return (%) (10.91) (3.63) 17.14 8.65++
Ratios (%) (to average net assets)/Supplemental data(S):
Expenses## 1.04 1.04 1.04 1.04+
Net investment income 1.27 1.44 1.83 1.12+
Portfolio turnover (%) 61 58 67 100
Net assets at end of period $179 $203 $223 $206
(S) Subject to reimbursement by the fund, the investment adviser voluntarily
agreed under a temporary expense reimbursement agreement to pay all of the
fund's operating expenses, exclusive of management fees. In consideration,
the fund pays the investment adviser a reimbursement fee not greater than
0.25% of average daily net assets. To the extent actual expenses were over
this limitation, the net investment loss per share and the ratios would
have been:
Net investment loss $(0.57) $(0.63) $(0.31) $(0.59)
Ratios (%) (to average net assets):
Expenses## 8.62 9.09 5.69 7.74+
Net investment loss (6.31) (6.63) (2.83) (5.58)+
* For the period from the inception of Class I shares, May 5, 1999, through April 30, 2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Emerging Opportunities Fund and MFS Large Cap Value Fund (the funds) are
each 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
accounting principles generally accepted in the United States of America
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 - Equity securities in each fund's portfolio for which
market quotations are available are valued at the last sale or official
closing price on the primary market or exchange on which they are primarily
traded or at the last quoted bid price for securities in which there were no
sales during the day. If no sales are reported, as is the case for most
securities traded over the counter, securities are valued on the basis of
quotations obtained from brokers and dealers or on the basis of valuations
furnished by a pricing service. Bonds and other fixed income securities (other
than short-term obligations) of U.S. issuers in the fund's portfolio are
valued at an evaluated bid price on the basis of quotes from brokers and
dealers or on the basis of valuations furnished by a pricing service. Prices
obtained from pricing services utilize both dealer-supplied valuations and
electronic data processing techniques which take into account appropriate
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 quoted prices or
exchange or over-the-counter prices, since such valuations are believed to
reflect more accurately the fair value of such securities. Portfolio
investments for which market quotations are not readily available, or whose
values have been materially affected by events occurring after the close of
their primary markets, valued at fair value as determined in good faith by or
at the direction of the Board of Trustees. Short-term obligations in each
fund's portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer supplied valuations.
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.
Short Sales - The MFS Emerging Opportunities Fund may enter into short sales.
A short sale transaction involves selling a security, which the fund does not
own, with the intent of purchasing it later at a lower price. The fund will
realize a gain if the security price decreases and a loss if the security
price increases between the date of the short sale and the date on which the
fund must replace the borrowed security. Losses from short sales can exceed
the proceeds of the security sold; and they can also exceed the potential loss
from an ordinary buy and sell transaction. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of the premium,
dividends, or interest the fund may be required to pay in connection with a
short sale. Whenever the fund engages in short sales, its custodian segregates
cash or marketable securities in an amount that, when combined with the amount
of proceeds from the short sale deposited with the broker, at least equals the
current market value of the security sold short.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with generally accepted accounting principles. All discount is
accreted for 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.
Fees Paid Indirectly - Each fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the fund. This amount is shown as a reduction of total expenses on the
Statement of Operations.
Tax Matters and Distributions - Each fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. Each fund
distinguishes between distributions on a tax basis and a financial reporting
basis and 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. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions and real estate investment trusts.
The tax character of distributions declared for the years ended April 30, 2003
and April 30, 2002 was as follows:
The MFS Emerging Opportunities Fund paid no distributions for the years ended
April 30, 2003 and April 30, 2002.
MFS LARGE CAP VALUE FUND APRIL 30, 2003 APRIL 30, 2002
- --------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $6,933 $15,709
Long-term capital gain -- 10,087
------ -------
Total distributions declared $6,933 $25,796
------ -------
During the year ended April 30, 2003, the following amounts were reclassified
due to differences between book and tax accounting for currency transactions,
net operating losses and non-taxable dividends. These changes had no effect on
the net assets or net asset value per share.
MFS EMERGING MFS LARGE CAP
OPPORTUNITIES FUND VALUE FUND
- -----------------------------------------------------------------------------------------------------------
Increase (decrease):
Paid-in capital $ (3,179) $ 251
Accumulated net realized loss on investments and foreign
currency transactions (40) 73
Accumulated undistributed net investment income 3,219 (324)
As of April 30, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
MFS EMERGING MFS LARGE CAP
OPPORTUNITIES FUND VALUE FUND
- -----------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ -- $ 1,849
Capital loss carryforward (432,649) (27,594)
Unrealized appreciation (depreciation) 62,937 (22,327)
Other temporary differences (83,502) (10,720)
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration.
MFS EMERGING OPPORTUNITIES FUND MFS LARGE CAP VALUE FUND
EXPIRATION DATE CARRYOVER EXPIRATION DATE CARRYOVER
- ----------------------------------------------- -------------------------------------------
April 30, 2010 $(258,269) April 30, 2010 $ --
April 30, 2011 (174,380) April 30, 2011 (27,594)
--------- --------
Total $(432,649) Total $(27,594)
--------- --------
Multiple Classes of Shares of Beneficial Interest - Each 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.
(3) Transactions with Affiliates
Investment Adviser - Each fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. Each
fund's management fee is computed daily and paid monthly at an annual rate of
0.75% of the fund's average daily net assets.
Each fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of the fund's operating expenses, exclusive of
management, distribution, and service fees. Each fund in turn will pay MFS an
expense reimbursement fee not greater than 0.25% of average daily net assets.
To the extent that the expense reimbursement fee exceeds the fund's actual
expenses, the excess will be applied to amounts paid by MFS in prior years. At
April 30, 2003, aggregate unreimbursed expenses amounted to $38,117 and
$35,787 for MFS Emerging Opportunities Fund and MFS Large Cap Value Fund,
respectively.
Each fund pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and 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 Trustees are currently waiving their right to receive compensation from
each fund.
Administrator - Each fund has an administrative services agreement with MFS to
provide each fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each fund pays MFS an administrative fee
at the following annual percentages of 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, did not
receive any sales charges on sales of Class A shares of each fund for the year
ended April 30, 2003.
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:
Each 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 each fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of each fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.10% per annum of each fund's average daily
net assets attributable to Class A shares. Distribution and service fees under
the Class A distribution plan are currently not being implemented.
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 during the year ended
April 30, 2003.
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
0.11%. Prior to April 1, 2003, the fee was 0.10% of the fund's average daily
net assets.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
MFS EMERGING MFS LARGE CAP
OPPORTUNITIES FUND VALUE FUND
- -------------------------------------------------------------------------------------------
Purchases
- ---------
Investments (non-U.S. government securities) $1,708,909 $291,833
---------- --------
Sales
- -----
Investments (non-U.S. government securities) $1,719,544 $259,410
---------- --------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the funds, as computed on a federal income tax basis, are
as follows:
MFS EMERGING MFS LARGE CAP
OPPORTUNITIES FUND VALUE FUND
- ------------------------------------------------------------------------------------------------------------------
Aggregate cost $827,127 $496,581
-------- --------
Gross unrealized appreciation $ 86,490 $ 20,180
Gross unrealized depreciation (21,756) (42,524)
-------- --------
Net unrealized appreciation (depreciation) $ 64,734 $(22,344)
-------- --------
(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:
Class A shares
MFS EMERGING OPPORTUNITIES FUND
----------------------------------------------------------
YEAR ENDED YEAR ENDED
APRIL 30, 2003 APRIL 30, 2002
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
Shares sold 26,674 $ 175,429 10,833 $ 88,974
Shares reacquired (8,645) (56,454) (28,796) (203,654)
------ ---------- ------ ---------
Net increase (decrease) 18,029 $ 118,975 (17,963) $(114,680)
------ ---------- ------ ---------
Class I shares
MFS EMERGING OPPORTUNITIES FUND
----------------------------------------------------------
YEAR ENDED YEAR ENDED
APRIL 30, 2003 APRIL 30, 2002
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
Shares sold 41,849 $ 279,220 83,581 $ 638,163
Shares reacquired (39,312) (259,776) (119,040) (927,801)
------ ---------- ------ ----------
Net increase (decrease) 2,537 $ 19,444 (35,459) $ (289,638)
------ ---------- ------ ----------
Class A shares
MFS LARGE CAP VALUE FUND
----------------------------------------------------------
YEAR ENDED YEAR ENDED
APRIL 30, 2003 APRIL 30, 2002
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
Shares sold 353 $ 3,097 2,619 $ 26,780
Shares issued to shareholders in
reinvestment
of distributions 791 6,929 2,682 25,775
Shares reacquired (104) (1,001) (662) (6,554)
------ ---------- ------ ---------
Net increase 1,040 $ 9,025 4,639 $ 46,001
------ ---------- ------ ---------
For the fiscal years ended April 30, 2003 and April 30, 2002, the MFS Large
Cap Value Fund had no Class I share activity.
(6) Line of Credit
Each fund and other affiliated funds participate in an $800 million 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 MFS Emerging
Opportunities Fund and MFS Large Cap Value Fund for the year ended April 30,
2003, was $5, and $3, respectively. The funds had no borrowings during the
year.
--------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded by a
current prospectus.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders of MFS Emerging Opportunities Fund and MFS Large Cap Value
Fund:
We have audited the accompanying statements of assets and liabilities of MFS
Emerging Opportunities Fund and MFS Large Cap Value Fund (the Funds), including
the portfolios of investments, as of April 30, 2003, and the related statements
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 periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds" management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of April 30, 2003, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Emerging Opportunities Fund and MFS Large Cap Value Fund at April 30, 2003,
the results of their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended, and their
financial highlights for each of the periods indicated therein, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
June 6, 2003
FEDERAL TAX INFORMATION (Unaudited)
In January 2004, shareholders will be mailed a Form 1099-DIV, if applicable,
reporting the federal tax status of all distributions paid during the calendar
year 2003.
For the year ended April 30, 2003, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 100% for
the MFS Large Cap Value Fund.
MFS(R) EMERGING OPPORTUNITIES FUND
MFS(R) LARGE CAP FUND
[MFS LOGO]
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
INCA-ANN 6/03 480
MFS(R) Mutual Funds
ANNUAL REPORT 4/30/03
MFS(R) INTERMEDIATE
INVESTMENT GRADE
BOND FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) INTERMEDIATE INVESTMENT GRADE BOND FUND
The fund seeks to provide as high a level of current income as the investment
adviser believes is consistent with prudent investment risk. The fund's
secondary objective is to protect shareholders' capital.
TABLE OF CONTENTS
- -----------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- -----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- -----------------------------------------------------
MANAGEMENT REVIEW 5
- -----------------------------------------------------
PERFORMANCE SUMMARY 7
- -----------------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- -----------------------------------------------------
FINANCIAL STATEMENTS 25
- -----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 36
- -----------------------------------------------------
INDEPENDENT AUDITORS' REPORT 45
- -----------------------------------------------------
TRUSTEES AND OFFICERS 46
- -----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES
OF INVESTORS 48
- -----------------------------------------------------
MFS PRIVACY POLICY 49
- -----------------------------------------------------
FEDERAL TAX INFORMATION 49
- -----------------------------------------------------
CONTACT INFORMATION 50
- -----------------------------------------------------
ASSET ALLOCATION 51
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers - no matter how
talented they may be - can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS' culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
- --------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- --------------------------------------------------------------------------------
THE HUMAN SIDE OF MONEY MANAGEMENT
For more than 75 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with insight
and care.
Our success, we believe, has to do with the fact that we see investors as people
with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain
first-hand knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- --------------------------------------------------------------------------------
MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
A MIXED YEAR FOR CORPORATE BONDS
The beginning of the reporting period coincided with an increasing investor
appetite for high-quality, investment-grade bonds as the stock market continued
to slide. However, as accounting irregularities surfaced at a number of
high-profile companies and it became apparent that the U.S. economy was not
recovering as expected, even the corporate bond market was affected.
By June and July of 2002, both the stock and corporate bond markets had
performed poorly, and we saw a flight to the relative safety of U.S. government
bonds as investors shifted their assets in an effort to protect their capital.
Both stock and corporate bond markets continued to be volatile through the
summer and into the fall of 2002.
In October and November, stock and corporate bond prices rebounded sharply from
a dramatic third-quarter decline. The stock market rally stalled in the first
quarter of 2003, however, as the uncertainty of war with Iraq really began to be
a factor with investors. Less-than-encouraging economic news in early 2003 also
dampened investor enthusiasm for stocks.
However, high-grade bonds continued to rally through the end of the reporting
period, as investor focus turned from U.S. Treasuries to higher-yielding bonds.
(The principal value and interest on Treasury securities are guaranteed by the
U.S. government if held to maturity.) Many companies were actively reducing the
amount of debt on their balance sheets and achieving stronger operations. These
factors helped improve credit quality and bond performance, particularly for
high-grade corporate issuers.
Mortgage-backed securities also posted strong returns for the reporting period,
benefiting from increased interest in higher-quality securities, which have
higher yields than U.S. Treasuries.
For the 12 month period ended April 30, 2003, the fund underperformed its
benchmark index, the Lehman Brothers Intermediate Government/Credit Index, but
outperformed the average return for its peer group, the Lipper Intermediate
Investment Grade Debt Fund category.
A VARIETY OF PERFORMANCE DRIVERS
As money came into the fund early in the reporting period, we tried to keep the
fund's interest rate sensitivity (duration) relatively constant and invested
more heavily in U.S. Treasury securities and U.S. government agency bonds. As
rates declined and sparked a rally in Treasuries over the summer of 2002, these
holdings helped mitigate some of the corporate bond underperformance that the
fund incurred during the same period. Also holding back performance were some of
the fund's holdings in corporate bonds with intermediate maturities, as
securities with longer maturities outperformed in that sector.
By late July 2002, we had significantly reduced the fund's corporate bond
holdings. However, as investors regained confidence in corporate securities,
this underweighted position hurt performance. Subsequently, we increased our
corporate bond position and trimmed our U.S. Treasury holdings, which was a
positive contributor to performance during the fourth-quarter corporate rally.
During the fourth-quarter rally, the fund's allocation to corporate bonds was a
significant contributor to relative performance. In the latter part of the
reporting period, we also tended to hold more higher-yield corporate bonds than
the fund's benchmark. This overweighting helped relative performance as the
corporate bond market performed well.
PORTFOLIO STRUCTURE 4/30/03
PIE CHART
High Grade Corporates 47.6%
Mortgage Backed 13.0%
Government Agency 10.0%
U.S. Treasuries 8.0%
Asset Backed 7.7%
Other 13.7%
The portfolio is actively managed, and current holdings may be different.
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
Prior to March 1, 2002, MFS(R) Intermediate Investment Grade Bond Fund was
available only to MFS employees and had limited assets.
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.
These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 4/30/03
- --------------------------------------------------------------------------------
The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmark. Performance results include
the deduction of the maximum applicable sales charge and reflect the percentage
change in net asset value, including reinvestment of dividends and capital gains
distributions. 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. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. (See
Notes to Performance Summary.)
LINE CHART
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
1/99 4/99 4/00 4/01 4/02 4/03
Lehman Brothers Intermediate Credit Index $10,000 $10,040 $10,082 $11,377 $12,182 $13,740
Lehman Brothers Intermediate Government/Credit Index 10,000 10,012 10,166 11,399 12,217 13,532
MFS Intermediate Investment Grade Bond Fund - Class A 9,525 9,567 9,722 10,950 11,767 13,014
TOTAL RETURNS
Cumulative without sales charge
Class
Inception
Share class date 1-yr 3-yr Life*
A 12/31/98 10.59% 33.86% 36.63%
- -----------------------------------------------------------------------
B 3/1/02 9.66% 32.55% 35.29%
- -----------------------------------------------------------------------
C 3/1/02 9.63% 32.52% 35.26%
- -----------------------------------------------------------------------
I 12/31/98 10.65% 33.97% 36.73%
- -----------------------------------------------------------------------
R 12/31/02 10.46% 33.70% 36.47%
- -----------------------------------------------------------------------
Average annual without sales charge
A 10.59% 10.21% 7.48%
- -----------------------------------------------------------------------
B 9.66% 9.85% 7.23%
- -----------------------------------------------------------------------
C 9.63% 9.84% 7.23%
- -----------------------------------------------------------------------
I 10.65% 10.24% 7.50%
- -----------------------------------------------------------------------
R 10.46% 10.17% 7.45%
- -----------------------------------------------------------------------
Average annual with sales charge
Share class 1-yr 3-yr Life*
A
5.34% 8.44% 6.27%
- -----------------------------------------------------------------------
B
5.66% 9.01% 6.86%
- -----------------------------------------------------------------------
C
8.63% 9.84% 7.23%
- -----------------------------------------------------------------------
I and R class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
Comparative benchmarks
Average Annual
Average intermediate investment
grade debt fund+ 9.26% 9.03% 6.21%
- -----------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Credit Index# 10.76% 10.00% 7.23%
- -----------------------------------------------------------------------
Lehman Brothers Intermediate Credit
Index# 12.79% 10.87% 7.61%
- -----------------------------------------------------------------------
Periods less than one year are actual, not annualized.
*For the period from the commencement of the fund's investment operations,
December 31, 1998, through April 30, 2003. Index information is from January 1,
1999.
+Source: Lipper Inc., an independent firm that reports mutual fund
performance.
#Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CREDIT INDEX - Measures the performance
of the investment-grade bond market and includes bonds with maturities up to 10
years.
LEHMAN BROTHERS INTERMEDIATE CREDIT INDEX - Measures the performance of the U.S.
intermediate-term, investment-grade bond market.
NOTE TO SHAREHOLDERS - We have included the Lehman Brothers Intermediate
Government/Credit Index as the primary benchmark because we believe that this
index better reflects the fund's investment policies and objectives. Included
for comparison purposes is the Lehman Brothers Intermediate Credit Index. For
the six months ended October 31, 2002, Class A shares of the fund provided a
total return of 5.98%, Class B shares 5.64%, Class C shares 5.61% and Class I
shares returned 6.06%. These returns include the reinvestment of any dividends
and capital gains distributions but exclude the effects of any sales charges.
For the six months ended October 31, 2002, the total return of the Lehman
Brothers Intermediate Government/Credit Index and Lehman Brothers Intermediate
Credit Index was 6.07% and 5.17%, respectively. Past performance is no guarantee
of future results.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results, including sales charge, reflect the deduction of the maximum
4.75% sales charge. Class B results, including sales charge, reflect the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%. Class C results, including sales charge,
redeemed within one year from the end of the calendar month of purchase reflect
the deduction of the 1% CDSC. Class I shares have no sales charges and are
available only to certain investors. Class R shares have no sales charges and
are available only to certain retirement plans.
Performance for share classes offered after Class A shares includes the
performance of the fund's Class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences in
sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of blended
performance generally results in higher performance for share classes with
higher operating expenses than the initial share class, and lower performance
for share classes with lower operating expenses than the initial share class.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. All results
are historical and assume the reinvestment of dividends and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT THE
DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS
OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
Because the portfolio invests in a limited number of companies a change in one
security's value may have a more significant effect on the portfolio's value.
These risks may increase share price volatility. Please see the prospectus for
further information on these and other risk considerations.
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.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS 4/30/03
- --------------------------------------------------------------------------------
The Portfolio of Investments is a list of all securities owned by your fund. It
is categorized by broad-based asset classes.
Bonds - 100.1%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- --------------------------------------------------------------------------------------------------
U.S. Bonds - 87.7%
- --------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 0.4%
- --------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc., 7.25s, 2003 $15 $15,265
- --------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc., 7.875s, 2005 362 399,775
- --------------------------------------------------------------------------------------------------
$415,040
- --------------------------------------------------------------------------------------------------
Aerospace & Defense - 1.3%
- --------------------------------------------------------------------------------------------------
BAE Systems Holdings, Inc., 6.4s, 2011## $400 $421,876
- --------------------------------------------------------------------------------------------------
Boeing Capital Corp., 5.75s, 2007 555 588,464
- --------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7s, 2006 280 311,822
- --------------------------------------------------------------------------------------------------
Raytheon Co., 5.7s, 2003 29 29,363
- --------------------------------------------------------------------------------------------------
Raytheon Co., 6.15s, 2008 20 22,098
- --------------------------------------------------------------------------------------------------
$1,373,623
- --------------------------------------------------------------------------------------------------
Automotive - 2.4%
- --------------------------------------------------------------------------------------------------
DaimlerChrysler NA Holding Corp., 7.4s, 2005 $600 $647,661
- --------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.125s, 2004 78 79,472
- --------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.875s, 2006 683 706,565
- --------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7.25s, 2011 125 125,313
- --------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 7.625s, 2004 5 5,245
- --------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.125s, 2006 810 840,689
- --------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 7.25s, 2011 108 111,415
- --------------------------------------------------------------------------------------------------
$2,516,360
- --------------------------------------------------------------------------------------------------
Banks & Credit Cos. - 2.1%
- --------------------------------------------------------------------------------------------------
Bank of America Corp., 9.2s, 2003 $10 $10,022
- --------------------------------------------------------------------------------------------------
Bank of America Corp., 4.875s, 2012 260 267,608
- --------------------------------------------------------------------------------------------------
Bank of America NA, 9.5s, 2004 75 81,249
- --------------------------------------------------------------------------------------------------
Citigroup, Inc., 7.25s, 2010 275 326,009
- --------------------------------------------------------------------------------------------------
First Interstate Bancorp, 9.125s, 2004 180 189,979
- --------------------------------------------------------------------------------------------------
Nationsbank Corp., 6.5s, 2006 200 221,250
- --------------------------------------------------------------------------------------------------
Nationsbank Corp., 7.5s, 2006 125 143,883
- --------------------------------------------------------------------------------------------------
Popular North America, Inc., 6.125s, 2006 365 401,690
- --------------------------------------------------------------------------------------------------
Wachovia Bank NA, 7.8s, 2010 250 304,678
- --------------------------------------------------------------------------------------------------
Wells Fargo Bank NA, 6.45s, 2011 200 229,481
- --------------------------------------------------------------------------------------------------
Wells Fargo Co., 7.2s, 2003 10 10,000
- --------------------------------------------------------------------------------------------------
$2,185,849
- --------------------------------------------------------------------------------------------------
Building - 0.3%
- --------------------------------------------------------------------------------------------------
CRH America, Inc., 6.95s, 2012 $15 $17,037
- --------------------------------------------------------------------------------------------------
Masco Corp., 6.75s, 2006 100 111,068
- --------------------------------------------------------------------------------------------------
Masco Corp., 5.875s, 2012 200 212,605
- --------------------------------------------------------------------------------------------------
$340,710
- --------------------------------------------------------------------------------------------------
Chemicals - 1.1%
- --------------------------------------------------------------------------------------------------
Chevron Phillips Chemical Co. LLC, 5.375s, 2007 $500 $522,524
- --------------------------------------------------------------------------------------------------
Dow Chemical Co., 5s, 2007 181 188,274
- --------------------------------------------------------------------------------------------------
Dow Chemical Co., 5.75s, 2008 350 377,150
- --------------------------------------------------------------------------------------------------
$1,087,948
- --------------------------------------------------------------------------------------------------
Conglomerates - 1.1%
- --------------------------------------------------------------------------------------------------
General Electric Capital Corp., 7.5s, 2005 $15 $16,688
- --------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5s, 2007 396 426,116
- --------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.7s, 2007 133 158,246
- --------------------------------------------------------------------------------------------------
General Electric Capital Corp., 3.5s, 2008 300 301,446
- --------------------------------------------------------------------------------------------------
Tyco International Group S.A., 6.75s, 2011 200 200,000
- --------------------------------------------------------------------------------------------------
$1,102,496
- --------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.3%
- --------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 $155 $169,472
- --------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2010 175 185,363
- --------------------------------------------------------------------------------------------------
$354,835
- --------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.8%
- --------------------------------------------------------------------------------------------------
Avery Dennison Corp., 4.875s, 2013 $600 $612,280
- --------------------------------------------------------------------------------------------------
Newell Rubbermaid, Inc., 4.625s, 2009 250 256,539
- --------------------------------------------------------------------------------------------------
$868,819
- --------------------------------------------------------------------------------------------------
Containers
- --------------------------------------------------------------------------------------------------
Pactiv Corp., 7.2s, 2005 $30 $32,963
- --------------------------------------------------------------------------------------------------
Corporate Asset-Backed and Securitized - 14.3%
- --------------------------------------------------------------------------------------------------
AmeriCredit Automobile Receivables Trust, 5.37s, 2008 $405 $422,386
- --------------------------------------------------------------------------------------------------
Ameriquest Mortgage Securities, Inc., 3.027s, 2033 750 753,098
- --------------------------------------------------------------------------------------------------
Bear Stearns Adjustable Rate Mortgage Trust, 3.545s, 2033 500 504,687
- --------------------------------------------------------------------------------------------------
California Infrastructure SDG&E-1, 6.19s, 2005 3 3,216
- --------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 4.79s, 2009 295 311,830
- --------------------------------------------------------------------------------------------------
Caterpillar Financial Asset Trust, 3.15s, 2008 $275 $279,271
- --------------------------------------------------------------------------------------------------
CIT Home Equity Loan Trust, 4.57s, 2023 25 25,195
- --------------------------------------------------------------------------------------------------
Citibank Credit Card Master Trust I, 5.5s, 2006 25 25,825
- --------------------------------------------------------------------------------------------------
Citigroup Global Markets, Inc., 5.875s, 2006 300 326,305
- --------------------------------------------------------------------------------------------------
CNH Equipment Trust, 1.56s, 2006 30 30,049
- --------------------------------------------------------------------------------------------------
CNH Equipment Trust, 4.3s, 2008 10 10,198
- --------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 5.8s, 2030 397 417,693
- --------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 6.04s, 2030 30 33,300
- --------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 7.03s, 2031 70 81,435
- --------------------------------------------------------------------------------------------------
Commercial Mortgage Pass-Through Certificate,
7.146s, 2018 (Interest Only) 4,465 136,877
- --------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 6.545s, 2019 4 3,786
- --------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 2.89s, 2009## 300 301,161
- --------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 3.52s, 2009## 200 203,062
- --------------------------------------------------------------------------------------------------
Criimi Mae Corp., 7s, 2033 150 167,106
- --------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, 4.21s, 2005 10 10,155
- --------------------------------------------------------------------------------------------------
Discover Card Master Trust I, 5.85s, 2006 20 20,189
- --------------------------------------------------------------------------------------------------
DLJ Commercial Mortgage Corp., 7.641s, 2005 (Interest Only) 100 1,642
- --------------------------------------------------------------------------------------------------
Drive Auto Receivables Trust, 2.77s, 2008 400 399,813
- --------------------------------------------------------------------------------------------------
Falcon Auto Dealership LLC, 3.88s, 2023 (Interest Only)## 1,193 228,205
- --------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, 6.06s, 2030 5 4,889
- --------------------------------------------------------------------------------------------------
GSR Mortgage Loan Trust, 3.322s, 2032 250 250,000
- --------------------------------------------------------------------------------------------------
GSR Mortgage Loan Trust, 4.018s, 2032 320 323,385
- --------------------------------------------------------------------------------------------------
Household Automotive Trust, 3.44s, 2009 400 409,281
- --------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, 1.77s, 2032 157 156,873
- --------------------------------------------------------------------------------------------------
Hyundai Automobile Receivables Trust, 2.8s, 2007## 350 355,524
- --------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 3.9s, 2006 230 234,403
- --------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 2.33s, 2007 500 499,994
- --------------------------------------------------------------------------------------------------
Lehman Brothers Commercial Conduit Mortgage Trust, 6.78s, 2031 70 80,188
- --------------------------------------------------------------------------------------------------
Lehman Brothers Commercial Conduit Mortgage Trust, 6.84s,
2035 (Interest Only) 8,040 221,213
- --------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 7.058s, 2030 170 186,498
- --------------------------------------------------------------------------------------------------
Morgan (J.P.) Commercial Mortgage Finance Corp.,
6.613s, 2030 630 709,993
- --------------------------------------------------------------------------------------------------
Morgan (J.P.) Commercial Mortgage Finance Corp.,
7.325s, 2031 $15 $16,072
- --------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 6.01s, 2030 6 6,143
- --------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.663s, 2030 275 311,486
- --------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 7.51s, 2031 (Interest Only) 2,639 91,753
- --------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.337s, 2031 600 674,477
- --------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 6.476s, 2030 500 566,197
- --------------------------------------------------------------------------------------------------
PSE&G Transition Funding LLC, 5.74s, 2007 11 11,444
- --------------------------------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc., 3.49s, 2029 300 305,290
- --------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 2.25s, 2032## 500 503,906
- --------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 3.39s, 2033## 650 652,054
- --------------------------------------------------------------------------------------------------
Summit Acceptance Auto Receivables Trust, 7.51s, 2007 219 219,620
- --------------------------------------------------------------------------------------------------
Superannuation Members Home Loans Global Fund,
1.54s, 2029 500 500,000
- --------------------------------------------------------------------------------------------------
Thornburg Mortgage Securities Trust, 1.66s, 2043 492 495,124
- --------------------------------------------------------------------------------------------------
TIAA Commercial Real Estate Securitization Trust,
7.17s, 2032## 218 240,686
- --------------------------------------------------------------------------------------------------
Triad Auto Receivables Trust, 3.24s, 2009 410 421,123
- --------------------------------------------------------------------------------------------------
Vanderbilt Mortgage & Finance, Inc., 5.17s, 2014 10 10,182
- --------------------------------------------------------------------------------------------------
Vendee Mortgage Trust, 6s, 2021 300 313,449
- --------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., 5.51s, 2032 2 2,198
- --------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., 3.112s, 2033 500 499,945
- --------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., 3.567s, 2033 400 403,478
- --------------------------------------------------------------------------------------------------
WFS Financial Owner Trust, 2.39s, 2007 400 403,982
- --------------------------------------------------------------------------------------------------
$14,777,334
- --------------------------------------------------------------------------------------------------
Energy - Independent - 0.8%
- --------------------------------------------------------------------------------------------------
Devon Financing Corp. U.L.C., 6.875s, 2011 $250 $287,544
- --------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.625s, 2005 275 306,753
- --------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 4.375s, 2007 45 46,567
- --------------------------------------------------------------------------------------------------
Seagull Energy Corp., 7.875s, 2003 155 156,744
- --------------------------------------------------------------------------------------------------
$797,608
- --------------------------------------------------------------------------------------------------
Entertainment - 0.3%
- --------------------------------------------------------------------------------------------------
Disney (Walt) Co., 6.75s, 2006 $315 $345,509
- --------------------------------------------------------------------------------------------------
Financial Institutions - 1.1%
- --------------------------------------------------------------------------------------------------
Associates Corp. of North America, 5.8s, 2004 $10 $10,420
- --------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.85s, 2004 78 82,425
- --------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2006 265 285,202
- --------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2007 240 259,056
- --------------------------------------------------------------------------------------------------
Household Finance Corp., 8s, 2005 120 134,239
- --------------------------------------------------------------------------------------------------
Household Finance Corp., 6.75s, 2011 20 22,535
- --------------------------------------------------------------------------------------------------
Household Finance Corp., 6.375s, 2012 125 137,900
- --------------------------------------------------------------------------------------------------
Household Finance Corp., 7s, 2012 170 194,700
- --------------------------------------------------------------------------------------------------
$1,126,477
- --------------------------------------------------------------------------------------------------
Financial Services - 2.8%
- --------------------------------------------------------------------------------------------------
Credit Suisse First Boston USA, Inc., 5.875s, 2006 $535 $584,599
- --------------------------------------------------------------------------------------------------
Credit Suisse First Boston USA, Inc., 4.625s, 2008 43 44,813
- --------------------------------------------------------------------------------------------------
Credit Suisse First Boston USA, Inc., 6.125s, 2011 160 173,747
- --------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 7.625s, 2005 275 307,850
- --------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.25s, 2007 120 142,553
- --------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 4s, 2008 250 255,347
- --------------------------------------------------------------------------------------------------
Lehman Brothers, Inc., 11.625s, 2005 400 471,942
- --------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 2.47s, 2006 400 400,219
- --------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc., 5.8s, 2007 475 521,669
- --------------------------------------------------------------------------------------------------
$2,902,739
- --------------------------------------------------------------------------------------------------
Food & Beverage Products - 2.0%
- --------------------------------------------------------------------------------------------------
Coors Brewing Co., 6.375s, 2012 $10 $11,197
- --------------------------------------------------------------------------------------------------
Dole Foods, Inc., 8.625s, 2009 128 138,560
- --------------------------------------------------------------------------------------------------
General Mills, Inc., 5.125s, 2007 375 403,888
- --------------------------------------------------------------------------------------------------
Kellogg Co., 6s, 2006 205 225,205
- --------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 4.625s, 2006 180 185,195
- --------------------------------------------------------------------------------------------------
PepsiAmericas, Inc., 6s, 2004 200 208,908
- --------------------------------------------------------------------------------------------------
PepsiAmericas, Inc., 3.875s, 2007 400 408,048
- --------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 6.625s, 2004 205 214,090
- --------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 8.25s, 2011 240 278,389
- --------------------------------------------------------------------------------------------------
$2,073,480
- --------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.9%
- --------------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.85s, 2012 $345 $390,316
- --------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 5.5s, 2005 385 404,479
- --------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 6.75s, 2012 80 89,620
- --------------------------------------------------------------------------------------------------
$884,415
- --------------------------------------------------------------------------------------------------
Gaming - 0.1%
- --------------------------------------------------------------------------------------------------
Harrahs Operating, Inc., 7.125s, 2007 $85 $93,314
- --------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.5s, 2010 3 3,360
- --------------------------------------------------------------------------------------------------
$96,674
- --------------------------------------------------------------------------------------------------
Healthcare - 0.5%
- --------------------------------------------------------------------------------------------------
HCA, Inc., 7.125s, 2006 $210 $225,760
- --------------------------------------------------------------------------------------------------
HCA, Inc., 8.75s, 2010 235 274,830
- --------------------------------------------------------------------------------------------------
$500,590
- --------------------------------------------------------------------------------------------------
Industrial - 1.0%
- --------------------------------------------------------------------------------------------------
Ingersoll-Rand Co., 6.25s, 2006 $460 $507,330
- --------------------------------------------------------------------------------------------------
Kennametal, Inc., 7.2s, 2012 155 165,009
- --------------------------------------------------------------------------------------------------
Timken Co., 5.75s, 2010 400 407,655
- --------------------------------------------------------------------------------------------------
$1,079,994
- --------------------------------------------------------------------------------------------------
Insurance - 3.2%
- --------------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing IV, 5.85s, 2006## $260 $282,487
- --------------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing IX, 5.1s, 2007## 375 399,786
- --------------------------------------------------------------------------------------------------
Allstate Corp., 7.2s, 2009 225 262,350
- --------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc., 4.7s, 2007 150 154,679
- --------------------------------------------------------------------------------------------------
Metlife, Inc., 3.911s, 2005 300 310,917
- --------------------------------------------------------------------------------------------------
Metlife, Inc., 5.375s, 2012 300 314,701
- --------------------------------------------------------------------------------------------------
Prudential Financial, Inc., 3.75s, 2008 400 400,000
- --------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 7.65s, 2007## 335 381,114
- --------------------------------------------------------------------------------------------------
Safeco Corp., 4.875s, 2010 300 305,291
- --------------------------------------------------------------------------------------------------
Safeco Corp., 7.25s, 2012 85 97,850
- --------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 3.75s, 2008## 350 352,405
- --------------------------------------------------------------------------------------------------
$3,261,580
- --------------------------------------------------------------------------------------------------
Media - 1.8%
- --------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 5.625s, 2005 $352 $370,747
- --------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 6.875s, 2012 100 109,071
- --------------------------------------------------------------------------------------------------
News America, Inc., 4.75s, 2010## 1,000 1,014,111
- --------------------------------------------------------------------------------------------------
Time Warner, Inc., 7.975s, 2004 228 242,809
- --------------------------------------------------------------------------------------------------
Viacom, Inc., 7.75s, 2005 105 116,850
- --------------------------------------------------------------------------------------------------
$1,853,588
- --------------------------------------------------------------------------------------------------
Media - Cable - 1.4%
- --------------------------------------------------------------------------------------------------
Comcast Cable Communications, Inc., 8.375s, 2007 $350 $404,292
- --------------------------------------------------------------------------------------------------
Comcast Cable Communications, Inc., 6.75s, 2011 4 4,415
- --------------------------------------------------------------------------------------------------
Comcast Corp., 5.85s, 2010 200 212,816
- --------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.5s, 2004 422 450,079
- --------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.125s, 2012 100 116,766
- --------------------------------------------------------------------------------------------------
TCI Communications, Inc., 6.375s, 2003 35 35,000
- --------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.8s, 2012 150 193,528
- --------------------------------------------------------------------------------------------------
$1,416,896
- --------------------------------------------------------------------------------------------------
Mining - 0.1%
- --------------------------------------------------------------------------------------------------
Phelps Dodge Corp., 8.75s, 2011 $71 $80,145
- --------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.1%
- --------------------------------------------------------------------------------------------------
CenterPoint Energy Resources Corp., 7.875s, 2013## $235 $269,662
- --------------------------------------------------------------------------------------------------
Kern River Funding Corp., 4.893s, 2018## 300 299,622
- --------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, LP, 8s, 2005 15 16,574
- --------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, LP, 5.35s, 2007 120 128,791
- --------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, LP, 6.75s, 2011 110 125,100
- --------------------------------------------------------------------------------------------------
Reliant Energy Resources Corp., 8.125s, 2005 241 260,280
- --------------------------------------------------------------------------------------------------
$1,100,029
- --------------------------------------------------------------------------------------------------
Oils - 0.8%
- --------------------------------------------------------------------------------------------------
Conoco Funding Co., 5.45s, 2006 $210 $229,131
- --------------------------------------------------------------------------------------------------
LASMO (USA), Inc., 7.5s, 2006 175 202,822
- --------------------------------------------------------------------------------------------------
Phillips Petroleum Co., 8.5s, 2005 210 237,153
- --------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.125s, 2007 110 117,426
- --------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.875s, 2012 15 16,690
- --------------------------------------------------------------------------------------------------
$803,222
- --------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.7%
- --------------------------------------------------------------------------------------------------
Wyeth Co., 5.875s, 2004 $240 $248,744
- --------------------------------------------------------------------------------------------------
Wyeth Co., 4.125s, 2008 450 459,944
- --------------------------------------------------------------------------------------------------
$708,688
- --------------------------------------------------------------------------------------------------
Pollution Control - 0.5%
- --------------------------------------------------------------------------------------------------
USA Waste Services, Inc., 7s, 2004 $114 $121,156
- --------------------------------------------------------------------------------------------------
Waste Management, Inc., 7s, 2006 90 99,969
- --------------------------------------------------------------------------------------------------
Waste Management, Inc., 7.375s, 2010 57 66,458
- --------------------------------------------------------------------------------------------------
Waste Management, Inc., 6.375s, 2012 250 276,999
- --------------------------------------------------------------------------------------------------
$564,582
- --------------------------------------------------------------------------------------------------
Printing & Publishing - 0.4%
- --------------------------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 6.125s, 2006 $365 $398,703
- --------------------------------------------------------------------------------------------------
Real Estate - 1.4%
- --------------------------------------------------------------------------------------------------
Equity Office Properties Operating, LP, 7.75s, 2007 $155 $179,396
- --------------------------------------------------------------------------------------------------
Equity Office Properties Operating, LP, 6.8s, 2009 155 174,603
- --------------------------------------------------------------------------------------------------
Kimco Realty Corp., 6s, 2012 250 269,144
- --------------------------------------------------------------------------------------------------
Simon Property Group, LP, 6.75s, 2004 120 125,924
- --------------------------------------------------------------------------------------------------
Simon Property Group, LP, 6.375s, 2007 125 136,823
- --------------------------------------------------------------------------------------------------
Vornado Realty Trust, 5.625s, 2007 525 540,559
- --------------------------------------------------------------------------------------------------
$1,426,449
- --------------------------------------------------------------------------------------------------
Retail - 0.3%
- --------------------------------------------------------------------------------------------------
Limited Brands, Inc., 6.125s, 2012 $300 $321,639
- --------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
- --------------------------------------------------------------------------------------------------
Kroger Co., 7.8s, 2007 $270 $309,721
- --------------------------------------------------------------------------------------------------
Supranational - 1.1%
- --------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento, 6.75s, 2005 $120 $126,428
- --------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento, 6.875s, 2012 200 213,146
- --------------------------------------------------------------------------------------------------
International Bank for Reconstruction & Development,
4.77s, 2005 750 789,000
- --------------------------------------------------------------------------------------------------
$1,128,574
- --------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.0%
- --------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.35s, 2006 $236 $262,911
- --------------------------------------------------------------------------------------------------
Sprint Capital Corp., 7.125s, 2006 411 433,605
- --------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6.125s, 2008 110 112,200
- --------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 183 197,204
- --------------------------------------------------------------------------------------------------
$1,005,920
- --------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.5%
- --------------------------------------------------------------------------------------------------
AT&T Corp., 6.5s, 2006 $410 $439,660
- --------------------------------------------------------------------------------------------------
Citizens Communications Co., 8.5s, 2006 293 339,443
- --------------------------------------------------------------------------------------------------
GTE Corp., 9.1s, 2003 17 17,092
- --------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 350 373,440
- --------------------------------------------------------------------------------------------------
Verizon New York, Inc., 6.875s, 2012 375 432,063
- --------------------------------------------------------------------------------------------------
$1,601,698
- --------------------------------------------------------------------------------------------------
Tobacco - 0.2%
- --------------------------------------------------------------------------------------------------
Reynolds (R.J.) Tobacco Holdings, Inc., 7.25s, 2012 $125 $117,826
- --------------------------------------------------------------------------------------------------
UST, Inc., 6.625s, 2012 90 101,729
- --------------------------------------------------------------------------------------------------
$219,555
- --------------------------------------------------------------------------------------------------
Transportation - Services - 0.1%
- --------------------------------------------------------------------------------------------------
Federal Express Corp., 9.65s, 2012 $100 $131,873
- --------------------------------------------------------------------------------------------------
U.S. Government Agencies - 22.9%
- --------------------------------------------------------------------------------------------------
AID to Israel, 6.6s, 2008 $15 $16,727
- --------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 4.875s, 2004 1,200 1,241,238
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.25s, 2005 800 841,969
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2021 6 5,959
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2014 - 2017 2,052 2,139,209
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6s, 2017 - 2017 411 429,305
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6.875s, 2010 2,750 3,295,765
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 7s, 2005 200 222,472
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. TBA 15, 5s, 2018 2,500 2,567,187
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. TBA 30, 5.5s, 2033 1,000 1,022,812
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.08s, 2031 48 48,089
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2016 - 2050 3,290 3,436,622
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.722s, 2009 71 77,859
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2017 - 2017 $584 $612,070
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.125s, 2012 315 362,084
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2004 - 2017 664 704,937
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.65s, 2008 188 201,678
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7s, 2015 7 7,637
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.085s, 2006 116 129,506
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.125s, 2005 1,700 1,867,044
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.25s, 2010 1,425 1,727,755
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.29s, 2006 116 129,252
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2015 5 5,299
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. TBA 30, 5.5s, 2033 500 511,563
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.204s, 2014 196 207,866
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.48s, 2015 91 96,640
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn. TBA 30, 6s, 2033 1,000 1,045,312
- --------------------------------------------------------------------------------------------------
Student Loan Marketing Assn., 5.25s, 2006 325 352,839
- --------------------------------------------------------------------------------------------------
Student Loan Marketing Assn., 5.375s, 2013 400 422,695
- --------------------------------------------------------------------------------------------------
$23,729,390
- --------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 9.4%
- --------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 11.875s, 2003 $200 $211,430
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 7.25s, 2004 1,000 1,062,617
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5s, 2005 680 754,534
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.75s, 2005 270 298,266
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2007 100 101,371
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.125s, 2007 3,195 3,654,655
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4s, 2012 2,551 2,583,584
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.375s, 2012 760 793,517
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.875s, 2013 313 313,416
- --------------------------------------------------------------------------------------------------
$9,773,390
- --------------------------------------------------------------------------------------------------
Utilities - Electric - 5.7%
- --------------------------------------------------------------------------------------------------
Constellation Energy Group, Inc., 6.35s, 2007 $350 $387,222
- --------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 7.6s, 2003 20 20,226
- --------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 2.8s, 2005 400 402,753
- --------------------------------------------------------------------------------------------------
DTE Energy Co., 6s, 2004 188 196,201
- --------------------------------------------------------------------------------------------------
DTE Energy Co., 7.05s, 2011 200 230,420
- --------------------------------------------------------------------------------------------------
Entergy Mississippi, Inc., 6.2s, 2004 $10 $10,406
- --------------------------------------------------------------------------------------------------
Exelon Generation Co. LLC, 6.95s, 2011 375 420,376
- --------------------------------------------------------------------------------------------------
FirstEnergy Corp., 6.45s, 2011 190 205,400
- --------------------------------------------------------------------------------------------------
FPL Group Capital, Inc., 3.25s, 2006 500 505,654
- --------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 4.625s, 2007 310 317,414
- --------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 5.875s, 2012 75 78,385
- --------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375s, 2004 546 564,701
- --------------------------------------------------------------------------------------------------
Oncor Electric Delivery Co., 5s, 2007 275 290,834
- --------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.05s, 2007 360 394,679
- --------------------------------------------------------------------------------------------------
PSE&G Power LLC, 6.875s, 2006 230 251,749
- --------------------------------------------------------------------------------------------------
PSE&G Power LLC, 7.75s, 2011 100 118,579
- --------------------------------------------------------------------------------------------------
PSEG Energy Holdings, Inc., 7.75s, 2007## 299 313,203
- --------------------------------------------------------------------------------------------------
TXU Energy Co., 6.125s, 2008## 375 399,323
- --------------------------------------------------------------------------------------------------
Virginia Electric & Power Co., 5.375s, 2007 135 145,172
- --------------------------------------------------------------------------------------------------
Wisconsin Energy Corp., 5.875s, 2006 572 623,328
- --------------------------------------------------------------------------------------------------
$5,876,025
- --------------------------------------------------------------------------------------------------
Utilities - Gas - 0.2%
- --------------------------------------------------------------------------------------------------
Keyspan Corp., 6.15s, 2006 $175 $193,800
- --------------------------------------------------------------------------------------------------
Total U.S. Bonds $90,768,930
- --------------------------------------------------------------------------------------------------
Foreign Bonds - 11.7%
- --------------------------------------------------------------------------------------------------
Canada - 2.4%
- --------------------------------------------------------------------------------------------------
Anderson Exploration Ltd., 6.75s, 2011 (Oils) $200 $225,908
- --------------------------------------------------------------------------------------------------
Government of Canada, 5.25s, 2008 12 13,348
- --------------------------------------------------------------------------------------------------
Hydro Quebec, 6.3s, 2011 265 305,506
- --------------------------------------------------------------------------------------------------
Province of Manitoba, 4.25s, 2006 475 501,218
- --------------------------------------------------------------------------------------------------
Province of New Brunswick, 3.5s, 2007 500 512,966
- --------------------------------------------------------------------------------------------------
Province of Ontario, 7s, 2005 80 88,929
- --------------------------------------------------------------------------------------------------
Province of Ontario, 6s, 2006 300 331,574
- --------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 7.875s, 2012 (Media - Cable) 250 267,500
- --------------------------------------------------------------------------------------------------
Telus Corp., 8s, 2011 (Telecommunications) 225 254,250
- --------------------------------------------------------------------------------------------------
$2,501,199
- --------------------------------------------------------------------------------------------------
Chile - 0.6%
- --------------------------------------------------------------------------------------------------
Compania Nacional de Transmision Electrica S.A.,
7.875s, 2011 (Electric Transmission) $300 $335,906
- --------------------------------------------------------------------------------------------------
Corporacion Nacional del Cobre de Chile, 6.375s, 2012
(Mining)## 250 264,001
- --------------------------------------------------------------------------------------------------
$599,907
- --------------------------------------------------------------------------------------------------
France - 1.4%
- --------------------------------------------------------------------------------------------------
France Telecom S.A., 7.2s, 2006 (Telecommunications) $255 $289,597
- --------------------------------------------------------------------------------------------------
France Telecom S.A., 9.25s, 2011 (Telecommunications) 135 165,099
- --------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s to 2008, 4.82875s to 2049
(Banks & Credit Cos.)## 415 492,186
- --------------------------------------------------------------------------------------------------
Socgen Real Estate Co. LLC, 7.64s to 2007, 3.852s to 2049
(Banks & Credit Cos.)## 475 528,604
- --------------------------------------------------------------------------------------------------
$1,475,486
- --------------------------------------------------------------------------------------------------
Germany - 2.5%
- --------------------------------------------------------------------------------------------------
Bayerische Landesbank, 1.36s, 2005 (Banks & Credit Cos.) $275 $274,940
- --------------------------------------------------------------------------------------------------
Bayerische Landesbank, 6.375s, 2005 (Banks & Credit Cos.) 400 442,451
- --------------------------------------------------------------------------------------------------
Deutsche Telekom International Finance BV, 7.75s, 2005
(Telecommunications) 415 461,022
- --------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 9.4s, 2004 (Financial
Institutions) 205 222,133
- --------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 2.5s, 2005 (Financial
Institutions) 800 811,548
- --------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 4.25s, 2005 (Financial
Institutions) 25 26,224
- --------------------------------------------------------------------------------------------------
Landesbank Baden-Wuerttemberg Girozentrale,
7.875s, 2004 (Banks & Credit Cos.) 15 15,969
- --------------------------------------------------------------------------------------------------
Landesbank Baden-Wuerttemberg Girozentrale,
5.125s, 2007 (Banks & Credit Cos.) 300 324,164
- --------------------------------------------------------------------------------------------------
$2,578,451
- --------------------------------------------------------------------------------------------------
Iceland - 0.3%
- --------------------------------------------------------------------------------------------------
Republic of Iceland, 6.125s, 2004 $300 $309,735
- --------------------------------------------------------------------------------------------------
Italy - 0.6%
- --------------------------------------------------------------------------------------------------
Republic of Italy, 4.625s, 2005 $25 $26,376
- --------------------------------------------------------------------------------------------------
Unicredito Italiano Capital Trust II, 9.2s, 2049 (Banks &
Credit Cos.)## 500 626,720
- --------------------------------------------------------------------------------------------------
$653,096
- --------------------------------------------------------------------------------------------------
Kazakhstan - 0.1%
- --------------------------------------------------------------------------------------------------
Kazkommerts International BV, 8.5s, 2013 (Banks & Credit
Cos.)## $150 $148,650
- --------------------------------------------------------------------------------------------------
Mexico - 0.6%
- --------------------------------------------------------------------------------------------------
BBVA Bancomer Capital Trust I, 10.5s, 2011 (Banks &
Credit Cos.)## $165 $188,100
- --------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 9.125s, 2010 (Oils) 335 402,000
- --------------------------------------------------------------------------------------------------
$590,100
- --------------------------------------------------------------------------------------------------
Norway - 0.2%
- --------------------------------------------------------------------------------------------------
Union Bank of Norway, 7.35s, 2049 (Banks & Credit Cos.)## $250 $252,208
- --------------------------------------------------------------------------------------------------
Singapore - 0.4%
- --------------------------------------------------------------------------------------------------
DBS Capital Funding Corp., 7.657s, 2049 (Banks &
Credit Cos.)## $335 $381,597
- --------------------------------------------------------------------------------------------------
Sweden - 0.4%
- --------------------------------------------------------------------------------------------------
AB Spintab, 7.5s, 2049 (Banks & Credit Cos.)## $325 $361,484
- --------------------------------------------------------------------------------------------------
Tunisia - 0.3%
- --------------------------------------------------------------------------------------------------
Banque Centrale de Tunisie, 7.375s, 2012 (Banks &
Credit Cos.) $260 $290,550
- --------------------------------------------------------------------------------------------------
United Kingdom - 1.9%
- --------------------------------------------------------------------------------------------------
Abbey National First Capital BV, 8.2s, 2004 (Banks &
Credit Cos.) $410 $445,426
- --------------------------------------------------------------------------------------------------
Barclays Bank PLC, 8.55s to 2011, 4.31s to 2049 (Banks &
Credit Cos.)## 170 213,222
- --------------------------------------------------------------------------------------------------
British Telecommunications PLC, 2.554s, 2003
(Telecommunications) 14 14,056
- --------------------------------------------------------------------------------------------------
British Telecommunications PLC, 7.625s, 2005
(Telecommunications) 250 283,405
- --------------------------------------------------------------------------------------------------
National Westminster Bank PLC, 7.75s to 2007,
2.74s to 2049 (Banks & Credit Cos.) 550 631,634
- --------------------------------------------------------------------------------------------------
Permanent Financing PLC, 4.2s, 2007 (Corporate Asset-
Backed) 350 364,532
- --------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC, 8.817s, 2049 (Banks &
Credit Cos.) 10 11,166
- --------------------------------------------------------------------------------------------------
$1,963,441
- --------------------------------------------------------------------------------------------------
Total Foreign Bonds $12,105,904
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Municipal Bonds - 0.7%
- --------------------------------------------------------------------------------------------------
Lakeville, MN Independent School District #194, 4.5s, 2012 $660 $708,464
- --------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $101,149,145) $103,583,298
- --------------------------------------------------------------------------------------------------
Short-Term Obligations - 5.7%
- --------------------------------------------------------------------------------------------------
Abbey National LLC, due 5/01/03 $3,656 $3,656,000
- --------------------------------------------------------------------------------------------------
Citigroup, Inc., due 5/01/03 2,228 2,228,000
- --------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $5,884,000
- --------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $107,033,145) $109,467,298
- --------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (5.8)% (5,963,279)
- --------------------------------------------------------------------------------------------------
Net Assets - 100.0% $103,504,019
- --------------------------------------------------------------------------------------------------
##SEC Rule 144A restriction.
