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: October 31, 2003
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This Form N-CSR is being filed for the purpose of amending and restating the
Form N-CSR filed on January 7, 2004 (Accession No. 0000950156-04-000010), which,
as a result of a filing error, contained the report of another registrant.
ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds
SEMIANNUAL REPORT 10/31/03
MFS(R) INTERMEDIATE
INVESTMENT GRADE
BOND FUND
[graphic omitted]
A path for pursuing opportunity
[logo] M F S(R)
INVESTMENT MANAGEMENT
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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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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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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.
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To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit www.mfs.com.
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TABLE OF CONTENTS
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MFS PRIVACY POLICY
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LETTER FROM THE CHAIRMAN 1
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MFS ORIGINAL RESEARCH(R) 2
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MANAGEMENT REVIEW 3
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PERFORMANCE SUMMARY 6
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PORTFOLIO OF INVESTMENTS 9
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FINANCIAL STATEMENTS 25
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NOTES TO FINANCIAL STATEMENTS 36
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TRUSTEES AND OFFICERS 46
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MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 48
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CONTACT INFORMATION 49
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ASSET ALLOCATION 50
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LETTER FROM THE CHAIRMAN
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Dear Shareholders,
[Photo of Jeffrey L. Shames]
In our view, the past year has been a promising one for investors. Financial
markets have improved steadily, spurred by indications of a global economic
recovery.
These developments make this an encouraging time for MFS and for our
shareholders. But we also think it's a time to reinforce the fundamentals of a
sound investment strategy.
At MFS, we think in any market environment the best approach for investors is
disciplined diversification. This method of investing involves three simple
steps. First, allocate your holdings across the major asset classes. Second,
diversify within each class so that you get exposure to different investment
styles, such as growth and value, and market sectors, such as government and
corporate bonds. Finally, to respond to the way market activity can shift the
value of your accounts, rebalance your accounts on a routine schedule, such as
once per year. Doing so will help you maintain your desired allocation across
each asset class.
These investing fundamentals are often lost when markets are on an upswing. At
such times, it's easy to be tempted to shift your holdings in the current,
"hottest" performing investment. History suggests, however, that it is
difficult to predict year after year what the best performing sector or market
will be. While it is true that the past cannot offer any guarantees for the
future, the markets historically have demonstrated the benefits of taking the
prudent approach and spreading your assets across a variety of holdings. For
investors with long-term goals such as college or retirement, a balanced
approach usually makes the most sense. As always, your investment professional
can help you identify an appropriate mix of investments for your needs.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
November 20, 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 nearly 80 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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MARKET ENVIRONMENT
Throughout the period, short-term interest rates were largely unchanged as the
Federal Reserve Board pursued an accommodative monetary policy designed to
stimulate the U.S. economy. However, intermediate-term interest rates rose
during June and July. For example, yields on two-year Treasury securities were
up slightly more than 33 basis points (0.33%), yields on five-year Treasury
notes were up nearly 50 basis points (0.50%), and 10-year bonds rose almost 46
basis points (0.46%). Also during the period, mortgage rates fell to
historically low levels in June but then began to rise as the summer progressed.
In our view, the U.S. economy moved out of a period of uncertainty and into a
period where investors began to wonder how much the economy would recover
instead of if it would recover. In the third quarter, the U.S. gross domestic
product increased 7.2% and surprised investors and economists alike. Most
attributed the unexpected rise to a variety of factors, including the Fed's
accommodative monetary policy, a cash infusion from the tax cuts, and a general
improvement in business and consumer sentiment.
FUND POSITIONING
High-grade corporate bonds comprised roughly half of the fund's holdings
throughout the period, which was an overweighting relative to our benchmark, the
Lehman Brothers Intermediate Government/Credit Index. We believed that corporate
securities offered better values and better yields than U.S. Treasury securities
of comparable maturities. (The principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity.) We kept
average portfolio quality at AA to AA- and maintained a duration of
approximately 3.6 years. Duration is a measure of interest-rate sensitivity -
the higher the number, the greater the sensitivity.
PORTFOLIO CONCENTRATION 10/31/03
High Grade Corporates 45.9%
U.S. Treasuries 15.1%
Asset Backed 9.3%
Mortgage Backed 8.9%
U.S. Agencies 7.3%
Commercial Mortgage Backed 5.2%
International Sovereigns 3.7%
Residential Mortgage Backed 2.4%
Emerging Markets Debt 1.6%
Municipal 0.4%
High Yield Corporates 0.2%
The portfolio is actively managed, and current holdings may be different.
DETRACTORS FROM FUND PERFORMANCE
The fund's mortgage-backed bonds underperformed equivalent Treasury securities
as prepayments and volatility affected valuations. In the months leading up to
the June low, refinancing activity had reached a feverish pitch as mortgage
holders took advantage of falling rates. Mortgage rates bottomed in June when
the average commitment rate from Freddie Mac (Federal Home Loan Mortgage
Corporation) reached 5.25% for a 30-year fixed mortgage, and rose to roughly
6.10% at the end of October 2003.
Relative performance was also hurt by fund holdings with five-year and longer
maturities because rates rose more in the 4- to 10-year maturities than in the
very short end of the range. As a result, the total return for a 2-year
Treasury security was better than that of a 5-year Treasury for the period.
CORPORATE BONDS A PLUS
Our overweighting in corporate bonds contributed to fund performance because
of their yield advantage over similar maturity U.S. Treasury bonds and a
general increase in bond prices. On average, one- to 10-year corporate bond
yields ranged between 120 and 95 basis points (1.20% and 0.95%) higher than
their Treasury counterparts. Corporate bonds, particularly those from the auto
industry and the telecommunications sector, rebounded from distressed levels
at the start of 2003.
In 2002, investor concerns about the amount of the auto industry's debt and
the size of its pension obligations depressed bond prices. In addition, the
group's bonds were negatively impacted when rating agencies downgraded Ford
and General Motors. As a result, yield premiums for the industry rose as
investors became concerned about liquidity and credit risk. However, in 2003,
changing economic conditions, continued consumer spending, and increased
liquidity in the capital markets helped to allay investor concerns. As a
result, the relative performance of these bonds during the period was better
than that of similar maturity U.S. Treasury securities.
Telecommunications bond prices relative to Treasuries had been severely
depressed in 2002 because of accounting problems and over leverage. When
companies addressed those issues, their bonds began to rebound from the
depressed levels of third quarter 2002. That rebound continued into 2003 and
throughout the reporting period as these companies raised additional capital
and refocused on their cash flow.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
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Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment-related news.
o From Week in Review, link to MFS Global Investment Perspective for our current
view of the world.
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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 10/31/03
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Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Performance results reflect the percentage change
in net asset value, including reinvestment of any dividends and capital gains
distributions. (See Notes to Performance Summary.)
VISIT WWW.MFS.COM FOR MORE CURRENT PERFORMANCE RESULTS.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN.
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.
TOTAL RETURNS
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Average annual
without sales charge
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Class
Share inception
class date 6-mo 1-yr 3-yr Life*
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A 12/31/1998 -- 5.40% 8.55% 6.89%
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B 3/1/2002 -- 4.41% 8.04% 6.58%
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C 3/1/2002 -- 4.41% 8.04% 6.58%
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I 12/31/1998 -- 5.56% 8.68% 6.95%
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R1** 12/31/2002 -- 5.09% 8.45% 6.83%
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R2*** 10/31/2003 N/A N/A N/A N/A
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Average annual
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Comparative benchmarks
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Average intermediate investment
grade debt fund+ 0.75% 5.66% 7.61% 5.76%
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Lehman Brothers Intermediate
Government/Credit Index# 0.96% 5.43% 8.46% 6.67%
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Lehman Brothers Intermediate
Credit Index# 1.82% 9.19% 9.60% 7.19%
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Periods less than one year are actual, not annualized.
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Average annual
with sales charge
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Share
class 6-mo 1-yr 3-yr Life*
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A -- 0.39% 6.81% 5.82%
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B -- 0.41% 7.18% 6.25%
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C -- 3.41% 8.04% 6.58%
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Class I, R1 and R2 shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
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Cumulative
without sales charge
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----------------------------------------------------------------------------
A 1.00% 5.40% 27.91% 38.00%
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B 0.58% 4.41% 26.12% 36.07%
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C 0.58% 4.41% 26.10% 36.04%
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I 1.18% 5.56% 28.37% 38.34%
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R1** 0.83% 5.09% 27.54% 37.60%
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R2*** N/A N/A N/A N/A
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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 October 31, 2003. Index
information is from January 2, 1999.
** Effective November 3, 2003, Class R shares have been renamed R1 shares.
*** R2 shares commenced investment operations on October 31, 2003, therefore
no performance information is available.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
LEHMAN BROTHERS INTERMEDIATE CREDIT INDEX - measures the performance of the
U.S. intermediate-term, investment-grade bond market.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CREDIT INDEX - measures the
performance of the investment-grade bond market and includes bonds with
maturities up to 10 years.
Note to Shareholders - Effective May 14, 2003, the benchmark of the fund
has been changed to the Lehman Brothers Intermediate Government/Credit Index.
We believe that this index better reflects the fund's investment policies and
objectives.
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
4.75% 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. Class I shares have no sales
charges and are available only to certain investors. Class R1 and R2 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.
Prior to March 1, 2002, the fund was available only to MFS employees and had
limited assets. Between February 1, 1999 and March 1, 2002, a significant
portion of the fund's fees and expenses were waived or paid for by the
adviser. Had applicable expense subsidies or waivers not been in effect,
performance would have been lower. For example, had these expense subsidies
and waivers not been in effect for Class A, average annual returns without
sales charge would have been 8.19% and 6.44% for the 3-year and Life periods,
respectively.
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 regarding 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 (unaudited) - 10/31/03
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The Portfolio of Investments is a complete list of all securities owned by your fund. 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 - 84.7%
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Advertising & Broadcasting - 0.9%
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Clear Channel Communications Co., 4.625s, 2008 $1,030 $1,059,909
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Reed Elsevier Capital, Inc., 6.125s, 2006 365 398,019
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$1,457,928
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Aerospace - 0.9%
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BAE Systems Holding, Inc., 6.4s, 2011## $400 $428,676
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Boeing Capital Corp., 5.75s, 2007 690 739,284
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Northrop Grumman Corp., 7s, 2006 280 309,200
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$1,477,160
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Airlines - 0.3%
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American Airlines, Inc., 3.857s, 2010 $400 $393,116
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Continental Airlines, Inc., 6.545s, 2019 74 73,377
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$466,493
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Alcoholic Beverages - 0.7%
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Miller Brewing Co., 4.25s, 2008## $1,200 $1,211,824
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Automotive - 3.5%
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DaimlerChrysler NA Holding Corp., 7.4s, 2005 $600 $634,277
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Ford Motor Credit Co., 6.125s, 2004 78 79,124
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Ford Motor Credit Co., 6.875s, 2006 1,568 1,641,058
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Ford Motor Credit Co., 7.25s, 2011 125 126,961
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Ford Motor Credit Co., 7s, 2013 750 737,282
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General Motors Acceptance Corp., 7.625s, 2004 5 5,171
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General Motors Acceptance Corp., 4.5s, 2006 200 203,072
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General Motors Acceptance Corp., 6.125s, 2006 810 856,220
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General Motors Acceptance Corp., 6.75s, 2006 350 373,171
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General Motors Acceptance Corp., 7.25s, 2011 433 456,267
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General Motors Corp., 7.2s, 2011 293 307,292
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Lear Corp., 7.96s, 2005 450 483,750
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$5,903,645
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Banks & Credit Companies - 4.5%
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Associates Corp., 5.8s, 2004 $10 $10,209
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Bank of America Corp., 6.5s, 2006 200 218,023
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Bank of America Corp., 7.5s, 2006 125 141,279
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CitiFinancial Credit Co., 6.25s, 2008 750 822,632
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Citigroup, Inc., 7.25s, 2010 275 319,933
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Credit Suisse First Boston USA, Inc., 6.125s, 2011 160 172,911
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Credit Suisse First Boston USA, Inc., 5.875s, 2006 535 577,975
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Credit Suisse First Boston USA, Inc., 4.625s, 2008 43 44,736
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First Interstate Bancorp, 9.125s, 2004 180 183,327
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Natexis AMBS Co. LLC, 8.44s to 2008, 4.605s to 2049## 800 937,625
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NCNB Texas National Bank, 9.5s, 2004 75 78,395
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Popular North America, Inc., 6.125s, 2006 605 658,251
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Popular North America, Inc., 3.875s, 2008 750 744,109
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Socgen Real Estate Co., 7.64s to 2007, 3.792s to 2049## 1,140 1,285,196
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Unicredito Italiano Capital Trust, 9.2s, 2049## 500 621,457
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UFJ Finance Aruba AEC, 6.75s, 2013 270 282,676
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Wachovia Corp., 7.8s, 2010 250 298,996
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Wells Fargo & Co., 6.45s, 2011 200 223,527
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$7,621,257
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Biotechnology - 0.4%
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Baxter International, Inc., 5.25s, 2007 $650 $694,775
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Broadcast & Cable TV - 1.1%
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Comcast Cable Communications, Inc., 8.375s, 2007 $350 $404,546
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Comcast Cable Communications, Inc., 5.85s, 2010 200 212,475
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Comcast Cable Communications, Inc., 6.75s, 2011 4 4,427
- -----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.5s, 2004 422 439,201
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Cox Communications, Inc., 3.875s, 2008 500 496,778
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Cox Communications, Inc., 7.125s, 2012 100 113,500
- -----------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.8s, 2012 150 194,859
- -----------------------------------------------------------------------------------------------------
$1,865,786
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Brokerage & Asset Managers - 1.5%
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Goldman Sachs Group, Inc., 7.625s, 2005 $275 $301,818
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 11.625s, 2005 400 454,657
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.25s, 2007 120 139,955
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 4s, 2008 250 253,635
- -----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., 2.47s, 2006 400 400,927
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc., 5.8s, 2007 675 727,826
- -----------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., 5.875s, 2006 300 322,913
- -----------------------------------------------------------------------------------------------------
$2,601,731
- -----------------------------------------------------------------------------------------------------
Building - 0.1%
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Masco Corp., 6.75s, 2006 $100 $109,472
- -----------------------------------------------------------------------------------------------------
Chemicals - 0.6%
- -----------------------------------------------------------------------------------------------------
Chevron Phillips Chemical Co. LLC, 5.375s, 2007 $500 $530,943
- -----------------------------------------------------------------------------------------------------
Dow Chemical Co., 5s, 2007 181 188,490
- -----------------------------------------------------------------------------------------------------
Dow Chemical Co., 5.75s, 2008 350 372,221
- -----------------------------------------------------------------------------------------------------
$1,091,654
- -----------------------------------------------------------------------------------------------------
Conglomerates - 1.1%
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General Electric Capital Corp., 7.5s, 2005 $15 $16,295
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5s, 2007 1,044 1,105,920
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.7s, 2007 133 155,708
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 3.5s, 2008 450 449,159
- -----------------------------------------------------------------------------------------------------
Tyco International Group S.A., 6.75s, 2011 200 212,750
- -----------------------------------------------------------------------------------------------------
$1,939,832
- -----------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.3%
- -----------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 $155 $170,327
- -----------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2010 290 312,763
- -----------------------------------------------------------------------------------------------------
$483,090
- -----------------------------------------------------------------------------------------------------
Containers
- -----------------------------------------------------------------------------------------------------
Pactiv Corp., 7.2s, 2005 $30 $32,758
- -----------------------------------------------------------------------------------------------------
Corporate Asset-Backed - 15.2%
- -----------------------------------------------------------------------------------------------------
AmeriCredit Automobile Receivable Trust, 5.37s, 2008 $405 $417,888
- -----------------------------------------------------------------------------------------------------
Ameriquest Mortgage Securities, Inc., 3.027s, 2033 750 746,275
- -----------------------------------------------------------------------------------------------------
Argent Securities, Inc., 2.8s, 2033 1,500 1,500,000
- -----------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 4.79s, 2009 295 307,346
- -----------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 2.47s, 2010 600 589,209
- -----------------------------------------------------------------------------------------------------
Caterpillar Financial Asset Trust, 3.15s, 2008 275 278,111
- -----------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., 7.37s, 2029 255 279,084
- -----------------------------------------------------------------------------------------------------
CIT Home Equity Loan Trust, 4.57s, 2023 3 3,464
- -----------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, 6.65s, 2008 500 539,395
- -----------------------------------------------------------------------------------------------------
Citibank Credit Card Master Trust I, 5.5s, 2006 25 25,308
- -----------------------------------------------------------------------------------------------------
CNH Equipment Trust, 1.37s, 2006 24 24,139
- -----------------------------------------------------------------------------------------------------
CNH Equipment Trust, 4.3s, 2008 7 7,146
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 5.8s, 2030 310 322,970
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 6.04s, 2030 30 32,789
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 7.03s, 2031 70 79,510
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Asset Trust, 7.701s, 2032 (Interest Only)## 5,707 323,210
- -----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 2.89s, 2009 278 281,278
- -----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 3.52s, 2009## 172 173,478
- -----------------------------------------------------------------------------------------------------
Criimi Mae Corp., 7s, 2033## 150 161,712
- -----------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, 4.21s, 2005 6 6,141
- -----------------------------------------------------------------------------------------------------
Deutsche Mortgage and Asset Receiving Corp.,
6.538s, 2031 (Corporate Asset-Backed) 825 902,486
- -----------------------------------------------------------------------------------------------------
DLJ Commercial Mortgage Corp., 7.146s, 2005 (Interest Only) 100 1,218
- -----------------------------------------------------------------------------------------------------
Drive Auto Receivables Trust, 2.77s, 2008## 400 396,125
- -----------------------------------------------------------------------------------------------------
DriveTime Auto Owner Trust, 1.918s, 2008## 700 693,000
- -----------------------------------------------------------------------------------------------------
Falcon Auto Dealership LLC, 3.875s, 2023 (Interest Only) 1,174 223,417
- -----------------------------------------------------------------------------------------------------
First Auto Receivables Group Trust, 2.436s, 2007## 650 650,000
- -----------------------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage Trust, 7.38s, 2029 500 561,516
- -----------------------------------------------------------------------------------------------------
Fortress CBO Investments I, Ltd., 1.92s, 2038 535 534,749
- -----------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, 6.06s, 2030 4 4,275
- -----------------------------------------------------------------------------------------------------
Household Automotive Trust, 3.44s, 2009 400 405,617
- -----------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, 1.57s, 2032 106 106,070
- -----------------------------------------------------------------------------------------------------
Hyundai Automobile Receivables Trust, 2.8s, 2007## 350 353,682
- -----------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 3.9s, 2006 183 185,343
- -----------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 2.33s, 2007 1,290 1,298,909
- -----------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 3.27s, 2011 135 136,362
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Commercial Conduit Mortgage Trust, 6.48s, 2030 1,000 1,105,036
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Commercial Conduit Mortgage Trust, 6.78s, 2031 70 78,873
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Commercial Conduit Mortgage Trust, 6.84s,
2035 (Interest Only) 7,884 209,092
- -----------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 6.39s, 2030 500 546,505
- -----------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 6.889s, 2030 170 185,021
- -----------------------------------------------------------------------------------------------------
Morgan (J.P.) Commercial Mortgage Finance Corp., 6.613s, 2030 630 697,676
- -----------------------------------------------------------------------------------------------------
Morgan (J.P.) Commercial Mortgage Finance Corp., 7.325s, 2031 14 14,958
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 6.01s, 2030 5 4,889
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 7.622s, 2031 (Interest Only) 4,627 190,610
- -----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.663s, 2030 275 305,956
- -----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.337s, 2031 600 661,726
- -----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 7.51s, 2031 (Interest Only) 2,553 83,675
- -----------------------------------------------------------------------------------------------------
Multi-Family Capital Access One, Inc., 6.65s, 2024 777 863,479
- -----------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 6.476s, 2030 500 555,662
- -----------------------------------------------------------------------------------------------------
PSE&G Transition Funding LLC, 5.74s, 2007 8 8,720
- -----------------------------------------------------------------------------------------------------
Putnam Structured Product Funding, 1.57s, 2008## 750 750,000
- -----------------------------------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc., 3.49s, 2029 300 303,458
- -----------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 2.99s, 2022## 1,000 1,000,938
- -----------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 2.25s, 2032## 500 500,195
- -----------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 3.39s, 2033 650 647,156
- -----------------------------------------------------------------------------------------------------
Summit Acceptance Auto Receivables Trust, 7.51s, 2007## 152 151,988
- -----------------------------------------------------------------------------------------------------
Thornburg Mortgage Securities Trust, 1.46s, 2043 381 380,934
- -----------------------------------------------------------------------------------------------------
TIAA Commercial Real Estate Securitization Trust, 7.17s, 2032## 597 648,989
- -----------------------------------------------------------------------------------------------------
Triad Auto Receivables Owner Trust, 2.48s, 2008 1,000 1,000,609
- -----------------------------------------------------------------------------------------------------
Triad Auto Receivables Owner Trust, 3.24s, 2009 520 529,031
- -----------------------------------------------------------------------------------------------------
Vanderbilt Mortgage & Finance, Inc., 5.17s, 2014 7 7,358
- -----------------------------------------------------------------------------------------------------
Washington Mutual, Inc., 3.112s, 2033 500 500,518
- -----------------------------------------------------------------------------------------------------
Washington Mutual, Inc., 3.177s, 2033 450 450,466
- -----------------------------------------------------------------------------------------------------
Washington Mutual, Inc., 3.567s, 2033 400 405,291
- -----------------------------------------------------------------------------------------------------
WFS Financial Owner Trust, 2.39s, 2007 400 402,575
- -----------------------------------------------------------------------------------------------------
$25,742,606
- -----------------------------------------------------------------------------------------------------
Defense Electronics
- -----------------------------------------------------------------------------------------------------
Raytheon Co., 5.7s, 2003 $29 $29,000
- -----------------------------------------------------------------------------------------------------
Raytheon Co., 6.15s, 2008 20 21,551
- -----------------------------------------------------------------------------------------------------
$50,551
- -----------------------------------------------------------------------------------------------------
Energy - Independent - 0.4%
- -----------------------------------------------------------------------------------------------------
Devon Financing Corp. U.L.C., 6.875s, 2011 $250 $282,118
- -----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.625s, 2005 275 300,023
- -----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 4.375s, 2007 45 46,297
- -----------------------------------------------------------------------------------------------------
$628,438
- -----------------------------------------------------------------------------------------------------
Energy - Integrated - 1.0%
- -----------------------------------------------------------------------------------------------------
Amerada Hess Corp., 5.9s, 2006 $1,100 $1,163,138
- -----------------------------------------------------------------------------------------------------
Conoco Funding Co., 5.45s, 2006 210 225,841
- -----------------------------------------------------------------------------------------------------
Phillips Petroleum Co., 8.5s, 2005 210 230,942
- -----------------------------------------------------------------------------------------------------
$1,619,921
- -----------------------------------------------------------------------------------------------------
Entertainment - 2.3%
- -----------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 7.975s, 2004 $228 $237,727
- -----------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 5.625s, 2005 1,129 1,184,856
- -----------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 6.875s, 2012 100 110,720
- -----------------------------------------------------------------------------------------------------
Disney (Walt) Co., 6.75s, 2006 490 534,676
- -----------------------------------------------------------------------------------------------------
Liberty Media Corp., 2.64s, 2006 750 746,979
- -----------------------------------------------------------------------------------------------------
News America, Inc., 4.75s, 2010 1,000 1,016,973
- -----------------------------------------------------------------------------------------------------
Viacom, Inc., 7.75s, 2005 105 114,370
- -----------------------------------------------------------------------------------------------------
$3,946,301
- -----------------------------------------------------------------------------------------------------
Financial Institutions - 1.5%
- -----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.85s, 2004 $78 $80,518
- -----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2006 850 906,798
- -----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2007 240 256,164
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 8s, 2005 120 130,708
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 4.625s, 2008 350 362,725
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 6.75s, 2011 20 22,382
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 6.375s, 2012 125 136,125
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 7s, 2012 170 193,064
- -----------------------------------------------------------------------------------------------------
SLM Corp., 5.375s, 2013 400 408,365
- -----------------------------------------------------------------------------------------------------
$2,496,849
- -----------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 1.5%
- -----------------------------------------------------------------------------------------------------
Dole Food Co., Inc., 8.625s, 2009 $128 $138,240
- -----------------------------------------------------------------------------------------------------
General Mills, Inc., 5.125s, 2007 375 399,310
- -----------------------------------------------------------------------------------------------------
Kellogg Co., 6s, 2006 205 220,779
- -----------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 4.625s, 2006 580 603,583
- -----------------------------------------------------------------------------------------------------
PepsiAmericas, Inc., 6s, 2004 200 204,406
- -----------------------------------------------------------------------------------------------------
PepsiAmericas, Inc., 3.875s, 2007 400 404,103
- -----------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 6.625s, 2004 205 212,684
- -----------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 8.25s, 2011 310 367,193
- -----------------------------------------------------------------------------------------------------
$2,550,298
- -----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.8%
- -----------------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.85s, 2012 $345 $380,904
- -----------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 5.5s, 2005 810 843,954
- -----------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 6.75s, 2012 80 86,603
- -----------------------------------------------------------------------------------------------------
$1,311,461
- -----------------------------------------------------------------------------------------------------
Full Faith and Credit - 0.2%
- -----------------------------------------------------------------------------------------------------
AID to Israel, 6.6s, 2008 $15 $16,254
- -----------------------------------------------------------------------------------------------------
Student Loan Marketing Assn., 5.25s, 2006 325 346,967
- -----------------------------------------------------------------------------------------------------
$363,221
- -----------------------------------------------------------------------------------------------------
Government Sponsored Entities - 7.0%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.25s, 2006 $1,700 $1,694,094
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 3.625s, 2008 15 14,992
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 7s, 2005 325 352,317
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.875s, 2007 3,000 3,190,152
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6.875s, 2010 2,750 3,182,270
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2004 250 260,143
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.25s, 2010 2,425 2,851,306
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.125s, 2012 315 349,192
- -----------------------------------------------------------------------------------------------------
$11,894,466
- -----------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.1%
- -----------------------------------------------------------------------------------------------------
Harrahs Operating Co., Inc., 7.125s, 2007 $85 $95,485
- -----------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.5s, 2010 3 3,401
- -----------------------------------------------------------------------------------------------------
$98,886
- -----------------------------------------------------------------------------------------------------
Home Loans
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.08s, 2031 $48 $48,321
- -----------------------------------------------------------------------------------------------------
Industrial - 0.2%
- -----------------------------------------------------------------------------------------------------
Steelcase, Inc., 6.375s, 2006 $400 $418,352
- -----------------------------------------------------------------------------------------------------
Insurance - 1.2%
- -----------------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing IV, 5.85s, 2006## $260 $278,661
- -----------------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing IX, 5.1s, 2007## 375 401,956
- -----------------------------------------------------------------------------------------------------
MetLife, Inc., 3.911s, 2005 300 309,808
- -----------------------------------------------------------------------------------------------------
MetLife, Inc., 5.375s, 2012 300 308,163
- -----------------------------------------------------------------------------------------------------
Prudential Financial, Inc., 3.75s, 2008 400 399,372
- -----------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 7.65s, 2007## 335 376,212
- -----------------------------------------------------------------------------------------------------
$2,074,172
- -----------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.7%
- -----------------------------------------------------------------------------------------------------
Allstate Corp., 7.2s, 2009 $225 $261,540
- -----------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc., 4.7s, 2007 150 157,051
- -----------------------------------------------------------------------------------------------------
SAFECO Corp., 4.2s, 2008 400 405,598
- -----------------------------------------------------------------------------------------------------
SAFECO Corp., 4.875s, 2010 300 307,126
- -----------------------------------------------------------------------------------------------------
SAFECO Corp., 7.25s, 2012 85 97,269
- -----------------------------------------------------------------------------------------------------
$1,228,584
- -----------------------------------------------------------------------------------------------------
Machinery & Tools - 0.4%
- -----------------------------------------------------------------------------------------------------
Ingersoll-Rand Co., 6.25s, 2006 $460 $501,019
- -----------------------------------------------------------------------------------------------------
Kennametal, Inc., 7.2s, 2012 155 163,611
- -----------------------------------------------------------------------------------------------------
$664,630
- -----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.4%
- -----------------------------------------------------------------------------------------------------
HCA, Inc., 7.125s, 2006 $360 $385,580
- -----------------------------------------------------------------------------------------------------
HCA, Inc., 8.75s, 2010 235 270,489
- -----------------------------------------------------------------------------------------------------
$656,069
- -----------------------------------------------------------------------------------------------------
Metals & Mining - 0.3%
- -----------------------------------------------------------------------------------------------------
Phelps Dodge Corp., 8.75s, 2011 $395 $470,768
- -----------------------------------------------------------------------------------------------------
Multi Family Agency Bonds - 0.3%
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.085s, 2006 $116 $126,366
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.29s, 2006 46 49,430
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.65s, 2008 187 196,132
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.722s, 2009 71 76,056
- -----------------------------------------------------------------------------------------------------
$447,984
- -----------------------------------------------------------------------------------------------------
Municipals - 0.4%
- -----------------------------------------------------------------------------------------------------
Lakeville, MN Independent School District #194, 4.5s, 2012 $660 $702,134
- -----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.2%
- -----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, LP, 8s, 2005 $15 $16,195
- -----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, LP, 5.35s, 2007 120 127,944
- -----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, LP, 6.75s, 2011 110 123,815
- -----------------------------------------------------------------------------------------------------
$267,954
- -----------------------------------------------------------------------------------------------------
Oil Services - 0.4%
- -----------------------------------------------------------------------------------------------------
Halliburton Co., 5.5s, 2010## $700 $707,535
- -----------------------------------------------------------------------------------------------------
Oils - 0.2%
- -----------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.125s, 2007 $310 $339,128
- -----------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.875s, 2012 15 16,476
- -----------------------------------------------------------------------------------------------------
$355,604
- -----------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 0.3%
- -----------------------------------------------------------------------------------------------------
Jabil Circuit, Inc., 5.875s, 2010 $500 $516,545
- -----------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.4%
- -----------------------------------------------------------------------------------------------------
Wyeth Co., 5.875s, 2004 $240 $243,982
- -----------------------------------------------------------------------------------------------------
Wyeth Co., 4.125s, 2008 450 457,555
- -----------------------------------------------------------------------------------------------------
$701,537
- -----------------------------------------------------------------------------------------------------
Photographic Products - 0.3%
- -----------------------------------------------------------------------------------------------------
Eastman Kodak Co., 7.25s, 2013 $480 $489,480
- -----------------------------------------------------------------------------------------------------
Pollution Control - 0.3%
- -----------------------------------------------------------------------------------------------------
Waste Management, Inc., 7s, 2004 $114 $118,812
- -----------------------------------------------------------------------------------------------------
Waste Management, Inc., 7s, 2006 90 99,684
- -----------------------------------------------------------------------------------------------------
Waste Management, Inc., 7.375s, 2010 57 65,917
- -----------------------------------------------------------------------------------------------------
Waste Management, Inc., 6.375s, 2012 250 272,450
- -----------------------------------------------------------------------------------------------------
$556,863
- -----------------------------------------------------------------------------------------------------
Real Estate - 1.6%
- -----------------------------------------------------------------------------------------------------
Equity Office Properties Operating, LP, 7.75s, 2007 $655 $750,240
- -----------------------------------------------------------------------------------------------------
Equity Office Properties Operating, LP, 6.8s, 2009 155 173,174
- -----------------------------------------------------------------------------------------------------
Highwoods Properties, Inc., 7.19s, 2004## 200 202,627
- -----------------------------------------------------------------------------------------------------
Kimco Realty Corp., 7.5s, 2006 300 340,688
- -----------------------------------------------------------------------------------------------------
Kimco Realty Corp., 6s, 2012 250 264,227
- -----------------------------------------------------------------------------------------------------
Simon Property Group LP, 6.75s, 2004 120 124,124
- -----------------------------------------------------------------------------------------------------
Simon Property Group LP, 6.375s, 2007 125 136,972
- -----------------------------------------------------------------------------------------------------
Vornado Realty Trust, 5.625s, 2007 705 744,630
- -----------------------------------------------------------------------------------------------------
$2,736,682
- -----------------------------------------------------------------------------------------------------
Residential Mortgage-Backed - 0.4%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 3.108s, 2035 $750 $744,844
- -----------------------------------------------------------------------------------------------------
Single Family Agency Bonds - 6.2%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2017 $695 $715,495
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6s, 2017 226 234,463
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2018 987 1,003,166
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2033 999 1,007,503
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7s, 2015 4 4,747
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2015 3 2,847
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2016 169 174,204
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2017 625 643,809
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2017 362 376,795
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2017 259 273,013
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.5s, 2018 1,246 1,245,306
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5s, 2018 2,559 2,600,240
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2018 704 725,387
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2033 498 503,211
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6s, 2033 969 1,000,799
- -----------------------------------------------------------------------------------------------------
$10,510,985
- -----------------------------------------------------------------------------------------------------
Structured Deal Agency Bonds - 2.4%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2017 $700 $717,782
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2021 605 629,075
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2022 1,000 1,044,258
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2017 370 381,214
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2018 700 723,379
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.204s, 2014 170 178,743
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.471s, 2015 77 80,516
- -----------------------------------------------------------------------------------------------------
U.S. Veteran Affairs Department, 6s, 2021 300 310,374
- -----------------------------------------------------------------------------------------------------
$4,065,341
- -----------------------------------------------------------------------------------------------------
Supermarkets - 0.2%
- -----------------------------------------------------------------------------------------------------
Kroger Co., 7.8s, 2007 $270 $310,277
- -----------------------------------------------------------------------------------------------------
Supranational - 0.7%
- -----------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento, 6.75s, 2005 $120 $126,447
- -----------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento, 6.875s, 2012 200 220,045
- -----------------------------------------------------------------------------------------------------
International Bank for Reconstruction & Development, 4.77s, 2005 750 778,350
- -----------------------------------------------------------------------------------------------------
$1,124,842
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.8%
- -----------------------------------------------------------------------------------------------------
AT&T Corp., 6.5s, 2006 $760 $841,631
- -----------------------------------------------------------------------------------------------------
Citizens Communications Co., 8.5s, 2006 468 528,641
- -----------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6s, 2007 800 847,775
- -----------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 350 378,580
- -----------------------------------------------------------------------------------------------------
Verizon New York, Inc., 6.875s, 2012 375 411,396
- -----------------------------------------------------------------------------------------------------
$3,008,023
- -----------------------------------------------------------------------------------------------------
Tobacco - 0.4%
- -----------------------------------------------------------------------------------------------------
Altria Group, Inc., 7s, 2013 $568 $573,268
- -----------------------------------------------------------------------------------------------------
Reynolds (R.J.) Tobacco Holdings, Inc., 7.25s, 2012 125 121,250
- -----------------------------------------------------------------------------------------------------
$694,518
- -----------------------------------------------------------------------------------------------------
Transportation - Services - 0.1%
- -----------------------------------------------------------------------------------------------------
Federal Express Corp., 9.65s, 2012 $100 $131,382
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 13.2%
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5s, 2006 $1,250 $1,396,582
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2007 2,100 2,110,172
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.375s, 2007 1,500 1,587,071
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.125s, 2007### 3,195 3,580,646
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 2.625s, 2008 110 107,830
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2008 2,500 2,501,368
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5s, 2010 4,000 4,640,156
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 5s, 2011 2,750 2,934,442
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.375s, 2012 2,510 2,548,042
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25s, 2013 953 949,129
- -----------------------------------------------------------------------------------------------------
$22,355,438
- -----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 5.4%
- -----------------------------------------------------------------------------------------------------
Beaver Valley II Funding, 9s, 2017 $225 $261,640
- -----------------------------------------------------------------------------------------------------
Constellation Energy Group, Inc., 6.35s, 2007 525 572,268
- -----------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 2.8s, 2005 400 404,026
- -----------------------------------------------------------------------------------------------------
DTE Energy Co., 6s, 2004 188 192,757
- -----------------------------------------------------------------------------------------------------
DTE Energy Co., 6.45s, 2006 750 813,418
- -----------------------------------------------------------------------------------------------------
DTE Energy Co., 7.05s, 2011 400 451,656
- -----------------------------------------------------------------------------------------------------
Entergy Mississippi, Inc., 6.2s, 2004 10 10,207
- -----------------------------------------------------------------------------------------------------
Exelon Generation Co. LLC, 6.95s, 2011 375 418,257
- -----------------------------------------------------------------------------------------------------
FirstEnergy Corp., 5.5s, 2006 300 315,260
- -----------------------------------------------------------------------------------------------------
FirstEnergy Corp., 6.45s, 2011 340 361,159
- -----------------------------------------------------------------------------------------------------
FPL Group Capital, Inc., 3.25s, 2006 500 505,851
- -----------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 4.625s, 2007 310 317,086
- -----------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 3.5s, 2008 119 115,696
- -----------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 5.875s, 2012 75 77,601
- -----------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375s, 2004 696 714,242
- -----------------------------------------------------------------------------------------------------
Nisource Finance Corp., 7.625s, 2005 180 197,361
- -----------------------------------------------------------------------------------------------------
Oncor Electric Delivery Co., 5s, 2007 325 341,646
- -----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.05s, 2007 610 658,054
- -----------------------------------------------------------------------------------------------------
PSE&G Energy Holdings, Inc., 7.75s, 2007 189 190,890
- -----------------------------------------------------------------------------------------------------
PSE&G Power LLC, 6.875s, 2006 430 470,813
- -----------------------------------------------------------------------------------------------------
PSE&G Power LLC, 7.75s, 2011 100 116,909
- -----------------------------------------------------------------------------------------------------
Reliant Energy Resources Corp., 8.125s, 2005 241 259,414
- -----------------------------------------------------------------------------------------------------
TXU Energy Co., 6.125s, 2008## 375 401,820
- -----------------------------------------------------------------------------------------------------
Virginia Electric & Power Co., 5.375s, 2007 363 387,851
- -----------------------------------------------------------------------------------------------------
Wisconsin Energy Corp., 5.875s, 2006 572 611,950
- -----------------------------------------------------------------------------------------------------
$9,167,832
- -----------------------------------------------------------------------------------------------------
Utilities - Gas - 0.1%
- -----------------------------------------------------------------------------------------------------
Keyspan Corp., 6.15s, 2006 $175 $189,638
- -----------------------------------------------------------------------------------------------------
Wireless Communications - 0.3%
- -----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.35s, 2006 $236 $258,938
- -----------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 183 195,441
- -----------------------------------------------------------------------------------------------------
$454,379
- -----------------------------------------------------------------------------------------------------
Total U.S. Bonds $143,461,116
- -----------------------------------------------------------------------------------------------------
Foreign Bonds - 12.9%
- -----------------------------------------------------------------------------------------------------
Australia - 0.4%
- -----------------------------------------------------------------------------------------------------
Suprannuation Members Home Loans Global Financing,
1.37s, 2029 (Corporate Asset-Backed) $401 $401,285
- -----------------------------------------------------------------------------------------------------
WMC Finance USA, 5.125s, 2013 (Metals & Mining) 200 195,201
- -----------------------------------------------------------------------------------------------------
$596,486
- -----------------------------------------------------------------------------------------------------
Brazil - 0.5%
- -----------------------------------------------------------------------------------------------------
Brazilian Diversified Payment Rights, 1.75s, 2008
(Corporate Asset-Backed)## $500 $500,000
- -----------------------------------------------------------------------------------------------------
Brazilian Merchant Voucher Receivables Ltd., 5.911s, 2011
(Corporate Asset-Backed)## 310 304,575
- -----------------------------------------------------------------------------------------------------
$804,575
- -----------------------------------------------------------------------------------------------------
Canada - 2.5%
- -----------------------------------------------------------------------------------------------------
Anderson Exploration Ltd., 6.75s, 2011 (Energy - Independent) $200 $220,027
- -----------------------------------------------------------------------------------------------------
Hydro Quebec, 6.3s, 2011 265 297,268
- -----------------------------------------------------------------------------------------------------
Province of Manitoba, 4.25s, 2006 475 495,112
- -----------------------------------------------------------------------------------------------------
Province of New Brunswick, 3.5s, 2007 500 506,996
- -----------------------------------------------------------------------------------------------------
Province of Ontario, 7s, 2005 80 86,777
- -----------------------------------------------------------------------------------------------------
Province of Ontario, 6s, 2006 1,200 1,288,639
- -----------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 7.875s, 2012 (Broadcast & Cable TV) 250 275,000
- -----------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 6.25s, 2013 (Broadcast & Cable TV) 375 375,000
- -----------------------------------------------------------------------------------------------------
Telus Corp., 7.5s, 2007 (Telecommunications - Wireline) 425 471,993
- -----------------------------------------------------------------------------------------------------
Telus Corp., 8s, 2011 (Telecommunications - Wireline) 225 258,676
- -----------------------------------------------------------------------------------------------------
$4,275,488
- -----------------------------------------------------------------------------------------------------
Chile - 0.8%
- -----------------------------------------------------------------------------------------------------
Corporacion Nacional del Cobre de Chile, 6.375s, 2012
(Metals & Mining)## $250 $267,841
- -----------------------------------------------------------------------------------------------------
Empresa Nacional de Electricidad S.A., 8.35s, 2013
(Utilities - Electric Power) 750 807,325
- -----------------------------------------------------------------------------------------------------
HQI Transelec Chile S.A., 7.875s, 2011 (Utilities -
Electric Power) 300 341,266
- -----------------------------------------------------------------------------------------------------
$1,416,432
- -----------------------------------------------------------------------------------------------------
France - 0.5%
- -----------------------------------------------------------------------------------------------------
France Telecom S.A., 7.2s, 2006 (Telecommunications -
Wireline) $505 $565,557
- -----------------------------------------------------------------------------------------------------
France Telecom S.A., 7.75s, 2011 (Telecommunications -
Wireline) 135 162,867
- -----------------------------------------------------------------------------------------------------
$728,424
- -----------------------------------------------------------------------------------------------------
Germany - 2.2%
- -----------------------------------------------------------------------------------------------------
Bayerische Landesbank, 1.16s, 2005 (Banks & Credit
Companies) $275 $275,052
- -----------------------------------------------------------------------------------------------------
Bayerische Landesbank, 6.375s, 2005 (Banks & Credit
Companies) 400 432,902
- -----------------------------------------------------------------------------------------------------
Deutsche Telekom AG, 8.25s, 2005 (Telecommunications -
Wireline) 665 726,559
- -----------------------------------------------------------------------------------------------------
Deutsche Telekom AG, 5.25s, 2013 (Telecommunications -
Wireline) 200 198,767
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 9.4s, 2004 (Financial
Institutions) 205 214,213
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 2.5s, 2005 (Financial
Institutions) 800 808,653
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 4.25s, 2005 (Financial
Institutions) 25 25,913
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 2.375s, 2006 (Financial
Institutions) 670 667,434
- -----------------------------------------------------------------------------------------------------
Landesbank Baden-Wurttemberg Girozentrale, 7.875s, 2004
(Banks & Credit Companies) 15 15,463
- -----------------------------------------------------------------------------------------------------
Landesbank Baden-Wurttemberg Girozentrale, 5.125s, 2007
(Banks & Credit Companies) 300 319,245
- -----------------------------------------------------------------------------------------------------
$3,684,201
- -----------------------------------------------------------------------------------------------------
Hong Kong - 0.5%
- -----------------------------------------------------------------------------------------------------
PCCW Capital II Ltd., 6s, 2013 (Telecommunications -
Wireline)## $800 $796,520
- -----------------------------------------------------------------------------------------------------
Iceland - 0.2%
- -----------------------------------------------------------------------------------------------------
Republic of Iceland, 6.125s, 2004 $300 $303,288
- -----------------------------------------------------------------------------------------------------
Ireland - 0.7%
- -----------------------------------------------------------------------------------------------------
DEPFA Bank PLC, 3.625s, 2008 (Banks & Credit Companies) $1,250 $1,246,162
- -----------------------------------------------------------------------------------------------------
Italy - 0.6%
- -----------------------------------------------------------------------------------------------------
Republic of Italy, 4.625s, 2005 $25 $26,080
- -----------------------------------------------------------------------------------------------------
Telecom Italia S.p.A., 5.25s, 2013 (Telecommunications -
Wireline)## 1,000 992,222
- -----------------------------------------------------------------------------------------------------
$1,018,302
- -----------------------------------------------------------------------------------------------------
Kazakhstan - 0.2%
- -----------------------------------------------------------------------------------------------------
Kazkommerts International B.V., 10.125s, 2007 (Banks &
Credit Companies)## $250 $275,000
- -----------------------------------------------------------------------------------------------------
Kazkommerts International B.V., 8.5s, 2013 (Banks &
Credit Companies)## 150 149,250
- -----------------------------------------------------------------------------------------------------
$424,250
- -----------------------------------------------------------------------------------------------------
Mexico - 0.3%
- -----------------------------------------------------------------------------------------------------
BBVA Bancomer Capital Trust I, 10.5s, 2011 (Banks &
Credit Companies)## $165 $185,212
- -----------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 9.125s, 2010 (Oil
Services) 335 391,950
- -----------------------------------------------------------------------------------------------------
$577,162
- -----------------------------------------------------------------------------------------------------
Netherlands - 0.3%
- -----------------------------------------------------------------------------------------------------
Coca Cola HBC Finance B.V., 5.125s, 2013 (Food & Non
Alcoholic Beverages)## $550 $550,176
- -----------------------------------------------------------------------------------------------------
Singapore - 0.4%
- -----------------------------------------------------------------------------------------------------
DBS Capital Funding Corp., 7.657s, 2049 (Banks & Credit
Companies)## $635 $712,911
- -----------------------------------------------------------------------------------------------------
Sweden - 0.2%
- -----------------------------------------------------------------------------------------------------
AB Spintab, 7.5s, 2006 (Banks & Credit Companies) $150 $166,699
- -----------------------------------------------------------------------------------------------------
AB Spintab, 7.5s, 2049 (Banks & Credit Companies)## 175 194,481
- -----------------------------------------------------------------------------------------------------
$361,180
- -----------------------------------------------------------------------------------------------------
Tunisia - 0.2%
- -----------------------------------------------------------------------------------------------------
Banque Centrale de Tunisie, 7.375s, 2012 (Banks & Credit
Companies) $260 $286,000
- -----------------------------------------------------------------------------------------------------
United Kingdom - 2.4%
- -----------------------------------------------------------------------------------------------------
Abbey National First Capital B.V., 8.2s, 2004 (Bank &
Credit Companies) $425 $451,016
- -----------------------------------------------------------------------------------------------------
Barclays Bank PLC, 8.55s, 2049 (Banks & Credit
Companies)## 170 208,528
- -----------------------------------------------------------------------------------------------------
British Telecommunications PLC, 2.435s, 2003
(Telecommunications - Wireline) 14 14,016
- -----------------------------------------------------------------------------------------------------
British Telecommunications PLC, 7.875s, 2005
(Telecommunications - Wireline) 250 276,811
- -----------------------------------------------------------------------------------------------------
Cadbury Schweppes PLC, 3.875s, 2008 (Food & Non Alcoholic
Beverages)## 1,200 1,190,701
- -----------------------------------------------------------------------------------------------------
Cadbury Schweppes PLC, 5.125s, 2013 (Food & Non Alcoholic
Beverages)## 300 297,572
- -----------------------------------------------------------------------------------------------------
LASMO (USA), Inc., 7.5s, 2006 (Energy - Intergrated) 175 196,797
- -----------------------------------------------------------------------------------------------------
National Westminster Bancorp PLC, 7.75s, 2049 (Banks &
Credit Companies) 550 630,637
- -----------------------------------------------------------------------------------------------------
Permanent Financing PLC, 4.2s, 2007 (Corporate Asset- Backed) 750 776,993
- -----------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC, 8.817s, 2049 (Banks &
Credit Companies) 10 10,896
- -----------------------------------------------------------------------------------------------------
$4,053,967
- -----------------------------------------------------------------------------------------------------
Total Foreign Bonds $21,835,524
- -----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $164,033,953) $165,296,640
- -----------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.2%
- -----------------------------------------------------------------------------------------------------
Edison Asset Securitization LLC, due 11/03/03,
at Amortized Cost $2,082 $2,081,880
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $166,115,833) $167,378,520
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.2% 1,953,254
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $169,331,774
- -----------------------------------------------------------------------------------------------------
## 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 composi
the total value of your fund.
AT 10/31/03
ASSETS
Investments, at value (identified cost, $166,115,833) $167,378,520
- -----------------------------------------------------------------------------------------------------
Cash 277
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 1,408,693
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 45,660
- -----------------------------------------------------------------------------------------------------
Interest receivable 1,785,641
- -----------------------------------------------------------------------------------------------------
Receivable for daily variation margin on open futures
contracts 4,297
- -----------------------------------------------------------------------------------------------------
Total assets $170,623,088
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $612,703
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 75,818
- -----------------------------------------------------------------------------------------------------
Distribution payable 599,290
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 1,624
- -----------------------------------------------------------------------------------------------------
Reimbursement fee 1,129
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 750
- -----------------------------------------------------------------------------------------------------
Total liabilities $1,291,314
- -----------------------------------------------------------------------------------------------------
Net assets $169,331,774
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $169,354,319
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 1,223,748
- -----------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net realized gain
on investments (226,140)
- -----------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income (1,020,153)
- -----------------------------------------------------------------------------------------------------
Total $169,331,774
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 16,443,584
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $43,092,134
- -----------------------------------------------------------------------------------------------------
Shares outstanding 4,183,622
- -----------------------------------------------------------------------------------------------------
Net asset value per share $10.30
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$10.30) $10.81
- -----------------------------------------------------------------------------------------------------
Class B shares
Net assets $14,578,389
- -----------------------------------------------------------------------------------------------------
Shares outstanding 1,415,156
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.30
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $6,434,209
- -----------------------------------------------------------------------------------------------------
Shares outstanding 624,387
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.30
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $105,000,972
- -----------------------------------------------------------------------------------------------------
Shares outstanding 10,198,465
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price
per share $10.30
- -----------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $186,010
- -----------------------------------------------------------------------------------------------------
Shares outstanding 18,065
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price
per share $10.30
- -----------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $40,060
- -----------------------------------------------------------------------------------------------------
Shares outstanding 3,889
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price
per share $10.30
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the offering price of Class A shares is reduced. A contingent deferred
sales charge may be imposed on redemptions of Class A, Class B and Class C shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
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.
SIX MONTHS ENDED 10/31/03
NET INVESTMENT INCOME
Interest income $2,673,402
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $345,606
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 1,458
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 76,033
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 70,454
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 79,512
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 27,268
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 274
- -----------------------------------------------------------------------------------------------------
Administrative fee 4,835
- -----------------------------------------------------------------------------------------------------
Auditing fees 18,881
- -----------------------------------------------------------------------------------------------------
Custodian fee 34,327
- -----------------------------------------------------------------------------------------------------
Printing 28,157
- -----------------------------------------------------------------------------------------------------
Legal fees 137
- -----------------------------------------------------------------------------------------------------
Postage 1,458
- -----------------------------------------------------------------------------------------------------
Miscellaneous 57,700
- -----------------------------------------------------------------------------------------------------
Total expenses $746,100
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (990)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and distributor (193,201)
- -----------------------------------------------------------------------------------------------------
Net expenses $551,909
- -----------------------------------------------------------------------------------------------------
Net investment income $2,121,493
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $89,427
- -----------------------------------------------------------------------------------------------------
Futures contracts 31,974
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments $121,401
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -----------------------------------------------------------------------------------------------------
Investments $(1,171,466)
- -----------------------------------------------------------------------------------------------------
Futures contracts (38,939)
- -----------------------------------------------------------------------------------------------------
Net unrealized loss on investments $(1,210,405)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments $(1,089,004)
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $1,032,489
- -----------------------------------------------------------------------------------------------------
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.
SIX MONTHS YEAR
ENDED ENDED
10/31/03 4/30/03
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $2,121,493 $1,518,421
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments 121,401 332,653
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments (1,210,405) 2,406,857
- ---------------------------------------------------------------- ----------- ------------
Increase in net assets from operations $1,032,489 $4,257,931
- ---------------------------------------------------------------- ----------- ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- -----------------------------------------------------------------------------------------------------
Class A $(901,403) $(1,019,402)
- -----------------------------------------------------------------------------------------------------
Class B (289,223) (307,813)
- -----------------------------------------------------------------------------------------------------
Class C (98,722) (90,332)
- -----------------------------------------------------------------------------------------------------
Class I (1,775,409) (745,297)
- -----------------------------------------------------------------------------------------------------
Class R1 (2,264) (618)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments
- -----------------------------------------------------------------------------------------------------
Class A -- (34,938)
- -----------------------------------------------------------------------------------------------------
Class B -- (12,353)
- -----------------------------------------------------------------------------------------------------
Class C -- (3,560)
- -----------------------------------------------------------------------------------------------------
Class I -- (19,465)
- ---------------------------------------------------------------- ----------- ------------
Total distributions declared to shareholders $(3,067,021) $(2,233,778)
- ---------------------------------------------------------------- ----------- ------------
Net increase in net assets from fund share transactions $67,862,287 $98,861,950
- ---------------------------------------------------------------- ----------- ------------
Total increase in net assets $65,827,755 $100,886,103
- ---------------------------------------------------------------- ----------- ------------
NET ASSETS
At beginning of period $103,504,019 $2,617,916
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $1,020,153 and $74,625,
respectively) $169,331,774 $103,504,019
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or, if shorter, the period of the fund's operation). Certain information reflects financial
results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or
lost) on an investment in the fund (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED ---------------------------------------------------- ENDED
10/31/03 2003 2002 2001 2000 4/30/99*
CLASS A (UNAUDITED)
Net asset value, beginning of period $10.43 $9.92 $9.85 $9.38 $9.88 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.16 $0.35 $0.49 $0.67 $0.64 $0.18
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (0.06) 0.68 0.23 0.48 (0.49) (0.14)
- ----------------------------------- ------- ----------- ----------- ----------- ----------- ----------
Total from investment
operations $0.10 $1.03 $0.72 $1.15 $0.15 $0.04
- ----------------------------------- ------- ----------- ----------- ----------- ----------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.23) $(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 declared to
shareholders $(0.23) $(0.52) $(0.65) $(0.68) $(0.65) $(0.16)
- ----------------------------------- ------- ----------- ----------- ----------- ----------- ----------
Net asset value, end of period $10.30 $10.43 $9.92 $9.85 $9.38 $9.88
- ----------------------------------- ------- ----------- ----------- ----------- ----------- ----------
Total return (%)(+) 1.00++ 10.59 7.47 12.63 1.62 0.44++
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED ---------------------------------------------------- ENDED
10/31/03 2003 2002 2001 2000 4/30/99*
CLASS A (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 0.75+ 0.75 0.41 0.03 0.04 0.27+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.14+ 3.48 5.62 7.02 6.69 5.53+
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 36 79 75 133 147 155
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $43,092 $36,151 $1,391 $235 $1,022 $1,005
- ------------------------------------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under a temporary expense agreement, to pay all of the fund's operating
expenses, exclusive of management and distribution and service fees. 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) $0.14 $0.28 $(0.29) $0.28 $0.25 $(0.09)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.17+ 1.41 9.37 4.13 4.10 8.60+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.72+ 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 are 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
SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED
10/31/03 4/30/03 4/30/02*
CLASS B (UNAUDITED)
Net asset value, beginning of period $10.43 $9.92 $10.03
- -----------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.12 $0.27 $0.07
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.06) 0.67 (0.10)
- ---------------------------------------------------------- ----------- ----------- -----------
Total from investment operations $0.06 $0.94 $(0.03)
- ---------------------------------------------------------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.19) $(0.42) $(0.07)
- -----------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (0.01) --
- -----------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.01)
- ---------------------------------------------------------- ----------- ----------- -----------
Total distributions declared to shareholders $(0.19) $(0.43) $(0.08)
- ---------------------------------------------------------- ----------- ----------- -----------
Net asset value, end of period $10.30 $10.43 $9.92
- ---------------------------------------------------------- ----------- ----------- -----------
Total return (%) 0.58++ 9.66 (0.27)++
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.60+ 1.60 1.61+
- -----------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.30+ 2.63 4.49+
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover 36 79 75
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $14,578 $15,603 $234
- -----------------------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under a temporary expense agreement, to pay all of the
fund's operating expenses, exclusive of management and distribution and service fees. 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 (loss) $0.11 $0.22 $(0.07)
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
- -----------------------------------------------------------------------------------------------------------------
Expenses## 1.82+ 2.06 10.47+
- -----------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.08+ 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 are based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED
10/31/03 4/30/03 4/30/02*
CLASS C (UNAUDITED)
Net asset value, beginning of period $10.43 $9.92 $10.03
- -----------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.12 $0.26 $0.07
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.06) 0.68 (0.10)
- ---------------------------------------------------------- ----------- ----------- -----------
Total from investment operations $0.06 $0.94 $(0.03)
- ---------------------------------------------------------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.19) $(0.42) $(0.07)
- -----------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.01)
- -----------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (0.01) --
- ---------------------------------------------------------- ----------- ----------- -----------
Total distributions declared to shareholders $(0.19) $(0.43) $(0.08)
- ---------------------------------------------------------- ----------- ----------- -----------
Net asset value, end of period $10.30 $10.43 $9.92
- ---------------------------------------------------------- ----------- ----------- -----------
Total return (%) 0.58++ 9.63 (0.27)++
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.60+ 1.60 1.61+
- -----------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.26+ 2.60 4.35+
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover 36 79 75
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $6,434 $4,671 $13
- -----------------------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under a temporary expense agreement, to pay all of the
fund's operating expenses, exclusive of management and distribution and service fees. 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 (loss) $0.11 $0.21 $(0.07)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.82+ 2.06 10.47+
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.04+ 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 are based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED ---------------------------------------------------- ENDED
10/31/03 2003 2002 2001 2000 4/30/99*
CLASS I (UNAUDITED)
Net asset value, beginning of period $10.42 $9.92 $9.84 $9.38 $9.87 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.17 $0.34 $0.59 $0.68 $0.65 $0.19
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (0.05) 0.69 0.14 0.46 (0.49) (0.16)
- ------------------------------------ ------ ----------- ----------- ----------- ----------- ----------
Total from investment operations $0.12 $1.03 $0.73 $1.14 $0.16 $0.03
- ------------------------------------ ------ ----------- ----------- ----------- ----------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.24) $(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 declared to
shareholders $(0.24) $(0.53) $(0.65) $(0.68) $(0.65) $(0.16)
- ------------------------------------ ------ ----------- ----------- ----------- ----------- ----------
Net asset value, end of period $10.30 $10.42 $9.92 $9.84 $9.38 $9.87
- ------------------------------------ ------ ----------- ----------- ----------- ----------- ----------
Total return (%) 1.18++ 10.65 7.60 12.52 1.72 0.33++
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED ---------------------------------------------------- ENDED
10/31/03 2003 2002 2001 2000 4/30/99*
CLASS I (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.60+ 0.60 0.13 0.03 0.04 0.27+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.25+ 3.58 5.90 6.96 6.80 5.43+
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 36 79 75 133 147 155
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $105,001 $47,031 $980 $915 $0+++ $0+++
- ------------------------------------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under a temporary expense agreement, to pay all of the fund's
operating expenses, exclusive of management and distribution and service fees. 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 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) $0.16 $0.30 $(0.30) $0.28 $0.30 $(0.09)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 0.82+ 1.06 8.99 4.13 3.75 8.25+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.03+ 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 are based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS R1 (UNAUDITED)
Net asset value, beginning of period $10.43 $10.34
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.14 $0.10
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.05) 0.14###
- ------------------------------------------------------------------------------ -----------
Total from investment operations $0.09 $0.24
- ------------------------------------------------------------------------------ -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.22) $(0.15)
- ------------------------------------------------------------------------------ -----------
Net asset value, end of period $10.30 $10.43
- ------------------------------------------------------------------------------ -----------
Total return (%) 0.83++ 2.36++
- --------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.10+ 1.10+
- --------------------------------------------------------------------------------------------------
Net investment income 2.76+ 3.06+
- --------------------------------------------------------------------------------------------------
Portfolio turnover 36 79
- --------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $186 $48
- --------------------------------------------------------------------------------------------------
(S) Effective March 1, 2002, MFS has voluntarily agreed under a temporary expense agreement, to pay
all of the fund's operating expenses, exclusive of management and distribution and service
fees. 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 per share and the
ratios would have been:
Net investment income $0.13 $0.09
- --------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------------------------
Expenses## 1.32+ 1.56+
- --------------------------------------------------------------------------------------------------
Net investment income 2.54+ 2.60+
- --------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 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 (unaudited)
- --------------------------------------------------------------------------------
(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) 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 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.
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 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 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 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 accounting principles generally accepted in the United States of America.
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 mortgage-backed securities, 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 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
- -----------------------------------------------------------------------------
As of April 30, 2003, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income $543,714
- ---------------------------------------------------------------------------
Post-October capital loss deferral (16,624)
- ---------------------------------------------------------------------------
Unrealized appreciation 1,856,640
- ---------------------------------------------------------------------------
Other temporary differences (371,743)
- ---------------------------------------------------------------------------
Post-October capital loss deferrals represent losses realized during the
current fiscal year, but recognized for tax purposes in the next fiscal year.
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 six
months ended October 31, 2003 were 0.35% of average daily net assets on an
annualized basis.
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, Class R1 and Class R2. 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
October 31, 2003, aggregate unreimbursed expenses amounted to $5,764.
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
not to exceed the following annual percentage rates 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%
----------------------------------------------------------
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain administrative
services with respect to class R2 shares. These services include various
administrative, recordkeeping and communication/educational services with
respect to the retirement plans which invest in class R2 shares, and may be
provided directly by MFS or by a third party. The fund pays an annual 0.25%
administrative service fee solely from the assets of class R2 shares to MFS for
the provision of these services. No administrative service fee from class R2
shares were paid to MFS as of October 31, 2003.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$11,298 for the six months ended October 31, 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,
Class R1 and Class R2 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 R1 CLASS R2
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.50%
- ------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the six months ended
October 31, 2003, amounted to:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Service Fee Retained by MFD $915 $8 $3 $1 $--
- ------------------------------------------------------------------------------------------------------------------
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 six months ended October 31, 2003 were as follows:
CLASS A CLASS B CLASS C CLASS R1
Effective Annual Percentage Rates 0.15% 1.00% 1.00% 0.50%
- ------------------------------------------------------------------------------------------------------------------
Class R2 shares, which commenced operations on October 31, 2003, did not incur
any fees.
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 six months ended October 31, 2003,
were as follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges Imposed $-- $22,975 $1,479
- --------------------------------------------------------------------------------
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 $52,085,124 $33,886,158
- ------------------------------------------------------------------------------
Investments (non-U.S. government securities) $59,802,461 $14,412,331
- ------------------------------------------------------------------------------
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 $167,271,622
---------------------------------------------------------------
Gross unrealized appreciation $1,498,256
---------------------------------------------------------------
Gross unrealized depreciation (1,391,358)
---------------------------------------------------------------
Net unrealized appreciation $106,898
---------------------------------------------------------------
(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:
Six months ended Year ended
10/31/03 4/30/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 1,375,047 $14,284,608 3,620,157 $36,808,485
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 23,243 241,799 18,576 191,160
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (681,384) (7,054,328) (312,134) (3,191,231)
- ------------------------------------------------------------------------------------------------------------
Net increase 716,906 $7,472,079 3,326,599 $33,808,414
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 350,835 $3,661,513 1,713,055 $17,528,658
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 23,664 246,407 22,185 228,330
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (455,326) (4,706,230) (262,852) (2,699,734)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (80,827) $(798,310) 1,472,388 $15,057,254
- ------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 276,205 $2,872,375 567,241 $5,806,103
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 6,705 69,782 6,123 63,025
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (106,271) (1,104,008) (126,964) (1,298,344)
- ------------------------------------------------------------------------------------------------------------
Net increase 176,639 $1,838,149 446,400 $4,570,784
- ------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 5,572,827 $57,983,552 4,398,671 $45,228,052
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 151,178 1,569,477 57,928 597,300
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (37,142) (381,555) (43,778) (447,132)
- ------------------------------------------------------------------------------------------------------------
Net increase 5,686,863 $59,171,474 4,412,821 $45,378,220
- ------------------------------------------------------------------------------------------------------------
CLASS R1 SHARES
Shares sold 13,542 $139,292 4,527 $46,876
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 174 1,802 44 453
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (217) (2,219) (5) (51)
- ------------------------------------------------------------------------------------------------------------
Net increase 13,499 $138,875 4,566 $47,278
- ------------------------------------------------------------------------------------------------------------
Period ended
10/31/03**
SHARES AMOUNT
CLASS R2 SHARES
Shares sold 3,889 $40,020
- ------------------------------------------------------------------
Net increase 3,889 $40,020
- ------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through April 30, 2003.
** Class R2 shares, which commenced operations on October 31, 2003, had no operating activity.
(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 six
months ended October 31, 2003 was $496. The fund had no borrowings during the
period.
(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.
Futures Contracts
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
5 Year U.S. Treasury Notes December 2003 25 Long $(38,939)
- -------------------------------------------------------------------------------------------------------------------
$(38,939)
- -------------------------------------------------------------------------------------------------------------------
At October 31, 2003, the fund had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the fund's investment adviser,
has been contacted by the Office of the New York State Attorney General ("NYAG")
and the United States Securities and Exchange Commission ("SEC") in connection
with their investigations of practices in the mutual fund industry identified as
"market timing" mutual fund shares. MFS is cooperating with respect to these
investigations. MFS has been informed that the SEC is considering whether to
institute an enforcement action against MFS alleging false and misleading
disclosure in certain MFS fund prospectuses and breach of fiduciary duty
concerning market timing. The NYAG has also indicated that it is considering
whether to commence an enforcement proceeding against MFS relating to these
practices. MFS continues to discuss these matters with the SEC and the NYAG.
Certain other regulatory authorities are also conducting investigations into
these practices within the industry and have requested that MFS provide
information to them.
In December 2003, MFS and Sun Life Financial Inc., along with certain MFS funds
and Trustees who serve on the Board of Trustees of these MFS funds, were named
as defendants in class action lawsuits filed in the United States District
Court, District of Massachusetts seeking damages of unspecified amounts. The
lawsuits were purportedly filed on behalf of people who purchased, owned and/or
redeemed shares of MFS funds during specified periods. The suits allege that
certain defendants permitted market timing and late trading in the MFS funds
which allegedly caused financial injury to the funds' shareholders. The
defendants are reviewing the allegations and will respond appropriately.
Additional lawsuits based upon similar allegations may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
sanctions, penalties, damages or injunctions regarding MFS, restitution to
mutual fund shareholders and/or other financial penalties and structural changes
in the governance of MFS' mutual fund business.
Although MFS does not believe that these lawsuits will have a material adverse
effect on the funds, there can be no assurance that these suits, the ongoing
adverse publicity and/or other developments resulting from related regulatory
investigations or developments will not result in increased fund redemptions,
reduced sales of fund shares, or other adverse consequences for the funds.
- -------------------------------------------------------------------------------------------------------------------
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, Private investor; Rockefeller Financial Services, Inc.
Chairman (investment 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 Company, Trustee
Chief Executive Officer and Director Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Company, Private investor; Harvard University Graduate School
President, Chief Investment Officer and of Business Administration, Class of 1961
Director Adjunct Professor in Entrepreneurship Emeritus;
CBL & Associates Properties, Inc. (real estate
INDEPENDENT TRUSTEES investment trust), Director
LAWRENCE H. COHN, M.D. (born 03/11/37) J. DALE SHERRATT (born 09/23/38)
Trustee Trustee
Brigham and Women's Hospital, Chief of Cardiac Insight Resources, Inc. (acquisition planning
Surgery; Harvard Medical School, Professor of Surgery specialists), President; Wellfleet Investments (investor
in health care companies), Managing General Partner
WILLIAM R. GUTOW (born 09/27/41) (since 1993); Cambridge Nutraceuticals (professional
Trustee nutritional products), Chief Executive Officer (until
Private investor and real estate consultant; May 2001)
Capitol Entertainment Management Company
(video franchise), Vice Chairman ELAINE R. SMITH (born 04/25/46)
Trustee
J. ATWOOD IVES (born 05/01/36) Independent health care industry consultant
Trustee
Private investor; KeySpan Corporation (energy related WARD SMITH (born 09/13/30)
services), Director; Eastern Enterprises (diversified Trustee
services company), Chairman, Trustee and Chief Private investor
Executive Officer (until November 2000)
(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
JOHN W. BALLEN (born 09/12/59) ROBERT R. FLAHERTY (born 09/18/63)
Trustee and President Assistant Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59)
Assistant Secretary and Assistant Clerk RICHARD M. HISEY (born 08/29/58)
Massachusetts Financial Services Company, Senior Treasurer
Vice President and Associate General Counsel Massachusetts Financial Services Company, Senior
Vice President (since July 2002); The Bank of New
STEPHEN E. CAVAN (born 11/06/53) York, Senior Vice President (September 2000 to July
Secretary and Clerk 2002); Lexington Global Asset Managers, Inc.,
Massachusetts Financial Services Company, Senior Executive Vice President and Chief Financial Officer
Vice President, General Counsel and Secretary (prior to September 2000); Lexington Funds,
Treasurer (prior to September 2000)
STEPHANIE A. DESISTO (born 10/01/53)
Assistant Treasurer ELLEN MOYNIHAN (born 11/13/57)
Massachusetts Financial Services Company, Vice Assistant Treasurer
President (since April 2003); Brown Brothers Massachusetts Financial Services Company,
Harriman & Co., Senior Vice President (November Vice President
2002 to April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice President JAMES O. YOST (born 06/12/60)
(prior to November 2002) Assistant Treasurer
Massachusetts Financial Services 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 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 110 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 Street Bank and Trust Company
500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA
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
A prospectus containing more complete information, including investment
objectives, risks, charges and expenses, for any of the MFS products can be
obtained from your investment professional. You should read and consider the
information carefully before investing.
Variable annuities are offered through MFS/Sun Life Financial Distributors, Inc.
- --------------------------------------------------------------------------------
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.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.
gov.
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
- --------------------------------------------------------------------------------
Share prices, account 1-800-MFS-TALK
balances (1-800-637-8255)
exchanges or stock and touch-tone 24 hours a day, 365 days a
bond outlooks required 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
IBF-SEM-12/03 16M
MFS(R) Mutual Funds
SEMIANNUAL REPORT 10/31/03
MFS(R) LIMITED MATURITY FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
MFS(R) LIMITED MATURITY FUND
The fund seeks as high a level of current income as is believed to be
consistent with prudent investing. It's secondary objective seeks to protect
shareholders' capital.
- -------------------------------------------------------------------------------
To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit www.mfs.com.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 2
- ----------------------------------------------------
MANAGEMENT REVIEW 3
- ----------------------------------------------------
PERFORMANCE SUMMARY 6
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 9
- ----------------------------------------------------
FINANCIAL STATEMENTS 22
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 38
- ----------------------------------------------------
TRUSTEES AND OFFICERS 48
- ----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 50
- ----------------------------------------------------
CONTACT INFORMATION 51
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
In our view, the past year has been a promising one for investors. Financial
markets have improved steadily, spurred by indications of a global economic
recovery.
These developments make this an encouraging time for MFS and for our
shareholders. But we also think it's a time to reinforce the fundamentals of a
sound investment strategy.
At MFS, we think in any market environment the best approach for investors is
disciplined diversification. This method of investing involves three simple
steps. First, allocate your holdings across the major asset classes. Second,
diversify within each class so that you get exposure to different investment
styles, such as growth and value, and market sectors, such as government and
corporate bonds. Finally, to respond to the way market activity can shift the
value of your accounts, rebalance your accounts on a routine schedule, such as
once per year. Doing so will help you maintain your desired allocation across
each asset class.
These investing fundamentals are often lost when markets are on an upswing. At
such times, it's easy to be tempted to shift your holdings in the current,
"hottest" performing investment. History suggests, however, that it is
difficult to predict year after year what the best performing sector or market
will be. While it is true that the past cannot offer any guarantees for the
future, the markets historically have demonstrated the benefits of taking the
prudent approach and spreading your assets across a variety of holdings. For
investors with long-term goals such as college or retirement, a balanced
approach usually makes the most sense. As always, your investment professional
can help you identify an appropriate mix of investments for your needs.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
November 20, 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 nearly 80 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
- -------------------------------------------------------------------------------
MARKET ENVIRONMENT
Throughout the period, short-term interest rates were largely unchanged as
the Federal Reserve Board pursued an accommodative monetary policy designed to
stimulate the U.S. economy. However, intermediate-term interest rates rose
during June and July. For example, yields on two-year Treasury securities were
up slightly more than 33 basis points (0.33%), those of five-year Treasury
notes were up nearly 50 basis points (0.50%), and 10-year bonds rose almost 46
basis points (0.46%). Also during the period, mortgage rates
fell to historically low levels in June but then began to rise as the
summer progressed.
In our view, the U.S. economy moved out of a period of uncertainty and into a
period where investors began to wonder how much the economy would recover
instead of if it would recover. In the third quarter, the U.S. gross domestic
product increased 7.2% and surprised investors and economists alike. Most
attributed the unexpected rise to a variety of factors, including the Fed's
accommodative monetary policy, a cash infusion from the tax cuts, and a
general improvement in business and consumer sentiment.
PORTFOLIO CONCENTRATION 10/31/03
High-grade Porporates 50.6%
Asset Backed 13.6%
Mortgage Backed 10.2%
U.S. Agencies 8.1%
Commercial Mortgaged Backed 5.9%
International Sovereigns 5.5%
Residential Mortgage Backed 2.7%
Cash & Other 2.5%
Emerging Markets Debt 0.9%
The portfolio is actively managed, and current
holdings may be different.
FUND POSITIONING
High-grade corporate bonds comprised roughly half of the fund's holdings
throughout the period, which was an overweighting relative to our benchmark,
the Lehman Brothers 1-3-year Government/Credit Index. We believed that
corporate securities offered better values and better yields than U.S.
Treasury securities of comparable maturities. (The principal value and
interest on Treasury securities are guaranteed by the U.S. government if held
to maturity.) We kept average portfolio quality at AA to AA- and maintained a
duration of approximately 1.7 years. Duration is a measure of interest-rate
sensitivity - the higher the number, the greater the sensitivity.
DETRACTORS FROM FUND PERFORMANCE
The fund's mortgage-backed bonds underperformed equivalent Treasury securities
as prepayments and volatility affected valuations. In the months leading up to
the June low, refinancing activity had reached a feverish pitch as mortgage
holders took advantage of falling rates. Mortgage rates bottomed in June when
the average commitment rate from Freddie Mac (Federal Home Loan Mortgage
Corporation) reached 5.25% for a 30-year fixed mortgage, and rose to roughly
6.10% at the end of October 2003.
Relative returns were also hurt by fund holdings with 5-year maturities
because rates rose more in the 4- to 10-year maturities than in the very short
end of the range. As a result, the total return for a 2-year Treasury security
was better than that of a 5-year Treasury for the period.
CORPORATE BONDS A PLUS
Our overweighting in corporate bonds contributed to fund performance because
of their yield advantage over similar maturity U.S. Treasury bonds. On
average, one- to five-year corporate bond yields ranged between 110 and 80
basis points (1.10% and 0.80%) higher than their Treasury counterparts.
Corporate bonds, particularly those from the auto industry and the
telecommunications sector, rebounded from distressed levels at the start
of 2003.
In 2002, investor concerns about the amount of the auto industry's debt and
the size of its pension obligations depressed bond prices. In addition, the
group's bonds were negatively impacted when rating agencies downgraded Ford
and General Motors. As a result, yield premiums for the industry rose as
investors became concerned about liquidity and credit risk. However, in 2003,
changing economic conditions, continued consumer spending, and increased
liquidity in the capital markets helped to allay investor concerns. As a
result, the relative performance of these bonds during the period was better
than that of similar maturity U.S. Treasury securities.
Telecommunications bond prices relative to Treasuries had been severely
depressed in 2002 because of accounting problems and over leverage. When
companies addressed those issues, their bonds began to rebound from the
depressed levels of third quarter 2002. That rebound continued into 2003 and
throughout the reporting period as these companies raised additional capital
and refocused on their cash flow.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
- -------------------------------------------------------------------------------
Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment- related news.
o From Week in Review, link to MFS Global Investment Perspective for our
current view of the world.
- -------------------------------------------------------------------------------
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 10/31/03
- -------------------------------------------------------------------------------
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Performance results reflect the percentage change
in net asset value, including the reinvestment of any dividends and capital
gains distributions. (See Notes to Performance Summary.)
VISIT WWW.MFS.COM FOR MORE CURRENT PERFORMANCE RESULTS.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN.
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.
TOTAL RETURNS
- ----------------------
Average annual
without sales charge
- ----------------------
Class
Share inception
class date 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 2/26/92 -- 3.94% 5.62% 5.18% 5.22%
- ------------------------------------------------------------------------------
B 9/7/93 -- 2.98% 4.82% 4.38% 4.36%
- ------------------------------------------------------------------------------
C 7/1/94 -- 2.91% 4.74% 4.29% 4.37%
- ------------------------------------------------------------------------------
I 1/2/97 -- 3.94% 5.74% 5.32% 5.29%
- ------------------------------------------------------------------------------
R1** 12/31/02 -- 3.71% 5.55% 5.13% 5.20%
- ------------------------------------------------------------------------------
R2*** 10/31/03 -- N/A N/A N/A N/A
- ------------------------------------------------------------------------------
529A 7/31/02 -- 3.51% 5.50% 5.10% 5.19%
- ------------------------------------------------------------------------------
529B 7/31/02 -- 2.77% 5.14% 4.89% 5.08%
- ------------------------------------------------------------------------------
529C 7/31/02 -- 2.74% 5.17% 4.91% 5.09%
- ------------------------------------------------------------------------------
- ----------------------
Average annual
- ----------------------
Comparative benchmarks
- ------------------------------------------------------------------------------
Average short-term
investment grade
debt fund+ 0.64% 3.07% 5.29% 4.96% 5.13%
- ------------------------------------------------------------------------------
Lehman Brothers
One- to
Three-Year Government/
Credit Index# 0.86% 3.25% 6.46% 5.74% 5.88%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
- ----------------------
Average annual
with sales charge
- ----------------------
Share
class 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A -- 1.34% 4.73% 4.65% 4.96%
- ------------------------------------------------------------------------------
B -- -0.99% 3.91% 4.05% 4.36%
- ------------------------------------------------------------------------------
C -- 1.92% 4.74% 4.29% 4.37%
- ------------------------------------------------------------------------------
529A -- 0.92% 4.61% 4.57% 4.92%
- ------------------------------------------------------------------------------
529B -- -1.19% 4.23% 4.57% 5.08%
- ------------------------------------------------------------------------------
529C -- 1.75% 5.17% 4.91% 5.09%
- ------------------------------------------------------------------------------
I, R1 and R2 class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
- ----------------------
Cumulative
without sales charge
- ----------------------
- ------------------------------------------------------------------------------
A 0.76% 3.94% 17.83% 28.71% 66.40%
- ------------------------------------------------------------------------------
B 0.37% 2.98% 15.18% 23.91% 53.23%
- ------------------------------------------------------------------------------
C 0.33% 2.91% 14.89% 23.39% 53.41%
- ------------------------------------------------------------------------------
I 0.83% 3.94% 18.23% 29.56% 67.49%
- ------------------------------------------------------------------------------
R1** 0.63% 3.71% 17.58% 28.43% 66.04%
- ------------------------------------------------------------------------------
R2*** N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------
529A 0.62% 3.51% 17.42% 28.26% 65.81%
- ------------------------------------------------------------------------------
529B 0.26% 2.77% 16.24% 26.97% 64.14%
- ------------------------------------------------------------------------------
529C 0.25% 2.74% 16.34% 27.08% 64.28%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
** Effective November 3, 2003, Class R shares have been renamed R1 shares.
*** R2 shares commenced investment operations on October 31, 2003, therefore no
performance information is available.
INDEX DEFINITION
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 R1 and R2 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.
Performance results reflect any applicable expense subsidies and waivers
in effect during the periods shown. Any such subsidy or waiver is voluntary
and may be revised or rescinded at any time without notice. Without such
subsidies and waivers, the results would be less favorable. Please see the
prospectus and financial statements for complete details.
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 regarding 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 (unaudited) - 10/31/03
- -----------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund at 10/31/03. It
is categorized by broad-based asset classes.
Bonds - 99.4%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------------
U.S. Bonds - 86.2%
- -----------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 0.8%
- -----------------------------------------------------------------------------------------------------
Clear Channel Communications Co., 4.625s, 2008 $4,320 $4,445,444
- -----------------------------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 6.125s, 2006 3,713 4,048,893
- -----------------------------------------------------------------------------------------------------
$8,494,337
- -----------------------------------------------------------------------------------------------------
Aerospace - 0.9%
- -----------------------------------------------------------------------------------------------------
Boeing Capital Corp., 5.75s, 2007 $5,130 $5,496,420
- -----------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7s, 2006 3,385 3,738,005
- -----------------------------------------------------------------------------------------------------
$9,234,425
- -----------------------------------------------------------------------------------------------------
Airlines - 0.2%
- -----------------------------------------------------------------------------------------------------
American Airlines, 3.857s, 2010 $1,440 $1,415,218
- -----------------------------------------------------------------------------------------------------
Delta Air Lines, Inc., 7.379s, 2011 784 799,511
- -----------------------------------------------------------------------------------------------------
$2,214,729
- -----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 0.9%
- -----------------------------------------------------------------------------------------------------
Diageo PLC, 7.125s, 2004 $2,923 $3,063,579
- -----------------------------------------------------------------------------------------------------
Miller Brewing Co., 4.25s, 2008# 6,550 6,614,537
- -----------------------------------------------------------------------------------------------------
$9,678,116
- -----------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 20.5%
- -----------------------------------------------------------------------------------------------------
Americredit Automobile Receivable Trust, 5.37s, 2008 $2,900 $2,992,287
- -----------------------------------------------------------------------------------------------------
Ameriquest Mortgage Securities, Inc., 3.027s, 2033 5,000 4,975,166
- -----------------------------------------------------------------------------------------------------
Argent Securities, Inc., 2.8s, 2033 4,270 4,270,000
- -----------------------------------------------------------------------------------------------------
Banamex Credit Card, 6.25s, 2003# 301 302,183
- -----------------------------------------------------------------------------------------------------
Brazilian Diversified, 1.75s, 2008# 3,000 3,000,000
- -----------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 4.79s, 2009 4,017 4,185,117
- -----------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 2.47s, 2010 4,500 4,419,066
- -----------------------------------------------------------------------------------------------------
Caterpillar Financial Asset Trust, 3.15s, 2008 6,400 6,472,392
- -----------------------------------------------------------------------------------------------------
Centex Home Equity, 5.93s, 2025 342 344,669
- -----------------------------------------------------------------------------------------------------
Certificates Funding Corp., 6.716s, 2004# 3,064 3,146,133
- -----------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., 7.37s, 2029 2,175 2,382,315
- -----------------------------------------------------------------------------------------------------
Circuit City Credit Card Master Trust, 1.55s, 2011 2,530 2,530,000
- -----------------------------------------------------------------------------------------------------
CIT Home Equity Loan Trust, 4.57s, 2023 343 342,883
- -----------------------------------------------------------------------------------------------------
Citibank Credit Card, 6.65s, 2008 3,375 3,640,918
- -----------------------------------------------------------------------------------------------------
CNH Equipment Test, 1.37s, 2006 5,310 5,314,572
- -----------------------------------------------------------------------------------------------------
CNH Equipment Test, 4.3s, 2008 1,077 1,090,018
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 5.8s, 2030 410 426,321
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Asset Trust, 0.911s, 2032 (Interest Only)# 35,241 1,995,822
- -----------------------------------------------------------------------------------------------------
Continental Airlines Co., 1.58s, 2011 2,197 2,196,953
- -----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 2.89s, 2009 2,272 2,297,102
- -----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 3.5s, 2009# 972 983,110
- -----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 3.52s, 2009# 617 624,434
- -----------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, 4.21s, 2005 2,529 2,545,358
- -----------------------------------------------------------------------------------------------------
Deutsche Mortgage and Asset Receiving Corp., 6.538s, 2031 4,840 5,294,584
- -----------------------------------------------------------------------------------------------------
DLJ Commercial Mortgage Corp., 0.906s, 2005 (Interest Only) 28,200 343,324
- -----------------------------------------------------------------------------------------------------
Drive Auto Receivables Trust, 2.77s, 2008# 3,149 3,118,494
- -----------------------------------------------------------------------------------------------------
Drivetime Auto Owner Trust, 1.918s, 2008# 4,780 4,732,200
- -----------------------------------------------------------------------------------------------------
Fannie Mae Whole Loan, 4.08s, 2031 2,958 2,977,767
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Structured Pass
Through Security, 3.108s, 2035 3,588 3,563,333
- -----------------------------------------------------------------------------------------------------
First Auto Receivables Group Trust, 2.436s, 2007# 3,950 3,950,000
- -----------------------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage, 7.38s, 2029 3,860 4,334,899
- -----------------------------------------------------------------------------------------------------
Fleet Credit Card Master Trust, 1.34s, 2007 1,305 1,306,765
- -----------------------------------------------------------------------------------------------------
Fortress CBO Investments I, Ltd., 1.92s, 2038 3,555 3,553,334
- -----------------------------------------------------------------------------------------------------
GSR Mortgage Loan Trust, 6.06s, 2030 1,468 1,536,803
- -----------------------------------------------------------------------------------------------------
Holmes Financing PLC, 1.34s, 2015 750 750,325
- -----------------------------------------------------------------------------------------------------
Household Automotive Trust, 3.44s, 2009 4,400 4,461,787
- -----------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, 1.57s, 2032 2,557 2,556,034
- -----------------------------------------------------------------------------------------------------
Household Private Label Credit Card, 1.57s, 2008 3,250 3,230,563
- -----------------------------------------------------------------------------------------------------
Hyundai Auto Receivables Trust, 2.8s, 2007# 6,900 6,972,594
- -----------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 3.9s, 2006 3,913 3,964,735
- -----------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 2.33s, 2007 2,355 2,371,264
- -----------------------------------------------------------------------------------------------------
Ikon Receivables Funding LLC, 3.27s, 2011 500 505,045
- -----------------------------------------------------------------------------------------------------
Impac CMB Trust, 1.44s, 2033 4,979 4,978,978
- -----------------------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp.,
6.533s, 2030 1,250 1,334,001
- -----------------------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp.,
6.613s, 2030 4,785 5,299,016
- -----------------------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp.,
7.325s, 2031 1,051 1,129,336
- -----------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust, 6.48s, 2030 3,600 3,978,130
- -----------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust, 0.564s, 2035
(Interest Only) 81,090 2,150,691
- -----------------------------------------------------------------------------------------------------
Medallion Trust, 1.38s, 2031 653 652,995
- -----------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 5.65s, 2030 930 959,251
- -----------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 6.39s, 2030 3,710 4,055,065
- -----------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 6.889s, 2030 2,180 2,372,620
- -----------------------------------------------------------------------------------------------------
MFN Automobile Receivables Trust, 5.07s, 2007# 325 325,696
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Capital, 6.01s, 2030 628 666,431
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Capital, 0.984s, 2031
(Interest Only) 39,196 1,614,684
- -----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 0.930s, 2031 (Interest Only) 36,744 1,204,170
- -----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.337s, 2031 4,885 5,387,555
- -----------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 0.716s, 2030 (Interest Only) 40,922 1,131,990
- -----------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 6.476s, 2030 2,350 2,611,610
- -----------------------------------------------------------------------------------------------------
Pemex Finance Ltd., 5.72s, 2003 371 371,041
- -----------------------------------------------------------------------------------------------------
Providian Home Equity Loan Trust, 1.41s, 2025 192 192,227
- -----------------------------------------------------------------------------------------------------
PSE&G Transition Funding LLC, 5.74s, 2007 1,912 1,973,579
- -----------------------------------------------------------------------------------------------------
Putnam Structured Product Funding, 1.57s, 2008# 4,600 4,600,000
- -----------------------------------------------------------------------------------------------------
Residential Asset Mortgage, Inc., 3.49s, 2029 1,800 1,820,750
- -----------------------------------------------------------------------------------------------------
Residential Asset Mortgage, Inc., 1.484s, 2035# 3,500 3,500,000
- -----------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 2.25s, 2032# 4,000 4,001,560
- -----------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 3.39s, 2033 4,270 4,251,319
- -----------------------------------------------------------------------------------------------------
SLM Student Loan Trust, 1.67s, 2009 499 503,624
- -----------------------------------------------------------------------------------------------------
Summit Acceptance Auto Investment LLC, 7.51s, 2007# 456 455,963
- -----------------------------------------------------------------------------------------------------
Thornburg Mortgage Securities Trust, 1.46s, 2043 4,652 4,647,395
- -----------------------------------------------------------------------------------------------------
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032# 3,903 4,240,512
- -----------------------------------------------------------------------------------------------------
Triad Auto Receivables Trust, 2.48s, 2008 670 670,408
- -----------------------------------------------------------------------------------------------------
Triad Auto Receivables Trust, 1.48s, 2009 2,450 2,452,476
- -----------------------------------------------------------------------------------------------------
Triad Auto Receivables Trust, 3.24s, 2009 4,494 4,572,050
- -----------------------------------------------------------------------------------------------------
Vanderbilt Mortgage & Finance, Inc., 5.17s, 2014 1,152 1,169,980
- -----------------------------------------------------------------------------------------------------
WAMU Mortgage Certificate, 3.112s, 2033 3,750 3,753,885
- -----------------------------------------------------------------------------------------------------
WAMU Mortgage Certificate, 3.18s, 2033 2,750 2,752,849
- -----------------------------------------------------------------------------------------------------
WAMU Mortgage Certificate, 3.567s, 2033 3,450 3,495,637
- -----------------------------------------------------------------------------------------------------
WFS Financial 2002, 2.39s, 2007 4,910 4,941,605
- -----------------------------------------------------------------------------------------------------
$214,219,748
- -----------------------------------------------------------------------------------------------------
Automotive - 3.3%
- -----------------------------------------------------------------------------------------------------
DaimlerChrysler N.A. Holding Corp., 7.4s, 2005 $5,300 $5,602,784
- -----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 5.75s, 2004 975 985,130
- -----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.125s, 2004 2,920 2,962,074
- -----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.875s, 2006 7,905 8,273,318
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.36s, 2004 3,641 3,723,570
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 4.5s, 2006 2,350 2,386,098
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.125s, 2006 4,735 5,005,189
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.75s, 2006 2,650 2,825,438
- -----------------------------------------------------------------------------------------------------
Lear Corp., 7.96s, 2005 2,450 2,633,750
- -----------------------------------------------------------------------------------------------------
$34,397,351
- -----------------------------------------------------------------------------------------------------
Banks & Credit Companies - 4.3%
- -----------------------------------------------------------------------------------------------------
Associates Corp. North America, 5.8s, 2004 $2,710 $2,766,666
- -----------------------------------------------------------------------------------------------------
Commercial Credit Co., 7.875s, 2004 3,189 3,329,759
- -----------------------------------------------------------------------------------------------------
Commercial Credit Co., 6.25s, 2008 2,500 2,742,108
- -----------------------------------------------------------------------------------------------------
Credit Suisse First Bank of America, Inc., 5.875s, 2006 5,425 5,860,774
- -----------------------------------------------------------------------------------------------------
Credit Suisse First Bank of America, Inc., 4.625s, 2008 1,250 1,300,475
- -----------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s, 2049# 4,324 5,067,866
- -----------------------------------------------------------------------------------------------------
NationsBank Corp., 6.5s, 2006 600 654,070
- -----------------------------------------------------------------------------------------------------
NationsBank Corp., 7.5s, 2006 3,920 4,430,510
- -----------------------------------------------------------------------------------------------------
NationsBank-Texax, 9.5s, 2004 1,500 1,567,894
- -----------------------------------------------------------------------------------------------------
Popular North America, Inc., 6.125s, 2006 4,210 4,580,556
- -----------------------------------------------------------------------------------------------------
Popular North America, Inc., 3.875s, 2008 3,000 2,976,435
- -----------------------------------------------------------------------------------------------------
Socgen Real Estate Co., 7.64s, 2049# 6,570 7,406,788
- -----------------------------------------------------------------------------------------------------
Wells Fargo Co., 7.8s, 2010 2,543 2,763,384
- -----------------------------------------------------------------------------------------------------
$45,447,285
- -----------------------------------------------------------------------------------------------------
Biotechnology - 0.4%
- -----------------------------------------------------------------------------------------------------
Baxter International, Inc., 5.25s, 2007 $4,100 $4,382,429
- -----------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 1.2%
- -----------------------------------------------------------------------------------------------------
Comcast Cable Communications, 8.375s, 2007 $4,818 $5,568,861
- -----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.5s, 2004 4,933 5,134,069
- -----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 3.875s, 2008 1,500 1,490,336
- -----------------------------------------------------------------------------------------------------
$12,193,266
- -----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 2.0%
- -----------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 7.625s, 2005 $4,035 $4,428,493
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 11.625s, 2005 3,420 3,887,316
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 4s, 2008 2,425 2,460,264
- -----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 2.47s, 2006 2,920 2,926,766
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc., 5.8s, 2007 5,385 5,806,430
- -----------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., 5.875s, 2006 1,300 1,399,292
- -----------------------------------------------------------------------------------------------------
$20,908,561
- -----------------------------------------------------------------------------------------------------
Building - 0.4%
- -----------------------------------------------------------------------------------------------------
Masco Corp., 6.75s, 2006 $3,475 $3,804,152
- -----------------------------------------------------------------------------------------------------
Chemicals - 0.8%
- -----------------------------------------------------------------------------------------------------
Chevron Phillips Chemical Co. LLC, 5.375s, 2007 $4,605 $4,889,990
- -----------------------------------------------------------------------------------------------------
Dow Chemical Co., 5.25s, 2004 2,250 2,283,979
- -----------------------------------------------------------------------------------------------------
Dow Chemical Co., 5s, 2007 1,660 1,728,691
- -----------------------------------------------------------------------------------------------------
$8,902,660
- -----------------------------------------------------------------------------------------------------
Conglomerates - 1.1%
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5s, 2007 $8,239 $8,727,655
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 3.5s, 2008 3,125 3,119,156
- -----------------------------------------------------------------------------------------------------
$11,846,811
- -----------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.4%
- -----------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 $2,700 $2,966,989
- -----------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2008 750 814,004
- -----------------------------------------------------------------------------------------------------
$3,780,993
- -----------------------------------------------------------------------------------------------------
Containers - 0.3%
- -----------------------------------------------------------------------------------------------------
Tenneco Packaging, Inc., 7.2s, 2005 $2,640 $2,882,669
- -----------------------------------------------------------------------------------------------------
Defense Electronics - 0.2%
- -----------------------------------------------------------------------------------------------------
Raytheon Co., 5.7s, 2003 $2,458 $2,458,000
- -----------------------------------------------------------------------------------------------------
Energy - Independent - 0.4%
- -----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.625s, 2005 $2,600 $2,836,576
- -----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 4.375s, 2007 1,155 1,188,293
- -----------------------------------------------------------------------------------------------------
$4,024,869
- -----------------------------------------------------------------------------------------------------
Energy - Integrated - 1.4%
- -----------------------------------------------------------------------------------------------------
Amerada Hess Corp., 5.9s, 2006 $5,800 $6,132,909
- -----------------------------------------------------------------------------------------------------
Conoco Funding Co., 5.45s, 2006 3,240 3,484,406
- -----------------------------------------------------------------------------------------------------
Phillips Petroleum Co., 8.5s, 2005 5,000 5,498,625
- -----------------------------------------------------------------------------------------------------
$15,115,940
- -----------------------------------------------------------------------------------------------------
Entertainment - 2.5%
- -----------------------------------------------------------------------------------------------------
Liberty Media Corp., 2.64s, 2006 $4,500 $4,481,874
- -----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 6.625s, 2008 4,524 5,023,006
- -----------------------------------------------------------------------------------------------------
Time Warner, Inc., 7.975s, 2004 3,970 4,139,372
- -----------------------------------------------------------------------------------------------------
Time Warner, Inc., 5.625s, 2005 4,945 5,189,649
- -----------------------------------------------------------------------------------------------------
Viacom, Inc., 7.75s, 2005 2,560 2,788,457
- -----------------------------------------------------------------------------------------------------
Walt Disney Co., 6.75s, 2006 3,880 4,233,763
- -----------------------------------------------------------------------------------------------------
$25,856,121
- -----------------------------------------------------------------------------------------------------
Financial Institutions - 1.4%
- -----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.85s, 2004 $4,807 $4,962,170
- -----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2006 3,150 3,360,486
- -----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2007 660 704,452
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 8s, 2005 3,700 4,030,159
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 4.625s, 2008 1,580 1,637,444
- -----------------------------------------------------------------------------------------------------