TBA - to be announced
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 4/30/03
ASSETS
Investments, at value (identified cost, $107,033,145) $109,467,298
- ---------------------------------------------------------------------------------------------------
Cash 338,531
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 700,954
- ---------------------------------------------------------------------------------------------------
Interest receivable 1,152,679
- ---------------------------------------------------------------------------------------------------
Total assets $111,659,462
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $2,634,482
- ---------------------------------------------------------------------------------------------------
Payable for TBA purchase commitments 5,108,125
- ---------------------------------------------------------------------------------------------------
Payable for fund shares repurchased 38,712
- ---------------------------------------------------------------------------------------------------
Distribution payable 371,743
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 993
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 705
- ---------------------------------------------------------------------------------------------------
Reimbursement fee 683
- ---------------------------------------------------------------------------------------------------
Total liabilities $8,155,443
- ---------------------------------------------------------------------------------------------------
Net assets $103,504,019
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $101,492,032
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments 2,434,153
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net realized gain
on investments (347,541)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income (74,625)
- ---------------------------------------------------------------------------------------------------
Total $103,504,019
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 9,926,615
- ---------------------------------------------------------------------------------------------------
Class A shares
Net assets $36,151,165
- ---------------------------------------------------------------------------------------------------
Shares outstanding 3,466,716
- ---------------------------------------------------------------------------------------------------
Net asset value per share $10.43
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/95.25 X 10.43) $10.95
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $15,602,621
- ---------------------------------------------------------------------------------------------------
Shares outstanding 1,495,983
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.43
- ---------------------------------------------------------------------------------------------------
Class C shares
Net assets $4,671,477
- ---------------------------------------------------------------------------------------------------
Shares outstanding 447,748
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.43
- ---------------------------------------------------------------------------------------------------
Class I shares
Net assets $47,031,150
- ---------------------------------------------------------------------------------------------------
Shares outstanding 4,511,602
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $10.42
- ---------------------------------------------------------------------------------------------------
Class R shares
Net assets $47,606
- ---------------------------------------------------------------------------------------------------
Shares outstanding 4,566
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $10.43
- ---------------------------------------------------------------------------------------------------
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.
See notes to financial statements.
- -------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
FOR YEAR ENDED 4/30/03
NET INVESTMENT INCOME
Interest income $1,925,942
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $229,810
- --------------------------------------------------------------------------------------------------
Trustees' compensation 882
- --------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 46,764
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 73,609
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 77,268
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 22,851
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 68
- --------------------------------------------------------------------------------------------------
Administrative fee 4,839
- --------------------------------------------------------------------------------------------------
Auditing fees 34,295
- --------------------------------------------------------------------------------------------------
Registration fees 71,592
- --------------------------------------------------------------------------------------------------
Custodian fee 21,467
- --------------------------------------------------------------------------------------------------
Printing 39,814
- --------------------------------------------------------------------------------------------------
Legal fees 3,268
- --------------------------------------------------------------------------------------------------
Postage 1,718
- --------------------------------------------------------------------------------------------------
Miscellaneous 32,482
- --------------------------------------------------------------------------------------------------
Total expenses $660,727
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (1,022)
- --------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and distributor (252,184)
- --------------------------------------------------------------------------------------------------
Net expenses $407,521
- --------------------------------------------------------------------------------------------------
Net investment income $1,518,421
- --------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- --------------------------------------------------------------------------------------------------
Investment transactions $347,722
- --------------------------------------------------------------------------------------------------
Futures contracts (15,069)
- --------------------------------------------------------------------------------------------------
Net realized gain on investments $332,653
- --------------------------------------------------------------------------------------------------
Change in unrealized appreciation on investments $2,406,857
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $2,739,510
- --------------------------------------------------------------------------------------------------
Increase in net assets from operations $4,257,931
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- ------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting
from operations, any distributions, and any shareholder transactions.
FOR YEARS ENDED 4/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $1,518,421 $81,319
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 332,653 (3,402)
- --------------------------------------------------------------------------------------------------
Net unrealized gain on investments 2,406,857 11,585
- ------------------------------------------------------------ ------------ ----------
Increase in net assets from operations $4,257,931 $89,502
- ------------------------------------------------------------ ------------ ----------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- --------------------------------------------------------------------------------------------------
Class A $(1,019,402) $(24,346)
- --------------------------------------------------------------------------------------------------
Class B (307,813) (804)
- --------------------------------------------------------------------------------------------------
Class C (90,332) (77)
- --------------------------------------------------------------------------------------------------
Class I (745,297) (56,603)
- --------------------------------------------------------------------------------------------------
Class R (618) --
- --------------------------------------------------------------------------------------------------
From net realized gain on investments
- --------------------------------------------------------------------------------------------------
Class A (34,938) --
- --------------------------------------------------------------------------------------------------
Class B (12,353) --
- --------------------------------------------------------------------------------------------------
Class C (3,560) --
- --------------------------------------------------------------------------------------------------
Class I (19,465) --
- --------------------------------------------------------------------------------------------------
In excess of net investment income
- --------------------------------------------------------------------------------------------------
Class A -- (2,622)
- --------------------------------------------------------------------------------------------------
Class B -- (87)
- --------------------------------------------------------------------------------------------------
Class C -- (8)
- --------------------------------------------------------------------------------------------------
Class I -- (6,098)
- ------------------------------------------------------------ ------------ ----------
Total distributions declared to shareholders $(2,233,778) $(90,645)
- ------------------------------------------------------------ ------------ ----------
Net increase in net assets from fund share transactions $98,861,950 $1,468,299
- ------------------------------------------------------------ ------------ ----------
Total increase in net assets $100,886,103 $1,467,156
- ------------------------------------------------------------ ------------ ----------
NET ASSETS
At beginning of period $2,617,916 $1,150,760
- --------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $74,625 and $1,491,
respectively) $103,504,019 $2,617,916
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights provide per share amounts and certain ratios to
summarize the effect of fund operations and any distributions to a shareholder
of each share class.
FOR YEARS ENDED 4/30
PERIOD ENDED
CLASS A 2003 2002 2001 2000 4/30/99*
Net asset value, beginning of period $9.92 $9.85 $9.38 $9.88 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.35 $0.49 $0.67 $0.64 $0.18
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 0.68 0.23 0.48 (0.49) (0.14)
- ---------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $1.03 $0.72 $1.15 $0.15 $0.04
- ---------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.51) $(0.59) $(0.68) $(0.65) $(0.16)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (0.01) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.06) -- -- --
- ---------------------------------------------- ------ ------ ------ ------ ------
Total distributions $(0.52) $(0.65) $(0.68) $(0.65) $(0.16)
- ---------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $10.43 $9.92 $9.85 $9.38 $9.88
- ---------------------------------------------- ------ ------ ------ ------ ------
Total return (%)(+) 10.59 7.47 12.63 1.62 0.44++
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.75 0.41 0.03 0.04 0.27+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.48 5.62 7.02 6.69 5.53+
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 79 75 133 147 155
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $36,151 $1,391 $235 $1,022 $1,005
- ------------------------------------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under temporary expense agreement, to pay all of the fund's
operating expenses, exclusive of management and distribution and service fees. In consideration, the fund pays the
investment adviser a reimbursement fee not greater than 0.25% of average daily net assets. In addition, the investment
adviser and the distributor voluntarily waived a portion of their fees for the periods indicated. Prior to March 1,
2002, MFS had 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) $0.28 $(0.29) $0.28 $0.25 $(0.09)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.41 9.37 4.13 4.10 8.60+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.82 (3.34) 2.92 2.63 (2.80)+
- ------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premiums on debt securities. The effect of this change for the year ended
April 30, 2002, was to decrease net investment income per share by $0.05, increase net realized and unrealized gains and
losses per share by $0.05, and to decrease the ratio of net investment income to average net assets by 0.52%. Per share,
ratios, and supplemental data for periods prior to May 1, 2001, have not been restated to reflect this change.
* For the period from the commencement of the fund's investment operations, December 31, 1998, through April 30, 1999.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
PERIOD ENDED
CLASS B 2003 4/30/02*
Net asset value, beginning of period $9.92 $10.03
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.27 $0.07
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.67 (0.10)
- ---------------------------------------------------------------- ------- ----------------
Total from investment operations $0.94 $(0.03)
- ---------------------------------------------------------------- ------- ----------------
LESS DISTRIBUTIONS
From net investment income $(0.42) $(0.07)
- ------------------------------------------------------------------------------------------------
From net realized gain on investments (0.01) --
- ------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.01)
- ---------------------------------------------------------------- ------- ----------------
Total distributions $(0.43) $(0.08)
- ---------------------------------------------------------------- ------- ----------------
Net asset value, end of period $10.43 $9.92
- ---------------------------------------------------------------- ------- ----------------
Total return (%) 9.66 (0.27)++
- ------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.60 1.61+
- ------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.63 4.49+
- ------------------------------------------------------------------------------------------------
Portfolio turnover 79 75
- ------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $15,603 $234
- ------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under temporary expense agreement, to pay
all of the fund's operating expenses, exclusive of management and distribution and service
fees. In consideration, the fund pays the investment adviser a reimbursement fee not greater
than 0.25% of average daily net assets. In addition, the investment adviser waived a portion
of its 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) $0.22 $(0.07)
- ------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
- ------------------------------------------------------------------------------------------------
Expenses## 2.06 10.47+
- ------------------------------------------------------------------------------------------------
Net investment income (loss) 2.17 (4.37)+
- ------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began amortizing premiums on debt
securities. The effect of this change for the period ended April 30, 2002, was to decrease
net investment income per share by $0.01, increase net realized and unrealized gains and
losses by $0.01, and to decrease the ratio of net investment income to average net assets
by 0.52%.
* For the period from the inception of Class B shares, March 1, 2002, through April 30,
2002.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
PERIOD ENDED
CLASS C 2003 4/30/02*
Net asset value, beginning of period $9.92 $10.03
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.26 $0.07
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.68 (0.10)
- -------------------------------------------------------------- -------- ------
Total from investment operations $0.94 $(0.03)
- -------------------------------------------------------------- -------- ------
LESS DISTRIBUTIONS
From net investment income $(0.42) $(0.07)
- ------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.01)
- ------------------------------------------------------------------------------------------------
From net realized gain on investments (0.01) --
- -------------------------------------------------------------- -------- ------
Total distributions $(0.43) $(0.08)
- -------------------------------------------------------------- -------- ------
Net asset value, end of period $10.43 $9.92
- -------------------------------------------------------------- -------- ------
Total return (%) 9.63 (0.27)
- ------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.60 1.61+
- ------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.60 4.35+
- ------------------------------------------------------------------------------------------------
Portfolio turnover 79 75
- ------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $4,671 $13
- ------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under temporary expense agreement, to pay
all of the fund's operating expenses, exclusive of management and distribution and service
fees. In consideration, the fund pays the investment adviser a reimbursement fee not greater
than 0.25% of average daily net assets. In addition, the investment adviser waived a portion
of its 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) $0.21 $(0.07)
- ------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 2.06 10.47+
- ------------------------------------------------------------------------------------------------
Net investment income (loss) 2.14 (4.51)+
- ------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began amortizing premiums on debt
securities. The effect of this change for the period ended April 30, 2002, was to decrease
net investment income per share by $0.01, increase net realized and unrealized gains and
losses by $0.01, and to decrease the ratio of net investment income to average net assets
by 0.51%.
* For the period from the inception of Class C shares, March 1, 2002, through April 30, 2002.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
See notes to financial statements.
FOR YEARS ENDED 4/30
PERIOD ENDED
CLASS I 2003 2002 2001 2000 4/30/99*
Net asset value, beginning of period $9.92 $9.84 $9.38 $9.87 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.34 $0.59 $0.68 $0.65 $0.19
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 0.69 0.14 0.46 (0.49) (0.16)
- ---------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $1.03 $0.73 $1.14 $0.16 $0.03
- ---------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.52) $(0.59) $(0.68) $(0.65) $(0.16)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments $(0.01) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.06) -- -- --
- ---------------------------------------------- ------ ------ ------ ------ ------
Total distributions $(0.53) $(0.65) $(0.68) $(0.65) $(0.16)
- ---------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $10.42 $9.92 $9.84 $9.38 $9.87
- ---------------------------------------------- ------ ------ ------ ------ ------
Total return (%) 10.65 7.60 12.52 1.72 0.33++
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.60 0.13 0.03 0.04 0.27+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.58 5.90 6.96 6.80 5.43+
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 79 75 133 147 155
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $47,031 $980 $915 $0+++ $0+++
- ------------------------------------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under temporary expense agreement, to pay all of the fund's
operating expenses, exclusive of management fees. In consideration, the fund pays the investment adviser a reimbursement
fee not greater than 0.25% of average daily net assets. In addition, the investment adviser voluntarily waived a portion
of its fees for the periods indicated. Prior to March 1, 2002, MFS had voluntarily agreed, under a temporary expense
agreement, to pay all of the fund's operating expenses, exclusive of management 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 voluntarily
waived its 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) $0.30 $(0.30) $0.28 $0.30 $(0.09)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.06 8.99 4.13 3.75 8.25+
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.12 (2.96) 2.86 3.09 (2.55)+
- -----------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities. The effect of this change
for the year ended April 30, 2002, was to decrease net investment income
per share by $0.05, increase net realized and unrealized gains and
losses per share by $0.05, and to decrease the ratio of net investment
income to average net assets by 0.52%. Per share, ratios, and
supplemental data for periods prior to May 1, 2001, have not been
restated to reflect this change.
* For the period from the commencement of the fund's investment operations,
December 31, 1998, through April 30, 1999.
+ Annualized.
++ Not annualized.
+++ Class I net assets were less than $500. # Per share data is based on
average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
CLASS R 4/30/03*
Net asset value, beginning of period $10.34
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.10
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.14###
- -----------------------------------------------------------------------------
Total from investment operations $0.24
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS
From net investment income $(0.15)
- -----------------------------------------------------------------------------
Net asset value, end of period $10.43
- -----------------------------------------------------------------------------
Total return (%) 2.36++
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.10+
- -----------------------------------------------------------------------------
Net investment income 3.06+
- -----------------------------------------------------------------------------
Portfolio turnover 79
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $48
- -----------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under temporary expense
agreement, to pay all of the fund's operating expenses, exclusive of
management and distribution and service fees. In consideration, the fund
pays the investment adviser a reimbursement fee not greater than 0.25% of
average daily net assets. In addition, the investment adviser voluntarily
waived a portion of its 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 $0.09
- ------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.56+
- ------------------------------------------------------------------------------
Net investment income 2.60+
- ------------------------------------------------------------------------------
* For the period from the commencement of Class R shares, December 31, 2002,
through April 30, 2003.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
### The per share amount is not in accordance with the net realized and
unrealized gain/loss for the period because of the timing of sales of fund
shares and the amount of per share realized and unrealized gains and losses
at such time.
See notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Intermediate Investment Grade Bond Fund (the fund) is a 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 accounting
principles generally accepted in the United States of America 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 - Bonds and other fixed income securities (other than
short-term obligations) of U.S. issuers in the fund's portfolio are valued at an
evaluated bid price on the basis of quotes from brokers and dealers or on the
basis of valuations furnished by a pricing service. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate 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 quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities.
All other securities (other than short-term obligations), including futures
contracts in the fund's portfolio for which the principal market is one or more
securities or commodities exchanges (whether domestic or foreign), will be
valued at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities or futures contracts are
traded; but if a securities exchange is not the principal market for securities,
such securities will, if market quotations are readily available, be valued at
current bid prices.
Short-term obligations in the fund's portfolio are valued at amortized cost,
which constitutes fair value as determined by the Board of Trustees. Short- term
obligations with a remaining maturity in excess of 60 days will be valued upon
dealer supplied valuations.
Portfolio investments for which market quotations are not readily available or
whose values have been materially affected by events occurring after the close
of their primary markets, are valued at fair value as determined in good faith
by or at the direction of the Board of 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.
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.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with generally accepted accounting principles. All discount is accreted for tax
reporting purposes as required by federal income tax regulations. 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. 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. The fund may enter
into TBA (to be announced) purchase commitments to purchase securities for a
fixed unit price at a future date. Although the unit price has been established,
the principal value has not been finalized. However, the principal amount of the
commitments will not fluctuate more than 1.0%. The fund holds, and maintains
until settlement date, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or the fund may enter into offsetting
contracts for the forward sale of other securities it owns. Income on the
securities will not be earned until settlement date. TBA purchase commitments
may be considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased declines prior to settlement date, which
is in addition to the risk of decline in the value of the fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value of the
underlying securities, according to the procedures described under "Investment
Valuations" above. The fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not received until
the contractual settlement date. During the time a TBA sale commitment is
outstanding, equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are held as
"cover" for the transaction.
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 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 fund
distinguishes between distributions on a tax basis and a financial reporting
basis and 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. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
capital losses, and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended April 30, 2003
and April 30, 2002 was as follows:
4/30/03 4/30/02
Distributions declared from:
Ordinary income $2,229,087 $90,645
- -------------------------------------------------------------------------------
Long-term capital gain 4,691 --
- -------------------------------------------------------------------------------
Total distributions declared $2,233,778 $90,645
- -------------------------------------------------------------------------------
During the year ended April 30, 2003, accumulated distributions in excess of net
investment income decreased by $571,907 and accumulated distributions in excess
of net realized gain on investments decreased by $571,907 due to differences
between book and tax accounting for mortgage-backed securities, currency
transactions and amortization and accretion on debt securities. This change had
no effect on the net assets or net asset value per share.
At April 30, 2003, accumulated distributions in excess of net investment income,
and accumulated distributions in excess of net realized gain on investments
under book accounting were different from tax accounting due to temporary
differences in accounting for currency transactions and accretion of premium on
debt securities.
As of April 30, 2003, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income $543,714
----------------------------------------------------------------------
Unrealized appreciation 1,856,640
----------------------------------------------------------------------
Other temporary differences (388,367)
----------------------------------------------------------------------
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 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. 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 an annual rate of 0.50% of
the fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee, which is shown as a reduction of total
expenses in the Statement of Operations. Management fees incurred for the year
ended April 30, 2003 were 0.35% of average daily net assets on an annualized
basis.
Effective March 1, 2002, the fund has a temporary expense reimbursement
agreement whereby MFS has voluntarily agreed to pay all of the fund's operating
expenses, exclusive of management and distribution and service fees. The fund in
turn will pay MFS an expense reimbursement fee not greater than 0.25% of average
daily net assets for Class A, Class B, Class C, Class I and Class R. To the
extent that the expense reimbursement fee exceeds the fund's actual expenses,
the excess will be applied to amounts paid by MFS in prior years. At April 30,
2003, aggregate unreimbursed expenses amounted to $166,864. This voluntary
reduction in the management fee effective April 30, 2003 may be rescinded by MFS
only with the approval of the fund's Board of Trustees.
The fund pays compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and 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).
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS 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
$22,880 for the year ended April 30, 2003, as its portion of the sales charge on
sales of Class A shares of the fund, respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C, and
Class R 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 an annual
percentage of its average daily net assets attributable to certain share classes
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 based
on the average daily net assets of accounts attributable to such dealers. These
fees are calculated based on each class' average daily net assets. The maximum
distribution and service fees for each class of shares are as follows:
CLASS A CLASS B CLASS C CLASS R
Distribution Fee 0.10% 0.75% 0.75% 0.25%
- -------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25%
- -------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50%
- -------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the year ended April 30, 2003, amounted to:
CLASS A CLASS B CLASS C CLASS R
Service Fee Retained by MFD $1,848 $14 $2 $0
- -------------------------------------------------------------------------------
Payment of the 0.10% per annum of the Class A distribution fee, and 0.10% per
annum portion of the Class A service fee that is not currently being charged,
will be implemented on such a date as the Trustees of the Trust may determine.
Fees incurred under the distribution plan during the year ended April 30, 2003,
were as follows:
CLASS A CLASS B CLASS C CLASS R
Total Distribution Plan 0.15% 1.00% 1.00% 0.50%
- -------------------------------------------------------------------------------
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within, for Class A shares, 12
months following the purchase, and, for Class C shares, the first year from the
end of the calendar month of 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 from the end of the calendar month of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the year ended April 30, 2003, were as
follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges Imposed $0 $21,224 $1,760
- --------------------------------------------------------------------------------
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 0.11%.
Prior to April 1, 2003, the fee was 0.10 % of the fund's average daily net
assets.
(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 $59,994,380 $28,140,242
- -------------------------------------------------------------------------------
Investments (non-U.S. government securities) $76,163,068 $9,124,145
- -------------------------------------------------------------------------------
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 $107,610,659
------------------------------------------------------------------
Gross unrealized appreciation $2,047,243
------------------------------------------------------------------
Gross unrealized depreciation (190,604)
------------------------------------------------------------------
Net unrealized appreciation $1,856,639
------------------------------------------------------------------
(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:
Year ended 4/30/03 Year ended 4/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 3,620,157 $36,808,485 115,720 $1,159,120
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 18,576 191,160 1,488 14,909
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (312,134) (3,191,231) (998) (10,006)
- ------------------------------------------------------------------------------------------------------------
Net increase 3,326,599 $33,808,414 116,210 $1,164,023
- ------------------------------------------------------------------------------------------------------------
Year ended 4/30/03 Period ended 4/30/02*
SHARES AMOUNT SHARES AMOUNT
CLASS B SHARES
Shares sold 1,713,055 $17,528,658 23,803 $235,005
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 22,185 228,330 10 94
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (262,852) (2,699,734) (218) (2,146)
- ------------------------------------------------------------------------------------------------------------
Net increase 1,472,388 $15,057,254 23,595 $232,953
- ------------------------------------------------------------------------------------------------------------
Year ended 4/30/03 Period ended 4/30/02*
SHARES AMOUNT SHARES AMOUNT
CLASS C SHARES
Shares sold 567,241 $5,806,103 1,355 $13,441
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 6,123 63,025 3 33
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (126,964) (1,298,344) (10) (101)
- ------------------------------------------------------------------------------------------------------------
Net increase 446,400 $4,570,784 1,348 $13,373
- ------------------------------------------------------------------------------------------------------------
Year ended 4/30/03 Year ended 4/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS I SHARES
Shares sold 4,398,671 $45,228,052 -- $--
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 57,928 597,300 5,785 57,950
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (43,778) (447,132) -- --
- ------------------------------------------------------------------------------------------------------------
Net increase 4,412,821 $45,378,220 5,785 $57,950
- ------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class B and C shares, March 1, 2002,
through April 30, 2002.
Period ended 4/30/03**
SHARES AMOUNT
CLASS R SHARES
Shares sold 4,527 $46,876
- -------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 44 453
- -------------------------------------------------------------------------
Shares reacquired (5) (51)
- -------------------------------------------------------------------------
Net increase 4,566 $47,278
- -------------------------------------------------------------------------
** For the period from the inception of Class R shares, December 31, 2002,
through April 30, 2003.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million 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. A commitment fee of $535 which is based on the average daily unused
portion of the line of credit is included in miscellaneous expense. The fund had
no significant 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 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.
There were no outstanding financial instruments with off-balance-sheet risk at
the end of the period.
(8) CHANGE IN ACCOUNTING PRINCIPLE
As required, effective May 1, 2001, the fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium
on debt securities. Prior to May 1, 2001, the fund did not amortize premium on
debt securities. The cumulative effect of this accounting change had no impact
on total net assets of the fund, but resulted in a $4,904 reduction in cost of
securities and a corresponding $4,904 increase in net unrealized appreciation,
based on securities held by the fund on April 30, 2001.
The effect of this change for the year ended April 30, 2002 was to decrease net
investment income by $7,317, increase net unrealized appreciation by $6,962, and
decrease net realized losses by $355. The Statement of Changes in Net Assets and
Financial Highlights for prior periods have not been restated to reflect this
change in presentation.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To The Trustees of MFS Series Trust IX and Shareholders of MFS Intermediate
Investment Grade Bond Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Intermediate Investment Grade Bond Fund (a
portfolio of MFS Series Trust IX (the Trust)) as of April 30, 2003, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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 audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
April 30, 2003 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Intermediate Investment Grade Bond Fund as of April 30, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period the ended, in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 11, 2003
- --------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust IX,
of which the fund is a series, including their principal occupations, which, unless specific dates are shown,
are of more than five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Company, Chairman Private investor; Rockefeller Financial Services,
Inc. (investment advisers), Chairman and Chief
JOHN W. BALLEN(2) (born 09/12/59) Executive Officer
Trustee and President
Massachusetts Financial Services Company, Chief LAWRENCE T. PERERA (born 06/23/35)
Executive Officer and Director Trustee
Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59)
Trustee WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Trustee
President, Chief Investment Officer and Director Private investor; Harvard University Graduate
School of Business Administration, Class of 1961
INDEPENDENT TRUSTEES Adjunct Professor in Entrepreneurship Emeritus;
CBL & Associates Properties, Inc. (real estate
LAWRENCE H. COHN, M.D. (born 03/11/37) investment trust), Director
Trustee
Brigham and Women's Hospital, Chief of Cardiac J. DALE SHERRATT (born 09/23/38)
Surgery; Harvard Medical School, Professor of Trustee
Surgery Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments
WILLIAM R. GUTOW (born 09/27/41) (investor in health care companies), Managing
Trustee General Partner (since 1993); Cambridge
Private investor and real estate consultant; Nutraceuticals (professional nutritional
Capitol Entertainment Management Company (video products), Chief Executive Officer (until May
franchise), Vice Chairman 2001)
J. ATWOOD IVES (born 05/01/36) ELAINE R. SMITH (born 04/25/46)
Trustee Trustee
Private investor; KeySpan Corporation (energy Independent health care industry consultant
related services), Director; Eastern Enterprises
(diversified services company), Chairman, Trustee WARD SMITH (born 09/13/30)
and Chief Executive Officer (until November 2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act) which is the principal federal law governing investment companies like the Trust. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
Trustees and Officers - continued
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) ROBERT R. FLAHERTY (born 09/18/63)
Chairman Assistant Treasurer
Massachusetts Financial Services Company, Chairman Massachusetts Financial Services Company, Vice
President (since August 2000); UAM Fund Services,
JOHN W. BALLEN (born 09/12/59) Senior Vice President (prior to August 2000)
Trustee and President
Massachusetts Financial Services Company, Chief RICHARD M. HISEY (born 08/29/58)
Executive Officer and Director Treasurer
Massachusetts Financial Services Company, Senior
JAMES R. BORDEWICK, JR. (born 03/06/59) Vice President (since July 2002); The Bank of New
Assistant Secretary and Assistant Clerk York, Senior Vice President (September 2000 to
Massachusetts Financial Services Company, Senior July 2002); Lexington Global Asset Managers, Inc.,
Vice President and Associate General Counsel Executive Vice President and Chief Financial
Officer, General Manager, Mutual Funds (prior to
STEPHEN E. CAVAN (born 11/06/53) September 2000)
Secretary and Clerk
Massachusetts Financial Services Company, Senior ELLEN MOYNIHAN (born 11/13/57)
Vice President, General Counsel and Secretary Assistant Treasurer
Massachusetts Financial Services Company, Vice
STEPHANIE A. DESISTO (born 10/1/53) President
Assistant Treasurer
Massachusetts Financial Services Company, Vice JAMES O. YOST (born 06/12/60)
President (since April 2003); Brown Brothers Assistant Treasurer
Harriman & Co., Senior Vice President (November Massachusetts Financial Services Company, Senior
2002 to April 2003); ING Groep N.V./Aeltus Vice President
Investment Management, Senior Vice President
(prior to November 2002)
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. This means that each Trustee will be elected to hold office until his or her
successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Each
officer will hold office until his or her successor is chosen and qualified, or until he or she retires,
resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Messrs. Ballen and Gutow have each served as a Trustee of
the Trust since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were elected by
shareholders and have served as Trustees of the Trust since January 1, 2002. Mr. Parke has served as Trustee
of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 112 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
- --------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
DISTRIBUTOR AUDITORS
MFS Fund Distributors, Inc. Deloitte & Touche LLP
500 Boylston Street, Boston, MA 200 Berkeley St.
02116-3741 Boston, MA 02116
PORTFOLIO MANAGER
James J. Calmas(1)
(1) MFS Investment Management
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MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
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YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international equity and
fixed-income investment across the full risk spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for building and
preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and risks
associated with investing. Read the prospectus carefully before investing or
sending money.
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MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
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Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
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FEDERAL TAX INFORMATION (UNAUDITED)
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
The fund has designated $4,691 as a capital gain dividend for the year ended
April 30, 2003.
The fund has the option to use equalization, which is a tax basis dividends paid
deduction from earnings and profits distributed to shareholders upon redemption
of shares.
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CONTACT INFORMATION
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INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
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General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
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Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
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Shares prices, account 1-800-MFS-TALK
balances (1-800-637-8255)
exchanges or stock and touch-tone required 24 hours a day, 365 days a
bond outlooks year
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WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send you
prospectuses, reports, and proxies electronically. You get timely information
without mailbox clutter (and help your fund save printing and postage costs).
SIGN-UP instructions: If your account is registered with us, go to www.mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available to
you.
[Logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116.
IBF-ANN-6/03 12.7M
MFS(R) Mutual Funds
ANNUAL REPORT 4/30/03
MFS(R) LIMITED
MATURITY FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) LIMITED MATURITY FUND
The fund seeks as high a level of current income as is believed to be consistent
with prudent investment risk. Its secondary objective seeks to protect
shareholders' capital.
TABLE OF CONTENTS
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LETTER FROM THE CHAIRMAN 1
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MFS ORIGINAL RESEARCH(R) 4
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MANAGEMENT REVIEW 5
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PERFORMANCE SUMMARY 7
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PORTFOLIO OF INVESTMENTS 11
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FINANCIAL STATEMENTS 23
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NOTES TO FINANCIAL STATEMENTS 34
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INDEPENDENT AUDITORS' REPORT 44
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TRUSTEES AND OFFICERS 45
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MONEY MANAGEMENT FOR ALL TYPES
OF INVESTORS 47
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MFS PRIVACY POLICY 48
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FEDERAL TAX INFORMATION 48
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CONTACT INFORMATION 49
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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LETTER FROM THE CHAIRMAN
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Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers - no matter how
talented they may be - can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS' culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo, and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
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MFS ORIGINAL RESEARCH(R)
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THE HUMAN SIDE OF MONEY MANAGEMENT
For more than 75 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with insight
and care.
Our success, we believe, has to do with the fact that we see investors as people
with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain
first-hand knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
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MANAGEMENT REVIEW
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A VOLATILE PERIOD
The market environment during the past 12 months can be looked at as a tale of
two half-years.
In the first half of the period, accounting scandal and fraud in some of the
United States' largest companies were front-page news. Stocks plunged across
most industries as investors lost faith in corporate America. Prices of U.S.
corporate bonds similarly came under pressure. Investment-grade corporate bonds,
even those issued by companies with clean balance sheets, became less attractive
to potential buyers. We saw a flight to quality last summer as investors sold
corporate bonds in favor of U.S. government securities.
During the second half of the period, beginning in October 2002, the corporate
bond market rebounded as new government regulations helped to restore investor
confidence in the credibility of financial reports, and companies started to
address investor concerns about liquidity and the amount of debt on their books.
PORTFOLIO CONCENTRATION AS OF 4/30/03
PIE CHART:
High Grade Corporates 48.2%
Mortgage Backed 13.5%
Asset Backed 12.8%
Government Agency 9.0%
International 5.4%
Commercial Mortgage Backed Securities 4.3%
Cash 3.0%
Residential Mortgage Backed Securities 3.0%
Other 0.8%
The portfolio is actively managed, and current holdings may be different.
Throughout much of the period, the fund was overweighted in corporate bonds, and
asset-backed and mortgage-backed securities, and underweighted in both U.S.
Treasuries and U.S. government agency securities relative to its benchmark, the
Lehman Brothers One- to Three-Year Government/Credit Index (the Lehman Index).
While this allocation alternately hurt and helped performance over the course of
the year, the fund ultimately underperformed the Lehman Index, but outperformed
the average short-term investment-grade debt fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance.
TELECOMMUNICATIONS, UTILITIES WEAK
Consistent with performance in many credit markets, our corporate bond holdings
in some sectors struggled over the period, especially those in telecom and
utilities, industries which were noted for big-name disappointments.
Unfortunately, the fund owned WorldCom bonds, and when WorldCom's accounting
fraud was exposed, the bonds declined significantly in value.
Our utilities holdings also did not perform as well as expected. In the wake of
deregulation, many of the companies whose bonds we owned had borrowed money to
expand and purchase generating capacity to meet anticipated demand. But energy
demand and prices did not rise enough to provide an adequate return on the
capital invested. As a result, profitability declined, leading to the
underperformance of these bonds as measured against U.S. Treasury securities.
(The principal value and interest on Treasury securities are guaranteed by the
U.S. government if held to maturity.)
SECTOR SELECTION AND DIVERSE HOLDINGS HELPED PERFORMANCE
The fund's mortgage- and asset-backed holdings benefited fund performance when
the corporate bond market soured in the summer months, as investors looking for
high credit quality and additional yield over treasuries drove up prices. The
fund's corporate bond holdings added positive returns in the fourth quarter of
2002, when the corporate bond market started to rebound.
Throughout the period, a relatively large portion of the portfolio was invested
in financial companies, such as banks, brokerage firms and finance companies,
which performed well. Bank bonds - in particular those issued by banks with
strong capital bases that controlled credit exposure - turned in strong
performance for the fund.
/s/ James J. Calmas
James J. Calmas
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.
These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
Past performance is no guarantee of future results.
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PERFORMANCE SUMMARY THROUGH 4/30/03
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The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmark. Performance results include
the deduction of the maximum applicable sales charge and reflect the percentage
change in net asset value, including reinvestment of dividends and capital gains
distributions. 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. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. (See
Notes to Performance Summary.) It is not possible to invest directly in an
index.
LINE CHART
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Lehman Brothers One- to Three-Year MFS Limited Maturity Fund -
Government/Credit Index Class A
4/93 $ 9,750 $10,000
4/95 10,510 10,760
4/97 11,958 12,218
4/99 13,211 13,882
4/01 14,868 15,818
4/03 16,564 17,934
TOTAL RETURNS
Cumulative without sales charge
Class
Share inception
class date 1-yr 3-yr 5-yr 10-yr
A 2/26/92 5.58% 22.07% 30.72% 69.89%
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B 9/7/93 4.76% 19.17% 25.69% 56.87%
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C 7/1/94 4.68% 18.85% 25.13% 57.30%
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I 1/2/97 5.59% 22.32% 31.41% 70.89%
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R 12/31/02 5.48% 21.96% 30.60% 69.74%
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529A 7/31/02 5.35% 21.81% 30.44% 69.52%
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529B 7/31/02 4.67% 21.02% 29.60% 68.43%
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529C 7/31/02 4.77% 21.14% 29.72% 68.59%
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Average annual without sales charge
Share
class 1-yr 3-yr 5-yr 10-yr
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A 5.58% 6.87% 5.50% 5.44%
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B 4.76% 6.02% 4.68% 4.61%
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C 4.68% 5.92% 4.59% 4.63%
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I 5.59% 6.95% 5.62% 5.50%
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R 5.48% 6.84% 5.48% 5.43%
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529A 5.35% 6.80% 5.46% 5.42%
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529B 4.67% 6.57% 5.32% 5.35%
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529C 4.77% 6.60% 5.34% 5.36%
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Average annual with sales charge
A 2.94% 5.98% 4.97% 5.18%
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B 0.76% 5.12% 4.35% 4.61%
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C 3.68% 5.92% 4.59% 4.63%
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529A 2.71% 5.90% 4.93% 5.15%
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529B 0.67% 5.68% 5.00% 5.35%
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529C 3.77% 6.60% 5.34% 5.36%
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Class I and R shares have no sales charges. Please see the Notes to Performance
Summary for details.
Comparative benchmarks
Average Annual
Average short-term
investment grade debt
fund+ 5.00% 6.38% 5.48% 5.35%
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Lehman Brothers One- to
Three-Year Government/
Credit Index# 6.39% 7.65% 6.50% 6.02%
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+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
LEHMAN BROTHERS ONE- TO THREE-YEAR GOVERNMENT/CREDIT INDEX:: Measures the
performance of the short term (1 to 3 years) government and investment-grade
corporate bond markets.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A and 529A results, including sales charge, reflects the reduction of the
maximum 2.50% sales charge. Class B and 529B results, including sales charge,
reflects the deduction of the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C and 529C results,
including sales charge, redeemed within one year from the end of the calendar
month of purchase reflects the deduction of the 1% CDSC. Class I shares have no
sales charges and are available only to certain investors. Class R shares have
no sales charges and are available only to certain retirement plans. Class 529A,
529B, and 529C shares are only available in conjunction with qualified tuition
programs, such as the MFS 529 Savings Plan.
Performance for share classes offered after class A shares includes the
performance of the fund's class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences in
sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of blended
performance generally results in higher performance for share classes with
higher operating expenses than the initial share class, and lower performance
for share classes with lower operating expenses than the initial share class.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. All results
are historical and assume the reinvestment of dividends and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT THE
DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS
OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
These risks may increase share price volatility. Please see the prospectus for
further information on these and other risk considerations.
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.
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PORTFOLIO OF INVESTMENTS - 4/30/03
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The Portfolio of Investments is a list of all securities owned by your fund at
4/30/03. It is categorized by broad-based asset classes.
Bonds - 97.6%
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PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
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U.S. Bonds - 85.2%
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Advertising & Broadcasting - 1.0%
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Clear Channel Communications, 7.25s, 2003 $2,545 $2,590,064
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Clear Channel Communications, 7.875s, 2005 2,567 2,834,867
- --------------------------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 6.125s, 2006 3,713 4,055,843
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$9,480,774
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Aerospace - 0.9%
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Boeing Capital Corp., 5.75s, 2007 $4,515 $4,787,236
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Northrop Grumman Corp., 7s, 2006 3,385 3,769,699
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$8,556,935
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Airlines - 0.1%
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Delta Air Lines, Inc., 7.379s, 2011 $825 $805,849
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Alcoholic Beverages - 0.3%
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Diageo PLC, 7.125s, 2004 $2,923 $3,130,410
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Asset Backed & Securitized - 19.2%
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Americredit Automobile Receivable Trust, 5.37s, 2008 $2,900 $3,024,491
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Ameriquest Mortgage Securities, Inc., 3.027s, 2033 5,000 5,020,656
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Banamex Credit Card, 6.25s, 2003 1,186 1,196,793
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Bear Stearns ARM Trust, 3.545s, 2033 4,905 4,950,984
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California Infrastructure, 6.19s, 2005 968 977,703
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Capital One Auto Finance Trust, 4.79s, 2009 4,017 4,246,169
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Caterpillar Financial Asset Trust, 3.15s, 2008 6,400 6,499,389
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Centex Home Equity, 5.93s, 2025 1,188 1,203,167
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Certificates Funding Corp., 6.716s, 2004 3,094 3,247,569
- --------------------------------------------------------------------------------------------------
Circuit City Credit Card Master Trust, 1.75s, 2011 2,530 2,530,000
- --------------------------------------------------------------------------------------------------
CIT Home Equity Loan Trust, 4.57s, 2023 2,475 2,494,280
- --------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, 6.65s, 2008 1,725 1,881,848
- --------------------------------------------------------------------------------------------------
CNH Equipment Test, 1.56s, 2006 6,605 6,615,817
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CNH Equipment Test, 4.3s, 2008 1,534 1,555,371
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Commerce 1999, 0.697s, 2018 (Interest Only) $61,788 $1,894,184
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Commerce 2000, 2.07s, 2003 865 862,683
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Commercial Mortgage Acceptance Corp., 5.8s, 2030 523 551,355
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Continental Airlines Co., 1.79s, 2011 2,313 2,312,872
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CPS Auto Receivables Trust, 2.89s, 2009 2,450 2,459,481
- --------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 3.5s, 2009# 1,175 1,193,177
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CPS Auto Receivables Trust, 3.52s, 2009# 720 730,922
- --------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, 4.21s, 2005 4,145 4,209,256
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Discover Card Master Trust, 5.85s, 2006 2,124 2,144,055
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DLJ Commercial Mortgage Corp., 0.906s, 2005
(Interest Only) 28,200 462,937
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Drive Auto Receivables Trust, 2.77s, 2008 3,149 3,147,524
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Fannie Mae Whole Loan, 4.08s, 2031 2,958 2,963,502
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Fleet Credit Card Master Trust, 1.53s, 2007 1,305 1,308,058
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General Motors Acceptance Corp., 3.898s, 2013 462 462,329
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Greenpoint Manufactured Housing, 6.26s, 2015 395 396,268
- --------------------------------------------------------------------------------------------------
GSR Mortgage Loan Trust, 6.06s, 2030 1,653 1,757,516
- --------------------------------------------------------------------------------------------------
GSR Mortgage Loan Trust, 3.322s, 2032 4,400 4,400,000
- --------------------------------------------------------------------------------------------------
GSR Mortgage Loan Trust, 4.018s, 2032 4,930 4,982,149
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Holmes Financing PLC, 1.479s, 2015 1,000 1,000,397
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Household Automotive Trust, 3.44s, 2009 4,400 4,502,092
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Household Home Equity Loan Trust, 1.77s, 2032 3,778 3,780,268
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Household Private Label Credit Card, 1.76s, 2008 3,250 3,217,194
- --------------------------------------------------------------------------------------------------
Hyundai Auto Receivables Trust, 2.8s, 2007# 6,900 7,008,903
- --------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 3.9s, 2006 4,920 5,014,184
- --------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 2.33s, 2007 2,010 2,009,978
- --------------------------------------------------------------------------------------------------
Indymac MBS, Inc., 5.35s, 2026 787 792,077
- --------------------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp.,
6.533s, 2030 1,250 1,362,544
- --------------------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp.,
6.613s, 2030 4,785 5,392,569
- --------------------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp.,
7.325s, 2031 1,099 1,213,415
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LB Commercial Conduit Mortgage Trust, 0.554s, 2035
(Interest Only) 82,699 2,275,361
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MBNA Master Credit Card Trust, 5.25s, 2006 $1,000 $1,014,796
- --------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 5.65s, 2030 1,970 2,064,587
- --------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 7.058s, 2030 2,180 2,391,560
- --------------------------------------------------------------------------------------------------
MFN Automobile Receivables Trust, 5.07s, 2007# 601 604,523
- --------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Capital, 2.288s, 2013# 1,254 1,252,713
- --------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Capital, 2.858s, 2013# 703 703,733
- --------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Capital, 6.01s, 2030 776 837,231
- --------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 1.098s, 2031
(Interest Only) 37,974 1,320,425
- --------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.337s, 2031 4,885 5,491,362
- --------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 0.661s, 2030 (Interest Only) 41,433 1,217,100
- --------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 6.476s, 2030 2,350 2,661,126
- --------------------------------------------------------------------------------------------------
Providian Home Equity Loan Trust, 1.61s, 2025 273 272,964
- --------------------------------------------------------------------------------------------------
PSE&G Transition Funding LLC, 5.74s, 2007 2,485 2,590,117
- --------------------------------------------------------------------------------------------------
Residential Asset Mortgage, Inc., 3.49s, 2029 1,800 1,831,738
- --------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 1.896s, 2009 636 642,765
- --------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 2.25s, 2032# 4,000 4,031,250
- --------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 3.39s, 2033 4,270 4,283,493
- --------------------------------------------------------------------------------------------------
SMHL Global Fund, 1.54s, 2029 4,900 4,900,000
- --------------------------------------------------------------------------------------------------
Summit Acceptance Auto Investment LLC, 7.51s, 2007 657 658,860
- --------------------------------------------------------------------------------------------------
Thornburg Mortgage Securities Trust, 1.66s, 2043 6,021 6,040,515
- --------------------------------------------------------------------------------------------------
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032# 3,495 3,860,416
- --------------------------------------------------------------------------------------------------
Triad Auto Receivables Trust, 3.24s, 2009 3,554 3,650,420
- --------------------------------------------------------------------------------------------------
Vanderbilt Mortgage & Finance, Inc., 5.17s, 2014 1,590 1,618,965
- --------------------------------------------------------------------------------------------------
WAMU Mortgage Certificate, 5.51s, 2032 275 274,768
- --------------------------------------------------------------------------------------------------
WAMU Mortgage Certificate, 3.112s, 2033 3,750 3,749,591
- --------------------------------------------------------------------------------------------------
WAMU Mortgage Certificate, 3.567s, 2033 3,450 3,479,995
- --------------------------------------------------------------------------------------------------
WFS Financial 2002 Owner Trust, 2.39s, 2007 4,910 4,958,879
- --------------------------------------------------------------------------------------------------
$185,655,379
- --------------------------------------------------------------------------------------------------
Automotive - 1.1%
- --------------------------------------------------------------------------------------------------
DaimlerChrysler NA Holding Corp., 7.4s, 2005 $5,300 $5,721,005
- --------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.125s, 2006 4,735 4,914,400
- --------------------------------------------------------------------------------------------------
$10,635,405
- --------------------------------------------------------------------------------------------------
Banks & Credit Cos. - 3.1%
- --------------------------------------------------------------------------------------------------
Associates Corp. North America, 5.8s, 2004 $2,710 $2,823,787
- --------------------------------------------------------------------------------------------------
Bank of America Corp., 9.2s, 2003 1,240 1,242,693
- --------------------------------------------------------------------------------------------------
Commercial Credit Co., 7.875s, 2004 3,189 3,423,041
- --------------------------------------------------------------------------------------------------
Credit Suisse First Boston, 5.875s, 2006 5,425 5,927,941
- --------------------------------------------------------------------------------------------------
Credit Suisse First Boston, 4.625s, 2008 1,250 1,302,700
- --------------------------------------------------------------------------------------------------
NationsBank Corp., 6.5s, 2006 600 663,748
- --------------------------------------------------------------------------------------------------
NationsBank Corp., 7.5s, 2006 3,920 4,512,183
- --------------------------------------------------------------------------------------------------
NationsBank-Texax, 9.5s, 2004 1,500 1,624,971
- --------------------------------------------------------------------------------------------------
Popular North America, Inc., 6.125s, 2006 3,380 3,719,758
- --------------------------------------------------------------------------------------------------
Wells Fargo Co., 7.2s, 2003 1,987 1,987,000
- --------------------------------------------------------------------------------------------------
Wells Fargo Co., 7.8s, 2010 2,543 2,822,768
- --------------------------------------------------------------------------------------------------
$30,050,590
- --------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 1.6%
- --------------------------------------------------------------------------------------------------
Comcast Cable Communications, 8.375s, 2007 $4,450 $5,140,284
- --------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.5s, 2004 4,933 5,261,227
- --------------------------------------------------------------------------------------------------
TCI Communications, Inc., 6.375s, 2003 5,415 5,415,000
- --------------------------------------------------------------------------------------------------
$15,816,511
- --------------------------------------------------------------------------------------------------
Brokerage - 2.1%
- --------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 7.625s, 2005 $4,035 $4,516,993
- --------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 4s, 2008 2,425 2,476,874
- --------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 11.625s, 2005 3,420 4,035,104
- --------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 2.47s, 2006 2,920 2,921,600
- --------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc., 5.8s, 2007 4,385 4,815,826
- --------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., 5.875s, 2006 1,300 1,413,989
- --------------------------------------------------------------------------------------------------
$20,180,386
- --------------------------------------------------------------------------------------------------
Building - 0.4%
- --------------------------------------------------------------------------------------------------
Masco Corp., 6.75s, 2006 $3,475 $3,859,606
- --------------------------------------------------------------------------------------------------
Chemicals - 0.9%
- --------------------------------------------------------------------------------------------------
Chevron Phillips Chemical Co. LLC, 5.375s, 2007 $4,605 $4,812,446
- --------------------------------------------------------------------------------------------------
Dow Chemical Co., 5.25s, 2004 2,250 2,321,102
- --------------------------------------------------------------------------------------------------
Dow Chemical Co., 5s, 2007 1,660 1,726,714
- --------------------------------------------------------------------------------------------------
$8,860,262
- --------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.4%
- --------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 $2,700 $2,952,094
- --------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2008 750 801,068
- --------------------------------------------------------------------------------------------------
$3,753,162
- --------------------------------------------------------------------------------------------------
Containers - 0.3%
- --------------------------------------------------------------------------------------------------
Tenneco Packaging, Inc., 7.2s, 2005 $2,640 $2,900,745
- --------------------------------------------------------------------------------------------------
Defense Electronics - 0.3%
- --------------------------------------------------------------------------------------------------
Raytheon Co., 5.7s, 2003 $2,458 $2,488,745
- --------------------------------------------------------------------------------------------------
Energy - Independent - 0.6%
- --------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.625s, 2005 $2,600 $2,900,209
- --------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 4.375s, 2007 1,155 1,195,218
- --------------------------------------------------------------------------------------------------
Seagull Energy Corp., 7.875s, 2003 1,880 1,901,150
- --------------------------------------------------------------------------------------------------
$5,996,577
- --------------------------------------------------------------------------------------------------
Energy - Integrated - 1.4%
- --------------------------------------------------------------------------------------------------
Amerada Hess Corp., 5.9s, 2006 $3,800 $4,108,013
- --------------------------------------------------------------------------------------------------
Conoco Funding Co., 5.45s, 2006 3,240 3,535,170
- --------------------------------------------------------------------------------------------------
Phillips Petroleum Co., 8.5s, 2005 5,000 5,646,505
- --------------------------------------------------------------------------------------------------
$13,289,688
- --------------------------------------------------------------------------------------------------
Entertainment - 1.8%
- --------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 5.625s, 2005 $1,620 $1,706,281
- --------------------------------------------------------------------------------------------------
News America Holdings, Inc., 6.625s, 2008 4,444 4,902,985
- --------------------------------------------------------------------------------------------------
Time Warner, Inc., 7.975s, 2004 3,970 4,227,868
- --------------------------------------------------------------------------------------------------
Viacom, Inc., 7.75s, 2005 2,560 2,848,906
- --------------------------------------------------------------------------------------------------
Walt Disney Co., 6.75s, 2006 3,355 3,679,949
- --------------------------------------------------------------------------------------------------
$17,365,989
- --------------------------------------------------------------------------------------------------
Financial Institutions - 3.3%
- --------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.85s, 2004 $4,807 $5,079,687
- --------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2006 850 914,797
- --------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2007 660 712,405
- --------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 5.75s, 2004 975 995,485
- --------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.125s, 2004 2,920 2,975,091
- --------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.875s, 2006 4,465 4,619,056
- --------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5s, 2007 5,176 5,569,635
- --------------------------------------------------------------------------------------------------
General Electric Capital Corp., 3.5s, 2008 2,250 2,260,845
- --------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.36s, 2004 $3,641 $3,744,328
- --------------------------------------------------------------------------------------------------
Household Finance Corp., 8s, 2005 3,700 4,139,046
- --------------------------------------------------------------------------------------------------
Household Finance Corp., 4.625s, 2008 1,250 1,304,379
- --------------------------------------------------------------------------------------------------
$32,314,754
- --------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverage Products - 2.0%
- --------------------------------------------------------------------------------------------------
General Mills, Inc., 5.125s, 2007 $5,000 $5,385,180
- --------------------------------------------------------------------------------------------------
Kellogg Co., 6s, 2006 2,430 2,669,498
- --------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 4.625s, 2006 2,870 2,952,828
- --------------------------------------------------------------------------------------------------
Pepsiamericas, Inc., 3.875s, 2007 3,750 3,825,454
- --------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 6.625s, 2004 3,211 3,353,379
- --------------------------------------------------------------------------------------------------
Whitman Corp., 6s, 2004 925 966,199
- --------------------------------------------------------------------------------------------------
$19,152,538
- --------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.9%
- --------------------------------------------------------------------------------------------------
Westvaco Corp., 6.85s, 2004 $3,600 $3,819,503
- --------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 5.5s, 2005 4,865 5,111,140
- --------------------------------------------------------------------------------------------------
$8,930,643
- --------------------------------------------------------------------------------------------------
Full Faith & Credit - 0.3%
- --------------------------------------------------------------------------------------------------
Aid to Israel, 6.625s, 2003 $3,000 $3,040,104
- --------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.1%
- --------------------------------------------------------------------------------------------------
MGM Grand, Inc., 6.95s, 2005 $1,250 $1,296,875
- --------------------------------------------------------------------------------------------------
Insurance - 1.8%
- --------------------------------------------------------------------------------------------------
AIG SunAmerica, 7.4s, 2003# $1,500 $1,500,000
- --------------------------------------------------------------------------------------------------
AIG SunAmerica, 7.6s, 2005# 400 445,567
- --------------------------------------------------------------------------------------------------
AIG SunAmerica, 5.85s, 2006# 2,615 2,841,172
- --------------------------------------------------------------------------------------------------
AIG SunAmerica, 5.1s, 2007# 2,305 2,457,351
- --------------------------------------------------------------------------------------------------
Metlife, Inc., 3.911s, 2005 3,375 3,497,809
- --------------------------------------------------------------------------------------------------
Prudential Financial, Inc., 3.75s, 2008 2,700 2,700,000
- ----------------------------------------------------------------------------------------------------
Prudential Insurance Co., 7.65s, 2007# 3,380 3,845,271
- ----------------------------------------------------------------------------------------------------
$17,287,170
- ----------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 1.3%
- --------------------------------------------------------------------------------------------------
Allstate Corp., 5.375s, 2006 $3,080 $3,340,969
- --------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc., 4.7s, 2007 1,750 1,804,586
- --------------------------------------------------------------------------------------------------
Safeco Corp., 4.2s, 2008 3,800 3,833,892
- --------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 3.75s, 2008# 3,370 3,393,155
- --------------------------------------------------------------------------------------------------
$12,372,602
- --------------------------------------------------------------------------------------------------
Machinery - 0.5%
- --------------------------------------------------------------------------------------------------
Ingersoll Rand Co., 6.25s, 2006 $4,225 $4,659,714
- --------------------------------------------------------------------------------------------------
Medical & Health Products - 0.8%
- --------------------------------------------------------------------------------------------------
Wyeth, 5.875s, 2004 $4,335 $4,492,946
- --------------------------------------------------------------------------------------------------
Wyeth, 4.125s, 2008 3,550 3,628,444
- --------------------------------------------------------------------------------------------------
$8,121,390
- --------------------------------------------------------------------------------------------------
Medical & Health Technology Services - 0.5%
- --------------------------------------------------------------------------------------------------
HCA Healthcare Co., 7.125s, 2006 $4,460 $4,794,719
- --------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.5%
- --------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 5.35s, 2007 $4,380 $4,700,892
- --------------------------------------------------------------------------------------------------
Oils - 0.2%
- --------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.125s, 2007 $2,065 $2,204,398
- --------------------------------------------------------------------------------------------------
Pollution Control - 0.6%
- --------------------------------------------------------------------------------------------------
USA Waste Services, Inc., 7s, 2004 $296 $314,581
- --------------------------------------------------------------------------------------------------
WMX Technologies, Inc., 6.375s, 2003 3,341 3,414,779
- --------------------------------------------------------------------------------------------------
WMX Technologies, Inc., 7s, 2006 1,751 1,944,962
- --------------------------------------------------------------------------------------------------
$5,674,322
- --------------------------------------------------------------------------------------------------
Railroads - 0.4%
- --------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.34s, 2003 $3,350 $3,428,685
- --------------------------------------------------------------------------------------------------
Union Pacific Corp., 5.84s, 2004 800 831,136
- --------------------------------------------------------------------------------------------------
$4,259,821
- --------------------------------------------------------------------------------------------------
Real Estate - 1.5%
- --------------------------------------------------------------------------------------------------
EOP Operating Ltd., 7.375s, 2003 $3,628 $3,728,053
- --------------------------------------------------------------------------------------------------
EOP Operating Ltd., 7.75s, 2007 1,945 2,251,129
- --------------------------------------------------------------------------------------------------
Kimco Reality Corp., 6.73s, 2005 855 932,537
- --------------------------------------------------------------------------------------------------
Simon Debartolo Group LP, 6.75s, 2004 2,823 2,962,377
- --------------------------------------------------------------------------------------------------
Vornado Reality Trust, 5.625s, 2007 4,800 4,942,253
- --------------------------------------------------------------------------------------------------
$14,816,349
- --------------------------------------------------------------------------------------------------
Retail - 0.3%
- --------------------------------------------------------------------------------------------------
Golden Funding Corp., 1.85s, 2005# $2,500 $2,501,895
- --------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
- --------------------------------------------------------------------------------------------------
Kroger Co., 7.8s, 2007 $2,815 $3,229,123
- --------------------------------------------------------------------------------------------------
Supranational - 0.7%
- --------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento, 6.75s, 2005 $1,644 $1,732,069
- --------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento, 8.875s, 2005 865 937,424
- --------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development,
4.77s, 2005 3,750 3,945,000
- --------------------------------------------------------------------------------------------------
$6,614,493
- --------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 2.2%
- --------------------------------------------------------------------------------------------------
AT&T Corp., 6.5s, 2006 $3,815 $4,090,981
- --------------------------------------------------------------------------------------------------
Citizens Communications Co., 8.5s, 2006 3,256 3,772,108
- --------------------------------------------------------------------------------------------------
GTE Corp., 9.1s, 2003 4,535 4,559,630
- --------------------------------------------------------------------------------------------------
Sprint Capital Corp., 7.125s, 2006 4,585 4,837,175
- --------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 3,620 3,862,431
- --------------------------------------------------------------------------------------------------
$21,122,325
- --------------------------------------------------------------------------------------------------
U.S. Government Agencies - 22.0%
- --------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 4.875s, 2004 $13,450 $13,912,209
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.25s, 2005 5,600 5,893,787
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2021 - 2033 19,242 19,761,726
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.25s, 2006 9,000 9,758,313
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2014 - 2017 29,403 30,538,195
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6s, 2017 4,777 4,990,899
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6.375s, 2003 3,000 3,084,942
- --------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 7s, 2005 6,525 7,258,149
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.25s, 2009 1,646 1,651,336
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2016 - 2050 30,056 31,387,038
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2017 - 2017 13,920 14,592,005
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.023s, 2011 355 368,392
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2004 - 2017 24,826 26,448,408
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.65s, 2008 2,352 2,520,973
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7s, 2015 1,444 1,542,713
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.085s, 2006 1,746 1,942,597
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.125s, 2005 13,300 14,606,871
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.29s, 2006 1,787 1,986,133
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.355s, 2006 1,536 1,713,366
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2015 1,089 1,168,558
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.204s, 2014 $2,259 $2,401,652
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.48s, 2015 2,319 2,463,168
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7s, 2009 - 2010 14 15,291
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7.5s, 2007 - 2011 1,448 1,566,361
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 8.5s, 2004 - 2009 967 1,068,511
- --------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 12.5s, 2011 107 126,132
- --------------------------------------------------------------------------------------------------
Student Loan Marketing Assn., 5.25s, 2006 6,500 7,056,777
- --------------------------------------------------------------------------------------------------
United States Department of Veteran Affairs, 6s, 2021 3,300 3,447,944
- --------------------------------------------------------------------------------------------------
$213,272,446
- --------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 1.8%
- --------------------------------------------------------------------------------------------------
U. S. Treasury Bonds, 11.125s, 2003 $6,000 $6,172,968
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5s, 2005## 4,000 4,438,436
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.75s, 2005 5,885 6,501,089
- --------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2007 400 405,484
- --------------------------------------------------------------------------------------------------
$17,517,977
- --------------------------------------------------------------------------------------------------
Utilities - Electric Power - 6.6%
- --------------------------------------------------------------------------------------------------
Constellation Energy Group, Inc., 6.35s, 2007 $3,131 $3,463,979
- --------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 7.6s, 2003 3,878 3,921,713
- --------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 2.8s, 2005 4,000 4,027,532
- --------------------------------------------------------------------------------------------------
DTE Energy Co., 6s, 2004 4,507 4,703,609
- --------------------------------------------------------------------------------------------------
Edison Mission Energy Funding Corp., 6.77s, 2003# 251 253,174
- --------------------------------------------------------------------------------------------------
Entergy Mississippi, Inc., 6.2s, 2004 1,603 1,668,098
- --------------------------------------------------------------------------------------------------
FPL Group Capital, Inc., 3.25s, 2006 4,320 4,368,850
- --------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 4.625s, 2007 4,140 4,239,016
- --------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375s, 2004 5,051 5,223,997
- --------------------------------------------------------------------------------------------------
Oncor Electric Delivery Co., 5s, 2007 3,826 4,046,297
- --------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.05s, 2007 3,760 4,122,205
- --------------------------------------------------------------------------------------------------
PSE&G Energy Holdings LLC, 7.75s, 2007# 2,638 2,763,305
- --------------------------------------------------------------------------------------------------
PSE&G Power LLC, 6.875s, 2006 3,125 3,420,500
- --------------------------------------------------------------------------------------------------
Reliant Energy Resources Corp., 8.125s, 2005 4,569 4,934,520
- --------------------------------------------------------------------------------------------------
Toledo Edison Co., 7.875s, 2004 2,800 2,993,906
- --------------------------------------------------------------------------------------------------
TXU Energy Co. LLC, 6.125s, 2008# 2,641 2,812,295
- --------------------------------------------------------------------------------------------------
Virginia Electric & Power Co., 5.375s, 2007 1,250 1,344,187
- --------------------------------------------------------------------------------------------------
Wisconsin Energy Corp., 5.875s, 2006 5,544 6,041,485
- --------------------------------------------------------------------------------------------------
$64,348,668
- --------------------------------------------------------------------------------------------------
Utilities - Gas - 0.4%
- --------------------------------------------------------------------------------------------------
Keyspan Corp., 6.15s, 2006 $3,700 $4,097,480
- --------------------------------------------------------------------------------------------------
Wireless Communication - 0.7%
- --------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.35s, 2006 $2,162 $2,408,533
- --------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 4,462 4,808,336
- --------------------------------------------------------------------------------------------------
$7,216,869
- --------------------------------------------------------------------------------------------------
Total U.S. Bonds $826,374,580
- --------------------------------------------------------------------------------------------------
Foreign Bonds - 12.4%
- --------------------------------------------------------------------------------------------------
Australia - 0.1%
- --------------------------------------------------------------------------------------------------
Medallion Trust, 1.51s, 2031 (Asset-Backed) $790 $790,459
- --------------------------------------------------------------------------------------------------
Austria - 0.0%
- --------------------------------------------------------------------------------------------------
Oesterreich Kontrollbank, 5.5s, 2006 (Banks & Credit Cos.) $220 $240,517
- --------------------------------------------------------------------------------------------------
Canada - 2.2%
- --------------------------------------------------------------------------------------------------
Province of British Columbia, 4.625s, 2006 $1,500 $1,606,722
- --------------------------------------------------------------------------------------------------
Province of Manitoba, 4.25s, 2006 5,020 5,297,084
- --------------------------------------------------------------------------------------------------
Province of New Brunswick, 3.5s, 2007 4,820 4,944,987
- --------------------------------------------------------------------------------------------------
Province of Ontario, 7s, 2005 800 889,290
- --------------------------------------------------------------------------------------------------
Province of Ontario, 6s, 2006 5,750 6,355,159
- --------------------------------------------------------------------------------------------------
Telus Corp., 7.5s, 2007 (Wireless Communications) 2,300 2,553,000
- --------------------------------------------------------------------------------------------------
$21,646,242
- --------------------------------------------------------------------------------------------------
France - 1.8%
- --------------------------------------------------------------------------------------------------
France Telecom S.A., 7.2s, 2006 (Telecommunications -
Wireline) $3,991 $4,532,479
- --------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s, 2049 (Banks & Credit Cos.)# 3,624 4,298,028
- --------------------------------------------------------------------------------------------------
Socgen Real Estate Co., 7.64s, 2049 (Banks & Credit
Cos.)# 5,170 5,753,434
- --------------------------------------------------------------------------------------------------
Societe Generale, 9.875s, 2003 (Banks & Credit Cos.) 2,913 2,960,724
- --------------------------------------------------------------------------------------------------
$17,544,665
- --------------------------------------------------------------------------------------------------
Germany - 3.2%
- --------------------------------------------------------------------------------------------------
Bayerische Landesbank, 1.36s, 2005 (Banks & Credit Cos.) $6,590 $6,588,570
- --------------------------------------------------------------------------------------------------
Deutsche Telekom International Finance, 7.75s, 2005
(Telecommunications) 3,790 4,210,300
- --------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 9.4s, 2004 (Financial
Institutions) $2,600 $2,817,300
- --------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 2.5s, 2005 (Financial
Institutions) 7,500 7,608,262
- --------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 4.25s, 2005 (Financial
Institutions) 225 236,017
- --------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 4.75s, 2007 (Financial
Institutions) 2,000 2,151,320
- --------------------------------------------------------------------------------------------------
Landesbank Baden Wurttemberg, 7.875s, 2004 (Banks &
Credit Cos.) 4,945 5,264,556
- --------------------------------------------------------------------------------------------------
Landesbank Baden Wurttemberg, 5.125s, 2007 (Banks &
Credit Cos.) 1,000 1,080,546
- --------------------------------------------------------------------------------------------------
Landwirtschaft Rentenbank, 4.5s, 2006 (Banks & Credit Cos.) 1,000 1,064,435
- --------------------------------------------------------------------------------------------------
$31,021,306
- --------------------------------------------------------------------------------------------------
Iceland - 0.3%
- --------------------------------------------------------------------------------------------------
Republic of Iceland, 6.125s, 2004 $2,792 $2,882,603
- --------------------------------------------------------------------------------------------------
Mexico - 0.8%
- --------------------------------------------------------------------------------------------------
BBVA Bancomer, 10.5s, 2011 (Banks & Credit Cos.)# $2,443 $2,785,020
- --------------------------------------------------------------------------------------------------
Pemex Finance Ltd., 5.72s, 2003 (Asset-Backed) 1,113 1,128,269
- --------------------------------------------------------------------------------------------------
Petroleos Mexicanos, 6.5s, 2005 (Oil Services) 3,450 3,677,700
- --------------------------------------------------------------------------------------------------
$7,590,989
- --------------------------------------------------------------------------------------------------
New Zealand - 0.3%
- --------------------------------------------------------------------------------------------------
New Zealand Government, 10.625s, 2005 $2,146 $2,608,339
- --------------------------------------------------------------------------------------------------
Norway - 0.5%
- --------------------------------------------------------------------------------------------------
Union Bank of Norway, 7.35s, 2049 (Banks & Credit Cos.)# $4,839 $4,881,728
- --------------------------------------------------------------------------------------------------
Sweden - 0.3%
- --------------------------------------------------------------------------------------------------
Spintab AB, 7.5s, 2049 (Banks & Credit Cos.) $1,125 $1,251,293
- --------------------------------------------------------------------------------------------------
Spintab AB, 7.5s, 2049 (Banks & Credit Cos.)# 1,150 1,279,099
- --------------------------------------------------------------------------------------------------
$2,530,392
- --------------------------------------------------------------------------------------------------
United Kingdom - 2.9%
- --------------------------------------------------------------------------------------------------
Abbey First National, 8.2s, 2004 (Banks & Credit Cos.) $4,205 $4,568,333
- --------------------------------------------------------------------------------------------------
British Telecom PLC, 2.554s, 2003 (Telecommunications -
Wireline) 3,453 3,466,709
- --------------------------------------------------------------------------------------------------
British Telecom PLC, 7.625s, 2005 (Telecommunications -
Wireline) 2,350 2,664,009
- --------------------------------------------------------------------------------------------------
Lasmo USA, Inc., 7.5s, 2006 (Energy - Integrated) 1,705 1,976,061
- --------------------------------------------------------------------------------------------------
National Westminster Bank PLC, 7.75s, 2049 (Banks &
Credit Cos.) 1,110 1,274,753
- --------------------------------------------------------------------------------------------------
Permanent Financing PLC, 4.2s, 2007 (Asset-Backed) 5,500 5,728,360
- --------------------------------------------------------------------------------------------------
Rolls Royce Capital, 7.125s, 2003 (Aerospace) 3,125 3,153,265
- --------------------------------------------------------------------------------------------------
Royal Bank of Scotland, 8.817s, 2049 (Banks & Credit
Cos.) 4,540 5,069,414
- --------------------------------------------------------------------------------------------------
$27,900,904
- --------------------------------------------------------------------------------------------------
Total Foreign Bonds $119,638,144
- --------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $921,592,597) $946,012,724
- --------------------------------------------------------------------------------------------------
Repurchase Agreement - 4.2%
- --------------------------------------------------------------------------------------------------
Goldman Sachs, dated 4/30/03, due 5/01/03, total to be received $40,925,501
(secured by various U.S. Treasury and Federal Agency obligations in a jointly
traded account),
at Cost $40,924 $40,924,000
- --------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $962,516,597) $986,936,724
- --------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.8)% (17,242,660
- --------------------------------------------------------------------------------------------------
Net Assets - 100.0% $969,694,064
- --------------------------------------------------------------------------------------------------
# SEC Rule 144A restriction.
## Security segregated as collateral for an open futures contract.
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 4/30/03
ASSETS
Investments, at value (identified cost, $962,516,597) $986,936,724
- ---------------------------------------------------------------------------------------------------
Cash 185,626
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 7,136,639
- ---------------------------------------------------------------------------------------------------
Interest receivable 10,971,299
- ---------------------------------------------------------------------------------------------------
Other assets 2,282
- ---------------------------------------------------------------------------------------------------
Total assets $1,005,232,570
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $3,412,136
- ---------------------------------------------------------------------------------------------------
Payable for daily variation margin on open futures
contracts 207,187
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased 28,986,603
- ---------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 2,688,456
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 9,230
- ---------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 2,901
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 41,916
- ---------------------------------------------------------------------------------------------------
Administrative fee 462
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 189,615
- ---------------------------------------------------------------------------------------------------
Total liabilities $35,538,506
- ---------------------------------------------------------------------------------------------------
Net assets $969,694,064
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $984,436,659
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments 23,951,970
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (37,472,760)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income (1,221,805)
- ---------------------------------------------------------------------------------------------------
Total $969,694,064
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 141,427,577
- ---------------------------------------------------------------------------------------------------
Class A shares
Net assets $489,999,679
- ---------------------------------------------------------------------------------------------------
Shares outstanding 71,369,797
- ---------------------------------------------------------------------------------------------------
Net asset value per share $6.87
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/97.5X$6.87) $7.05
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $244,736,188
- ---------------------------------------------------------------------------------------------------
Shares outstanding 35,788,514
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.84
- ---------------------------------------------------------------------------------------------------
Class C shares
Net assets $203,529,419
- ---------------------------------------------------------------------------------------------------
Shares outstanding 29,675,030
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.86
- ---------------------------------------------------------------------------------------------------
Class I shares
Net assets $29,074,972
- ---------------------------------------------------------------------------------------------------
Shares outstanding 4,250,881
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $6.84
- ---------------------------------------------------------------------------------------------------
Class R shares
Net assets $85,105
- ---------------------------------------------------------------------------------------------------
Shares outstanding 12,397
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $6.87
- ---------------------------------------------------------------------------------------------------
Class 529A shares
Net assets $1,010,771
- ---------------------------------------------------------------------------------------------------
Shares outstanding 147,230
- ---------------------------------------------------------------------------------------------------
Net asset value per share $6.87
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/97.5X$6.87) $7.05
- ---------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $524,431
- ---------------------------------------------------------------------------------------------------
Shares outstanding 76,773
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.83
- ---------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $733,499
- ---------------------------------------------------------------------------------------------------
Shares outstanding 106,955
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.86
- ---------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A and Class 529A shares
are reduced. A contingent deferred sales charge may be imposed on redemptions of
Class A, Class B, Class C, Class 529A, Class 529B and Class 529C shares.
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- ---------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
FOR YEAR ENDED 4/30/03
NET INVESTMENT INCOME
Interest income $34,366,471
- ---------------------------------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------------------------------
Management fee $2,955,188
- ---------------------------------------------------------------------------------------------------
Trustees' compensation 44,200
- ---------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 746,771
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 600,675
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 1,805,860
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 1,346,004
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 129
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 977
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 2,011
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 2,116
- ---------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 699
- ---------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 510
- ---------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 529
- ---------------------------------------------------------------------------------------------------
Administrative fee 70,332
- ---------------------------------------------------------------------------------------------------
Custodian fee 292,890
- ---------------------------------------------------------------------------------------------------
Printing 56,426
- ---------------------------------------------------------------------------------------------------
Postage 48,702
- ---------------------------------------------------------------------------------------------------
Auditing fees 33,910
- ---------------------------------------------------------------------------------------------------
Legal fees 5,431
- ---------------------------------------------------------------------------------------------------
Miscellaneous 561,006
- ---------------------------------------------------------------------------------------------------
Total expenses $8,574,366
- ---------------------------------------------------------------------------------------------------
Fees paid indirectly (19,855)
- ---------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and
distributor (369,132)
- ---------------------------------------------------------------------------------------------------
Net expenses $8,185,379
- ---------------------------------------------------------------------------------------------------
Net investment income $26,181,092
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized loss (identified cost basis) -
- ---------------------------------------------------------------------------------------------------
Investment transactions $(6,363,638)
- ---------------------------------------------------------------------------------------------------
Futures contracts (1,520,745)
- ---------------------------------------------------------------------------------------------------
Net realized loss on investments $(7,884,383)
- ---------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) -
Investments $19,624,086
- ---------------------------------------------------------------------------------------------------
Futures contracts (394,800)
- ---------------------------------------------------------------------------------------------------
Net unrealized gain on investments $19,229,286
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $11,344,903
- ---------------------------------------------------------------------------------------------------
Increase in net assets from operations $37,525,995
- ---------------------------------------------------------------------------------------------------
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting
from operations, any distributions, and any shareholder transactions.
FOR YEARS ENDED 4/30 2003 2002
INCREASE IN NET ASSETS
OPERATIONS
Net investment income $26,181,092 $18,310,643
- ---------------------------------------------------------------------------------------------------
Net realized loss on investments (7,884,383) (1,110,043)
- ---------------------------------------------------------------------------------------------------
Net unrealized gain on investments 19,229,286 894,839
- ----------------------------------------------------------- ------------ ------------
Increase in net assets from operations $37,525,995 $18,095,439
- ----------------------------------------------------------- ------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- ---------------------------------------------------------------------------------------------------
Class A $(19,905,095) $(12,096,901)
- ---------------------------------------------------------------------------------------------------
Class B (8,092,921) (4,238,980)
- ---------------------------------------------------------------------------------------------------
Class C (5,499,319) (1,913,746)
- ---------------------------------------------------------------------------------------------------
Class I (505,449) (61,016)
- ---------------------------------------------------------------------------------------------------
Class R (1,179) --
- ---------------------------------------------------------------------------------------------------
Class 529A (13,104) --
- ---------------------------------------------------------------------------------------------------
Class 529B (8,027) --
- ---------------------------------------------------------------------------------------------------
Class 529C (8,225) --
- ---------------------------------------------------------------------------------------------------
In excess of net investment income
- ---------------------------------------------------------------------------------------------------
Class A -- (1,657,719)
- ---------------------------------------------------------------------------------------------------
Class B -- (580,896)
- ---------------------------------------------------------------------------------------------------
Class C -- (262,253)
- ---------------------------------------------------------------------------------------------------
Class I -- (8,361)
- ----------------------------------------------------------- ------------ ------------
Total distributions declared to shareholders $(34,033,319) $(20,819,872)
- ----------------------------------------------------------- ------------ ------------
Net increase in net assets from fund share transactions $478,044,178 $177,060,417
- ----------------------------------------------------------- ------------ ------------
Total increase in net assets $481,536,854 $174,335,984
- ----------------------------------------------------------- ------------ ------------
NET ASSETS
At beginning of period $488,157,210 $313,821,226
- ---------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $1,221,805 and
$585,077, respectively) $969,694,064 $488,157,210
- ---------------------------------------------------------------------------------------------------
See notes to financial statements.
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights provide per share amounts and certain ratios to
summarize the effect of fund operations and any distributions to a shareholder
of each share class.
FOR YEAR ENDED 4/30
CLASS A 2003 2002 2001 2000 1999
Net asset value, beginning of period $6.84 $6.86 $6.66 $6.87 $6.99
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.27 $0.34 $0.42 $0.40 $0.43
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.10 0.03 0.20 (0.22) (0.14)
- -------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $0.37 $0.37 $0.62 $0.18 $0.29
- -------------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.34) $(0.34) $(0.42) $(0.39) $(0.41)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.05) (0.00)+ -- --
- -------------------------------------------------- ------ ------ ------ ------ ------
Total distributions $(0.34) $(0.39) $(0.42) $(0.39) $(0.41)
- -------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $6.87 $6.84 $6.86 $6.66 $6.87
- -------------------------------------------------- ------ ------ ------ ------ ------
Total return (%)(+) 5.58 5.52 9.52 2.71 4.26
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.75 0.80 0.82 0.86 0.84
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.92 5.02 6.20 5.87 6.14
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 53 53 58 74 278
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $490,000 $293,435 $209,687 $115,752 $134,086
- ------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for certain
of the periods indicated. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income(S)(S) $0.26 $0.34 $0.42 -- --
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (TO AVERAGE NET ASSETS)
Expenses## 0.80 0.85 0.85 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.87 4.97 6.17 -- --
- ------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended April 30, 2002 was to decrease net investment income
per share by $0.04, increase net realized and unrealized gains and losses
per share by $0.04, and decrease the ratio of net investment income to
average net assets by 0.57%. Per share, ratios, and supplemental data for
periods prior to May 1, 2001 have not been restated to reflect this
change in presentation.
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
CLASS B 2003 2002 2001 2000 1999
Net asset value, beginning of period $6.81 $6.83 $6.64 $6.85 $6.97
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.21 $0.29 $0.37 $0.34 $0.38
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.11 0.03 0.19 (0.21) (0.14
- -------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $0.32 $0.32 $0.56 $0.13 $0.24
- -------------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.29) $(0.29) $(0.37) $(0.34) $(0.36
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.05) (0.00)+ -- --
- -------------------------------------------------- ------ ------ ------ ------ ------
Total distributions $(0.29) $(0.34) $(0.37) $(0.34) $(0.36
- -------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $6.84 $6.81 $6.83 $6.64 $6.85
- -------------------------------------------------- ------ ------ ------ ------ ------
Total return (%) 4.76 4.73 8.61 1.91 3.48
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.54 1.58 1.59 1.65 1.61
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.14 4.25 5.41 5.09 5.33
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 53 53 58 74 278
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $244,736 $120,535 $77,012 $45,214 $52,883
- ------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for certain
of the periods indicated. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income(S)(S) $0.21 $0.29 $0.37 -- --
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (TO AVERAGE NET ASSETS)
Expenses## 1.59 1.63 1.63 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.09 4.20 5.37 -- --
- ------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended April 30, 2002 was to decrease net investment income
per share by $0.04, increase net realized and unrealized gains and losses
per share by $0.04, and decrease the ratio of net investment income to
average net assets by 0.57%. Per share, ratios, and supplemental data for
periods prior to May 1, 2001 have not been restated to reflect this
change in presentation.