$14,694,711
- -----------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 1.9%
- -----------------------------------------------------------------------------------------------------
General Mills, Inc., 5.125s, 2007 $5,000 $5,324,125
- -----------------------------------------------------------------------------------------------------
Kellogg Co., 6s, 2006 2,430 2,617,042
- -----------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 4.625s, 2006 3,665 3,814,019
- -----------------------------------------------------------------------------------------------------
PepsiAmericas, Inc., 3.875s, 2007 3,750 3,788,464
- -----------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 6.625s, 2004 3,211 3,331,361
- -----------------------------------------------------------------------------------------------------
Whitman Corp., 6s, 2004 925 945,379
- -----------------------------------------------------------------------------------------------------
$19,820,390
- -----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.9%
- -----------------------------------------------------------------------------------------------------
Westvaco Corp., 6.85s, 2004 $3,600 $3,768,397
- -----------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 5.5s, 2005 5,440 5,668,034
- -----------------------------------------------------------------------------------------------------
$9,436,431
- -----------------------------------------------------------------------------------------------------
Industrial - 0.3%
- -----------------------------------------------------------------------------------------------------
Steelcase, Inc., 6.375s, 2006 $2,540 $2,656,538
- -----------------------------------------------------------------------------------------------------
Insurance - 1.5%
- -----------------------------------------------------------------------------------------------------
AIG SunAmerica, 7.6s, 2005# $400 $436,895
- -----------------------------------------------------------------------------------------------------
AIG SunAmerica, 5.85s, 2006# 2,615 2,802,691
- -----------------------------------------------------------------------------------------------------
AIG SunAmerica, 5.1s, 2007# 2,305 2,470,693
- -----------------------------------------------------------------------------------------------------
Metlife, Inc., 3.911s, 2005 3,375 3,485,335
- -----------------------------------------------------------------------------------------------------
Prudential Financial, Inc., 3.75s, 2008 2,700 2,695,761
- -----------------------------------------------------------------------------------------------------
Prudential Insurance Co., 7.65s, 2007# 3,380 3,795,808
- -----------------------------------------------------------------------------------------------------
$15,687,183
- -----------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 1.0%
- -----------------------------------------------------------------------------------------------------
Allstate Corp., 5.375s, 2006 $3,080 $3,320,345
- -----------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc., 4.7s, 2007 1,750 1,832,264
- -----------------------------------------------------------------------------------------------------
Safeco Corp., 4.2s, 2008 5,040 5,110,535
- -----------------------------------------------------------------------------------------------------
$10,263,144
- -----------------------------------------------------------------------------------------------------
Machinery & Tools - 0.4%
- -----------------------------------------------------------------------------------------------------
Ingersoll Rand Co., 6.25s, 2006 $4,225 $4,601,747
- -----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.5%
- -----------------------------------------------------------------------------------------------------
HCA Healthcare Co., 7.125s, 2006 $4,565 $4,889,371
- -----------------------------------------------------------------------------------------------------
Mortgage Backed - 9.8%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2018 - 2021 $5,790 $5,911,782
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2017 17,526 18,008,880
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6s, 2017 2,614 2,717,092
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.5s, 2018 5,481 5,479,345
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5s, 2018 - 2022 15,520 15,886,941
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2016 - 2050 23,464 24,187,096
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2017 8,704 9,053,050
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.011s, 2011 128 130,704
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2017 3,027 3,185,154
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.65s, 2008 2,335 2,451,656
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7s, 2015 903 958,955
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.085s, 2006 1,737 1,895,493
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.29s, 2006 699 759,564
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.355s, 2006 1,525 1,662,190
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2015 - 2050 588 627,831
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.204s, 2014 1,969 2,065,163
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.471s, 2015 1,958 2,052,200
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7s, 2009 - 2010 11 11,590
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7.5s, 2007 - 2011 1,196 1,282,669
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 8.5s, 2004 - 2009 688 756,903
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 12.5s, 2011 100 114,203
- -----------------------------------------------------------------------------------------------------
U.S. Department of Veteran Affairs, 6s, 2021 3,300 3,414,116
- -----------------------------------------------------------------------------------------------------
$102,612,577
- -----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.4%
- -----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 5.35s, 2007 $4,380 $4,669,952
- -----------------------------------------------------------------------------------------------------
Oils - 0.2%
- -----------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.125s, 2007 $2,365 $2,587,215
- -----------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.8%
- -----------------------------------------------------------------------------------------------------
Wyeth, 5.875s, 2004 $4,335 $4,406,926
- -----------------------------------------------------------------------------------------------------
Wyeth, 4.125s, 2008 3,550 3,609,601
- -----------------------------------------------------------------------------------------------------
$8,016,527
- -----------------------------------------------------------------------------------------------------
Pollution Control - 0.5%
- -----------------------------------------------------------------------------------------------------
USA Waste Services, Inc., 7s, 2004 $296 $308,493
- -----------------------------------------------------------------------------------------------------
WMX Technologies, Inc., 6.375s, 2003 3,341 3,351,384
- -----------------------------------------------------------------------------------------------------
WMX Technologies, Inc., 7s, 2006 1,751 1,939,416
- -----------------------------------------------------------------------------------------------------
$5,599,293
- -----------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.4%
- -----------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.34s, 2003 $3,350 $3,358,271
- -----------------------------------------------------------------------------------------------------
Union Pacific Corp., 5.84s, 2004 800 816,958
- -----------------------------------------------------------------------------------------------------
$4,175,229
- -----------------------------------------------------------------------------------------------------
Real Estate - 2.0%
- -----------------------------------------------------------------------------------------------------
EOP Operating Limited Partnership, 7.375s, 2003 $3,628 $3,633,794
- -----------------------------------------------------------------------------------------------------
EOP Operating Limited Partnership, 7.75s, 2007 3,445 3,945,920
- -----------------------------------------------------------------------------------------------------
Highwoods, 7.19s, 2004# 1,130 1,144,845
- -----------------------------------------------------------------------------------------------------
Kimco Reality Corp., 6.73s, 2005 855 917,269
- -----------------------------------------------------------------------------------------------------
Kimco Realty Corp., 7.5s, 2006 2,900 3,293,315
- -----------------------------------------------------------------------------------------------------
Simon Debartolo Group LP, 6.75s, 2004 2,823 2,920,012
- -----------------------------------------------------------------------------------------------------
Vornado Reality Trust, 5.625s, 2007 4,800 5,069,818
- -----------------------------------------------------------------------------------------------------
$20,924,973
- -----------------------------------------------------------------------------------------------------
Restaurants - 0.2%
- -----------------------------------------------------------------------------------------------------
Golden Funding Corp., 1.663s, 2005# $2,500 $2,502,665
- -----------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
- -----------------------------------------------------------------------------------------------------
Kroger Co., 7.8s, 2007 $2,815 $3,234,928
- -----------------------------------------------------------------------------------------------------
Supranational - 0.6%
- -----------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento, 6.75s, 2005 $1,644 $1,732,322
- -----------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento, 8.875s, 2005 865 951,451
- -----------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development,
4.77s, 2005 3,750 3,891,750
- -----------------------------------------------------------------------------------------------------
$6,575,523
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.7%
- -----------------------------------------------------------------------------------------------------
AT&T Corp., 7s, 2006 $3,815 $4,224,769
- -----------------------------------------------------------------------------------------------------
Citizens Communications Co., 8.5s, 2006 3,256 3,677,893
- -----------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6s, 2007 5,350 5,669,496
- -----------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 3,620 3,915,595
- -----------------------------------------------------------------------------------------------------
$17,487,753
- -----------------------------------------------------------------------------------------------------
Tobacco - 0.3%
- -----------------------------------------------------------------------------------------------------
Altria Group, Inc., 5.625s, 2008 $2,850 $2,842,507
- -----------------------------------------------------------------------------------------------------
U.S. Government Agencies - 8.4%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 4.875s, 2004 $13,450 $13,676,310
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.25s, 2006 13,305 13,258,778
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6.375s, 2003 3,000 3,005,262
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 7s, 2005 8,260 8,954,278
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.25s, 2006 8,500 9,046,507
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.875s, 2007 8,000 8,507,072
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2004 20,000 20,811,460
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5s, 2021 3,600 3,746,250
- -----------------------------------------------------------------------------------------------------
Student Loan Marketing Assn., 5.25s, 2006 6,500 6,939,335
- -----------------------------------------------------------------------------------------------------
$87,945,252
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 3.0%
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5s, 2005## $4,000 $4,336,092
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.75s, 2005 5,885 6,345,684
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 2.375s, 2006 2,750 2,758,594
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2007 5,400 5,426,157
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.375s, 2007 9,000 9,522,423
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 2.625s, 2008 2,575 2,524,203
- -----------------------------------------------------------------------------------------------------
$30,913,153
- -----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 6.6%
- -----------------------------------------------------------------------------------------------------
Constellation Energy Group, Inc., 6.35s, 2007 $4,606 $5,020,701
- -----------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 2.8s, 2005 4,000 4,040,256
- -----------------------------------------------------------------------------------------------------
DTE Energy Co., 6s, 2004 4,507 4,621,045
- -----------------------------------------------------------------------------------------------------
DTE Energy Co., 6.45s, 2006 3,250 3,524,810
- -----------------------------------------------------------------------------------------------------
Entergy Mississippi, Inc., 6.2s, 2004 1,603 1,636,134
- -----------------------------------------------------------------------------------------------------
Firstenegy Corp., 5.5s, 2006 3,285 3,452,092
- -----------------------------------------------------------------------------------------------------
FPL Group Capital, Inc., 3.25s, 2006 4,320 4,370,553
- -----------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 4.625s, 2007 4,140 4,234,636
- -----------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 3.5s, 2008 1,076 1,046,129
- -----------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375s, 2004 5,173 5,308,584
- -----------------------------------------------------------------------------------------------------
Nisource Finance Corp., 7.625s, 2005 1,147 1,257,627
- -----------------------------------------------------------------------------------------------------
Oncor Electric Delivery Co., 5s, 2007 3,826 4,021,968
- -----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.05s, 2007 4,010 4,325,896
- -----------------------------------------------------------------------------------------------------
PSE&G Power LLC, 6.875s, 2006 3,225 3,531,098
- -----------------------------------------------------------------------------------------------------
PSE&G Power LLC, 7.75s, 2007 1,283 1,295,830
- -----------------------------------------------------------------------------------------------------
Reliant Energy Resources Corp., 8.125s, 2005 4,569 4,918,108
- -----------------------------------------------------------------------------------------------------
Toledo Edison Co., 7.875s, 2004 2,800 2,918,362
- -----------------------------------------------------------------------------------------------------
TXU Energy Co. LLC, 6.125s, 2008# 2,641 2,829,884
- -----------------------------------------------------------------------------------------------------
Virginia Electric & Power Co., 5.375s, 2007 1,250 1,335,575
- -----------------------------------------------------------------------------------------------------
Wisconsin Energy Corp., 5.875s, 2006 5,544 5,931,204
- -----------------------------------------------------------------------------------------------------
$69,620,492
- -----------------------------------------------------------------------------------------------------
Utilities - Gas - 0.4%
- -----------------------------------------------------------------------------------------------------
Keyspan Corp., 6.15s, 2006 $3,700 $4,009,487
- -----------------------------------------------------------------------------------------------------
Wireless Communications - 0.7%
- -----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.35s, 2006 $2,162 $2,372,134
- -----------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 4,462 4,765,349
- -----------------------------------------------------------------------------------------------------
$7,137,483
- -----------------------------------------------------------------------------------------------------
Total U.S. Bonds $902,746,986
- -----------------------------------------------------------------------------------------------------
Foreign Bonds - 13.2%
- -----------------------------------------------------------------------------------------------------
Australia - 0.4%
- -----------------------------------------------------------------------------------------------------
SMHL Global Fund, 1.37s, 2029 (Asset Backed) $3,932 $3,932,596
- -----------------------------------------------------------------------------------------------------
Austria
- -----------------------------------------------------------------------------------------------------
Oesterreich Kontrollbank, 5.5s, 2006 (Banks & Credit Cos.) $220 $234,781
- -----------------------------------------------------------------------------------------------------
Brazil - 0.2%
- -----------------------------------------------------------------------------------------------------
Brazilian Merchant Voucher, 5.911s, 2011 (Asset-Backed)# $2,050 $2,014,125
- -----------------------------------------------------------------------------------------------------
Canada - 2.4%
- -----------------------------------------------------------------------------------------------------
Province of British Columbia, 4.625s, 2006 $1,500 $1,579,941
- -----------------------------------------------------------------------------------------------------
Province of Manitoba, 4.25s, 2006 5,020 5,232,557
- -----------------------------------------------------------------------------------------------------
Province of New Brunswick, 3.5s, 2007 4,820 4,887,441
- -----------------------------------------------------------------------------------------------------
Province of Ontario, 7s, 2005 800 867,763
- -----------------------------------------------------------------------------------------------------
Province of Ontario, 6s, 2006 7,350 7,892,915
- -----------------------------------------------------------------------------------------------------
Telus Corp., 7.5s, 2007 (Wireless Communications) 4,275 4,747,700
- -----------------------------------------------------------------------------------------------------
$25,208,317
- -----------------------------------------------------------------------------------------------------
France - 0.5%
- -----------------------------------------------------------------------------------------------------
France Telecom S.A., 7.2s, 2006 (Telecommunications -
Wireline) $4,541 $5,085,534
- -----------------------------------------------------------------------------------------------------
Germany - 3.6%
- -----------------------------------------------------------------------------------------------------
Bayerische Landesbank, 1.16s, 2005 (Banks & Credit Cos.) $6,590 $6,591,239
- -----------------------------------------------------------------------------------------------------
Deutsche Telekom, 7.75s, 2005 (Telecommunications -
Wireline) 4,315 4,714,439
- -----------------------------------------------------------------------------------------------------
Deutsche Telekom, 3.875s, 2008 (Telecommunications -
Wireline) 1,650 1,644,859
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 9.4s, 2004 (Financial
Institutions) 2,600 2,716,852
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 2.5s, 2005 (Financial
Institutions) 7,500 7,581,120
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 4.25s, 2005 (Financial
Institutions) 225 233,215
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 4.75s, 2007 (Financial
Institutions) 2,000 2,121,220
- -----------------------------------------------------------------------------------------------------
Kredit Wiederauf, 2.375s, 2006 (Banks & Credit Cos.) 4,580 4,562,459
- -----------------------------------------------------------------------------------------------------
Landesbank Baden Wurttemberg, 7.875s, 2004 (Banks &
Credit Cos.) 4,945 5,097,850
- -----------------------------------------------------------------------------------------------------
Landesbank Baden Wurttemberg, 5.125s, 2007 (Banks &
Credit Cos.) 1,000 1,064,149
- -----------------------------------------------------------------------------------------------------
Landwirtschaft Rentenbank, 4.5s, 2006 (Banks & Credit Cos.) 1,000 1,054,019
- -----------------------------------------------------------------------------------------------------
$37,381,421
- -----------------------------------------------------------------------------------------------------
Iceland - 0.3%
- -----------------------------------------------------------------------------------------------------
Republic of Iceland, 6.125s, 2004 $2,792 $2,822,597
- -----------------------------------------------------------------------------------------------------
Ireland - 1.1%
- -----------------------------------------------------------------------------------------------------
Chalet Finance PLC, 1.36s, 2013 (Asset-Backed) $4,800 $4,830,130
- -----------------------------------------------------------------------------------------------------
Depfa ACS Bank, 3.625s, 2008 (Banks & Credit Cos.) 6,100 6,081,273
- -----------------------------------------------------------------------------------------------------
$10,911,403
- -----------------------------------------------------------------------------------------------------
Kazakhstan - 0.2%
- -----------------------------------------------------------------------------------------------------
Kazkommerts International B.V., 10.125s, 2007 (Banks &
Credit Cos.)# $2,200 $2,420,000
- -----------------------------------------------------------------------------------------------------
Luxembourg - 0.4%
- -----------------------------------------------------------------------------------------------------
Telecom Italia Capital, 4s, 2008 (Telecommunications -
Wireline)# $4,100 $4,094,965
- -----------------------------------------------------------------------------------------------------
Mexico - 0.6%
- -----------------------------------------------------------------------------------------------------
BBVA Bancomer, 10.5s, 2011 (Banks & Credit Cos.)# $2,443 $2,742,267
- -----------------------------------------------------------------------------------------------------
Petroleos Mexicanos, 6.5s, 2005 (Oil Services) 3,450 3,605,250
- -----------------------------------------------------------------------------------------------------
$6,347,517
- -----------------------------------------------------------------------------------------------------
New Zealand - 0.2%
- -----------------------------------------------------------------------------------------------------
Government of New Zealand, 10.625s, 2005 $2,146 $2,510,213
- -----------------------------------------------------------------------------------------------------
Sweden - 0.2%
- -----------------------------------------------------------------------------------------------------
Spintab AB, 7.5s, 2049 (Banks & Credit Cos.) $1,125 $1,250,235
- -----------------------------------------------------------------------------------------------------
Spintab AB, 7.5s, 2049 (Banks & Credit Cos.)# 1,150 1,278,027
- -----------------------------------------------------------------------------------------------------
$2,528,262
- -----------------------------------------------------------------------------------------------------
United Kingdom - 3.1%
- -----------------------------------------------------------------------------------------------------
Abbey First National, 8.2s, 2004 (Banks & Credit Cos.) $4,205 $4,462,405
- -----------------------------------------------------------------------------------------------------
British Telecom PLC, 2.435s, 2003 (Telecommunications -
Wireline) 3,453 3,457,054
- -----------------------------------------------------------------------------------------------------
British Telecom PLC, 7.875s, 2005 (Telecommunications -
Wireline) 2,350 2,602,023
- -----------------------------------------------------------------------------------------------------
Cadbury Schweppes PLC, 3.875s, 2008 (Food & Non
Alcoholic Beverages)# 8,080 8,017,388
- -----------------------------------------------------------------------------------------------------
Lasmo (USA), Inc., 7.5s, 2006 (Energy - Integrated) 1,705 1,917,361
- -----------------------------------------------------------------------------------------------------
National Westminster Bancorp, 7.75s, 2049 (Banks &
Credit Cos.) 1,110 1,272,740
- -----------------------------------------------------------------------------------------------------
Permanent Financing PLC, 4.2s, 2007 (Asset-Backed) 5,900 6,112,341
- -----------------------------------------------------------------------------------------------------
Royal Bank of Scotland, 8.817s, 2049 (Banks & Credit Cos.) 4,540 4,946,739
- -----------------------------------------------------------------------------------------------------
$32,788,051
- -----------------------------------------------------------------------------------------------------
Total Foreign Bonds $138,279,782
- -----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,022,554,260) $1,041,026,768
- -----------------------------------------------------------------------------------------------------
Repurchase Agreement
- -----------------------------------------------------------------------------------------------------
Goldman Sachs, dated 10/31/03, due 11/03/03, total to
be received $54,005 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account), at Cost $54 $54,000
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,022,608,260) $1,041,080,768
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.6% 6,139,671
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,047,220,439
- -----------------------------------------------------------------------------------------------------
# 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 (unaudited)
- -----------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities
composing the total value of your fund.
AT 10/31/03
ASSETS
Investments, at value (identified cost, $1,022,608,260) $1,041,080,768
- -----------------------------------------------------------------------------------------------------
Cash 192
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 2,307,866
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 6,512,404
- -----------------------------------------------------------------------------------------------------
Interest receivable 11,722,805
- -----------------------------------------------------------------------------------------------------
Other assets 2,282
- -----------------------------------------------------------------------------------------------------
Total assets $1,061,626,317
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $3,437,471
- -----------------------------------------------------------------------------------------------------
Payable for daily variation margin on open futures contracts 143,125
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased 5,129,433
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 5,201,045
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 10,018
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 3,148
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 267,596
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 214,042
- -----------------------------------------------------------------------------------------------------
Total liabilities $14,405,878
- -----------------------------------------------------------------------------------------------------
Net assets $1,047,220,439
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $1,076,708,535
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments 17,684,247
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (39,626,694)
- -----------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (7,545,649)
- -----------------------------------------------------------------------------------------------------
Total $1,047,220,439
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 154,874,267
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $527,743,009
- -----------------------------------------------------------------------------------------------------
Shares outstanding 77,943,650
- -----------------------------------------------------------------------------------------------------
Net asset value per share $6.77
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/97.5X$6.77) $6.94
- -----------------------------------------------------------------------------------------------------
Class B shares
Net assets $229,027,737
- -----------------------------------------------------------------------------------------------------
Shares outstanding 33,962,426
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.74
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $229,618,903
- -----------------------------------------------------------------------------------------------------
Shares outstanding 33,950,131
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.76
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $57,358,028
- -----------------------------------------------------------------------------------------------------
Shares outstanding 8,504,313
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $6.74
- -----------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $505,236
- -----------------------------------------------------------------------------------------------------
Shares outstanding 74,597
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $6.77
- -----------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $40,020
- -----------------------------------------------------------------------------------------------------
Shares outstanding 5,911
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $6.77
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class 529A shares
Net assets $1,236,800
- -----------------------------------------------------------------------------------------------------
Shares outstanding 182,726
- -----------------------------------------------------------------------------------------------------
Net asset value per share $6.77
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/97.5X$6.77) $6.94
- -----------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $683,967
- -----------------------------------------------------------------------------------------------------
Shares outstanding 101,597
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.73
- -----------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $1,006,739
- -----------------------------------------------------------------------------------------------------
Shares outstanding 148,916
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.76
- -----------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A and Class 529A 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 (unaudited)
- -----------------------------------------------------------------------------------------------------
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 SIX MONTHS ENDED 10/31/03
NET INVESTMENT INCOME
Interest income $20,561,617
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $2,072,058
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 9,547
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 569,453
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 388,497
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 1,137,831
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 1,130,740
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 760
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 2,080
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 3,133
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 4,396
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 1,485
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 783
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 1,099
- -----------------------------------------------------------------------------------------------------
Administrative fee 40,681
- -----------------------------------------------------------------------------------------------------
Custodian fee 195,312
- -----------------------------------------------------------------------------------------------------
Printing 53,434
- -----------------------------------------------------------------------------------------------------
Postage 23,820
- -----------------------------------------------------------------------------------------------------
Auditing fees 16,991
- -----------------------------------------------------------------------------------------------------
Legal fees 4,314
- -----------------------------------------------------------------------------------------------------
Miscellaneous 491,905
- -----------------------------------------------------------------------------------------------------
Total expenses $6,148,319
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (10,076)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and
distributor (260,908)
- -----------------------------------------------------------------------------------------------------
Net expenses $5,877,335
- -----------------------------------------------------------------------------------------------------
Net investment income $14,684,282
- -----------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Realized loss (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $(1,921,678)
- -----------------------------------------------------------------------------------------------------
Futures contracts (232,256)
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments $(2,153,934)
- -----------------------------------------------------------------------------------------------------
Change in unrealized depreciation
Investments $(5,947,619)
- -----------------------------------------------------------------------------------------------------
Futures contracts (320,104)
- -----------------------------------------------------------------------------------------------------
Net unrealized loss on investments $(6,267,723)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments $(8,421,657)
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $6,262,625
- -----------------------------------------------------------------------------------------------------
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.
SIX MONTHS YEAR
ENDED ENDED
10/31/03 4/30/03
(UNAUDITED)
OPERATIONS
Net investment income $14,684,282 $26,181,092
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments (2,153,934) (7,884,383)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments (6,267,723) 19,229,286
- ------------------------------------------------------------- ------------ ------------
Increase in net assets from operations $6,262,625 $37,525,995
- ------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- -----------------------------------------------------------------------------------------------------
Class A $(11,446,287) $(19,905,095)
- -----------------------------------------------------------------------------------------------------
Class B (4,449,256) (8,092,921)
- -----------------------------------------------------------------------------------------------------
Class C (4,032,790) (5,499,319)
- ------------------------------------------------------------- ------------ ------------
Class I (1,023,001) (505,449)
- ------------------------------------------------------------- ------------ ------------
Class R1 (6,382) (1,179)
- ------------------------------------------------------------- ------------ ------------
Class 529A (24,627) (13,104)
- ------------------------------------------------------------- ------------ ------------
Class 529B (10,788) (8,027)
- ------------------------------------------------------------- ------------ ------------
Class 529C (14,995) (8,225)
- ------------------------------------------------------------- ------------ ------------
Total distributions declared to shareholders $(21,008,126) $(34,033,319)
- ------------------------------------------------------------- ------------ ------------
Net increase in net assets from fund share transactions $92,271,876 $478,044,178
- ------------------------------------------------------------- ------------ ------------
Total increase in net assets $77,526,375 $481,536,854
- ------------------------------------------------------------- ------------ ------------
NET ASSETS
At beginning of period $969,694,064 $488,157,210
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $7,545,649 and
$1,221,805, respectively) $1,047,220,439 $969,694,064
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period and
the past 5 fiscal years (or, if shorter, the period of the fund's operation). Certain information reflects financial results for
a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an
investment in the fund (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS A (UNAUDITED)
Net asset value, beginning of
period $6.87 $6.84 $6.86 $6.66 $6.87 $6.99
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.11 $0.27 $0.34 $0.42 $0.40 $0.43
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (0.06) 0.10 0.03 0.20 (0.22) (0.14)
- ------------------------------- ------- ------ ------ ------ ------ ------
Total from investment
operations $0.05 $0.37 $0.37 $0.62 $0.18 $0.29
- ------------------------------- ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.15) $(0.34) $(0.34) $(0.42) $(0.39) $(0.41)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net investment
income -- -- (0.05) (0.00)+++ -- --
- ------------------------------- ------- ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.15) $(0.34) $(0.39) $(0.42) $(0.39) $(0.41)
- ------------------------------- ------- ------ ------ ------ ------ ------
Net asset value, end of period $6.77 $6.87 $6.84 $6.86 $6.66 $6.87
- ------------------------------- ------- ------ ------ ------ ------ ------
Total return (%)(+) 0.76++ 5.58 5.52 9.52 2.71 4.26
- --------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS A (CONTINUED) (UNAUDITED)
RATIOS (%) TO
AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 0.77+ 0.75 0.80 0.82 0.86 0.84
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.19+ 3.92 5.02 6.20 5.87 6.14
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 26 53 53 58 74 278
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $527,743 $490,000 $293,435 $209,687 $115,752 $134,086
- --------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for the periods indicated. To the extent expenses were over
this limitation and the waiver had not been place, the net investment income per share and the ratios would have been:
Net investment income(S)(S) $0.11 $0.26 $0.34 $0.42 -- --
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 0.82+ 0.80 0.85 0.85 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.14+ 3.87 4.97 6.17 -- --
- --------------------------------------------------------------------------------------------------------------------------------
(S)(S) 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. 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.
+ Annualized.
++ Not annualized.
+++ 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
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS B (UNAUDITED)
Net asset value, beginning of
period $6.84 $6.81 $6.83 $6.64 $6.85 $6.97
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.08 $0.21 $0.29 $0.37 $0.34 $0.38
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (0.05) 0.11 0.03 0.19 (0.21) (0.14)
- ------------------------------- ------- ------ ------ ------ ------ ------
Total from investment
operations $0.03 $0.32 $0.32 $0.56 $0.13 $0.24
- ------------------------------- ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.13) $(0.29) $(0.29) $(0.37) $(0.34) $(0.36)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net investment
income -- -- (0.05) (0.00)+++ -- --
- ------------------------------- ------- ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.13) $(0.29) $(0.34) $(0.37) $(0.34) $(0.36)
- ------------------------------- ------- ------ ------ ------ ------ ------
Net asset value, end
of period $6.74 $6.84 $6.81 $6.83 $6.64 $6.85
- ------------------------------- ------- ------ ------ ------ ------ ------
Total return (%) 0.37++ 4.76 4.73 8.61 1.91 3.48
- --------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS B (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE NET
ASSETS AND SUPPLEMENTAL
DATA(S):
Expenses## 1.55+ 1.54 1.58 1.59 1.65 1.61
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.43+ 3.14 4.25 5.41 5.09 5.33
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 26 53 53 58 74 278
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $229,028 $244,736 $120,535 $77,012 $45,214 $52,883
- --------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. To the extent actual
expenses were over this limitation and the waiver had not been in place, the net investment income per share and the ratios
would have been:
Net investment income(S)(S) $0.08 $0.21 $0.29 $0.37 -- --
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.60+ 1.59 1.63 1.63 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.38+ 3.09 4.20 5.37 -- --
- --------------------------------------------------------------------------------------------------------------------------------
(S)(S) 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. 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.
+ Annualized.
++ Not annualized.
+++ 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
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS C (UNAUDITED)
Net asset value, beginning of
period $6.86 $6.83 $6.85 $6.66 $6.86 $6.99
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.08 $0.20 $0.28 $0.36 $0.34 $0.36
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (0.06) 0.11 0.03 0.19 (0.21) (0.14)
- ------------------------------- ------- ------ ------ ------ ------ ------
Total from investment
operations $0.02 $0.31 $0.31 $0.55 $0.13 $0.22
- ------------------------------- ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.12) $(0.28) $(0.28) $(0.36) $(0.33) $(0.35)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net investment
income -- -- (0.05) (0.00)+++ -- --
- ------------------------------- ------- ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.12) $(0.28) $(0.33) $(0.36) $(0.33) $(0.35)
- ------------------------------- ------- ------ ------ ------ ------ ------
Net asset value, end
of period $6.76 $6.86 $6.83 $6.85 $6.66 $6.86
- ------------------------------- ------- ------ ------ ------ ------ ------
Total return (%) 0.33++ 4.68 4.64 8.50 1.99 3.23
- --------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS C (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE NET
ASSETS AND SUPPLEMENTAL
DATA(S):
Expenses## 1.62+ 1.60 1.65 1.67 1.71 1.69
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.34+ 3.01 4.12 5.33 5.03 5.19
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 26 53 53 58 74 278
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $229,619 $203,529 $72,888 $26,233 $22,825 $24,228
- --------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. To the extent actual
expenses were over this limitation and the waiver had not been in place, the net investment income per share and the ratios
would have been:
Net investment income(S)(S) $0.08 $0.20 $0.27 $0.36 -- --
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.67+ 1.65 1.70 1.70 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.29+ 2.96 4.07 5.30 -- --
- --------------------------------------------------------------------------------------------------------------------------------
(S)(S) 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. 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.
+ Annualized.
++ Not annualized.
+++ 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
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS I (UNAUDITED)
Net asset value, beginning of
period $6.84 $6.82 $6.84 $6.65 $6.85 $6.98
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.11 $0.25 $0.35 $0.42 $0.42 $0.43
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (0.05) 0.12 0.03 0.20 (0.22) (0.14)
- ------------------------------- ------- ------ ------ ------ ------ ------
Total from investment
operations $0.06 $0.37 $0.38 $0.62 $0.20 $0.29
- ------------------------------- ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.16) $(0.35) $(0.35) $(0.43) $(0.40) $(0.42)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net investment
income -- -- (0.05) (0.00)+++ -- --
- ------------------------------- ------- ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.16) $(0.35) $(0.40) $(0.43) $(0.40) $(0.42)
- ------------------------------- ------- ------ ------ ------ ------ ------
Net asset value, end
of period $6.74 $6.84 $6.82 $6.84 $6.65 $6.85
- ------------------------------- ------- ------ ------ ------ ------ ------
Total return (%) 0.83++ 5.59 5.70 9.60 3.02 4.28
- --------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS A (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE NET
ASSETS AND SUPPLEMENTAL
DATA(S):
Expenses## 0.63+ 0.60 0.65 0.67 0.71 0.69
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.28+ 3.81 5.17 6.32 6.00 6.21
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 26 53 53 58 74 278
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $57,358 $29,075 $1,299 $888 $684 $1,459
- --------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for 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) $0.11 $0.24 $0.35 $0.42 -- --
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 0.68+ 0.65 0.70 0.70 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.23+ 3.76 5.12 6.29 -- --
- --------------------------------------------------------------------------------------------------------------------------------
(S)(S) 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. 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.
+ Annualized.
++ Not annualized.
+++ 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
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS R1 (UNAUDITED)
Net asset value, beginning of period $6.87 $6.86
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.10 $0.08
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.06) 0.03
- ------------------------------------------------------------------- ------ ------
Total from investment operations $0.04) $0.11
- ------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.14) $(0.10)
- ------------------------------------------------------------------- ------ ------
Net asset value, end of period $6.77 $6.87
- ------------------------------------------------------------------- ------ ------
Total return (%) 0.63++ 1.65++
- -----------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## 1.05+ 1.00+
- -----------------------------------------------------------------------------------------------------
Net investment income 2.83+ 3.33+
- -----------------------------------------------------------------------------------------------------
Portfolio turnover 26 53
- -----------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $505 $85
- -----------------------------------------------------------------------------------------------------
(S) The investment adviser and the distributor contractually waived a portion of its fee for certain
of the periods indicated. To the extent actual expenses were over this limitation and the waiver
had not been in place, the net investment income per share and the ratios would have been:
Net investment income $0.09 $0.07
- -----------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.20+ 1.15+
- -----------------------------------------------------------------------------------------------------
Net investment income 2.68+ 3.18+
- -----------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1, 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
SIX SIX SIX
MONTHS PERIOD MONTHS PERIOD MONTHS PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/03 4/30/03* 10/31/03 4/30/03* 10/31/03 4/30/03*
(UNAUDITED) (UNAUDITED) (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS 529A CLASS 529B CLASS 529C
Net asset value, beginning of period $6.87 $6.80 $6.83 $6.77 $6.86 $6.79
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.10 $0.15 $0.07 $0.13 $0.07 $0.12
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (0.06) 0.16 (0.05) 0.13 (0.05) 0.15
- -------------------------------------- ------ ----- ----- ----- ----- -----
Total from investment operations $0.04 $0.31 $0.02 $0.26 $0.02 $0.27
- -------------------------------------- ------ ----- ----- ----- ----- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.14) $(0.24) $(0.12) $(0.20) $(0.12) $(0.20)
- -------------------------------------- ------ ----- ----- ----- ----- -----
Net asset value, end of period $6.77 $6.87 $6.73 $6.83 $6.76 $6.86
- -------------------------------------- ------ ----- ----- ----- ----- -----
Total return (%)(+) 0.62++ 4.27++ 0.26++ 3.60++ 0.25++ 3.70++
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses# 1.13+ 1.10+ 1.88+ 1.85+ 1.88+ 1.85+
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.84+ 3.23+ 2.09+ 2.63+ 2.08+ 2.51+
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 26 53 26 53 26 53
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $1,237 $1,011 $684 $524 $1,007 $734
- --------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser (and the distributor in the case of Class 529A) contractually waived a portion of its fee for certain
of the periods indicated. To the extent actual expenses were over this limitation and the waiver had been in place, the net
investment income per share and the ratios would have been:
Net investment income $0.09 $0.15 $0.07 $0.13 $0.07 $0.12
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.28+ 1.25+ 1.93+ 1.90+ 1.93+ 1.90+
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.69+ 3.08+ 2.04+ 2.58+ 2.03+ 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 charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -------------------------------------------------------------------------------
(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) 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 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 accounting principles generally accepted in the United States
of America. 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 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.
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 was as follows:
4/30/03 4/30/02
Distributions declared from:
Ordinary income $34,033,319 $20,819,872
------------------------------------------------------------
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 (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 six months ended October 31, 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).
The fund has an unfunded, defined benefit plan for inactive Trustees. Included
in Trustees' compensation is a pension expense of $1,073 for inactive trustees
for the six months ended October 31, 2003.
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
not to exceed the following annual percentage rates 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%
----------------------------------------------------------
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain administrative
services with respect to class R2 shares. These services include various
administrative, recordkeeping and communication/educational services with
respect to the retirement plans which invest in class R2 shares, and may be
provided directly by MFS or by a third party. The fund pays an annual 0.25%
administrative service fee solely from the assets of class R2 shares to MFS
for the provision of these services. No administrative service fee from class
R2 shares were paid to MFS as of October 31, 2003.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor,
received $63,143 and $552 for the six months ended October 31, 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 J, Class R1, Class R2, 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 R1 CLASS R2 CLASS 529A CLASS 529B CLASS 529C
Distribution
Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.25% 0.75% 0.75%
- -----------------------------------------------------------------------------------------------------------------------------
Service
Fee 0.25% 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% 0.50% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the six months ended October 31,
2003, amounted to:
CLASS A CLASS B CLASS C CLASS R1 CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained by
MFD $8,886 $185 $352 $1 $4 $1 $9
- ---------------------------------------------------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will be implemented on
such a date as the Trustees of the Trust may determine. A portion of the class
A service fee is being paid by the fund. The remaining 10% per annum of Class
A service fee not currently being charged will be implemented on such date as
the Trustees of the Trust may determine.
A portion of the Class R1 and Class R2 distribution fee (0.10%) is currently
being waived.
A portion of the 529A distribution fee is being paid by the fund. Payment of
the remaining 0.15% per annum portion of the Class 529A distribution fee that
is not currently being charged will be implemented on such a date as the
Trustees of the Trust may determine. A portion of the Class 529A service fee
(0.10%) is currently being waived.
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 six months ended October
31, 2003 were as follows:
CLASS A CLASS B CLASS C CLASS R1 CLASS 529A CLASS 529B CLASS 529C
Total Distribution Plan 0.15% 0.93% 1.00% 0.40% 0.25% 1.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------------
Class R2 shares, which commenced operations on October 31, 2003, did not incur
any fees.
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 six months ended October 31, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred Sales
Charges Imposed $24,044 $390,669 $308,906 -- $50
- --------------------------------------------------------------------------------
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%.
(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 $145,886,484 $145,886,569
- -------------------------------------------------------------------------------
Investments (non-U.S. government securities) $223,331,692 $114,417,042
- -------------------------------------------------------------------------------
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 $1,035,812,499
------------------------------------------------------------
Gross unrealized appreciation $12,820,200
------------------------------------------------------------
Gross unrealized depreciation (7,551,931)
------------------------------------------------------------
Net unrealized appreciation $5,268,269
------------------------------------------------------------
(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:
Six months ended Year ended
10/31/03 4/30/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 24,358,214 $166,393,134 50,528,040 $345,478,580
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 1,134,389 7,757,406 1,945,280 13,307,478
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (18,918,750) (129,069,565) (23,998,763) (164,006,416)
- ------------------------------------------------------------------------------------------------------------
Net increase 6,573,853 $45,080,975 28,474,557 $194,779,642
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 6,303,190 $42,928,335 26,906,225 $183,263,812
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 487,336 3,318,916 834,359 5,685,818
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (8,616,614) (58,574,906) (9,644,667) (65,630,804)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,826,088) $(12,327,655) 18,095,917 $123,318,826
- ------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 11,474,910 $78,438,726 25,915,682 $177,058,161
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 304,453 2,078,687 387,484 2,648,594
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (7,504,262) (51,156,013) (7,294,777) (49,774,026)
- ------------------------------------------------------------------------------------------------------------
Net increase 4,275,101 $29,361,400 19,008,389 $129,932,729
- ------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 4,221,435 $28,774,593 4,086,620 $27,842,713
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 136,133 926,306 58,886 401,769
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (104,136) (709,617) (85,133) (579,262)
- ------------------------------------------------------------------------------------------------------------
Net increase 4,253,432 $28,991,282 4,060,373 $27,665,220
- ------------------------------------------------------------------------------------------------------------
CLASS R1 SHARES
Shares sold 100,378 $688,734 12,271 $84,049
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 716 4,888 126 866
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (38,894) (267,262) -- --
- ------------------------------------------------------------------------------------------------------------
Net increase 62,200 $426,360 12,397 $84,915
- ------------------------------------------------------------------------------------------------------------
Period ended
10/31/03**
SHARES AMOUNT
CLASS R2 SHARES
Shares sold 5,911 $40,020
- -------------------------------------------------------------------
Six months ended Period ended
10/31/03 4/30/03***
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 56,535 $388,265 146,500 $1,004,256
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 3,535 24,172 1,356 9,301
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (24,574) (168,111) (626) (4,289)
- ------------------------------------------------------------------------------------------------------------
Net increase 35,496 $244,326 147,230 $1,009,268
- ------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1, December 31, 2002, through April 30, 2003.
** Class R2 shares, which commenced operations on October 31, 2003, had no operating activity.
*** For the period from the inception of Class 529A, July 31, 2002, through April 30, 2003.
Six months ended Period ended
10/31/03 4/30/03***
SHARES AMOUNT SHARES AMOUNT
CLASS 529B SHARES
Shares sold 30,745 $209,051 81,851 $557,176
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 1,551 10,548 948 6,460
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (7,472) (50,617) (6,026) (41,019)
- ------------------------------------------------------------------------------------------------------------
Net increase 24,824 $168,982 76,773 $522,617
- ------------------------------------------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 66,950 $457,172 106,109 $725,171
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 2,128 14,537 885 6,054
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (27,117) (185,523) (39) (264)
- ------------------------------------------------------------------------------------------------------------
Net increase 41,961 $286,186 106,955 $730,961
- ------------------------------------------------------------------------------------------------------------
*** For the period from the inception of Class 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 six
months ended October 31, 2003, was $3,503. The fund had no borrowings during
the six months ended October 31, 2003.
(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.
Futures Contracts
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
U.S. Treasury Notes
5-Year Future December-03 827 Short $(788,261)
- --------------------------------------------------------------------------------
At October 31, 2003, the fund had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the fund's investment
adviser, has been contacted by the Office of the New York State Attorney
General ("NYAG") and the United States Securities and Exchange Commission
("SEC") in connection with their investigations of practices in the mutual
fund industry identified as "market timing" mutual fund shares. MFS is
cooperating with respect to these investigations. MFS has been informed that
the SEC is considering whether to institute an enforcement action against MFS
alleging false and misleading disclosure in certain MFS fund prospectuses and
breach of fiduciary duty concerning market timing. The NYAG has also indicated
that it is considering whether to commence an enforcement proceeding against
MFS relating to these practices. MFS continues to discuss these matters with
the SEC and the NYAG. Certain other regulatory authorities are also conducting
investigations into these practices within the industry and have requested
that MFS provide information to them.
In December 2003, MFS and Sun Life Financial Inc., along with certain MFS
funds and Trustees who serve on the Board of Trustees of these MFS funds, were
named as defendants in class action lawsuits filed in the United States
District Court, District of Massachusetts seeking damages of unspecified
amounts. The lawsuits were purportedly filed on behalf of people who
purchased, owned and/or redeemed shares of MFS funds during specified periods.
The suits allege that certain defendants permitted market timing and late
trading in the MFS funds which allegedly caused financial injury to the funds'
shareholders. The defendants are reviewing the allegations and will respond
appropriately. Additional lawsuits based upon similar allegations may be filed
in the future.
Any potential resolution of these matters may include, but not be limited to,
sanctions, penalties, damages or injunctions regarding MFS, restitution to
mutual fund shareholders and/or other financial penalties and structural
changes in the governance of MFS' mutual fund business.
Although MFS does not believe that these lawsuits will have a material adverse
effect on the funds, there can be no assurance that these suits, the ongoing
adverse publicity and/or other developments resulting from related regulatory
investigations or developments will not result in increased fund redemptions,
reduced sales of fund shares, or other adverse consequences for the funds.
- ------------------------------------------------------------------------------------------------------
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
JOHN W. BALLEN (born 09/12/59) ROBERT R. FLAHERTY (born 09/18/63)
Trustee and President Assistant Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59)
Assistant Secretary and Assistant Clerk RICHARD M. HISEY (born 08/29/58)
Massachusetts Financial Services Company, Senior Treasurer
Vice President and Associate General Counsel Massachusetts Financial Services Company, Senior
Vice President (since July 2002); The Bank of New
STEPHEN E. CAVAN (born 11/06/53) York, Senior Vice President (September 2000 to
Secretary and Clerk July 2002); Lexington Global Asset Managers, Inc.,
Massachusetts Financial Services Company, Senior Executive Vice President and Chief Financial
Vice President, General Counsel and Secretary Officer (prior to September 2000); Lexington
Funds, Treasurer (prior to September 2000)
STEPHANIE A. DESISTO (born 10/01/53)
Assistant Treasurer ELLEN MOYNIHAN (born 11/13/57)
Massachusetts Financial Services Company, Vice Assistant Treasurer
President (since April 2003); Brown Brothers Massachusetts Financial Services Company, Vice
Harriman & Co., Senior Vice President (November President
2002 to April 2003); ING Groep N.V./ Aeltus
Investment Management, Senior Vice President JAMES O. YOST (born 06/12/60)
(prior to November 2002) Assistant Treasurer
Massachusetts Financial Services 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 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 110 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 Manhattan Bank
MFS Fund Distributors, Inc. One Chase Manhattan Plaza
500 Boylston Street, Boston, MA New York, NY 10081
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
A prospectus containing more complete information, including investment
objectives, risks, charges and expenses, for any of the MFS products can be
obtained from your investment professional. You should read and consider the
information carefully before investing.
Variable annuities are offered through MFS/Sun Life Financial Distributors,
Inc.
- -------------------------------------------------------------------------------
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.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.
gov.
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 exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required 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-SEM-12/03 102M
MFS(R) Mutual Funds
SEMIANNUAL REPORT 10/31/03
MFS(R) MUNICIPAL LIMITED MATURITY FUND
[graphic omitted]
A path for pursuing opportunity
[logo] M F S(R)
INVESTMENT MANAGEMENT
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit www.mfs.com.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 2
- ----------------------------------------------------
MANAGEMENT REVIEW 3
- ----------------------------------------------------
PERFORMANCE SUMMARY 6
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 9
- ----------------------------------------------------
FINANCIAL STATEMENTS 28
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 38
- ----------------------------------------------------
TRUSTEES AND OFFICERS 46
- ----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 48
- ----------------------------------------------------
CONTACT INFORMATION 49
- ----------------------------------------------------
ASSET ALLOCATION 50
- -------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- -------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
In our view, the past year has been a promising one for investors. Financial
markets have improved steadily, spurred by indications of a global economic
recovery.
These developments make this an encouraging time for MFS and for our
shareholders. But we also think it's a time to reinforce the fundamentals of a
sound investment strategy.
At MFS, we think in any market environment the best approach for investors is
disciplined diversification. This method of investing involves three simple
steps. First, allocate your holdings across the major asset classes. Second,
diversify within each class so that you get exposure to different investment
styles, such as growth and value, and market sectors, such as government and
corporate bonds. Finally, to respond to the way market activity can shift the
value of your accounts, rebalance your accounts on a routine schedule, such as
once per year. Doing so will help you maintain your desired allocation across
each asset class.
These investing fundamentals are often lost when markets are on an upswing. At
such times, it's easy to be tempted to shift your holdings in the current,
"hottest" performing investment. History suggests, however, that it is difficult
to predict year after year what the best performing sector or market will be.
While it is true that the past cannot offer any guarantees for the future, the
markets historically have demonstrated the benefits of taking the prudent
approach and spreading your assets across a variety of holdings. For investors
with long-term goals such as college or retirement, a balanced approach usually
makes the most sense. As always, your investment professional can help you
identify an appropriate mix of investments for your needs.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
November 20, 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 nearly 80 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
- -------------------------------------------------------------------------------
MARKET ENVIRONMENT
For the six-month period ended October 31, 2003, interest rates on shorter-
maturity municipal issues (maturities of less than nine years or so) ranged from
unchanged to modestly lower. Municipal bonds with maturities over about nine
years saw their rates rise slightly. Those facts, however, belie the tremendous
volatility in the bond market over that time. In early 2003 and into the first
part of the period, we saw a confluence of factors that were positive for bond
prices. Geopolitical uncertainty, the hangover from corporate scandals in 2002,
and a weak U.S. economy were among the factors that prompted a "flight to
quality" by many investors and pushed interest rates down to four-decade lows by
spring 2003.
In late June, however, the bond market reversed direction as fixed-income
investors became concerned that the economic recovery was accelerating faster
than expected. Although stocks had been rising since late March, the catalyst
for the bond market appeared to be the Federal Reserve Board's decision on June
25 to lower rates by one-quarter percent rather than one-half percent as many
investors had expected. From that date through the end of August, bond rates
rose sharply. Rates settled back down slightly in the final months of the
period.
Shorter-term municipal bonds in general slightly outperformed Treasuries over
the period, as yields in the first nine years of the municipal yield curve were
unchanged or modestly lower, while Treasury yields were generally higher across
the yield curve. Yields for municipal bonds with maturities over about nine
years rose modestly over the period. (The principal value and interest on U.S.
Treasury securities are guaranteed by the U.S. government if held to maturity.)
PORTFOLIO CONCENTRATION 10/31/03
QUALITY RATINGS
"AAA" 68.2%
"AA" 10.4%
"A" 8.9%
"BBB" 9.2%
Other 3.3%
The portfolio is actively managed, and current holdings may be different.
PERFORMANCE RELATIVE TO LIPPER PEERS
With rates relatively steady for the period as a whole, portfolio returns came
mainly from coupon yield. The fund's underperformance relative to its Lipper
peers was mainly a result of the fund's underweighting in lower-rated debt that
offered higher coupon yields. Historically, this fund has tended to be
overweighted in higher-quality, somewhat less risky debt. That strategy hurt
performance in a period when investors became more optimistic about the economy
and seemed willing to take on more risk in search of higher yields.