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
CLASS C 2003 2002 2001 2000 1999
Net asset value, beginning of period $6.83 $6.85 $6.66 $6.86 $6.99
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.20 $0.28 $0.36 $0.34 $0.36
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.11 0.03 0.19 (0.21) (0.14
- -------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $0.31 $0.31 $0.55 $0.13 $0.22
- -------------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.28) $(0.28) $(0.36) $(0.33) $(0.35
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.05) (0.00)+ -- --
- -------------------------------------------------- ------ ------ ------ ------ ------
Total distributions $(0.28) $(0.33) $(0.36) $(0.33) $(0.35
- -------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $6.86 $6.83 $6.85 $6.66 $6.86
- -------------------------------------------------- ------ ------ ------ ------ ------
Total return (%) 4.68 4.64 8.50 1.99 3.23
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.60 1.65 1.67 1.71 1.69
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.01 4.12 5.33 5.03 5.19
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 53 53 58 74 278
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $203,529 $72,888 $26,233 $22,825 $24,228
- ------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for certain
of the periods indicated. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income(S)(S) $0.20 $0.27 $0.36 -- --
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (TO AVERAGE NET ASSETS)
Expenses## 1.65 1.70 1.70 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.96 4.07 5.30 -- --
- ------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended April 30, 2002 was to decrease net investment income
per share by $0.04, increase net realized and unrealized gains and losses
per share by $0.04, and decrease the ratio of net investment income to
average net assets by 0.57%. Per share, ratios, and supplemental data for
periods prior to May 1, 2001 have not been restated to reflect this
change in presentation.
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
FOR YEAR ENDED 4/30
CLASS I 2003 2002 2001 2000 1999
Net asset value, beginning of period $6.82 $6.84 $6.65 $6.85 $6.98
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.25 $0.35 $0.42 $0.42 $0.43
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.12 0.03 0.20 (0.22) (0.14
- -------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations $0.37 $0.38 $0.62 $0.20 $0.29
- -------------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.35) $(0.35) $(0.43) $(0.40) $(0.42
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.05) (0.00)+ -- --
- -------------------------------------------------- ------ ------ ------ ------ ------
Total distributions $(0.35) $(0.40) $(0.43) $(0.40) $(0.42
- -------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $6.84 $6.82 $6.84 $6.65 $6.85
- -------------------------------------------------- ------ ------ ------ ------ ------
Total return (%) 5.59 5.70 9.60 3.02 4.28
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.60 0.65 0.67 0.71 0.69
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.81 5.17 6.32 6.00 6.21
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 53 53 58 74 278
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $29,075 $1,299 $888 $684 $1,459
- ------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for certain
of the periods indicated. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income(S)(S) $0.24 $0.35 $0.42 -- --
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (TO AVERAGE NET ASSETS)
Expenses## 0.65 0.70 0.70 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.76 5.12 6.29 -- --
- ------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended April 30, 2002 was to decrease net investment income
per share by $0.04, increase net realized and unrealized gains and losses
per share by $0.04, and decrease the ratio of net investment income to
average net assets by 0.57%. Per share, ratios, and supplemental data for
periods prior to May 1, 2001 have not been restated to reflect this
change in presentation.
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
FOR PERIOD ENDED
CLASS R 4/30/03*
Net asset value, beginning of period $6.86
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.08
- ------------------------------------------------------------------------------
Net realized and unrealized loss on investments 0.03
- ------------------------------------------------------------------------------
Total from investment operations $0.11
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
From net investment income $(0.10)
- ------------------------------------------------------------------------------
Net asset value, end of period $6.87
- ------------------------------------------------------------------------------
Total return (%) 1.65++
- ------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.00+
- ------------------------------------------------------------------------------
Net investment income 3.33+
- ------------------------------------------------------------------------------
Portfolio turnover 53
- ------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $85
- ------------------------------------------------------------------------------
(S) The investment adviser and the distributor voluntarily waived a portion of
their fees for the period indicated. If these fees had been incurred by the
fund, the net investment income per share and the ratios would have been:
Net investment income $0.07
- ------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.15+
- ------------------------------------------------------------------------------
Net investment income 3.18+
- ------------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002,
through April 30, 2003.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
FOR PERIOD ENDED 4/30/03* CLASS 529A CLASS 529B CLASS 529C
Net asset value, beginning of period $6.80 $6.77 $6.79
- ----------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.15 $0.13 $0.12
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments 0.16 0.13 0.15
- ------------------------------------------------------- ------ ------ ------
Total from investment operations $0.31 $0.26 $0.27
- ------------------------------------------------------- ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.24) $(0.20) $(0.20)
- ------------------------------------------------------- ------ ------ ------
Net asset value, end of period $6.87 $6.83 $6.86
- ------------------------------------------------------- ------ ------ ------
Total return (%)(+) 4.27++ 3.60++ 3.70++
- ----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.10+ 1.85+ 1.85+
- ----------------------------------------------------------------------------------------------------------------
Net investment income 3.23+ 2.63+ 2.51+
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover 53 53 53
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $1,011 $524 $734
- ----------------------------------------------------------------------------------------------------------------
(S) The investment adviser (and the distributor in the case of Class 529A)
voluntarily waived a portion of their fees for the period indicated. If
these fees had been incurred by the fund, the net investment income per
share and the ratios would have been:
Net investment income $0.15 $0.13 $0.12
- ----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.25+ 1.90+ 1.90+
- ----------------------------------------------------------------------------------------------------------------
Net investment income 3.08+ 2.58+ 2.46+
- ----------------------------------------------------------------------------------------------------------------
* For the period from the inception of Classes 529A, 529B and 529C, July 31,
2002, through April 30, 2003.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class 529A shares do not include the applicable sales
charges. If the charge had been included, the results would have been lower.
See notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Limited Maturity 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 accounting
principles generally accepted in the United States of America 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 - Bonds and other fixed income securities (other than
short-term obligations) of U.S. issuers in the fund's portfolio are valued at an
evaluated bid price on the basis of quotes from brokers and dealers or on the
basis of valuations furnished by a pricing service. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate 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 quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Futures contracts in the fund's portfolio for
which the principal market is one or more securities or commodities exchanges
(whether domestic or foreign) will be valued at the last reported sale price or
at the settlement price prior to the determination (or if there has been no
current sale, at the closing bid price) on the primary exchange on which such
futures contracts are traded; but if a securities exchange is not the principal
market for securities, such securities will, if market quotations are readily
available, be valued at current bid prices. Short-term obligations in the fund's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer supplied valuations.
Portfolio investments for which market quotations are not readily available, or
whose values have been materially affected by events occurring after the close
of their primary markets are valued at fair value as determined in good faith by
or at the direction of the Board of 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.
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 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. Should interest rates or securities prices move unexpectedly, the
fund may not achieve the anticipated benefits of the futures contracts and may
realize a loss.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with generally accepted accounting principles. All discount is accreted for tax
reporting purposes as required by federal income tax regulations. Interest
payments received in additional securities are recorded on the 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.
The fund may enter into "TBA" (to be announced) purchase commitments to purchase
securities for a fixed unit price at a future date. Although the unit price has
been established, the principal value has not been finalized. However, the
principal amount of the commitments will not fluctuate more than 1.0%. The fund
holds, and maintains until settlement date, cash or high-grade debt obligations
in an amount sufficient to meet the purchase price, or the fund may enter into
offsetting contracts for the forward sale of other securities it owns. Income on
the securities will not be earned until settlement date. TBA purchase
commitments may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to settlement
date, which is in addition to the risk of decline in the value of the fund's
other assets. Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities, according to the procedures described
under "Investment Valuations" above.
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 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 fund
distinguishes between distributions on a tax basis and a financial reporting
basis and 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. Common
types of book and tax differences that could occur include differences in
accounting for mortgage-backed securities, derivatives, defaulted bonds, capital
losses, and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended April 30, 2003
and April 30, 2002 were as follows:
4/30/03 4/30/02
Distributions declared from ordinary income $34,033,319 $20,819,872
- --------------------------------------------------------------------------------
During the year ended April 30, 2003, accumulated distributions in excess of net
investment income decreased by $7,215,499, accumulated net realized loss on
investments increased by $9,572,308, and paid-in capital increased by $2,356,809
due to differences between book and tax accounting for mortgage backed
securities, amortization and accretion on debt securities, capital losses and
defaulted bonds. This change had no effect on the net assets or net asset value
per share.
As of April 30, 2003, the components of accumulated losses on a tax basis were
as follows:
Undistributed ordinary income $2,210,745
----------------------------------------------------------------------
Capital loss carryforward (25,752,876)
----------------------------------------------------------------------
Unrealized appreciation 15,408,556
----------------------------------------------------------------------
Other temporary differences (6,609,020)
----------------------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the earlier
of its utilization or expiration.
EXPIRATION DATE
April 30, 2005 $(2,906,238)*
----------------------------------------------------------------------
April 30, 2006 (1,767,089)*
----------------------------------------------------------------------
April 30, 2007 (4,524,994)*
----------------------------------------------------------------------
April 30, 2008 (4,772,473)*
----------------------------------------------------------------------
April 30, 2009 (2,874,797)
----------------------------------------------------------------------
April 30, 2011 (8,907,285)
----------------------------------------------------------------------
Total $(25,752,876)
----------------------------------------------------------------------
*Includes amounts associated with the May 19, 2000 acquisition of MFS
Intermediate Income Fund. The total capital loss carryforward related to the
acquisition was $5,976,273.
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 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. Class B and Class 529B shares will convert to Class A and Class 529A
shares, respectively 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 an annual rate of 0.40% of
the fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee, which is shown as a reduction of total
expenses in the Statement of Operations. Management fees incurred for the year
ended April 30, 2003 were 0.35% of average daily net assets on an annualized
basis.
The fund pays compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and 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). On January
1, 2002, the Trustees terminated the Independent Trustee unfunded defined
benefit plan for active Trustees. Included in Trustees' compensation is a
pension expense of $2,217 for inactive trustees for the year ended April 30,
2003. Also included in Trustees' compensation is a one-time settlement expense
of $30,950.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS 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
$137,518 and $1,922 for the year ended April 30, 2003, as its portion of the
sales charge on sales of Class A and Class 529A shares of the fund,
respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R, Class 529A, Class 529B and Class 529C 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 an annual
percentage of its average daily net assets attributable to certain share classes
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 based
on the average daily net assets of accounts attributable to such dealers. These
fees are calculated based on each class' average daily net assets. The maximum
distribution and service fees for each class of shares are as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.50% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the year ended April 30, 2003 amounted to:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained
by MFD $15,768 $ 531 $ 767 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will be implemented on
such date as the Trustees of the fund may determine. A portion of the Class A
service fee is currently being paid by the fund. Payment of the remaining 0.10%
per annum Class A service fee will be implemented on such date as the Trustees
of the fund may determine.
A portion of the Class R distribution fee (0.10%) is currently being waived on a
voluntary basis.
A portion of the Class 529A distribution fee is being paid by the fund. Payment
of the remaining 0.15% per annum Class 529A distribution fee will be implemented
on such date as the Trustees of the fund may determine. A portion of the Class
529A service fee (0.10%) is currently being waived on a voluntary basis.
Except in the case of the 0.25% per annum Class B and 529B service fees paid
upon sale of the Class B and Class 529B shares in the first year, the Class B
and Class 529B service fee is 0.15% per annum and may be increased to 0.25% per
annum on such date as the Trustees of the fund may determine.
Fees incurred under the distribution plan during the year ended April 30, 2003
were as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Total Distribution Plan 0.15% 0.94% 1.00% 0.40% 0.25% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within, for class
A shares, 12 months following the purchase, and, for Classes C and 529C shares,
the first year from the end of the calendar month of purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class B and Class
529B shares in the event of a shareholder redemption within six years from the
end of the calendar month of purchase. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
April 30, 2003 were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred Sales
Charges Imposed $73,283 $624,232 $89,074 -- --
- -------------------------------------------------------------------------------------------------------------------
The fund has and may from time to time enter into contracts with program
managers and other parties which administer the tuition programs through which
an investment in the fund's 529 share classes is made. The fund has entered into
an agreement with MFD pursuant to which MFD receives an annual fee of up to
0.35% from the fund based solely upon the value of the fund's 529 share classes
attributable to tuition programs to which MFD or a third party which contracts
with MFD provides administrative services. The current fee has been established
at 0.25% annually of average net assets of the fund's 529 share classes
attributable to such programs. The fee may only be increased with the approval
of the board of trustees that oversees the fund. The services provided by MFD or
a third party with which MFD contracts include recordkeeping and tax reporting
and account services, as well as services designed to maintain the program's
compliance with the Code and other regulatory requirements.
SHAREHOLDER SERVICING AGENT - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. Effective April 1, 2003 the
fee is calculated as a percentage of the fund's average daily net assets at an
annual rate of 0.11%. Prior to April 1, 2003, the annual rate was 0.10% of the
fund's average daily net assets.
(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 $346,830,632 $161,495,766
- --------------------------------------------------------------------------------
Investments (non-U.S. government securities) $504,493,096 $218,482,280
- --------------------------------------------------------------------------------
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 $971,528,168
-----------------------------------------------------------------------
Gross unrealized appreciation $18,465,718
-----------------------------------------------------------------------
Gross unrealized depreciation (3,057,162
-----------------------------------------------------------------------
Net unrealized appreciation $15,408,556
-----------------------------------------------------------------------
(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:
Year ended 4/30/03 Year ended 4/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 50,528,040 $345,478,580 27,502,162 $189,860,525
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,945,280 13,307,478 1,421,864 9,826,145
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (23,998,763) (164,006,416) (16,599,074) (114,565,192)
- -------------------------------------------------------------------------------------------------------------
Net increase 28,474,557 $194,779,642 12,324,952 $85,121,478
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 26,906,225 $183,263,812 12,593,229 $86,746,812
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 834,359 5,685,818 472,179 3,251,324
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (9,644,667) (65,630,804) (6,644,490) (45,711,107)
- -------------------------------------------------------------------------------------------------------------
Net increase 18,095,917 $123,318,826 6,420,918 $44,287,029
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 25,915,682 $177,058,161 10,930,233 $75,441,901
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 387,484 2,648,594 159,372 1,100,803
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (7,294,777) (49,774,026) (4,250,869) (29,306,019)
- -------------------------------------------------------------------------------------------------------------
Net increase 19,008,389 $129,932,729 6,838,736 $47,236,685
- -------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 4,086,620 $27,842,713 174,956 $1,211,619
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 58,886 401,769 9,012 62,173
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (85,133) (579,262) (123,350) (858,567)
- -------------------------------------------------------------------------------------------------------------
Net increase 4,060,373 $27,665,220 60,618 $415,225
- -------------------------------------------------------------------------------------------------------------
Period ended 4/30/03*
SHARES AMOUNT
CLASS R SHARES
Shares sold 12,271 $84,049
- --------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 126 866
- --------------------------------------------------------------------------
Shares reacquired -- --
- --------------------------------------------------------------------------
Net increase 12,397 $84,915
- --------------------------------------------------------------------------
Period ended 4/30/03**
SHARES AMOUNT
CLASS 529A SHARES
Shares sold 146,500 $1,004,256
- --------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,356 9,301
- --------------------------------------------------------------------------
Shares reacquired (626) (4,289)
- --------------------------------------------------------------------------
Net increase 147,230 $1,009,268
- --------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 81,851 $557,176
- --------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 948 6,460
- --------------------------------------------------------------------------
Shares reacquired (6,026) (41,019)
- --------------------------------------------------------------------------
Net increase 76,773 $522,617
- --------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 106,109 $725,171
- --------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 885 6,054
- --------------------------------------------------------------------------
Shares reacquired (39) (264)
- --------------------------------------------------------------------------
Net increase 106,955 $730,961
- --------------------------------------------------------------------------
*For the period from the inception of Class R, December 31, 2002 through April
30, 2003.
**For the period from the inception of Classes 529A, 529B and 529C, July 31,
2002, through April 30, 2003.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million 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, 2003 was $6,535. 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 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.
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
- -----------------------------------------------------------------------------------------------------------
U.S. Treasury Notes 5-Year Futures June 2003 442 Short $(468,157)
- -----------------------------------------------------------------------------------------------------------
At April 30, 2003, the fund had sufficient cash and/or securities to cover any
margin requirements under these contracts.
(8) CHANGE IN ACCOUNTING PRINCIPLE
As required, effective May 1, 2001, the fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium
on debt securities. Prior to May 1, 2001, the fund did not amortize premium on
debt securities. The cumulative effect of this accounting change had no impact
on total net assets of the fund, but resulted in a $1,372,032 reduction in cost
of securities and a corresponding $1,372,032 increase in net unrealized
appreciation, based on securities held by the fund on May 1, 2001.
The effect of this change for the year ended April 30, 2002 was to decrease net
investment income by $2,220,843, increase net unrealized appreciation by
$2,083,408, and decrease net realized losses by $137,435. The Statement of
Changes in Net Assets and Financial Highlights for prior periods has not been
restated to reflect this change in presentation.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees of MFS Series Trust IX and Shareholders of MFS Limited Maturity
Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Limited Maturity Fund (a portfolio of MFS
Series Trust IX (the Trust)) as of April 30, 2003, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 2003 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Limited Maturity Fund as of April 30, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 11, 2003
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and
officers of MFS Series Trust IX, of which the fund is a series, including their
principal occupations, which, unless specific dates are shown, are of more than
five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other
directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Financial Services, Inc. (investment
Chairman advisers), Chairman and
Chief Executive Officer
JOHN W. BALLEN(2) (born 09/12/59)
Trustee and President LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Trustee
Company, Hemenway & Barnes (attorneys),
Chief Executive Officer and Director Partner
KEVIN R. PARKE(2) (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Private investor; Harvard University
Company, Graduate School of Business
President, Chief Investment Officer and Administration, Class of 1961
Director Adjunct Professor in
Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc.
(real estate investment trust),
LAWRENCE H. COHN, M.D. (born 03/11/37) Director
Trustee
Brigham and Women's Hospital, Chief of J. DALE SHERRATT (born 09/23/38)
Cardiac Surgery; Harvard Medical School, Trustee
Professor of Surgery Insight Resources, Inc. (acquisition
planning specialists), President;
WILLIAM R. GUTOW (born 09/27/41) Wellfleet Investments (investor in
Trustee health care companies), Managing
Private investor and real estate General Partner (since 1993);
consultant; Cambridge Nutraceuticals
Capitol Entertainment Management Company (professional nutritional products),
(video franchise), Vice Chairman Chief Executive Officer (until May
2001)
J. ATWOOD IVES (born 05/01/36)
Trustee ELAINE R. SMITH (born 04/25/46)
Private investor; KeySpan Corporation Trustee
(energy related services), Director; Independent health care industry
Eastern Enterprises (diversified consultant
services company), Chairman, Trustee and
Chief Executive Officer (until November WARD SMITH (born 09/13/30)
2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
Trustees and Officers - continued
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) ROBERT R. FLAHERTY (born 09/18/63)
Chairman Assistant Treasurer
Massachusetts Financial Services Massachusetts Financial Services
Company, Chairman Company, Vice President (since
August 2000); UAM Fund Services,
JOHN W. BALLEN (born 09/12/59) Senior Vice President (prior to
Trustee and President August 2000)
Massachusetts Financial Services
Company, Chief Executive Officer and RICHARD M. HISEY (born 08/29/58)
Director Treasurer
Massachusetts Financial Services
JAMES R. BORDEWICK, JR. (born 03/06/59) Company, Senior Vice President
Assistant Secretary and Assistant Clerk (since July 2002); The Bank of New
Massachusetts Financial Services York, Senior Vice President
Company, Senior Vice President and (September 2000 to July 2002);
Associate General Counsel Lexington Global Asset Managers,
Inc., Executive Vice President and
STEPHEN E. CAVAN (born 11/06/53) Chief Financial Officer, General
Secretary and Clerk Manager, Mutual Funds (prior to
Massachusetts Financial Services September 2000)
Company, Senior Vice President, General
Counsel and Secretary ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer
STEPHANIE A. DESISTO (born 10/01/53) Massachusetts Financial Services
Assistant Treasurer Company,
Massachusetts Financial Services Vice President
Company, Vice President (since April
2003); Brown Brothers Harriman & Co., JAMES O. YOST (born 06/12/60)
Senior Vice President (November 2002 to Assistant Treasurer
April 2003); ING Groep N.V./Aeltus Massachusetts Financial Services
Investment Management, Senior Vice Company, Senior Vice President
President (prior to November 2002)
The Trust does not hold annual shareholder meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. This means that each
Trustee will be elected to hold office until his or her successor is chosen and
qualified or until his or her earlier death, resignation, retirement or removal.
Each officer will hold office until his or her successor is chosen and
qualified, or until he or she retires, resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their
capacity as Trustee of the Trust continuously since originally elected or
appointed. Messrs. Ballen and Gutow have each served as a Trustee of the Trust
since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were
elected by shareholders and have served as Trustees of the Trust since January
1, 2002. Mr. Parke has served as Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
AUDITORS
DISTRIBUTOR Deloitte & Touche LLP
MFS Fund Distributors, Inc. 200 Berkeley St.
500 Boylston Street, Boston, MA Boston, MA 02116
02116-3741
PORTFOLIO MANAGER
James J. Calmas(1)
(1)MFS Investment Management
- --------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- --------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international equity and
fixed-income investment across the full risk spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for building and
preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products for
high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and risks
associated with investing. Read the prospectus carefully before investing or
sending money.
- --------------------------------------------------------------------------------
MFS (R) PRIVACY POLICY: A COMMITMENT TO YOU
- --------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTACT INFORMATION
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from 8 a.m.
to 8 p.m. Eastern time.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances (1-800-637-8255)
exchanges or stock and touch-tone required 24 hours a day, 365 days a
bond outlooks year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send you
prospectuses, reports, and proxies electronically. You get timely information
without mailbox clutter (and help your fund save printing and postage costs).
SIGN-UP instructions: If your account is registered with us, go to www.mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available to
you.
[Logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
MQL-ANN-6/03 52M
MFS(R) Mutual Funds
ANNUAL REPORT 4/30/03
MFS(R) MUNICIPAL
LIMITED MATURITY FUND
A path for pursuing opportunity
[MFS LOGO]
INVESTMENT MANAGEMENT
MFS(R) MUNICIPAL LIMITED MATURITY FUND
The fund seeks as high a level of current income exempt from federal income
taxes as is consistent with prudent investing, while seeking protection of
shareholders' capital.
TABLE OF CONTENTS
- ------------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ------------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- ------------------------------------------------------
MANAGEMENT REVIEW 5
- ------------------------------------------------------
PERFORMANCE SUMMARY 8
- ------------------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ------------------------------------------------------
FINANCIAL STATEMENTS 29
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 36
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 43
- ------------------------------------------------------
TRUSTEES AND OFFICERS 44
- ------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES
OF INVESTORS 46
- ------------------------------------------------------
MFS PRIVACY POLICY 47
- ------------------------------------------------------
FEDERAL TAX INFORMATION 47
- ------------------------------------------------------
CONTACT INFORMATION 48
- ------------------------------------------------------
ASSET ALLOCATION 49
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers - no matter how
talented they may be - can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS' culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo, and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
- --------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- --------------------------------------------------------------------------------
MFS Original Research
THE HUMAN SIDE OF MONEY MANAGEMENT
For more than 75 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands
of institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain
first-hand knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- --------------------------------------------------------------------------------
MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
HIGHER-RATED BONDS BENEFITED AS STOCKS RETREATED
The municipal bond market overall posted solid gains during the 12 months ended
April 30, 2003, as economic growth was moderate and uncertainty about the
economy pushed interest rates down. While consumer spending supported a slight
recovery, corporate spending remained in the doldrums and layoffs continued.
Additional pressures on financial markets included a rash of corporate scandals
in 2002 and the expectation of war with Iraq - a pressure that was relieved at
the end of the period by a relatively short and militarily successful conflict.
While these factors were negative for the stock market until late in the period,
they were positive for the prices of bonds overall, and particularly for
higher-rated bonds. Inflation remained in check, interest rates came down, and
we saw a "flight to quality" as investors flocked to high-quality assets such as
Treasuries and municipal bonds, which typically have been less volatile than
corporate issues in times of crisis. (Principal and interest of U.S. Treasury
securities are guaranteed by the U.S. government if held to maturity.)
PERFORMANCE RELATIVE TO LIPPER PEERS
Over the period, the fund's performance relative to its peers, as measured by
the average short-intermediate term municipal debt fund tracked by Lipper Inc.,
was helped by four main factors: longer duration, beneficial positioning on the
yield curve, higher average credit quality, and a higher weighting in insured
bonds.
The fund's modestly longer duration, relative to its peers, enabled the fund to
benefit more than its average peers when interest rates declined - and bond
prices rose - over the period. (Duration is a measure of sensitivity to interest
rate changes; the longer a bond's or a fund's duration, the more it will be
affected by interest rate fluctuations.)
Similarly, the fund was overweighted in the longer part of the yield curve,
relative to its peers, and the longer part of the curve benefited more when
rates fell over the period. (A yield curve for bonds is a graph showing yield
against time remaining to maturity. In most cases, yield increases with
maturity, and longer-term bonds are more sensitive to interest rate changes.)
As mentioned earlier, economic and geopolitical uncertainty led investors to be
risk-averse for much of the period. In the municipal area, we witnessed an
increase in budget shortfalls at the state and local levels, as the slowing
economy hurt tax receipts and threatened the credit quality of municipal issues
in general. These factors led investors to prefer less risky, higher- quality
bonds. The fund benefited from this trend by being relatively overweighted in
"AAA"-rated bonds and underweighted in lower-quality "BBB" issues.
PORTFOLIO CONCENTRATION 4/30/03
QUALITY RATINGS
"AAA" 71.8%
"AA" 10.3%
"A" 7.8%
"BBB" 5.7%
Cash, Short-Term Investments,
Not Rated and Other 4.4%
The portfolio is actively managed, and current holdings may be different.
For the same reason, the fund was overweighted in insured bonds, and that also
helped performance. At a slight sacrifice in yield, an insured bond offers
protection if the original issuer defaults or is downgraded. For example, if a
"AAA"-rated state bond is insured by a "AAA"-rated insurer, the bond retains its
"AAA" credit rating even if the state's debt is downgraded to a lower rating due
to fiscal problems.
PERFORMANCE RELATIVE TO BENCHMARKS
The fund has two benchmarks, the Lehman Brothers 3-year Municipal Bond Index and
the Lehman Brothers 5-year Municipal Bond Index. The fund is limited by
prospectus to an average maturity of no more than 5 years, and the portfolio's
average maturity over the period was about 4.5 years.
As mentioned above, bonds in the longer area of the yield curve outperformed
shorter-maturity bonds over the period. This environment helped the fund's
performance relative to the Lehman 3-year benchmark, which had a shorter
average maturity than the portfolio. Similarly, the portfolio underperformed the
Lehman 5-year benchmark, as that index had a longer average maturity than the
fund.
/s/ Michael L. Dawson /s/ Geoffrey L Schechter
Michael L. Dawson Geoffrey L. Schechter
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 4/30/03
- --------------------------------------------------------------------------------
The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmarks. Performance results
include the deduction of the maximum applicable sales charge and reflect the
percentage change in net asset value, including reinvestment of dividends and
capital gains distributions. 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. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. (See Notes to Performance Summary.)
Growth of a hypothetical $10,000 investment
Lehman Brothers Five-Year Municipal Bond Index
4/93 $10,000
4/95 10,862
4/97 12,147
4/99 13,804
4/01 15,114
4/03 17,427
Lehman Brothers Three-Year Municipal Bond Index
4/93 $10,000
4/95 10,750
4/97 11,948
4/99 13,336
4/01 14,596
4/03 16,384
MFS Municipal Limited Maturity Fund -- Class A
4/93 $ 9,750
4/95 10,322
4/97 11,230
4/99 12,343
4/01 13,305
4/03 14,927
TOTAL RETURNS
Cumulative
without sales charge
Class
Share class inception date 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 3/17/1992 6.43% 20.48% 26.57% 53.10%
- ------------------------------------------------------------------------------
B 9/7/1993 5.61% 17.76% 21.77% 41.77%
- ------------------------------------------------------------------------------
C 7/1/1994 5.52% 17.44% 21.29% 42.12%
- ------------------------------------------------------------------------------
Average annual
without sales charge
- ------------------------------------------------------------------------------
A 6.43% 6.41% 4.82% 4.35%
- ------------------------------------------------------------------------------
B 5.61% 5.60% 4.02% 3.55%
- ------------------------------------------------------------------------------
C 5.52% 5.50% 3.94% 3.58%
- ------------------------------------------------------------------------------
Average annual
with sales charge
Share class 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 3.77% 5.51% 4.30% 4.09%
- ------------------------------------------------------------------------------
B 1.61% 4.70% 3.67% 3.55%
- ------------------------------------------------------------------------------
C 4.52% 5.50% 3.94% 3.58%
- ------------------------------------------------------------------------------
Average
annual
Comparative benchmarks
Average short/intermediate-term
municipal debt fund+ 5.59% 6.01% 4.57% 4.65%
- ------------------------------------------------------------------------------
Lehman Brothers Three-Year
Municipal Bond Index# 5.82% 6.55% 5.37% 5.06%
- ------------------------------------------------------------------------------
Lehman Brothers Five-Year
Municipal Bond Index# 7.88% 7.95% 6.09% 5.71%
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
LEHMAN BROTHERS THREE-YEAR MUNICIPAL BOND INDEX - Measures the performance of
the medium-term (2 to 4 years) municipal bond market.
LEHMAN BROTHERS FIVE-YEAR MUNICIPAL BOND INDEX - Measures the performance of
the medium-term (4 to 6 years) municipal bond market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results, including sales charge, reflects the deduction of the maximum
2.50% sales charge. Class B results, including sales charge, reflects the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%. Class C results, including sales charge,
redeemed within one year from the end of the calendar month of purchase reflects
the deduction of the 1% CDSC.
Performance for share classes offered after class A shares includes the
performance of the fund's class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences in
sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of blended
performance generally results in higher performance for share classes with
higher operating expenses than the initial share class, and lower performance
for share classes with lower operating expenses than the initial share class.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. All results
are historical and assume the reinvestment of dividends and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT THE
DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS
OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
The portfolio may invest in derivative securities which may include futures and
options. These types of instruments can increase price fluctuation.
Government guarantees apply to the underlying securities only and not to the
prices and yields of the portfolio.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
These risks may increase share price volatility. Please see the prospectus for
further information on these and other risk considerations.
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.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS 4/30/03
- --------------------------------------------------------------------------------
The Portfolio of Investments is a list of all securities owned by your fund. It is categorized by
broad-based asset classes.
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- ----------------------------------------------------------------------------------------------------
Municipal Bonds - 94.7%
- ----------------------------------------------------------------------------------------------------
Airport and Port Revenue - 3.5%
- ----------------------------------------------------------------------------------------------------
Chicago, IL (O'Hare International Airport), MBIA, 5.7s, 2008 $450 $460,467
- ----------------------------------------------------------------------------------------------------
Chicago, IL (O'Hare International Airport), "A", AMBAC, 6s, 2005 1,900 2,032,772
- ----------------------------------------------------------------------------------------------------
Cleveland, OH, Airport Systems Rev., FSA, 5.5s, 2008 250 277,105
- ----------------------------------------------------------------------------------------------------
Dallas Fort Worth International Airport, Refunding &
Improvement, "A", FGIC, 5.5s, 2003 400 407,920
- ----------------------------------------------------------------------------------------------------
Delaware River Port Authority Pennsylvania & New Jersey,
Refunding Port District Project, "A", FSA, 5.25s, 2009 550 619,014
- ----------------------------------------------------------------------------------------------------
Denver, CO, City & County Airport Rev., MBIA, 6s, 2006 1,000 1,122,870
- ----------------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., 5.25s, 2007 375 413,576
- ----------------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., 5.75s, 2010 175 198,084
- ----------------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., "B", FSA, 4.35s, 2004 500 515,205
- ----------------------------------------------------------------------------------------------------
Minneapolis & St. Paul, MN, Metropolitan Airport, FGIC, 5.25s, 2009 500 546,040
- ----------------------------------------------------------------------------------------------------
Omaha, NE, Airport Authority Rev., FSA, 4s, 2006 500 525,595
- ----------------------------------------------------------------------------------------------------
Port Seattle, WA, FGIC, 5.5s, 2007 500 558,040
- ----------------------------------------------------------------------------------------------------
Richland Lexington, SC, Columbia Metropolitan Airport
Rev., FSA, 5s, 2009 200 220,516
- ----------------------------------------------------------------------------------------------------
Wayne Charter County, MI, Airport Rev., Refunding Detroit
Metropolitan, "D", FGIC, 5.25s, 2006 1,000 1,099,510
- ----------------------------------------------------------------------------------------------------
$8,996,714
- ----------------------------------------------------------------------------------------------------
Chemicals - 0.3%
- ----------------------------------------------------------------------------------------------------
Brazos River, TX, Harbor Navigation District (Dow
Chemical), "B", 4.75s, 2033 $330 $337,306
- ----------------------------------------------------------------------------------------------------
Michigan Strategic Fund (Dow Chemical), 4.6s, 2014 350 356,251
- ----------------------------------------------------------------------------------------------------
$693,557
- ----------------------------------------------------------------------------------------------------
General Obligation - General Purpose - 15.1%
- ----------------------------------------------------------------------------------------------------
Allen County, IN (Jail Building Corp.), 5.75s, 2009 $235 $272,403
- ----------------------------------------------------------------------------------------------------
Broward County, FL, 5s, 2008 500 554,205
- ----------------------------------------------------------------------------------------------------
Central Falls, RI, Radian, 5.5s, 2005 440 472,820
- ----------------------------------------------------------------------------------------------------
Chicago, IL, AMBAC, 0s, 2006 1,000 923,510
- ----------------------------------------------------------------------------------------------------
Columbus, OH, 5.25s, 2011 705 791,348
- ----------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, 5.75s, 2005 500 537,225
- ----------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, 6s, 2011 310 368,674
- ----------------------------------------------------------------------------------------------------
Dickson County, TN, FGIC, 4s, 2007 $820 $879,466
- ----------------------------------------------------------------------------------------------------
Du Page County, IL (Ars Jail), 5s, 2009 870 965,944
- ----------------------------------------------------------------------------------------------------
Hawkins County, TN, AMBAC, 4.5s, 2008 425 462,855
- ----------------------------------------------------------------------------------------------------
Henderson, NV, Parks and Recreation, FGIC, 6s, 2006 340 383,578
- ----------------------------------------------------------------------------------------------------
Huntsville, AL, "A", 4s, 2003 500 500,000
- ----------------------------------------------------------------------------------------------------
Huntsville, AL, "D", 5s, 2008 350 393,032
- ----------------------------------------------------------------------------------------------------
Indianapolis, IN (Public Improvement Bond Bank) "A", 5.25s, 2006 275 300,545
- ----------------------------------------------------------------------------------------------------
King County, WA, "B", 4.75s, 2009 1,500 1,629,180
- ----------------------------------------------------------------------------------------------------
Kingsport, TN, FGIC, "A", 4s, 2008 1,000 1,061,540
- ----------------------------------------------------------------------------------------------------
Lansing, IL, FSA, "A", 4.25s, 2007 530 571,213
- ----------------------------------------------------------------------------------------------------
Milwaukee County, WI, "A", 4.75s, 2007 1,000 1,100,710
- ----------------------------------------------------------------------------------------------------
Mobile County, AL, MBIA, 5s, 2007 500 550,160
- ----------------------------------------------------------------------------------------------------
Montgomery County, MD, 5.375s, 2005 500 533,255
- ----------------------------------------------------------------------------------------------------
Nassau County, NY, "G", MBIA, 5.35s, 2009 1,000 1,123,660
- ----------------------------------------------------------------------------------------------------
New York, NY, 5.3s, 2003 500 504,790
- ----------------------------------------------------------------------------------------------------
New York, NY, 5s, 2010 370 394,983
- ----------------------------------------------------------------------------------------------------
New York, NY, 5.25s, 2012 265 284,970
- ----------------------------------------------------------------------------------------------------
New York, NY, "B", 5.75s, 2011 375 415,965
- ----------------------------------------------------------------------------------------------------
New York, NY, "C", 5.25s, 2009 250 272,685
- ----------------------------------------------------------------------------------------------------
New York, NY, "G", 5.5s, 2009 780 861,588
- ----------------------------------------------------------------------------------------------------
Oakland, CA, "A", FGIC, 5s, 2010 820 912,471
- ----------------------------------------------------------------------------------------------------
Pawtucket, RI, "A", AMBAC, 5s, 2009 1,000 1,113,800
- ----------------------------------------------------------------------------------------------------
Philadelphia, PA, FGIC, 5.25s, 2008 2,000 2,248,780
- ----------------------------------------------------------------------------------------------------
Phoenix, AZ, (Civic Improvement) AMBAC, 5.5s, 2007 250 281,318
- ----------------------------------------------------------------------------------------------------
Pittsburgh, PA, "A", AMBAC, 5s, 2009 1,000 1,119,830
- ----------------------------------------------------------------------------------------------------
Prescott Valley, AZ, Municipal Property Corp., FGIC, 3.25s, 2007 500 519,225
- ----------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth, "C", 6s, 2013 800 905,048
- ----------------------------------------------------------------------------------------------------
Saraland, AL, MBIA, 4.5s, 2009 865 938,421
- ----------------------------------------------------------------------------------------------------
Springfield, MA, MBIA, 5s, 2011 1,000 1,105,510
- ----------------------------------------------------------------------------------------------------
St. Clair County, IL, FGIC, 5.625s, 2012 500 568,170
- ----------------------------------------------------------------------------------------------------
State of California, 5s, 2011 1,000 1,078,500
- ----------------------------------------------------------------------------------------------------
State of California, FSA, 5.25s, 2010 2,000 2,250,620
- ----------------------------------------------------------------------------------------------------
State of Georgia, "E", 5.5s, 2003 500 503,400
- ----------------------------------------------------------------------------------------------------
State of Hawaii, "C", FSA, 5.25s, 2008 500 560,680
- ----------------------------------------------------------------------------------------------------
State of Illinois, FGIC, 5s, 2005 500 530,180
- ----------------------------------------------------------------------------------------------------
State of Mississippi, 5.5s, 2006 250 282,682
- ----------------------------------------------------------------------------------------------------
State of Mississippi, 6.2s, 2008 450 522,414
- ----------------------------------------------------------------------------------------------------
State of South Carolina, Capital Improvement, "B", 5.75s, 2003 350 353,906
- ----------------------------------------------------------------------------------------------------
State of Washington, "B", FSA, 5s, 2008 500 555,135
- ----------------------------------------------------------------------------------------------------
State of Washington, "A", MBIA, 4s, 2008 1,000 1,066,530
- ----------------------------------------------------------------------------------------------------
State of Washington, "R", 5.375s, 2007 750 848,512
- ----------------------------------------------------------------------------------------------------
State of Wisconsin, 5.125s, 2011 400 447,504
- ----------------------------------------------------------------------------------------------------
State of Wisconsin, "C", FSA, 5s, 2010 1,000 1,110,010
- ----------------------------------------------------------------------------------------------------
Taylor, MI, Building Authority, AMBAC, 5.5s, 2010 500 570,320
- ----------------------------------------------------------------------------------------------------
Weslaco, TX, MBIA, 3.25s, 2007 795 823,620
- ----------------------------------------------------------------------------------------------------
Wisconsin Housing & Economic Development, AMBAC, 4.9s, 2005 160 168,496
- ----------------------------------------------------------------------------------------------------
$38,495,386
- ----------------------------------------------------------------------------------------------------
General Obligations - Improvement - 3.6%
- ----------------------------------------------------------------------------------------------------
Chicago, IL, MBIA, 5s, 2008 $1,250 $1,384,938
- ----------------------------------------------------------------------------------------------------
Jefferson County, KY, FSA, 0s, 2004 1,000 984,200
- ----------------------------------------------------------------------------------------------------
Jersey City, NJ, Refunding & General Improvement, "A", AMBAC, 4s, 2007 500 534,135
- ----------------------------------------------------------------------------------------------------
Kauai County, HI, FGIC, 6.25s, 2019(+++) 375 452,126
- ----------------------------------------------------------------------------------------------------
Madison & St. Clair Counties, IL (School Building), FGIC, 4.25s, 2005 500 523,770
- ----------------------------------------------------------------------------------------------------
Madison, WI, Industrial Development Rev. (Refunding Gas &
Electric Co.), "B", FGIC, 4.875s, 2027 420 448,715
- ----------------------------------------------------------------------------------------------------
New Orleans, LA, Certificates Indebtedness, FSA, 5.5s, 2010 500 578,340
- ----------------------------------------------------------------------------------------------------
North Slope Borough, AK, "A", MBIA, 0s, 2005 500 479,030
- ----------------------------------------------------------------------------------------------------
Oak Ridge, TN, AMBAC, 5s, 2012 300 328,290
- ----------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth, Refunding Public Improvement,
"A" MBIA, 5.5s, 2015 1,000 1,166,150
- ----------------------------------------------------------------------------------------------------
State of Ohio, "E", 5.5s, 2008 1,450 1,653,218
- ----------------------------------------------------------------------------------------------------
State of Tennessee, "A", FGIC, 5.25s, 2008 500 560,445
- ----------------------------------------------------------------------------------------------------
$9,093,357
- ----------------------------------------------------------------------------------------------------
General Obligations - Schools - 10.5%
- ----------------------------------------------------------------------------------------------------
Birdville, TX, Independent School District, "A", PSF, 4.25s, 2008 $500 $536,435
- ----------------------------------------------------------------------------------------------------
Bloomington, MN, Independent School District, 5.25s, 2011 500 554,960
- ----------------------------------------------------------------------------------------------------
Byron Center, MI, Public Schools, 5s, 2011 600 665,340
- ----------------------------------------------------------------------------------------------------
Cincinnati, OH, City School District, FSA, 4.5s, 2006 500 542,200
- ----------------------------------------------------------------------------------------------------
Clackamas County, OR, School District, 6s, 2011 315 368,547
- ----------------------------------------------------------------------------------------------------
Cook County, IL, Community Consolidated School, FSA, 0s, 2008 500 421,075
- ----------------------------------------------------------------------------------------------------
Cook County, IL, High School District Number 205, "D", FSA, 0s, 2004 500 493,155
- ----------------------------------------------------------------------------------------------------
Cook County, IL, School District Number 135, "A", MBIA, 3.25s, 2006 500 521,155
- ----------------------------------------------------------------------------------------------------
Cypress Fair, TX, Independent School District, PSF, 5s, 2008 500 553,180
- ----------------------------------------------------------------------------------------------------
Deer Park, TX, Independent School District, PSF, 0s, 2009 1,000 819,890
- ----------------------------------------------------------------------------------------------------
Detroit, MI, City School District (School Building & Site
Improvement) "B", FGIC, 5s, 2010 2,000 2,224,000
- ----------------------------------------------------------------------------------------------------
Dodge, KS, Unified School District, FGIC, 4s, 2006 500 531,120
- ----------------------------------------------------------------------------------------------------
Ferndale, MI, School District, 5.5s, 2013 1,115 1,259,537
- ----------------------------------------------------------------------------------------------------
Hall County, GA, School District, 4.5s, 2007 1,540 1,683,959
- ----------------------------------------------------------------------------------------------------
Kane McHenry Cook & De Kalb, Capital Appreciation, AMBAC, 0s, 2003 750 744,330
- ----------------------------------------------------------------------------------------------------
Kaufman, TX, Independent School District, PSF, 0s, 2005 500 482,705
- ----------------------------------------------------------------------------------------------------
Lake County, IL, FGIC, 4.8s, 2004 400 409,716
- ----------------------------------------------------------------------------------------------------
Lake County, IL, Community School District, "B", FGIC, 0s, 2005 500 474,685
- ----------------------------------------------------------------------------------------------------
Lancaster County, NE, School District, (Lincoln Public
School) 4s, 2008 500 532,160
- ----------------------------------------------------------------------------------------------------
Manistee, MI, Public Schools, FGIC, 5.15s, 2010(+++) 100 113,110
- ----------------------------------------------------------------------------------------------------
Mauston, WI, Joint School District, FGIC, 5.55s, 2005 500 537,895
- ----------------------------------------------------------------------------------------------------
McHenry & Kane Counties, IL, FGIC, 0s, 2004 350 347,084
- ----------------------------------------------------------------------------------------------------
Mesquite, TX, Independent School District, PSF, 0s, 2004 685 672,554
- ----------------------------------------------------------------------------------------------------
Michigan City, IN, School Building, FSA, 5s, 2006 250 270,938
- ----------------------------------------------------------------------------------------------------
Midlothian, TX, Independent School District, "A", PSF, 4.4s, 2007 700 754,194
- ----------------------------------------------------------------------------------------------------
Mishawaka, IN (School Building Corp.), AMBAC, 4.5s, 2007 320 345,850
- ----------------------------------------------------------------------------------------------------
New Albany, Floyd County School Building, (First
Mortgage) FGIC, 5.5s, 2007 250 279,018
- ----------------------------------------------------------------------------------------------------
North Lawrence, IN, FSA, 5s, 2008 500 554,330
- ----------------------------------------------------------------------------------------------------
Norwin, PA, School District, FGIC, 6s, 2020(+++) 250 295,433
- ----------------------------------------------------------------------------------------------------
Oconto Falls, WI, Public School District, FSA, 5.25s,
2007 500 556,180
- ----------------------------------------------------------------------------------------------------
Oklahoma County, OK, Independent School District, FGIC, 5s, 2009 2,000 2,231,440
- ----------------------------------------------------------------------------------------------------
Plymouth Canton, MI, Community School, 5s, 2011 500 554,560
- ----------------------------------------------------------------------------------------------------
Portage, IN, High School, First Mortgage, 2.15s, 2005 255 257,017
- ----------------------------------------------------------------------------------------------------
Round Rock, TX, Independent School District, PSF, 6.5s, 2011 500 601,265
- ----------------------------------------------------------------------------------------------------
Round Rock, TX, Independent School District, PSF, 5.375s, 2012 570 648,654
- ----------------------------------------------------------------------------------------------------
State of Ohio, "A", 5.25s, 2004 450 470,358
- ----------------------------------------------------------------------------------------------------
State of South Carolina, 5.75s, 2007 500 563,880
- ----------------------------------------------------------------------------------------------------
Tuscaloosa , AL, 5s, 2007 465 512,114
- ----------------------------------------------------------------------------------------------------
Unionville Chadds Ford, PA School, MBIA, 4s, 2004 490 504,891
- ----------------------------------------------------------------------------------------------------
Vidor, TX, Independent School District, PSF, 5.875s, 2007 410 463,521
- ----------------------------------------------------------------------------------------------------
Warren Township, IN, (First Mortgage) FGIC, 4.5s, 2005 500 525,250
- ----------------------------------------------------------------------------------------------------
Wasterville, OH, City School District, MBIA, 5.5s, 2012 300 341,268
- ----------------------------------------------------------------------------------------------------
Will County, IL, School District, FSA, 0s, 2003 525 521,608
- ----------------------------------------------------------------------------------------------------
$26,740,561
- ----------------------------------------------------------------------------------------------------
Health Care Revenue - Hospitals - 10.5%
- ----------------------------------------------------------------------------------------------------
Baxter County, AR, Hospital Rev., 4.7s, 2005 $320 $333,347
- ----------------------------------------------------------------------------------------------------
Blair County, PA, Hospital Authority Rev. (Altoona
Hospital), "A", AMBAC, 5.375s, 2006 460 509,321
- ----------------------------------------------------------------------------------------------------
California Statewide Community, (Kaiser Permanente) "D",
4.35s, 2036 600 624,834
- ----------------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Catholic
Health Initiatives), "A", 5s, 2008 500 536,795
- ----------------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Rocky Mountain
Adventist) 6.625s, 2013 300 307,947
- ----------------------------------------------------------------------------------------------------
Comal County, TX, Health Facilities Development,
Healthcare Systems (McKenna Memorial), "A",
3.625s, 2005 195 196,844
- ----------------------------------------------------------------------------------------------------
Comal County, TX, Health Facilities Development,
Healthcare Systems (McKenna Memorial), "A", 4s, 2006 170 172,416
- ----------------------------------------------------------------------------------------------------
DCH Health Care Authority, AL, Facilities Rev., 4s, 2008 500 516,145
- ----------------------------------------------------------------------------------------------------
Delaware County, PA, Hospital Rev. (Crozer-Chester
Medical Center), 4.75s, 2005 500 523,645
- ----------------------------------------------------------------------------------------------------
Denver, CO, Health & Hospital Rev., 5.125s, 2006 200 216,052
- ----------------------------------------------------------------------------------------------------
Erie County, OH, Hospital Facilities Rev. (Firelands
Regional Medical Center), "A", 4s, 2004 420 430,752
- ----------------------------------------------------------------------------------------------------
Gainsville & Hall County, GA, Hospital, 3.5s, 2005 500 510,820
- ----------------------------------------------------------------------------------------------------
Greenville Hospital Systems Facilities, "A", 5s, 2008 500 555,180
- ----------------------------------------------------------------------------------------------------
Highlands County, FL, Health Facilities (Adventist
Health), 3.35s, 2032 500 513,050
- ----------------------------------------------------------------------------------------------------
Huntsville, AL, Health Care Authority, "A", 4s, 2003 300 300,447
- ----------------------------------------------------------------------------------------------------
Huntsville, AL, Health Care Authority, "A", 5.25s, 2005 300 316,491
- ----------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Children's
Memorial Hospital), AMBAC, 5.75s, 2011 250 282,235
- ----------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Condell
Medical Center), 4s, 2004 825 844,330
- ----------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Decatur
Memorial Hospital), 4s, 2004 415 428,081
- ----------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Sherman Health
Systems), 5.5s, 2007 440 495,801
- ----------------------------------------------------------------------------------------------------
Indiana Health Facility Financing Authority Rev. (Holy
Cross Health Systems Corp.), 5.375s, 2008 1,000 1,139,090
- ----------------------------------------------------------------------------------------------------
Indiana Health Facility Financing Authority Rev. (Sherman
Health Systems), 5.5s, 2008 500 558,470
- ----------------------------------------------------------------------------------------------------
Iowa Finance Authority Health Care Facilites (Genesis
Medical Center), 6s, 2010 210 237,890
- ----------------------------------------------------------------------------------------------------
Iowa Finance Authority Health Care Facilities (Great
River Medical Center) 4s, 2003 500 500,400
- ----------------------------------------------------------------------------------------------------
Kent Hospital Finance Authority, MI (Spectrum Health),
"A" 5.25s, 2009 750 817,747
- ----------------------------------------------------------------------------------------------------
Kentucky Ecomomic Development Finance Authority (Norton
Healthcare, Inc.), 6.125s, 2010 150 162,465
- ----------------------------------------------------------------------------------------------------
Marion County, FL, Hospital District Rev. (Monroe
Regional) 4.75s, 2005 500 530,795
- ----------------------------------------------------------------------------------------------------
Marshall County, AL, Health Care, "A", 4.5s, 2005 225 233,624
- ----------------------------------------------------------------------------------------------------
Marshall County, AL, Health Care, "A", 4.5s, 2006 240 251,935
- ----------------------------------------------------------------------------------------------------
Martin County, FL, Health Facilities (Martin Memorial
Medical Center), "A", 5.25s, 2008 800 849,184
- ----------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (MA Biomedical
Research Corp.) 5.75s, 2006 260 286,549
- ----------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Baystate Medical Center), "F", 5s, 2009 235 252,421
- ----------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Berkshire Health) "E", 4.5s, 2005 385 399,842
- ----------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Caritas Christi), "B", 4s, 2003 200 200,612
- ----------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Healthcare Systems
(Covenant Health), 5s, 2007 260 274,505
- ----------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Jordan Hospital) 4.8s, 2006 600 631,716
- ----------------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev., "A" (Crittenton
Hospital) 5.5s, 2013 310 336,024
- ----------------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev. (Genesys Health
System), 5.5s, 2007 750 857,430
- ----------------------------------------------------------------------------------------------------
Mississippi Hospital Equipment & Facilities (SW
Mississippi Medical), 5s, 2014 500 497,065
- ----------------------------------------------------------------------------------------------------
Montgomery, AL (Baptist) 5s, 2011 1,000 1,109,120
- ----------------------------------------------------------------------------------------------------
Montgomery, AL, Special Care Facilities (Baptist Medical
Center), "C" FSA, 5.15s, 2005 250 269,850
- ----------------------------------------------------------------------------------------------------
New Hampshire Health & Education Facilities (Catholic
Medical Center), 3.6s, 2006 250 253,573
- ----------------------------------------------------------------------------------------------------
New Hampshire Health & Education Facilities (Catholic
Medical Center), "A", 3.25s, 2005 265 267,748
- ----------------------------------------------------------------------------------------------------
New Hampshire Health & Education Facilities (Exeter
Hospital), 4.6s, 2007 395 416,057
- ----------------------------------------------------------------------------------------------------
Oklahoma State Development Finance Authority (Oklahoma
Hospital Assn.), AMBAC, 5.25s, 2004 250 260,698
- ----------------------------------------------------------------------------------------------------
Philadelphia, PA, Hospital & High Education (Children's
Hospital), "E", 5s, 2032 750 828,540
- ----------------------------------------------------------------------------------------------------
Rhode Island Health & Education Building, Hospital
Financing (Lifespan Obligation Group) 5.75s, 2010 250 267,445
- ----------------------------------------------------------------------------------------------------
Richland County, OH, Hospital Facilities (Medcentral
Health) 5.4s, 2003 200 203,380
- ----------------------------------------------------------------------------------------------------
Scranton-Lackawanna, PA, Health & Welfare (Community
Medical Center), 5.25s, 2006 935 1,033,194
- ----------------------------------------------------------------------------------------------------
South Dakota Health & Educational (Prairie Lakes Health
Care Systems) 3.1s, 2005 215 217,262
- ----------------------------------------------------------------------------------------------------
Spartanburg County, SC, Health Service, FSA, 3.5s, 2004 660 674,652
- ----------------------------------------------------------------------------------------------------
Spartanburg County, SC, Health Service, FSA, 6s, 2007 675 771,390
- ----------------------------------------------------------------------------------------------------
St. Cloud, MN (St. Cloud Hospital), FSA, 5.5s, 2006 260 287,550
- ----------------------------------------------------------------------------------------------------
State of Wisconsin Health & Educational Facilities
(Wheaton Franciscan Services), 5s, 2007 260 280,069
- ----------------------------------------------------------------------------------------------------
Steubenville, OH (Trinity Hospital) 5.7s, 2010 220 243,060
- ----------------------------------------------------------------------------------------------------
Tyler, TX, Health Facilities Development Corp. (Mother
Frances Hospital), 4.5s, 2006 500 523,635
- ----------------------------------------------------------------------------------------------------
Tyler, TX, Health Facilities Development Corp. (Mother
Frances Hospital), 5s, 2007 500 531,085
- ----------------------------------------------------------------------------------------------------
Waco, TX, Health Facilities Development Corp. (Ascension
Health), 5.5s, 2009 250 280,342
- ----------------------------------------------------------------------------------------------------
West Virginia Hospital Finance Authority (Charleston
Medical Center), 6.5s, 2005 20 21,836
- ----------------------------------------------------------------------------------------------------
West Virginia Hospital Finance Authority (Charleston
Medical Center), 6.5s, 2005 80 89,288
- ----------------------------------------------------------------------------------------------------
Wichita, KS, Hospital Rev. (Via Christi) 3.75s, 2003 410 414,547
- ----------------------------------------------------------------------------------------------------
Wisconsin Health & Higher Educational Facilities
(Agnesian Healthcare, Inc.), 5s, 2006 65 69,797
- ----------------------------------------------------------------------------------------------------
$26,946,415
- ----------------------------------------------------------------------------------------------------
Industrial Revenue - Airlines - 0.0%
- ----------------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev. (US Airways), MBIA,
5s, 2006 $50+ $53,943
- ----------------------------------------------------------------------------------------------------
Industrial Revenue - Environmental Services - 0.3%
- ----------------------------------------------------------------------------------------------------
California Statewide Community Development Authority
(Republic Services,. Inc.) "A", 4.95s, 2012 $250 $250,313
- ----------------------------------------------------------------------------------------------------
Michigan Strategic Fund (Waste Management) 4.2s, 2027 400 406,180
- ----------------------------------------------------------------------------------------------------
$656,493
- ----------------------------------------------------------------------------------------------------
Industrial Revenue - Other - 1.1%
- ----------------------------------------------------------------------------------------------------
Cartersville, GA, Development Authority Waste (Anheuser
Busch), 5.1s, 2012 $375 $401,347
- ----------------------------------------------------------------------------------------------------
Corpus Christi, TX, Nueces County General Rev. (Union
Pacific), 5.35s, 2010 610 625,104
- ----------------------------------------------------------------------------------------------------
Fort Bend County, TX, Industrial Development (Frito Lay),
3s, 2011 575 591,836
- ----------------------------------------------------------------------------------------------------
Memphis-Shelby County, TN (Federal Express), 5.05s, 2012 400 425,616
- ----------------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing (Amtrak),
"A", 6s, 2006 100 105,453
- ----------------------------------------------------------------------------------------------------
Prince Georges County, MD, Industrial Development
(International Paper), 3.15s, 2014 320 320,000
- ----------------------------------------------------------------------------------------------------
Utah County, UT, Environmental Improvement Rev. (USX
Corp.), 5.05s, 2017 300 301,722
- ----------------------------------------------------------------------------------------------------
$2,771,078
- ----------------------------------------------------------------------------------------------------
Industrial Revenue - Paper - 0.1%
- ----------------------------------------------------------------------------------------------------
Erie County, PA, Industrial Development Authority
(International Paper Co.), 5.25s, 2010 $250 $262,378
- ----------------------------------------------------------------------------------------------------
Miscellaneous Revenue - Entertainment & Tourism - 0.4%
- ----------------------------------------------------------------------------------------------------
Arizona Tourism & Sports Authority, (Multipurpose
Stadium) Facility Rev., "A", MBIA, 5s, 2010 $1,000 $1,119,120
- ----------------------------------------------------------------------------------------------------
Miscellaneous Revenue - Other - 1.3%
- ----------------------------------------------------------------------------------------------------
California Department Water Resources, "A", 5.5s, 2010 $600 $667,176
- ----------------------------------------------------------------------------------------------------
California Department Water Resources, "A" MBIA,
5.25s, 2011 1,000 1,123,500
- ----------------------------------------------------------------------------------------------------
District of Columbia Tax, FSA, 0s, 2005 600 569,922
- ----------------------------------------------------------------------------------------------------
Illinois Development Finance Authority Rev. (Elgin
School), FSA, 0s, 2010 500 388,310
- ----------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, MBIA,
5s, 2009 500 560,855
- ----------------------------------------------------------------------------------------------------
$3,309,763
- ----------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.8%
- ----------------------------------------------------------------------------------------------------
Massachusetts Housing Finance Agency, MBIA, 5.35s, 2010 $230 $243,835
- ----------------------------------------------------------------------------------------------------
Missouri Housing Development Commission, 4.35s, 2007 220 230,773
- ----------------------------------------------------------------------------------------------------
Philadelphia, PA, Housing Authority, "A", FSA, 5s, 2008 500 559,315
- ----------------------------------------------------------------------------------------------------
Virginia Housing Development Authority, 4.4s, 2003 560 567,386
- ----------------------------------------------------------------------------------------------------
Wisconsin Housing & Economic Development Housing, MBIA,
3.2s, 2004 500 512,765
- ----------------------------------------------------------------------------------------------------
$2,114,074
- ----------------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.3%
- ----------------------------------------------------------------------------------------------------
Fayetteville, AK, Sales & Use, 3.2s, 2007 $275 $277,142
- ----------------------------------------------------------------------------------------------------
Illinois Sales Tax Rev., First Series, 5s, 2007 1,000 1,106,960
- ----------------------------------------------------------------------------------------------------
Monroe, LA, Sales & Use Tax Rev., FGIC, 5.75s, 2011 845 986,267
- ----------------------------------------------------------------------------------------------------
Spokane, WA, Public Facilities District Hotel, "A" MBIA,
5.75s, 2012 425 487,960
- ----------------------------------------------------------------------------------------------------
Washington, DC, (Convention Center) AMBAC, 4.75s, 2005 345 371,644
- ----------------------------------------------------------------------------------------------------
$3,229,973
- ----------------------------------------------------------------------------------------------------
Single Family Housing Revenue - Local - 0.0%
- ----------------------------------------------------------------------------------------------------
Chicago, IL, GNMA, 5.4s, 2010 $45 $48,195
- ----------------------------------------------------------------------------------------------------
San Bernardino County, CA, Single Family Mortgage Rev.,
GNMA, 7.375s, 2020 110 115,741
- ----------------------------------------------------------------------------------------------------
$163,936
- ----------------------------------------------------------------------------------------------------
Single Family Housing Revenue - State - 1.7%
- ----------------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority, 7.25s, 2010 $190 $200,839
- ----------------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority, 6.7s, 2016 115 120,074
- ----------------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority 8.4s, 2021 90 94,883
- ----------------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority, Single Family
Program Authority, 6.3s, 2012 235 255,393
- ----------------------------------------------------------------------------------------------------
Minnesota Housing Finance Agency, Variable Residential
Housing Finance "C", 3s, 2021 500 504,305
- ----------------------------------------------------------------------------------------------------
Ohio Housing Finance Agency, Single Family Mortgage Rev.,
GNMA, 5.45s, 2006 400 425,792
- ----------------------------------------------------------------------------------------------------
Oklahoma Housing Development Authority Rev. (Lease
Purchase Program), "A", 5.1s, 2005 200 211,776
- ----------------------------------------------------------------------------------------------------
Oklahoma Housing Finance Agency, GNMA, 7.6s, 2015 310 341,202
- ----------------------------------------------------------------------------------------------------
South Dakota Housing Development Authority, 3.45s, 2003 250 250,000
- ----------------------------------------------------------------------------------------------------
South Dakota Housing Development Authority, 4.9s, 2008 685 731,135
- ----------------------------------------------------------------------------------------------------
South Dakota Housing Development Authority, FNMA, 5.65s,
2011 250 268,085
- ----------------------------------------------------------------------------------------------------
South Dakota Housing Development Authority, Homeownership
Mortgage, "A", 4.15s, 2007 300 308,325
- ----------------------------------------------------------------------------------------------------
Wyoming Community Development Authority, Housing Rev.,
5s, 2006 600 635,340
- ----------------------------------------------------------------------------------------------------
$4,347,149
- ----------------------------------------------------------------------------------------------------
Solid Waste Revenue - 0.8%
- ----------------------------------------------------------------------------------------------------
Central Wayne County, MI, Sanitation, Series VII,
4.75s, 2007 $500 $505,245
- ----------------------------------------------------------------------------------------------------
Detroit, MI, Economic Development Corp., AMBAC,
3.8s, 2005 375 390,788
- ----------------------------------------------------------------------------------------------------
Niagara County, NY, Industrial Development Agency, Solid
Waste Disposal Rev. (American Ref-fuel Inc.) 5.625s, 2024 300 317,757
- ----------------------------------------------------------------------------------------------------
Northeast Maryland Waste Disposal Authority Rev.,
(Ogden Mortin) 5.9s, 2005 500 538,395
- ----------------------------------------------------------------------------------------------------
Tacoma, WA, Solid Waste Utility Rev., AMBAC, 5s, 2010 400 446,428
- ----------------------------------------------------------------------------------------------------
$2,198,613
- ----------------------------------------------------------------------------------------------------
State and Local Appropriation - 9.0%
- ----------------------------------------------------------------------------------------------------
Alaska Certificates Participation (Alaska Psychiatric
Institute) AMBAC, 4s, 2006 $500 $535,115
- ----------------------------------------------------------------------------------------------------
Arizona Certificates Participation, "A" MBIA, 5s, 2006 500 548,960
- ----------------------------------------------------------------------------------------------------
Columbia, SC, Certificates Participation, AMBAC, 5s, 2011 650 721,565
- ----------------------------------------------------------------------------------------------------
Columbus, IN, Multi School Building, FSA, 5s, 2010 725 804,757
- ----------------------------------------------------------------------------------------------------
District of Columbia Certificates Participation AMBAC,
5.25s, 2008 1,500 1,669,215
- ----------------------------------------------------------------------------------------------------
Escambia County, FL, School Board, MBIA, 3.5s, 2005 500 518,230
- ----------------------------------------------------------------------------------------------------
Hamilton County, IN, Public Building Corp., AMBAC,
3.5s, 2004 1,010 1,038,634
- ----------------------------------------------------------------------------------------------------
Hamilton County, IN, Public Building Corp., FSA, 5s, 2010 605 671,556
- ----------------------------------------------------------------------------------------------------
Indiana Bond Bank Rev., AMBAC, 5.3s, 2007 350 388,328
- ----------------------------------------------------------------------------------------------------
Kentucky Property & Building Commerce, 5.25s, 2005 500 532,410
- ----------------------------------------------------------------------------------------------------
Kentucky Property & Building Commerce, "A" FSA,
5.5s, 2011 500 575,410
- ----------------------------------------------------------------------------------------------------
Kosciusko County, IN, Building Corp., FSA, 3.5s, 2004 600 610,608
- ----------------------------------------------------------------------------------------------------
Macon County and Decatur, IL, FGIC, 6.5s, 2005 325 351,634
- ----------------------------------------------------------------------------------------------------
Michigan Building Authority Rev., FSA, 5s, 2011 1,500 1,628,655
- ----------------------------------------------------------------------------------------------------
New Jersey Building Authority, 5.5s, 2006 1,000 1,110,800
- ----------------------------------------------------------------------------------------------------
New Jersey State Transit Corp. (Federal Transit
Administration Grants), "B" AMBAC, 5.5s, 2007 650 737,321
- ----------------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., "A", 5.25s, 2009 1,000 1,142,110
- ----------------------------------------------------------------------------------------------------
New York Urban Development Corp. Rev., AMBAC,
5.4s, 2006 1,000 1,096,470
- ----------------------------------------------------------------------------------------------------
Ohio Building Authority (Adult Correctional Building)
FSA, 5s, 2009 1,290 1,437,382
- ----------------------------------------------------------------------------------------------------
Ohio Building Authority (State Facilities Administration
Building) 5.375s, 2013 1,000 1,120,830
- ----------------------------------------------------------------------------------------------------
Pennsylvania Industrial Development Authority, Economic
Development AMBAC, 5.25s, 2011 1,900 2,141,737
- ----------------------------------------------------------------------------------------------------
Salt Lake City, UT, Redevelopment Agency, "A" FSA,
3.75s, 2004 500 510,725
- ----------------------------------------------------------------------------------------------------
State of Ohio Building Authority (Adult Correctional
Facilities) 5.75s, 2008 425 487,641
- ----------------------------------------------------------------------------------------------------
State of Oregon, AMBAC, 5.5s, 2008 500 569,320
- ----------------------------------------------------------------------------------------------------
State of Utah, Building Ownership Authority Lease Rev.,
FSA, 0s, 2005 685 659,895
- ----------------------------------------------------------------------------------------------------
Suffolk County, NY, Judicial Facilities (John P. Cohalan
Complex), AMBAC, 5.75s, 2011 160 182,581
- ----------------------------------------------------------------------------------------------------
Texas Public Finance Authority Building Rev., Building
Revenue, "B" AMBAC 6.25s, 2006 1,000 1,120,660
- ----------------------------------------------------------------------------------------------------
$22,912,549
- ----------------------------------------------------------------------------------------------------
Student Loan Revenue - 0.3%
- ----------------------------------------------------------------------------------------------------
Alaska Student Loan Corp. Rev., AMBAC, 5s, 2003 $400 $402,296
- ----------------------------------------------------------------------------------------------------
Massachusetts Educational Financing Authority, "E" AMBAC
4.5s, 2009 100 104,210
- ----------------------------------------------------------------------------------------------------
Pennsylvania Higher Education Standard Loan, "B" FSA,
3.15s, 2017 250 250,673
- ----------------------------------------------------------------------------------------------------
$757,179
- ----------------------------------------------------------------------------------------------------
Tax Assesment - 1.1%
- ----------------------------------------------------------------------------------------------------
Birmingham Jefferson, AL, Civic, "A" FSA,
5.25s, 2005 $575 $610,604
- ----------------------------------------------------------------------------------------------------
Birmingham Jefferson, AL, Civic, "A" FSA,
5.25s, 2007 1,250 1,383,638
- ----------------------------------------------------------------------------------------------------
Lewisville, TX, 4.125s, 2031 500 530,770
- ----------------------------------------------------------------------------------------------------
Omaha, NE, Special Obligation (Riverfront Redevelopment),
"A", 4.125s, 2008 285 305,078
- ----------------------------------------------------------------------------------------------------
$2,830,090
- ----------------------------------------------------------------------------------------------------
Tax-Other - 1.6%
- ----------------------------------------------------------------------------------------------------
Chicago, IL, Motor Fuel Tax Rev., AMBAC, 6.125s, 2009 $500 $584,610
- ----------------------------------------------------------------------------------------------------
Collier County, FL, Gas Tax Rev., AMBAC, 5s, 2010 1,045 1,166,784
- ----------------------------------------------------------------------------------------------------
Denver, CO, City & County Excise Tax, FSA, 5.25s, 2008 250 284,408
- ----------------------------------------------------------------------------------------------------
District of Columbia Tax Increment (Galary Place) FSA,
4s, 2006 370 393,447
- ----------------------------------------------------------------------------------------------------
Florida State Board of Education, Lottery Rev., FGIC,
5.5s, 2011 150 171,357
- ----------------------------------------------------------------------------------------------------
State of Wisconsin, 6s, 2004 500 527,450
- ----------------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority, 5.5s, 2005 1,000 1,069,830
- ----------------------------------------------------------------------------------------------------
$4,197,886
- ----------------------------------------------------------------------------------------------------
Tobacco - 0.5%
- ----------------------------------------------------------------------------------------------------
District of Columbia Tobacco Settlement, Asset Backed
Bonds, 5.2s, 2008 $450 $446,490
- ----------------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization, "A", 5s, 2021 500 481,150
- ----------------------------------------------------------------------------------------------------
Tobacco Settlement Financing Corp., NJ, 4.375s, 2019 250 226,350
- ----------------------------------------------------------------------------------------------------
$1,153,990
- ----------------------------------------------------------------------------------------------------
Transportation -Special Tax - 2.9%
- ----------------------------------------------------------------------------------------------------
Arizona Transportation Board Highway Rev., 5s, 2006 $550 $605,880
- ----------------------------------------------------------------------------------------------------
Colorado Department of Transportation Rev., AMBAC, 6s, 2008 235 273,932
- ----------------------------------------------------------------------------------------------------
Du Page County, IL, Transport Rev., FSA, 5.5s, 2011 1,000 1,134,870
- ----------------------------------------------------------------------------------------------------
New York Thruway Authority Highway & Bridge Trust Fund,
"A" FGIC, 5.25s, 2010 1,600 1,809,264
- ----------------------------------------------------------------------------------------------------
New York Thruway Authority Highway & Bridge Trust Fund,
"C" FGIC, 5.5s, 2006 1,200 1,329,804
- ----------------------------------------------------------------------------------------------------
Oklahoma Turnpike Authority, Turnpike Rev., "A" FGIC, 5.5s, 2007 1,000 1,122,760
- ----------------------------------------------------------------------------------------------------
Texas Turnpike Authority Central Turnpike Systems, Bond
Anticipation Notes Second Tier, 5s, 2007 1,000 1,103,940
- ----------------------------------------------------------------------------------------------------
$7,380,450
- ----------------------------------------------------------------------------------------------------
Turnpike Revenue - 0.6%
- ----------------------------------------------------------------------------------------------------
New Mexico State Highway Commission, 5.5s, 2006 $430 $479,996
- ----------------------------------------------------------------------------------------------------
Orlando & Orange County, FL (Expressway Florida), FGIC,
8.844s, 2004(++) 1,000 1,047,740
- ----------------------------------------------------------------------------------------------------
$1,527,736
- ----------------------------------------------------------------------------------------------------
Universities - Colleges - 5.4%
- ----------------------------------------------------------------------------------------------------
Auburn University , AL, University Rev., AMBAC, 5s, 2006 $255 $278,526
- ----------------------------------------------------------------------------------------------------
Clemson University, SC, University Rev., AMBAC, 5.5s, 2007 875 990,054
- ----------------------------------------------------------------------------------------------------
District of Columbia Rev. (Gonzaga College), FSA, 5s, 2012 500 557,255
- ----------------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev. (Augustana
College), "A", 4s, 2006 615 642,466
- ----------------------------------------------------------------------------------------------------
Massachusetts College Building, "A" XLCA, 5s, 2009 1,205 1,340,285
- ----------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (Massachusetts
College of Pharmacy) "C", 5s, 2007 475 509,129
- ----------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (Western New
England College), 4s, 2008 685 690,685
- ----------------------------------------------------------------------------------------------------
Massachusetts Health & Educational (Massachusetts
Institute Technology) "K", 5.25s, 2012 375 428,385
- ----------------------------------------------------------------------------------------------------
Northern Arizona University Rev., FGIC, 4s, 2005 500 526,560
- ----------------------------------------------------------------------------------------------------
Rhode Island Health & Education Building (Johnson &
Wales), XLCA, 5s, 2010 2,265 2,508,465
- ----------------------------------------------------------------------------------------------------
Southeast Missouri State University, MBIA, 5.625s, 2010 250 288,315
- ----------------------------------------------------------------------------------------------------
Texas A & M University Rev., Financing Systems, 2.5s, 2006 750 766,965
- ----------------------------------------------------------------------------------------------------
Texas Public Finance Authority Rev., Southern University
Financing Systems, MBIA, 5s, 2007 500 558,905
- ----------------------------------------------------------------------------------------------------
Texas University Systems Financing Rev., FSA, 5s, 2008 565 625,551
- ----------------------------------------------------------------------------------------------------
University of Arizona Rev., Refunding Systems, FSA, 5s, 2006 570 627,325
- ----------------------------------------------------------------------------------------------------
University of Arizona Rev., Refunding Systems, FSA, 5.25s, 2010 1,000 1,133,650
- ----------------------------------------------------------------------------------------------------
University of Arkansas Rev., Athletic Facility (Razorback
Stadium), FSA, 3.55s, 2021 500 531,030
- ----------------------------------------------------------------------------------------------------
University of Texas Permanent University Fund, "A", 5s, 2009 580 650,244
- ----------------------------------------------------------------------------------------------------
$13,653,795
- ----------------------------------------------------------------------------------------------------
Universities - Dormatories - 0.5%
- ----------------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., FGIC, 5.25s, 2029 $1,000 $1,117,590
- ----------------------------------------------------------------------------------------------------
Private College & University Authority (Mercer Housing
Corp.), "A", 6s, 2004 50 51,559
- ----------------------------------------------------------------------------------------------------
Private College & University Authority (Mercer Housing
Corp.), "A", 6s, 2005 70 73,739
- ----------------------------------------------------------------------------------------------------
$1,242,888
- ----------------------------------------------------------------------------------------------------
Universities - Secondary Schools - 0.5%
- ----------------------------------------------------------------------------------------------------
Alabama Public School & College, "C" FSA, 4.5s, 2009 $1,000 $1,089,580
- ----------------------------------------------------------------------------------------------------
New Hampshire Health & Education (Derryfield School), 6.5s, 2010 180 194,346
- ----------------------------------------------------------------------------------------------------
$1,283,926
- ----------------------------------------------------------------------------------------------------
Utilities - Investor Owned - 1.2%
- ----------------------------------------------------------------------------------------------------
Brazos River Authority Texas (TXU Electric Co.), "A", 4.95s, 2030 $200 $200,376
- ----------------------------------------------------------------------------------------------------
Chesapeake, VA, Industrial Development Authority (VEPCO) 5.25s, 2008 250 260,657
- ----------------------------------------------------------------------------------------------------
Hillsborough County, FL (Tampa Electric) 4s, 2025 500 495,260
- ----------------------------------------------------------------------------------------------------
Illinois Development Finance Authority, "B" (Peoples Gas) 3.05s, 2033 1,000 1,023,980
- ----------------------------------------------------------------------------------------------------
Illinois Development Finance Authority (Commonwealth
Edison Co.), 4.4s, 2006 500 544,960
- ----------------------------------------------------------------------------------------------------
New Hampshire Pollution Control Rev. (United Illuminating
Co.), 3.75s, 2027 500 504,425
- ----------------------------------------------------------------------------------------------------
$3,029,658
- ----------------------------------------------------------------------------------------------------
Utilities - Municipal Owned - 9.9%
- ----------------------------------------------------------------------------------------------------
Alaska Municipal Bond Bank Authority Rev., AMBAC,
5.75s, 2006 $325 $370,064
- ----------------------------------------------------------------------------------------------------
American Public Energy Agency, NE Public Gas Agency, "C"
AMBAC, 4.2s, 2010 395 418,238
- ----------------------------------------------------------------------------------------------------
Carrollton & Henderson, KY, Kentucky Trust, "B" FSA, 4.2s, 2005 1,000 1,044,640
- ----------------------------------------------------------------------------------------------------
Clallam County, WA, Public Utility District, FSA, 5s, 2008 400 441,140
- ----------------------------------------------------------------------------------------------------
Clark County, WA, Public Utility District 1, AMBAC, 5.25s, 2008 1,380 1,536,961
- ----------------------------------------------------------------------------------------------------
Corpus Christi, TX, Utility Systems Rev., FSA, 4s, 2007 480 513,826
- ----------------------------------------------------------------------------------------------------
Delaware Municipal Electric Corp. AMBAC, 5s, 2008 500 560,245
- ----------------------------------------------------------------------------------------------------
Harrison County, MS, Wastewater Treatment Facilities,
"A", FGIC, 5.5s, 2011 400 453,304
- ----------------------------------------------------------------------------------------------------
Illinois Development Finance Authority, Pollution Control
Rev. (Illinois Power Co.), 7.375s, 2021(+++) 580 693,083
- ----------------------------------------------------------------------------------------------------
Kissimmee, FL, Utility Authority Electric, AMBAC, 5s, 2011 500 558,585
- ----------------------------------------------------------------------------------------------------
Long Island Power Authority, New York Electric Systems
Rev., "A", 5s, 2009 1,100 1,184,414
- ----------------------------------------------------------------------------------------------------
Lower Colorado River Authority, Texas Rev., FSA, 5.5s, 2008 600 680,454
- ----------------------------------------------------------------------------------------------------
Lower Colorado River Authority, Texas Rev., "A" MBIA, 5s, 2011 500 552,940
- ----------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (Devens
Electrical Systems), 5.125s, 2011 230 243,529
- ----------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (Semass
Systems), "B" MBIA, 5.625s, 2012 400 453,212
- ----------------------------------------------------------------------------------------------------
Michigan Public Power Agency Rev., "A" MBIA, 5.25s, 2008 500 558,500
- ----------------------------------------------------------------------------------------------------
Muscatine, IA, Electric Rev., "A" AMBAC, 5.5s, 2010 1,000 1,143,330
- ----------------------------------------------------------------------------------------------------
Nebraska Public Power District Rev., "B" AMBAC, 4s, 2007 695 741,217
- ----------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency, MBIA, 5.25s, 2007 500 556,060
- ----------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency, "A", 5.5s, 2010 750 812,362
- ----------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency, "A", 5.5s, 2013 500 548,840
- ----------------------------------------------------------------------------------------------------
Oak Ridge, TN, Electric Systems Rev., AMBAC, 5s, 2012 1,000 1,106,260
- ----------------------------------------------------------------------------------------------------
Oak Ridge, TN, Electric Systems Rev., AMBAC, 5s, 2013 1,010 1,116,484
- ----------------------------------------------------------------------------------------------------
Philadelphia, PA, Gas Works Rev., FSA, 4s, 2006 1,000 1,069,220
- ----------------------------------------------------------------------------------------------------
Rock Hill, SC, Utility Systems Rev., "A" FSA, 5s, 2010 750 832,230
- ----------------------------------------------------------------------------------------------------
Salt River, AZ, Agricultural Improvement, "A", 5s, 2011 500 556,085
- ----------------------------------------------------------------------------------------------------
San Antonio, TX, Electric & Gas Rev., 5.8s, 2006 660 715,262
- ----------------------------------------------------------------------------------------------------
Seattle, WA, Municipal Light & Power Rev., FSA, 5.25s, 2007 1,000 1,112,360
- ----------------------------------------------------------------------------------------------------
Snohomish County, WA, Public Utility 1, "B" FSA, 5.25s, 2008 1,000 1,134,820
- ----------------------------------------------------------------------------------------------------
South Carolina Public Service Authority, 4.5s, 2008 500 543,280
- ----------------------------------------------------------------------------------------------------
South Carolina Public Service Authority, "D", 5s, 2007 500 549,640
- ----------------------------------------------------------------------------------------------------
Southern California Public Power Authority, "A" FSA, 5.375s, 2012 595 679,306
- ----------------------------------------------------------------------------------------------------
Tacoma, WA, Electric Systems Rev., AMBAC, 6s, 2006 1,125 1,247,884
- ----------------------------------------------------------------------------------------------------
Wilsonville, AL, Industrial Development Board, AMBAC, 4.2s, 2019 500 530,460
- ----------------------------------------------------------------------------------------------------
$25,258,235
- ----------------------------------------------------------------------------------------------------
Utilities - Other - 1.1%
- ----------------------------------------------------------------------------------------------------
Brownsville, TX, Utility Systems Rev., AMBAC, 6.25s, 2011 $1,000 $1,194,950
- ----------------------------------------------------------------------------------------------------
Edmond, OK, Public Works Authority, AMBAC, 4.5s, 2008 500 548,975
- ----------------------------------------------------------------------------------------------------
Missouri Environment Improvement, 3.9s, 2012 1,000 1,026,630
- ----------------------------------------------------------------------------------------------------
$2,770,555
- ----------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 8.4%
- ----------------------------------------------------------------------------------------------------
Allentown, PA, Water Rev. Guaranteed, AMBAC, 5s, 2011 $925 $1,030,237
- ----------------------------------------------------------------------------------------------------
Brevard County, FL, Utility Rev., FGIC, 5.25s, 2010### 1,000 1,128,030
- ----------------------------------------------------------------------------------------------------
Columbus, IN, Waterworks Rev., MBIA, 3.5s, 2005 500 517,740
- ----------------------------------------------------------------------------------------------------
Fort Worth, TX, Water and Sewer Rev., 5.5s, 2004 1,000 1,033,730
- ----------------------------------------------------------------------------------------------------
Helena, AL, Utilities Board Water & Sewer, MBIA, 3s, 2004 180 182,990
- ----------------------------------------------------------------------------------------------------
Jefferson County, AL, Sewer Rev., FSA, 5.25s, 2010 2,000 2,248,040
- ----------------------------------------------------------------------------------------------------
Kansas Development Finance Authority Rev., Water
Pollution Control, 5s, 2008 500 557,660
- ----------------------------------------------------------------------------------------------------
King County, WA, Sewer Rev., FGIC, 5.25s, 2012 750 840,360
- ----------------------------------------------------------------------------------------------------
Lee County, FL, Water & Sewer Rev., "A", 5s, 2013 1,000 1,086,730
- ----------------------------------------------------------------------------------------------------
Metropolitan Government of Nashville & Davidson County,
Water & Sewer Rev., FGIC, 6.5s, 2010 1,000 1,192,460
- ----------------------------------------------------------------------------------------------------
Myrtle Beach, SC, Water & Sewer Rev., FGIC, 5s, 2008 1,150 1,277,811
- ----------------------------------------------------------------------------------------------------
Philadelphia, PA, Water, FSA, 5.625s, 2008 595 680,781
- ----------------------------------------------------------------------------------------------------
Philadelphia, PA, Water & Wastewater, Series 93, MBIA, 5.5s, 2007 1,105 1,250,363
- ----------------------------------------------------------------------------------------------------
Phoenix, AZ, Civic Improvement Corp., Junior Lien, FGIC, 4.5s, 2007 500 546,250
- ----------------------------------------------------------------------------------------------------
Phoenix, AZ, Civic Improvement Corp., Junior Lien, FGIC, 5.25s, 2009 255 289,927
- ----------------------------------------------------------------------------------------------------
Seacoast, FL, Utility Water & Sewer Systems, FGIC, 5s, 2009 1,000 1,116,150
- ----------------------------------------------------------------------------------------------------
Seattle, WA, Water Systems Rev., 5s, 2008 475 529,065
- ----------------------------------------------------------------------------------------------------
Sebring, FL, Water & Wastewater, FGIC, 5.25s, 2013 690 778,865
- ----------------------------------------------------------------------------------------------------
Spartanburg, SC, Waterworks Rev., Junior Lien, FSA, 5s, 2007 500 557,125
- ----------------------------------------------------------------------------------------------------
Tarrant Regional Water District Texas Water, FSA, 4s, 2007 500 533,375
- ----------------------------------------------------------------------------------------------------
Truckee Meadows, NV, Water Authority, "A" FSA, 5.5s, 2011 1,000 1,144,110
- ----------------------------------------------------------------------------------------------------
Utah Water Finance Agency Rev., "A", AMBAC, 5s, 2012 500 554,790
- ----------------------------------------------------------------------------------------------------
Western Carolina Regional Sewer, FSA, 5s, 2004 590 608,626
- ----------------------------------------------------------------------------------------------------
Wilkinsburg, PA, Joint Water, "B" FSA, 4.75s, 2010 1,260 1,378,642
- ----------------------------------------------------------------------------------------------------
Wilsonville, OR, Water Systems Rev., MBIA, 5s, 2010 300 335,163
- ----------------------------------------------------------------------------------------------------
$21,399,020
- ----------------------------------------------------------------------------------------------------
Utilities - Electric - 0.4%
- ----------------------------------------------------------------------------------------------------
Cowlitz County, WA, Public Utility District, AMBAC, 5.25s, 2008 $500 $564,550
- ----------------------------------------------------------------------------------------------------
Tacoma, WA, Electric Systems Rev., FSA, 5.5s, 2011 500 563,850
- ----------------------------------------------------------------------------------------------------
$1,128,400
- ----------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $233,753,394) $241,718,867
- ----------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 7.1%
- ----------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority,
Pollution Control Rev., due 05/01/03 $200 $200,000
- ----------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority Rev.
(Shell Oil), due 05/01/03 200 200,000
- ----------------------------------------------------------------------------------------------------
California Statewide Community Development Authority
(Sutter Health), due 05/01/03 1,500 1,500,000
- ----------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, "A" (Central Artery),
due 05/01/03 100 100,000
- ----------------------------------------------------------------------------------------------------
East Baton Rouge Parish, LA, Pollution Control Rev.
(Exxon Corp.), due 05/01/03 300 300,000
- ----------------------------------------------------------------------------------------------------
Harris County, TX, Industrial Development Corp.,
Pollution Control Rev. (Exxon Corp.), due 05/01/03 4,100 4,100,000
- ----------------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev.
(University of Chicago Hospital), due 05/01/03 2,400 2,400,000
- ----------------------------------------------------------------------------------------------------
Jackson County, MS, Pollution Control Rev. (Chevron USA,
Inc.), due 05/01/03 1,700 1,700,000
- ----------------------------------------------------------------------------------------------------
Knoxville, TN, Utilities Board Rev., due 05/01/03 200 200,000
- ----------------------------------------------------------------------------------------------------
Massachusetts Water Resources Authority, due 05/07/03 400 400,000
- ----------------------------------------------------------------------------------------------------
Missouri Development Finance Board, "B", due 05/01/03 500 500,000
- ----------------------------------------------------------------------------------------------------
New York, NY, due 05/01/03 250 250,000
- ----------------------------------------------------------------------------------------------------
New York, NY, Job Development Authority Rev.,
due 05/01/03 300 300,000
- ----------------------------------------------------------------------------------------------------
New York, NY, Municipal Water & Sewer Finance Authority
Rev., due 05/01/03 900 900,000
- ----------------------------------------------------------------------------------------------------
Pinellas County, FL, Health Facility Authority, due 05/
01/03 1,100 1,100,000
- ----------------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, due 05/01/
03 2,105 2,105,000
- ----------------------------------------------------------------------------------------------------
Uinta County, WY, Pollution Control Rev. (Chevron USA,
Inc.), due 05/01/03 1,800 1,800,000
- ----------------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes
(Identified Cost, $18,055,000) $18,055,000
- ----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $251,808,394) $259,773,867
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.8)% (4,631,433)
- ----------------------------------------------------------------------------------------------------
Net assets - 100.0% $255,142,434
- ----------------------------------------------------------------------------------------------------
(++)Inverse floating rate security.