More specifically, performance was hurt by our underweighting in tobacco bonds,
utility bonds, and some other corporate-backed industrial bonds. Tobacco bonds
are state bonds backed by payments under the Master Settlement Agreement (MSA)
between the states and the major tobacco companies, in which the states agreed
to drop their lawsuits against the firms in return for a series of payments. As
the period began, Philip Morris was in the midst of legal problems that
threatened to bankrupt the firm and cast doubt upon the tobacco industry's
ability to continue payments under the MSA. This doubt caused tobacco bonds to
fall in price. As the period progressed, tobacco bonds rose and fell with the
industry's legal fortunes. In the end, tobacco bond prices were up modestly for
the six-month period, and our underweighting in the area detracted from
performance.
Similarly, an underweighting in utility bonds detracted from results as that
sector performed well. As utility firms in general repaired their balance
sheets, sold off trading operations, and secured their bank lines of credit, the
industry seemed to shake off the taint of the Enron scandal and return to
investor favor.
An underweighting in corporate-backed bonds in other sectors was also slightly
negative for performance, as corporate-backed issues in general rallied as
investors became more confident about the U.S. economy. Spreads on corporate-
backed bonds, which had widened on investor uncertainty in late 2002 and early
2003, tightened during the period.
Relative to its Lipper peers, the fund's positioning on the yield curve was a
positive for performance. The fund was overweighted in the two best-performing
areas of the curve, bonds in the 6-to-8-year maturity range and the 4-to-6- year
maturity range.
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. While the fund's holdings
encompass a range of maturities up to about 10 years, the fund is limited to an
average maturity of no more than 5 years under normal market conditions. Over
the period, the portfolio's average maturity was about 4.75 years.
As mentioned above, bonds in the 4-to-6-year maturity range were one of the best
performing groups over the period. This environment hurt the fund's performance
relative to the Lehman 5-year benchmark, because that benchmark had all of its
assets in the strong performing 4-to-6-year group, while the fund also had
assets in other, weaker-performing maturity ranges. The portfolio performed
approximately in line with the Lehman 3-year benchmark.
Respectfully,
/s/ Michael L. Dawson /s/ Geoffrey L. Schechter
Michael L. Dawson Geoffrey L. Schechter
Portfolio Manager Portfolio Manager
- -------------------------------------------------------------------------------
Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment-related news.
o From Week in Review, link to MFS Global Investment Perspective for our
current view of the world.
- -------------------------------------------------------------------------------
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 10/31/03
- -------------------------------------------------------------------------------
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Performance results reflect the percentage change in
net asset value, including reinvestment of any dividends and capital gains
distributions. (See Notes to Performance Summary.)
VISIT WWW.MFS.COM FOR MORE CURRENT PERFORMANCE RESULTS.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN.
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.
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share inception
class date 6-mo 1-yr 3-yr 5-yr 10-yr
----------------------------------------------------------------------------
A 3/17/1992 -- 4.06% 5.53% 4.42% 4.12%
----------------------------------------------------------------------------
B 9/7/1993 -- 3.13% 4.70% 3.60% 3.29%
----------------------------------------------------------------------------
C 7/1/1994 -- 3.18% 4.64% 3.54% 3.30%
----------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative benchmarks
----------------------------------------------------------------------------
Average short/intermediate-term
municipal debt fund+ 1.33% 3.95% 5.29% 4.07% 4.35%
----------------------------------------------------------------------------
Lehman Brothers Three-Year
Municipal Bond Index# 1.23% 3.86% 5.74% 4.85% 4.92%
----------------------------------------------------------------------------
Lehman Brothers Five-Year
Municipal Bond Index# 1.69% 5.26% 6.96% 5.51% 5.44%
----------------------------------------------------------------------------
- --------------------
Average annual
with sales charge
- --------------------
----------------------------------------------------------------------------
A -- 1.46% 4.65% 3.90% 3.85%
----------------------------------------------------------------------------
B -- -0.87% 3.78% 3.25% 3.29%
----------------------------------------------------------------------------
C -- 2.18% 4.64% 3.54% 3.30%
----------------------------------------------------------------------------
- --------------------
Cumulative
without sales charge
- --------------------
----------------------------------------------------------------------------
A 1.26% 4.06% 17.54% 24.17% 49.71%
----------------------------------------------------------------------------
B 0.74% 3.13% 14.76% 19.32% 38.29%
----------------------------------------------------------------------------
C 0.83% 3.18% 14.58% 19.00% 38.39%
----------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
+ 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.
Performance results reflect any applicable subsidies and waivers in effect
during the periods shown. Any such subsidy or waiver is voluntary and may be
revised or rescinded at any time without notice. Without such subsidies and
waivers the fund's performance results would be less favorable. Please see the
prospectus and financial statements for complete details.
KEY RISK CONSIDERATIONS
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 regarding 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 (unaudited) - 10/31/03
- -------------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized
by broad-based asset classes.
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -------------------------------------------------------------------------------------------------------
Municipal Bonds - 95.4%
- -------------------------------------------------------------------------------------------------------
Airport and Port Revenue - 4.5%
- -------------------------------------------------------------------------------------------------------
Chicago, IL (O'Hare International Airport), FSA, 5.25s, 2013 $1,500 $1,614,360
- -------------------------------------------------------------------------------------------------------
Chicago, IL (O'Hare International Airport), "A", AMBAC,
6s, 2005 1,900 2,003,854
- -------------------------------------------------------------------------------------------------------
Cleveland, OH, Airport Systems Rev., FSA, 5.5s, 2008 250 276,398
- -------------------------------------------------------------------------------------------------------
Dallas Fort Worth International Airport, "A", AMBAC,
6s, 2013 1,000 1,136,490
- -------------------------------------------------------------------------------------------------------
Dallas Fort Worth International Airport, Refunding &
Improvement "A", FGIC, 5.5s, 2003 400 400,000
- -------------------------------------------------------------------------------------------------------
Delaware River Port Authority Pennsylvania & New Jersey,
Port District Project "A", FSA, 5.25s, 2009 550 618,343
- -------------------------------------------------------------------------------------------------------
Denver, CO, City & County Airport Rev., MBIA, 6s, 2006 1,000 1,116,940
- -------------------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., "B", FSA, 4.35s, 2004 500 510,580
- -------------------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., 5.25s, 2007 375 414,116
- -------------------------------------------------------------------------------------------------------
Massachusetts Port Authority Rev., 5.75s, 2010 175 200,205
- -------------------------------------------------------------------------------------------------------
Minneapolis & St. Paul, MN, Metropolitan Airport, FGIC,
5.25s, 2009 500 549,210
- -------------------------------------------------------------------------------------------------------
Omaha, NE, Airport Authority Rev., FSA, 4s, 2006 500 523,685
- -------------------------------------------------------------------------------------------------------
Port Seattle, WA, FGIC, 5.5s, 2007 500 551,075
- -------------------------------------------------------------------------------------------------------
Rhode Island Economic Development Corp., Airport Rev.,
"A", FGIC, 5s, 2012 750 801,172
- -------------------------------------------------------------------------------------------------------
Richland Lexington, SC, Columbia Metropolitan Airport
Rev., FSA, 5s, 2009 200 221,642
- -------------------------------------------------------------------------------------------------------
Wayne Charter County, MI, Airport Rev., Detroit
Metropolitan "D", FGIC, 5.25s, 2006 1,000 1,096,360
- -------------------------------------------------------------------------------------------------------
$12,034,430
- -------------------------------------------------------------------------------------------------------
Chemicals - 0.3%
- -------------------------------------------------------------------------------------------------------
Brazos River, TX, Harbor Navigation District (Dow
Chemical) "B", 4.75s, 2033 $330 $343,910
- -------------------------------------------------------------------------------------------------------
Michigan Strategic Fund (Dow Chemical), 4.6s, 2014 350 370,832
- -------------------------------------------------------------------------------------------------------
$714,742
- -------------------------------------------------------------------------------------------------------
General Obligation - General Purpose - 14.7%
- -------------------------------------------------------------------------------------------------------
Allen County, IN (Jail Building Corp.), 5.75s, 2009 $235 $270,809
- -------------------------------------------------------------------------------------------------------
Broward County, FL, 5s, 2008 500 551,735
- -------------------------------------------------------------------------------------------------------
Central Falls, RI, ASST GTY, 5.5s, 2005 440 466,206
- -------------------------------------------------------------------------------------------------------
Chicago, IL, MBIA, 5s, 2008 1,250 1,375,688
- -------------------------------------------------------------------------------------------------------
Columbus, OH, 5.25s, 2011 705 789,642
- -------------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, 5.75s, 2005 500 527,885
- -------------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts, 6s, 2011(+++) 310 366,668
- -------------------------------------------------------------------------------------------------------
Dickson County, TN, FGIC, 4s, 2007 820 875,965
- -------------------------------------------------------------------------------------------------------
Du Page County, IL (Ars Jail), 5s, 2009 870 960,611
- -------------------------------------------------------------------------------------------------------
Gulf Shores Alabama, "C", FSA, 5s, 2012 1,460 1,603,255
- -------------------------------------------------------------------------------------------------------
Hawkins County, TN, AMBAC, 4.5s, 2008 425 462,613
- -------------------------------------------------------------------------------------------------------
Henderson, NV, Parks and Recreation, FGIC, 6s, 2006 340 377,182
- -------------------------------------------------------------------------------------------------------
Huntsville, AL, "D", 5s, 2008 350 389,841
- -------------------------------------------------------------------------------------------------------
Indianapolis, IN (Public Improvement Bond Bank) "A", 5.25s, 2006 275 296,288
- -------------------------------------------------------------------------------------------------------
King County, WA, "B", 4.75s, 2009 1,500 1,624,200
- -------------------------------------------------------------------------------------------------------
Kingsport, TN, "A", FGIC, 4s, 2008 1,000 1,064,500
- -------------------------------------------------------------------------------------------------------
Lansing, IL, "A", FSA, 4.25s, 2007 530 567,879
- -------------------------------------------------------------------------------------------------------
Milwaukee County, WI, "A", 4.75s, 2007 1,000 1,094,890
- -------------------------------------------------------------------------------------------------------
Mobile County, AL, MBIA, 5s, 2007 500 545,980
- -------------------------------------------------------------------------------------------------------
Montgomery, AL, AMBAC, 5s, 2011 1,000 1,103,050
- -------------------------------------------------------------------------------------------------------
Nassau County, NY, "G", MBIA, 5.35s, 2009 1,000 1,120,670
- -------------------------------------------------------------------------------------------------------
New York, NY, 5.25s, 2012 265 286,226
- -------------------------------------------------------------------------------------------------------
New York, NY, "B", 5.75s, 2011 375 417,690
- -------------------------------------------------------------------------------------------------------
New York, NY, "C", 5.25s, 2009 250 274,835
- -------------------------------------------------------------------------------------------------------
New York, NY, "G", 5.5s, 2009 780 867,602
- -------------------------------------------------------------------------------------------------------
New York, NY, "J", 5s, 2010 1,000 1,078,800
- -------------------------------------------------------------------------------------------------------
New York, NY, "K", 5s, 2010 370 398,775
- -------------------------------------------------------------------------------------------------------
Oakland, CA, "A", FGIC, 5s, 2010 820 912,004
- -------------------------------------------------------------------------------------------------------
Pawtucket, RI, "A", AMBAC, 5s, 2009 1,000 1,116,610
- -------------------------------------------------------------------------------------------------------
Philadelphia, PA, FGIC, 5.25s, 2008 2,000 2,240,660
- -------------------------------------------------------------------------------------------------------
Phoenix, AZ (Civic Improvement), AMBAC, 5.5s, 2007 250 277,700
- -------------------------------------------------------------------------------------------------------
Pittsburgh, PA, "A", AMBAC, 5s, 2009 1,000 1,105,950
- -------------------------------------------------------------------------------------------------------
Prescott Valley, AZ, Municipal Property Corp., FGIC,
3.25s, 2007 500 519,170
- -------------------------------------------------------------------------------------------------------
Puerto Rico, "C", 6s, 2013 800 898,448
- -------------------------------------------------------------------------------------------------------
Saraland, AL, MBIA, 4.5s, 2009 865 936,622
- -------------------------------------------------------------------------------------------------------
St. Clair County, IL, FGIC, 5.625s, 2012 500 565,470
- -------------------------------------------------------------------------------------------------------
State of California, FSA, 5.25s, 2010 2,000 2,242,040
- -------------------------------------------------------------------------------------------------------
State of California, 5s, 2011 2,250 2,409,165
- -------------------------------------------------------------------------------------------------------
State of Hawaii, "C", FSA, 5.25s, 2008 500 557,105
- -------------------------------------------------------------------------------------------------------
State of Illinois, FGIC, 5s, 2005 500 522,970
- -------------------------------------------------------------------------------------------------------
State of Washington, "A", MBIA, 4s, 2008 1,000 1,063,560
- -------------------------------------------------------------------------------------------------------
State of Washington, "B", FSA, 5s, 2008 500 551,465
- -------------------------------------------------------------------------------------------------------
State of Washington, "R", 5.375s, 2007 750 839,737
- -------------------------------------------------------------------------------------------------------
State of Wisconsin, 5.125s, 2011 400 444,960
- -------------------------------------------------------------------------------------------------------
State of Wisconsin, "C", FSA, 5s, 2010 1,000 1,106,990
- -------------------------------------------------------------------------------------------------------
Taylor, MI, Building Authority, AMBAC, 5.5s, 2010 500 569,925
- -------------------------------------------------------------------------------------------------------
Weslaco, TX, MBIA, 3.25s, 2007 795 824,312
- -------------------------------------------------------------------------------------------------------
$39,464,348
- -------------------------------------------------------------------------------------------------------
General Obligations - Improvement - 3.2%
- -------------------------------------------------------------------------------------------------------
Jefferson County, KY, FSA, 0s, 2004 $1,000 $990,510
- -------------------------------------------------------------------------------------------------------
Jersey City, NJ, Refunding & General Improvement "A",
AMBAC, 4s, 2007 500 532,145
- -------------------------------------------------------------------------------------------------------
Kauai County, HI, FGIC, 6.25s, 2019(+++) 375 450,870
- -------------------------------------------------------------------------------------------------------
Madison & St. Clair Counties, IL, School Building, FGIC,
4.25s, 2005 500 518,375
- -------------------------------------------------------------------------------------------------------
Montgomery County, MD, 5.375s, 2005 500 524,470
- -------------------------------------------------------------------------------------------------------
New Orleans, LA, Certificates Indebtedness, FSA, 5.5s, 2010 500 573,680
- -------------------------------------------------------------------------------------------------------
North Slope Borough, AK, "A", MBIA, 0s, 2005 500 486,525
- -------------------------------------------------------------------------------------------------------
Oak Ridge, TN, AMBAC, 5s, 2012 300 325,485
- -------------------------------------------------------------------------------------------------------
Springfield, MA, MBIA, 5s, 2011 1,000 1,098,710
- -------------------------------------------------------------------------------------------------------
State of Mississippi, 5.5s, 2006(+++) 250 277,957
- -------------------------------------------------------------------------------------------------------
State of Mississippi, 6.2s, 2008(+++) 445 508,960
- -------------------------------------------------------------------------------------------------------
State of Ohio, "E", 5.5s, 2008 1,450 1,639,704
- -------------------------------------------------------------------------------------------------------
State of Tennessee, "A", FGIC, 5.25s, 2008 500 557,470
- -------------------------------------------------------------------------------------------------------
$8,484,861
- -------------------------------------------------------------------------------------------------------
General Obligations - Schools - 10.6%
- -------------------------------------------------------------------------------------------------------
Birdville, TX, Independent School District, "A", PSF,
4.25s, 2008 $500 $535,910
- -------------------------------------------------------------------------------------------------------
Bloomington, MN, Independent School District, 5.25s, 2011 500 552,140
- -------------------------------------------------------------------------------------------------------
Byron Center, MI, Public Schools, Q-SBLF, 5s, 2011 600 662,958
- -------------------------------------------------------------------------------------------------------
Cincinnati, OH, City School District, FSA, 4.5s, 2006 500 535,345
- -------------------------------------------------------------------------------------------------------
Clackamas County, OR, School District, 6s, 2011 315 365,756
- -------------------------------------------------------------------------------------------------------
Cook County, IL, Community Consolidated School, FSA,
0s, 2008 500 429,930
- -------------------------------------------------------------------------------------------------------
Cook County, IL, High School District Number 205, "D",
FSA, 0s, 2004 500 496,530
- -------------------------------------------------------------------------------------------------------
Cook County, IL, School District Number 135, "A", MBIA,
3.25s, 2006 500 518,560
- -------------------------------------------------------------------------------------------------------
Cypress Fairbanks, TX, Independent School District, PSF,
5s, 2008 500 552,125
- -------------------------------------------------------------------------------------------------------
Deer Park, TX, Independent School District, PSF, 0s, 2009 1,000 843,600
- -------------------------------------------------------------------------------------------------------
Detroit, MI, City School District (School Building & Site
Improvement) "B", FGIC, 5s, 2010 2,000 2,221,780
- -------------------------------------------------------------------------------------------------------
Dodge, KS, Unified School District Number 443, FGIC, 4s, 2006 500 526,885
- -------------------------------------------------------------------------------------------------------
Ferndale, MI, School District, 5.5s, 2013 1,115 1,257,898
- -------------------------------------------------------------------------------------------------------
Hall County, GA, School District, 4.5s, 2007 1,540 1,660,305
- -------------------------------------------------------------------------------------------------------
Jackson County, MI, Reorganized School District 7, FSA,
4.375s, 2011 1,750 1,866,882
- -------------------------------------------------------------------------------------------------------
Kane McHenry Cook & De Kalb Counties, IL, Capital
Appreciation, 0s, 2003 750 749,340
- -------------------------------------------------------------------------------------------------------
Kaufman, TX, Independent School District, PSF, 0s, 2005 500 491,165
- -------------------------------------------------------------------------------------------------------
Lake County, IL, FGIC, 4.8s, 2004 400 402,364
- -------------------------------------------------------------------------------------------------------
Lake County, IL, Community School District, Capital
Appreciation "B", FGIC, 0s, 2005 500 482,270
- -------------------------------------------------------------------------------------------------------
Lancaster County, NE, School District (Lincoln Public
School), 4s, 2008 500 531,310
- -------------------------------------------------------------------------------------------------------
Manistee, MI, Public Schools, FGIC, 5.15s, 2010(+++) 100 112,965
- -------------------------------------------------------------------------------------------------------
Mauston, WI, Joint School District, FGIC, 5.55s, 2005 500 529,710
- -------------------------------------------------------------------------------------------------------
McHenry & Kane Counties, IL, FGIC, 0s, 2004 350 349,360
- -------------------------------------------------------------------------------------------------------
Mesquite, TX, Independent School District, PSF, 0s, 2004 685 678,390
- -------------------------------------------------------------------------------------------------------
Michigan City, IN, School Building, FSA, 5s, 2006 250 267,748
- -------------------------------------------------------------------------------------------------------
Midlothian, TX, Independent School District, "A", PSF,
4.4s, 2007 700 751,184
- -------------------------------------------------------------------------------------------------------
Mishawaka, IN (School Building Corp.), AMBAC, 4.5s, 2007 320 344,115
- -------------------------------------------------------------------------------------------------------
New Albany, Floyd County School Building (First Mortgage)
FGIC, 5.5s, 2007 250 276,530
- -------------------------------------------------------------------------------------------------------
North Lawrence, IN, FSA, 5s, 2008 500 549,985
- -------------------------------------------------------------------------------------------------------
Norwin, PA, School District, FGIC, 6s, 2020(+++) 250 294,680
- -------------------------------------------------------------------------------------------------------
Oconto Falls, WI, Public School District, FSA, 5.25s, 2007 500 551,795
- -------------------------------------------------------------------------------------------------------
Oklahoma County, OK, Independent School District, FGIC,
5s, 2009 2,000 2,235,260
- -------------------------------------------------------------------------------------------------------
Plymouth Canton, MI, Community School, 5s, 2011 500 552,570
- -------------------------------------------------------------------------------------------------------
Portage, IN, High School, First Mortgage, 2.15s, 2005 255 257,109
- -------------------------------------------------------------------------------------------------------
Round Rock, TX, Independent School District, 6.5s, 2011 500 594,980
- -------------------------------------------------------------------------------------------------------
Round Rock, TX, Independent School District, PSF,
5.375s, 2012 570 639,534
- -------------------------------------------------------------------------------------------------------
State of Ohio, "A", 5.25s, 2004 450 461,560
- -------------------------------------------------------------------------------------------------------
State of South Carolina, 5.75s, 2007 500 557,975
- -------------------------------------------------------------------------------------------------------
Tuscaloosa, AL, 5s, 2007 465 508,101
- -------------------------------------------------------------------------------------------------------
Unionville Chadds Ford, PA School, MBIA, 4s, 2004 490 498,335
- -------------------------------------------------------------------------------------------------------
Vidor, TX, Independent School District, PSF, 5.875s, 2007 410 459,040
- -------------------------------------------------------------------------------------------------------
Warren Township, IN, First Mortgage, FGIC, 4.5s, 2005 500 519,320
- -------------------------------------------------------------------------------------------------------
Westerville, OH, City School District, MBIA, 5.5s, 2012 300 337,737
- -------------------------------------------------------------------------------------------------------
Will County, IL, School District, FSA, 0s, 2003 525 525,000
- -------------------------------------------------------------------------------------------------------
$28,536,036
- -------------------------------------------------------------------------------------------------------
Health Care Revenue - Hospitals - 10.3%
- -------------------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority Rev.
(University Pittsburgh Medical Center) "B", 5.5s, 2005 $1,000 $1,055,690
- -------------------------------------------------------------------------------------------------------
Baxter County, AR, Hospital Rev., 4.7s, 2005 320 333,094
- -------------------------------------------------------------------------------------------------------
Blair County, PA, Hospital Authority Rev. (Altoona
Hospital), AMBAC, 5.375s, 2006 460 501,943
- -------------------------------------------------------------------------------------------------------
California Statewide Community (Kaiser Permanente) "D",
4.35s, 2036 600 626,184
- -------------------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Catholic
Health Initiatives) "A", 5s, 2008 500 532,500
- -------------------------------------------------------------------------------------------------------
Comal County, TX, Health Facilities Development,
Healthcare Systems (McKenna Memorial) "A", 3.625s, 2005 195 197,130
- -------------------------------------------------------------------------------------------------------
Comal County, TX, Health Facilities Development,
Healthcare Systems (McKenna Memorial) "A", 4s, 2006 170 172,101
- -------------------------------------------------------------------------------------------------------
DCH Health Care Authority, AL, Facilities Rev., 4s, 2008 500 513,910
- -------------------------------------------------------------------------------------------------------
Delaware County, PA, Hospital Rev. (Crozer-Chester
Medical Center), 4.75s, 2005 500 522,470
- -------------------------------------------------------------------------------------------------------
Denver, CO, Health & Hospital Rev., 5.125s, 2006 200 214,080
- -------------------------------------------------------------------------------------------------------
Erie County, OH, Hospital Facilities Rev. (Firelands
Regional Medical Center), 4s, 2004 420 427,589
- -------------------------------------------------------------------------------------------------------
Gainesville & Hall County, GA, Hospital Authority
(Northeast GA Health System), 3.5s, 2005 500 511,530
- -------------------------------------------------------------------------------------------------------
Greenville, SC, Hospital Systems Facilities, "A", AMBAC,
5s, 2008 500 553,710
- -------------------------------------------------------------------------------------------------------
Highlands County, FL, Health Facilities (Adventist
Health), 3.35s, 2032 500 513,190
- -------------------------------------------------------------------------------------------------------
Hillsborough County, FL, Industrial Development Authority
Hospital Rev. (Tampa General Hospital) "A", 5s, 2007 500 529,015
- -------------------------------------------------------------------------------------------------------
Huntsville, AL, Health Care Authority, "A", 5.25s, 2005 300 314,679
- -------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Childrens
Memorial Hospital), AMBAC, 5.75s, 2011 250 282,595
- -------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Condell
Medical Center), 4s, 2004 825 835,667
- -------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Decatur
Memorial Hospital), 4s, 2004 415 424,254
- -------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Sherman Health
Systems), AMBAC, 5.5s, 2007 440 489,984
- -------------------------------------------------------------------------------------------------------
Indiana Health Facility Financing Authority Rev.
(Ascension Health), 5.5s, 2008 500 552,740
- -------------------------------------------------------------------------------------------------------
Indiana Health Facility Financing Authority Rev. (Holy
Cross Health Systems Corp.), MBIA, 5.375s, 2008 1,000 1,122,830
- -------------------------------------------------------------------------------------------------------
Iowa Finance Authority Health Care Facilities (Genesis
Medical Center), 6s, 2010 210 236,013
- -------------------------------------------------------------------------------------------------------
Kent Hospital Finance Authority, MI, Rev. (Spectrum
Health), 5.25s, 2009 750 811,417
- -------------------------------------------------------------------------------------------------------
Kentucky Ecomomic Development Finance Authority (Norton
Healthcare, Inc.), 6.125s, 2010 150 159,821
- -------------------------------------------------------------------------------------------------------
Marion County, FL, Hospital District Rev. (Monroe
Regional), 4.75s, 2005 500 528,760
- -------------------------------------------------------------------------------------------------------
Marshall County, AL, Health Care, "A", 4.5s, 2005 225 231,991
- -------------------------------------------------------------------------------------------------------
Marshall County, AL, Health Care, "A", 4.5s, 2006 240 249,902
- -------------------------------------------------------------------------------------------------------
Martin County, FL, Health Facilities (Martin Memorial
Medical Center), 5.25s, 2008 800 843,872
- -------------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (MA Biomedical
Research Corp.), 5.75s, 2006 260 282,584
- -------------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Baystate Medical Center), 5s, 2009 235 250,853
- -------------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Berkshire Health) "E", 4.5s, 2005 260 270,156
- -------------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Covenant Health), 5s, 2007 190 199,692
- -------------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Jordan Hospital), 4.8s, 2006 600 592,782
- -------------------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
(Partners Healthcare) "E", 5s, 2007 1,000 1,082,780
- -------------------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev. (Crittendon
Hospital) "A", 5.5s, 2013 310 331,133
- -------------------------------------------------------------------------------------------------------
Michigan Hospital Finance Authority Rev. (Genesys Health
System), 5.5s, 2007(+++) 750 847,230
- -------------------------------------------------------------------------------------------------------
Mississippi Hospital Equipment & Facilities (SW
Mississippi Medical), 5s, 2014 500 493,535
- -------------------------------------------------------------------------------------------------------
Montgomery, AL, Special Care Facilities (Baptist Medical
Center), FSA, 5.15s, 2005 250 266,150
- -------------------------------------------------------------------------------------------------------
New Hampshire Health & Education Facilities (Catholic
Medical Center), 3.25s, 2005 265 269,277
- -------------------------------------------------------------------------------------------------------
New Hampshire Health & Education Facilities (Catholic
Medical Center), 3.6s, 2006 250 253,220
- -------------------------------------------------------------------------------------------------------
New Hampshire Health & Education Facilities (Exeter
Hospital), 4.6s, 2007 395 414,399
- -------------------------------------------------------------------------------------------------------
Oklahoma State Development Finance Authority (Oklahoma
Hospital Assn.), AMBAC, 5.25s, 2004 250 256,030
- -------------------------------------------------------------------------------------------------------
Philadelphia, PA, Hospital & High Education (Children's
Hospital), MBIA, 5s, 2032 750 823,627
- -------------------------------------------------------------------------------------------------------
Rhode Island Health & Education Building, Hospital
Financing (Lifespan Obligation Group), 5.75s, 2010 250 266,235
- -------------------------------------------------------------------------------------------------------
Richland County, OH, Hospital Facilities (Medcentral
Health), 5.4s, 2003 200 200,182
- -------------------------------------------------------------------------------------------------------
Scranton-Lackawanna, PA, Health & Welfare (Community
Medical Center), MBIA, 5.25s, 2006 935 1,017,243
- -------------------------------------------------------------------------------------------------------
South Carolina Jobs Economic Development Hospital
Facilities Rev. (Palmetto Health Alliance) "A", 4s, 2004 260 262,600
- -------------------------------------------------------------------------------------------------------
South Carolina Jobs Economic Development Hospital
Facilities Rev. (Palmetto Health Alliance) "A", 4.25s, 2005 290 298,175
- -------------------------------------------------------------------------------------------------------
South Dakota Health & Educational (Prairie Lakes Health
Care Systems), 3.1s, 2005 215 218,109
- -------------------------------------------------------------------------------------------------------
Spartanburg County, SC, Health Service, FSA, 3.5s, 2004 660 667,293
- -------------------------------------------------------------------------------------------------------
Spartanburg County, SC, Health Service, MBIA, 6s, 2007 675 763,222
- -------------------------------------------------------------------------------------------------------
St. Cloud, MN (St. Cloud Hospital), FSA, 5.5s, 2006 260 283,179
- -------------------------------------------------------------------------------------------------------
State of Wisconsin Health & Educational Facilities
(Wheaton Franciscan Services), 5s, 2007 260 278,239
- -------------------------------------------------------------------------------------------------------
Steubenville, OH (Trinity Hospital), 5.7s, 2010 220 242,194
- -------------------------------------------------------------------------------------------------------
Sullivan County, TN, Health Educational & Housing
Facilities Board Rev. (Wellmont Health Systems), 4s, 2005 500 515,435
- -------------------------------------------------------------------------------------------------------
Tyler, TX, Health Facilities Development Corp. (Mother
Frances Hospital), 4.5s, 2006 500 520,420
- -------------------------------------------------------------------------------------------------------
Tyler, TX, Health Facilities Development Corp. (Mother
Frances Hospital), 5s, 2007 500 528,320
- -------------------------------------------------------------------------------------------------------
Waco, TX, Health Facilities Development Corp. (Ascension
Health), 5.5s, 2009 250 277,913
- -------------------------------------------------------------------------------------------------------
West Virginia Hospital Finance Authority (Charleston
Medical Center), 6.5s, 2005(+++) 80 87,359
- -------------------------------------------------------------------------------------------------------
West Virginia Hospital Finance Authority (Charleston
Medical Center), 6.5s, 2005 20 21,613
- -------------------------------------------------------------------------------------------------------
Wichita, KS, Hospital Rev. (Via Christi), 3.75s, 2003 410 410,250
- -------------------------------------------------------------------------------------------------------
Wisconsin Health & Higher Educational Facilities
(Agnesian Healthcare Inc.), 5s, 2006 65 69,113
- -------------------------------------------------------------------------------------------------------
$27,849,203
- -------------------------------------------------------------------------------------------------------
Industrial Revenue - Airlines - 0.0%
- -------------------------------------------------------------------------------------------------------
Massachusetts Port Authority (US Airways), MBIA, 5s, 2006 $50 $53,809
- -------------------------------------------------------------------------------------------------------
Industrial Revenue - Environmental Services - 0.2%
- -------------------------------------------------------------------------------------------------------
Michigan Strategic Fund (Waste Management), 4.2s, 2027 $400 $403,972
- -------------------------------------------------------------------------------------------------------
Industrial Revenue - Other - 0.9%
- -------------------------------------------------------------------------------------------------------
Cartersville, GA, Development Authority Waste (Anheuser
Busch), 5.1s, 2012 $375 $401,119
- -------------------------------------------------------------------------------------------------------
Corpus Christi, TX, Nueces County General Rev. (Union
Pacific), 5.35s, 2010 610 628,525
- -------------------------------------------------------------------------------------------------------
Fort Bend County, TX, Industrial Development (Frito Lay),
3s, 2011 575 591,882
- -------------------------------------------------------------------------------------------------------
Memphis-Shelby County, TN (Federal Express), 5.05s, 2012 400 422,012
- -------------------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing (Amtrak), 6s, 2006 100 104,634
- -------------------------------------------------------------------------------------------------------
Utah County, UT, Environmental Improvement Rev. (USX
Corp.), 5.05s, 2017 300 316,068
- -------------------------------------------------------------------------------------------------------
$2,464,240
- -------------------------------------------------------------------------------------------------------
Industrial Revenue - Paper - 0.9%
- -------------------------------------------------------------------------------------------------------
Courtland, AL, Industrial Development Board Environmental
Improvement Rev. (International Paper Co.) "A", 5s, 2013 $750 $770,723
- -------------------------------------------------------------------------------------------------------
Erie County, PA, Industrial Development Authority
(International Paper Co.), 5.25s, 2010 250 267,703
- -------------------------------------------------------------------------------------------------------
Ohio State Air Quality Development Authority Rev.,
(Meadwestvaco), 2s, 2023 1,250 1,250,362
- -------------------------------------------------------------------------------------------------------
$2,288,788
- -------------------------------------------------------------------------------------------------------
Miscellaneous Revenue - Entertainment & Tourism - 0.8%
- -------------------------------------------------------------------------------------------------------
Arizona Tourism & Sports Authority (Multipurpose Stadium)
Facility Rev., "A", MBIA, 5s, 2010 $1,000 $1,114,090
- -------------------------------------------------------------------------------------------------------
George L Smith II Georgia World Congress Center Authority
Rev. (Domed Stadium), MBIA, 6s, 2011 1,000 1,129,110
- -------------------------------------------------------------------------------------------------------
$2,243,200
- -------------------------------------------------------------------------------------------------------
Miscellaneous Revenue - Other - 1.3%
- -------------------------------------------------------------------------------------------------------
District of Columbia Tax, FSA, 0s, 2005 $600 $578,088
- -------------------------------------------------------------------------------------------------------
Illinois Development Finance Authority Rev., FSA, 0s, 2010 500 398,605
- -------------------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev. (Art
Institute Chicago), 3.35s, 2034 1,550 1,548,016
- -------------------------------------------------------------------------------------------------------
Kentucky Property & Buildings Commerce Rev., 5.25s, 2005 500 524,435
- -------------------------------------------------------------------------------------------------------
Kentucky Property & Buildings Commerce Rev., "A", FSA,
5.5s, 2011 500 572,100
- -------------------------------------------------------------------------------------------------------
$3,621,244
- -------------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.5%
- -------------------------------------------------------------------------------------------------------
Missouri Housing Development Commission, 4.35s, 2007 $215 $224,533
- -------------------------------------------------------------------------------------------------------
Philadelphia, PA, Housing Authority, "A", FSA, 5s, 2008 500 557,305
- -------------------------------------------------------------------------------------------------------
Wisconsin Housing & Economic Development Housing, "A",
MBIA, 3.2s, 2004 500 510,300
- -------------------------------------------------------------------------------------------------------
$1,292,138
- -------------------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.2%
- -------------------------------------------------------------------------------------------------------
Fayetteville, AK, Sales & Use, 3.2s, 2007 $165 $165,583
- -------------------------------------------------------------------------------------------------------
Illinois Sales Tax Rev., First Series, 5s, 2007 1,000 1,099,590
- -------------------------------------------------------------------------------------------------------
Monroe, LA, Sales & Use Tax Rev., FGIC, 5.75s, 2011 845 976,144
- -------------------------------------------------------------------------------------------------------
Spokane, WA, Public Facilities District Hotel, "A", MBIA,
5.75s, 2012 425 482,868
- -------------------------------------------------------------------------------------------------------
Washington, DC, Convention Center, AMBAC, 4.75s, 2005 345 366,652
- -------------------------------------------------------------------------------------------------------
$3,090,837
- -------------------------------------------------------------------------------------------------------
Single Family Housing Revenue - Local - 0.0%
- -------------------------------------------------------------------------------------------------------
Chicago, IL, GNMA, 5.4s, 2010 $20 $21,263
- -------------------------------------------------------------------------------------------------------
San Bernardino County, CA, Single Family Mortgage Rev.,
GNMA, 7.375s, 2020 50 52,000
- -------------------------------------------------------------------------------------------------------
$73,263
- -------------------------------------------------------------------------------------------------------
Single Family Housing Revenue - State - 1.4%
- -------------------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority, 7.25s, 2010 $140 $143,513
- -------------------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority, 6.7s, 2016 85 86,654
- -------------------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority, 8.4s, 2021 75 77,356
- -------------------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority, Single Family
Program Authority, 6.3s, 2012 215 231,762
- -------------------------------------------------------------------------------------------------------
Massachusetts Housing Finance Agency, MBIA, 5.35s, 2010 230 240,773
- -------------------------------------------------------------------------------------------------------
Minnesota Housing Finance Agency, Variable Residential
Housing Finance, "C", 3s, 2021 500 502,510
- -------------------------------------------------------------------------------------------------------
Ohio Housing Finance Agency, Single Family Mortgage Rev.,
GNMA, 5.45s, 2006 270 284,688
- -------------------------------------------------------------------------------------------------------
Oklahoma Housing Development Authority Rev. (Lease
Purchase Program) "A", 5.1s, 2005 200 210,666
- -------------------------------------------------------------------------------------------------------
Oklahoma Housing Finance Agency, GNMA, 7.6s, 2015 220 238,548
- -------------------------------------------------------------------------------------------------------
South Dakota Housing Development Authority, 4.9s, 2008 665 704,780
- -------------------------------------------------------------------------------------------------------
South Dakota Housing Development Authority, Homeownership
Mortgage, "A", 4.15s, 2007 300 307,542
- -------------------------------------------------------------------------------------------------------
Wisconsin Housing & Economic Development Housing, AMBAC,
4.9s, 2005 $160 $167,851
- -------------------------------------------------------------------------------------------------------
Wyoming Community Development Authority, Housing Rev.,
5s, 2006 600 630,090
- -------------------------------------------------------------------------------------------------------
$3,826,733
- -------------------------------------------------------------------------------------------------------
Solid Waste Revenue - 0.9%
- -------------------------------------------------------------------------------------------------------
California Statewide Community Development Authority
(Republic Services, Inc.), 4.95s, 2012 $250 $247,565
- -------------------------------------------------------------------------------------------------------
Central Wayne County, MI, Sanitation, Series VII, 4.75s, 2007 500 507,785
- -------------------------------------------------------------------------------------------------------
Detroit, MI, Economic Development Corp., AMBAC, 3.8s, 2005 375 387,653
- -------------------------------------------------------------------------------------------------------
Niagara County, NY, Industrial Development Agency, Solid
Waste Disposal Rev. (American Ref-Fuel, Inc.), 5.625s, 2024 300 312,735
- -------------------------------------------------------------------------------------------------------
Northeast Maryland Waste Disposal Authority Rev. (Ogden
Martin), 5.9s, 2005 500 530,655
- -------------------------------------------------------------------------------------------------------
Tacoma, WA, Solid Waste Utility Rev., AMBAC, 5s, 2010 400 446,616
- -------------------------------------------------------------------------------------------------------
$2,433,009
- -------------------------------------------------------------------------------------------------------
State and Local Appropriation - 9.6%
- -------------------------------------------------------------------------------------------------------
Alabama Public School & College, "C", FSA, 4.5s, 2009 $1,000 $1,085,220
- -------------------------------------------------------------------------------------------------------
Alaska Certificates Participation (Alaska Psychiatric
Institute), AMBAC, 4s, 2006 500 529,475
- -------------------------------------------------------------------------------------------------------
Arizona Certificates Participation, "A", MBIA, 5s, 2006 500 540,550
- -------------------------------------------------------------------------------------------------------
Columbia, SC, Certificates Participation, AMBAC, 5s, 2011 650 719,004
- -------------------------------------------------------------------------------------------------------
Columbus, IN, Multi School Building, FSA, 5s, 2010 725 801,002
- -------------------------------------------------------------------------------------------------------
District of Columbia Certificates Participation, AMBAC,
5.25s, 2008 1,500 1,653,690
- -------------------------------------------------------------------------------------------------------
Escambia County, FL, School Board, MBIA, 3.5s, 2005 500 514,095
- -------------------------------------------------------------------------------------------------------
Hamilton County, IN, FSA, 5s, 2010 605 668,422
- -------------------------------------------------------------------------------------------------------
Hamilton County, IN, Public Building Corp., AMBAC, 3.5s, 2004 1,010 1,027,624
- -------------------------------------------------------------------------------------------------------
Indiana Bond Bank Rev., AMBAC, 5.3s, 2007 350 384,304
- -------------------------------------------------------------------------------------------------------
Kosciusko County, IN, Building Corp., FSA, 3.5s, 2004 600 603,588
- -------------------------------------------------------------------------------------------------------
Macon County and Decatur, IL, FGIC, 6.5s, 2005 325 344,624
- -------------------------------------------------------------------------------------------------------
Michigan Building Authority Rev., FSA, 5s, 2011(+++) 1,500 1,681,890
- -------------------------------------------------------------------------------------------------------
New Jersey Building Authority, 5.5s, 2006 1,000 1,094,750
- -------------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, MBIA, 5s, 2009 500 555,970
- -------------------------------------------------------------------------------------------------------
New Jersey State Transit Corp. (Federal Transit
Administration Grants) "B", AMBAC, 5.5s, 2007 650 727,428
- -------------------------------------------------------------------------------------------------------
New York Dormitory Authority Rev. (City University),
MBIA, 5.25s, 2011 1,270 1,423,733
- -------------------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., "A", MBIA, 5.25s, 2009 1,000 1,129,480
- -------------------------------------------------------------------------------------------------------
New York Urban Development Corp. Rev., AMBAC, 5.4s, 2006 1,000 1,079,960
- -------------------------------------------------------------------------------------------------------
Ohio Building Authority (Adult Correctional Building),
5.75s, 2008 425 483,455
- -------------------------------------------------------------------------------------------------------
Ohio Building Authority (Adult Correctional Building),
FSA, 5s, 2009 1,290 1,434,596
- -------------------------------------------------------------------------------------------------------
Ohio Building Authority (State Facilities Administration
Building), 5.375s, 2013 1,000 1,120,340
- -------------------------------------------------------------------------------------------------------
Pennsylvania Industrial Development Authority, Economic
Development, AMBAC, 5.25s, 2011 1,900 2,136,797
- -------------------------------------------------------------------------------------------------------
Salt Lake City, UT, Redevelopment Agency, "A", FSA,
3.75s, 2004 500 504,470
- -------------------------------------------------------------------------------------------------------
State of Oregon, AMBAC, 5.5s, 2008 500 566,555
- -------------------------------------------------------------------------------------------------------
State of Utah, Building Ownership Authority Lease Rev.,
FSA, 0s, 2005 685 667,409
- -------------------------------------------------------------------------------------------------------
Suffolk County, NY, Judicial Facilities (John P. Cohalan
Complex), AMBAC, 5.75s, 2011 160 182,488
- -------------------------------------------------------------------------------------------------------
Texas Public Finance Authority Building Rev., Building
Revenue, "B", AMBAC, 6.25s, 2006 1,000 1,100,900
- -------------------------------------------------------------------------------------------------------
Tobacco Settlement Financing Corp., NY, "A", 5.25s, 2012 1,000 1,047,430
- -------------------------------------------------------------------------------------------------------
$25,809,249
- -------------------------------------------------------------------------------------------------------
Student Loan Revenue - 0.0%
- -------------------------------------------------------------------------------------------------------
Massachusetts Educational Financing Authority, "E",
AMBAC, 4.5s, 2009 $100 $103,565
- -------------------------------------------------------------------------------------------------------
Tax Assessment - 1.4%
- -------------------------------------------------------------------------------------------------------
Birmingham Jefferson, AL, Civic, "A", FSA, 5.25s, 2005 $575 $601,973
- -------------------------------------------------------------------------------------------------------
Birmingham Jefferson, AL, Civic, "A", FSA, 5.25s, 2007 1,250 1,371,588
- -------------------------------------------------------------------------------------------------------
Chicago, IL, Tax Increment, AMBAC, 0s, 2006 1,000 937,550
- -------------------------------------------------------------------------------------------------------
Lewisville, TX, 4.125s, 2031 500 526,360
- -------------------------------------------------------------------------------------------------------
Omaha, NE, Special Obligation (Riverfront Redevelopment),
4.125s, 2008 285 304,100
- -------------------------------------------------------------------------------------------------------
$3,741,571
- -------------------------------------------------------------------------------------------------------
Tax - Other - 1.5%
- -------------------------------------------------------------------------------------------------------
Chicago, IL, Motor Fuel Tax Rev., AMBAC, 6.125s, 2009 $500 $579,430
- -------------------------------------------------------------------------------------------------------
Collier County, FL, Gas Tax Rev., AMBAC, 5s, 2010 1,045 1,164,861
- -------------------------------------------------------------------------------------------------------
Denver, CO, City & County Excise Tax, FSA, 5.25s, 2008 250 280,365
- -------------------------------------------------------------------------------------------------------
District of Columbia Tax Increment (Gallary Palace), FSA,
4s, 2006 370 390,713
- -------------------------------------------------------------------------------------------------------
Florida State Board of Education, Lottery Rev., FGIC, 5.5s, 2011 150 169,721
- -------------------------------------------------------------------------------------------------------
State of Wisconsin, 6s, 2004 500 516,185
- -------------------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority, 5.5s, 2005 1,000 1,060,460
- -------------------------------------------------------------------------------------------------------
$4,161,735
- -------------------------------------------------------------------------------------------------------
Tobacco - 1.3%
- -------------------------------------------------------------------------------------------------------
District of Columbia Tobacco Settlement, Asset Backed
Bonds, 5.2s, 2008 $450 $449,788
- -------------------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization, "A", 5s, 2021 500 491,350
- -------------------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization, "B", 5.25s, 2016 2,335 2,373,994
- -------------------------------------------------------------------------------------------------------
Tobacco Settlement Financing Corp., NJ, 4.375s, 2019 250 232,138
- -------------------------------------------------------------------------------------------------------
$3,547,270
- -------------------------------------------------------------------------------------------------------
Transportation - Special Tax - 3.0%
- -------------------------------------------------------------------------------------------------------
Arizona State Transportation Board Highway Rev., 5s, 2006 $550 $597,069
- -------------------------------------------------------------------------------------------------------
Colorado Department of Transportation Rev., AMBAC, 6s, 2008 235 269,980
- -------------------------------------------------------------------------------------------------------
Delaware Transportation Authority Systems Rev., FGIC,
4.75s, 2012 1,000 1,059,160
- -------------------------------------------------------------------------------------------------------
Du Page County, IL, Transport Rev., FSA, 5.5s, 2011 1,000 1,128,380
- -------------------------------------------------------------------------------------------------------
New Mexico State Highway Commission, 5.5s, 2006 430 472,131
- -------------------------------------------------------------------------------------------------------
New York Thruway Authority Highway & Bridge Trust Fund,
"A", FGIC, 5.25s, 2010 1,000 1,126,470
- -------------------------------------------------------------------------------------------------------
New York Thruway Authority Highway & Bridge Trust Fund,
"C", FGIC, 5.5s, 2006 1,200 1,309,692
- -------------------------------------------------------------------------------------------------------
Oklahoma Turnpike Authority, Turnpike Rev., "A", FGIC,
5.5s, 2007 1,000 1,110,700
- -------------------------------------------------------------------------------------------------------
Texas Turnpike Authority Central Turnpike Systems, Bond
Anticipation Notes Second Tier, 5s, 2007 1,000 1,096,750
- -------------------------------------------------------------------------------------------------------
$8,170,332
- -------------------------------------------------------------------------------------------------------
Universities - Colleges - 5.0%
- -------------------------------------------------------------------------------------------------------
Auburn University, AL, University Rev., AMBAC, 5s, 2006 $255 $274,747
- -------------------------------------------------------------------------------------------------------
Clemson University, SC, University Rev., AMBAC, 5.5s, 2007 875 979,274
- -------------------------------------------------------------------------------------------------------
District of Columbia Rev. (Gonzaga College High School),
FSA, 5s, 2012 500 545,185
- -------------------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev. (Augustana
College), 4s, 2006 615 638,235
- -------------------------------------------------------------------------------------------------------
Massachusetts College Building, "A", XLCA, 5s, 2009 1,205 1,336,851
- -------------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (Massachusetts
College of Pharmacy) "C", 5s, 2007 475 506,455
- -------------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (Western New
England College), 4s, 2008 685 691,569
- -------------------------------------------------------------------------------------------------------
Massachusetts Health & Educational (Massachusetts
Institute Technology) "K", 5.25s, 2012 375 420,476
- -------------------------------------------------------------------------------------------------------
Northern Arizona University Rev., FGIC, 4s, 2005 500 521,415
- -------------------------------------------------------------------------------------------------------
Rhode Island Health & Education Building (Johnson &
Wales), XLCA, 5s, 2010 2,265 2,513,176
- -------------------------------------------------------------------------------------------------------
Southeast Missouri State University, MBIA, 5.625s, 2010 250 288,138
- -------------------------------------------------------------------------------------------------------
Texas A & M University Rev., Financing Systems, 2.5s, 2006 750 764,032
- -------------------------------------------------------------------------------------------------------
Texas Public Finance Authority Rev., Texas Southern
University Financing Systems, MBIA, 5s, 2007 500 555,000
- -------------------------------------------------------------------------------------------------------
Texas University Systems Financing Rev., FSA, 5s, 2008 565 625,252
- -------------------------------------------------------------------------------------------------------
University of Arizona Rev., Refunding Systems, FSA, 5s, 2006 570 617,737
- -------------------------------------------------------------------------------------------------------
University of Arizona Rev., Refunding Systems, FSA,
5.25s, 2010 1,000 1,127,580
- -------------------------------------------------------------------------------------------------------
University of Arkansas Rev., Athletic Facility (Razorback
Stadium), FSA, 3.55s, 2021 500 526,340
- -------------------------------------------------------------------------------------------------------
University of Texas Permanent University Fund, "A", 5s, 2009 580 645,244
- -------------------------------------------------------------------------------------------------------
$13,576,706
- -------------------------------------------------------------------------------------------------------
Universities - Dormatories - 0.5%
- -------------------------------------------------------------------------------------------------------
New York Dormitory Authority Rev., FGIC, 5.25s, 2029 $1,000 $1,105,050
- -------------------------------------------------------------------------------------------------------
Private College & University Authority, GA (Mercer
Housing Corp.), 6s, 2004 50 50,895
- -------------------------------------------------------------------------------------------------------
Private College & University Authority, GA (Mercer
Housing Corp.), 6s, 2005 70 73,299
- -------------------------------------------------------------------------------------------------------
$1,229,244
- -------------------------------------------------------------------------------------------------------
Universities - Secondary Schools - 0.1%
- -------------------------------------------------------------------------------------------------------
New Hampshire Health & Education (Derryfield School),
6.5s, 2010 $150 $154,251
- -------------------------------------------------------------------------------------------------------
Utilities - Investor Owned - 2.8%
- -------------------------------------------------------------------------------------------------------
Brazos River Authority, TX (TXU Electric Co.) "A", 4.95s, 2030 $200 $201,332
- -------------------------------------------------------------------------------------------------------
Brazos River Authority, TX (TXU Electric Co.) "D", 5.4s, 2029 780 792,823
- -------------------------------------------------------------------------------------------------------
Chesapeake, VA, Industrial Development Authority (VEPCO),
5.25s, 2008 250 263,920
- -------------------------------------------------------------------------------------------------------
Hillsborough County, FL (Tampa Electric), 4s, 2025 500 506,740
- -------------------------------------------------------------------------------------------------------
Illinois Development Finance Authority (Commonwealth
Edison Co.), AMBAC, 4.4s, 2006 500 536,815
- -------------------------------------------------------------------------------------------------------
Illinois Development Finance Authority (People Gas), "B",
AMBAC, 3.05s, 2033 1,000 1,012,760
- -------------------------------------------------------------------------------------------------------
Lawrenceburg, IN, Pollution Control Rev. (Indiana
Michigan Power Co.) "F", 2.625s, 2019 775 769,521
- -------------------------------------------------------------------------------------------------------
Madison, WI, Industrial Development Rev. (Madison Gas &
Electric) "B", 4.875s, 2027 420 442,713
- -------------------------------------------------------------------------------------------------------
Matagorda County, TX, Navigation District 1, Pollution
Control Rev. (Texas Central), 2.35s, 2030 500 499,900
- -------------------------------------------------------------------------------------------------------
New Hampshire Pollution Control Rev. (United Illuminating
Co.), 3.75s, 2027 500 502,285
- -------------------------------------------------------------------------------------------------------
Ohio Air Quality Development Authority Rev. (Ohio
Edison), 2.25s, 2033 1,250 1,239,300
- -------------------------------------------------------------------------------------------------------
Peninsula Ports Authority, VA, Coal (Dominion Term
Associates), 3.3s, 2033 775 774,791
- -------------------------------------------------------------------------------------------------------
$7,542,900
- -------------------------------------------------------------------------------------------------------
Utilities - Municipal Owned - 9.8%
- -------------------------------------------------------------------------------------------------------
Alaska Municipal Bond Bank Authority Rev., AMBAC,
5.75s, 2006 $325 $363,714
- -------------------------------------------------------------------------------------------------------
American Public Energy Agency, NE Public Gas Agency, "C",
AMBAC, 4.2s, 2010 395 419,028
- -------------------------------------------------------------------------------------------------------
California State Department Water Resources, "A", FSA,
5.25s, 2011 1,000 1,111,770
- -------------------------------------------------------------------------------------------------------
California State Department Water Resources Power Supply
Rev., "A", 5.5s, 2010 600 668,370
- -------------------------------------------------------------------------------------------------------
Carrollton & Henderson, KY, Kentucky Trust, "B", FSA,
4.2s, 2005 1,000 1,033,140
- -------------------------------------------------------------------------------------------------------
Clallam County, WA, Public Utility District, FSA, 5s, 2008 400 440,720
- -------------------------------------------------------------------------------------------------------
Clark County, WA, Public Utility District 1, AMBAC,
5.25s, 2008 1,380 1,534,063
- -------------------------------------------------------------------------------------------------------
Corpus Christi, TX, Utility Systems Rev., FSA, 4s, 2007 480 512,069
- -------------------------------------------------------------------------------------------------------
Dalton, GA, Utilities Rev., Comb, FSA, 6s, 2012 500 583,120
- -------------------------------------------------------------------------------------------------------
Delaware Municipal Electric Corp., AMBAC, 5s, 2008 500 553,510
- -------------------------------------------------------------------------------------------------------
Harrison County, MI, Wastewater Treatment Facilities,
"A", FGIC, 5.5s, 2011 400 451,064
- -------------------------------------------------------------------------------------------------------
Illinois Development Finance Authority, Pollution Control
Rev. (Illinois Power Co.), AMBAC, 7.375s, 2021(+++) 580 678,681
- -------------------------------------------------------------------------------------------------------
Kissimmee, FL, Utility Authority Electric, AMBAC, 5s, 2011 500 554,775
- -------------------------------------------------------------------------------------------------------
Long Island Power Authority, New York Electric Systems
Rev., "A", 5s, 2009 1,100 1,198,329
- -------------------------------------------------------------------------------------------------------
Lower Colorado River Authority, TX, Rev., FSA, 5.5s, 2008 600 677,772
- -------------------------------------------------------------------------------------------------------
Lower Colorado River Authority, TX, Rev., "A", MBIA, 5s, 2011 500 551,410
- -------------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (Devens
Electrical Systems), 5.125s, 2011 210 222,766
- -------------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency (Semass
Systems), MBIA, 5.625s, 2012 400 447,580
- -------------------------------------------------------------------------------------------------------
Michigan Public Power Agency Rev., "A", MBIA, 5.25s, 2008 500 556,865
- -------------------------------------------------------------------------------------------------------
Muscatine, IA, Electric Rev., "A", AMBAC, 5.5s, 2010 1,000 1,132,860
- -------------------------------------------------------------------------------------------------------
Nebraska Public Power District Rev., "B", AMBAC, 4s, 2007 695 738,382
- -------------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency, MBIA, 5.25s, 2007 500 551,700
- -------------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency, "A", 5.5s, 2010 750 815,842
- -------------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency, "A", MBIA, 5.5s, 2013 500 539,640
- -------------------------------------------------------------------------------------------------------
Oak Ridge, TN, Electric Systems Rev., AMBAC, 5s, 2012 1,000 1,101,200
- -------------------------------------------------------------------------------------------------------
Philadelphia, PA, Gas Works Rev., FSA, 4s, 2006 1,000 1,057,410
- -------------------------------------------------------------------------------------------------------
Rock Hill, SC, Utility Systems Rev., "A", FSA, 5s, 2010 750 835,005
- -------------------------------------------------------------------------------------------------------
Salt River, AZ, Agricultural Improvement, "A", 5s, 2011 500 553,470
- -------------------------------------------------------------------------------------------------------
San Antonio, TX, Electric & Gas Rev., 5.8s, 2006 660 703,072
- -------------------------------------------------------------------------------------------------------
Seattle, WA, Municipal Light & Power Rev., FSA, 5.25s, 2007 1,000 1,103,590
- -------------------------------------------------------------------------------------------------------
Snohomish County, WA, Public Utility 1, "B", FSA,
5.25s, 2008 1,000 1,129,990
- -------------------------------------------------------------------------------------------------------
South Carolina Public Service Authority, FSA, 4.5s, 2008 500 542,305
- -------------------------------------------------------------------------------------------------------
South Carolina Public Service Authority, "D", 5s, 2007 500 545,795
- -------------------------------------------------------------------------------------------------------
Southern California Public Power Authority, "A", FSA,
5.375s, 2012 595 669,637
- -------------------------------------------------------------------------------------------------------
Tacoma, WA, Electric Systems Rev., AMBAC, 6s, 2006 1,125 1,228,432
- -------------------------------------------------------------------------------------------------------
Wilsonville, AL, Industrial Development Board, AMBAC,
4.2s, 2019 500 526,025
- -------------------------------------------------------------------------------------------------------
$26,333,101
- -------------------------------------------------------------------------------------------------------
Utilities - Other - 1.0%
- -------------------------------------------------------------------------------------------------------
Brownsville, TX, Utility Systems Rev., AMBAC, 6.25s, 2011 $1,000 $1,191,490
- -------------------------------------------------------------------------------------------------------
Edmond, OK, Public Works Authority, AMBAC, 4.5s, 2008 500 547,200
- -------------------------------------------------------------------------------------------------------
Missouri Environment Improvement (Kansas City Power &
Light), 3.9s, 2012 1,000 1,022,590
- -------------------------------------------------------------------------------------------------------
$2,761,280
- -------------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 7.3%
- -------------------------------------------------------------------------------------------------------
Allentown, PA, Water Rev. Guaranteed, AMBAC, 5s, 2011 $925 $1,028,147
- -------------------------------------------------------------------------------------------------------
Brevard County, FL, Utility Rev., FGIC, 5.25s, 2010 1,000 1,124,950
- -------------------------------------------------------------------------------------------------------
Columbus, IN, Waterworks Rev., MBIA, 3.5s, 2005 500 513,890
- -------------------------------------------------------------------------------------------------------
Fort Worth, TX, Water and Sewer Rev., 5.5s, 2004 1,000 1,012,460
- -------------------------------------------------------------------------------------------------------
Fulton County, GA, Development Authority Rev., Cauley
Creek Water Facility, "A", AMBAC, 4.4s, 2008 490 526,598
- -------------------------------------------------------------------------------------------------------
Helena, AL, Utilities Board Water & Sewer, MBIA, 3s, 2004 180 181,467
- -------------------------------------------------------------------------------------------------------
Jefferson County, AL, Sewer Rev., "B", FSA, 5.25s, 2010 2,000 2,243,240
- -------------------------------------------------------------------------------------------------------
Kansas Development Finance Authority Rev., Water
Pollution Control, 5s, 2008 500 554,610
- -------------------------------------------------------------------------------------------------------
King County, WA, Sewer Rev., FGIC, 5.25s, 2012 750 833,010
- -------------------------------------------------------------------------------------------------------
Metropolitan Government of Nashville & Davidson County,
Water & Sewer Rev., FGIC, 6.5s, 2010 1,000 1,192,230
- -------------------------------------------------------------------------------------------------------
Myrtle Beach, SC, Water & Sewer Rev., FGIC, 5s, 2008 1,150 1,273,579
- -------------------------------------------------------------------------------------------------------
Philadelphia, PA, Water & Wastewater, FSA, 5.625s, 2008 595 677,527
- -------------------------------------------------------------------------------------------------------
Philadelphia, PA, Water & Wastewater, Series 93, MBIA,
5.5s, 2007 1,105 1,237,423
- -------------------------------------------------------------------------------------------------------
Phoenix, AZ, Civic Improvement Corp., Junior Lien, FGIC,
4.5s, 2007 500 541,265
- -------------------------------------------------------------------------------------------------------
Phoenix, AZ, Civic Improvement Corp., Junior Lien, FGIC,
5.25s, 2009 255 287,994
- -------------------------------------------------------------------------------------------------------
Seattle, WA, Water Systems Rev., 5s, 2008 475 525,835
- -------------------------------------------------------------------------------------------------------
Sebring, FL, Water & Wastewater, FGIC, 5.25s, 2013 690 768,681
- -------------------------------------------------------------------------------------------------------
Spartanburg, SC, Waterworks Rev., Junior Lien, FSA, 5s, 2007 500 552,370
- -------------------------------------------------------------------------------------------------------
Tarrant Regional Water District Texas Water, FSA, 4s, 2007 500 531,810
- -------------------------------------------------------------------------------------------------------
Truckee Meadows, NV, Water Authority, "A", 5.5s, 2011 1,000 1,138,480
- -------------------------------------------------------------------------------------------------------
Utah Water Finance Agency Rev., "A", AMBAC, 5s, 2012 500 550,285
- -------------------------------------------------------------------------------------------------------
Western Carolina Regional Sewer, FSA, 5s, 2004 590 597,640
- -------------------------------------------------------------------------------------------------------
Wilkinsburg, PA, Joint Water, "B", FSA, 4.75s, 2010 1,260 1,382,144
- -------------------------------------------------------------------------------------------------------
Wilsonville, OR, Water Systems Rev., MBIA, 5s, 2010 300 335,736
- -------------------------------------------------------------------------------------------------------
$19,611,371
- -------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.4%
- -------------------------------------------------------------------------------------------------------
Cowlitz County, WA, Public Utility District, AMBAC,
5.25s, 2008 $500 $561,940
- -------------------------------------------------------------------------------------------------------
Tacoma, WA, Electric Systems Rev., FSA, 5.5s, 2011 500 564,870
- -------------------------------------------------------------------------------------------------------
$1,126,810
- -------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $249,148,135) $256,744,238
- -------------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 3.0%
- -------------------------------------------------------------------------------------------------------
Bay Area Toll Authority, CA, Toll Bridge Rev., due 11/06/03 $600 $600,000
- -------------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts (Central Artery) "A",
due 11/03/03 100 100,000
- -------------------------------------------------------------------------------------------------------
East Baton Rouge, LA, Pollution Control Rev. (Exxon
Corp.), due 11/03/03 100 100,000
- -------------------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev.
(University Chicago Hospital), due 11/03/03 800 800,000
- -------------------------------------------------------------------------------------------------------
MSR Public Power Agency, CA, San Juan Project Rev.,
due 11/06/03 1,350 1,350,000
- -------------------------------------------------------------------------------------------------------
New Castle, PA, Area Hospital Authority, Hospital Rev.
(Jameson Memorial Hospital), due 11/05/03 300 300,000
- -------------------------------------------------------------------------------------------------------
New York, NY, due 11/03/03 150 150,000
- -------------------------------------------------------------------------------------------------------
New York, NY, Job Development Authority Rev., due 11/03/03 700 700,000
- -------------------------------------------------------------------------------------------------------
New York, NY, Municipal Water & Sewer Finance Authority
Rev., due 11/03/03 1,200 1,200,000
- -------------------------------------------------------------------------------------------------------
Pinellas County, FL, Health Facility Authority, due 11/03/03 550 550,000
- -------------------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, due 11/03/03 $790 $790,000
- -------------------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, due 11/06/03 1,350 1,350,000
- -------------------------------------------------------------------------------------------------------
Uinta County, WY, Pollution Control Rev. (Chevron USA, Inc.),
due 11/03/03 50 50,000
- -------------------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $8,040,000
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $257,188,135) $264,784,238
- -------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.6% 4,430,754
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $269,214,992
- -------------------------------------------------------------------------------------------------------
(+++)Refunded security.
Insurers:
AMBAC = AMBAC Indemnity Corp.
ASST GTY = Asset Guaranty Insurance Co.
FGIC = Financial Guaranty Insurance Corp.
FSA = Financial Security Assurance, Inc.
GNMA = Government National Mortgage Assn.
MBIA = Municipal Bond Investors Corp.
PSF = Permanent Schoool Fund
Q-SBLF = Qualified School Bond Loan Fund
XLCA = XL Capital Insurance Co.
See notes to financial statements.
- -------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- -------------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities composing
the total value of your fund.
AT 10/31/03
ASSETS
Investments, at value (identified cost, $257,188,135) $264,784,238
- -------------------------------------------------------------------------------------------------------
Cash 82,129
- -------------------------------------------------------------------------------------------------------
Receivable for investments sold 430,770
- -------------------------------------------------------------------------------------------------------
Receivable for fund shares sold 2,351,545
- -------------------------------------------------------------------------------------------------------
Interest receivable 3,467,360
- -------------------------------------------------------------------------------------------------------
Other assets 383
- -------------------------------------------------------------------------------------------------------
Total assets $271,116,425
- -------------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $534,052
- -------------------------------------------------------------------------------------------------------
Payable for investments purchased 500,065
- -------------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 727,098
- -------------------------------------------------------------------------------------------------------
Unrealized depreciation on interest rate swaps 10,936
- -------------------------------------------------------------------------------------------------------
Payable to affiliates
- -------------------------------------------------------------------------------------------------------
Management fee 2,204
- -------------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 808
- -------------------------------------------------------------------------------------------------------
Distribution and service fee 48,866
- -------------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 77,404
- -------------------------------------------------------------------------------------------------------
Total liabilities $1,901,433
- -------------------------------------------------------------------------------------------------------
Net assets $269,214,992
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $263,574,207
- -------------------------------------------------------------------------------------------------------
Unrealized appreciation on investments 7,585,168
- -------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (1,411,058)
- -------------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (533,325)
- -------------------------------------------------------------------------------------------------------
Total $269,214,992
- -------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 33,976,635
- -------------------------------------------------------------------------------------------------------
See notes to financial statements.
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $167,413,490
- -------------------------------------------------------------------------------------------------------
Shares outstanding 21,123,205
- -------------------------------------------------------------------------------------------------------
Net asset value per share $7.93
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/97.5X$7.93) $8.13
- -------------------------------------------------------------------------------------------------------
Class B shares
Net assets $43,173,855
- -------------------------------------------------------------------------------------------------------
Shares outstanding 5,456,041
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $7.91
- -------------------------------------------------------------------------------------------------------
Class C shares
Net assets $58,627,647
- -------------------------------------------------------------------------------------------------------
Shares outstanding 7,397,389
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $7.93
- -------------------------------------------------------------------------------------------------------
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 (unaudited)
- -------------------------------------------------------------------------------------------------------
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 SIX MONTHS ENDED 10/31/03
NET INVESTMENT INCOME
Interest income $4,598,997
- -------------------------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------------------------
Management fee $541,706
- -------------------------------------------------------------------------------------------------------
Trustees' compensation 4,370
- -------------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 148,980
- -------------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 129,311
- -------------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 195,685
- -------------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 284,776
- -------------------------------------------------------------------------------------------------------
Administrative fee 10,819
- -------------------------------------------------------------------------------------------------------
Custodian fee 59,367
- -------------------------------------------------------------------------------------------------------
Printing 8,543
- -------------------------------------------------------------------------------------------------------
Postage 2,309
- -------------------------------------------------------------------------------------------------------
Auditing fees 17,314
- -------------------------------------------------------------------------------------------------------
Legal fees 427
- -------------------------------------------------------------------------------------------------------
Registration fees 35,834
- -------------------------------------------------------------------------------------------------------
Miscellaneous 92,343
- -------------------------------------------------------------------------------------------------------
Total expenses $1,531,784
- -------------------------------------------------------------------------------------------------------
Fees paid indirectly (1,573)
- -------------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (135,397)
- -------------------------------------------------------------------------------------------------------
Net expenses $1,394,814
- -------------------------------------------------------------------------------------------------------
Net investment income $3,204,183
- -------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -------------------------------------------------------------------------------------------------------
Investment transactions $(374,269)
- -------------------------------------------------------------------------------------------------------
Futures contracts 68,603
- -------------------------------------------------------------------------------------------------------
Net realized loss on investments $(305,666)
- -------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -------------------------------------------------------------------------------------------------------
Investments $(369,369)
- -------------------------------------------------------------------------------------------------------
Futures contracts 116,115
- -------------------------------------------------------------------------------------------------------
Swap transactions (10,936)
- -------------------------------------------------------------------------------------------------------
Net unrealized loss on investments $(264,190)
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments $(569,856)
- -------------------------------------------------------------------------------------------------------
Increase in net assets from operations $2,634,327
- -------------------------------------------------------------------------------------------------------
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.
SIX MONTHS ENDED YEAR ENDED
10/31/03 4/30/03
(UNAUDITED)
INCREASE IN NET ASSETS
OPERATIONS
Net investment income $3,204,183 $4,836,262
- -------------------------------------------------------------------------------------------------------
Net realized loss on investments (305,666) (72,430)
- -------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments (264,190) 5,460,086
- --------------------------------------------------------------- ----------- ------------
Increase in net assets from operations $2,634,327 $10,223,918
- --------------------------------------------------------------- ----------- ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- -------------------------------------------------------------------------------------------------------
Class A $(2,358,332) $(3,777,760)
- -------------------------------------------------------------------------------------------------------
Class B (410,070) (584,022)
- -------------------------------------------------------------------------------------------------------
Class C (537,689) (711,199)
- -------------------------------------------------------------- ------------ ------------
Total distributions declared to shareholders $(3,306,091) $(5,072,981)
- -------------------------------------------------------------- ------------ ------------
Net increase in net assets from fund share transactions $14,744,322 $128,277,751
- -------------------------------------------------------------- ------------ ------------
Total increase in net assets $14,072,558 $133,428,688
- -------------------------------------------------------------- ------------ ------------
NET ASSETS
At beginning of period $255,142,434 $121,713,746
- -------------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $533,325 and $431,417,
respectively) $269,214,992 $255,142,434
- -------------------------------------------------------------------------------------------------------
See notes to financial statements.
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period and
the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all
distributions) held for the entire period.
SIX MONTHS YEAR ENDED 4/30
ENDED ---------------------------------------------------------------------
CLASS A 10/31/03 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of period $7.94 $7.69 $7.57 $7.35 $7.62 $7.57
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.11 $0.23 $0.26 $0.31 $0.30 $0.29
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (0.01) 0.26 0.14 0.22 (0.27) 0.06
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ----------
Total from investment operations $0.10 $0.49 $0.40 $0.53 $0.03 $0.35
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.11) $(0.24) $(0.26) $(0.31) $(0.30) $(0.30)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment
income -- -- (0.02) (0.00)+++ -- --
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ----------
Total distributions declared to
shareholders $(0.11) $(0.24) $(0.28) $(0.31) $(0.30) $(0.30)
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ----------
Net asset value, end of period $7.93 $7.94 $7.69 $7.57 $7.35 $7.62
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ----------
Total return (%)(+) 1.26++ 6.43 5.41 7.39 0.38 4.65
- -------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ---------------------------------------------------------------------
CLASS A (CONTINUED) 10/31/03 2003 2002 2001 2000 1999
(UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.73+ 0.74 0.85 0.88 0.88 0.88
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.66+ 2.90 3.45 4.14 3.99 3.84
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 10 12 15 27 60 31
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $167,413 $165,598 $87,222 $48,057 $42,277 $45,840
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 contractually 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 $0.10 $0.22 $0.25 $0.31 $0.30 $0.28
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 0.83+ 0.84 1.00 0.96 0.91 0.99
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.56+ 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.
+ Annualized.
++ Not annualized.
+++ 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 STATEMENTS FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED 4/30
ENDED --------------------------------------------------------------------
CLASS B 10/31/03 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of period $7.93 $7.68 $7.56 $7.34 $7.61 $7.56
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.07 $0.16 $0.20 $0.25 $0.24 $0.23
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (0.01) 0.27 0.15 0.22 (0.27) 0.06
- ------------------------------------- --------- ----------- ---------- ---------- ---------- ----------
Total from investment operations $0.06 $0.43 $0.35 $0.47 $(0.03) $0.29
- ------------------------------------- --------- ----------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.08) $(0.18) $(0.20) $(0.25) $(0.24) $(0.24)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.03) (0.00)+++ -- --
- ------------------------------------- --------- ----------- ---------- ---------- ---------- ----------
Total distributions declared to
shareholders $(0.08) $(0.18) $(0.23) $(0.25) $(0.24) $(0.24)
- ------------------------------------- --------- ----------- ---------- ---------- ---------- ----------
Net asset value, end of period $7.91 $7.93 $7.68 $7.56 $7.34 $7.61
- ------------------------------------- --------- ----------- ---------- ---------- ---------- ----------
Total return (%) 0.74++ 5.61 4.65 6.55 (0.43) 3.85
- -------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED --------------------------------------------------------------------
CLASS B (CONTINUED) 10/31/03 2003 2002 2001 2000 1999
(UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.52+ 1.53 1.59 1.68 1.69 1.66
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 1.87+ 2.10 2.70 3.35 3.18 3.06
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 10 12 15 27 60 31
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $43,174 $38,360 $15,104 $7,397 $6,781 $9,149
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 contractually 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 $0.07 $0.16 $0.19 $0.25 $0.24 $0.22
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.62+ 1.63 1.74 1.76 1.72 1.77
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.77+ 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.
+ Annualized.
++ Not annualized.
+++ 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 STATEMENTS FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED 4/30
ENDED --------------------------------------------------------------------
CLASS C 10/31/03 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of period $7.94 $7.69 $7.58 $7.35 $7.63 $7.57
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)#
Net investment income(S) $0.07 $0.16 $0.19 $0.24 $0.23 $0.23
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 0.00+++ 0.26 0.14 0.24 (0.28) 0.06
- ------------------------------------- -------- ----------- ---------- ---------- ---------- ---------
Total from investment operations $0.07 $0.42 $0.33 $0.48 $(0.05) $0.29
- ------------------------------------- -------- ----------- ---------- ---------- ---------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.08) $(0.17) $(0.19) $(0.25) $(0.23) $(0.23)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment
income -- -- (0.03) (0.00)+++ -- --
- ------------------------------------- -------- ----------- ---------- ---------- ---------- ---------
Total distributions declared to
shareholders $(0.08) $(0.17) $(0.22) $(0.25) $(0.23) $(0.23)
- ------------------------------------- -------- ----------- ---------- ---------- ---------- ---------
Net asset value, end of period $7.93 $7.94 $7.69 $7.58 $7.35 $7.63
- ------------------------------------- -------- ----------- ---------- ---------- ---------- ---------
Total return (%) 0.83++ 5.52 4.38 6.62 (0.48) 3.77
- -------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ---------------------------------------------------------------------
CLASS C (CONTINUED) 10/31/03 2003 2002 2001 2000 1999
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.58+ 1.59 1.70 1.73 1.73 1.73
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 1.81+ 2.02 2.52 3.28 3.14 2.98
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 10 12 15 27 60 31
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $58,628 $51,184 $19,388 $4,820 $2,968 $4,282
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 contractually 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 $0.07 $0.15 $0.18 $0.24 $0.23 $0.22
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.68+ 1.69 1.85 1.81 1.76 1.84
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.71+ 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.
+ Annualized.
++ Not annualized.
+++ 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.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -------------------------------------------------------------------------------
(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) 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.
SWAP AGREEMENTS - The fund may enter into swap agreements. A swap is an exchange
of cash payments between the fund and another party, which is based on a
specific financial index. Cash payments are exchanged at specified intervals and
the expected income or expense is recorded on the accrual basis. The value of
the swap is adjusted daily and the change in value is recorded as unrealized
appreciation or depreciation. Risks may arise upon entering into these
agreements from the potential inability of counterparties to meet the terms of
their contract and from unanticipated changes in the value of the financial
index on which the swap agreement is based. The fund uses swaps for both hedging
and non-hedging purposes. For hedging purposes, the fund may use swaps to reduce
its exposure to interest rate fluctuations. For non-hedging purposes, the fund
may use swaps to take a position on anticipated changes in the underlying
financial index.
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 accounting principles generally accepted in the United States of America.
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 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:
- -------------------------------------------------------------------------------
Tax exempt income $5,072,981 $2,924,976
- -------------------------------------------------------------------------------
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 six
months ended October 31, 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). The fund has
an unfunded, defined benefit plan for inactive Trustees. Included in Trustees"
compensation is a pension expense of $392 for inactive trustees for the six
months ended October 31, 2003.
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
not to exceed the following annual percentage rates 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
$13,858 for the six months ended October 31, 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 six months ended October 31, 2003, amounted to:
CLASS A CLASS B CLASS C
Service Fee Retained by MFD $5,572 $0 $74
- --------------------------------------------------------------------------------
Fees incurred under the distribution plan during the six months ended October
31, 2003, were as follows:
CLASS A CLASS B CLASS C
Effective Annual Percentage Rates 0.15% 0.94% 1.00%
- --------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will be implemented on
such a date as the Trustees of the Trust may determine. 0.15% of the Class A
service fee is currently being paid by the fund. Payment of the 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 six months ended October 31, 2003,
were as follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges Imposed $24,956 $35,867 $14,594
- --------------------------------------------------------------------------------
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%.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$41,589,077 and $24,885,807, 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 $257,185,846
----------------------------------------------------------
Gross unrealized appreciation $7,765,640
----------------------------------------------------------
Gross unrealized depreciation (167,248)
----------------------------------------------------------
Net unrealized appreciation $7,598,392
----------------------------------------------------------
(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:
Six months ended Year ended
10/31/03 4/30/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 7,969,213 $63,192,291 15,047,309 $118,304,622
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 196,706 1,562,021 331,908 2,604,477
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (7,899,481) (62,503,577) (5,859,266) (46,047,614)
- --------------------------------------------------------------------------------------------------------------
Net increase 266,438 $2,250,735 9,519,951 $74,861,485
- --------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 1,212,706 $9,596,942 3,552,864 $27,869,717
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 24,652 195,473 31,329 245,874
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (619,414) (4,900,100) (712,266) (5,586,480)
- --------------------------------------------------------------------------------------------------------------
Net increase 617,944 $4,892,315 2,871,927 $22,529,111
- --------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 2,095,463 $16,671,673 5,034,866 $39,570,129
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 30,387 241,226 41,458 325,583
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (1,174,611) (9,311,627) (1,149,959) (9,008,557)
- --------------------------------------------------------------------------------------------------------------
Net increase 951,239 $7,601,272 3,926,365 $30,887,155
- --------------------------------------------------------------------------------------------------------------
(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 six months
ended October 31, 2003, was $859. The fund had no borrowings during the period.
(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. These financial instruments include swap agreements. 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.
Swap Agreements
Interest Rate Swaps
NOTIONAL
PRINCIPAL CASH FLOWS
AMOUNT OF PAID BY CASH FLOWS RECEIVED UNREALIZED
EXPIRATION CONTRACT THE FUND BY THE FUND DEPRECIATION
- ------------------------------------------------------------------------------
2/18/14 10,000,000 Fixed - 10 Year Floating - 7 day $(6,949)
BMA Swap Index BMA Swap Index
(3.84%)
- --------------------------------------------------------------------------------
3/17/14 10,000,000 Fixed - 10 Year Floating - 7 day (3,987)
BMA Swap Index BMA Swap Index
(3.87%)
- --------------------------------------------------------------------------------
$(10,936)
- --------------------------------------------------------------------------------
At October 31, 2003, the fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the fund's investment adviser,
has been contacted by the Office of the New York State Attorney General ("NYAG")
and the United States Securities and Exchange Commission ("SEC") in connection
with their investigations of practices in the mutual fund industry identified as
"market timing" mutual fund shares. MFS is cooperating with respect to these
investigations. MFS has been informed that the SEC is considering whether to
institute an enforcement action against MFS alleging false and misleading
disclosure in certain MFS fund prospectuses and breach of fiduciary duty
concerning market timing. The NYAG has also indicated that it is considering
whether to commence an enforcement proceeding against MFS relating to these
practices. MFS continues to discuss these matters with the SEC and the NYAG.
Certain other regulatory authorities are also conducting investigations into
these practices within the industry and have requested that MFS provide
information to them.
In December 2003, MFS and Sun Life Financial Inc., along with certain MFS funds
and Trustees who serve on the Board of Trustees of these MFS funds, were named
as defendants in class action lawsuits filed in the United States District
Court, District of Massachusetts seeking damages of unspecified amounts. The
lawsuits were purportedly filed on behalf of people who purchased, owned and/or
redeemed shares of MFS funds during specified periods. The suits allege that
certain defendants permitted market timing and late trading in the MFS funds
which allegedly caused financial injury to the funds' shareholders. The
defendants are reviewing the allegations and will respond appropriately.
Additional lawsuits based upon similar allegations may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
sanctions, penalties, damages or injunctions regarding MFS, restitution to
mutual fund shareholders and/or other financial penalties and structural changes
in the governance of MFS' mutual fund business.
Although MFS does not believe that these lawsuits will have a material adverse
effect on the funds, there can be no assurance that these suits, the ongoing
adverse publicity and/or other developments resulting from related regulatory
investigations or developments will not result in increased fund redemptions,
reduced sales of fund shares, or other adverse consequences for the funds.
- ---------------------------------------------------------------------------------------------------------------------------------
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, Private investor; Rockefeller Financial Services, Inc.
Chairman (investment 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 Company, Trustee
Chief Executive Officer and Director Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Company, Private investor; Harvard University Graduate School
President, Chief Investment Officer and Director of Business Administration, Class of 1961 Adjunct
Professor in Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc. (real estate
investment trust), Director
LAWRENCE H. COHN, M.D. (born 03/11/37)
Trustee J. DALE SHERRATT (born 09/23/38)
Brigham and Women's Hospital, Chief of Cardiac Trustee
Surgery; Harvard Medical School, Professor of Surgery Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments (investor
WILLIAM R. GUTOW (born 09/27/41) in health care companies), Managing General Partner
Trustee (since 1993); Cambridge Nutraceuticals (professional
Private investor and real estate consultant; nutritional products), Chief Executive Officer (until
Capitol Entertainment Management Company May 2001)
(video franchise), Vice Chairman
ELAINE R. SMITH (born 04/25/46)
J. ATWOOD IVES (born 05/01/36) Trustee
Trustee Independent health care industry consultant
Private investor; KeySpan Corporation (energy related
services), Director; Eastern Enterprises (diversified WARD SMITH (born 09/13/30)
services company), Chairman, Trustee and Chief Trustee
Executive Officer (until November 2000) 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
JOHN W. BALLEN (born 09/12/59) ROBERT R. FLAHERTY (born 09/18/63)
Trustee and President Assistant Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59)
Assistant Secretary and Assistant Clerk RICHARD M. HISEY (born 08/29/58)
Massachusetts Financial Services Company, Senior Treasurer
Vice President and Associate General Counsel Massachusetts Financial Services Company, Senior
Vice President (since July 2002); The Bank of New
STEPHEN E. CAVAN (born 11/06/53) York, Senior Vice President (September 2000 to July
Secretary and Clerk 2002); Lexington Global Asset Managers, Inc.,
Massachusetts Financial Services Company, Senior Executive Vice President and Chief Financial Officer
Vice President, General Counsel and Secretary (prior to September 2000); Lexington Funds,
Treasurer (prior to September 2000)
STEPHANIE A. DESISTO (born 10/01/53)
Assistant Treasurer ELLEN MOYNIHAN (born 11/13/57)
Massachusetts Financial Services Company, Vice Assistant Treasurer
President (since April 2003); Brown Brothers Massachusetts Financial Services Company,
Harriman & Co., Senior Vice President (November Vice President
2002 to April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice President (prior JAMES O. YOST (born 06/12/60)
to November 2002) Assistant Treasurer
Massachusetts Financial Services 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 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 110 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 02116-3741 225 Franklin Street, Boston, MA 02110
DISTRIBUTOR JP Morgan Chase Bank
MFS Fund Distributors, Inc. One Chase Manhattan Plaza
500 Boylston Street, Boston, MA 02116-3741 New York, NY 10081
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
A prospectus containing more complete information, including investment
objectives, risks, charges and expenses, for any of the MFS products can be
obtained from your investment professional. You should read and consider the
information carefully before investing.
Variable annuities are offered through MFS/Sun Life Financial Distributors, Inc.
- -------------------------------------------------------------------------------
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.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec. gov.
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 exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required 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
MML-SEM-12/03 25M
MFS(R) Mutual Funds
ANNUAL REPORT 10/31/03
MFS(R) RESEARCH BOND FUND
[graphic omitted]
A path for pursuing opportunity
[logo] M F S(R)
INVESTMENT MANAGEMENT
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
MFS(R) RESEARCH BOND FUND
The fund seeks to provide total return (high current income and long-term
growth of capital).
- -------------------------------------------------------------------------------
To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit www.mfs.com.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 2
- ----------------------------------------------------
MANAGEMENT REVIEW 3
- ----------------------------------------------------
PERFORMANCE SUMMARY 6
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- ----------------------------------------------------
FINANCIAL STATEMENTS 25
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 42
- ----------------------------------------------------
TRUSTEES AND OFFICERS 51
- ----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 53
- ----------------------------------------------------
CONTACT INFORMATION 54
- ----------------------------------------------------
ASSET ALLOCATION 55
- -------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- -------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
In our view, the past year has been a promising one for investors. Financial
markets have improved steadily, spurred by indications of a global economic
recovery.
These developments make this an encouraging time for MFS and for our
shareholders. But we also think it's a time to reinforce the fundamentals of a
sound investment strategy.
At MFS, we think in any market environment the best approach for investors is
disciplined diversification. This method of investing involves three simple
steps. First, allocate your holdings across the major asset classes. Second,
diversify within each class so that you get exposure to different investment
styles, such as growth and value, and market sectors, such as government and
corporate bonds. Finally, to respond to the way market activity can shift the
value of your accounts, rebalance your accounts on a routine schedule, such as
once per year. Doing so will help you maintain your desired allocation across
each asset class.
These investing fundamentals are often lost when markets are on an upswing. At
such times, it's easy to be tempted to shift your holdings in the current,
"hottest" performing investment. History suggests, however, that it is
difficult to predict year after year what the best performing sector or market
will be. While it is true that the past cannot offer any guarantees for the
future, the markets historically have demonstrated the benefits of taking the
prudent approach and spreading your assets across a variety of holdings. For
investors with long-term goals such as college or retirement, a balanced
approach usually makes the most sense. As always, your investment professional
can help you identify an appropriate mix of investments for your needs.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
November 20, 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 nearly 80 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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IMPROVING ECONOMY HELPED LOWER-RATED DEBT
Although the six months ended October 31, 2003, were slightly negative for
Treasuries - with rates on 10-year bonds rising about 40 basis points (a basis
point is 0.01 percent of yield) - we feel the environment was relatively good
for corporate and emerging market bonds. (Principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to maturity.)
Treasury rates rose only modestly for the period as a whole, but did experience
sharp volatility in the spring and summer. Ten-year rates fell when the Federal
Reserve Board, after its May meeting, expressed a strong desire to keep rates
low and implied that it might use some unconventional strategies to do so - such
as buying longer-term bonds. However, long-term rates shot up in late June and
July after the Fed lowered the short-term rate by only a quarter point at its
June meeting, disappointing a market that had expected a half- point drop. Many
investors read the quarter-point move as a sign that perhaps the economy was
improving faster than the Fed had expected.
In contrast, corporate bonds generally benefited from the accelerating U.S.
recovery. Growth in GDP (gross domestic product), employment, and other
measures pointed toward improving corporate fundamentals - business factors
such as earnings and cash flow growth.
In response, investors moved away from the risk aversion or "flight to quality"
that had characterized the bond market in late 2002 and early 2003. Riskier,
lower-rated classes of bonds showed the best performance over the period. With
Treasury yields at four-decade lows, investors sought out higher-yielding
corporate and emerging market debt. This caused spreads - the difference between
corporate or emerging market yields and the yields of Treasuries - to tighten
(decrease) over the period. Emerging market and high-yield corporate debt
outperformed high-grade corporate debt over the period. Within categories,
lower-rated bonds generally outperformed higher-rated issues.
PORTFOLIO CONCENTRATION 10/31/03
QUALITY RATINGS
Governments 35.5%
"AAA" 17.0%
"AA" 3.6%
"A" 8.9%
"BBB" 23.3%
"BB" 5.1%
"B" 2.9%
Other 3.7%
The portfolio is actively managed, and current holdings may be different.
LOWER-RATED DEBT DROVE RELATIVE PERFORMANCE
The fund's holdings in high-yield and emerging market bonds contributed strongly
to its relative outperformance against its benchmark, the Lehman Brothers
Government/Credit Index, which does not contain below-investment-grade emerging
market debt or high-yield debt. Over the period, the fund also outperformed its
peers, as represented by the Lipper average "A"-rated corporate debt fund. Funds
in the peer group generally do have allocations to lower-rated classes of bonds.
In the high-yield area, the fund's performance was broad-based and not
concentrated in particular industries. One area of notable strength, however,
was our position in "BB"-rated securities. These noninvestment-grade bonds are
one level below investment grade territory ("BBB" is the lowest investment
grade rating) and are often referred to as "crossover" bonds. If these bonds
shoud crossover to an investment-grade rating, such an upgrade signifies
credit improvement and usually increases the number of potential buyers for a
bond - and thus generally increases its price.
Within our emerging market holdings, Russian corporate debt was an area of
strength. On October 8, Moody's Investors Service, one of the major bond
rating firms, upgraded Russian government debt to an investment-grade status.
This also helped performance of Russian corporate debt. Later in October, the
arrest of the head of Yukos, one of the nation's largest oil firms, received
significant media coverage and moved some commentators to question the
government's commitment to an open business climate. In our view, however,
this was an isolated incident that is not likely to harm the Russian bond
market over the longer term.
HIGH-GRADE AND TIPS POSITIONS ALSO HELPED RESULTS
In the high-grade corporate area, the fund's financial services holdings did
particularly well over the period. Our European bank debt, especially in banks
in the United Kingdom, Italy, and France, performed well. We also benefited by
avoiding German banks, which were troubled by a weak German economy.
Performance was also aided by the fact that a large portion of our U.S.
Treasury holdings were in TIPS, or Treasury inflation-protection securities.
Over the period, these inflation-linked securities, which are issued by the
U.S. Treasury, outperformed comparable ordinary, or nominal, Treasuries. We
believe TIPS did well because the improving economy caused investors' concerns
to shift from deflation to possible inflation if economic growth continues to
accelerate.
AGENCY UNDERWEIGHTING DETRACTED FROM RELATIVE RESULTS
The fund's relative underweighting in government agency debt - bonds issued by
agencies such as Fannie Mae and Freddie Mac - detracted slightly from relative
performance. While questions about the agencies' implicit government backing
hurt their bonds early in the period, those fears faded and agency debt
performed well for the period as a whole. However, the fund owned commercial
mortgage-backed and asset-backed securities - asset classes that are similar
in nature to agency debt - and good performance of those assets helped
compensate for our underweighting in agency bonds.
/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 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.
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Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment-related news.
o From Week in Review, link to MFS Global Investment Perspective for our
current view of the world.
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The opinions expressed in this report are those of the Director of Fixed
Income Research 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 10/31/03
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Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Performance results reflect the percentage change
in net asset value, including the reinvestment of any dividends and capital
gains distributions. (See Notes to Performance Summary.)
VISIT WWW.MFS.COM FOR MORE CURRENT PERFORMANCE RESULTS.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN.
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.
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share inception
class date 6-mo 1-yr 3-yr Life*
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A 1/4/99 -- 8.25% 9.69% 7.49%
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B 12/29/00 -- 7.23% 8.83% 6.96%
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C 12/29/00 -- 7.34% 8.83% 6.96%
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I 1/4/99 -- 8.42% 9.90% 7.57%
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R1** 12/31/02 -- 7.84% 9.55% 7.40%
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R2*** 10/31/03 N/A N/A N/A N/A
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529A 7/31/02 -- 7.87% 9.50% 7.37%
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529B 7/31/02 -- 7.08% 9.16% 7.16%
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529C 7/31/02 -- 6.97% 9.12% 7.14%
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- --------------------
Average annual
- --------------------
Comparative benchmarks
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Average A-rated corporate
debt fund+ 0.82% 6.25% 7.61% 5.40%
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Lehman Brothers
Government/Credit Index# 0.62% 6.17% 8.91% 6.62%
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Periods less than one year are actual, not annualized.
- --------------------
Average annual
with sales charge
- --------------------
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A -- 3.11% 7.93% 6.41%
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B -- 3.23% 7.98% 6.64%
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C -- 6.34% 8.83% 6.96%
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529A -- 2.75% 7.74% 6.29%
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529B -- 3.08% 8.31% 6.84%
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529C -- 5.97% 9.12% 7.14%
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I, R1 and R2 class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A 1.54% 8.25% 31.99% 41.65%
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B 1.02% 7.23% 28.88% 38.32%
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C 1.02% 7.34% 28.91% 38.34%
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I 1.52% 8.42% 32.72% 42.16%
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R1** 1.27% 7.84% 31.49% 41.11%
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R2*** N/A N/A N/A N/A
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529A 1.32% 7.87% 31.29% 40.89%
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529B 0.89% 7.08% 30.07% 39.59%
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529C 0.89% 6.97% 29.94% 39.45%
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Periods less than one year are actual, not annualized.
* For the period from the commencement of the fund's investment operations,
January 4, 1999, through October 31, 2003. Index information is from
January 1, 1999.
** Effective November 3, 2003, Class R shares have been renamed R1 shares.
*** Class R2 shares commenced investment operations on October 31, 2003.
Therefore, no performance information is available.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX - measures the performance of all debt
obligations of the U.S. Treasury and U.S. government agencies, and all
investment-grade domestic corporate debt.
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 R1 and R2
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.
Prior to January 1, 2001, the fund was available only to MFS employees and had
limited assets. Between February 1, 1999 and December 29, 2000, a significant
portion of the fund's fees and expenses were waived or paid for by the adviser.
Had applicable expense subsidies or waivers not been in effect, performance
would have been lower. For example, had these expense subsidies and waivers not
been in effect for Class A, average annual returns without sales charge would
have been 9.67% and 7.27% for the 3-year and Life periods, respectively.
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 regarding 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 (Unaudited) - 10/31/03
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The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized
by broad-based asset classes.