(+++)Refunded bond.
###Security segregated as collateral for open futures contracts.
The following abbreviations for insurers are used in the Portfolio of
Investments and are defined as such:
Insurers:
AMBAC= AMBAC Indemnity Corp.
FGIC= Financial Guaranty Insurance Corp.
FNMA= Federal National Mortgage Assn.
FSA= Financial Security Assurance, Inc.
GNMA= Government National Mortgage Assn.
MBIA= Municipal Bond Investors Corp.
PSF= Permanent School Fund
Radian= Radian Guaranty, Inc.
XLCA= XL Capital Insurance Co.
See notes to financial statements.
- --------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 4/30/03
ASSETS
Investments, at value (identified cost, $251,808,394) $259,773,867
- --------------------------------------------------------------------------------------------
Cash 23,732
- --------------------------------------------------------------------------------------------
Receivable for investments sold 527,925
- --------------------------------------------------------------------------------------------
Receivable for fund shares sold 2,923,942
- --------------------------------------------------------------------------------------------
Interest receivable 3,009,735
- --------------------------------------------------------------------------------------------
Other assets 383
- --------------------------------------------------------------------------------------------
Total assets $266,259,584
- --------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $528,309
- --------------------------------------------------------------------------------------------
Payable for daily variation margin on open futures
contracts 29,219
- --------------------------------------------------------------------------------------------
Payable for investments purchased 8,536,032
- --------------------------------------------------------------------------------------------
Payable for fund shares reacquired 1,925,816
- --------------------------------------------------------------------------------------------
Payable to affiliates
- --------------------------------------------------------------------------------------------
Management fee 2,087
- --------------------------------------------------------------------------------------------
Shareholder servicing agent fee 765
- --------------------------------------------------------------------------------------------
Distribution and service fee 8,482
- --------------------------------------------------------------------------------------------
Administrative fee 122
- --------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 86,318
- --------------------------------------------------------------------------------------------
Total liabilities $11,117,150
- --------------------------------------------------------------------------------------------
Net assets $255,142,434
- --------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $248,829,885
- --------------------------------------------------------------------------------------------
Unrealized appreciation on investments 7,849,358
- --------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (1,105,392)
- --------------------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income (431,417)
- --------------------------------------------------------------------------------------------
Net assets $255,142,434
- --------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 32,141,014
- --------------------------------------------------------------------------------------------
See notes to financial statements.
Statement of Assets and Liabilities - continued
Class A shares
Net assets $165,598,418
- --------------------------------------------------------------------------------------------
Shares outstanding 20,856,767
- --------------------------------------------------------------------------------------------
Net asset value per share $7.94
- --------------------------------------------------------------------------------------------
Offering price per share (100/97.5X$7.94) $8.14
- --------------------------------------------------------------------------------------------
Class B shares
Net assets $38,360,062
- --------------------------------------------------------------------------------------------
Shares outstanding 4,838,097
- --------------------------------------------------------------------------------------------
Net asset value and offering price per share $7.93
- --------------------------------------------------------------------------------------------
Class C shares
Net assets $51,183,954
- --------------------------------------------------------------------------------------------
Shares outstanding 6,446,150
- --------------------------------------------------------------------------------------------
Net asset value and offering price per share $7.94
- --------------------------------------------------------------------------------------------
On sales of $50,000 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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
FOR YEAR ENDED 4/30/03
NET INVESTMENT INCOME
Interest income $6,688,149
- --------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------
Management fee $737,590
- --------------------------------------------------------------------------------------------
Trustees' compensation 12,608
- --------------------------------------------------------------------------------------------
Shareholder servicing agent fee 186,522
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 187,792
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 246,258
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 330,605
- --------------------------------------------------------------------------------------------
Administrative fee 17,750
- --------------------------------------------------------------------------------------------
Custodian fee 75,343
- --------------------------------------------------------------------------------------------
Printing 36,213
- --------------------------------------------------------------------------------------------
Postage 4,704
- --------------------------------------------------------------------------------------------
Auditing fees 34,105
- --------------------------------------------------------------------------------------------
Legal fees 106
- --------------------------------------------------------------------------------------------
Registration fees 96,441
- --------------------------------------------------------------------------------------------
Miscellaneous 72,726
- --------------------------------------------------------------------------------------------
Total expenses $2,038,763
- --------------------------------------------------------------------------------------------
Fees paid indirectly (2,752)
- --------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (184,124)
- --------------------------------------------------------------------------------------------
Net expenses $1,851,887
- --------------------------------------------------------------------------------------------
Net investment income $4,836,262
- --------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized loss on investment transactions (identified cost
basis) $(72,430)
- --------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- --------------------------------------------------------------------------------------------
Investments $5,576,201
- --------------------------------------------------------------------------------------------
Futures contracts (116,115)
- --------------------------------------------------------------------------------------------
Net unrealized gain on investments $5,460,086
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $5,387,656
- --------------------------------------------------------------------------------------------
Increase in net assets from operations $10,223,918
- --------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
FOR YEARS ENDED 4/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $4,836,262 $2,750,284
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (72,430) (55,704)
- --------------------------------------------------------------------------------------------------
Net unrealized gain on investments 5,460,086 1,209,031
- ---------------------------------------------------------------------------- -----------
Increase in net assets from operations $10,223,918 $3,903,611
- ---------------------------------------------------------------------------- -----------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- --------------------------------------------------------------------------------------------------
Class A $(3,777,760) $(2,201,522)
- --------------------------------------------------------------------------------------------------
Class B (584,022) (273,697)
- --------------------------------------------------------------------------------------------------
Class C (711,199) (275,065)
- --------------------------------------------------------------------------------------------------
In excess of net investment income
- --------------------------------------------------------------------------------------------------
Class A -- (139,836)
- --------------------------------------------------------------------------------------------------
Class B -- (17,385)
- --------------------------------------------------------------------------------------------------
Class C -- (17,471)
- --------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(5,072,981) $(2,924,976)
- ---------------------------------------------------------------------------- -----------
Net increase in net assets from fund share transactions $128,277,751 $60,461,340
- ---------------------------------------------------------------------------- -----------
Total increase in net assets $133,428,688 $61,439,975
- ---------------------------------------------------------------------------- -----------
NET ASSETS
At beginning of period $121,713,746 $60,273,771
- --------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $431,417 and $192,815,
respectively) $255,142,434 $121,713,746
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------
The Financial Highlights provide per share amounts and certain ratios to
summarize the effect of fund operations and any distributions to a shareholder
of each share class.
FOR YEARS ENDED 4/30
CLASS A 2003 2002 2001 2000 1999
Net asset value, beginning of period $7.69 $7.57 $7.35 $7.62 $7.57
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.23 $0.26 $0.31 $0.30 $0.29
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.26 0.14 0.22 (0.27) 0.06
- ------------------------------------------------------------ ------ ------ ------ ------
Total from investment operations $0.49 $0.40 $0.53 $0.03 $0.35
- ------------------------------------------------------------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.24) $(0.26) $(0.31) $(0.30) $(0.30)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.02) (0.00)+ -- --
- ------------------------------------------------------------ ------ ------ ------ ------
Total distributions $(0.24) $(0.28) $(0.31) $(0.30) $(0.30)
- ------------------------------------------------------------ ------ ------ ------ ------
Net asset value, end of period $7.94 $7.69 $7.57 $7.35 $7.62
- ------------------------------------------------------------ ------ ------ ------ ------
Total return (%)(+) 6.43 5.41 7.39 0.38 4.65
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 0.74 0.85 0.88 0.88 0.88
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.90 3.45 4.14 3.99 3.84
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 12 15 27 60 31
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $165,598 $87,222 $48,057 $42,277 $45,840
- ------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for the
periods indicated. In addition, for periods prior to May 1, 2002, subject
to reimbursement by the fund, the adviser voluntarily agreed under a
temporary expense reimbursement agreement to pay all of the fund's
operating expenses, exclusive of management and distribution and service
fees. In consideration, the fund paid the investment adviser a
reimbursement fee not greater than 0.40% of average net daily assets. To
the extent the waiver had not been in place and actual expenses were over
this limitation the investment income per share and the ratios would have
been:
Net investment income $0.22 $0.25 $0.31 $0.30 $0.28
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 0.84 1.00 0.96 0.91 0.99
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.80 3.30 4.06 3.96 3.71
- ------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began accreting market discount on debt securities. The effect of this
change for the year ended April 30, 2002 was to increase net investment
income per share and decrease net realized and unrealized gains and
losses per share. The impact of this change calculates to less than
$0.01 per share. In addition, the ratio of net investment income to
average net assets increased by 0.01%. Per share ratios and supplemental
data for periods prior to May 1, 2001 have not been restated to reflect
this change in presentation.
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid directly.
(+) Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
CLASS B 2003 2002 2001 2000 1999
Net asset value, beginning of period $7.68 $7.56 $7.34 $7.61 $7.56
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.16 $0.20 $0.25 $0.24 $0.23
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.27 0.15 0.22 (0.27) 0.06
- ---------------------------------------------------------------- ------ ------ ------ ------
Total from investment operations $0.43 $0.35 $0.47 $(0.03) $0.29
- ---------------------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.18) $(0.20) $(0.25) $(0.24) $(0.24)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.03) (0.00)+ -- --
- ---------------------------------------------------------------- ------ ------ ------ ------
Total distributions $(0.18) $(0.23) $(0.25) $(0.24) $(0.24)
- ---------------------------------------------------------------- ------ ------ ------ ------
Net asset value, end of period $7.93 $7.68 $7.56 $7.34 $7.61
- ---------------------------------------------------------------- ------ ------ ------ ------
Total return (%) 5.61 4.65 6.55 (0.43) 3.85
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 1.53 1.59 1.68 1.69 1.66
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.10 2.70 3.35 3.18 3.06
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 12 15 27 60 31
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $38,360 $15,104 $7,397 $6,781 $9,149
- ------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for the
periods indicated. In addition, for periods prior to May 1, 2002, subject
to reimbursement by the fund, the adviser voluntarily agreed under a
temporary expense reimbursement agreement to pay all of the fund's
operating expenses, exclusive of management and distribution and service
fees. In consideration, the fund paid the investment adviser a
reimbursement fee not greater than 0.40% of average net daily assets. To
the extent the waiver had not been in place and actual expenses were over
this limitation the investment income per share and the ratios would have
been:
Net investment income $0.16 $0.19 $0.25 $0.24 $0.22
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.63 1.74 1.76 1.72 1.77
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.00 2.55 3.27 3.15 2.93
- ------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began accreting market discount on debt securities. The effect of this
change for the year ended April 30, 2002 was to increase net investment
income per share and decrease net realized and unrealized gains and
losses per share. The impact of this change calculates to less than
$0.01 per share. In addition, the ratio of net investment income to
average net assets increased by 0.01%. Per share ratios and supplemental
data for periods prior to May 1, 2001 have not been restated to reflect
this change in presentation.
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid directly.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
CLASS C 2003 2002 2001 2000 1999
Net asset value, beginning of period $7.69 $7.58 $7.35 $7.63 $7.57
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.16 $0.19 $0.24 $0.23 $0.23
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.26 0.14 0.24 (0.28) 0.06
- ---------------------------------------------------------------- ------ ------ ------ ------
Total from investment operations $0.42 $0.33 $0.48 $(0.05) $0.29
- ---------------------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income $(0.17) $(0.19) $(0.25) $(0.23) $(0.23)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.03) (0.00)+ -- --
- ---------------------------------------------------------------- ------ ------ ------ ------
Total distributions $(0.17) $(0.22) $(0.25) $(0.23) $(0.23)
- ---------------------------------------------------------------- ------ ------ ------ ------
Net asset value, end of period $7.94 $7.69 $7.58 $7.35 $7.63
- ---------------------------------------------------------------- ------ ------ ------ ------
Total return (%) 5.52 4.38 6.62 (0.48) 3.77
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 1.59 1.70 1.73 1.73 1.73
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.02 2.52 3.28 3.14 2.98
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 12 15 27 60 31
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $51,184 $19,388 $4,820 $2,968 $4,282
- ------------------------------------------------------------------------------------------------------------------------------
(S)The investment adviser voluntarily waived a portion of its fee for the
periods indicated. In addition, for periods prior to May 1, 2002, subject
to reimbursement by the fund, the adviser voluntarily agreed under a
temporary expense reimbursement agreement to pay all of the fund's
operating expenses, exclusive of management and distribution and service
fees. In consideration, the fund paid the investment adviser a
reimbursement fee not greater than 0.40% of average net daily assets. To
the extent the waiver had not been in place and actual expenses were over
this limitation the investment income per share and the ratios would have
been:
Net investment income $0.15 $0.18 $0.24 $0.23 $0.22
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses(5) 1.69 1.85 1.81 1.76 1.84
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.92 2.37 3.20 3.11 2.85
- ------------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began accreting market discount on debt securities. The effect of this
change for the year ended April 30, 2002 was to increase net investment
income per share and decrease net realized and unrealized gains and
losses per share. The impact of this change calculates to less than
$0.01 per share. In addition, the ratio of net investment income to
average net assets increased by 0.01%. Per share ratios and supplemental
data for periods prior to May 1, 2001 have not been restated to reflect
this change in presentation.
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid directly.
See notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Municipal Limited Maturity 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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
INVESTMENT VALUATIONS - Bonds and other fixed income securities (other than
short-term obligations) of U.S. issuers in the fund's portfolio are valued at an
evaluated bid price on the basis of quotes from brokers and dealers or on the
basis of valuations furnished by a pricing service. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate 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 quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. All other securities (other than short-term
obligations) and futures contracts in the fund's portfolio for which the
principal market is one or more securities or commodities exchanges (whether
domestic or foreign) will be valued at the last reported sale price or at the
settlement price prior to the determination (or if there has been no current
sale, at the closing bid price) on the primary exchange on which such securities
and futures contracts are traded; but if a securities exchange is not the
principal market for securities, such securities will, if market quotations are
readily available, be valued at current bid prices. Short-term obligations in
the fund's portfolio are valued at amortized cost, which constitutes fair value
as determined by the Board of Trustees. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer supplied valuations.
Portfolio investments for which market quotations are not readily available, or
whose values have been materially affected by events occurring after the close
of their primary markets, are valued at fair value as determined in good faith
by or at the direction of the Board of Trustees.
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 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. Should interest rates or securities prices move unexpectedly, the
fund may not achieve the anticipated benefits of the futures contracts and may
realize a loss.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with generally accepted accounting principles. All premium and original issue
discount is amortized or accreted for tax reporting purposes as required by
federal income tax regulations.
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 net tax exempt
and taxable net income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is provided.
Distributions paid by the fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because the fund intends to meet certain requirements of the
Code applicable to regulated investment companies, which will enable the fund to
pay exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986 may be considered a
tax-preference item to shareholders.
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 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. Common
types of book and tax differences that could occur include differences in
accounting for capital losses, derivatives, and amortization and accretion on
debt securities.
The tax character of distributions declared for the years ended April 30, 2003
and April 30, 2002 were as follows:
4/30/03 4/30/02
Distributions declared from tax-exempt income $5,072,981 $2,924,976
- -------------------------------------------------------------------------------
During the year ended April 30, 2003, accumulated distributions in excess of net
investment income increased by $1,883, accumulated net realized loss on
investments decreased by $490,908, and paid-in capital decreased by $489,025 due
to differences between book and tax accounting for amortization and accretion on
debt securities and capital losses. This change had no effect on the net assets
or net asset value per share.
At April 30, 2003, accumulated distributions in excess of net investment income
and accumulated realized losses on investments under book accounting were
different from tax accounting due to temporary differences in accounting for
capital losses and derivatives.
As of April 30, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed tax-exempt income $109,376
----------------------------------------------------------------------
Capital loss carryforward $(1,134,458)
----------------------------------------------------------------------
Unrealized appreciation $7,967,332
----------------------------------------------------------------------
Other temporary differences $(629,701)
----------------------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the earlier
of its utilization or expiration.
EXPIRATION DATE
April 30, 2004 $(32,070)
----------------------------------------------------------------------
April 30, 2005 (42,827)
----------------------------------------------------------------------
April 30, 2006 --
----------------------------------------------------------------------
April 30, 2007 --
----------------------------------------------------------------------
April 30, 2008 (383,520)
----------------------------------------------------------------------
April 30, 2009 (516,819)
----------------------------------------------------------------------
April 30, 2010 (159,222)
----------------------------------------------------------------------
Total $(1,134,458)
----------------------------------------------------------------------
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 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. 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 an annual rate of 0.40% of
the fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee, which is shown as a reduction of total
expenses in the Statement of Operations. Management fees incurred for the year
ended April 30, 2003 were 0.30% of average daily net assets on an annualized
basis.
The fund pays compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and 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). On January
1, 2002, the Trustees terminated the Independent Trustee unfunded defined
benefit plan for active Trustees. Included in Trustees' compensation is a
pension expense of $622 for inactive trustees for the year ended April 30, 2003.
Also included in Trustees' compensation is a one-time settlement expense of
$6,077.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS 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
$37,411 for the year ended April 30, 2003, 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, 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 an annual
percentage of its average daily net assets attributable to certain share classes
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 based
on the average daily net assets of accounts attributable to such dealers. These
fees are calculated based on each class' average daily net assets. The maximum
distribution and service fees for each class of shares are as follows:
CLASS A CLASS B CLASS C
Distribution Fee 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25%
- --------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the year ended April 30, 2003 amounted to:
CLASS A CLASS B CLASS C
Service Fee Retained by MFD $10,895 $3 $110
- --------------------------------------------------------------------------------
Fees incurred under the distribution plan during the year ended
April 30, 2003, were as follows:
CLASS A CLASS B CLASS C
Total Distribution Plan 0.15% 0.94% 1.00%
- --------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will be implemented on
such date as the Trustees of the fund may determine. 0.15% of the Class A
service fee is currently being paid by the fund. Payment of 0.10% of the Class A
service fee will become payable on such date as the Trustees of the fund may
determine. Except in the case of the 0.25% per annum Class B service fee paid by
the fund upon the sale of Class B shares in the first year, the Class B service
fee is currently 0.15% per annum and may be increased to the maximum of 0.25%
per annum on such date as the Trustees of the fund may determine.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within, for Class A shares, 12
months following the purchase, and, for Class C shares, the first year from the
end of the calendar month of 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 from the end of the calendar month of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the year ended April 30, 2003 were as
follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges Imposed $31,611 $81,500 $31,885
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. Effective April 1, 2003 the
fee is calculated as a percentage of the fund's average daily net assets at an
annual rate of 0.11%. Prior to April 1, 2003, the annual rate was 0.10% of the
fund's average net daily assets.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$144,898,373 and $21,432,021, respectively.
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 $251,806,535
- --------------------------------------------------------------------------------
Gross unrealized appreciation $8,037,450
- --------------------------------------------------------------------------------
Gross unrealized depreciation (70,118)
- --------------------------------------------------------------------------------
Net unrealized appreciation $7,967,332
- --------------------------------------------------------------------------------
(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:
Year ended 4/30/03 Year ended 4/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 15,047,309 $118,304,622 7,441,419 $57,203,008
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 331,908 2,604,477 206,135 1,581,031
- ---------------------------------------------------------------------------------------------------------------
Shares reacquired (5,859,266) (46,047,614) (2,655,243) (20,364,699)
- ---------------------------------------------------------------------------------------------------------------
Net increase 9,519,951 $74,861,485 4,992,311 $38,419,340
- ---------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 3,552,864 $27,869,717 1,403,415 $10,749,779
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 31,329 245,874 13,866 106,164
- ---------------------------------------------------------------------------------------------------------------
Shares reacquired (712,266) (5,586,480) (429,073) (3,286,063)
- ---------------------------------------------------------------------------------------------------------------
Net increase 2,871,927 $22,529,111 988,208 $7,569,880
- ---------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 5,034,866 $39,570,129 2,156,064 $16,560,489
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 41,458 325,583 20,114 154,337
- ---------------------------------------------------------------------------------------------------------------
Shares reacquired (1,149,959) (9,008,557) (292,657) (2,242,706)
- ---------------------------------------------------------------------------------------------------------------
Net increase 3,926,365 $30,887,155 1,883,521 $14,472,120
- ---------------------------------------------------------------------------------------------------------------
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million 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, 2003 was $1,624. 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 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.
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
- -----------------------------------------------------------------------------------------------------------
Municipal Bond Index Futures June 2003 55 Short $(116,115)
- -----------------------------------------------------------------------------------------------------------
At April 30, 2003, the fund had sufficient cash and/or securities to cover any
margin requirements under these contracts.
(8) CHANGE IN ACCOUNTING PRINCIPLE
As required, effective May 1, 2001, the fund adopted the provision of the AICPA
Audit and Accounting Guide for Investment Companies and began accreting discount
and amortizing premium on all debt securities. The cumulative effect of this
accounting change had no impact on total net assets of the fund, but resulted in
a $11,691 reduction in cost of securities and a corresponding $11,691 increase
in net unrealized appreciation, based on securities held by the fund on May 1,
2001.
The effect of this change for the year ended April 30, 2002, was to increase net
investment income by $11,556, decrease net unrealized appreciation by $11,599,
and decrease net realized losses by $43. The Statement of Changes in Net Assets
and Financial Highlights for prior periods have not been restated to reflect
this change in presentation.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees of MFS Series Trust IX and Shareholders of MFS Municipal Limited
Maturity Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Municipal Limited Maturity Fund (a
portfolio of MFS Series Trust IX (the Trust)) as of April 30, 2003, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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 as of April 30, 2003 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Municipal Limited Maturity Fund as of April 30, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 11, 2003
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and
officers of MFS Series Trust IX, of which the fund is a series, including their
principal occupations, which, unless specific dates are shown, are of more than
five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other
directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Financial Services, Inc. (investment
Chairman advisers), Chairman and
Chief Executive Officer
JOHN W. BALLEN(2) (born 09/12/59)
Trustee and President LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Trustee
Company, Hemenway & Barnes (attorneys),
Chief Executive Officer and Director Partner
KEVIN R. PARKE(2) (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Private investor; Harvard University
Company, Graduate School of Business
President, Chief Investment Officer, and Administration, Class of 1961
Director Adjunct Professor in
Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc.
(real estate investment trust),
LAWRENCE H. COHN, M.D. (born 03/11/37) Director
Trustee
Brigham and Women's Hospital, Chief of J. DALE SHERRATT (born 09/23/38)
Cardiac Surgery; Harvard Medical School, Trustee
Professor of Surgery Insight Resources, Inc. (acquisition
planning specialists), President;
WILLIAM R. GUTOW (born 09/27/41) Wellfleet Investments (investor in
Trustee health care companies), Managing
Private investor and real estate General Partner (since 1993);
consultant; Cambridge Nutraceuticals
Capitol Entertainment Management Company (professional nutritional products),
(video franchise), Vice Chairman Chief Executive Officer (until May
2001)
J. ATWOOD IVES (born 05/01/36)
Trustee ELAINE R. SMITH (born 04/25/46)
Private investor; KeySpan Corporation Trustee
(energy related services), Director; Independent health care industry
Eastern Enterprises (diversified consultant
services company), Chairman, Trustee and
Chief Executive Officer (until November WARD SMITH (born 09/13/30)
2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) ROBERT R. FLAHERTY (born 09/18/63)
Chairman Assistant Treasurer
Massachusetts Financial Services Massachusetts Financial Services
Company, Chairman Company, Vice President (since
August 2000); UAM Fund Services,
Senior Vice President (prior to
JOHN W. BALLEN (born 09/12/59) August 2000)
Trustee and President
Massachusetts Financial Services RICHARD M. HISEY (born 08/29/58)
Company, Chief Executive Officer and Treasurer
Director Massachusetts Financial Services
Company, Senior Vice President
(since July 2002); The Bank of New
JAMES R. BORDEWICK, JR. (born 03/06/59) York, Senior Vice President
Assistant Secretary and Assistant Clerk (September 2000 to
Massachusetts Financial Services July 2002); Lexington Global Asset
Company, Senior Vice President and Managers, Inc., Executive Vice
Associate General Counsel President and Chief Financial
Officer, General Manager, Mutual
Funds (prior to
STEPHEN E. CAVAN (born 11/06/53) September 2000)
Secretary and Clerk
Massachusetts Financial Services ELLEN MOYNIHAN (born 11/13/57)
Company, Senior Vice President, General Assistant Treasurer
Counsel and Secretary Massachusetts Financial Services
Company,
Vice President
STEPHANIE A. DESISTO (born 10/01/53)
Assistant Treasurer JAMES O. YOST (born 06/12/60)
Massachusetts Financial Services Assistant Treasurer
Company, Vice President (since April Massachusetts Financial Services
2003); Brown Brothers Harriman & Co., Company, Senior Vice President
Senior Vice President
(November 2002 to April 2003); ING Groep
N.V./Aeltus Investment Management,
Senior Vice President (prior to November
2002)
The Trust does not hold annual shareholder meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. This means that each
Trustee will be elected to hold office until his or her successor is chosen and
qualified or until his or her earlier death, resignation, retirement or removal.
Each officer will hold office until his or her successor is chosen and
qualified, or until he or she retires, resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their
capacity as Trustee of the Trust continuously since originally elected or
appointed. Messrs. Ballen and Gutow have each served as a Trustee of the Trust
since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were
elected by shareholders and have served as Trustees of the Trust since January
1, 2002. Mr. Parke has served as Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
AUDITORS
DISTRIBUTOR Deloitte & Touche LLP
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA
02116-3741
PORTFOLIO MANAGERS
Michael L. Dawson(1)
Geoffrey L. Schechter(1)
(1)MFS Investment Management
- --------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- --------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international
equity and fixed-income investment across the full risk
spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for
building and preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and risks
associated with investing. Read the prospectus carefully before investing or
sending money.
- --------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
- --------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2004, shareholders will be mailed a Tax Form Summary or Form 1099-
DIV, if applicable, reporting the federal tax status of all distributions paid
during the calendar year 2003.
For federal income tax purposes, approximately 100% of the total dividends paid
by the fund from net investment income during the year ended April 30, 2003, is
designated as an exempt-interest dividend.
The fund has the option to use equalization, which is a tax basis dividends paid
deduction from earnings and profits distributed to shareholders upon redemption
of shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTACT INFORMATION
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from 8 a.m.
to 8 p.m. Eastern time.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances (1-800-637-8255)
exchanges or stock and touch-tone required 24 hours a day, 365 days a
bond outlooks year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send you
prospectuses, reports, and proxies electronically. You get timely information
without mailbox clutter (and help your fund save printing and postage costs).
SIGN-UP instructions: If your account is registered with us, go to www.mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available to
you.
[MFS LOGO]
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2003 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
MTL-ANN-6/03 16M
MFS(R) Mutual Funds
ANNUAL REPORT 4/30/03
MFS(R) RESEARCH
BOND FUND
A path for pursuing opportunity
[MFS LOGO}
INVESTMENT MANAGEMENT
MFS(R) RESEARCH BOND FUND
The fund seeks to provide total return (high current income and long-term
growth of capital).
TABLE OF CONTENTS
- ------------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ------------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- ------------------------------------------------------
MANAGEMENT REVIEW 5
- ------------------------------------------------------
PERFORMANCE SUMMARY 8
- ------------------------------------------------------
PORTFOLIO OF INVESTMENTS 12
- ------------------------------------------------------
FINANCIAL STATEMENTS 25
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 43
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 53
- ------------------------------------------------------
TRUSTEES AND OFFICERS 54
- ------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES
OF INVESTORS 56
- ------------------------------------------------------
MFS PRIVACY POLICY 57
- ------------------------------------------------------
FEDERAL TAX INFORMATION 57
- ------------------------------------------------------
CONTACT INFORMATION 58
- ------------------------------------------------------
ASSET ALLOCATION 59
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- ------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is
the best means of achieving superior long term investment performance. When
you're managing billions of dollars for investors, we think you have an
obligation to have in-depth, firsthand knowledge of every company you own
whether it is in the U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize
on the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into
one team that emphasizes a collaborative process in analyzing securities
across the globe. Credit analysts also share their expertise in each segment
of the fixed-income market and work as part of the same team ensuring that
every member has access to information that may have a material effect on
their investment decisions. As MFS continues to grow and as markets become
more complex, we believe our structure will enable us to maintain a consistent
investment process with the goal of providing strong, long-term investment
performance across market capitalizations, investment disciplines, and country
borders for our fund shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts
know the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry
insights and a wider perspective on companies and industries. Our goal is to
make sure those two sets of perspectives coordinate and work well together. As
markets across the globe become more interdependent, we believe our
collaborative environment allows us to produce solid investment ideas for our
portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers - no matter how
talented they may be - can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS' culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income
analysts will look at stability of a company's cash flow, the value of its
assets, and its capital structure to gauge whether the company can generate
enough free cash flow to pay off its debt. As a result of their collaboration,
we believe we're able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we
have rigorous guidelines to assure that the level of risk is measured and
monitored and consistent with the investment philosophies of each of our
portfolios. All told, we believe our culture empowers the members of our
investment team to continue to do their best work and allows them to make
better investment decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
- --------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- --------------------------------------------------------------------------------
THE HUMAN SIDE OF MONEY MANAGEMENT
For more than 75 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands
of institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain
first-hand knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- --------------------------------------------------------------------------------
MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
VOLATILE BUT OVERALL POSITIVE ENVIRONMENT
The bond market overall posted solid gains during the 12 months ended
April 30, 2003, as the economy stayed weak and interest rates came down. The
first half of the period, however, was marked by a series of corporate
scandals that shook investors' faith in corporate America. Problems at Enron,
WorldCom, Adelphia, and other firms drove down stock and corporate bond prices
and precipitated a flight to the quality of Treasuries and other "AAA"-rated
issues. (Principal value and interest of Treasury securities are guaranteed by
the U.S. government if held to maturity.)
In the second half of the period, the corporate bond market turned around,
followed several months later by the stock market. We think the turnaround and
subsequent strong performance in corporate bonds was driven by a combination
of factors. Investors began to perceive that corporate fraud was limited to
relatively few situations and not, as some had feared, endemic
to American business. New legislation was passed to prevent future management
excesses.
And, under pressure from the 2002 scandals and the excesses of the late 1990s,
corporations in general became leaner and more profitable. We believe
companies were diligent in their efforts to clean up their balance sheets by
lowering their debt loads. This had the effect of both improving the overall
quality of corporate debt and lowering the amount of debt outstanding; these
factors pushed prices upward. In the latter part of the period, as some of the
firms whose bonds had been most beaten-down showed significant improvements in
the way they ran their businesses, high-yield debt outperformed high-grade
debt.
SECTOR SELECTION AIDED PERFORMANCE
While the fund outperformed its peer group, as measured by the average
"A"-rated corporate debt fund tracked by Lipper Inc., the fund performed
approximately in line with its benchmark, the Lehman Government/Credit Index
(the Lehman Index).
The key positive factors for performance were sector selection and security
selection within sectors. Early in the period, the fund's strongest-performing
areas were financial services and regulated utilities. We believe that was in
part because investors perceived these as relatively "safe" areas at a time
when corporate credit quality was called into question. Later in the period,
our telecommunications holdings also helped performance.
In the financial services sector, bank holdings did well. We think that was
caused by a strong real estate market and good management of corporate debt
exposure. In the early 1990s, major banks were badly hurt by corporate bond
problems. Learning from that experience, banks have syndicated their exposure
to other banks to spread out their risk. As a result, banks in general held up
relatively well through the recent corporate scandals.
In the utilities sector, we focused on traditional regulated utilities early
in the period, as we had for some time. We had tended to avoid firms with
significant energy trading exposure, and that bias proved positive for the
fund as most energy trading companies were dragged down by the Enron scandal.
Later in the period, however, we invested in some of those beaten-down
companies as they improved their balance sheets and worked to restore investor
confidence. Several of those investments performed well in the latter half of
the period.
The telecommunications sector has seen a wave of consolidation over the past
few years. Weaker players have gone bankrupt or been taken over, and the
remaining companies have improved their balance sheets. The market appeared to
recognize that improvement in the second half of the period, and our telecom
investments helped performance.
PORTFOLIO CONCENTRATION 4/30/03
QUALITY RATINGS
Governments 41.7%
"AAA" 14.1%
"AA" 3.7%
"A" 10.3%
"BBB" 19.6%
"BB" 4.8%
"B" 3.5%
Not Rated and Other 2.3%
The portfolio is actively managed, and current
holdings may be different.
LOWER-RATED DEBT HURT PERFORMANCE
The fund's overexposure to high-yield bonds, compared to its benchmark, hurt
relative performance. Most of the negative effect occurred in the first half
of the period, as high-profile scandals weighed heavily on corporate debt and
particularly on the high-yield sector. While high-yield issues came back
strongly in the second half of the period, the net relative effect of our
high-yield exposure was slightly negative.
/s/ Michael W. Roberge
Michael W. Roberge
Director of Fixed Income Research
The committee of MFS fixed-income research analysts is responsible for the
day-to-day management of the fund under the general supervision of Mr.
Roberge.
Prior to January 1, 2001, MFS(R) Research Bond Fund was available only to MFS
employees and had limited assets. Between February 1, 1999, and
December 29, 2000, all of the fund's fees and expenses were waived or paid
for by the adviser; had these fees been in effect, performance would have
been lower.
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 4/30/03
- --------------------------------------------------------------------------------
The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmarks. Performance results
include the deduction of the maximum applicable sales charge and reflect the
percentage change in net asset value, including reinvestment of dividends and
capital gains distributions. 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. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. (See Notes to Performance Summary.)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
MFS Research Bond Fund -- Class A
1/99 $ 9,525
4/99 9,497
4/00 9,621
4/01 10,910
4/02 11,803
4/03 13,288
Lehman Brothers Government/Credit Index
1/99 $10,000
4/99 9,905
4/00 9,999
4/01 11,210
4/02 12,048
4/03 13,546
TOTAL RETURNS
Cumulative
without sales charge
Class
Share inception
class Date 1-yr 3-yr Life*
A 1/4/99 12.58% 38.11% 39.50%
- --------------------------------------------------------------
B 12/29/00 11.72% 35.55% 36.93%
- --------------------------------------------------------------
C 12/29/00 11.72% 35.58% 36.95%
- --------------------------------------------------------------
I 1/4/99 12.86% 38.77% 40.03%
- --------------------------------------------------------------
R 12/31/02 12.45% 37.95% 39.34%
- --------------------------------------------------------------
529A 7/31/02 12.22% 37.67% 39.06%
- --------------------------------------------------------------
529B 7/31/02 11.65% 36.97% 38.35%
- --------------------------------------------------------------
529C 7/31/02 11.54% 36.84% 38.22%
Average annual
without sales charge
Share
class 1-yr 3-yr Life*
- --------------------------------------------------------------
A 12.58% 11.36% 8.02%
- --------------------------------------------------------------
B 11.72% 10.67% 7.55%
- --------------------------------------------------------------
C 11.72% 10.68% 7.55%
- --------------------------------------------------------------
I 12.86% 11.54% 8.11%
- --------------------------------------------------------------
R 12.45% 11.32% 7.99%
- --------------------------------------------------------------
529A 12.22% 11.25% 7.94%
- --------------------------------------------------------------
529B 11.65% 11.06% 7.81%
- --------------------------------------------------------------
529C 11.54% 11.02% 7.78%
Average annual
with sales charge
A 7.23% 9.57% 6.80%
- --------------------------------------------------------------
B 7.72% 9.85% 7.18%
- --------------------------------------------------------------
C 10.72% 10.68% 7.55%
- --------------------------------------------------------------
529A 6.89% 9.46% 6.73%
- --------------------------------------------------------------
529B 7.65% 10.24% 7.45%
- --------------------------------------------------------------
529C 10.54% 11.02% 7.78%
I and R class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
Comparative benchmarks
Average
Annual
Average A-rated corporate
debt fund+ 9.84% 9.05% 5.87%
- --------------------------------------------------------------
Lehman Brothers
Government/Credit Index# 12.43% 10.65% 7.26%
* For the period from the commencement of the fund's investment operations,
January 4, 1999, through April 30, 2003. Index information is from January 1,
1999.
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX - Measures the performance of the
investment-grade bond market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A and 529A results, including sales charge, reflects the deduction of
the maximum 4.75% sales charge. Class B and 529B results, including sales
charge, reflects the deduction of the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C and 529C
results, including sales charge, redeemed within one year from the end of the
calendar month of purchase reflects the deduction of the 1% CDSC. Class I
shares have no sales charge and are available only to certain investors. Class
R shares have no sales charge and are available only to certain retirement
plans. Class 529A, 529B, and 529C shares are only available in conjunction
with qualified tuition programs, such as the MFS 529 Savings Plan.
Performance for share classes offered after class A shares includes the
performance of the fund's class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences
in sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of
blended performance generally results in higher performance for share classes
with higher operating expenses than the initial share class, and lower
performance for share classes with lower operating expenses than the initial
share class.
All performance results reflect any applicable expense subsidies and waivers
in effect during the periods shown; without these, the results would have been
less favorable. See the prospectus and financial statements for details.
All results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT
THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and political
conditions.
Investments in high yield or lower-rated securities may provide greater
returns but are subject to greater-than-average risk.
Because the portfolio invests in a limited number of companies a change in one
security's value may have a more significant effect on the portfolio's value.
These risks may increase share price volatility. Please see the prospectus
for further information on these and other risk considerations.
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.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS 4/30/03
- --------------------------------------------------------------------------------
The Portfolio of Investments is a list of all securities owned by your fund. It
is categorized by broad-based asset classes.
Bonds - 96.2%
- ----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- ----------------------------------------------------------------------------------------------------
U.S. Bonds - 85.4%
- ----------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 0.5%
- ----------------------------------------------------------------------------------------------------
Allbritton Communications Co., 7.75s, 2012 $1,000 $1,040,000
- ----------------------------------------------------------------------------------------------------
RH Donnelley Finance Corp., 8.875s, 2010## 560 627,200
- ----------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 8.5s, 2008 1,200 1,285,500
- ----------------------------------------------------------------------------------------------------
$2,952,700
- ----------------------------------------------------------------------------------------------------
Aerospace - 0.9%
- ----------------------------------------------------------------------------------------------------
Alliant Techsystems, Inc., 8.5s, 2011 $160 $174,400
- ----------------------------------------------------------------------------------------------------
BAE Systems Holdings, Inc., 6.4s, 2011## 3,810 4,018,373
- ----------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7s, 2006 350 389,777
- ----------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.125s, 2011 723 846,690
- ----------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.75s, 2031 250 317,588
- ----------------------------------------------------------------------------------------------------
$5,746,828
- ----------------------------------------------------------------------------------------------------
Airlines - 0.5%
- ----------------------------------------------------------------------------------------------------
Boeing Capital Corp., 6.5s, 2012 $2,000 $2,151,146
- ----------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 6.545s, 2019 841 730,635
- ----------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 7.256s, 2020 4 3,541
- ----------------------------------------------------------------------------------------------------
$2,885,322
- ----------------------------------------------------------------------------------------------------
Automotive - 0.8%
- ----------------------------------------------------------------------------------------------------
Daimler Chrysler Holdings, 8.5s, 2031 $395 $494,006
- ----------------------------------------------------------------------------------------------------
Ford Motor Co., 7.45s, 2031 1,661 1,478,343
- ----------------------------------------------------------------------------------------------------
TRW Automotive, Inc., 9.375s, 2013## 2,555 2,791,338
- ----------------------------------------------------------------------------------------------------
TRW Automotive, Inc., 11s, 2013## 80 87,600
- ----------------------------------------------------------------------------------------------------
$4,851,287
- ----------------------------------------------------------------------------------------------------
Banks & Credit Cos. - 4.6%
- ----------------------------------------------------------------------------------------------------
Abbey National Capital Trust I, 8.963s, 2049 $1,985 $2,658,999
- ----------------------------------------------------------------------------------------------------
Bank of America Corp., 7.4s, 2011 2,570 3,085,257
- ----------------------------------------------------------------------------------------------------
Citigroup, Inc., 7.25s, 2010 4,043 4,792,932
- ----------------------------------------------------------------------------------------------------
Credit Suisse First Boston, 4.625s, 2008 437 455,424
- ----------------------------------------------------------------------------------------------------
Credit Suisse First Boston, 6.125s, 2011 2,363 2,566,034
- ----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 4.25s, 2005 1,500 1,573,446
- ----------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s, 2049## 2,050 2,431,279
- ----------------------------------------------------------------------------------------------------
Popular North America, Inc., 4.25s, 2008 2,500 2,528,800
- ----------------------------------------------------------------------------------------------------
Socgen Real Estate Co., 7.64s, 2049## $1,944 $2,163,380
- ----------------------------------------------------------------------------------------------------
Unicredito Italiano Capital Trust, 9.2s, 2049## 2,214 2,775,116
- ----------------------------------------------------------------------------------------------------
Wachovia Bank, 7.8s, 2010 1,755 2,138,838
- ----------------------------------------------------------------------------------------------------
Wells Fargo Co., 7.8s, 2010 250 277,504
- ----------------------------------------------------------------------------------------------------
Wells Fargo Co., 6.45s, 2011 1,307 1,499,661
- ----------------------------------------------------------------------------------------------------
$28,946,670
- ----------------------------------------------------------------------------------------------------
Brokerage - 0.9%
- ----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.25s, 2007 $2,000 $2,375,880
- ----------------------------------------------------------------------------------------------------
Morgan Stanley, 5.3s, 2013 930 965,246
- ----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 6.1s, 2006 800 877,660
- ----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 6.6s, 2012 1,501 1,699,117
- ----------------------------------------------------------------------------------------------------
$5,917,903
- ----------------------------------------------------------------------------------------------------
Building - 0.7%
- ----------------------------------------------------------------------------------------------------
American Standard, Inc., 7.375s, 2008 $1,970 $2,127,600
- ----------------------------------------------------------------------------------------------------
CRH America, Inc., 6.95s, 2012 221 251,020
- ----------------------------------------------------------------------------------------------------
Masco Corp., 6.75s, 2006 970 1,077,358
- ----------------------------------------------------------------------------------------------------
Masco Corp., 5.875s, 2012 1,067 1,134,246
- ----------------------------------------------------------------------------------------------------
$4,590,224
- ----------------------------------------------------------------------------------------------------
Business Services - 0.1%
- ----------------------------------------------------------------------------------------------------
General Binding Corp., 9.375s, 2008 $550 $525,250
- ----------------------------------------------------------------------------------------------------
Chemicals - 0.3%
- ----------------------------------------------------------------------------------------------------
Dow Chemical Co., 5.75s, 2008 $2,000 $2,155,144
- ----------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.5%
- ----------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 $700 $765,357
- ----------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2008 1,976 2,110,548
- ----------------------------------------------------------------------------------------------------
$2,875,905
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.1%
- ----------------------------------------------------------------------------------------------------
Newell Rubbermaid, Inc., 4.625s, 2009 $728 $747,041
- ----------------------------------------------------------------------------------------------------
Containers - 0.2%
- ----------------------------------------------------------------------------------------------------
Owens-Brockway Glass Container, 8.25s, 2013## $735 $756,131
- ----------------------------------------------------------------------------------------------------
Pliant Corp., 13s, 2010 550 508,750
- ----------------------------------------------------------------------------------------------------
$1,264,881
- ----------------------------------------------------------------------------------------------------
Corporate Asset-Backed - 7.7%
- ----------------------------------------------------------------------------------------------------
Americredit Automobile Receivable Trust, 5.37s, 2008 $1,040 $1,084,645
- ----------------------------------------------------------------------------------------------------
Amresco Commercial Mortgage Funding I Corp., 7s, 2029## 700 696,749
- ----------------------------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage Securities, Inc., 6.8s, 2008 292 319,732
- ----------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 4.79s, 2009 650 687,082
- ----------------------------------------------------------------------------------------------------
Centex Home Equity, 5.93s, 2025 554 561,478
- ----------------------------------------------------------------------------------------------------
Certificates Funding Corp., 6.716s, 2004 195 204,894
- ----------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., 6.39s, 2030 2,000 2,261,664
- ----------------------------------------------------------------------------------------------------
CNH Equipment Trust, 4.3s, 2008 421 427,089
- ----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 5.44s, 2030 550 462,316
- ----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 5.8s, 2030 183 192,661
- ----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 6.04s, 2030 900 999,018
- ----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 6.49s, 2031 2,400 2,716,124
- ----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 7.03s, 2031 750 872,516
- ----------------------------------------------------------------------------------------------------
Commercial Mortgage Pass-Through Certificate, 5.645s, 2032 992 931,162
- ----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 2.89s, 2009## 2,000 2,007,740
- ----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 3.5s, 2009## 600 609,282
- ----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 3.52s, 2009## 1,400 1,421,434
- ----------------------------------------------------------------------------------------------------
Criimi Mae Corp., 6.701s, 2030## 10 11,054
- ----------------------------------------------------------------------------------------------------
Criimi Mae Corp., 7s, 2033## 2,389 2,661,441
- ----------------------------------------------------------------------------------------------------
DLJ Commercial Mortgage Corp., 0.91s, 2005 (Interest Only) 300 4,925
- ----------------------------------------------------------------------------------------------------
Falcon Franchise Loan LLC, 3.408s, 2023## (Interest Only) 935 141,806
- ----------------------------------------------------------------------------------------------------
Falcon Franchise Loan LLC, 4.198s, 2023## (Interest Only) 13,672 2,614,845
- ----------------------------------------------------------------------------------------------------
First Union Lehman Brothers Bank, 0.77s, 2028 (Interest Only) 40,219 1,083,183
- ----------------------------------------------------------------------------------------------------
First Union Lehman Brothers Bank, 6.56s, 2035 1,980 2,248,620
- ----------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., 6.269s, 2035 2,560 2,892,014
- ----------------------------------------------------------------------------------------------------
Greenpoint Manufactured Housing, 6.26s, 2015 34 34,458
- ----------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, 6.06s, 2030 57 61,110
- ----------------------------------------------------------------------------------------------------
Household Automotive Trust, 3.44s, 2009 1,500 1,534,804
- ----------------------------------------------------------------------------------------------------
Hyundai Auto Receivables Trust, 2.8s, 2007## 1,000 1,015,783
- ----------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 3.9s, 2006 1,000 1,019,143
- ----------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust, 0.77s, 2035 (Interest Only) 43,103 1,185,928
- ----------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 5.65s, 2030 27 28,075
- ----------------------------------------------------------------------------------------------------
MFN Automobile Receivables Trust, 5.07s, 2007## 53 53,498
- ----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 6.01s, 2030 $46 $49,141
- ----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 7.559s, 2030 550 609,610
- ----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.663s, 2030 1,285 1,455,489
- ----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 1.098s, 2031 (Interest Only) 27,060 940,917
- ----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.337s, 2031 2,910 3,271,210
- ----------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 0.89s, 2023 (Interest Only) 13,462 395,444
- ----------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 6.001s, 2030 179 192,942
- ----------------------------------------------------------------------------------------------------
PSE&G Transitions Funding LLC, 5.98s, 2008 170 186,441
- ----------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust., 5.35s, 2026 262 264,026
- ----------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 2.25s, 2032## 1,500 1,511,719
- ----------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 3.39s, 2033## 2,500 2,507,900
- ----------------------------------------------------------------------------------------------------
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032## 1,316 1,453,555
- ----------------------------------------------------------------------------------------------------
Triad Auto Receivables Owner Trust, 3.24s, 2009 1,578 1,620,513
- ----------------------------------------------------------------------------------------------------
Vanderbilt Mortgage & Finance, Inc., 5.17s, 2014 350 356,376
- ----------------------------------------------------------------------------------------------------
Vanderbilt Mortgage & Finance, Inc., 6.12s, 2015 338 343,399
- ----------------------------------------------------------------------------------------------------
WFS Financial Owner Trust, 2.39s, 2007 310 313,086
- ----------------------------------------------------------------------------------------------------
$48,518,041
- ----------------------------------------------------------------------------------------------------
Defense Electronics - 0.1%
- ----------------------------------------------------------------------------------------------------
Raytheon Co., 5.7s, 2003 $15 $15,187
- ----------------------------------------------------------------------------------------------------
Raytheon Co., 8.3s, 2010 645 767,180
- ----------------------------------------------------------------------------------------------------
$782,367
- ----------------------------------------------------------------------------------------------------
Energy - Independent - 0.6%
- ----------------------------------------------------------------------------------------------------
Apache Corp., 7.375s, 2047 $47 $56,722
- ----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.625s, 2005 500 557,732
- ----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 4.375s, 2007 1,000 1,034,821
- ----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.25s, 2011 1,337 1,565,495
- ----------------------------------------------------------------------------------------------------
Stone Energy Corp., 8.25s, 2011 500 518,750
- ----------------------------------------------------------------------------------------------------
$3,733,520
- ----------------------------------------------------------------------------------------------------
Entertainment - 1.0%
- ----------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 6.125s, 2006 $200 $212,902
- ----------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 7.7s, 2032 1,790 2,000,217
- ----------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 8.875s, 2012 500 629,404
- ----------------------------------------------------------------------------------------------------
Turner Broadcasting Systems, Inc., 8.375s, 2013 500 579,428
- ----------------------------------------------------------------------------------------------------
Walt Disney Co., 6.75s, 2006 2,845 3,120,552
- ----------------------------------------------------------------------------------------------------
$6,542,503
- ----------------------------------------------------------------------------------------------------
Financial Institutions - 1.9%
- ----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.85s, 2004 $500 $528,363
- ----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2006 550 591,928
- ----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7.5s, 2005 2,046 2,140,083
- ----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.75s, 2006 1,000 1,054,488
- ----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 7s, 2012 400 409,835
- ----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8s, 2031 3,155 3,286,052
- ----------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.7s, 2012 2,300 2,449,725
- ----------------------------------------------------------------------------------------------------
SLM Corp., 5.375s, 2013 1,600 1,690,781
- ----------------------------------------------------------------------------------------------------
$12,151,255
- ----------------------------------------------------------------------------------------------------
Food & Beverage Products - 0.2%
- ----------------------------------------------------------------------------------------------------
Coors Brewing Co., 6.375s, 2012 337 $377,345
- ----------------------------------------------------------------------------------------------------
Kellogg Co., 6s, 2006 80 87,885
- ----------------------------------------------------------------------------------------------------
Kellogg Co., 6.6s, 2011 400 457,378
- ----------------------------------------------------------------------------------------------------
Michael Foods, Inc., 11.75s, 2011 450 513,000
- ----------------------------------------------------------------------------------------------------
$1,435,608
- ----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.6%
- ----------------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.85s, 2012 $1,234 $1,396,086
- ----------------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.8s, 2032 1,500 1,587,394
- ----------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 6.75s, 2012 700 784,180
- ----------------------------------------------------------------------------------------------------
$3,767,660
- ----------------------------------------------------------------------------------------------------
Gaming - 0.6%
- ----------------------------------------------------------------------------------------------------
Aztar Corp., 8.875s, 2007 $1,000 $1,045,000
- ----------------------------------------------------------------------------------------------------
Harrahs Operating, Inc., 7.125s, 2007 675 741,019
- ----------------------------------------------------------------------------------------------------
MGM Grand, Inc., 6.95s, 2005 400 415,000
- ----------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.5s, 2010 760 851,200
- ----------------------------------------------------------------------------------------------------
Station Casinos, Inc., 8.375s, 2008 550 589,875
- ----------------------------------------------------------------------------------------------------
$3,642,094
- ----------------------------------------------------------------------------------------------------
Industrial - 0.6%
- ----------------------------------------------------------------------------------------------------
Kennametal, Inc., 7.2s, 2012 $1,484 $1,579,825
- ----------------------------------------------------------------------------------------------------
Timken Co., 5.75s, 2010 1,927 1,963,881
- ----------------------------------------------------------------------------------------------------
$3,543,706
- ----------------------------------------------------------------------------------------------------
Insurance - 1.6%
- ----------------------------------------------------------------------------------------------------
AIG Sunamerica Global Financing II, 7.6s, 2005## $525 $584,807
- ----------------------------------------------------------------------------------------------------
AIG Sunamerica Global Financing IV, 5.85s, 2006## 430 467,191
- ----------------------------------------------------------------------------------------------------
AIG Sunamerica Global Financing IX, 5.1s, 2007## 2,260 2,409,377
- ----------------------------------------------------------------------------------------------------
Metlife, Inc., 6.5s, 2032 2,450 2,717,648
- ----------------------------------------------------------------------------------------------------
Prudential Funding Corp., 6.6s, 2008 800 904,455
- ----------------------------------------------------------------------------------------------------
Safeco Corp., 4.875s, 2010 2,500 2,544,095
- ----------------------------------------------------------------------------------------------------
Safeco Corp., 7.25s, 2012 180 207,210
- ----------------------------------------------------------------------------------------------------
$9,834,783
- ----------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.3%
- ----------------------------------------------------------------------------------------------------
Allstate Corp., 7.2s, 2009 $683 $796,379
- ----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 6.375s, 2033## 1,056 1,124,378
- ----------------------------------------------------------------------------------------------------
Willis Corroon Corp., 9s, 2009 295 315,650
- ----------------------------------------------------------------------------------------------------
$2,236,407
- ----------------------------------------------------------------------------------------------------
Media - Cable - 1.4%
- ----------------------------------------------------------------------------------------------------
Belo Corp., 7.25s, 2027 $350 $380,484
- ----------------------------------------------------------------------------------------------------
Belo Corp., 7.75s, 2027 1,078 1,236,435
- ----------------------------------------------------------------------------------------------------
Comcast Corp., 6.5s, 2015 1,508 1,638,284
- ----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.75s, 2010 500 600,449
- ----------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 8.125s, 2009 2,520 2,671,200
- ----------------------------------------------------------------------------------------------------
TCI Communications Financing III, 9.65s, 2027 25 27,816
- ----------------------------------------------------------------------------------------------------
Tele-Communications, Inc., 9.8s, 2012 1,835 2,367,499
- ----------------------------------------------------------------------------------------------------
$8,922,167
- ----------------------------------------------------------------------------------------------------
Medical & Health Technology Services - 0.8%
- ----------------------------------------------------------------------------------------------------
HCA, Inc., 7.125s, 2006 $304 $326,815
- ----------------------------------------------------------------------------------------------------
HCA, Inc., 8.75s, 2010 2,610 3,052,361
- ----------------------------------------------------------------------------------------------------
HCA, Inc., 7.875s, 2011 670 754,067
- ----------------------------------------------------------------------------------------------------
HCA, Inc., 6.95s, 2012 275 295,713
- ----------------------------------------------------------------------------------------------------
HCA, Inc., 6.25s, 2013 398 408,093
- ----------------------------------------------------------------------------------------------------
$4,837,049
- ----------------------------------------------------------------------------------------------------
Metals & Mining - 0.1%
- ----------------------------------------------------------------------------------------------------
Phelps Dodge Corp., 8.75s, 2011 $480 $541,824
- ----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.7%
- ----------------------------------------------------------------------------------------------------
Kern River Funding Corp., 4.893s, 2018## $2,300 $2,297,102
- ----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 6.75s, 2011 500 568,635
- ----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 6.5s, 2012 2,442 2,719,778
- ----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.4s, 2031 60 70,564
- ----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.75s, 2032 1,213 1,486,886
- ----------------------------------------------------------------------------------------------------
Plains All American Pipeline, 7.75s, 2012 675 735,750
- ----------------------------------------------------------------------------------------------------
Reliant Energy Resources Corp., 8.125s, 2005 965 1,042,200
- ----------------------------------------------------------------------------------------------------
Williams Cos, Inc., 7.75s, 2031 1,950 1,755,000
- ----------------------------------------------------------------------------------------------------
$10,675,915
- ----------------------------------------------------------------------------------------------------
Oil Services - 1.3%
- ----------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 8.125s, 2011## $550 $594,000
- ----------------------------------------------------------------------------------------------------
Conocophillips, 5.9s, 2032 2,510 2,599,429
- ----------------------------------------------------------------------------------------------------
Dresser, Inc., 9.375s, 2011 250 257,500
- ----------------------------------------------------------------------------------------------------
Pioneer Natural Resources Co., 7.5s, 2012 2,205 2,503,502
- ----------------------------------------------------------------------------------------------------
XTO Energy, Inc., 6.25s, 2013## 2,167 2,259,097
- ----------------------------------------------------------------------------------------------------
$8,213,528
- ----------------------------------------------------------------------------------------------------
Pollution Control - 0.7%
- ----------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 10s, 2009 $200 $213,750
- ----------------------------------------------------------------------------------------------------
Joy Global, Inc., 8.75s, 2012 637 687,960
- ----------------------------------------------------------------------------------------------------
USA Waste Services, Inc., 7s, 2004 400 425,110
- ----------------------------------------------------------------------------------------------------
USA Waste Services, Inc., 7s, 2028 1,536 1,699,841
- ----------------------------------------------------------------------------------------------------
Waste Management, Inc., 7.1s, 2026 1,500 1,673,205
- ----------------------------------------------------------------------------------------------------
$4,699,866
- ----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.7%
- ----------------------------------------------------------------------------------------------------
Houghton Mifflin Co., 8.25s, 2011## $1,605 $1,705,312
- ----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 6.703s, 2004 500 521,207
- ----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 7.75s, 2024 750 853,100
- ----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 8.5s, 2025 150 179,172
- ----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 6.55s, 2033## 1,000 1,015,705
- ----------------------------------------------------------------------------------------------------
$4,274,496
- ----------------------------------------------------------------------------------------------------
Railroads - 0.4%
- ----------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.34s, 2003 $20 $20,470
- ----------------------------------------------------------------------------------------------------
Union Pacific Corp., 5.84s, 2004 160 166,227
- ----------------------------------------------------------------------------------------------------
Union Pacific Corp., 7.25s, 2008 1,980 2,309,422
- ----------------------------------------------------------------------------------------------------
$2,496,119
- ----------------------------------------------------------------------------------------------------
Real Estate - 1.1%
- ----------------------------------------------------------------------------------------------------
EOP Operating Ltd., 6.8s, 2009 $2,204 $2,482,740
- ----------------------------------------------------------------------------------------------------
Kimco Realty Corp., 6s, 2012 1,500 1,614,862
- ----------------------------------------------------------------------------------------------------
Simon Property Group LP, 6.375s, 2007 950 1,039,853
- ----------------------------------------------------------------------------------------------------
Vornado Reality Trust, 5.625s, 2007 1,638 1,686,544
- ----------------------------------------------------------------------------------------------------
$6,823,999
- ----------------------------------------------------------------------------------------------------
Restaurants & Lodging - 0.2%
- ----------------------------------------------------------------------------------------------------
Yum! Brands, Inc., 8.875s, 2011 $1,195 $1,389,188
- ----------------------------------------------------------------------------------------------------
Retail - 0.4%
- ----------------------------------------------------------------------------------------------------
Dollar General Corp., 8.625s, 2010 $1,340 $1,460,600
- ----------------------------------------------------------------------------------------------------
Sears Roebuck Acceptance Corp., 7s, 2032 1,212 1,237,797
- ----------------------------------------------------------------------------------------------------
$2,698,397
- ----------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
- ----------------------------------------------------------------------------------------------------
Kroger Co., 7.8s, 2007 $1,925 $2,208,193
- ----------------------------------------------------------------------------------------------------
Supranational - 0.6%
- ----------------------------------------------------------------------------------------------------
Central American Bank, 6.75s, 2013## $1,920 $2,003,566
- ----------------------------------------------------------------------------------------------------
Corp. Andina De Fomento, 6.875s, 2012 2,000 2,131,460
- ----------------------------------------------------------------------------------------------------
$4,135,026
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.4%
- ----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.75s, 2031 $1,357 $1,689,784
- ----------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 792 853,474
- ----------------------------------------------------------------------------------------------------
$2,543,258
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.7%
- ----------------------------------------------------------------------------------------------------
Citizens Communications Co., 7.625s, 2008 $500 $584,182
- ----------------------------------------------------------------------------------------------------
Sprint Capital Corp., 7.125s, 2006 1,257 1,326,135
- ----------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6.875s, 2028 1,646 1,522,550
- ----------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 1,010 1,077,640
- ----------------------------------------------------------------------------------------------------
$4,510,507
- ----------------------------------------------------------------------------------------------------
Transportation - Services - 0.2%
- ----------------------------------------------------------------------------------------------------
Federal Express Corp., 9.65s, 2012 $783 $1,032,564
- ----------------------------------------------------------------------------------------------------
U.S. Government Agencies - 24.2%
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 3.5s, 2003 $3,000 $3,026,073
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.5s, 2004 20,800 21,631,459
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2006 13,906 15,294,834
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.125s, 2012 8,412 9,032,696
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.5s, 2013 1,200 1,225,787
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., TBA, 5s, 2017 6,700 6,886,437
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., TBA, 5.5s, 2032 6,000 6,163,128
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2004 12,150 12,961,365
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.125s, 2005 18,990 20,855,976
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.085s, 2006 509 566,591
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.29s, 2006 488 542,857
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.355s, 2006 484 539,970
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2008 12,900 14,637,991
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.65s, 2008 1,411 1,512,584
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2017 4,000 4,175,834
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2018 974 1,013,884
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2030 5 5,113
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.08s, 2031 763 764,419
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2031 394 419,482
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2032 9,492 9,917,674
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2033 6,705 6,899,071
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., TBA, 6s, 2031 7,500 7,804,687
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., TBA, 5.5s, 2032 5,000 5,095,310
- ----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6.5s, 2028 73 77,147
- ----------------------------------------------------------------------------------------------------
Small Business Administration, 5.34s, 2021 721 745,138
- ----------------------------------------------------------------------------------------------------
Small Business Administration, 6.34s, 2021 139 153,635
- ----------------------------------------------------------------------------------------------------
Small Business Administration, 6.35s, 2021 111 122,263
- ----------------------------------------------------------------------------------------------------
Small Business Administration, 6.44s, 2021 141 155,954
- ----------------------------------------------------------------------------------------------------
Small Business Administration, 6.07s, 2022 482 523,566
- ----------------------------------------------------------------------------------------------------
$152,750,925
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 21.0%
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8.125s, 2019 $24 $33,664
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.25s, 2023 16,923 20,043,178
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375s, 2031 4,185 4,566,555
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 2s, 2004 21,380 21,601,326
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 5.875s, 2004 6,889 7,364,499
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.5s, 2006 13,970 14,562,635
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.875s, 2006 13,183 15,063,120
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2007 1,244 1,261,057
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.25s, 2007 1,467 1,506,999
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.375s, 2007 6,549 7,132,962
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.375s, 2007 3,748 4,021,634
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25s, 2010 8,886 10,244,427
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2012 7,371 7,916,881
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4s, 2012 3,474 3,518,373
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.875s, 2013 13,864 13,882,411
- ----------------------------------------------------------------------------------------------------
$132,719,721
- ----------------------------------------------------------------------------------------------------
Utilities - Electric - 3.4%
- ----------------------------------------------------------------------------------------------------
Centerpoint Energy Resources Corp., 7.875s, 2013## $1,935 $2,220,413
- ----------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 7.6s, 2003 345 348,889
- ----------------------------------------------------------------------------------------------------
Exelon Generation Co. LLC, 6.95s, 2011 4,026 4,513,158
- ----------------------------------------------------------------------------------------------------
First Energy Corp., 6.45s, 2011 2,075 2,243,187
- ----------------------------------------------------------------------------------------------------
Midamerican Energy Holdings Co., 5.875s, 2012 1,482 1,548,883
- ----------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375s, 2004 541 559,529
- ----------------------------------------------------------------------------------------------------
Oncor Electric Delivery Co., 7s, 2022 2,867 3,157,189
- ----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.75s, 2006 340 375,033
- ----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.85s, 2012 502 572,656
- ----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 7s, 2031 510 571,802
- ----------------------------------------------------------------------------------------------------
PSEG Energy Holdings LLC, 7.75s, 2007## 1,240 1,298,900
- ----------------------------------------------------------------------------------------------------
PSEG Power LLC, 6.95s, 2012 510 581,879
- ----------------------------------------------------------------------------------------------------
TXU Energy Co., 7s, 2013## 3,321 3,708,461
- ----------------------------------------------------------------------------------------------------
$21,699,979
- ----------------------------------------------------------------------------------------------------
Utilities - Gas
- ----------------------------------------------------------------------------------------------------
Amerigas Partners, 8.875s, 2011 $205 $221,400
- ----------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.5%
- ----------------------------------------------------------------------------------------------------
Verizon Global Funding Corp., 7.75s, 2030 $1,960 $2,420,139
- ----------------------------------------------------------------------------------------------------
Verizon Global Funding Corp., 7.75s, 2032 697 861,827
- ----------------------------------------------------------------------------------------------------
$3,281,966
- ----------------------------------------------------------------------------------------------------
Total U.S. Bonds $540,323,186
- ----------------------------------------------------------------------------------------------------
Foreign Bonds - 8.6%
- ----------------------------------------------------------------------------------------------------
Australia - 0.1%
- ----------------------------------------------------------------------------------------------------
Burns Philip Capital Property Ltd., 9.75s, 2012 (Food &
Beverage Products)## $600 $600,000
- ----------------------------------------------------------------------------------------------------
Canada - 1.2%
- ----------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 8.85s, 2030 (Forest & Paper Products) $2,982 $3,304,444
- ----------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 7.875s, 2012 (Media - Cable) 1,404 1,502,280
- ----------------------------------------------------------------------------------------------------
Telus Corp., 8s, 2011 (Telecommunications - Wireless) 2,205 2,491,650
- ----------------------------------------------------------------------------------------------------
$7,298,374
- ----------------------------------------------------------------------------------------------------
Dominican Republic - 0.5%
- ----------------------------------------------------------------------------------------------------
Dominican Republic, 9.04s, 2013## $3,080 $3,099,250
- ----------------------------------------------------------------------------------------------------
France - 1.1%
- ----------------------------------------------------------------------------------------------------
Crown European Holdings S.A., 9.5s, 2011 (Containers)## $2,185 $2,327,025
- ----------------------------------------------------------------------------------------------------
France Telecom S.A., 8.5s, 2031 (Telecommunications - Wireline) 3,670 4,881,526
- ----------------------------------------------------------------------------------------------------
$7,208,551
- ----------------------------------------------------------------------------------------------------
Grand Cayman Islands - 0.2%
- ----------------------------------------------------------------------------------------------------
DBS Capital Funding Corp., 7.657s, 2049 (Banks & Credit Cos.)## $779 $887,355
- ----------------------------------------------------------------------------------------------------
Pemex Finance Ltd., 9.69s, 2009 (Financial Institutions) 180 218,498
- ----------------------------------------------------------------------------------------------------
$1,105,853
- ----------------------------------------------------------------------------------------------------
Ireland - 0.1%
- ----------------------------------------------------------------------------------------------------
MDP Acquisitions PLC, 9.625s, 2012 (Forest & Paper Products)## $375 $406,875
- ----------------------------------------------------------------------------------------------------
Luxembourg - 1.0%
- ----------------------------------------------------------------------------------------------------
Mobile Telesystems, 10.95s, 2004 (Telecommunications - Wireline) $1,888 $2,015,440
- ----------------------------------------------------------------------------------------------------
Mobile Telesystems, 9.75s, 2008 (Telecommunications - Wireline)## 500 532,500
- ----------------------------------------------------------------------------------------------------
Tyco International Group S.A., 6.75s, 2011 (Conglomerates) 3,920 3,920,000
- ----------------------------------------------------------------------------------------------------
$6,467,940
- ----------------------------------------------------------------------------------------------------
Malaysia - 0.5%
- ----------------------------------------------------------------------------------------------------
Petronas Capital Ltd., 7.875s, 2022 (Oil Services)## $2,700 $2,973,521
- ----------------------------------------------------------------------------------------------------
Mexico - 1.0%
- ----------------------------------------------------------------------------------------------------
BBVA Bancomer Capital Trust, 10.5s, 2011 (Banks & Credit Cos.) $775 $887,262
- ----------------------------------------------------------------------------------------------------
BBVA Bancomer Capital Trust I, 10.5s, 2011 (Banks & Credit Cos.)## 3,007 3,427,980
- ----------------------------------------------------------------------------------------------------
Grupo Televisa S.A., 8.5s, 2032 (Media - Cable) 2,225 2,225,000
- ----------------------------------------------------------------------------------------------------
$6,540,242
- ----------------------------------------------------------------------------------------------------
Netherlands - 0.7%
- ----------------------------------------------------------------------------------------------------
Deutsche Telekom, 8.75s, 2030 (Telecommunications - Wireline) $1,994 $2,464,113
- ----------------------------------------------------------------------------------------------------
Kazkommerts International, 10.125s, 2007 (Banks & Credit Cos.)## 1,940 2,126,725
- ----------------------------------------------------------------------------------------------------
$4,590,838
- ----------------------------------------------------------------------------------------------------
Qatar - 0.5%
- ----------------------------------------------------------------------------------------------------
State of Qatar, 9.75s, 2030## $2,262 $3,014,115
- ----------------------------------------------------------------------------------------------------
Russia - 0.4%
- ----------------------------------------------------------------------------------------------------
Gazprom, 9.625s, 2013 (Utilities - Gas)## $2,650 $2,822,250
- ----------------------------------------------------------------------------------------------------
United Kingdom - 1.3%
- ----------------------------------------------------------------------------------------------------
Barclays Bank PLC, 6.86s, 2032 (Banks & Credit Cos.)## $1,001 $1,111,617
- ----------------------------------------------------------------------------------------------------
Barclays Bank PLC, 8.55s, 2049 (Banks & Credit Cos.)## 1,131 1,418,550
- ----------------------------------------------------------------------------------------------------
British Sky Broadcasting Group, 8.2s, 2009 (Advertising & Broadcasting) 1,593 1,816,020
- ----------------------------------------------------------------------------------------------------
Orange PLC, 9s, 2009 (Telecommunications - Wireless) 100 109,973
- ----------------------------------------------------------------------------------------------------
Permanent Financing PLC, 4.2s, 2007 (Special Products & Services) 1,485 1,546,657
- ----------------------------------------------------------------------------------------------------
Royal Bank Scotland Group PLC, 8.817s, 2049 (Banks & Credit Cos.) 300 334,983
- ----------------------------------------------------------------------------------------------------
United Biscuits Finance, 10.75s, 2011 (Food & Beverage Products) GBP 1,000 1,807,208
- ----------------------------------------------------------------------------------------------------
$8,145,008
- ----------------------------------------------------------------------------------------------------
Total Foreign Bonds $54,272,817
- ----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- ----------------------------------------------------------------------------------------------------
Municipal Bonds - 2.2%
- ----------------------------------------------------------------------------------------------------
Anderson County SC Joint Municipal Water, 5s, 2032 $1,500 $1,543,740
- ----------------------------------------------------------------------------------------------------
Jefferson County Alabama Sewer Revenue, 5s, 2032 2,800 2,843,960
- ----------------------------------------------------------------------------------------------------
Metropolitan, NY, Transportation Authority Revenue, 5s, 2030 1,500 1,538,145
- ----------------------------------------------------------------------------------------------------
Philadelphia, PA, Water & Wastewater Revenue, 5s, 2031 990 1,014,334
- ----------------------------------------------------------------------------------------------------
Richmond Virginia Public Utility Revenue, 5s, 2033 5,000 5,131,800
- ----------------------------------------------------------------------------------------------------
South Carolina Transit Infrastructure Revenue, 5s, 2033 1,500 1,538,835
- ----------------------------------------------------------------------------------------------------
Total Municipal Bonds $13,610,814
- ----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $587,494,039) $608,206,817
- ----------------------------------------------------------------------------------------------------
Short-Term Obligations - 6.4%
- ----------------------------------------------------------------------------------------------------
Abbey National LLC, due 5/01/03 $22,375 $22,375,000
- ----------------------------------------------------------------------------------------------------
Citigroup, Inc., due 5/01/03 3,740 3,740,000
- ----------------------------------------------------------------------------------------------------
General Electric Co., due 5/01/03 14,328 14,328,000
- ----------------------------------------------------------------------------------------------------
UBS Finance, Inc., due 5/01/03 187 187,000
- ----------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $40,630,000
- ----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $628,124,039) $648,836,817
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (2.6)% (16,489,178)
- ----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $632,347,639
- ----------------------------------------------------------------------------------------------------
##SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown
in various currencies.
A list of abbreviations is shown below:
GBP = British Pounds
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 4/30/03
ASSETS
Investments, at value (identified cost, $628,124,039) $648,836,817
- --------------------------------------------------------------------------------------------
Cash 27,353
- --------------------------------------------------------------------------------------------
Receivable for fund shares sold 4,495,505
- --------------------------------------------------------------------------------------------
Receivable for investments sold 3,559,502
- --------------------------------------------------------------------------------------------
Receivable from investment adviser 328,915
- --------------------------------------------------------------------------------------------
Interest receivable 8,524,223
- --------------------------------------------------------------------------------------------
Total assets $665,772,315
- --------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $2,569,351
- --------------------------------------------------------------------------------------------
Payable for fund shares reacquired 542,363
- --------------------------------------------------------------------------------------------
Payable for investments purchased 4,405,229
- --------------------------------------------------------------------------------------------
Payable for TBA purchase commitments 25,743,078
- --------------------------------------------------------------------------------------------
Payable to affiliates
- --------------------------------------------------------------------------------------------
Management fee 5,992
- --------------------------------------------------------------------------------------------
Distribution and service fee 4,851
- --------------------------------------------------------------------------------------------
Administrative fee 303
- --------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 153,509
- --------------------------------------------------------------------------------------------
Total liabilities $33,424,676
- --------------------------------------------------------------------------------------------
Net assets $632,347,639
- --------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $609,891,510
- --------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 20,712,855
- --------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments
and foreign currency transactions 2,443,664
- --------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment
income (700,390)
- --------------------------------------------------------------------------------------------
Net assets $632,347,639
- --------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 59,520,774
- --------------------------------------------------------------------------------------------
Class A shares
Net assets $221,871,810
- --------------------------------------------------------------------------------------------
Shares outstanding 20,892,170
- --------------------------------------------------------------------------------------------
Net asset value per share $10.62
- --------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$10.62) $11.15
- --------------------------------------------------------------------------------------------
Class B shares
Net assets $98,652,585
- --------------------------------------------------------------------------------------------
Shares outstanding 9,272,698
- --------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.64
- --------------------------------------------------------------------------------------------
Class C shares
Net assets $41,767,765
- --------------------------------------------------------------------------------------------
Shares outstanding 3,926,120
- --------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.64
- --------------------------------------------------------------------------------------------
Class I shares
Net assets $259,920,159
- --------------------------------------------------------------------------------------------
Shares outstanding 24,475,394
- --------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $10.62
- --------------------------------------------------------------------------------------------
Class R shares
Net assets $9,879,827
- --------------------------------------------------------------------------------------------
Shares outstanding 930,328
- --------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $10.62
- --------------------------------------------------------------------------------------------
Class 529A shares
Net assets $156,852
- --------------------------------------------------------------------------------------------
Shares outstanding 14,788
- --------------------------------------------------------------------------------------------
Net asset value per share $10.61
- --------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$10.61) $11.14
- --------------------------------------------------------------------------------------------
Class 529B shares
Net assets $41,322
- --------------------------------------------------------------------------------------------
Shares outstanding 3,885
- --------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.64
- --------------------------------------------------------------------------------------------
Class 529C shares
Net assets $57,319
- --------------------------------------------------------------------------------------------
Shares outstanding 5,391
- --------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.63
- --------------------------------------------------------------------------------------------
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, Class C, Class 529A, Class 529B and Class 529C shares.
See notes to financial statements.
- --------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
FOR YEAR ENDED 4/30/03
NET INVESTMENT INCOME
Income
- --------------------------------------------------------------------------------------------
Interest income $15,945,787
- --------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------
Management fee $1,560,481
- --------------------------------------------------------------------------------------------
Trustees' compensation 16,946
- --------------------------------------------------------------------------------------------
Shareholder servicing agent fee 312,290
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 418,043
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 690,103
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 289,317
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 12,118
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 159
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 144
- --------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 149
- --------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 114
- --------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 36
- --------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 37
- --------------------------------------------------------------------------------------------
Administrative fee 35,084
- --------------------------------------------------------------------------------------------
Registration fees 165,731
- --------------------------------------------------------------------------------------------
Custodian fee 130,713
- --------------------------------------------------------------------------------------------
Printing 59,247
- --------------------------------------------------------------------------------------------
Auditing fees 42,945
- --------------------------------------------------------------------------------------------
Postage 21,283
- --------------------------------------------------------------------------------------------
Legal fees 5,035
- --------------------------------------------------------------------------------------------
Miscellaneous 169,456
- --------------------------------------------------------------------------------------------
Total expenses $3,929,431
- --------------------------------------------------------------------------------------------
Fees paid indirectly (5,776)
- --------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and distributor (1,035,704)
- --------------------------------------------------------------------------------------------
Net expenses $2,887,951
- --------------------------------------------------------------------------------------------
Net investment income $13,057,836
- --------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $5,754,665
- --------------------------------------------------------------------------------------------
Foreign currency transactions (7,855)
- --------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
transactions $5,746,810
- --------------------------------------------------------------------------------------------
Change in unrealized appreciation on
- --------------------------------------------------------------------------------------------
Investments $20,476,760
- --------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies 77
- --------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation $20,476,837
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency $26,223,647
- --------------------------------------------------------------------------------------------
Increase in net assets from operations $39,281,483
- --------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
FOR YEARS ENDED 4/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $13,057,836 $2,783,609
- --------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
transactions 5,746,810 84,925
- --------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation 20,476,837 325,660
- ---------------------------------------------------------------------------- ------------
Increase in net assets from operations $39,281,483 $3,194,194
- ---------------------------------------------------------------------------- ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- --------------------------------------------------------------------------------------------------
Class A $(6,542,041) $(1,274,745)
- --------------------------------------------------------------------------------------------------
Class B (3,180,566) (1,041,350)
- --------------------------------------------------------------------------------------------------
Class C (1,331,103) (432,942)
- --------------------------------------------------------------------------------------------------
Class I (5,101,606) (34,572)
- --------------------------------------------------------------------------------------------------
Class R (124,405) --
- --------------------------------------------------------------------------------------------------
Class 529A (2,407) --
- --------------------------------------------------------------------------------------------------
Class 529B (632) --
- --------------------------------------------------------------------------------------------------
Class 529C (658) --
- --------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions
- --------------------------------------------------------------------------------------------------
Class A (100,998) (36,124)
- --------------------------------------------------------------------------------------------------
Class B (60,918) (36,157)
- --------------------------------------------------------------------------------------------------
Class C (24,979) (12,644)
- --------------------------------------------------------------------------------------------------
Class I (73,126) (1)
- --------------------------------------------------------------------------------------------------
Class 529A (46) --
- --------------------------------------------------------------------------------------------------
Class 529B (7) --
- --------------------------------------------------------------------------------------------------
Class 529C (14) --
- --------------------------------------------------------------------------------------------------
In excess of net investment income
- --------------------------------------------------------------------------------------------------
Class A -- (128,513)
- --------------------------------------------------------------------------------------------------
Class B -- (104,983)
- --------------------------------------------------------------------------------------------------
Class C -- (43,647)
- --------------------------------------------------------------------------------------------------
Class I -- (3,485)
- --------------------------------------------------------------------------------------------------
In excess of net realized gain on investments and
foreign currency transactions
- --------------------------------------------------------------------------------------------------
Class A -- (74,826)
- --------------------------------------------------------------------------------------------------
Class B -- (74,894)
- --------------------------------------------------------------------------------------------------
Class C -- (26,189)
- --------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(16,543,506) $(3,325,072)
- ---------------------------------------------------------------------------- ------------
Net increase in net assets from fund share transactions $492,906,320 $101,658,097
- ---------------------------------------------------------------------------- ------------
Total increase in net assets $515,644,297 $101,527,219
- ---------------------------------------------------------------------------- ------------
NET ASSETS
At beginning of period $116,703,342 $15,176,123
- --------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $700,390 and $20,756,
respectively) $632,347,639 $116,703,342
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights provide per share amounts and certain ratios to
summarize the effect of fund operations and any distributions to a shareholder
of each share class.
FOR YEARS ENDED 4/30
PERIOD ENDED
CLASS A 2003 2002 2001 2000 4/30/99*
Net asset value, beginning of period $9.97 $9.80 $9.27 $9.80 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.45 $0.50 $0.58 $0.64 $0.18
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.77 0.29 0.62+++ (0.53) (0.21)
- ------------------------------------------------------ ------ ------ ------ -----
Total from investment operations $1.22 $0.79 $1.20 $0.11 $(0.03)
- ------------------------------------------------------ ------ ------ ------ -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.56) $(0.53) $(0.64) $(0.64) $(0.17)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.05) (0.03) -- --
- ------------------------------------------------------ ------ ------ ------ -----
From net realized gain on investments
and foreign currency transactions (0.01) (0.01) -- -- --
- ------------------------------------------------------ ------ ------ ------ -----
In excess of net realized gain on
investments and foreign currency
transactions -- (0.03) -- -- --
- ------------------------------------------------------ ------ ------ ------ -----
Total distributions declared to
shareholders $(0.57) $(0.62) $(0.67) $(0.64) $(0.17)
- ------------------------------------------------------ ------ ------ ------ -----
Net asset value, end of period $10.62 $9.97 $9.80 $9.27 $9.80
- ------------------------------------------------------ ------ ------ ------ -----
Total return (%)(+) 12.58 8.19 13.39 1.31 (0.29)++
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 0.70 0.70 0.41 0.03 0.30+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.44 5.21 6.54 6.82 5.62+
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 141 166 272 209 117
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $221,872 $55,592 $5,447 $1,011 $999
- ------------------------------------------------------------------------------------------------------------------------------
(S) Effective December 29, 2000, the investment adviser voluntarily agreed under
a temporary expense agreement to pay all of the fund's operating expenses,
exclusive of management and distribution and service fees in excess of 0.20%
of average daily net assets. In addition, the investment adviser and the
distributor voluntarily waived a portion of their fees for the periods
indicated. Prior to December 29, 2000, and effective February 1, 1999, the
investment adviser had 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 the investment adviser 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) $0.40 $0.44 $0.15 $0.23 $(0.09)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.16 1.37 5.24 4.43 8.93+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.98 4.54 1.71 2.42 (3.01)+
- ------------------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, January 4,
1999, through April 30, 1999.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with the net realized and unrealized gain/loss
for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the
charge had been included, the results would have been lower.
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended April 30, 2002 was to decrease
net investment income per share by $0.04, increase net realized and unrealized gains and
losses per share by $0.04, and to decrease the ratio of net investment income to average
net assets by 0.43%. Per share, ratios, and supplemental data for periods prior to May 1,
2001, have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
PERIOD ENDED
CLASS B 2003 2002 4/30/01*
Net asset value, beginning of period $9.98 $9.81 $9.77
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.37 $0.43 $0.12
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 0.77 0.28 0.10+++
- ----------------------------------------------------------------------- ------ ------
Total from investment operations $1.14 $0.71 $0.22
- ----------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.47) $(0.45) $(0.17)
- ------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.05) (0.01)
- ----------------------------------------------------------------------- ------ ------
From net realized gain on investments and foreign
currency transactions (0.01) (0.01) --
- ----------------------------------------------------------------------- ------ ------
In excess of net realized gain on investments and
foreign currency transactions -- (0.03) --
- ----------------------------------------------------------------------- ------ ------
Total distributions declared to shareholders $(0.48) $(0.54) $(0.18)
- ----------------------------------------------------------------------- ------ ------
Net asset value, end of period $10.64 $9.98 $9.81
- ----------------------------------------------------------------------- ------ ------
Total return (%) 11.72 7.27 5.89++
- ------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 1.55 1.55 1.57+
- ------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.62 4.35 5.19+
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 141 166 272
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $98,653 $40,800 $5,454
- ------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily agreed under a temporary expense
agreement to pay all of the fund's operating expenses, exclusive of
management and distribution and service fees in excess of 0.20% of average
daily net assets. In addition, the investment adviser and the distributor
voluntarily waived a portion of 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 per share and the ratios would have
been:
Net investment income $0.34 $0.38 $0.01
- ------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.81 2.02 6.30+
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 3.36 3.88 0.46+
- ------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class B shares, December 29, 2000, through April
30, 2001.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with the net realized and unrealized gain/loss
for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended April 30, 2002 was to decrease
net investment income per share by $0.04, increase net realized and unrealized gains and
losses per share by $0.04, and to decrease the ratio of net investment income to average
net assets by 0.43%. Per share, ratios, and supplemental data for periods prior to May
1, 2001, have not been restated to reflect this change
in presentation.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
PERIOD ENDED
CLASS C 2003 2002 4/30/01*
Net asset value, beginning of period $9.98 $9.81 $9.77
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.37 $0.43 $0.13
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 0.77 0.28 0.09+++
- ----------------------------------------------------------------------- ------ ------
Total from investment operations $1.14 $0.71 $0.22
- ----------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.47) $(0.45) $(0.17)
- ------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.05) (0.01)
- ----------------------------------------------------------------------- ------ ------
From net realized gain on investments and foreign
currency transactions (0.01) (0.01) --
- ----------------------------------------------------------------------- ------ ------
In excess of net realized gain on investments and
foreign currency transactions -- (0.03) --
- ----------------------------------------------------------------------- ------ ------
Total distributions declared to shareholders $(0.48) $(0.54) $(0.18)
- ----------------------------------------------------------------------- ------ ------
Net asset value, end of period $10.64 $9.98 $9.81
- ----------------------------------------------------------------------- ------ ------
Total return (%) 11.72 7.27 5.90++
- ------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 1.55 1.55 1.57+
- ------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.62 4.34 5.20+
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 141 166 272
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $41,768 $16,411 $4,274
- ------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily agreed under a temporary expense
agreement to pay all of the fund's operating expenses, exclusive of
management and distribution and service fees in excess of 0.20% of average
daily net assets. In addition, the investment adviser and the distributor
voluntarily waived a portion of 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 per share and the ratios would have
been:
Net investment income $0.34 $0.38 $0.01
- ------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.81 2.02 6.30+
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 3.36 3.87 0.47+
- ------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class C shares, December 29, 2000, through April
30, 2001.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with the net realized and unrealized gain/loss
for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended April 30, 2002 was to decrease
net investment income per share by $0.04, increase net realized and unrealized gains and
losses per share by $0.04, and to decrease the ratio of net investment income to average
net assets by 0.43%. Per share, ratios, and supplemental data for periods prior to May
1, 2001, have not been restated to reflect this change
in presentation.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 4/30
PERIOD ENDED
CLASS I 2003 2002 2001 2000 4/30/99*
Net asset value, beginning of period $9.96 $9.79 $9.26 $9.78 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.45 $0.45 $0.66 $0.65 $0.18
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.80 0.35 0.55++++ (0.53) (0.23)
- ---------------------------------------------------- ------ ------ ------ ------
Total from investment operations $1.25 $0.80 $1.21 $0.12 $(0.05)
- ---------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.58) $(0.54) $(0.65) $(0.64) $(0.17)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (0.05) (0.03) -- --
- ---------------------------------------------------- ------ ------ ------ ------
From net realized gain on
investments and foreign currency
transactions (0.01) (0.01) -- -- --
- ---------------------------------------------------- ------ ------ ------ ------
In excess of net realized gain on
investments and foreign currency
transactions -- (0.03) -- -- --
- ---------------------------------------------------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.59) $(0.63) $(0.68) $(0.64) $(0.17)
- ---------------------------------------------------- ------ ------ ------ ------
Net asset value, end of period $10.62 $9.96 $9.79 $9.26 $9.78
- ---------------------------------------------------- ------ ------ ------ ------
Total return (%) 12.86 8.36 13.47 1.41 (0.49)++
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 0.55 0.55 0.04 0.03 0.30+
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.52 5.48 6.92 6.92 5.13+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 141 166 272 209 117
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $259,920 $3,900 $0+++ $0+++ $0+++
- ------------------------------------------------------------------------------------------------------------------------------------
(S) Effective December 29, 2000, the investment adviser voluntarily agreed under a
temporary expense agreement to pay all of the fund's operating expenses, exclusive of
management fees in excess of 0.20% of average daily net assets. In addition, the
investment adviser voluntarily waived a portion of its fees for the periods indicated.