Bonds - 94.7%
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PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
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U.S. Bonds - 84.9%
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Advertising & Broadcasting - 0.5%
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Allbritton Communications Co., 7.75s, 2012 $1,000 $1,020,000
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Young Broadcasting, Inc., 8.5s, 2008 3,090 3,329,475
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$4,349,475
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Aerospace - 1.0%
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Alliant Techsystems, Inc., 8.5s, 2011 $160 $176,800
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BAE Systems Holdings, Inc., 6.4s, 2011## 3,810 4,083,139
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Boeing Capital Corp., 6.5s, 2012 2,717 2,974,954
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Northrop Grumman Corp., 7s, 2006 350 386,500
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Northrop Grumman Corp., 7.125s, 2011 723 830,799
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Northrop Grumman Corp., 7.75s, 2031 250 301,893
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$8,754,085
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Airlines - 0.2%
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Continental Airlines, Inc., 6.545s, 2019 $1,235 $1,228,420
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Continental Airlines, Inc., 6.648s, 2019 562 549,051
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Continental Airlines, Inc., 7.256s, 2020 4 4,080
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$1,781,551
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Agency - Other - 0.5%
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Small Business Administration, 5.34s, 2021 $691 $712,670
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Small Business Administration, 6.34s, 2021 135 145,491
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Small Business Administration, 6.35s, 2021 105 113,362
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Small Business Administration, 6.44s, 2021 136 147,425
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Small Business Administration, 6.07s, 2022 472 501,425
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Small Business Administration, 4.35s, 2023 2,700 2,574,048
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$4,194,421
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Alcoholic Beverages - 0.3%
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Miller Brewing Co., 5.5s, 2013## $2,703 $2,758,063
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Asset Backed - 0.4%
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CNH Equipment Trust, 4.3s, 2008 $296 $299,308
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Ikon Receivables Funding LLC, 3.9s, 2006 795 805,841
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Ikon Receivables Funding LLC, 3.27s, 2011 2,500 2,525,226
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$3,630,375
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Auto Parts - 1.6%
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Americredit Automobile Receivable Trust, 5.37s, 2008 $1,040 $1,073,096
- -------------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 4.79s, 2009 650 677,203
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CPS Auto Receivables Trust, 2.89s, 2009 1,855 1,875,185
- -------------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 3.5s, 2009## 496 502,013
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CPS Auto Receivables Trust, 3.52s, 2009## 1,201 1,214,346
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Drive Auto Receivables Trust, 2.5s, 2009## 2,900 2,885,727
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Household Automotive Trust, 3.44s, 2009 1,500 1,521,064
- -------------------------------------------------------------------------------------------------------
Hyundai Auto Receivables Trust, 2.8s, 2007## 1,000 1,010,521
- -------------------------------------------------------------------------------------------------------
MFN Automobile Receivables Trust, 5.07s, 2007## 29 28,823
- -------------------------------------------------------------------------------------------------------
Triad Auto Receivables Owner Trust, 2.48s, 2008 1,230 1,230,749
- -------------------------------------------------------------------------------------------------------
Triad Auto Receivables Owner Trust, 3.24s, 2009 1,578 1,605,111
- -------------------------------------------------------------------------------------------------------
WFS Financial Owner Trust, 2.39s, 2007 310 311,995
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$13,935,833
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Automotive - 2.4%
- -------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7.875s, 2010 $3,708 $3,879,154
- -------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7s, 2013 1,948 1,914,968
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General Motors Acceptance Corp., 6.75s, 2006 3,919 4,178,450
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General Motors Acceptance Corp., 7s, 2012 400 413,418
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General Motors Acceptance Corp., 8s, 2031 3,155 3,244,605
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General Motors Corp., 8.375s, 2033 3,000 3,164,520
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Lear Corp., 8.11s, 2009 3,405 3,924,262
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TRW Automotive, 11s, 2013## 80 94,400
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$20,813,777
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Banks & Credit Companies - 4.2%
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Abbey National Capital Trust I, 8.963s, 2049 $1,985 $2,632,918
- -------------------------------------------------------------------------------------------------------
Bank of America Corp., 7.4s, 2011 4,540 5,299,079
- -------------------------------------------------------------------------------------------------------
Citigroup, Inc., 7.25s, 2010 4,043 4,703,598
- -------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, USA, 4.625s, 2008 2,287 2,379,349
- -------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, USA, 6.125s, 2011 2,363 2,553,670
- -------------------------------------------------------------------------------------------------------
First Union National, 7.8s, 2010 1,755 2,098,954
- -------------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s, 2049## 2,050 2,402,666
- -------------------------------------------------------------------------------------------------------
Popular North America, Inc., 4.25s, 2008 2,500 2,532,175
- -------------------------------------------------------------------------------------------------------
Socgen Real Estate Co., 7.64s, 2049## 2,944 3,318,963
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Unicredito Italiano Capital Trust, 9.2s, 2049## 2,214 2,751,809
- -------------------------------------------------------------------------------------------------------
Wachovia Corp., 6.605s, 2025 3,000 3,298,302
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Wells Fargo Co., 7.8s, 2010 250 271,666
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Wells Fargo Co., 6.45s, 2011 1,946 2,174,921
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$36,418,070
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Broadcast & Cable TV - 0.9%
- -------------------------------------------------------------------------------------------------------
Comcast Corp., 6.5s, 2015 $1,508 $1,615,575
- -------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 8.125s, 2009 3,495 3,634,800
- -------------------------------------------------------------------------------------------------------
TCI Communications Financing III, 9.65s, 2027 25 30,406
- -------------------------------------------------------------------------------------------------------
Tele-Communications, Inc., 9.8s, 2012 1,835 2,383,771
- -------------------------------------------------------------------------------------------------------
$7,664,552
- -------------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.0%
- -------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.7s, 2012 $2,300 $2,404,247
- -------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.25s, 2007 2,000 2,332,584
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 6.1s, 2006 800 867,010
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 6.6s, 2012 1,501 1,660,976
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 5.3s, 2013 930 943,823
- -------------------------------------------------------------------------------------------------------
$8,208,640
- -------------------------------------------------------------------------------------------------------
Building - 0.8%
- -------------------------------------------------------------------------------------------------------
American Standard, Inc., 7.375s, 2008 $1,970 $2,171,925
- -------------------------------------------------------------------------------------------------------
American Standard, Inc., 7.625s, 2010 2,925 3,261,375
- -------------------------------------------------------------------------------------------------------
Masco Corp., 6.75s, 2006 970 1,061,878
- -------------------------------------------------------------------------------------------------------
$6,495,178
- -------------------------------------------------------------------------------------------------------
Business Services - 0.1%
- -------------------------------------------------------------------------------------------------------
General Binding Corp., 9.375s, 2008 $550 $550,000
- -------------------------------------------------------------------------------------------------------
Chemicals - 0.3%
- -------------------------------------------------------------------------------------------------------
Dow Chemical Co., 5.75s, 2008 $2,000 $2,126,976
- -------------------------------------------------------------------------------------------------------
Conglomerates - 0.7%
- -------------------------------------------------------------------------------------------------------
Tyco International Group S.A., 6.75s, 2011 $5,820 $6,191,025
- -------------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.3%
- -------------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 $700 $769,219
- -------------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2008 1,976 2,144,628
- -------------------------------------------------------------------------------------------------------
$2,913,847
- -------------------------------------------------------------------------------------------------------
Containers - 0.1%
- -------------------------------------------------------------------------------------------------------
Owens Brockway Glass Container, 8.25s, 2013 $735 $775,425
- -------------------------------------------------------------------------------------------------------
Corporate Asset-Backed - 5.6%
- -------------------------------------------------------------------------------------------------------
Amresco Commercial Mortgage Funding I Corp., 7s, 2029 $700 $695,242
- -------------------------------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage Securities, Inc., 6.8s, 2008 275 294,466
- -------------------------------------------------------------------------------------------------------
Certificates Funding Corp., 6.716s, 2004## 193 198,494
- -------------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., 6.39s, 2030 2,000 2,217,348
- -------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 5.8s, 2030 143 148,970
- -------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 6.04s, 2030 900 983,659
- -------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 6.49s, 2031 2,400 2,667,674
- -------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 7.03s, 2031 750 851,894
- -------------------------------------------------------------------------------------------------------
Criimi Mae Corp., 6.701s, 2030## 10 10,842
- -------------------------------------------------------------------------------------------------------
Criimi Mae Corp., 7s, 2033## 2,389 2,575,533
- -------------------------------------------------------------------------------------------------------
Deutsche Mortgage and Asset Receiving Corp., 6.538s, 2031 1,945 2,127,679
- -------------------------------------------------------------------------------------------------------
Deutsche Mortgage and Asset Receiving Corp., 7.5s, 2031 2,050 1,512,219
- -------------------------------------------------------------------------------------------------------
DLJ Commercial Mortgage Corp., 0.91s, 2005 (Interest Only) 300 3,652
- -------------------------------------------------------------------------------------------------------
Falcon Franchise Loan LLC, 3.089s, 2023 (Interest Only)## 917 136,814
- -------------------------------------------------------------------------------------------------------
Falcon Franchise Loan LLC, 3.875s, 2023 (Interest Only) 13,455 2,559,986
- -------------------------------------------------------------------------------------------------------
First Union Lehman Brothers Bank, 0.58s, 2028 (Interest Only) 39,494 1,042,211
- -------------------------------------------------------------------------------------------------------
First Union Lehman Brothers Bank, 6.56s, 2035 1,980 2,204,756
- -------------------------------------------------------------------------------------------------------
First Union Lehman Brothers Commercial Mortgage, 7.38s, 2029 3,250 3,649,850
- -------------------------------------------------------------------------------------------------------
First Union Lehman Brothers Commercial Mortgage, 7.5s, 2029 1,000 924,766
- -------------------------------------------------------------------------------------------------------
First Union National Bank Commercial Mortgage Trust,
7.39s, 2031 1,950 2,255,253
- -------------------------------------------------------------------------------------------------------
Fortress CBO Investments I, Ltd., 1.92s, 2038 2,750 2,748,711
- -------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., 6.269s, 2035 2,560 2,818,875
- -------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, 6.06s, 2030 51 53,436
- -------------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust, 6.78s, 2031 1,456 1,640,466
- -------------------------------------------------------------------------------------------------------
LB Commercial Condiut Mortgage Trust, 0.55s, 2035
(Interest Only) 42,264 1,120,950
- -------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 5.65s, 2030 13 13,044
- -------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 6.39s, 2030 1,000 1,093,010
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 6.86s, 2010 1,450 1,519,145
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 6.01s, 2030 37 39,116
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 7.377s, 2030 790 887,924
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 0.96s, 2031 (Interest Only) 28,123 1,158,548
- -------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.663s, 2030 1,285 1,429,649
- -------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 0.93s, 2031 (Interest Only) 26,183 858,075
- -------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.337s, 2031 2,910 3,209,373
- -------------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 0.66s, 2023 (Interest Only) 13,296 367,791
- -------------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 6.001s, 2030 168 177,608
- -------------------------------------------------------------------------------------------------------
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032## 1,727 1,876,970
- -------------------------------------------------------------------------------------------------------
$48,073,999
- -------------------------------------------------------------------------------------------------------
Defense Electronics - 0.1%
- -------------------------------------------------------------------------------------------------------
Raytheon Co., 5.7s, 2003 $15 $15,000
- -------------------------------------------------------------------------------------------------------
Raytheon Co., 8.3s, 2010 645 766,277
- -------------------------------------------------------------------------------------------------------
$781,277
- -------------------------------------------------------------------------------------------------------
Energy - Independent - 0.8%
- -------------------------------------------------------------------------------------------------------
Apache Corp., 7.375s, 2047 $47 $55,286
- -------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 8.125s, 2011## 550 603,625
- -------------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.625s, 2005 500 545,496
- -------------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 4.375s, 2007 1,000 1,028,825
- -------------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.25s, 2011 1,337 1,528,970
- -------------------------------------------------------------------------------------------------------
Pioneer Natural Resources Co., 7.5s, 2012 2,205 2,472,552
- -------------------------------------------------------------------------------------------------------
Stone Energy Corp., 8.25s, 2011 500 535,000
- -------------------------------------------------------------------------------------------------------
$6,769,754
- -------------------------------------------------------------------------------------------------------
Energy - Integrated - 0.5%
- -------------------------------------------------------------------------------------------------------
Amerada Hess Corp., 7.3s, 2031 $4,000 $4,018,352
- -------------------------------------------------------------------------------------------------------
Entertainment - 0.9%
- -------------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 6.125s, 2006 $200 $215,121
- -------------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 7.7s, 2032 2,790 3,157,527
- -------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 6.703s, 2004 500 511,481
- -------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 7.75s, 2024 750 859,359
- -------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 8.5s, 2025 150 179,503
- -------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 6.55s, 2033 1,000 1,021,483
- -------------------------------------------------------------------------------------------------------
Turner Broadcasting Systems, Inc., 8.375s, 2013 500 601,474
- -------------------------------------------------------------------------------------------------------
Walt Disney Co., 6.75s, 2006 1,345 1,467,632
- -------------------------------------------------------------------------------------------------------
$8,013,580
- -------------------------------------------------------------------------------------------------------
Financial Institutions - 0.3%
- -------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.85s, 2004 $500 $516,140
- -------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2006 550 586,751
- -------------------------------------------------------------------------------------------------------
SLM Corp., 5.375s, 2013 1,600 1,633,461
- -------------------------------------------------------------------------------------------------------
$2,736,352
- -------------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 0.5%
- -------------------------------------------------------------------------------------------------------
Kellogg Co., 6s, 2006 $80 $86,158
- -------------------------------------------------------------------------------------------------------
Kellogg Co., 6.6s, 2011 400 446,912
- -------------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 6.25s, 2012 1,733 1,867,425
- -------------------------------------------------------------------------------------------------------
Michael Foods, Inc., 11.75s, 2011 450 568,687
- -------------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 8.25s, 2011 904 1,070,782
- -------------------------------------------------------------------------------------------------------
$4,039,964
- -------------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.6%
- -------------------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.85s, 2012 $1,234 $1,362,423
- -------------------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.8s, 2032 3,445 3,510,968
- -------------------------------------------------------------------------------------------------------
$4,873,391
- -------------------------------------------------------------------------------------------------------
Gaming & Lodging - 1.0%
- -------------------------------------------------------------------------------------------------------
Aztar Corp., 8.875s, 2007 $1,000 $1,045,000
- -------------------------------------------------------------------------------------------------------
Aztar Corp., 9s, 2011 1,460 1,576,800
- -------------------------------------------------------------------------------------------------------
Harrahs Operating Co., Inc., 7.125s, 2007 1,675 1,881,613
- -------------------------------------------------------------------------------------------------------
MGM Grand, Inc., 6.95s, 2005 400 417,500
- -------------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.5s, 2010 760 861,650
- -------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 8.375s, 2008 550 598,125
- -------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.875s, 2010 1,945 2,161,381
- -------------------------------------------------------------------------------------------------------
$8,542,069
- -------------------------------------------------------------------------------------------------------
Government Sponsored Entity - 12.5%
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.25s, 2006 $19,000 $18,933,994
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.875s, 2006 13,635 13,709,529
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.5s, 2004 20,800 21,317,546
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6s, 2011 14,600 16,103,975
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.5s, 2013 14,080 13,881,148
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2008 12,900 14,283,680
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.125s, 2012 8,301 9,202,048
- -------------------------------------------------------------------------------------------------------
$107,431,920
- -------------------------------------------------------------------------------------------------------
Home Construction - 0.4%
- -------------------------------------------------------------------------------------------------------
Pulte Homes, Inc., 6.375s, 2033 $3,946 $3,772,088
- -------------------------------------------------------------------------------------------------------
Home Loans - 0.3%
- -------------------------------------------------------------------------------------------------------
Argent Securities, Inc., 2.8s, 2033 $1,945 $1,945,000
- -------------------------------------------------------------------------------------------------------
Centex Home Equity, 5.93s, 2025 160 160,845
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Whole Loan, 4.08s, 2031 763 768,099
- -------------------------------------------------------------------------------------------------------
$2,873,944
- -------------------------------------------------------------------------------------------------------
Insurance - 1.3%
- -------------------------------------------------------------------------------------------------------
AIG Sunamerica Global Financing II, 7.6s, 2005## $525 $573,424
- -------------------------------------------------------------------------------------------------------
AIG Sunamerica Global Financing IV, 5.85s, 2006## 430 460,863
- -------------------------------------------------------------------------------------------------------
AIG Sunamerica Global Financing IX, 5.1s, 2007## 2,260 2,422,458
- -------------------------------------------------------------------------------------------------------
Metlife, Inc., 6.5s, 2032 2,450 2,577,760
- -------------------------------------------------------------------------------------------------------
Prudential Financial, Inc., 4.5s, 2013 2,500 2,385,223
- -------------------------------------------------------------------------------------------------------
Prudential Funding Corp., 6.6s, 2008## 2,275 2,534,955
- -------------------------------------------------------------------------------------------------------
$10,954,683
- -------------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.8%
- -------------------------------------------------------------------------------------------------------
Allstate Corp., 7.2s, 2009 $683 $793,919
- -------------------------------------------------------------------------------------------------------
Safeco Corp., 4.875s, 2010 2,500 2,559,385
- -------------------------------------------------------------------------------------------------------
Safeco Corp., 7.25s, 2012 180 205,982
- -------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 6.375s, 2033 1,056 1,096,827
- -------------------------------------------------------------------------------------------------------
Willis Corroon Corp., 9s, 2009 2,240 2,368,800
- -------------------------------------------------------------------------------------------------------
$7,024,913
- -------------------------------------------------------------------------------------------------------
Machinery & Tools - 0.6%
- -------------------------------------------------------------------------------------------------------
Joy Global, Inc., 8.75s, 2012 $637 $703,885
- -------------------------------------------------------------------------------------------------------
Kennametal, Inc., 7.2s, 2012 4,333 4,573,720
- -------------------------------------------------------------------------------------------------------
$5,277,605
- -------------------------------------------------------------------------------------------------------
Manufactured Housing
- -------------------------------------------------------------------------------------------------------
Vanderbilt Mortgage & Finance, Inc., 5.17s, 2014 $254 $257,543
- -------------------------------------------------------------------------------------------------------
Vanderbilt Mortgage & Finance, Inc., 6.12s, 2015 99 99,734
- -------------------------------------------------------------------------------------------------------
$357,277
- -------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.7%
- -------------------------------------------------------------------------------------------------------
HCA, Inc., 7.125s, 2006 $304 $325,601
- -------------------------------------------------------------------------------------------------------
HCA, Inc., 8.75s, 2010 2,610 3,004,152
- -------------------------------------------------------------------------------------------------------
HCA, Inc., 7.875s, 2011 2,493 2,745,765
- -------------------------------------------------------------------------------------------------------
HCA, Inc., 6.95s, 2012 275 284,786
- -------------------------------------------------------------------------------------------------------
$6,360,304
- -------------------------------------------------------------------------------------------------------
Metals & Mining - 0.4%
- -------------------------------------------------------------------------------------------------------
Arch Western Finance, 6.75s, 2013## $160 $165,600
- -------------------------------------------------------------------------------------------------------
Phelps Dodge Corp., 8.75s, 2011 2,420 2,884,197
- -------------------------------------------------------------------------------------------------------
$3,049,797
- -------------------------------------------------------------------------------------------------------
Multi-Family Agency Bonds - 0.3%
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.29s, 2006 $191 $207,607
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.355s, 2006 480 523,842
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.805s, 2006 507 552,852
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.65s, 2008 1,401 1,470,993
- -------------------------------------------------------------------------------------------------------
$2,755,294
- -------------------------------------------------------------------------------------------------------
Natural Gas - Distribution
- -------------------------------------------------------------------------------------------------------
Amerigas Partners, 8.875s, 2011 $205 $222,425
- -------------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.9%
- -------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 6.75s, 2011 $500 $562,795
- -------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 6.5s, 2012 2,442 2,689,534
- -------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.4s, 2031 60 67,865
- -------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.75s, 2032 1,213 1,429,450
- -------------------------------------------------------------------------------------------------------
Plains All American Pipeline, 7.75s, 2012 675 745,875
- -------------------------------------------------------------------------------------------------------
Williams Cos., Inc., 8.625s, 2010 2,000 2,190,000
- -------------------------------------------------------------------------------------------------------
$7,685,519
- -------------------------------------------------------------------------------------------------------
Oil Services - 0.5%
- -------------------------------------------------------------------------------------------------------
Dresser, Inc., 9.375s, 2011 $250 $256,875
- -------------------------------------------------------------------------------------------------------
Halliburton Co., 5.5s, 2010## 4,090 4,134,029
- -------------------------------------------------------------------------------------------------------
$4,390,904
- -------------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 0.4%
- -------------------------------------------------------------------------------------------------------
Jabil Circuit, Inc., 5.875s, 2010 $3,112 $3,214,973
- -------------------------------------------------------------------------------------------------------
Photographic Products - 0.2%
- -------------------------------------------------------------------------------------------------------
Eastman Kodak Co., 7.25s, 2013 $1,261 $1,285,904
- -------------------------------------------------------------------------------------------------------
Pollution Control - 0.6%
- -------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 8.875s, 2008 $2,190 $2,419,950
- -------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 10s, 2009 200 217,500
- -------------------------------------------------------------------------------------------------------
Waste Mangement, Inc., 7s, 2004 400 416,883
- -------------------------------------------------------------------------------------------------------
Waste Mangement, Inc., 7.1s, 2026 1,500 1,612,450
- -------------------------------------------------------------------------------------------------------
$4,666,783
- -------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.6%
- -------------------------------------------------------------------------------------------------------
Belo Corp., 7.25s, 2027 $350 $376,226
- -------------------------------------------------------------------------------------------------------
Belo Corp., 7.75s, 2027 1,078 1,222,287
- -------------------------------------------------------------------------------------------------------
Dex Media West, 9.875s, 2013## 2,675 3,042,812
- -------------------------------------------------------------------------------------------------------
RH Donnelley Finance Corp., 8.875s, 2010 560 627,900
- -------------------------------------------------------------------------------------------------------
$5,269,225
- -------------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.3%
- -------------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.34s, 2003 $20 $20,049
- -------------------------------------------------------------------------------------------------------
Union Pacific Corp., 5.84s, 2004 160 163,392
- -------------------------------------------------------------------------------------------------------
Union Pacific Corp., 7.25s, 2008 1,980 2,258,691
- -------------------------------------------------------------------------------------------------------
$2,442,132
- -------------------------------------------------------------------------------------------------------
Real Estate - 1.0%
- -------------------------------------------------------------------------------------------------------
Boston Properties, Inc., 5s, 2015 $1,940 $1,825,325
- -------------------------------------------------------------------------------------------------------
EOP Operating LP, 6.8s, 2009 2,204 2,462,417
- -------------------------------------------------------------------------------------------------------
Kimco Realty Corp., 6s, 2012 1,500 1,585,363
- -------------------------------------------------------------------------------------------------------
Simon Property Group LP, 6.375s, 2007 950 1,040,989
- -------------------------------------------------------------------------------------------------------
Vornado Reality Trust, 5.625s, 2007 1,638 1,730,075
- -------------------------------------------------------------------------------------------------------
$8,644,169
- -------------------------------------------------------------------------------------------------------
Residential Mortgage-Backed - 0.3%
- -------------------------------------------------------------------------------------------------------
Multi-Family Capital Access One, Inc., 6.65s, 2024 $2,269 $2,523,086
- -------------------------------------------------------------------------------------------------------
Restaurants - 0.4%
- -------------------------------------------------------------------------------------------------------
Yum! Brands, Inc., 8.875s, 2011 $2,615 $3,111,850
- -------------------------------------------------------------------------------------------------------
Single Family Agency Bonds - 5.3%
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2018 $6,379 $6,481,840
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5s, 2016 862 876,386
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.5s, 2018 6,048 6,047,138
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2018 763 785,886
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2030 2 2,215
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2031 258 274,678
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2032 4,645 4,825,240
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2033 14,193 14,329,721
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2033 5,807 5,962,682
- -------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6.5s, 2028 43 45,564
- -------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6s, 2032 5,275 5,435,433
- -------------------------------------------------------------------------------------------------------
$45,066,783
- -------------------------------------------------------------------------------------------------------
Stores - 0.3%
- -------------------------------------------------------------------------------------------------------
Dollar General Corp., 8.625s, 2010 $2,185 $2,439,006
- -------------------------------------------------------------------------------------------------------
Student Loans - 0.6%
- -------------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 2.99s, 2022## $1,393 $1,394,306
- -------------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 2.25s, 2032## 1,500 1,500,585
- -------------------------------------------------------------------------------------------------------
Sallie Mae Student Loan Trust, 3.39s, 2033 2,500 2,489,062
- -------------------------------------------------------------------------------------------------------
$5,383,953
- -------------------------------------------------------------------------------------------------------
Structured Deal Agency - 1.1%
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2022 $4,871 $5,086,600
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2017 4,000 4,121,231
- -------------------------------------------------------------------------------------------------------
$9,207,831
- -------------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
- -------------------------------------------------------------------------------------------------------
Kroger Co., 7.8s, 2007 $2,325 $2,671,832
- -------------------------------------------------------------------------------------------------------
Supranational - 0.5%
- -------------------------------------------------------------------------------------------------------
Central American Bank, 6.75s, 2013## $2,309 $2,464,858
- -------------------------------------------------------------------------------------------------------
Corp. Andina De Fomento, 6.875s, 2012 2,000 2,200,450
- -------------------------------------------------------------------------------------------------------
$4,665,308
- -------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.2%
- -------------------------------------------------------------------------------------------------------
AT&T Corp., 8.5s, 2031 $2,725 $3,090,036
- -------------------------------------------------------------------------------------------------------
Citizens Communications Co., 7.625s, 2008 500 573,926
- -------------------------------------------------------------------------------------------------------
Sprint Capital Corp., 7.125s, 2006 1,257 1,359,057
- -------------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6.875s, 2028 4,755 4,474,797
- -------------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 1,010 1,092,473
- -------------------------------------------------------------------------------------------------------
$10,590,289
- -------------------------------------------------------------------------------------------------------
Tobacco - 0.3%
- -------------------------------------------------------------------------------------------------------
Altria Group, Inc., 7s, 2013 $2,900 $2,926,898
- -------------------------------------------------------------------------------------------------------
Transportation - Services - 0.1%
- -------------------------------------------------------------------------------------------------------
Federal Express Corp., 9.65s, 2012 $783 $1,028,718
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 22.2%
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8.125s, 2019 $24 $32,207
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8s, 2021 33,285 44,608,390
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375s, 2031 8,788 9,081,502
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 5.875s, 2004 16,189 16,947,228
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5s, 2005 40,690 43,725,840
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 2s, 2006 23,176 23,119,868
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.5s, 2006 1,450 1,496,558
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.875s, 2006 9,183 10,250,882
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.25s, 2007 1,467 1,492,272
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.375s, 2007 11,137 12,145,424
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.375s, 2007 2,223 2,352,038
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25s, 2010 8,984 10,469,763
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2012 7,432 8,133,507
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25s, 2013 7,358 7,328,112
- -------------------------------------------------------------------------------------------------------
$191,183,591
- -------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 4.3%
- -------------------------------------------------------------------------------------------------------
Centerpoint Energy Resources Corp., 8.125s, 2005 $965 $1,038,734
- -------------------------------------------------------------------------------------------------------
DTE Energy Co., 7.05s, 2011 5,350 6,040,899
- -------------------------------------------------------------------------------------------------------
Exelon Generation Co. LLC, 6.95s, 2011 4,026 4,490,407
- -------------------------------------------------------------------------------------------------------
First Energy Corp., 6.45s, 2011 4,000 4,248,932
- -------------------------------------------------------------------------------------------------------
Midamerican Energy Holdings Co., 5.875s, 2012 1,482 1,533,391
- -------------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375s, 2004 541 555,180
- -------------------------------------------------------------------------------------------------------
Nisource Finance Corp., 7.875s, 2010 2,900 3,431,396
- -------------------------------------------------------------------------------------------------------
Progress Energy, Inc., 7.1s, 2011 3,012 3,397,340
- -------------------------------------------------------------------------------------------------------
Progress Energy, Inc., 7s, 2031 510 547,163
- -------------------------------------------------------------------------------------------------------
PSE&G Energy Holdings LLC, 7.75s, 2007 3,240 3,272,400
- -------------------------------------------------------------------------------------------------------
PSE&G Power LLC, 6.95s, 2012 510 571,037
- -------------------------------------------------------------------------------------------------------
PSE&G Power LLC, 8.625s, 2031 1,276 1,621,958
- -------------------------------------------------------------------------------------------------------
TXU Energy Corp., 7s, 2013## 5,261 5,751,904
- -------------------------------------------------------------------------------------------------------
$36,500,741
- -------------------------------------------------------------------------------------------------------
Wireless Communications - 0.6%
- -------------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.75s, 2031 $1,946 $2,340,157
- -------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 9.375s, 2009 1,705 1,858,450
- -------------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 792 845,844
- -------------------------------------------------------------------------------------------------------
$5,044,451
- -------------------------------------------------------------------------------------------------------
Total U.S. Bonds $729,434,227
- -------------------------------------------------------------------------------------------------------
Foreign Bonds - 8.5%
- -------------------------------------------------------------------------------------------------------
Australia - 0.1%
- -------------------------------------------------------------------------------------------------------
Burns Philip Capital Property Ltd., 9.75s, 2012 (Food &
Non Alcoholic Beverages)## $600 $612,000
- -------------------------------------------------------------------------------------------------------
Canada - 1.2%
- -------------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 6.95s, 2008 (Forest & Paper
Products) $2,400 $2,447,026
- -------------------------------------------------------------------------------------------------------
Rogers Cable, Inc, 7.875s, 2012 (Broadcast & Cable TV) 1,404 1,544,400
- -------------------------------------------------------------------------------------------------------
Rogers Cable, Inc, 6.25s, 2013 (Broadcast & Cable TV) 2,721 2,721,000
- -------------------------------------------------------------------------------------------------------
Telus Corp., 8s, 2011 (Telecom - Wireline) 3,105 3,569,722
- -------------------------------------------------------------------------------------------------------
$10,282,148
- -------------------------------------------------------------------------------------------------------
Chile - 0.4%
- -------------------------------------------------------------------------------------------------------
Empresa Nacional de Electricidad S.A., 8.35s, 2013
(Utilities - Electric Power) $3,149 $3,389,688
- -------------------------------------------------------------------------------------------------------
Dominican Republic - 0.1%
- -------------------------------------------------------------------------------------------------------
Dominican Republic, 9.04s, 2013 (Sovereign)## $723 $556,710
- -------------------------------------------------------------------------------------------------------
France - 1.1%
- -------------------------------------------------------------------------------------------------------
Crown European Holdings S.A., 10.875s, 2013 (Containers) $2,185 $2,490,900
- -------------------------------------------------------------------------------------------------------
France Telecom S.A., 9.75s, 2031 (Telecom - Wireline) 3,670 4,843,743
- -------------------------------------------------------------------------------------------------------
Rhodia S.A., 7.625s, 2010 (Chemicals)## 1,945 1,828,300
- -------------------------------------------------------------------------------------------------------
$9,162,943
- -------------------------------------------------------------------------------------------------------
Germany - 0.4%
- -------------------------------------------------------------------------------------------------------
Deutsche Telekom, 5.25s, 2013 (Telecom - Wireline) $779 $774,198
- -------------------------------------------------------------------------------------------------------
Deutsche Telekom, 8.75s, 2030 (Telecom - Wireline) 1,994 2,508,562
- -------------------------------------------------------------------------------------------------------
$3,282,760
- -------------------------------------------------------------------------------------------------------
Hong Kong - 0.4%
- -------------------------------------------------------------------------------------------------------
PCCW Capital II Ltd., 6s, 2013 (Telecom - Wireline)## $3,495 $3,479,797
- -------------------------------------------------------------------------------------------------------
Ireland
- -------------------------------------------------------------------------------------------------------
MDP Acquisitions PLC, 9.625s, 2012 (Forest & Paper
Products) $375 $416,250
- -------------------------------------------------------------------------------------------------------
Italy - 0.3%
- -------------------------------------------------------------------------------------------------------
Telecom Italia Capital, 5.25s, 2013 (Telecom -
Wireline)## $2,852 $2,829,817
- -------------------------------------------------------------------------------------------------------
Japan - 0.5%
- -------------------------------------------------------------------------------------------------------
UFJ Finance Aruba AEC, 6.75s, 2013 (Banks & Credit Cos.) $3,917 $4,100,895
- -------------------------------------------------------------------------------------------------------
Kazakhstan - 0.3%
- -------------------------------------------------------------------------------------------------------
Kazkommerts International B.V, 10.125s, 2007 (Banks &
Credit Cos.) $700 $770,000
- -------------------------------------------------------------------------------------------------------
Kazkommerts International B.V., 10.125s, 2007 (Banks &
Credit Cos.)## 1,940 2,134,000
- -------------------------------------------------------------------------------------------------------
$2,904,000
- -------------------------------------------------------------------------------------------------------
Mexico - 1.0%
- -------------------------------------------------------------------------------------------------------
BBVA Bancomer Capital Trust I, 10.5s, 2011 (Banks &
Credit Cos.) $775 $868,000
- -------------------------------------------------------------------------------------------------------
BBVA Bancomer Capital Trust I, 10.5s, 2011 (Banks &
Credit Cos.)## 3,007 3,375,358
- -------------------------------------------------------------------------------------------------------
Grupo Televisa S.A. de CV, 8.5s, 2032 (Broadcast & Cable
TV) 3,613 3,793,650
- -------------------------------------------------------------------------------------------------------
Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V.,
12.5s, 2012 (Transportation - Services) 511 562,100
- -------------------------------------------------------------------------------------------------------
Pemex Finance Ltd., 9.69s, 2009 (Energy - Integrated) 180 209,700
- -------------------------------------------------------------------------------------------------------
$8,808,808
- -------------------------------------------------------------------------------------------------------
Netherlands - 0.2%
- -------------------------------------------------------------------------------------------------------
Coca-Cola HBC Finance B.V., 5.125s, 2013 (Food & Non
Alcoholic Beverages)## $1,848 $1,848,591
- -------------------------------------------------------------------------------------------------------
Russia - 0.7%
- -------------------------------------------------------------------------------------------------------
Gazprom, 9.625s, 2013 (Utilities - Gas) $210 $227,325
- -------------------------------------------------------------------------------------------------------
Gazprom, 9.625s, 2013 (Utilities - Gas)## 1,540 1,670,900
- -------------------------------------------------------------------------------------------------------
Mobile Telesystems, 10.95s, 2004 (Wireless
Communications) 1,200 1,266,000
- -------------------------------------------------------------------------------------------------------
Mobile Telesystems, 8.375s, 2010 (Wireless
Communications)## 1,100 1,083,500
- -------------------------------------------------------------------------------------------------------
Tyumen Oil Co., 11s, 2007 (Oil Services) 1,930 2,190,550
- -------------------------------------------------------------------------------------------------------
$6,438,275
- -------------------------------------------------------------------------------------------------------
Singapore - 0.5%
- -------------------------------------------------------------------------------------------------------
DBS Capital Funding Corp., 7.657s, 2049 (Banks &
Credit Cos.)## $3,779 $4,242,661
- -------------------------------------------------------------------------------------------------------
United Kingdom - 1.3%
- -------------------------------------------------------------------------------------------------------
Barclays Bank PLC, 6.86s, 2049 (Banks & Credit Cos.)## $1,001 $1,079,731
- -------------------------------------------------------------------------------------------------------
Barclays Bank PLC, 8.55s, 2049 (Banks & Credit Cos.)## 1,131 1,387,326
- -------------------------------------------------------------------------------------------------------
Cadbury Schweppes, 5.125s, 2013 (Food & Non Alcoholic
Beverages)## 1,950 1,934,217
- -------------------------------------------------------------------------------------------------------
Orange PLC, 9s, 2009 (Wireless Communications) 100 108,337
- -------------------------------------------------------------------------------------------------------
Permanent Financing PLC, 4.2s, 2007 (Asset Backed) 3,975 4,118,060
- -------------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC, 8.817s, 2049 (Banks &
Credit Cos.) 300 326,877
- -------------------------------------------------------------------------------------------------------
United Biscuits Finance PLC, 10.75s, 2011 (Food & Non
Alcoholic Beverages) GBP 1,000 1,890,984
- -------------------------------------------------------------------------------------------------------
$10,845,532
- -------------------------------------------------------------------------------------------------------
Total Foreign Bonds $73,200,875
- -------------------------------------------------------------------------------------------------------
Municipal Bonds - 1.3%
- -------------------------------------------------------------------------------------------------------
Anderson County, SC, Joint Municipal Water, 5s, 2032 $1,500 $1,512,765
- -------------------------------------------------------------------------------------------------------
Metropolitan, NY, Transportation Authority Revenue, 5s,
2030 1,500 1,508,940
- -------------------------------------------------------------------------------------------------------
Philadelphia, PA, Water & Wastewater Revenue, 5s, 2031 990 992,317
- -------------------------------------------------------------------------------------------------------
Regional Transport Authority Illinois, 5.75s, 2033 3,330 3,776,686
- -------------------------------------------------------------------------------------------------------
South Carolina Transit Infrastructure Revenue, 5s, 2033 1,500 1,507,695
- -------------------------------------------------------------------------------------------------------
Tampa Bay Water Florida Utility Systems Revenue., 6s,
2029 1,945 2,289,634
- -------------------------------------------------------------------------------------------------------
Total Municipal Bonds $11,588,037
- -------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $800,499,002) $814,223,139
- -------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.6%
- -------------------------------------------------------------------------------------------------------
Citigroup, Inc., due 12/02/03 $7,700 $7,692,972
- -------------------------------------------------------------------------------------------------------
Citigroup, Inc., due 12/09/03 5,000 4,994,405
- -------------------------------------------------------------------------------------------------------
New Center Asset Trust, due 11/03/03 26,563 26,561,465
- -------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $39,248,842
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $839,747,844) $853,471,981
- -------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.7% 6,128,230
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $859,600,211
- -------------------------------------------------------------------------------------------------------
## 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:
GBP = British Pounds
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- -----------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities composing
the total value of your fund.
AT 10/31/03
ASSETS
Investments, at value (identified cost, $839,747,844) $853,471,981
- -----------------------------------------------------------------------------------------------------
Cash 122
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 4,779,186
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 232,359
- -----------------------------------------------------------------------------------------------------
Receivable from investment adviser 119,727
- -----------------------------------------------------------------------------------------------------
Interest receivable 12,992,733
- -----------------------------------------------------------------------------------------------------
Total assets $871,596,108
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $3,545,718
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 2,721,259
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased 5,571,352
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 8,192
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 5,613
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 143,763
- -----------------------------------------------------------------------------------------------------
Total liabilities $11,995,897
- -----------------------------------------------------------------------------------------------------
Net assets $859,600,211
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $847,188,582
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 13,724,181
- -----------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments
and foreign currency transactions 4,321,110
- -----------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (5,633,662)
- -----------------------------------------------------------------------------------------------------
Total $859,600,211
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 81,804,257
- -----------------------------------------------------------------------------------------------------
Class A shares
Net asset $344,648,854
- -----------------------------------------------------------------------------------------------------
Shares outstanding 32,807,453
- -----------------------------------------------------------------------------------------------------
Net asset value per share $10.51
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$10.51) $11.03
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class B shares
Net assets $94,180,296
- -----------------------------------------------------------------------------------------------------
Shares outstanding 8,949,760
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.52
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $51,524,383
- -----------------------------------------------------------------------------------------------------
Shares outstanding 4,896,448
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.52
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $352,820,839
- -----------------------------------------------------------------------------------------------------
Shares outstanding 33,586,748
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $10.50
- -----------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $15,962,558
- -----------------------------------------------------------------------------------------------------
Shares outstanding 1,519,739
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $10.50
- -----------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $40,078
- -----------------------------------------------------------------------------------------------------
Shares outstanding 3,815
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $10.51
- -----------------------------------------------------------------------------------------------------
Class 529A shares
Net assets $204,253
- -----------------------------------------------------------------------------------------------------
Shares outstanding 19,474
- -----------------------------------------------------------------------------------------------------
Net asset value per share $10.49
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$10.49) $11.01
- -----------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $106,977
- -----------------------------------------------------------------------------------------------------
Shares outstanding 10,171
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.52
- -----------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $111,973
- -----------------------------------------------------------------------------------------------------
Shares outstanding 10,649
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $10.51
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the offering price of Class A and Class 529A 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 (unaudited)
- -----------------------------------------------------------------------------------------------------
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 SIX MONTHS ENDED 10/31/03
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Interest income $17,474,149
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $1,926,094
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 3,542
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 385,275
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 520,958
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 499,021
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 242,223
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 33,614
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 302
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 503
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 533
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 215
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 126
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 134
- -----------------------------------------------------------------------------------------------------
Administrative fee 28,892
- -----------------------------------------------------------------------------------------------------
Custodian fees 145,703
- -----------------------------------------------------------------------------------------------------
Printing 49,166
- -----------------------------------------------------------------------------------------------------
Auditing fees 23,519
- -----------------------------------------------------------------------------------------------------
Postage 14,284
- -----------------------------------------------------------------------------------------------------
Legal fees 14,159
- -----------------------------------------------------------------------------------------------------
Miscellaneous 230,554
- -----------------------------------------------------------------------------------------------------
Total expenses $4,118,817
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (4,918)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and distributor (995,540)
- -----------------------------------------------------------------------------------------------------
Net expenses $3,118,359
- -----------------------------------------------------------------------------------------------------
Net investment income $14,355,790
- -----------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $1,875,787
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions 1,659
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
transactions $1,877,446
- -----------------------------------------------------------------------------------------------------
Change in unrealized depreciation on
- -----------------------------------------------------------------------------------------------------
Investments $(6,988,641)
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies (33)
- -----------------------------------------------------------------------------------------------------
Net unrealized loss on investments and foreign currency
translation $(6,988,674)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and foreign
currency $(5,111,228)
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $9,244,562
- -----------------------------------------------------------------------------------------------------
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.
SIX MONTHS YEAR
ENDED ENDED
10/31/03 4/30/03
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $14,355,790 $13,057,836
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
transactions 1,877,446 5,746,810
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation (6,988,674) 20,476,837
- ------------------------------------------------------------- -------------- ----------------
Increase in net assets from operations $9,244,562 $39,281,483
- ------------------------------------------------------------- -------------- ----------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- -----------------------------------------------------------------------------------------------------
Class A $(7,613,792) $(6,542,041)
- -----------------------------------------------------------------------------------------------------
Class B (2,126,955) (3,180,566)
- -----------------------------------------------------------------------------------------------------
Class C (1,032,091) (1,331,103)
- -----------------------------------------------------------------------------------------------------
Class I (8,185,383) (5,101,606)
- -----------------------------------------------------------------------------------------------------
Class R1 (322,445) (124,405)
- -----------------------------------------------------------------------------------------------------
Class 529A (4,201) (2,407)
- -----------------------------------------------------------------------------------------------------
Class 529B (2,034) (632)
- -----------------------------------------------------------------------------------------------------
Class 529C (2,161) (658)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions
- -----------------------------------------------------------------------------------------------------
Class A -- (100,998)
- -----------------------------------------------------------------------------------------------------
Class B -- (60,918)
- -----------------------------------------------------------------------------------------------------
Class C -- (24,979)
- -----------------------------------------------------------------------------------------------------
Class I -- (73,126)
- -----------------------------------------------------------------------------------------------------
Class 529A -- (46)
- -----------------------------------------------------------------------------------------------------
Class 529B -- (7)
- -----------------------------------------------------------------------------------------------------
Class 529C -- (14)
- -----------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(19,289,062) $(16,543,506)
- ------------------------------------------------------------- -------------- ----------------
Net increase in net assets from fund share transactions $237,297,072 $492,906,320
- ------------------------------------------------------------- -------------- ----------------
Total increase in net assets $227,252,572 $515,644,297
- ------------------------------------------------------------- -------------- ----------------
NET ASSETS
At beginning of period $632,347,639 $116,703,342
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $5,633,662 and $700,390,
respectively) $859,600,211 $632,347,639
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or, if shorter, the period of the fund's operation). Certain information reflects financial
results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or
lost) on an investment in the fund (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED -------------------------------------------------- ENDED
10/31/03 2003 2002 2001 2000 4/30/99*
CLASS A (UNAUDITED)
Net asset value, beginning of period $10.62 $9.97 $9.80 $9.27 $9.80 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.20 $0.45 $0.50 $0.58 $0.64 $0.18
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.23+++ 0.77 0.29 0.62+++ (0.53) (0.21)
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ---------
Total from investment operations $0.43 $1.22 $0.79 $1.20 $0.11 $(0.03)
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.54) $(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
investment and foreign currency
transactions -- (0.01) (0.01) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain
on investments and foreign
currency tranactions -- -- (0.03) -- -- --
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ---------
Total distributions declared to
shareholders $(0.54) $(0.57) $(0.62) $(0.67) $(0.64) $(0.17)
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ---------
Net asset value, end of period $10.51 $10.62 $9.97 $9.80 $9.27 $9.80
- ------------------------------------- ------- ----------- ---------- ---------- ---------- ---------
Total return (%)(+) 1.54++ 12.58 8.19 13.39 1.31 (0.29)++
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED -------------------------------------------------- ENDED
10/31/03 2003 2002 2001 2000 4/30/99*
CLASS A (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.70+ 0.70 0.70 0.41 0.03 0.30+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.83+ 4.44 5.21 6.54 6.82 5.62+
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 87 141 166 272 209 117
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000
Omitted) $344,649 $221,872 $55,592 $5,447 $1,011 $999
- ------------------------------------------------------------------------------------------------------------------------------
(S) Effective December 29, 2000, the investment adviser contractually 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 contractually
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 contractually 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) $0.18 $0.40 $0.44 $0.15 $0.23 $(0.09)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.08+ 1.16 1.37 5.24 4.43 8.93+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.45+ 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 are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
(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
SIX MONTHS YEASR ENDED 4/30 PERIOD
ENDED ---------------------------- ENDED
10/31/03 2003 2002 4/30/01*
CLASS B (UNAUDITED)
Net asset value, beginning of period $10.64 $9.98 $9.81 $9.77
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.16 $0.37 $0.43 $0.12
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 0.17+++ 0.77 0.28 0.10+++
- ----------------------------------------------------- --------- ------------ ------------ -----------
Total from investment operations $0.33 $1.14 $0.71 $0.22
- ----------------------------------------------------- --------- ------------ ------------ -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.45) $(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 $(0.45) $(0.48) $(0.54) $(0.18)
- ----------------------------------------------------- --------- ------------ ------------ -----------
Net asset value, end of period $10.52 $10.64 $9.98 $9.81
- ----------------------------------------------------- --------- ------------ ------------ -----------
Total return (%) 1.02++ 11.72 7.27 5.89++
- ------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED ---------------------------- ENDED
10/31/03 2003 2002 4/30/01*
CLASS B (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.55+ 1.55 1.55 1.57+
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.97+ 3.62 4.35 5.19+
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 87 141 166 272
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $94,180 $98,653 $40,800 $5,454
- ---------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 $0.15 $0.34 $0.38 $0.01
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.73+ 1.81 2.02 6.30+
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.79+ 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 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 $0.04, 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
SIX MONTHS YEASR ENDED 4/30 PERIOD
ENDED ---------------------------- ENDED
10/31/03 2003 2002 4/30/01*
CLASS C (UNAUDITED)
Net asset value, beginning of period $10.64 $9.98 $9.81 $9.77
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.16 $0.37 $0.43 $0.13
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 0.17+++ 0.77 0.28 0.09+++
- ------------------------------------------------------ -------- ------------ ------------ -----------
Total from investment operations $0.33 $1.14 $0.71 $0.22
- ------------------------------------------------------ -------- ------------ ------------ -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.45) $(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 $(0.45) $(0.48) $(0.54) $(0.18)
- ------------------------------------------------------ -------- ------------ ------------ -----------
Net asset value, end of period $10.52 $10.64 $9.98 $9.81
- ------------------------------------------------------ -------- ------------ ------------ -----------
Total return (%) 1.02++ 11.72 7.27 5.90++
- ------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED ---------------------------- ENDED
10/31/03 2003 2002 4/30/01*
CLASS C (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.55+ 1.55 1.55+ 1.57+
- ------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.98+ 3.62 4.34 5.20+
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 87 141 166 272
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $51,524 $41,768 $16,411 $4,274
- ------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 $0.15 $0.34 $0.38 $0.01
- ------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.73+ 1.81 2.02 6.30+
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 2.80+ 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 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 $0.04, 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
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED ------------------------------------------------- ENDED
10/31/03 2003 2002 2001 2000 4/30/99*
CLASS I (UNAUDITED)
Net asset value, beginning of period $10.62 $9.96 $9.79 $9.26 $9.78 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.21 $0.45 $0.45 $0.66 $0.65 $0.18
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 0.23++++ 0.80 0.35 0.55++++ (0.53) (0.23)
- ---------------------------------------- ------- ----------- --------- --------- -------- --------
Total from investment operations $0.44 $1.25 $0.80 $1.21 $0.12 $(0.05)
- ---------------------------------------- ------- ----------- --------- --------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.56) $(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 $(0.56) $(0.59) $(0.63) $(0.68) $(0.64) $(0.17)
- ---------------------------------------- ------- ----------- --------- --------- -------- --------
Net asset value, end of period $10.50 $10.62 $9.96 $9.79 $9.26 $9.78
- ---------------------------------------- ------- ----------- --------- --------- -------- --------
Total return (%) 1.52++ 12.86 8.36 13.47 1.41 (0.49)++
- ------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30 PERIOD
ENDED ------------------------------------------------- ENDED
10/31/03 2003 2002 2001 2000 4/30/99*
CLASS I (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.55+ 0.55 0.55 0.04 0.03 0.30+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 3.98+ 4.52 5.48 6.92 6.92 5.13+
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 87 141 166 272 209 117
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $352,821 $259,920 $3,900 $0+++ $0+++ $0+++
- ------------------------------------------------------------------------------------------------------------------------------
(S) Effective December 29, 2000, the investment adviser contractually 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 contractually 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 contractually 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) $0.20 $0.42 $0.41 $0.21 $0.27 $(0.11)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 0.73+ 0.81 1.02 4.77 4.08 8.58+
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.80+ 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 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 $0.04, 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
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS R1 (UNAUDITED)
Net asset value, beginning of period $10.62 $10.42
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.19 $0.14
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.20+++ 0.24+++
- -------------------------------------------------------------------- ------- -----------
Total from investment operations $0.39 $0.38
- -------------------------------------------------------------------- ------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.51) $(0.18)
- -------------------------------------------------------------------- ------- -----------
Net asset value, end of period $10.50 $10.62
- -------------------------------------------------------------------- ------- -----------
Total return (%) 1.27++ 3.43++
- --------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.05+ 1.05+
- --------------------------------------------------------------------------------------------------
Net investment income 3.49+ 3.88+
- --------------------------------------------------------------------------------------------------
Portfolio turnover 87 141
- --------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $15,963 $9,880
- --------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 $0.18 $0.13
- --------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.23+ 1.31+
- --------------------------------------------------------------------------------------------------
Net investment income 3.31+ 3.62+
- --------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 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 are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS 529A (UNAUDITED)
Net asset value, beginning of period $10.61 $10.05
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.18 $0.29
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency 0.22+++ 0.68+++
- --------------------------------------------------------------------- ------ -----------
Total from investment operations $0.40 $0.97
- --------------------------------------------------------------------- ------ -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.52) $(0.40)
- --------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency
transactions -- (0.01)
- --------------------------------------------------------------------- ------ -----------
Total distributions declared to shareholders $(0.52) $(0.41)
- --------------------------------------------------------------------- ------ -----------
Net asset value, end of period $10.49 $10.61
- --------------------------------------------------------------------- ------ -----------
Total return (%)(+) 1.32++ 10.56++
- --------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.05+ 1.05+
- --------------------------------------------------------------------------------------------------
Net investment income 3.47+ 3.99+
- --------------------------------------------------------------------------------------------------
Portfolio turnover 87 141
- --------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $204 $157
- --------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 0.45% 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 $0.17 $0.26
- --------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.33+ 1.41+
- --------------------------------------------------------------------------------------------------
Net investment income 3.19+ 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 are based on average shares outstanding.
## Ratios do not reflect expense 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.
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS 529B (UNAUDITED)
Net asset value, beginning of period $10.64 $10.07
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.15 $0.23
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency 0.16+++ 0.69+++
- ------------------------------------------------------------- -------------- -----------
Total from investment operations $0.31 $0.92
- ------------------------------------------------------------- -------------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.43) $(0.34)
- --------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency
transactions -- (0.01)
- ------------------------------------------------------------- -------------- -----------
Total distributions declared to shareholders $(0.43) $(0.35)
- ------------------------------------------------------------- -------------- -----------
Net asset value, end of period $10.52 $10.64
- ------------------------------------------------------------- -------------- -----------
Total return (%) 0.89++ 10.00++
- --------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.81+ 1.80+
- --------------------------------------------------------------------------------------------------
Net investment income 2.72+ 3.24+
- --------------------------------------------------------------------------------------------------
Portfolio turnover 87 141
- --------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $107 $41
- --------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 0.45% 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 $0.14 $0.21
- --------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.99+ 2.06+
- --------------------------------------------------------------------------------------------------
Net investment income 2.54+ 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 are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS 529C (UNAUDITED)
Net asset value, beginning of period $10.63 $10.07
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.15 $0.22
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency 0.16+++ 0.69+++
- ------------------------------------------------------------------ --------- -----------
Total from investment operations $0.31 $0.91
- ------------------------------------------------------------------ --------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.43) $(0.34)
- --------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency
transactions -- (0.01)
- ------------------------------------------------------------------ --------- -----------
Total distributions declared to shareholders $(0.43) $(0.35)
- ------------------------------------------------------------------ --------- -----------
Net asset value, end of period $10.51 $10.63
- ------------------------------------------------------------------ --------- -----------
Total return (%) 0.89++ 9.89++
- --------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA(S):
Expenses## 1.80+ 1.80+
- --------------------------------------------------------------------------------------------------
Net investment income 2.72+ 3.23+
- --------------------------------------------------------------------------------------------------
Portfolio turnover 87 141
- --------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $112 $57
- --------------------------------------------------------------------------------------------------
(S) The investment adviser contractually 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 0.45% 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 $0.14 $0.20
- --------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.98+ 2.06+
- --------------------------------------------------------------------------------------------------
Net investment income 2.54+ 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 are 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 (unaudited)
- --------------------------------------------------------------------------------
(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) 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.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States
of America. 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.
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, 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
- -------------------------------------------------------------------------------
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, distribution and service and program manger
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 R1,
and not greater than 0.45% of average daily net assets for Class R2, 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).
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
not to exceed the following annual percentage rates 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%
----------------------------------------------------------
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain administrative
services with respect to class R2 shares. These services include various
administrative, recordkeeping and communication/educational services with
respect to the retirement plans which invest in class R2 shares, and may be
provided directly by MFS or by a third party. The fund pays an annual 0.25%
administrative service fee solely from the assets of class R2 shares to MFS
for the provision of these services. No administrative service fee from class
R2 shares were paid to MFS as of October 31, 2003.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor,
received $105,286 and $204 for the year ended October 31, 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 R1, Class R2, 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 R1 CLASS R2 CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.25% 0.75% 0.75%
- ---------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 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% 0.50% 1.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the six months ended October 31, 2003,
amounted to:
CLASS A CLASS B CLASS C CLASS R1 CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained by
MFD $4,585 $74 $164 $1 $28 $3 $9
- ------------------------------------------------------------------------------------------------------------------------
Payment of the 0.10% per annum portion of the 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 six months ended October 31, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS R1 CLASS 529A CLASS 529B CLASS 529C
Effective Annual
Percentage Rates 0.15% 1.00% 1.00% 0.50% 0.25% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Class R2 shares, which commenced operations on October 31, 2003, did not incur
any fees.
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 six months ended October 31, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred Sales
Charges Imposed $1,090 $144,406 $13,203 $-- $--
- --------------------------------------------------------------------------------
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%.
(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 $595,914,836 $513,414,191
- ------------------------------------------------------------------------------
Investments (non-U.S. government securities) $254,989,239 $122,986,156
- ------------------------------------------------------------------------------
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 $844,634,234
- --------------------------------------------------------------------------------
Gross unrealized appreciation $14,608,610
- --------------------------------------------------------------------------------
Gross unrealized depreciation (5,770,863)
- --------------------------------------------------------------------------------
Net unrealized appreciation $8,837,747
- --------------------------------------------------------------------------------
(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:
Six months ended Year ended
10/31/03 4/30/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 16,850,678 $178,964,757 21,301,327 $219,722,265
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 480,186 5,077,451 446,788 4,604,741
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (5,415,581) (57,165,993) (6,434,161) (66,305,242)
- --------------------------------------------------------------------------------------------------------------
Net increase 11,915,283 $126,876,215 15,313,954 $158,021,764
- --------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 1,924,447 $20,474,311 6,795,714 $69,916,045
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 158,566 1,680,896 240,661 2,477,529
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (2,405,951) (25,346,806) (1,850,884) (19,066,192)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) (322,938) $(3,191,599) 5,185,491 $53,327,382
- --------------------------------------------------------------------------------------------------------------
Six months ended Year ended
10/31/03 4/30/03
SHARES AMOUNT SHARES AMOUNT
CLASS C SHARES
Shares sold 1,882,645 $20,084,440 3,146,247 $32,327,164
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 57,355 607,626 84,884 873,622
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (969,672) (10,228,832) (949,327) (9,760,776)
- --------------------------------------------------------------------------------------------------------------
Net increase 970,328 $10,463,234 2,281,804 $23,440,010
- --------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 10,335,367 $109,544,021 26,012,408 $268,160,960
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 270,860 2,861,719 143,945 1,493,016
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (1,494,873) (15,753,673) (2,072,534) (21,446,901)
- --------------------------------------------------------------------------------------------------------------
Net increase 9,111,354 $96,652,067 24,083,819 $248,207,075
- --------------------------------------------------------------------------------------------------------------
Six months ended Period ended
10/31/03 4/30/03*
SHARES AMOUNT SHARES AMOUNT
CLASS R1 SHARES
Shares sold 1,181,637 $12,586,711 1,086,251 $11,292,420
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 27,836 293,905 8,058 84,526
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (620,062) (6,596,297) (163,981) (1,716,753)
- --------------------------------------------------------------------------------------------------------------
Net increase 589,411 $6,284,319 930,328 $9,660,193
- --------------------------------------------------------------------------------------------------------------
Period ended
10/31/03**
SHARES AMOUNT
CLASS R2 SHARES
Shares sold 3,815 $40,015
- -------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions -- --
- -------------------------------------------------------------------
Shares reacquired -- --
- -------------------------------------------------------------------
Net increase 3,815 $40,015
- -------------------------------------------------------------------
Six months ended Period ended
10/31/03 4/30/03***
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 6,088 $63,798 14,623 $151,778
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 363 3,831 187 1,945
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (1,765) (18,342) (22) (230)
- --------------------------------------------------------------------------------------------------------------
Net increase 4,686 $49,287 14,788 $153,493
- --------------------------------------------------------------------------------------------------------------
Six months ended Period ended
10/31/03 4/30/03***
SHARES AMOUNT SHARES AMOUNT
CLASS 529B SHARES
Shares sold 6,331 $67,514 3,862 $40,061
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 171 1,809 48 498
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (216) (2,307) (25) (259)
- --------------------------------------------------------------------------------------------------------------
Net increase 6,286 $67,016 3,885 $40,300
- --------------------------------------------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 5,294 $56,893 5,363 $55,810
- --------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 184 1,948 48 504
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (220) (2,323) (20) (211)
- --------------------------------------------------------------------------------------------------------------
Net increase 5,258 $56,518 5,391 $56,103
- --------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through April 30, 2003.
** Class R2 shares, which commenced operations on October 31, 2003, had no operating activity.
*** 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 six
months ended October 31, 2003, was $2,787. The fund had no borrowings during
the period.
(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) SUBSEQUENT EVENT
On November 20, 2003, the Trustees approved the redemption "in-kind" of a
significant shareholder in the fund (MFS Research Bond Fund J). The redemption
"in-kind" is expected to occur on or about December 19, 2003. As of October
31, 2003, MFS Research Bond Fund J held 22.7% of the outstanding shares of the
fund.
(9) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the fund's investment adviser,
has been contacted by the Office of the New York State Attorney General ("NYAG")
and the United States Securities and Exchange Commission ("SEC") in connection
with their investigations of practices in the mutual fund industry identified as
"market timing" mutual fund shares. MFS is cooperating with respect to these
investigations. MFS has been informed that the SEC is considering whether to
institute an enforcement action against MFS alleging false and misleading
disclosure in certain MFS fund prospectuses and breach of fiduciary duty
concerning market timing. The NYAG has also indicated that it is considering
whether to commence an enforcement proceeding against MFS relating to these
practices. MFS continues to discuss these matters with the SEC and the NYAG.
Certain other regulatory authorities are also conducting investigations into
these practices within the industry and have requested that MFS provide
information to them.
In December 2003, MFS and Sun Life Financial Inc., along with certain MFS
funds and Trustees who serve on the Board of Trustees of these MFS funds, were
named as defendants in class action lawsuits filed in the United States
District Court, District of Massachusetts seeking damages of unspecified
amounts. The lawsuits were purportedly filed on behalf of people who
purchased, owned and/or redeemed shares of MFS funds during specified periods.
The suits allege that certain defendants permitted market timing and late
trading in the MFS funds which allegedly caused financial injury to the funds'
shareholders. The defendants are reviewing the allegations and will respond
appropriately. Additional lawsuits based upon similar allegations may be filed
in the future.
Any potential resolution of these matters may include, but not be limited to,
sanctions, penalties, damages or injunctions regarding MFS, restitution to
mutual fund shareholders and/or other financial penalties and structural
changes in the governance of MFS' mutual fund business.
Although MFS does not believe that these lawsuits will have a material adverse
effect on the funds, there can be no assurance that these suits, the ongoing
adverse publicity and/or other developments resulting from related regulatory
investigations or developments will not result in increased fund redemptions,
reduced sales of fund shares, or other adverse consequences for the funds.
- ---------------------------------------------------------------------------------------------------------------------------------
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, Private investor; Rockefeller Financial Services, Inc.
Chairman (investment 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 Company, Trustee
Chief Executive Officer and Director Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Company, Private investor; Harvard University Graduate School
President, Chief Investment Officer and Director of Business Administration, Class of 1961 Adjunct
Professor in Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc. (real estate
investment trust), Director
LAWRENCE H. COHN, M.D. (born 03/11/37)
Trustee J. DALE SHERRATT (born 09/23/38)
Brigham and Women's Hospital, Chief of Cardiac Trustee
Surgery; Harvard Medical School, Professor of Surgery Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments (investor
WILLIAM R. GUTOW (born 09/27/41) in health care companies), Managing General Partner
Trustee (since 1993); Cambridge Nutraceuticals (professional
Private investor and real estate consultant; nutritional products), Chief Executive Officer (until
Capitol Entertainment Management Company May 2001)
(video franchise), Vice Chairman
ELAINE R. SMITH (born 04/25/46)
J. ATWOOD IVES (born 05/01/36) Trustee
Trustee Independent health care industry consultant
Private investor; KeySpan Corporation (energy related
services), Director; Eastern Enterprises (diversified WARD SMITH (born 09/13/30)
services company), Chairman, Trustee and Chief Trustee
Executive Officer (until November 2000) 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
JOHN W. BALLEN (born 09/12/59) ROBERT R. FLAHERTY (born 09/18/63)
Trustee and President Assistant Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59)
Assistant Secretary and Assistant Clerk RICHARD M. HISEY (born 08/29/58)
Massachusetts Financial Services Company, Senior Treasurer
Vice President and Associate General Counsel Massachusetts Financial Services Company, Senior
Vice President (since July 2002); The Bank of New
STEPHEN E. CAVAN (born 11/06/53) York, Senior Vice President (September 2000 to July
Secretary and Clerk 2002); Lexington Global Asset Managers, Inc.,
Massachusetts Financial Services Company, Senior Executive Vice President and Chief Financial Officer
Vice President, General Counsel and Secretary (prior to September 2000); Lexington Funds,
Treasurer (prior to September 2000)
STEPHANIE A. DESISTO (born 10/01/53)
Assistant Treasurer ELLEN MOYNIHAN (born 11/13/57)
Massachusetts Financial Services Company, Vice Assistant Treasurer
President (since April 2003); Brown Brothers Massachusetts Financial Services Company,
Harriman & Co., Senior Vice President (November Vice President
2002 to April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice President (prior JAMES O. YOST (born 06/12/60)
to November 2002) Assistant Treasurer
Massachusetts Financial Services 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 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 110 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 02116-3741 225 Franklin Street, Boston, MA 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
DIRECTOR OF FIXED INCOME RESEARCH
Michael W. Roberge(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
A prospectus containing more complete information, including investment
objectives, risks, charges and expenses, for any of the MFS products can be
obtained from your investment professional. You should read and consider the
information carefully before investing.
Variable annuities are offered through MFS/Sun Life Financial Distributors, Inc.
- -------------------------------------------------------------------------------
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.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.
gov.
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 exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required 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
RBF SEM-12/03 82M
MFS(R) Mutual Funds
SEMIANNUAL REPORT 10/31/03
MFS(R) INFLATION-ADJUSTED
BOND FUND
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) INFLATION-ADJUSTED BOND FUND
The fund seeks a total return that exceeds the rate of inflation over the long
term.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- ---------------------------------------------
To view MFS' statement concerning regulatory
issues affecting the mutual fund industry and
the firm, please visit www.mfs.com.
- ---------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 2
- ----------------------------------------------------
FINANCIAL STATEMENTS 3
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 8
- ----------------------------------------------------
TRUSTEES AND OFFICERS 12
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) - 10/31/03
- ---------------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized
by broad-based asset classes.
Bonds - 96.8%
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- ---------------------------------------------------------------------------------------------------------
U.S. Bonds - 96.8%
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Inflation Protected Obligations - 90.6%
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 3.625s, 2028 $216 $261,111
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.375s, 2007 175 190,566
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.625s, 2008 226 251,375
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25s, 2010 97 112,513
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.5s, 2011 135 151,768
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2012 80 87,626
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 1.875s, 2013 47 47,112
- ---------------------------------------------------------------------------------------------------------
$1,102,071
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 6.2%
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.125s, 2029 $31 $34,804
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.125s, 2008 25 24,886
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.875s, 2013 16 15,554
- ---------------------------------------------------------------------------------------------------------
$75,244
- ---------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,177,863) $1,177,315
- ---------------------------------------------------------------------------------------------------------
Repurchase Agreement - 3.8%
- ---------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., dated 10/31/03, due 11/03/03,
total to be received $46,004 (secured by U.S. Treasury and
Federal Agency obligations in a jointly traded account), at Cost $46 $46,000
- ---------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,223,863) $1,223,315
- ---------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.6)% (6,833)
- ---------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,216,482
- ---------------------------------------------------------------------------------------------------------
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES - (unaudited)
- ---------------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities composing
the total value of your fund.
AT 10/31/03
ASSETS
Investments, at value (identified cost, $1,223,863) $1,223,315
- -----------------------------------------------------------------------------------------------------
Cash 42,152
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 97
- -----------------------------------------------------------------------------------------------------
Interest receivable 8,767
- -----------------------------------------------------------------------------------------------------
Total assets $1,274,331
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $4,517
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased 45,893
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 7,423
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
Management fee 11
- -----------------------------------------------------------------------------------------------------
Reimbursement fee 5
- -----------------------------------------------------------------------------------------------------
Total liabilities $57,849
- -----------------------------------------------------------------------------------------------------
Net assets $1,216,482
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $1,217,717
- -----------------------------------------------------------------------------------------------------
Unrealized depreciation on investments (548)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (588)
- -----------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (99)
- -----------------------------------------------------------------------------------------------------
Total $ 1,216,482
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 121,921
- -----------------------------------------------------------------------------------------------------
Class A shares
Net assets $498,857
- -----------------------------------------------------------------------------------------------------
Shares outstanding 50,000
- -----------------------------------------------------------------------------------------------------
Net asset value per share $9.98
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$9.98) $10.48
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $717,625
- -----------------------------------------------------------------------------------------------------
Shares outstanding 71,921
- -----------------------------------------------------------------------------------------------------
Net asset value per share $9.98
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the offering price of Class A shares is reduced. A contingent deferred
sales charge may be imposed on redemptions of Class A shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS - (unaudited)
- -----------------------------------------------------------------------------------------------------
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 PERIOD ENDED 10/31/03*
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Interest income $4,900
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $477
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 169
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 105
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 145
- -----------------------------------------------------------------------------------------------------
Custodian fee 60
- -----------------------------------------------------------------------------------------------------
Printing 1,001
- -----------------------------------------------------------------------------------------------------
Postage 55
- -----------------------------------------------------------------------------------------------------
Auditing fees 1,200
- -----------------------------------------------------------------------------------------------------
Legal fees 500
- -----------------------------------------------------------------------------------------------------
Registration fees 407
- -----------------------------------------------------------------------------------------------------
Miscellaneous 528
- -----------------------------------------------------------------------------------------------------
Total expenses $4,647
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and distributor (4,165)
- -----------------------------------------------------------------------------------------------------
Net expenses $482
- -----------------------------------------------------------------------------------------------------
Net investment income $4,418
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Realized loss (identified cost basis) on investment transactions $(588)
- -----------------------------------------------------------------------------------------------------
Change in unrealized depreciation on investments (548)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments $(1,136)
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $3,282
- -----------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,September 30, 2003, through
October 31, 2003.
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS - (unaudited)
- --------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
PERIOD ENDING
10/31/03*
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $4,418
- ----------------------------------------------------------------------------
Net realized loss on investments (588)
- ----------------------------------------------------------------------------
Net unrealized loss on investments (548)
- ----------------------------------------------------------------------------
Increase in net assets from operations $3,282
- ------------------------------------------------------------ -------------
Distributions declared to shareholders
From net investment income (Class A) $(1,945)
- ----------------------------------------------------------------------------
From net investment income (Class I) (2,572)
- ------------------------------------------------------------ -------------
Total distributions declared to shareholders $(4,517)
- ------------------------------------------------------------ -------------
Net increase in net assets from fund share transactions $1,217,717
- ------------------------------------------------------------ -------------
Total increase in net assets $1,216,482
- ------------------------------------------------------------ -------------
NET ASSETS
At beginning of period $--
- ----------------------------------------------------------------------------
At end of period (including distributions in excess of
net investment income of $99) $1,216,482
- ----------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
September 30, 2003, through October 31, 2003.
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance for the semiannual period. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the fund (assuming reinvestment of all distributions).
PERIOD ENDED
10/31/03*
CLASS A (UNAUDITED)
Net asset value, beginning of period $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.04
- ------------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.02)
- ---------------------------------------------------------------- -----------
Total from investment operations $0.02
- ---------------------------------------------------------------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS FROM
NET INVESTMENT INCOME $(0.04)
- ---------------------------------------------------------------- -----------
Net asset value, end of period $9.98
- ---------------------------------------------------------------- -----------
Total return (%)(+) 0.19++
RATIOS (%) (TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA (S)
Expenses 0.50+
- ------------------------------------------------------------------------------
Net investment income 4.53+
- ------------------------------------------------------------------------------
Portfolio turnover 8
- ------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $499
- ------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually
agreed under a temporary expense reimbursement agreement to pay all of the
funds operating expenses exclusive of management fees and distribution and
service fees. In consideration, the fund pays the investment adviser a
reimbursement fee not greater than 0.15% of average net assets. In addition,
the investment adviser voluntarily waived a portion of its fee and the
distributor voluntarily waived its fee for the periods indicated. To the
extent actual expenses were over this limitation and the waivers had not
been in place, the net investment income per share and the ratios would have
been:
Net investment income $0.00**
- ------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses 5.00+
- ------------------------------------------------------------------------------
Net investment income 0.03+
- ------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
September 30, 2003, through October 31, 2003.
** Per share amount was less than $0.01.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
(+) 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
PERIOD ENDED
10/31/03*
CLASS I (UNAUDITED)
Net asset value, beginning of period $10.00
- ---------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.04
- ---------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.02)
- ---------------------------------------------------------------- ---------
Total from investment operations $0.02
- ---------------------------------------------------------------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS FROM NET INVESTMENT
INCOME $(0.04)
- ---------------------------------------------------------------- ---------
Net asset value, end of period $9.98
- ---------------------------------------------------------------- ---------
Total return (%)(+) 0.19++
RATIOS (%) (TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA (S)
Expenses 0.50+
- ---------------------------------------------------------------------------
Net investment income 4.61+
- ---------------------------------------------------------------------------
Portfolio turnover 8
- ---------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $718
- ---------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually
agreed under a temporary expense reimbursement agreement to pay all of the
funds operating expenses exclusive of management fees. In consideration, the
fund pays the investment adviser a reimbursement fee not greater than 0.15%
of average net assets. In addition, the investment adviser voluntarily
waived a portion of its fee for the periods indicated. To the extent actual
expenses were over this limitation and the waiver had not been in place, the
net investment income per share and the ratios would have been:
Net investment income $0.00**
- ---------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses 4.65+
- ---------------------------------------------------------------------------
Net investment income 0.46+
- ---------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
September 30, 2003, through October 31, 2003.
** Per share amount was less than $0.01.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
See notes to financial statements.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Inflation-Adjusted 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) 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, 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.
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 accounting principles generally accepted in the United States of America.
All discount is accreted for tax reporting purposes as required by federal
income tax regulations.
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 amortization and accretion on debt securities.
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.
(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 period
ended October 31, 2003 were 0.35% of average daily net assets on an annualized
basis.
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, distribution, and service fees. The fund in turn will pay MFS an
expense reimbursement fee not greater than 0.15% of average daily net assets for
Class A and Class I. 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 October 31, 2003, aggregate unreimbursed expenses amounted to
$3,880.
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). The fund has
an unfunded, defined benefit plan for inactive Trustees.
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
not to exceed the following annual percentage rates 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 the fund for the period
ended October 31, 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:
The fund's distribution plan provides that the fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer 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 being waived.
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 period ended
October 31, 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%.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
U.S. government securities $1,266,944 $90,349
- -------------------------------------------------------------------------------
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 $ 1,223,863
----------------------------------------------
Gross unrealized depreciation $(4,433)
----------------------------------------------
Gross unrealized appreciation 3,885
----------------------------------------------
Net unrealized depreciation $(548)
----------------------------------------------
(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:
Period ended 10/31/03*
CLASS A SHARES SHARES AMOUNT
Shares sold 50,000 $500,000
- --------------------------------------------------------------------------------
CLASS I SHARES SHARES AMOUNT
Shares sold 73,197 $730,454
- --------------------------------------------------------------------------------
Shares reacquired (1,276) (12,737)
- --------------------------------------------------------------------------------
Net increase 71,921 $717,717
- --------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
September 30, 2003, through October 31, 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 October 31, 2003. The fund had no borrowings during the period.
(7) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the fund's investment adviser,
has been contacted by the Office of the New York State Attorney General ("NYAG")
and the United States Securities and Exchange Commission ("SEC") in connection
with their investigations of practices in the mutual fund industry identified as
"market timing" mutual fund shares. MFS is cooperating with respect to these
investigations. MFS has been informed that the SEC is considering whether to
institute an enforcement action against MFS alleging false and misleading
disclosure in certain MFS fund prospectuses and breach of fiduciary duty
concerning market timing. The NYAG has also indicated that it is considering
whether to commence an enforcement proceeding against MFS relating to these
practices. MFS continues to discuss these matters with the SEC and the NYAG.
Certain other regulatory authorities are also conducting investigations into
these practices within the industry and have requested that MFS provide
information to them.
In December 2003, MFS and Sun Life Financial Inc., along with certain MFS funds
and Trustees who serve on the Board of Trustees of these MFS funds, were named
as defendants in class action lawsuits filed in the United States District
Court, District of Massachusetts seeking damages of unspecified amounts. The
lawsuits were purportedly filed on behalf of people who purchased, owned and/or
redeemed shares of MFS funds during specified periods. The suits allege that
certain defendants permitted market timing and late trading in the MFS funds
which allegedly caused financial injury to the funds" shareholders. The
defendants are reviewing the allegations and will respond appropriately.
Additional lawsuits based upon similar allegations may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
sanctions, penalties, damages or injunctions regarding MFS, restitution to
mutual fund shareholders and/or other financial penalties and structural changes
in the governance of MFS' mutual fund business.
Although MFS does not believe that these lawsuits will have a material adverse
effect on the funds, there can be no assurance that these suits, the ongoing
adverse publicity and/or other developments resulting from related regulatory
investigations or developments will not result in increased fund redemptions,
reduced sales of fund shares, or other adverse consequences for the funds.
This publication is authorized for distribution only when preceded or
accompanied by a prospectus for the portfolio being offered.
- -----------------------------------------------------------------------------------------------------------------------------------
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) Chairman ABBY M. O'NEILL (born 04/27/28) Trustee
Massachusetts Financial Services Company, Chairman Private investor; Rockefeller Financial Services, Inc.
(investment advisers), Chairman and Chief Executive Office
JOHN W. BALLEN(2) (born 09/12/59) Trustee and President
Massachusetts Financial Services Company, Chief Executive LAWRENCE T. PERERA (born 06/23/35) Trustee
Officer and Director Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59) Trustee WILLIAM J. POORVU (born 04/10/35) Trustee
Massachusetts Financial Services Company, President, Private investor; Harvard University Graduate School of
Chief Investment Officer and Director Business Administration, Class of 1961 Adjunct Professor
in Entrepreneurship Emeritus; 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 planning specialists),
Brigham and Women's Hospital, Chief of Cardiac Surgery; President; Wellfleet Investments (investor in health care
Harvard Medical School, Professor of Surgery companies), Managing General Partner (since 1993); Cambridge
Nutraceuticals (professional nutritional products),
WILLIAM R. GUTOW (born 09/27/41) Trustee Chief Executive Officer (until May 2001)
Private investor and real estate consultant; Capitol
Entertainment Management Company (video franchise), Vice ELAINE R. SMITH (born 04/25/46) Trustee
Chairman Independent health care industry consultant
J. ATWOOD IVES (born 05/01/36) Trustee WARD SMITH (born 09/13/30) Trustee
Private investor; KeySpan Corporation (energy related Private investor
services), Director; Eastern Enterprises (diversified
services company), Chairman, Trustee and Chief Executive
Officer (until November 2000)
OFFICERS
JOHN W. BALLEN (born 09/12/59) Trustee and President ROBERT R. FLAHERTY (born 09/18/63) Assistant
Massachusetts Financial Services Company, Chief Executive Treasurer
Officer and Director Massachusetts Financial Services Company, Vice President
(since August 2000); UAM Fund Services, Senior Vice Presid
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant Secretary (prior to August 2000)
and Assistant Clerk
Massachusetts Financial Services Company, Senior Vice RICHARD M. HISEY (born 08/29/58) Treasurer
President and Associate General Counsel Massachusetts Financial Services Company, Senior Vice President
(since July 2002); The Bank of New York, Senior Vice Presi
STEPHEN E. CAVAN (born 11/06/53) Secretary and Clerk (September 2000 to July 2002); Lexington Global Asset Managers,
Massachusetts Financial Services Company, Senior Vice Inc., Executive Vice President and Chief Financial Officer
President, General Counsel and Secretary (prior to September 2000); Lexington Funds, Treasurer (prior to
September 2000)
STEPHANIE A. DESISTO (born 10/01/53) Assistant Treasurer
Massachusetts Financial Services Company, Vice President ELLEN MOYNIHAN (born 11/13/57) Assistant
(since April 2003); Brown Brothers Harriman & Co., Senior Treasurer
Vice President (November 2002 to April 2003); ING Groep Massachusetts Financial Services Company, Vice President
N.V./Aeltus Investment Management, Senior Vice President
(prior to November 2002) JAMES O. YOST (born 06/12/60) Assistant Treasurer
Massachusetts Financial Services Company, Senior Vice Pres
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 110 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").
(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
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street 225 Franklin Street, Boston, MA 02110
Boston, MA 02116-3741
JP Morgan Chase Bank
DISTRIBUTOR One Chase Manhattan Plaza
New York, NY 10081
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS
Mark E. Dow(1)
Erik S. Weisman(1)
A general description of the MFS Funds proxy voting policies is available without charge, upon request, by
calling 1-800-225-2606, by visiting the About MFS section of mfs.com or by visiting the SEC's website at
http://www.sec.gov
(1) MFS Investment Management
MFS(R) INFLATION-ADJUSTED BOND FUND
[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
IAB-SEMI 12/03 260
MFS(R) Mutual Funds
SEMIANNUAL REPORT 10/31/03
MFS(R) BOND FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit www.mfs.com.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 2
- ----------------------------------------------------
MANAGEMENT REVIEW 3
- ----------------------------------------------------
PERFORMANCE SUMMARY 7
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ----------------------------------------------------
FINANCIAL STATEMENTS 24
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 41
- ----------------------------------------------------
TRUSTEES AND OFFICERS 52
- ----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 54
- ----------------------------------------------------
CONTACT INFORMATION 55
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
In our view, the past year has been a promising one for investors. Financial
markets have improved steadily, spurred by indications of a global economic
recovery.
These developments make this an encouraging time for MFS and for our
shareholders. But we also think it's a time to reinforce the fundamentals of a
sound investment strategy.
At MFS, we think in any market environment the best approach for investors is
disciplined diversification. This method of investing involves three simple
steps. First, allocate your holdings across the major asset classes. Second,
diversify within each class so that you get exposure to different investment
styles, such as growth and value, and market sectors, such as government and
corporate bonds. Finally, to respond to the way market activity can shift the
value of your accounts, rebalance your accounts on a routine schedule, such as
once per year. Doing so will help you maintain your desired allocation across
each asset class.
These investing fundamentals are often lost when markets are on an upswing. At
such times, it's easy to be tempted to shift your holdings in the current,
"hottest" performing investment. History suggests, however, that it is
difficult to predict year after year what the best performing sector or market
will be. While it is true that the past cannot offer any guarantees for the
future, the markets historically have demonstrated the benefits of taking the
prudent approach and spreading your assets across a variety of holdings. For
investors with long-term goals such as college or retirement, a balanced
approach usually makes the most sense. As always, your investment professional
can help you identify an appropriate mix of investments for your needs.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
November 20, 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 nearly 80 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
- -------------------------------------------------------------------------------
IMPROVING ECONOMY HELPED LOWER-RATED DEBT
Although the six months ended October 31, 2003 were slightly negative for
Treasuries - with rates on 10-year bonds rising about 40 basis points (a basis
point is 0.01 percent of yield) - the environment was relatively favorable for
corporate bonds. (Principal value and interest on Treasury securities are
guaranteed by the U.S. government if held to maturity.)
Treasury rates rose only modestly for the period as a whole, but did
experience sharp volatility in the spring and summer. Ten-year rates fell when
the Federal Reserve Board, after its May meeting, expressed a strong desire to
keep rates low and implied that it might use some unconventional strategies to
do so - such as buying longer-term bonds. However, long-term rates shot up in
late June and July after the Fed lowered the short-term rate by only a quarter
point at its June meeting, disappointing a market that had expected a half-
point drop. Many investors read the quarter-point move as a sign that perhaps
the economy was improving faster than the Fed had expected.
In contrast, corporate bonds generally benefited from the accelerating U.S.
recovery. Growth in GDP (gross domestic product), employment, and other
economic measures pointed toward improving corporate bond fundamentals -
business factors such as earnings, cash flow growth, and credit quality.
In response, investors became less risk averse, and the "flight to quality"
that had characterized the bond market in late 2002 began to fade. Riskier,
lower-rated bonds showed the best performance over the period. With Treasury
yields at four-decade lows, investors sought out higher-yielding corporate
debt. This caused spreads - the difference between corporate yields and
Treasury yields - to tighten (decrease, or improve) over the period.
PORTFOLIO CONCENTRATION 10/31/03
QUALITY RATINGS
AAA 10.2%
AA 3.1%
A 15.4%
B 2.9%
BB 12.0%
BBB 40.6%
Governments 13.5%
Other 0.9%
Not Rated 1.4%
The portfolio is actively managed, and current
holdings may be different.
LOWER-RATED DEBT DROVE RELATIVE PERFORMANCE
A key driver of the fund's outperformance against its primary benchmark, the
Lehman Brothers Government/Credit Index, was a relative overweighting in bonds
of "BBB" and "BB" credit quality. Over the period, we increased the fund's
concentration in those areas and decreased its allocation to higher-rated
bonds. This downward shift in overall credit quality was based on our belief
going into the period that credit spreads were wide and were likely to narrow,
and that an improving economy would benefit corporate bonds. In fact our
strategy worked well over the period as the U.S. economic recovery accelerated
and lower-rated bonds outperformed.
One area of strength was our position in "BB"-rated securities. These
noninvestment-grade bonds are one level below investment-grade territory
("BBB" is the lowest investment-grade rating) and are often referred to as
"crossover" bonds. Our research strives to uncover "BB"-rated bonds that we
believe have a strong probability of crossing over to an investment-grade
rating. Such an upgrade increases the number of potential buyers for a bond
and thus generally increases its price.
Specific industry and security selection was another key area of strength.
Some of the worst-performing segments of the market in 2002 were among the
strongest beneficiaries of the improving economy in 2003. More specifically,
over the period the fund's holdings in four industries did particularly well:
autos, telecommunications, media and cable, and utilities.
In our view, bonds of U.S. auto companies, especially those of Ford Motor
Company, had been somewhat over-penalized in 2002. As rating agencies
downgraded Ford debt in 2002, many investors feared a credit crisis if the
market refused to refinance the firm's short-term debt. When those fears did
not come to fruition, our Ford bonds and other auto industry bonds performed
well.
In the telecommunications area, we feel investors came to the conclusion that
the WorldCom debacle was not indicative of the industry as a whole. While
telecom bonds as a group were hard-hit in 2002, over the period bonds of some
of the industry's major firms rallied back. Fund performance benefited from
our holdings in Verizon, Sprint, and Canadian telecommunications company
Telus.
In the utilities industry, we witnessed a situation that paralleled events in
the telecom area: fraud at a major firm, Enron, caused investors to question
the health of the entire industry in 2002. By the beginning of the six-month
period, however, the panic had started to subside. Utilities had begun to
improve their balance sheets by issuing equity to pay down debt. Banks
restructured utility debt. Investors seemed to realize that most utilities
were not going to go bankrupt and that perhaps their securities had become
undervalued. The result was strong performance of the fund's utility holdings
over the period.
In the media and cable business, our Comcast position did particularly well.
Previous to the period, Comcast bonds had been held back by concerns that the
firm would struggle with the integration of its largest-ever acquisition, the
cable business of AT&T. As Comcast displayed its ability to manage the
business better than AT&T had done, Comcast bonds rallied.
Although not all of the fund's investments performed as well as those
described above, this was a period in which the market environment was
particularly favorable for the asset class - corporate debt - in which we were
overweighted. That situation contrasted with the environment in some earlier
periods, during which our corporate holdings struggled under the weight of a
sluggish economy.
The fund did, however, underperform during this period relative to its secondary
benchmark, the Lipper Corporate Debt Funds "BBB"-Rated Index (the Lipper Index),
although the fund outperformed its peers, as represented by the Lipper average
corporate debt "BBB"-rated fund. The Lipper Index consists of only a small
subset of the peer group; we believe the Index significantly outperformed the
larger group of peers because the top performing funds in the Index had sizeable
allocations to very low quality debt. Over the longer term, we think that is a
more risky and potentially more volatile approach to managing a corporate bond
portfolio.
Respectfully,
/s/ William J. Adams
William J. Adams
Portfolio Manager
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Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment-related news.
o From Week in Review, link to MFS Global Investment Perspective for our
current view of the world.
- -------------------------------------------------------------------------------
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 10/31/03
- -------------------------------------------------------------------------------
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Performance results reflect the percentage change
in net asset value, including reinvestment of any dividends and capital gains
distributions. (See Notes to Performance Summary.)
VISIT WWW.MFS.COM FOR THE MOST CURRENT PERFORMANCE RESULTS.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN.
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.
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share inception
class date 6-mo 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 5/8/74 -- 12.02% 9.18% 6.45% 6.39%
- ------------------------------------------------------------------------------
B 9/7/93 -- 11.27% 8.43% 5.71% 5.62%
- ------------------------------------------------------------------------------
C 1/3/94 -- 11.28% 8.44% 5.70% 5.66%
- ------------------------------------------------------------------------------
I 1/2/97 -- 12.35% 9.54% 6.78% 6.62%
- ------------------------------------------------------------------------------
R1** 12/31/02 -- 11.84% 9.12% 6.42% 6.37%
- ------------------------------------------------------------------------------
R2*** 10/31/03 -- N/A N/A N/A N/A
- ------------------------------------------------------------------------------
529A 7/31/02 -- 11.78% 9.07% 6.39% 6.36%
- ------------------------------------------------------------------------------
529B 7/31/02 -- 10.92% 8.73% 6.19% 6.26%
- ------------------------------------------------------------------------------
529C 7/31/02 -- 10.92% 8.73% 6.19% 6.26%
- ------------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative
benchmarks
- ------------------------------------------------------------------------------
Average corporate debt
"BBB"-rated
fund+ 1.95% 10.06% 8.26% 6.12% 6.24%
- ------------------------------------------------------------------------------
Lehman Brothers
Government/C
redit
Index#
0.62% 6.17% 8.91% 6.57% 6.77%
- ------------------------------------------------------------------------------
Lipper BBB Corporate
Bond Fund Index+ 2.70% 11.51% 8.44% 6.15% 6.27%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
- --------------------
Average annual
with sales charge
- --------------------
Share
class
- ------------------------------------------------------------------------------
A -- 6.70% 7.42% 5.42% 5.87%
- ------------------------------------------------------------------------------
B -- 7.27% 7.57% 5.40% 5.62%
- ------------------------------------------------------------------------------
C -- 10.28% 8.44% 5.70% 5.66%
- ------------------------------------------------------------------------------
529A -- 6.47% 7.31% 5.36% 5.84%
- ------------------------------------------------------------------------------
529B -- 6.92% 7.88% 5.88% 6.26%
- ------------------------------------------------------------------------------
529C -- 9.92% 8.73% 6.19% 6.26%
- ------------------------------------------------------------------------------
I, R1 and R2 class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
- --------------------
Cumulative without
sales charge
- --------------------
- ------------------------------------------------------------------------------
A 2.38% 12.02% 30.13% 36.71% 85.77%
- ------------------------------------------------------------------------------
B 2.02% 11.27% 27.47% 32.03% 72.76%
- ------------------------------------------------------------------------------
C 2.10% 11.28% 27.51% 31.97% 73.35%
- ------------------------------------------------------------------------------
I 2.61% 12.35% 31.42% 38.81% 89.93%
- ------------------------------------------------------------------------------
R1** 2.28% 11.84% 29.92% 36.49% 85.46%
- ------------------------------------------------------------------------------
R2*** N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------
529A 2.23% 11.78% 29.75% 36.31% 85.22%
- ------------------------------------------------------------------------------
529B 1.89% 10.92% 28.55% 35.05% 83.51%
- ------------------------------------------------------------------------------
529C 1.89% 10.92% 28.56% 35.06% 83.52%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
** Effective November 3, 2003, Class R shares have been renamed R1 shares.
*** R2 shares commenced investment operations October 31, 2003, therefore no
performance information is available.
INDEX DEFINITIONS
LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX - measures the performance of all debt
obligations of the U.S. Treasury and U.S. government agencies, and all
investment-grade domestic corporate debt.
LIPPER CORPORATE DEBT FUNDS BBB-RATED 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 R1 and R2 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. Any such subsidy or waiver is voluntary
and may be revised or rescinded at any time without notice. Without such
subsidies and waivers, the fund's performance would be less favorable. Please
see the prospectus and financial statements for complete details.
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.