Prior to December 29, 2000, and effective February 1, 1999, the investment adviser had
voluntarily agreed, under a temporary expense agreement, to pay all of the fund's
operating expenses, exclusive of management fees. Prior to February 1, 1999 the fund
paid the investment adviser a fee not greater than 1.10% of average daily net assets.
In addition, the investment adviser voluntarily waived its 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) $0.42 $0.41 $0.21 $0.27 $(0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 0.81 1.02 4.77 4.08 8.58+
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.26 5.01 2.19 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.
++++ The per share amount is not in accordance with the net realized and unrealized gain/
loss for the period because of the timing of sales of fund shares and the amount of
per share realized and unrealized gains and losses at such time.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(S)(S) As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on
debt securities. The effect of this change for the year ended April 30, 2002 was to
decrease net investment income per share by $0.04, increase net realized and
unrealized gains and losses per share by $0.04, and to decrease the ratio of net
investment income to average net assets by 0.45%. Per share, ratios, and supplemental
data for periods prior to May 1, 2001, have not been restated to reflect this change
in presentation.
See notes to financial statements.
Financial Highlights - continued
FOR PERIOD ENDED
CLASS R 4/30/03*
Net asset value, beginning of period $10.42
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.14
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.24+++
- -------------------------------------------------------------------------------------------------
Total from investment operations $0.38
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.18)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $10.62
- -------------------------------------------------------------------------------------------------
Total return (%) 3.43++
- -------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 1.05+
- -------------------------------------------------------------------------------------------------
Net investment income 3.88+
- -------------------------------------------------------------------------------------------------
Portfolio turnover 141
- -------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $9,880
- -------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily agreed under a temporary expense
agreement to pay all of the fund's operating expenses, exclusive of
management and distribution and service fees in excess of 0.20% of average
daily net assets. In addition, the investment adviser and the distributor
voluntarily waived a portion of 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 per share and the ratios would have
been:
Net investment income $0.13
- -------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.31+
- -------------------------------------------------------------------------------------------------
Net investment income 3.62+
- -------------------------------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002, through April
30, 2003.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with the net realized and unrealized gain/loss
for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
See notes to financial statements.
Financial Highlights - continued
FOR PERIOD ENDED
CLASS 529A 4/30/03*
Net asset value, beginning of period $10.05
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.29
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.68+++
- -----------------------------------------------------------------------------------------------------
Total from investment operations $0.97
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.40)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions (0.01)
- -----------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.41)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $10.61
- -----------------------------------------------------------------------------------------------------
Total return (%)(+) 10.56++
- -----------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 1.05+
- -----------------------------------------------------------------------------------------------------
Net investment income 3.99+
- -----------------------------------------------------------------------------------------------------
Portfolio turnover 141
- -----------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $157
- -----------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily agreed under a temporary expense
agreement to pay all of the fund's operating expenses, exclusive of
management and distribution and service fees in excess of 0.20% of average
daily net assets. In addition, the investment adviser and the distributor
voluntarily waived a portion of 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 per share and the ratios would have
been:
Net investment income $0.26
- -----------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.41+
- -----------------------------------------------------------------------------------------------------
Net investment income 3.63+
- -----------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529A shares, July 31, 2002, through April 30,
2003.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with the net realized and unrealized gain/loss
for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
(+) Total returns for Class 529A shares do not include the applicable sales charge. If the
charge had been included, the results would have been lower.
See notes to financial statements.
Financial Highlights - continued
FOR PERIOD ENDED
CLASS 529B 4/30/03*
Net asset value, beginning of period $10.07
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.23
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.69+++
- -----------------------------------------------------------------------------------------------------
Total from investment operations $0.92
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.34)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions (0.01)
- -----------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.35)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $10.64
- -----------------------------------------------------------------------------------------------------
Total return (%) 10.00++
- -----------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 1.80+
- -----------------------------------------------------------------------------------------------------
Net investment income 3.24+
- -----------------------------------------------------------------------------------------------------
Portfolio turnover 141
- -----------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $41
- -----------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily agreed under a temporary expense
agreement to pay all of the fund's operating expenses, exclusive of
management and distribution and service fees in excess of 0.20% of average
daily net assets. In addition, the investment adviser and the distributor
voluntarily waived a portion of 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 per share and the ratios would have
been:
Net investment income $0.21
- -----------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 2.06+
- -----------------------------------------------------------------------------------------------------
Net investment income 2.98+
- -----------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529B shares, July 31, 2002, through April 30,
2003.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with the net realized and unrealized gain/loss
for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
See notes to financial statements.
Financial Highlights - continued
FOR PERIOD ENDED
CLASS 529C 4/30/03*
Net asset value, beginning of period $10.07
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.22
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.69+++
- -----------------------------------------------------------------------------------------------------
Total from investment operations $0.91
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.34)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions (0.01)
- -----------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.35)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $10.63
- -----------------------------------------------------------------------------------------------------
Total return (%) 9.89++
- -----------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S)
Expenses## 1.80+
- -----------------------------------------------------------------------------------------------------
Net investment income 3.23+
- -----------------------------------------------------------------------------------------------------
Portfolio turnover 141
- -----------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $57
- -----------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily agreed under a temporary expense
agreement to pay all of the fund's operating expenses, exclusive of
management and distribution and service fees in excess of 0.20% of average
daily net assets. In addition, the investment adviser and the distributor
voluntarily waived a portion of 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 per share and the ratios would have
been:
Net investment income $0.20
- -----------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 2.06+
- -----------------------------------------------------------------------------------------------------
Net investment income 2.97+
- -----------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529C shares, July 31, 2002, through April 30,
2003.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with the net realized and unrealized gain/loss
for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
See notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Research Bond Fund (the fund) is a 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
accounting principles generally accepted in the United States of America
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 - Bonds and other fixed income securities (other than
short-term obligations) of U.S. issuers in the Fund's portfolio are valued at
an evaluated bid price on the basis of quotes from brokers and dealers or on
the basis of valuations furnished by a pricing service. Prices obtained from
pricing services utilize both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate 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 quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Forward Contracts will be valued using a
pricing model taking into consideration market data from an external pricing
source. Use of the pricing services has been approved by the Board of
Trustees. Short-term obligations in the Fund's portfolio are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees. Short-term obligations with a remaining maturity in excess of 60
days will be valued upon dealer supplied valuations. Portfolio investments for
which market quotations are not readily available or whose values have been
materially affected by events occurring after the close of their primary
markets, are valued at fair value as determined in good faith by or at the
direction of the Board of 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.
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 foreign currency exchange 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 premium
and discount is amortized or accreted for financial statement purposes in
accordance with generally accepted accounting principles. Interest payments
received in additional securities are recorded on the ex-interest date in an
amount equal to the value of the security on such date.
The fund may enter in "TBA" (to be announced) purchase commitments to purchase
securities for a fixed unit price at a future date. Although the unit price
has been established, the principal value has not been finalized. However, the
principal amount of the commitments will not fluctuate more than 1.0%. The
fund holds, and maintains until settlement date, cash or high-grade debt
obligations in an amount sufficient to meet the purchase price, or the fund
may enter into offsetting contracts for the forward sale of other securities
it owns. Income on the securities will not be earned until settlement date.
TBA purchase commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be purchased declines
prior to settlement date, which is in addition to the risk of decline in the
value of the fund's other assets. Unsettled TBA purchase commitments are
valued at the current market value of the underlying securities, according to
the procedures described under "Investment Valuations" above.
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 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 fund
distinguishes between distributions on a tax basis and a financial reporting
basis and 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. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
defaulted bonds, capital losses, and amortization and accretion on debt
securities.
The tax character of distributions declared for the years ended April 30, 2003
and April 30, 2002 was as follows:
4/30/03 4/30/02
Distributions declared from:
Ordinary income $16,543,506 $3,320,669
Long-term capital gain -- 4,403
- -------------------------------------------------------------------------
Total distributions declared $16,543,506 $3,325,072
- -------------------------------------------------------------------------
During the year ended April 30, 2003, accumulated distributions in excess of
net investment income increased by $2,545,948, accumulated undistributed net
realized gain on investments and foreign currency transactions decreased by
$2,545,023, and paid-in capital decreased by $925 due to differences between
book and tax accounting for mortgage-backed securities, currency transactions,
amortization and accretion on debt securities, market discount and capital
losses. This change had no effect on the net assets or net asset value
per share.
As of April 30, 2003, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income $6,282,740
----------------------------------------------------------------------
Undistributed long-term capital gain 850,717
----------------------------------------------------------------------
Capital loss carryforward --
----------------------------------------------------------------------
Unrealized appreciation 17,892,023
----------------------------------------------------------------------
Other temporary differences 2,569,351
----------------------------------------------------------------------
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 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. Class B and Class 529B shares will convert to Class A and Class 529A
shares, respectively 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 an annual rate of 0.50%
of the fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee, which is shown as a reduction of total
expenses in the Statement of Operations.
The investment adviser has voluntarily agreed to pay the fund's operating
expenses exclusive of management and distribution and service and program
manager fees such that the fund's aggregate expenses do not exceed 0.20% of
its average daily net assets for Class A, Class B, Class C, Class I, and Class
R, and not greater than 0.45% of average daily net assets for Class 529A,
Class 529B, and Class 529C. This is reflected as a reduction of expenses in
the Statement of Operations.
The fund pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and 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).
On January 1, 2002, the Trustees terminated the Independent Trustee unfunded
defined benefit plan for active Trustees. Included in Trustees' compensation
is a pension expense of $870 for inactive trustees for the year ended April
30, 2003. Also included in Trustees' compensation is a one time settlement
expense of $9,730.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS 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
$119,183 and $790 for the year ended April 30, 2003, as its portion of the
sales charge on sales of Class A and Class 529A shares of the fund,
respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R, Class 529A, Class 529B and Class 529C 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 an annual
percentage of its average daily net assets attributable to certain share
classes 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
based on the average daily net assets of accounts attributable to such
dealers. These fees are calculated based on each class' average daily net
assets. The maximum distribution and service fees for each class of shares are
as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.50% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the year ended April 30, 2003, amounted to:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained
by MFD $11,286 $102 $261 -- $5 $2 $0
- ------------------------------------------------------------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee and the 0.15% per
annum portion of the Class 529A distribution fee will be implemented on such a
date as the Trustees of the Trust may determine.
Payment of the 0.10% per annum portion of the Class A and Class 529A service
fee that is not currently being charged will be implemented on such a date as
the Trustees of the Trust may determine.
Fees incurred under the distribution plan during the year ended April 30,
2003, were as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Total Distribution Plan 0.15% 1.00% 1.00% 0.50% 0.25% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within, for
class A shares, 12 months following the purchase, and, for class C and 529C
shares, the first year from the end of the calendar month of purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B and Class 529B shares in the event of a shareholder redemption within
six years from the end of the calendar month of purchase. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended April 30, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred Sales Charges Imposed $11,534 $183,372 $11,708 $0 $0
- ------------------------------------------------------------------------------------------------------------------------------
The fund has and may from time to time enter into contracts with program
managers and other parties which administer the tuition programs through which
an investment in the fund's 529 share classes is made. The fund has entered
into an agreement with MFD pursuant to which MFD receives an annual fee of up
to 0.35% from the fund based solely upon the value of the fund's 529 share
classes attributable to tuition programs to which MFD or a third party which
contracts with MFD provides administrative services. The current fee has been
established at 0.25% annually of average net assets of the fund's 529 share
classes attributable to such programs. The fee may only be increased with the
approval of the board of trustees that oversees the fund. The services
provided by MFD or a third party with which MFD contracts include
recordkeeping and tax reporting and account services, as well as services
designed to maintain the program's compliance with the Internal Revenue Code
and other regulatory requirements.
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
0.11%. Prior to April 1, 2003 the fee was 0.10% of the fund's average daily
net assets.
(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 $542,487,147 $303,927,319
- ------------------------------------------------------------------------------------------------------
Investments (non-U.S. government securities) $369,250,980 $136,915,860
- ------------------------------------------------------------------------------------------------------
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 $630,944,872
- -----------------------------------------------------------------------
Gross unrealized appreciation $18,760,944
- -----------------------------------------------------------------------
Gross unrealized depreciation (868,999)
- -----------------------------------------------------------------------
Net unrealized appreciation $17,891,945
- -----------------------------------------------------------------------
(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:
Year ended 4/30/03 Year ended 4/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 21,301,327 $219,722,265 6,637,803 $66,314,402
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 446,788 4,604,741 90,668 909,231
- ---------------------------------------------------------------------------------------------------------------
Shares reacquired (6,434,161) (66,305,242) (1,705,864) (16,990,874)
- ---------------------------------------------------------------------------------------------------------------
Net increase 15,313,954 $158,021,764 5,022,607 $50,232,759
- ---------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 6,795,714 $69,916,045 4,323,493 $43,378,563
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 240,661 2,477,529 87,848 882,880
- ---------------------------------------------------------------------------------------------------------------
Shares reacquired (1,850,884) (19,066,192) (880,051) (8,812,421)
- ---------------------------------------------------------------------------------------------------------------
Net increase 5,185,491 $53,327,382 3,531,290 $35,449,022
- ---------------------------------------------------------------------------------------------------------------
Year ended 4/30/03 Year ended 4/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS C SHARES
Shares sold 3,146,247 $32,327,164 1,613,124 $16,161,929
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 84,884 873,622 34,395 345,469
- ---------------------------------------------------------------------------------------------------------------
Shares reacquired (949,327) (9,760,776) (438,989) (4,438,727)
- ---------------------------------------------------------------------------------------------------------------
Net increase 2,281,804 $23,440,010 1,208,530 $12,068,671
- ---------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 26,012,408 $268,160,960 484,829 $4,835,506
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 143,945 1,493,016 2,215 21,932
- ---------------------------------------------------------------------------------------------------------------
Shares reacquired (2,072,534) (21,446,901) (95,485) (949,793)
- ---------------------------------------------------------------------------------------------------------------
Net increase 24,083,819 $248,207,075 391,559 $3,907,645
- ---------------------------------------------------------------------------------------------------------------
Period ended 4/30/03*
SHARES AMOUNT
CLASS R SHARES
Shares sold 1,086,251 $11,292,420
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 8,058 84,526
- -------------------------------------------------------------------------------
Shares reacquired (163,981) (1,716,753)
- -------------------------------------------------------------------------------
Net increase 930,328 $9,660,193
- -------------------------------------------------------------------------------
Period ended 4/30/03**
SHARES AMOUNT
CLASS 529A SHARES
Shares sold 14,623 $151,778
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 187 1,945
- -------------------------------------------------------------------------------
Shares reacquired (22) (230)
- -------------------------------------------------------------------------------
Net increase 14,788 $153,493
- -------------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 3,862 $40,061
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 48 498
- -------------------------------------------------------------------------------
Shares reacquired (25) (259)
- -------------------------------------------------------------------------------
Net increase 3,885 $40,300
- -------------------------------------------------------------------------------
Period ended 4/30/03**
SHARES AMOUNT
CLASS 529C SHARES
Shares sold 5,363 $55,810
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 48 504
- -------------------------------------------------------------------------------
Shares reacquired (20) (211)
- -------------------------------------------------------------------------------
Net increase 5,391 $56,103
- -------------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002,
through April 30, 2003.
** For the period from the inception of Class 529A, 529B, and 529C shares,
July 31, 2002, through
April 30, 2003.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million 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, 2003, was $3,224. 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, 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.
There were no outstanding financial instruments with off-balance-sheet risk at
the end of the period.
(8) CHANGE IN ACCOUNTING PRINCIPLE
As required, effective May 1, 2001, the fund adopted the provision of the
AICPA Audit and Accounting Guide for Investment Companies and began amortizing
premium on debt securities. Prior to May 1, 2001, the fund did not amortize
premium on debt securities. The cumulative effect of this accounting change
had no impact on total net assets of the fund, but resulted in a $6,144
reduction in cost of securities and a corresponding $6,144 increase in net
unrealized appreciation, based on securities held by the fund on May 1, 2001.
The effect of this change for the year ended April 30, 2002 was to decrease
net investment income by $255,728, increase net unrealized appreciation by
$249,320, and increase net realized gains by $6,408. The Statement of Changes
in Net Assets and Financial Highlights for prior periods has not been restated
to reflect this change in presentation.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To The Trustees of MFS Series Trust IX and Shareholders of MFS Research Bond
Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Research Bond Fund (a portfolio
of MFS Series Trust IX (the "Trust")) as of April 30, 2003, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended.
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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned as of April 30, 2003 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Research Bond Fund as of April 30, 2003, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period the ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 11, 2003
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and
officers of MFS Series Trust IX, of which the fund is a series, including their
principal occupations, which, unless specific dates are shown, are of more than
five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other
directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Financial Services, Inc. (investment
Chairman advisers), Chairman and
Chief Executive Officer
JOHN W. BALLEN(2) (born 09/12/59)
Trustee and President LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Trustee
Company, Hemenway & Barnes (attorneys),
Chief Executive Officer and Director Partner
KEVIN R. PARKE(2) (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Private investor; Harvard University
Company, Graduate School of Business
President, Chief Investment Officer and Administration, Class of 1961
Director Adjunct Professor in
Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc.
(real estate investment trust),
LAWRENCE H. COHN, M.D. (born 03/11/37) Director
Trustee
Brigham and Women's Hospital, Chief of J. DALE SHERRATT (born 09/23/38)
Cardiac Surgery; Harvard Medical School, Trustee
Professor of Surgery Insight Resources, Inc. (acquisition
planning specialists), President;
WILLIAM R. GUTOW (born 09/27/41) Wellfleet Investments (investor in
Trustee health care companies), Managing
Private investor and real estate General Partner (since 1993);
consultant; Cambridge Nutraceuticals
Capitol Entertainment Management Company (professional nutritional products),
(video franchise), Vice Chairman Chief Executive Officer (until May
2001)
J. ATWOOD IVES (born 05/01/36)
Trustee ELAINE R. SMITH (born 04/25/46)
Private investor; KeySpan Corporation Trustee
(energy related services), Director; Independent health care industry
Eastern Enterprises (diversified consultant
services company), Chairman, Trustee and
Chief Executive Officer (until November WARD SMITH (born 09/13/30)
2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
Trustees and Officers - continued
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) ROBERT R. FLAHERTY (born 09/18/63)
Chairman Assistant Treasurer
Massachusetts Financial Services Massachusetts Financial Services
Company, Chairman Company, Vice President (since
August 2000); UAM Fund Services,
JOHN W. BALLEN (born 09/12/59) Senior Vice President (prior to
Trustee and President August 2000)
Massachusetts Financial Services
Company, Chief Executive Officer and RICHARD M. HISEY (born 08/29/58)
Director Treasurer
Massachusetts Financial Services
JAMES R. BORDEWICK, JR. (born 03/06/59) Company, Senior Vice President
Assistant Secretary and Assistant Clerk (since July 2002); The Bank of New
Massachusetts Financial Services York, Senior Vice President
Company, Senior Vice President and (September 2000 to July 2002);
Associate General Counsel Lexington Global Asset Managers,
Inc., Executive Vice President and
STEPHEN E. CAVAN (born 11/06/53) Chief Financial Officer, General
Secretary and Clerk Manager, Mutual Funds (prior to
Massachusetts Financial Services September 2000)
Company, Senior Vice President, General
Counsel and Secretary ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer
STEPHANIE A. DESISTO (born 10/01/53) Massachusetts Financial Services
Assistant Treasurer Company,
Massachusetts Financial Services Vice President
Company, Vice President (since April
2003); Brown Brothers Harriman & Co., JAMES O. YOST (born 06/12/60)
Senior Vice President (November 2002 to Assistant Treasurer
April 2003); ING Groep N.V./Aeltus Massachusetts Financial Services
Investment Management, Senior Vice Company, Senior Vice President
President (prior to November 2002)
The Trust does not hold annual shareholder meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. This means that each
Trustee will be elected to hold office until his or her successor is chosen and
qualified or until his or her earlier death, resignation, retirement or removal.
Each officer will hold office until his or her successor is chosen and
qualified, or until he or she retires, resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their
capacity as Trustee of the Trust continuously since originally elected or
appointed. Messrs. Ballen and Gutow have each served as a Trustee of the Trust
since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were
elected by shareholders and have served as Trustees of the Trust since January
1, 2002. Mr. Parke has served as Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
DISTRIBUTOR JP Morgan Chase Bank
MFS Fund Distributors, Inc. One Chase Manhattan Plaza
500 Boylston Street, Boston, MA New York, NY 10081
02116-3741
AUDITORS
DIRECTOR OF FIXED INCOME RESEARCH Deloitte & Touche LLP
Michael W. Roberge(1) 200 Berkeley St., Boston, MA 02116
(1)MFS Investment Management
- --------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- --------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international
equity and fixed-income investment across the full risk
spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for
building and preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and
risks associated with investing. Read the prospectus carefully before
investing or sending money.
- ------------------------------------------------------------------------------
MFS (R) PRIVACY POLICY: A COMMITMENT TO YOU
- ------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product
and service that we offer and how we protect the nonpublic personal
information of investors who have a direct relationship with us and our wholly
owned subsidiaries.
Throughout our business relationship, you provide us with personal
information; we maintain information and records about you, your investments,
and the services you use. Examples of the nonpublic personal information we
maintain include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share
information with companies or financial institutions that perform marketing
services on our behalf or to other financial institutions with which we have
joint marketing arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
The fund has the option to use equalization, which is a tax basis dividends
paid deduction from earnings and profits distributed to shareholders upon
redemption of shares.
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CONTACT INFORMATION
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances (1-800-637-8255)
exchanges or stock and touch-tone required 24 hours a day, 365 days a
bond outlooks year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education,
account access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send
you prospectuses, reports, and proxies electronically. You get timely
information without mailbox clutter (and help your fund save printing and
postage costs).
SIGN-UP instructions: If your account is registered with us, go to
www.mfs.com, log in to your account via MFS Access, and select the eDelivery
sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available
to you.
[MFS LOGO]
500 Boylston Street
Boston, MA 02116-3741
(C) 2003 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116 RBF-ANN-6/03 51M
[MFS LOGO] ANNUAL REPORT
INVESTMENT MANAGEMENT APRIL 30, 2003
MFS(R) RESEARCH BOND FUND J
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
MFS(R) RESEARCH BOND FUND J
The following tables present certain information regarding the Trustees and officers of MFS Series Trust IX,
of which the fund is a series, including their principal occupations, which, unless specific dates are shown,
are of more than five years" duration, although the titles may not have been the same throughout.
NAME, POSITION WITH THE TRUST, AGE, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) Chairman LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Company, Chairman Trustee
Hemenway & Barnes (attorneys), Partner
JOHN W. BALLEN* (born 09/12/59) Trustee and
President WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Trustee
Chief Executive Officer and Director Private investor; Harvard University
Graduate School of Business
KEVIN R. PARKE* (born 12/14/59) Trustee Administration, Class of 1961 Adjunct
Massachusetts Financial Services Company, Professor in Entrepreneurship Emeritus;
President, Chief Investment Officer, and Director CBL & Associates Properties, Inc. (real
estate investment trust), Director
INDEPENDENT TRUSTEES
J. DALE SHERRATT (born 09/23/38) Trustee
LAWRENCE H. COHN, M.D. (born 03/11/37) Trustee Insight Resources, Inc. (acquisition
Brigham and Women's Hospital, Chief of Cardiac planning specialists), President;
Surgery; Harvard Medical School, Professor of Wellfleet Investments (investor in
Surgery health care companies), Managing General
Partner (since 1993); Cambridge
WILLIAM R. GUTOW (born 09/27/41) Trustee Nutraceuticals (professional nutritional
Private investor and real estate consultant; products), Chief Executive Officer
Capitol Entertainment Management Company (video (until May 2001)
franchise), Vice Chairman
ELAINE R. SMITH (born 04/25/46) Trustee
J. ATWOOD IVES (born 05/01/36) Trustee Independent health care industry
Private investor; KeySpan Corporation (energy consultant
related services), Director; Eastern Enterprises
(diversified services company), Chairman, Trustee WARD SMITH (born 09/13/30) Trustee
and Chief Executive Officer (until November 2000) Private investor
ABBY M. O'NEILL (born 04/27/28) Trustee
Private investor; Rockefeller Financial Services,
Inc. (investment advisers), Chairman and Chief
Executive Officer
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) Chairman ROBERT R. FLAHERTY (born 09/18/63)
Massachusetts Financial Services Company, Chairman Assistant Treasurer
Massachusetts Financial Services
JOHN W. BALLEN (born 9/12/59) Trustee and Company, Vice President (since August
President 2000); UAM Fund Services, Senior Vice
Massachusetts Financial Services Company, Chief President (prior to August 2000)
Executive Officer
and Director RICHARD M. HISEY (born 08/29/58)
Treasurer
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant Massachusetts Financial Services
Secretary and Assistant Clerk Company, Senior Vice President (since
Massachusetts Financial Services Company, Senior July 2002); The Bank of New York, Senior
Vice President and Associate General Counsel Vice President (September 2000 to July
2002); Lexington Global Asset Managers,
STEPHEN E. CAVAN (born 11/06/53) Secretary and Inc., Executive Vice President and Chief
Clerk Financial Officer, General Manager,
Massachusetts Financial Services Company, Senior Mutual Funds (prior to September 2000)
Vice President, General Counsel and Secretary
ELLEN MOYNIHAN (born 11/13/57) Assistant
STEPHANIE A. DESISTO (born 10/01/53) Assistant Treasurer
Treasurer Massachusetts Financial Services
Massachusetts Financial Services, Vice President Company, Vice President
(since April 2003); Brown Brothers Harriman & Co.,
Senior Vice President (November 2002 to April JAMES O. YOST (born 06/12/60) Assistant
2003); ING Groep N.V./Aeltus Investment Treasurer
Management, Senior Vice President (prior to Massachusetts Financial Services
November 2002) Company, Senior Vice President
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. This means that each Trustee will be elected to hold office until his or her
successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Each
officer will hold office until his or her successor is chosen and qualified, or until he or she retires,
resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Messrs. Ballen and Gutow have each served as a Trustee of
the Trust since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were elected by
shareholders and have served as Trustees of the Trust since January 1, 2002. Mr. Parke has served as Trustee
of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 112 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the 1940
Act) which is the principal federal law governing investment companies like the Trust. The address of MFS is
500 Boylston Street, Boston, Massachusetts 02116.
INVESTMENT ADVISER INVESTOR SERVICE
Massachusetts Financial Services Company MFS Service Center, Inc.
500 Boylston Street P.O. Box 2281
Boston, MA 02116-3741 Boston, MA 02107-9906
DISTRIBUTOR For general information, call toll free:
1-800-225-2606 any business day from
MFS Fund Distributors, Inc. 8 a.m. to 8 p.m. Eastern time.
500 Boylston Street
Boston, MA 02116-3741 For service to speech- or hearing-
impaired individuals,
DIRECTOR OF FIXED INCOME RESEARCH call toll free: 1-800-637-6576 any
business day from
Michael W. Roberge+ 9 a.m. to 5 p.m. Eastern time. (To use
this service, your phone must be
CUSTODIANS equipped with a Telecommunications
Device for the Deaf).
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110 For share prices, account balances,
exchanges or stock
JP Morgan Chase Bank and bond outlooks, call toll free:
One Chase Manhattan Plaza 1-800-MFS-TALK
New York, NY 10081 (1-800-637-8255) anytime from a touch-
tone telephone.
AUDITORS
WORLD WIDE WEB
Deloitte & Touche LLP
200 Berkeley Street www.mfs.com
Boston, MA 02116
INVESTOR INFORMATION
For information on MFS mutual funds, call your
investment professional or, for an information
kit, call toll free:
1-800-637-2929 any business day from 9 a.m. to 5 p.m.
Eastern time (or leave a message anytime).
+ MFS Investment Management
- --------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY
At MFS(R), we are committed to protecting your privacy.
On behalf of the MFS Family of Funds(R), the MFS(R) Institutional Trusts, the
Vertex(SM) Funds, Massachusetts Financial Services Company, and certain
affiliates(1) (collectively, "MFS," "we," "us" or "our"), this privacy policy
outlines certain of our policies designed to maintain the privacy of your
nonpublic personal information.
Nonpublic personal information includes much of the information you provide to
us and the related information about you and your transactions involving your
MFS investment product or service. Examples of nonpublic personal information
include the information you provide on new account applications for MFS
investment products or services, your share balance or transactional history,
and the fact that you are a customer of MFS.
We may collect nonpublic personal information about you from the following
sources:
o information we receive from you on applications or other forms
o information about your transactions with us, our affiliates, or
others, and
o information we receive from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may disclose all of
the information we collect, as described above, to companies that perform
marketing services on our behalf or to other financial institutions with whom we
have joint marketing arrangements.
We restrict access to nonpublic personal information about you to personnel who
are necessary or appropriate to provide products or services to you. We maintain
physical, electronic, and procedural safeguards that comply with federal
regulations to guard your nonpublic personal information.
Our privacy policy applies only to individual MFS investors who have a direct
relationship with us. If you own MFS products or receive MFS investment services
in the name of a third-party broker/dealer, bank, investment adviser, or other
financial service provider, that third-party's privacy policies may apply to you
and our privacy policy may not.
If you have any questions with respect to MFS" privacy policy, please call
1-800-255-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
(1) MFS Institutional Advisors, Inc., Vertex Investment Management, Inc., MFS
Original Research Advisors, LLC, MFS Original Research Partners, LLC,
MFS(R) Heritage Trust Company(SM), and MFS Fund Distributors, Inc.
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
Dear Shareholders,
Our firm was built on the philosophy that bottom-up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers -- no matter how
talented they may be -- can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS" culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/S/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
PERFORMANCE RE-CAP
Dear Shareholders,
The fund commenced investment operations on October 17, 2002. From that date
through April 30, 2003, the fund provided a total return of 7.66%, including
the reinvestment of any dividends and capital gains distributions but
excluding the effects of any sales charges.
The fund invests in the MFS(R) Research Bond Fund. For information about
holdings and more specific investment strategies of the overall portfolio,
please refer to the Management Review section of the attached MFS(R) Research
Bond Fund annual report dated April 30, 2003.
/s/ Michael W. Roberge
Michael W. Roberge
Director of Fixed Income Research
The committee of MFS fixed-income research analysts is responsible for the
day-to-day management of the fund under the general supervision of Mr.
Roberge.
PORTFOLIO MANAGEMENT
The portfolio is managed by a team of fixed income research analysts. Our
analysts are supported by an investment staff of over 160 professionals
utilizing MFS Original Research(R), a global, company-oriented, bottom-up
process of selecting securities. Michael W. Roberge, Senior Vice President of
MFS(R), monitors the overall investment process.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by the current prospectus.
PERFORMANCE SUMMARY
Currently, the fund offers only Class B shares.
The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmarks. Performance results
include the deduction of the maximum applicable sales charge and reflect the
percentage change in net asset value, including reinvestment of dividends and
capital gains distributions. 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. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. (See Notes to Performance Summary.)
TOTAL RATES OF RETURN THROUGH APRIL 30, 2003
CLASS B
1 Year 3 Years Life*
- --------------------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +11.66% +35.55% +36.92%
- --------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +11.66% +10.67% + 7.55%
- --------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge + 7.66% + 9.85% + 7.37%
- --------------------------------------------------------------------------------------------
COMPARATIVE BENCHMARKS(+)
1 Year 3 Years Life*
- --------------------------------------------------------------------------------------------
Average A-rated corporate debt fund+ + 9.84% + 9.05% + 5.87%
- --------------------------------------------------------------------------------------------
Lehman Brothers Government/Credit Index# +12.43% +10.65% + 7.26%
- --------------------------------------------------------------------------------------------
*For the period from the commencement of the MFS Research Bond Fund's
investment operations, January 4, 1999, through
April 30, 2003. Index information is from January 1, 1999.
(+)Average annual rates of return.
+Source: Lipper Inc., an independent firm that reports mutual fund
performance.
#Source: Standard & Poor's Micropal, Inc.
Periods less than one year are actual, not annualized.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Lehman Brothers Government/Credit Index
11/02 $10,000
4/03 $10,552
MFS Research Bond Fund J - Class B
11/02 $10,000
4/03 $10,408
INDEX DEFINITIONS
LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX -- Measures the performance of the
investment-grade bond market and includes bonds with maturities up to 10
years.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
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%.
The Research Bond Fund J ("the fund") commenced investment operations with the
offering of Class B shares on or about October 17, 2002. The Research Bond
Fund ("the portfolio") commenced investment operations on January 4, 1999,
with the offering of Class A and Class I shares, and subsequently offered
Class B and Class C shares on December 29, 2000, Class 529A, 529B, and 529C
shares on July 31, 2002, and Class R shares on December 31, 2002. The
investment performance of Class B shares of the fund reflects the investment
performance of Class B shares of the portfolio for periods prior to the fund's
commencement of investment operations. Also, the performance of Class B shares
of the fund includes the performance of Class A shares of the portfolio for
periods prior to the offering of the portfolio's other share classes. The
performance of Class B shares of the fund has been adjusted to take into
account any differences in the sales charges of Class B shares of the
portfolio, but has not been adjusted to take into account differences in
operating expenses between the fund and the portfolio. Because the operating
expenses of Class B shares of the fund are higher than those of Class B shares
of the portfolio, the performance of Class B shares of the fund is higher than
it would have been had the fund commenced investment operations at the same
time as the portfolio.
All performance results reflect any applicable expense subsidies and waivers
in effect during the periods shown; without these, the results would have been
less favorable. See the prospectus and financial statements for details. All
results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT
THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and political
conditions.
Investments in high yield or lower-rated securities may provide greater
returns but are subject to greater-than-average risk.
Because the portfolio invests in a limited number of companies a change in one
security's value may have a more significant effect on the portfolio's value.
These risks may increase share price volatility. Please see the prospectus for
further information on these and other risk considerations.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
APRIL 30, 2003
- --------------------------------------------------------------------------------
Assets:
Investments in MFS Research Bond Fund, at value
(identified cost, $169,752,197) $174,800,171
Cash 3,967
Receivable for investments sold 3,168
Receivable for fund shares sold 488,431
Dividends receivable 764,664
------------
Total assets $176,060,401
------------
Liabilities:
Distribution payable $ 627,636
Payable for investments purchased 486,319
Payable for fund shares repurchased 5,280
Payable to affiliates --
Distribution and service fee 153,788
Reimbursement fee 7,689
------------
Total liabilities $ 1,280,712
------------
Net assets $174,779,689
------------
Net assets consist of:
Paid-in capital $169,753,619
Unrealized appreciation on investments 5,047,974
Accumulated net realized gain on investments 239,853
Accumulated distributions in excess of net investment income (261,757)
------------
Total $174,779,689
------------
Shares of beneficial interest outstanding 16,555,040
---------
Class B shares:
Net asset value and offering price per share
(net assets / shares of beneficial interest outstanding) $10.56
------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Operations
- --------------------------------------------------------------------------------
PERIOD ENDED APRIL 30, 2003*
- --------------------------------------------------------------------------------
Net investment income:
Income --
Dividend income from underlying fund $3,335,933
----------
Expenses --
Management fee $ 302,117
Distribution and service fee (Class B) 599,744
Administrative fee 8,575
Legal fees 64,505
Printing 56,844
Auditing fees 14,600
Custodian fee 13,279
Miscellaneous 5,078
----------
Total expenses $1,064,742
Fees paid indirectly (630)
Reduction of expenses by investment adviser (434,381)
----------
Net expenses $ 629,731
----------
Net investment income $2,706,202
----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) --
Investment transactions $ 189,302
Capital gain distributions from underlying fund 50,551
----------
Net realized gain on investments $ 239,853
----------
Change in unrealized appreciation on investments $5,047,974
----------
Net realized and unrealized gain on investments $5,287,827
----------
Increase in net assets from operations $7,994,029
----------
*For the period from the commencement of the fund's investment operations,
October 17, 2002, through April 30, 2003.
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
PERIOD ENDED APRIL 30, 2003*
- --------------------------------------------------------------------------------
Increase in net assets:
From operations --
Net investment income $ 2,706,202
Net realized gain on investments 239,853
Net unrealized gain on investments 5,047,974
------------
Increase in net assets from operations $ 7,994,029
------------
Distributions declared to shareholders --
From net investment income (Class B) $ (2,967,959)
------------
Net increase in net assets from fund share transactions $169,753,619
------------
Total increase in net assets $174,779,689
Net assets:
At beginning of period --
------------
At end of period (accumulated distributions in excess of net
investment income $261,757) $174,779,689
------------
*For the period from the commencement of the fund's investment
operations, October 17, 2002, through April 30, 2003.
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights
- --------------------------------------------------------------------------------
PERIOD ENDED
CLASS B APRIL 30, 2003*
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
Net asset value -- beginning of period $10.00
------
Income from investment operations# --
Net investment income(S) $ 0.27
Capital gain distribution from underlying fund 0.01
Net realized and unrealized gain on investments
and foreign currency 0.52
------
Total from investment operations $ 0.80
------
Less distributions declared to shareholders --
From net investment income $(0.24)
------
Net asset value -- end of period $10.56
------
Total return 7.66%++
Ratios (to average net assets)/Supplemental data(S):
Expenses(1)## 1.05%+
Net investment income 4.48%+
Portfolio turnover(2) 141%
Net assets at end of period (000 Omitted) $174,780
(S) The investment adviser voluntarily agreed under a temporary expense
agreement to pay all of the fund's operating expenses, exclusive of
management and distribution and service fees in excess of 0.05% of average
daily net assets. In addition, the investment adviser voluntarily waived
its fees for the period. To the extent actual expenses were over these
limitations and the waivers had not been in place, the net investment
income per share and the ratios would have been:
Net investment income $ 0.23
Ratios (to average net assets):
Expenses(1)## 1.75%+
Net investment income 3.78%+
* For the period from the commencement of the fund's investment operations,
October 17, 2002, through April 30, 2003.
(1) Reflects direct fund expenses only.
(2) Portfolio turnover rate reflects that of the Portfolio in which the
fund invests.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Research Bond Fund J (the fund) is a 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 accounting
principles generally accepted in the United States of America 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 is a "fund of funds" which invests substantially all of its
assets in the MFS Research Bond Fund, an open-end investment company that has
the same investment objective as the fund. The financial statements of the MFS
Research Bond Fund, including the Portfolio of Investments, are included with
this report. The percentage of ownership of the MFS Research Bond Fund owned by
the fund at April 30, 2003 was 27.65%.
Investment Valuations - Investment in the underlying fund is valued at the net
asset value per share of the underlying fund as of the close of the regular
trading on the New York Stock Exchange. Short-term obligations in the fund's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer supplied valuations.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on an accrual basis. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Distributions of income and capital gains from the underlying fund
are recorded on the ex-dividend date. In determining the net gain or loss on
securities sold, the cost of securities is determined on the identified cost
basis.
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 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 fund
distinguishes between distributions on a tax basis and a financial reporting
basis and 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. Common
types of book and tax differences that could occur include differences in
accounting for capital losses.
The tax character of distributions declared for the year ended April 30, 2003
was as follows:
APRIL 30, 2003
- --------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $2,967,959
As of April 30, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $ 605,732
Unrealized appreciation 5,047,974
Other temporary differences (627,636)
(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 an annual rate 0.50% of the
fund's average daily net assets. 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 the fund's operating
expenses exclusive of management and distribution and service fees such that the
fund's aggregate expenses do not exceed 0.05% of its average daily net assets.
This is reflected as a reduction of expenses in the Statement of Operations.
The fund pays compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and 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 and
MFS Fund Distributors, Inc. (MFD). The Trustees are currently not receiving any
payments for their services to the fund.
Administrator - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS 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 - The Trustees have adopted a distribution plan for Class B 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 an annual
percentage of its average daily net assets attributable to certain share
classes 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
based on the average daily net assets of accounts attributable to such
dealers. These fees are calculated based on each class" average daily net
assets. The maximum distribution and service fees for each class of shares are
as follows:
CLASS B
- -----------------------------------------------------------------
Distribution Fee 0.75%
Service Fee 0.25%
-----
Total Distribution Plan 1.00%
-----
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the period, ended April 30, 2003, amounted to $94,033.
Fees incurred under the distribution plan during the period ended April 30,
2003, were as follows:
CLASS B
----------------------------------------------
Total Distribution Plan 1.00%
A contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years from
the end of the calendar month of purchase. MFD receives all contingent
deferred sales charges. Contingent deferred sales charges imposed during the
period ended April 30, 2003, were $29,818.
(4) Portfolio Securities
Purchases and sales of shares of MFS Research Bond Fund, aggregated $176,428,815
and $6,916,471, respectively.
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 $169,752,197
------------
Gross unrealized appreciation $ 5,047,974
Gross unrealized depreciation --
------------
Net unrealized appreciation $ 5,047,974
------------
(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:
Class B shares
PERIOD ENDED APRIL 30, 2003*
------------------------------
SHARES AMOUNT
------------------------------
Shares sold 17,199,580 $176,428,815
Shares reacquired (644,540) (6,675,196)
---------- ------------
Net increase 16,555,040 $169,753,619
---------- ------------
* For the period from the commencement of the fund's investment operations,
October 17, 2002, through April 30, 2003.
(6) Line of Credit
The fund and other affiliated funds participate in an $800 million 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. There was no commitment fee allocated to the fund for the
period ended April 30, 2003. The fund had no borrowings during the period.
INDEPENDENT AUDITORS' REPORT
To The Trustees of MFS Series Trust IX and Shareholders of MFS Research Bond
Fund J:
We have audited the accompanying statement of assets and liabilities of MFS
Research Bond Fund J (a portfolio of MFS Series Trust IX (the "Trust")) as of
April 30, 2003, and the related statement of operations, the statement of
changes in net assets, and the financial highlights for the period from the
commencement of operations, October 17, 2002, to April 30, 2003. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned as of April 30, 2003 by correspondence with the shareholder
servicing agent. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Research Bond Fund J as of April 30, 2003, the results of its operations, the
changes in its net assets, and the financial highlights for the period from
the commencement of operations, October 17, 2002, to April 30, 2003, in
conformity with accounting principles generally accepted in the United States
of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 11, 2003
FEDERAL TAX INFORMATION (Unaudited)
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
The fund has the option to use equalization, which is a tax basis dividends
paid deduction from earnings and profits distributed to shareholders upon
redemption of shares.
MFS(R) RESEARCH BOND FUND J
[MFS LOGO]
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
RBJ-ANN 6/03 100
ITEM 2. CODE OF ETHICS.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time. Applicable for annual reports filed for the first
fiscal year ending after December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
If applicable, not applicable at this time. Applicable for annual reports
covering periods ending on or after the compliance date for the listing
standards applicable to the particular issuer. Listed issuers must be in
compliance with the new listing rules by the earlier of the registrant's first
annual shareholders meeting after January 15, 2004 or October 31, 2004.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
If applicable, not applicable at this time. Applicable for annual reports filed
on or after July 1, 2003.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's principal financial officer and principal executive
officer have concluded that those disclosure controls and procedures
provide reasonable assurance that the material information requir ed to be
disclosed by the registrant on this report is recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their evaluation.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not
applicable.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a)
under the Act (17 CFR 270.30a-2): Attached hereto.
[If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)) and Section 1350 of Chapter 63 of Title 18 of the United
States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for the purposes of
Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the
liability of that section. Such certification will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933
or the Exchange Act, except to the extent that the registrant specifically
incorporates it by reference: Attached hereto.][The submission of Section
906 certifications has been proposed by the SEC, but has not yet been
finalized. The SEC has encouraged issuers to submit Section 906
certifications as an exhibit to Form N-CSR until the final rule has been
adopted. Please see Proposed Rule: Certification of Disclosure in Certain
Exchange Act Reports, Release No. 33-8212 (March 21, 2003)].
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST IX
-------------------------------------
By (Signature and Title)* /s/ JOHN W. BALLEN
-----------------------------------------------------
John W. Ballen, President
Date: June 23, 2003
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ JOHN W. BALLEN
------------------------------------------------------
John W. Ballen, President
(Principal Executive Officer)
Date: June 23, 2003
By (Signature and Title)* /s/ RICHARD M. HISEY
------------------------------------------------------
Richard M. Hisey, Treasurer
(Principal Financial Officer and Accounting Officer)
Date: June 23, 2003
* Print name and title of each signing officer under his or her signature.