These risks may increase share price volatility. Please see the prospectus for
further information regarding 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 (unaudited) - 10/31/03
- -----------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Bonds - 97.7%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------------
U.S. Bonds - 77.9%
- -----------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 1.0%
- -----------------------------------------------------------------------------------------------------
Chancellor Media Corp., 8s, 2008 $5,140 $5,898,150
- -----------------------------------------------------------------------------------------------------
Clear Channel Communications, 7.65s, 2010 3,552 4,137,093
- -----------------------------------------------------------------------------------------------------
Echostar DBS Corp., 9.125s, 2009 4,134 4,650,750
- -----------------------------------------------------------------------------------------------------
Granite Broadcasting Corp., 8.875s, 2008 2,000 1,920,000
- -----------------------------------------------------------------------------------------------------
$16,605,993
- -----------------------------------------------------------------------------------------------------
Aerospace - 0.5%
- -----------------------------------------------------------------------------------------------------
BAE Systems Holdings, Inc., 6.4s, 2011## $7,006 $7,508,260
- -----------------------------------------------------------------------------------------------------
Airlines - 1.0%
- -----------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 6.648s, 2019 $1,116 $1,091,323
- -----------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 6.545s, 2019 7,877 7,834,089
- -----------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 7.256s, 2020 2,808 2,856,206
- -----------------------------------------------------------------------------------------------------
Delta Air Lines, Inc., 7.379s, 2011 4,087 4,167,597
- -----------------------------------------------------------------------------------------------------
Jet Equipment Trust, 11.44s, 2014## 3,500 17,500
- -----------------------------------------------------------------------------------------------------
$15,966,715
- -----------------------------------------------------------------------------------------------------
Airlines Pass-Through
- -----------------------------------------------------------------------------------------------------
Airplane Pass-Through Trust, 10.875s, 2019 $1,482 $29,631
- -----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 0.3%
- -----------------------------------------------------------------------------------------------------
Miller Brewing Co., 5.5s, 2013## $4,112 $4,195,766
- -----------------------------------------------------------------------------------------------------
Asset Backed - 0.3%
- -----------------------------------------------------------------------------------------------------
Ikon Receivables LLC, 3.27s, 2011 $4,670 $4,717,123
- -----------------------------------------------------------------------------------------------------
Auto Loans - 1.2%
- -----------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 2.47s, 2010 $4,350 $4,271,764
- -----------------------------------------------------------------------------------------------------
CPS Auto Trust, 3.52s, 2009## 3,430 3,469,559
- -----------------------------------------------------------------------------------------------------
Drive Auto Receivables Trust, 2.5s, 2009## 4,240 4,219,131
- -----------------------------------------------------------------------------------------------------
Drivetime Auto Owner Trust, 1.918s, 2008## 6,770 6,702,300
- -----------------------------------------------------------------------------------------------------
$18,662,754
- -----------------------------------------------------------------------------------------------------
Automotive - 5.7%
- -----------------------------------------------------------------------------------------------------
DaimlerChrysler NA Holdings, 7.2s, 2009 $4,267 $4,669,207
- -----------------------------------------------------------------------------------------------------
Dana Corp., 9s, 2011 3,235 3,615,113
- -----------------------------------------------------------------------------------------------------
Dura Operating Corp., 8.625s, 2012 2,505 2,542,575
- -----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.875s, 2006 9,315 9,749,014
- -----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7.875s, 2010 13,095 13,699,439
- -----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7s, 2013 9,490 9,329,078
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.75s, 2006 11,232 11,975,592
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 7.25s, 2011 3,427 3,611,146
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8.375s, 2033 16,866 17,790,932
- -----------------------------------------------------------------------------------------------------
Lear Corp., 7.96s, 2005 4,799 5,158,925
- -----------------------------------------------------------------------------------------------------
Lear Corp., 8.11s, 2009 4,225 4,869,312
- -----------------------------------------------------------------------------------------------------
TRW Automotive, Inc., 9.375s, 2013## 3,830 4,347,050
- -----------------------------------------------------------------------------------------------------
$91,357,383
- -----------------------------------------------------------------------------------------------------
Banks & Credit Companies - 2.5%
- -----------------------------------------------------------------------------------------------------
Bank of America Corp., 7.4s, 2011 $2,712 $3,165,441
- -----------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, 6.65s, 2008 3,966 4,278,483
- -----------------------------------------------------------------------------------------------------
Citigroup, Inc., 7.25s, 2010 4,156 4,835,062
- -----------------------------------------------------------------------------------------------------
Credit Suisse First Boston USA, Inc., 6.125s, 2011 10,325 11,158,124
- -----------------------------------------------------------------------------------------------------
Popular North America, Inc., 4.25s, 2008 7,630 7,728,198
- -----------------------------------------------------------------------------------------------------
Wachovia Corp., 6.605s, 2025 7,936 8,725,108
- -----------------------------------------------------------------------------------------------------
$39,890,416
- -----------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 2.8%
- -----------------------------------------------------------------------------------------------------
Comcast Corp., 5.85s, 2010 $3,997 $4,246,313
- -----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.75s, 2010 6,944 8,165,269
- -----------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.875s, 2007 5,024 5,137,040
- -----------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625s, 2011 2,584 2,635,680
- -----------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.8s, 2012 3,539 4,597,366
- -----------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.65s, 2027 16,336 19,868,660
- -----------------------------------------------------------------------------------------------------
$44,650,328
- -----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.5%
- -----------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.5s, 2014 $4,283 $4,352,569
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.25s, 2007 10,490 12,234,403
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter, 6.6s, 2012 7,094 7,850,078
- -----------------------------------------------------------------------------------------------------
$24,437,050
- -----------------------------------------------------------------------------------------------------
Building - 1.0%
- -----------------------------------------------------------------------------------------------------
American Standard, Inc., 7.375s, 2008 $6,465 $7,127,663
- -----------------------------------------------------------------------------------------------------
Building Materials Corp., 8s, 2008 4,685 4,567,875
- -----------------------------------------------------------------------------------------------------
Nortek, Inc., 9.25s, 2007 3,820 3,948,925
- -----------------------------------------------------------------------------------------------------
$15,644,463
- -----------------------------------------------------------------------------------------------------
Chemicals - 0.8%
- -----------------------------------------------------------------------------------------------------
Dow Chemical Co., 5s, 2007 $4,002 $4,167,603
- -----------------------------------------------------------------------------------------------------
Dow Chemical Co., 5.75s, 2008 8,505 9,044,965
- -----------------------------------------------------------------------------------------------------
$13,212,568
- -----------------------------------------------------------------------------------------------------
Conglomerates - 0.8%
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.7s, 2007 $1,244 $1,456,402
- -----------------------------------------------------------------------------------------------------
Tyco International Group S.A., 5.8s, 2006 4,969 5,192,605
- -----------------------------------------------------------------------------------------------------
Tyco International Group S.A., 6.75s, 2011 5,974 6,354,842
- -----------------------------------------------------------------------------------------------------
$13,003,849
- -----------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.7%
- -----------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 $5,243 $5,761,454
- -----------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2010 4,595 4,955,675
- -----------------------------------------------------------------------------------------------------
$10,717,129
- -----------------------------------------------------------------------------------------------------
Corporate Asset-Backed - 7.3%
- -----------------------------------------------------------------------------------------------------
Amresco Commercial Mortgage Funding I Corp., 7s, 2029 $4,595 $4,563,768
- -----------------------------------------------------------------------------------------------------
BCF LLC, 7.75s, 2026## 1,250 985,189
- -----------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., 6.6s, 2012 4,040 3,881,307
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 1.047s, 2008 88,066 3,944,258
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 5.44s, 2030 4,362 3,814,614
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 6.04s, 2030 7,385 8,071,470
- -----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 7.03s, 2031 5,200 5,906,467
- -----------------------------------------------------------------------------------------------------
Criimi Mae Commercial Mortgage Trust, 7s, 2033## 4,668 5,032,477
- -----------------------------------------------------------------------------------------------------
Deutsche Mortgage and Asset Corp., 6.538s, 2031 6,525 7,137,843
- -----------------------------------------------------------------------------------------------------
Falcon Auto Dealership LLC, 3.875s, 2023 (Interest Only) 21,805 4,148,667
- -----------------------------------------------------------------------------------------------------
First Union Lehman Brothers Commercial, 7s, 2014 3,028 2,832,249
- -----------------------------------------------------------------------------------------------------
Fortress CBO Investments I, Ltd., 1.77s, 2038 4,095 4,098,839
- -----------------------------------------------------------------------------------------------------
Fortress CBO Investments I, Ltd., 1.92s, 2038 4,325 4,322,973
- -----------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Security, Inc., 6.02s, 2033 4,140 3,679,483
- -----------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 9.4s, 2004 5,127 5,357,423
- -----------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust, 0.98s, 2028 58,087 2,064,418
- -----------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust, 6.78s, 2031 3,960 4,461,941
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., 6.86s, 2010 6,477 6,785,865
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., 0.67s, 2030## 169,511 4,904,855
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., 6.48s, 2030 4,287 4,767,121
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., 7.709s, 2039 7,510 7,166,486
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Capital, 6.01s, 2030 2,460 2,612,429
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Capital, 5.72s, 2032 6,146 6,604,508
- -----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 0s, 2031 (Interest Only) 76,313 2,500,899
- -----------------------------------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc., 3.49s, 2029 3,484 3,524,163
- -----------------------------------------------------------------------------------------------------
TIAA Retail Commercial Real Estate Mortgage Trust,
7.17s, 2032## 3,948 4,290,120
- -----------------------------------------------------------------------------------------------------
$117,459,832
- -----------------------------------------------------------------------------------------------------
Defense Electronics - 1.3%
- -----------------------------------------------------------------------------------------------------
Litton Industies, Inc., 8s, 2009 $8,035 $9,536,227
- -----------------------------------------------------------------------------------------------------
Raytheon Co., 8.2s, 2006 4,072 4,552,402
- -----------------------------------------------------------------------------------------------------
Raytheon Co., 8.3s, 2010 5,650 6,712,353
- -----------------------------------------------------------------------------------------------------
$20,800,982
- -----------------------------------------------------------------------------------------------------
Energy - Independent - 2.4%
- -----------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 8.125s, 2011## $4,115 $4,516,213
- -----------------------------------------------------------------------------------------------------
Forest Oil Corp., 8s, 2008 4,920 5,264,400
- -----------------------------------------------------------------------------------------------------
Occidental Petroleum Corp., 7.65s, 2006 4,498 4,959,922
- -----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.625s, 2005 3,772 4,115,218
- -----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 7.25s, 2011 7,829 8,953,111
- -----------------------------------------------------------------------------------------------------
XTO Energy, Inc., 6.25s, 2013 10,729 11,198,394
- -----------------------------------------------------------------------------------------------------
$39,007,258
- -----------------------------------------------------------------------------------------------------
Energy - Integrated - 0.4%
- -----------------------------------------------------------------------------------------------------
Amerada Hess Corp., 7.3s, 2031 $5,800 $5,826,610
- -----------------------------------------------------------------------------------------------------
Entertainment - 2.1%
- -----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 7.75s, 2024 $6,693 $7,668,920
- -----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 8.5s, 2025 5,388 6,447,760
- -----------------------------------------------------------------------------------------------------
News America, Inc., 6.55s, 2033 2,123 2,168,609
- -----------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.125s, 2013 7,818 9,782,147
- -----------------------------------------------------------------------------------------------------
Time Warner, Inc., 6.625s, 2029 3,650 3,649,898
- -----------------------------------------------------------------------------------------------------
Walt Disney Co., 6.75s, 2006 3,960 4,321,057
- -----------------------------------------------------------------------------------------------------
$34,038,391
- -----------------------------------------------------------------------------------------------------
Financial Institutions - 0.6%
- -----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 5.5s, 2006 $5,517 $5,885,651
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 6.75s, 2011 2,384 2,667,901
- -----------------------------------------------------------------------------------------------------
Household Finance Corp., 6.375s, 2012 1,519 1,654,185
- -----------------------------------------------------------------------------------------------------
$10,207,737
- -----------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 0.8%
- -----------------------------------------------------------------------------------------------------
Dole Food, Inc., 8.625s, 2009 $4,391 $4,742,280
- -----------------------------------------------------------------------------------------------------
Nabisco, Inc., 6.375s, 2005 2,270 2,385,191
- -----------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 8.25s, 2011 4,824 5,713,994
- -----------------------------------------------------------------------------------------------------
$12,841,465
- -----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.8%
- -----------------------------------------------------------------------------------------------------
Meadwestvaco Corp., 6.8s, 2032 $12,139 $12,371,450
- -----------------------------------------------------------------------------------------------------
Government Sponsored Entity - 3.2%
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.125s, 2005 $14,285 $15,288,864
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2008 20,365 22,549,391
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.125s, 2012 11,611 12,871,339
- -----------------------------------------------------------------------------------------------------
$50,709,594
- -----------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.9%
- -----------------------------------------------------------------------------------------------------
Harrahs Operating, Inc., 7.125s, 2007 $6,189 $6,952,420
- -----------------------------------------------------------------------------------------------------
MGM Grand, Inc., 6.95s, 2005 3,928 4,099,850
- -----------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.5s, 2010 2,847 3,227,786
- -----------------------------------------------------------------------------------------------------
$14,280,056
- -----------------------------------------------------------------------------------------------------
Insurance - 0.3%
- -----------------------------------------------------------------------------------------------------
Prudential Insurance Co., 7.65s, 2007## $4,623 $5,191,722
- -----------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.8%
- -----------------------------------------------------------------------------------------------------
Safeco Corp., 4.875s, 2010 $4,145 $4,243,460
- -----------------------------------------------------------------------------------------------------
Safeco Corp., 7.25s, 2012 2,351 2,690,344
- -----------------------------------------------------------------------------------------------------
Willis Corroon Corp., 9s, 2009 5,230 5,530,725
- -----------------------------------------------------------------------------------------------------
$12,464,529
- -----------------------------------------------------------------------------------------------------
Machinery & Tools - 1.0%
- -----------------------------------------------------------------------------------------------------
Ingersoll-Rand Co., 6.25s, 2006 $4,675 $5,091,874
- -----------------------------------------------------------------------------------------------------
Joy Global, Inc., 8.75s, 2012 2,595 2,867,475
- -----------------------------------------------------------------------------------------------------
Kennametal, Inc., 7.2s, 2012 5,246 5,537,442
- -----------------------------------------------------------------------------------------------------
New Terex Corp., 8.875s, 2008 2,595 2,705,287
- -----------------------------------------------------------------------------------------------------
$16,202,078
- -----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.8%
- -----------------------------------------------------------------------------------------------------
HCA-The Healthcare Co., 8.75s, 2010 $5,802 $6,678,195
- -----------------------------------------------------------------------------------------------------
HCA-The Healthcare Co., 7.875s, 2011 5,897 6,494,897
- -----------------------------------------------------------------------------------------------------
$13,173,092
- -----------------------------------------------------------------------------------------------------
Metals & Mining - 0.4%
- -----------------------------------------------------------------------------------------------------
Phelps Dodge Corp., 8.75s, 2011 $5,009 $5,969,811
- -----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.6%
- -----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.4s, 2031 $6,187 $6,998,017
- -----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.75s, 2032 2,758 3,250,143
- -----------------------------------------------------------------------------------------------------
$10,248,160
- -----------------------------------------------------------------------------------------------------
Oil Services - 0.8%
- -----------------------------------------------------------------------------------------------------
Dresser, Inc., 9.375s, 2011 $4,215 $4,330,913
- -----------------------------------------------------------------------------------------------------
Halliburton Co., 5.5s, 2010## 7,872 7,956,742
- -----------------------------------------------------------------------------------------------------
$12,287,655
- -----------------------------------------------------------------------------------------------------
Oils - 0.4%
- -----------------------------------------------------------------------------------------------------
Valero Energy Corp. New, 7.5s, 2032 $5,601 $6,128,816
- -----------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 0.5%
- -----------------------------------------------------------------------------------------------------
Jabil Circuit, Inc., 5.875s, 2010 $7,856 $8,115,947
- -----------------------------------------------------------------------------------------------------
Photographic Products - 0.2%
- -----------------------------------------------------------------------------------------------------
Eastman Kodak Co., 7.25s, 2013 $2,434 $2,482,069
- -----------------------------------------------------------------------------------------------------
Pollution Control - 1.2%
- -----------------------------------------------------------------------------------------------------
Allied Waste Industries, Inc., 7.875s, 2013 $6,400 $6,864,000
- -----------------------------------------------------------------------------------------------------
USA Waste Services, Inc., 7s, 2004 3,459 3,604,994
- -----------------------------------------------------------------------------------------------------
WMX Technologies, Inc., 7.1s, 2026 8,743 9,398,437
- -----------------------------------------------------------------------------------------------------
$19,867,431
- -----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.8%
- -----------------------------------------------------------------------------------------------------
Belo Ah Corp., 7.75s, 2027 $6,650 $7,540,083
- -----------------------------------------------------------------------------------------------------
Dex Media West Finance LLC, 9.875s, 2013## 4,235 4,817,312
- -----------------------------------------------------------------------------------------------------
$12,357,395
- -----------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.7%
- -----------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.34s, 2003 $3,024 $3,031,466
- -----------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.39s, 2004 5,585 5,812,081
- -----------------------------------------------------------------------------------------------------
Union Pacific Corp., 5.75s, 2007 2,620 2,811,794
- -----------------------------------------------------------------------------------------------------
$11,655,341
- -----------------------------------------------------------------------------------------------------
Real Estate - 2.3%
- -----------------------------------------------------------------------------------------------------
EOP Operating Ltd., 6.625s, 2005 $6,569 $6,934,072
- -----------------------------------------------------------------------------------------------------
EOP Operating Ltd., 8.375s, 2006 4,920 5,520,486
- -----------------------------------------------------------------------------------------------------
EOP Operating Ltd., 6.8s, 2009 4,476 5,000,807
- -----------------------------------------------------------------------------------------------------
Simon Property Group LP, 6.375s, 2007 6,890 7,549,910
- -----------------------------------------------------------------------------------------------------
Simon Property Group LP, 6.35s, 2012 4,283 4,577,812
- -----------------------------------------------------------------------------------------------------
Vornado Reality Trust, 5.625s, 2007 6,252 6,603,437
- -----------------------------------------------------------------------------------------------------
$36,186,524
- -----------------------------------------------------------------------------------------------------
Restaurants - 0.4%
- -----------------------------------------------------------------------------------------------------
Tricon Global Restaurants, Inc., 8.875s, 2011 $4,819 $5,734,610
- -----------------------------------------------------------------------------------------------------
Retail - 1.0%
- -----------------------------------------------------------------------------------------------------
Dollar General Corp., 8.625s, 2010 $4,765 $5,318,931
- -----------------------------------------------------------------------------------------------------
Gap, Inc., 10.55s, 2008 5,860 7,134,550
- -----------------------------------------------------------------------------------------------------
JC Penney Corp., Inc., 8s, 2010 3,552 3,951,600
- -----------------------------------------------------------------------------------------------------
$16,405,081
- -----------------------------------------------------------------------------------------------------
Single Family Agency Bonds - 6.9%
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2016 $6,568 $6,832,421
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2017 9,652 9,941,422
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2017 10,569 10,992,525
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.5s, 2018 17,429 17,424,868
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2030 3,316 3,534,833
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2031 7,301 7,779,293
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2032 27,949 29,036,954
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2033 12,833 12,956,660
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2033 5,446 5,591,714
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7.5s, 2023 171 182,647
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6.5s, 2028 5,598 5,866,674
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7.5s, 2028 95 102,281
- -----------------------------------------------------------------------------------------------------
$110,242,292
- -----------------------------------------------------------------------------------------------------
Supermarkets - 0.4%
- -----------------------------------------------------------------------------------------------------
Kroger Co., 7.8s, 2007 $5,052 $5,805,632
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 2.6%
- -----------------------------------------------------------------------------------------------------
AT&T Corp., 8.5s, 2031 $8,145 $9,236,088
- -----------------------------------------------------------------------------------------------------
Citizens Communications Co., 8.5s, 2006 10,265 11,595,077
- -----------------------------------------------------------------------------------------------------
Citizens Communications Co., 7.625s, 2008 1,598 1,834,267
- -----------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6.875s, 2028 15,099 14,209,246
- -----------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 2,794 3,022,147
- -----------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.8s, 2009 1,746 1,940,934
- -----------------------------------------------------------------------------------------------------
$41,837,759
- -----------------------------------------------------------------------------------------------------
Tobacco - 0.8%
- -----------------------------------------------------------------------------------------------------
Altria Group, Inc., 7s, 2013 $5,416 $5,466,233
- -----------------------------------------------------------------------------------------------------
RJ Reynolds Tobacco Holdings, Inc., 7.25s, 2012 7,722 7,490,340
- -----------------------------------------------------------------------------------------------------
$12,956,573
- -----------------------------------------------------------------------------------------------------
Transportation - Services - 0.5%
- -----------------------------------------------------------------------------------------------------
Federal Express Corp., 9.65s, 2012 $5,930 $7,790,929
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 4.8%
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 9.875s, 2015 $3,151 $4,679,604
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375s, 2031 12,061 12,463,813
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.375s, 2007 16,694 18,205,431
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.75s, 2008 2,998 3,203,645
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6s, 2009 14,887 16,832,776
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2012 7,884 8,627,808
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25s, 2013 12,336 12,285,891
- -----------------------------------------------------------------------------------------------------
$76,298,968
- -----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 8.6%
- -----------------------------------------------------------------------------------------------------
Beaver Valley Funding Corp. II, 9s, 2017 $9,424 $10,958,651
- -----------------------------------------------------------------------------------------------------
Centerpoint Energy Resources Corp., 7.875s, 2013## 2,845 3,232,722
- -----------------------------------------------------------------------------------------------------
DTE Energy Co., 7.05s, 2011 8,535 9,637,210
- -----------------------------------------------------------------------------------------------------
Entergy Mississippi, Inc., 6.2s, 2004 1,307 1,334,016
- -----------------------------------------------------------------------------------------------------
Exelon Generation Co. LLC, 6.95s, 2011 9,118 10,169,779
- -----------------------------------------------------------------------------------------------------
FirstEnergy Corp., 6.45s, 2011 4,243 4,507,055
- -----------------------------------------------------------------------------------------------------
GGIB Funding Corp., 7.43s, 2011 3,056 3,128,027
- -----------------------------------------------------------------------------------------------------
Gulf States Utilities Co., 8.25s, 2004 658 675,402
- -----------------------------------------------------------------------------------------------------
Midamerican Energy Holdings Co., 5.875s, 2012 6,179 6,393,269
- -----------------------------------------------------------------------------------------------------
Midland Funding Corp., "B", 13.25s, 2006 925 1,091,500
- -----------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375s, 2004 4,074 4,180,780
- -----------------------------------------------------------------------------------------------------
Nisource Finance Corp., 7.5s, 2003 3,099 3,104,011
- -----------------------------------------------------------------------------------------------------
NiSource Finance Corp., 7.875s, 2010 7,620 9,016,289
- -----------------------------------------------------------------------------------------------------
Northeast Utilities, 8.58s, 2006 3,363 3,681,113
- -----------------------------------------------------------------------------------------------------
Oncor Electric Corp., 7s, 2022 5,631 6,153,084
- -----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 7.1s, 2011 3,065 3,457,121
- -----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 7s, 2031 6,729 7,219,335
- -----------------------------------------------------------------------------------------------------
PSEG Power, 7.75s, 2007 11,529 12,516,240
- -----------------------------------------------------------------------------------------------------
PSEG Power, 8.625s, 2031 3,724 4,733,677
- -----------------------------------------------------------------------------------------------------
Reliant Energy Resources Corp., 8.125s, 2005 5,793 6,235,632
- -----------------------------------------------------------------------------------------------------
Toledo Edison Co., 7.875s, 2004 8,709 9,077,147
- -----------------------------------------------------------------------------------------------------
TXU Corp., 6.375s, 2006 9,312 9,870,720
- -----------------------------------------------------------------------------------------------------
Waterford 3 Funding Corp., 8.09s, 2017 6,909 7,862,144
- -----------------------------------------------------------------------------------------------------
$138,234,924
- -----------------------------------------------------------------------------------------------------
Wireless Communications - 1.2%
- -----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.75s, 2031 $9,902 $11,907,620
- -----------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 9.375s, 2009 4,240 4,621,600
- -----------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 3,132 3,344,929
- -----------------------------------------------------------------------------------------------------
$19,874,149
- -----------------------------------------------------------------------------------------------------
Total U.S. Bonds $1,245,654,290
- -----------------------------------------------------------------------------------------------------
Foreign Bonds - 17.8%
- -----------------------------------------------------------------------------------------------------
Australia - 0.6%
- -----------------------------------------------------------------------------------------------------
Burns Philip Capital Property Ltd., 9.75s, 2012 (Food &
Non Alcoholic Beverage)## $5,455 $5,564,100
- -----------------------------------------------------------------------------------------------------
WMC Finance USA Ltd., 5.125s, 2013 (Metals & Mining) 3,481 3,397,466
- -----------------------------------------------------------------------------------------------------
$8,961,566
- -----------------------------------------------------------------------------------------------------
Brazil - 0.3%
- -----------------------------------------------------------------------------------------------------
Brazilian Merchant Voucher Receivable, 5.911s, 2011
(Credit Cards)## $5,180 $5,089,350
- -----------------------------------------------------------------------------------------------------
Bulgaria - 0.2%
- -----------------------------------------------------------------------------------------------------
Republic of Bulgaria, 8.25s, 2015## $2,807 $3,192,963
- -----------------------------------------------------------------------------------------------------
Canada - 2.4%
- -----------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 6.95s, 2008 (Forest & Paper
Products) $4,281 $4,364,882
- -----------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 7.875s, 2009 (Forest &
Paper Products) 2,974 3,141,522
- -----------------------------------------------------------------------------------------------------
Anderson Exploration Ltd., 6.75s, 2011 (Energy -
Independent) 2,572 2,829,542
- -----------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 7.875s, 2012 (Broadcast & Cable TV) 5,413 5,954,300
- -----------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 6.25s, 2013 (Broadcast & Cable TV) 4,621 4,621,000
- -----------------------------------------------------------------------------------------------------
Telus Corp., 8s, 2011 (Telecom - Wireline) 14,772 16,982,911
- -----------------------------------------------------------------------------------------------------
$37,894,157
- -----------------------------------------------------------------------------------------------------
Chile - 0.1%
- -----------------------------------------------------------------------------------------------------
Codelco, Inc., 6.375s, 2012 (Metals & Mining)## $2,308 $2,472,708
- -----------------------------------------------------------------------------------------------------
Denmark - 0.3%
- -----------------------------------------------------------------------------------------------------
Kingdom of Denmark, 6s, 2009 DKK 26,148 $4,514,806
- -----------------------------------------------------------------------------------------------------
Dominican Republic - 0.1%
- -----------------------------------------------------------------------------------------------------
Dominican Republic, 9.5s, 2006## $2,015 $1,753,050
- -----------------------------------------------------------------------------------------------------
Dominican Republic, 9.04s, 2013## 674 518,980
- -----------------------------------------------------------------------------------------------------
$2,272,030
- -----------------------------------------------------------------------------------------------------
Finland - 0.3%
- -----------------------------------------------------------------------------------------------------
Republic of Finland, 5.375s, 2013 EUR 3,539 $4,448,670
- -----------------------------------------------------------------------------------------------------
France - 2.8%
- -----------------------------------------------------------------------------------------------------
Crown European Holdings SA, 9.5s, 2011 (Containers) $4,995 $5,544,450
- -----------------------------------------------------------------------------------------------------
France Telecom, 9s, 2011 (Telecom - Wireline) 3,693 4,455,305
- -----------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s, 2049 (Banks & Credit Cos.)## 15,382 18,028,196
- -----------------------------------------------------------------------------------------------------
Socgen Real Estate Co., 7.64s, 2049 (Banks & Credit Cos.)## 15,158 17,088,599
- -----------------------------------------------------------------------------------------------------
$45,116,550
- -----------------------------------------------------------------------------------------------------
Germany - 1.2%
- -----------------------------------------------------------------------------------------------------
Deutsche Telekom International, 8.5s, 2010 (Telecom -
Wireline) $8,439 $10,156,413
- -----------------------------------------------------------------------------------------------------
Deutsche Telekom International Finance, 8.75s, 2030
(Telecom - Wireline) 7,624 9,591,411
- -----------------------------------------------------------------------------------------------------
$19,747,824
- -----------------------------------------------------------------------------------------------------
Hong Kong - 0.3%
- -----------------------------------------------------------------------------------------------------
PCCW Capital II Ltd., 6s, 2013 (Telecom - Wireline)## $4,917 $4,895,611
- -----------------------------------------------------------------------------------------------------
Ireland - 0.3%
- -----------------------------------------------------------------------------------------------------
Republic of Ireland, 5s, 2013 EUR 3,615 $4,415,040
- -----------------------------------------------------------------------------------------------------
Italy - 1.5%
- -----------------------------------------------------------------------------------------------------
Telecom Italia Capital, 4s, 2008 (Telecom - Wireline)## $4,190 $4,184,855
- -----------------------------------------------------------------------------------------------------
Telecom Italia Capital, 5.25s, 2013 (Telecom -
Wireline)## 8,377 8,311,844
- -----------------------------------------------------------------------------------------------------
Unicredito Italiano Capital Trust, 9.2s, 2049 (Banks
and Credit Cos.)## 8,744 10,868,031
- -----------------------------------------------------------------------------------------------------
$23,364,730
- -----------------------------------------------------------------------------------------------------
Japan - 0.3%
- -----------------------------------------------------------------------------------------------------
UFJ Finance Aruba AEC, 6.75s, 2013 (Banks & Credit Cos.) $4,306 $4,508,158
- -----------------------------------------------------------------------------------------------------
Malaysia - 0.2%
- -----------------------------------------------------------------------------------------------------
Petronas Capital Ltd., 7.875s, 2022 (Oil Services)## $2,800 $3,175,292
- -----------------------------------------------------------------------------------------------------
Mexico - 2.1%
- -----------------------------------------------------------------------------------------------------
BBVA Bancomer, 10.5s, 2011 (Banks & Credit Cos.)## $6,664 $7,480,340
- -----------------------------------------------------------------------------------------------------
Corp. Andina De Fomento, 6.875s, 2012 (Banks &
Credit Cos.) 5,545 6,100,748
- -----------------------------------------------------------------------------------------------------
Pemex Finance Ltd., 9.69s, 2009 (Energy - Integrated) 3,502 4,079,830
- -----------------------------------------------------------------------------------------------------
Pemex Finance Ltd., 10.61s, 2017 (Energy - Integrated) 1,500 1,961,670
- -----------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 8.625s, 2022
(Oil Services) 1,936 2,110,240
- -----------------------------------------------------------------------------------------------------
United Mexican States, 8s, 2022 3,050 3,316,875
- -----------------------------------------------------------------------------------------------------
United Mexican States, 11.5s, 2026 6,366 9,103,380
- -----------------------------------------------------------------------------------------------------
$34,153,083
- -----------------------------------------------------------------------------------------------------
Panama - 0.3%
- -----------------------------------------------------------------------------------------------------
Republic of Panama, 9.375s, 2029 $4,400 $4,994,000
- -----------------------------------------------------------------------------------------------------
Russia - 0.7%
- -----------------------------------------------------------------------------------------------------
Gazprom OAO, 9.625s, 2013 (Utilities - Gas)## $2,490 $2,701,650
- -----------------------------------------------------------------------------------------------------
Mobile Telesystems Fin SA, 9.75s, 2008 (Wireless
Communications)## 3,758 3,992,875
- -----------------------------------------------------------------------------------------------------
OAO Siberian Oil Co., 10.75s, 2009 (Energy -
Integrated) 2,771 2,958,042
- -----------------------------------------------------------------------------------------------------
Russia Federation, 3s, 2011 1,260 951,300
- -----------------------------------------------------------------------------------------------------
$10,603,867
- -----------------------------------------------------------------------------------------------------
Singapore - 0.3%
- -----------------------------------------------------------------------------------------------------
DBS Capital Funding Corp., 7.657s, 2049 (Banks &
Credit Cos.)## $4,304 $4,832,075
- -----------------------------------------------------------------------------------------------------
Spain - 0.3%
- -----------------------------------------------------------------------------------------------------
Telefonica Europe Bv, 8.25s, 2030 (Telecom - Wireline) $4,130 $5,131,575
- -----------------------------------------------------------------------------------------------------
United Kingdom - 3.2%
- -----------------------------------------------------------------------------------------------------
Abbey National Capital Trust 1 Corp., 8.963s, 2049
(Banks & Credit Cos.) $4,214 $5,589,479
- -----------------------------------------------------------------------------------------------------
Barclays Bank PLC, 8.55s, 2049 (Banks & Credit Cos.)## 10,798 13,245,227
- -----------------------------------------------------------------------------------------------------
British Sky Broadcasting, 7.3s, 2006 (Advertising &
Broadcasting) 4,211 4,647,689
- -----------------------------------------------------------------------------------------------------
British Sky Broadcasting, 8.2s, 2009 (Advertising &
Broadcasting) 7,457 8,687,830
- -----------------------------------------------------------------------------------------------------
Orange PLC, 9s, 2009 (Wireless Communications) 10,333 11,194,462
- -----------------------------------------------------------------------------------------------------
Sabmiller PLC, 6.625s, 2033 (Alcoholic Beverage)## 6,785 7,107,152
- -----------------------------------------------------------------------------------------------------
$50,471,839
- -----------------------------------------------------------------------------------------------------
Total Foreign Bonds $284,255,894
- -----------------------------------------------------------------------------------------------------
Municipal Bonds - 2.0%
- -----------------------------------------------------------------------------------------------------
Baltimore Maryland Project Revenue, 5.125s, 2042 $4,340 $4,387,219
- -----------------------------------------------------------------------------------------------------
Metropolitan Pier & Exposition Authority Illinois, 5s, 2028 9,540 9,570,910
- -----------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority NY Rev., 5s, 2030 8,700 8,751,852
- -----------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority NY Service
Contract, 5.5s, 2013 8,375 9,484,017
- -----------------------------------------------------------------------------------------------------
Total Municipal Bonds $32,193,998
- -----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,490,476,549) $1,562,104,182
- -----------------------------------------------------------------------------------------------------
Repurchase Agreement - 1.0%
- -----------------------------------------------------------------------------------------------------
Goldman Sachs, dated 10/31/03, due 11/03/03, total to
be received $16,002,400 (secured by various U.S.
Treasury and federal agency obligations in a jointly
traded account), at Cost $16,001 $16,001,000
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,506,477,549) $1,578,105,182
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.3% 20,215,688
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,598,320,870
- -----------------------------------------------------------------------------------------------------
## 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 (unaudited)
- -----------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities
composing the total value of your fund.
AT 10/31/03
ASSETS
Investments, at value (identified cost, $1,506,477,549) $1,578,105,182
- -----------------------------------------------------------------------------------------------------
Cash 512
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 1,989,568
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 19,371,290
- -----------------------------------------------------------------------------------------------------
Interest receivable 25,411,590
- -----------------------------------------------------------------------------------------------------
Total assets $1,624,878,142
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $6,967,332
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 3,474,063
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased 15,615,363
- -----------------------------------------------------------------------------------------------------
Payable for daily variation margin on open futures
contracts 38,500
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 17,003
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 4,835
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 22,870
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 417,306
- -----------------------------------------------------------------------------------------------------
Total liabilities $26,557,272
- -----------------------------------------------------------------------------------------------------
Net assets $1,598,320,870
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $1,619,423,252
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 71,699,288
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (79,477,882)
- -----------------------------------------------------------------------------------------------------
Accumulated net investment loss (13,323,788)
- -----------------------------------------------------------------------------------------------------
Total $1,598,320,870
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 123,270,898
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
Net assets $1,030,971,200
- -----------------------------------------------------------------------------------------------------
Shares outstanding 79,424,640
- -----------------------------------------------------------------------------------------------------
Net asset value per share $12.98
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$12.98) $13.63
- -----------------------------------------------------------------------------------------------------
Class B shares
Net assets $422,342,128
- -----------------------------------------------------------------------------------------------------
Shares outstanding 32,643,379
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.94
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $98,403,456
- -----------------------------------------------------------------------------------------------------
Shares outstanding 7,613,804
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.92
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $43,113,838
- -----------------------------------------------------------------------------------------------------
Shares outstanding 3,320,056
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $12.99
- -----------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $3,005,925
- -----------------------------------------------------------------------------------------------------
Shares outstanding 231,627
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $12.98
- -----------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $40,065
- -----------------------------------------------------------------------------------------------------
Shares outstanding 3,088
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $12.97
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class 529A shares
Net assets $169,163
- -----------------------------------------------------------------------------------------------------
Shares outstanding 13,019
- -----------------------------------------------------------------------------------------------------
Net asset value per share $12.99
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$12.99) $13.64
- -----------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $129,399
- -----------------------------------------------------------------------------------------------------
Shares outstanding 10,009
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.93
- -----------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $145,696
- -----------------------------------------------------------------------------------------------------
Shares outstanding 11,276
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.92
- -----------------------------------------------------------------------------------------------------
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 10/31/03
NET INVESTMENT INCOME
Interest $49,286,973
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $3,321,152
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 21,843
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 945,379
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 1,652,983
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 2,300,413
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 525,026
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 4,874
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 276
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 523
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 606
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 197
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 130
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 150
- -----------------------------------------------------------------------------------------------------
Administrative fee 71,745
- -----------------------------------------------------------------------------------------------------
Custodian fee 248,576
- -----------------------------------------------------------------------------------------------------
Postage 82,837
- -----------------------------------------------------------------------------------------------------
Printing 72,887
- -----------------------------------------------------------------------------------------------------
Auditing fees 22,531
- -----------------------------------------------------------------------------------------------------
Legal fees 897
- -----------------------------------------------------------------------------------------------------
Miscellaneous 713,974
- -----------------------------------------------------------------------------------------------------
Total expenses $9,986,999
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (17,977)
- -----------------------------------------------------------------------------------------------------
Net expenses $9,969,022
- -----------------------------------------------------------------------------------------------------
Net investment income $39,317,951
- -----------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $27,643,542
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions 12,807
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
transactions $27,656,349
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -----------------------------------------------------------------------------------------------------
Investments $(30,753,952)
- -----------------------------------------------------------------------------------------------------
Futures contracts 58,335
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies 161
- -----------------------------------------------------------------------------------------------------
Net unrealized loss on investments and foreign currency
translation $(30,695,456)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and foreign
currency $(3,039,107)
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $36,278,844
- -----------------------------------------------------------------------------------------------------
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.
SIX MONTHS YEAR
ENDED ENDED
10/31/03 4/30/03
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $39,317,951 $86,818,227
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 27,656,349 (2,572,516)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation (30,695,456) 111,701,187
- ---------------------------------------------------------- ------------- --------------
Increase in net assets from operations $36,278,844 $195,946,898
- ---------------------------------------------------------- ------------- --------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- -----------------------------------------------------------------------------------------------------
Class A $(30,016,240) $(63,802,266)
- -----------------------------------------------------------------------------------------------------
Class B (10,927,843) (23,772,406)
- -----------------------------------------------------------------------------------------------------
Class C (2,494,292) (5,933,652)
- -----------------------------------------------------------------------------------------------------
Class I (1,417,930) (1,796,795)
- -----------------------------------------------------------------------------------------------------
Class R1 (51,535) (3,680)
- -----------------------------------------------------------------------------------------------------
Class 529A (4,069) (1,650)
- -----------------------------------------------------------------------------------------------------
Class 529B (2,356) (1,421)
- -----------------------------------------------------------------------------------------------------
Class 529C (2,729) (1,531)
- -----------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(44,916,994) $(95,313,401)
- ---------------------------------------------------------- ------------- --------------
Net increase (decrease) in net assets from fund share
transactions $(147,935,163) $152,140,128
- ---------------------------------------------------------- ------------- --------------
Total increase (decrease) in net assets $(156,573,313) $252,773,625
- ---------------------------------------------------------- ------------- --------------
NET ASSETS
At beginning of period $1,754,894,183 $1,502,120,558
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $13,323,788 and
$7,724,745, respectively) $1,598,320,870 $1,754,894,183
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period and
the past 5 fiscal years (or, if shorter, the period of the fund's operation). Certain information reflects financial results for
a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an
investment in the fund (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 4/30
ENDED ------------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS A (UNAUDITED)
Net asset value, beginning of
period $13.03 $12.27 $12.34 $12.02 $13.08 $13.57
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.31 $0.70 $0.76 $0.85 $0.87 $0.88
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.00+++ 0.82 0.01 0.34 (1.07) (0.46)
- --------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations $0.31 $1.52 $0.77 $1.19 $(0.20) $0.42
- --------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.36) $(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 $(0.36) $(0.76) $(0.84) $(0.87) $(0.86) $(0.91)
- --------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $12.98 $13.03 $12.27 $12.34 $12.02 $13.08
- --------------------------------- ------ ------ ------ ------ ------ ------
Total return (%)(+) 2.38++ 12.84 6.39 10.22 (1.51) 3.22
- --------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ------------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS A (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 0.91+ 0.92 0.94 0.93 0.92 0.96
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.75+ 5.59 6.09 7.01 6.97 6.61
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 46 112 206 289 290 343
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $1,030,971 $1,116,853 $975,849 $853,273 $738,936 $866,388
- --------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
(+) 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 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 the periods prior to May 1, 2001 have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS B (UNAUDITED)
Net asset value, beginning of
period $12.99 $12.23 $12.30 $11.98 $13.04 $13.52
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.27 $0.61 $0.67 $0.76 $0.78 $0.78
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency (0.01) 0.82 0.01 0.34 (1.07) (0.45)
- --------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations $0.26 $1.43 $0.68 $1.10 $(0.29) $0.33
- --------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.31) $(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 $(0.31) $(0.67) $(0.75) $(0.78) $(0.77) $(0.81)
- --------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $12.94 $12.99 $12.23 $12.30 $11.98 $13.04
- --------------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 2.02++ 12.09 5.62 9.49 (2.21) 2.54
- --------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED -----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS B (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.62+ 1.62 1.64 1.63 1.62 1.66
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.09+ 4.89 5.40 6.31 6.27 5.92
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 46 112 206 289 290 343
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $422,342 $474,882 $401,988 $335,629 $278,030 $299,523
- --------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# 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 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 the periods prior to May 1, 2001 have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS C (UNAUDITED)
Net asset value, beginning of
period $12.97 $12.22 $12.29 $11.97 $13.03 $13.52
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.27 $0.61 $0.67 $0.76 $0.78 $0.78
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency (0.01) 0.81 0.01 0.34 (1.07) (0.46)
- --------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations $0.26 $1.42 $0.68 $1.10 $(0.29) $0.32
- --------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.31) $(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 $(0.31) $(0.67) $(0.75) $(0.78) $(0.77) $(0.81)
- --------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $12.92 $12.97 $12.22 $12.29 $11.97 $13.03
- --------------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 2.10++ 12.02 5.71 9.42 (2.21) 2.48
- --------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ----------------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS C (CONTINUED) (UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.62+ 1.62 1.64 1.63 1.62 1.66
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.09+ 4.91 5.40 6.31 6.27 5.92
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 46 112 206 289 290 343
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $98,403 $108,718 $107,212 $100,334 $77,687 $88,173
- --------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# 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 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 the periods prior to May 1, 2001 have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 4/30
ENDED ---------------------------------------------------------------
10/31/03 2003 2002 2001 2000 1999
CLASS I (UNAUDITED)
Net asset value, beginning of period $13.03 $12.27 $12.35 $12.03 $13.09 $13.58
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income $0.34 $0.67 $0.79 $0.90 $0.91 $0.92
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency 0.00+++ 0.89 0.01 0.32 (1.08) (0.45)
- --------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations $0.34 $1.56 $0.80 $1.22 $(0.17) $0.47
- --------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.38) $(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 $(0.38) $(0.80) $(0.88) $(0.90) $(0.89) $(0.96)
- --------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $12.99 $13.03 $12.27 $12.35 $12.03 $13.09
- --------------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 2.61++ 13.17 6.64 10.55 (1.21) 3.56
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 0.62+ 0.62 0.64 0.63 0.62 0.65
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 5.09+ 5.73 6.39 7.30 7.26 6.90
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 46 112 206 289 290 343
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $43,114 $53,249 $17,071 $14,459 $6,873 $9,256
- --------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(S)(S) 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. 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 the periods prior to May 1, 2001 have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS R1 (UNAUDITED)
Net asset value, beginning of period $13.03 $12.65
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.29 $0.11
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency 0.00++++ 0.51+++
- ------------------------------------------------------------------- ------ ------
Total from investment operations $0.29 $0.62
- ------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.34) $(0.24)
- ------------------------------------------------------------------- ------ ------
Net asset value, end of period $12.98 $13.03
- ------------------------------------------------------------------- ------ ------
Total return (%) 2.28++ 4.77++
- ------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Expenses## 1.12+ 1.12+
- ------------------------------------------------------------------------------------------------------
Net investment income 4.49+ 2.95+
- ------------------------------------------------------------------------------------------------------
Portfolio turnover 46 112
- ------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $3,006 $872
- ------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through April 30, 2003.
+ 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.
++++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangement.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS 529A (UNAUDITED)
Net asset value, beginning of period $13.04 $12.14
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.29 $0.39
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency 0.00++++ 1.05+++
- ------------------------------------------------------------------- ------ ------
Total from investment operations $0.29 $1.44
- ------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.34) $(0.54)
- ------------------------------------------------------------------- ------ ------
Net asset value, end of period $12.99 $13.04
- ------------------------------------------------------------------- ------ ------
Total return (%)(+) 2.23++ 12.94++
- ------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Expenses## 1.22+ 1.22+
- ------------------------------------------------------------------------------------------------------
Net investment income 4.46+ 4.68+
- ------------------------------------------------------------------------------------------------------
Portfolio turnover 46 112
- ------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $169 $140
- ------------------------------------------------------------------------------------------------------
* 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 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.
++++ Per share amount was less than $0.01.
# 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.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS 529B (UNAUDITED)
Net asset value, beginning of period $12.98 $12.10
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.25 $0.39
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency (0.01) 0.97+++
- ------------------------------------------------------------------- ------ ------
Total from investment operations $0.24 $1.36
- ------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.29) $(0.48)
- ------------------------------------------------------------------- ------ ------
Net asset value, end of period $12.93 $12.98
- ------------------------------------------------------------------- ------ ------
Total return (%) 1.89++ 12.26++
- ------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Expenses## 1.87+ 1.87+
- ------------------------------------------------------------------------------------------------------
Net investment income 3.83+ 4.30+
- ------------------------------------------------------------------------------------------------------
Portfolio turnover 46 112
- ------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $129 $81
- ------------------------------------------------------------------------------------------------------
* 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 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.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangement.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS ENDED PERIOD ENDED
10/31/03 4/30/03*
CLASS 529C (UNAUDITED)
Net asset value, beginning of period $12.97 $12.09
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.24 $0.36
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency 0.00++++ 1.00+++
- ------------------------------------------------------------------- ------ ------
Total from investment operations $0.24 $1.36
- ------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.29) $(0.48)
- ------------------------------------------------------------------- ------ ------
Net asset value, end of period $12.92 $12.97
- ------------------------------------------------------------------- ------ ------
Total return (%) 1.89++ 12.27++
- ------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Expenses## 1.87+ 1.87+
- ------------------------------------------------------------------------------------------------------
Net investment income 3.78+ 4.26+
- ------------------------------------------------------------------------------------------------------
Portfolio turnover 46 112
- ------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $146 $100
- ------------------------------------------------------------------------------------------------------
* 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 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.
++++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangement.
See notes to financial statements.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -------------------------------------------------------------------------------
(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) 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 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 accounting principles generally accepted in the United States
of America. 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.
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
- -------------------------------------------------------------------------------
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 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 of average net assets 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). The fund has
an unfunded, defined benefit plan for inactive Trustees and an unfunded
retirement benefit deferral plan for active Trustees. Included in Trustees'
compensation is a net increase of $1,355 as a result of the change in the fund's
pension liability for active Trustees and a pension expense of $3,524 for
inactive trustees for the six months ended October 31, 2003.
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
not to exceed the following annual percentage rates 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%
----------------------------------------------------------
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain administrative
services with respect to class R2 shares. These services include various
administrative, recordkeeping and communication/educational services with
respect to the retirement plans which invest in class R2 shares, and may be
provided directly by MFS or by a third party. The fund pays an annual 0.25%
administrative service fee solely from the assets of class R2 shares to MFS
for the provision of these services. No administrative service fee from class
R2 shares were paid to MFS as of October 31, 2003.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$107,261 and $136 for the six months ended October 31, 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 R1, Class R2, 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 R1 CLASS R2 CLASS 529A CLASS 529B CLASS 529C
Distribution
Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.25% 0.75% 0.75%
- ---------------------------------------------------------------------------------------------------------------------------
Service
Fee 0.25% 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% 0.50% 1.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the six months ended October 31, 2003, amounted to:
CLASS A CLASS B CLASS CCLASS R1 CLASS 529ACLASS 529BCLASS 529C
Service Fee
Retained by MFD $53,677 $2,055 $2,019 $1 $49 $2 $10
- --------------------------------------------------------------------------------
Payment of 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.
Fees incurred under the distribution plan during the six months ended October
31, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS R1 CLASS 529A CLASS 529B CLASS 529C
Effective
Annual
Percentage
Rates 0.30% 1.00% 1.00% 0.50% 0.35% 1.00% 1.00%
- -------------------------------------------------------------------------------
Class R2 shares, which commenced operation on October 31, 2003, did not incur
any fees.
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 six months ended October 31, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred
Sales Charges Imposed $107,553 $537,940 $5,868 $-- $--
- --------------------------------------------------------------------------------
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%.
(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 $263,764,922 $326,019,208
- ------------------------------------------------------------------------------
Investments (non-U.S. government securities) $501,460,783 $581,228,081
- ------------------------------------------------------------------------------
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 $1,514,703,447
------------------------------------------------------------
Gross unrealized appreciation $76,914,029
------------------------------------------------------------
Gross unrealized depreciation (13,512,294)
------------------------------------------------------------
Net unrealized appreciation $63,401,735
------------------------------------------------------------
(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:
Six months ended Year ended
10/31/03 4/30/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 33,484,380 $438,341,671 53,583,571 $666,471,550
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 1,935,148 25,216,914 4,239,071 52,704,901
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (41,716,388) (543,567,246) (51,653,643) (643,384,521)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (6,296,860) $(80,008,661) 6,168,999 $75,791,930
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 4,027,115 $52,448,211 15,036,570 $186,594,982
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 661,250 8,586,873 1,446,005 17,923,585
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (8,613,460) (111,552,058) (12,788,436) (158,630,861)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (3,925,095) $(50,516,974) 3,694,139 $45,887,706
- ------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 960,580 $12,489,488 3,181,711 $39,389,428
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 132,954 1,724,099 318,590 3,942,493
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (1,860,175) (24,103,229) (3,896,016) (48,242,113)
- ------------------------------------------------------------------------------------------------------------
Net decrease (766,641) $(9,889,642) (395,715) $(4,910,192)
- ------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 688,005 $9,027,604 3,850,486 $48,720,670
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 108,636 1,416,254 122,598 1,535,631
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (1,562,307) (20,277,460) (1,278,326) (16,051,738)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (765,666) $(9,833,602) 2,694,758 $34,204,563
- ------------------------------------------------------------------------------------------------------------
Six months ended Period ended
10/31/03 4/30/03*
CLASS R1 SHARES
Shares sold 373,731 $4,857,965 98,132 $1,255,845
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 3,169 41,073 30 383
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (212,181) (2,751,742) (31,254) (399,742)
- ------------------------------------------------------------------------------------------------------------
Net increase 164,719 $2,147,296 66,908 $856,486
- ------------------------------------------------------------------------------------------------------------
Period ended
10/31/03***
SHARES AMOUNT
CLASS R2 SHARES
Shares sold 3,088 $40,020
- ------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions -- --
- ------------------------------------------------------------------
Shares reacquired -- --
- ------------------------------------------------------------------
Net increase 3,088 $40,020
- ------------------------------------------------------------------
Six months ended Period ended
10/31/03 4/30/03**
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 2,098 $27,759 10,839 $137,466
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 301 3,920 83 1,059
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (131) (1,726) (171) (2,141)
- ------------------------------------------------------------------------------------------------------------
Net increase 2,268 $29,953 10,751 $136,384
- ------------------------------------------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 3,687 $48,106 6,161 $76,789
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 169 2,195 87 1,100
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (69) (905) (26) (328)
- ------------------------------------------------------------------------------------------------------------
Net increase 3,787 $49,396 6,222 $77,561
- ------------------------------------------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 3,642 $47,543 7,603 $94,769
- ------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of
distributions 200 2,602 90 1,136
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (242) (3,094) (17) (215)
- ------------------------------------------------------------------------------------------------------------
Net increase 3,600 $47,051 7,676 $95,690
- ------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through April 30, 2003.
** For the period from the inception of Class 529A, Class 529B, and Class 529C shares, July 31, 2002,
through April 30, 2003.
*** Class R2 shares, which commenced operations on October 31, 2003, had no operating activity.
(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 six
months ended October 31, 2003, was $5,660. The fund had no borrowings during
the period.
(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.
Futures Contracts
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
U.S. Treasury Notes December 2003 224 Short $(38,500)
- -------------------------------------------------------------------------------
At October 31, 2003, the fund had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the fund's investment
adviser, has been contacted by the Office of the New York State Attorney
General ("NYAG") and the United States Securities and Exchange Commission
("SEC") in connection with their investigations of practices in the mutual
fund industry identified as "market timing" mutual fund shares. MFS is
cooperating with respect to these investigations. MFS has been informed that
the SEC is considering whether to institute an enforcement action against MFS
alleging false and misleading disclosure in certain MFS fund prospectuses and
breach of fiduciary duty concerning market timing. The NYAG has also indicated
that it is considering whether to commence an enforcement proceeding against
MFS relating to these practices. MFS continues to discuss these matters with
the SEC and the NYAG. Certain other regulatory authorities are also conducting
investigations into these practices within the industry and have requested
that MFS provide information to them.
In December 2003, MFS and Sun Life Financial Inc., along with certain MFS
funds and Trustees who serve on the Board of Trustees of these MFS funds, were
named as defendants in class action lawsuits filed in the United States
District Court, District of Massachusetts seeking damages of unspecified
amounts. The lawsuits were purportedly filed on behalf of people who
purchased, owned and/or redeemed shares of MFS funds during specified periods.
The suits allege that certain defendants permitted market timing and late
trading in the MFS funds which allegedly caused financial injury to the funds'
shareholders. The defendants are reviewing the allegations and will respond
appropriately. Additional lawsuits based upon similar allegations may be filed
in the future.
Any potential resolution of these matters may include, but not be limited to,
sanctions, penalties, damages or injunctions regarding MFS, restitution to
mutual fund shareholders and/or other financial penalties and structural
changes in the governance of MFS' mutual fund business.
Although MFS does not believe that these lawsuits will have a material adverse
effect on the funds, there can be no assurance that these suits, the ongoing
adverse publicity and/or other developments resulting from related regulatory
investigations or developments will not result in increased fund redemptions,
reduced sales of fund shares, or other adverse consequences for the funds.
- -------------------------------------------------------------------------------------------------------------
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
JOHN W. BALLEN (born 09/12/59) ROBERT R. FLAHERTY (born 09/18/63)
Trustee and President Assistant Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59)
Assistant Secretary and Assistant Clerk RICHARD M. HISEY (born 08/29/58)
Massachusetts Financial Services Company, Senior Treasurer
Vice President and Associate General Counsel Massachusetts Financial Services Company, Senior
Vice President (since July 2002); The Bank of New
STEPHEN E. CAVAN (born 11/06/53) York, Senior Vice President (September 2000 to
Secretary and Clerk July 2002); Lexington Global Asset Managers, Inc.,
Massachusetts Financial Services Company, Senior Executive Vice President and Chief Financial
Vice President, General Counsel and Secretary Officer (prior to September 2000); Lexington
Funds, Treasurer (prior to September 2000)
STEPHANIE A. DESISTO (born 10/01/53)
Assistant Treasurer ELLEN MOYNIHAN (born 11/13/57)
Massachusetts Financial Services Company, Vice Assistant Treasurer
President (since April 2003); Brown Brothers Massachusetts Financial Services Company, Vice
Harriman & Co., Senior Vice President (November President
2002 to April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice President JAMES O. YOST (born 06/12/60)
(prior to November 2002) Assistant Treasurer
Massachusetts Financial Services 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 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 110 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
PORTFOLIO MANAGER
William J. Adams(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
A prospectus containing more complete information, including investment
objectives, risks, charges, and expenses, for any of the MFS products can be
obtained from your investment professional. You should read and consider the
information carefully before investing.
Variable annuities are offered through MFS/Sun Life Financial Distributors,
Inc.
- -------------------------------------------------------------------------------
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.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.
gov.
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 exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required 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-SEM-12/03 105M
MFS(R) Mutual Funds
SEMIANNUAL REPORT 10/31/03
MFS(R) EMERGING
OPPORTUNITIES FUND
- ------------------------------
MFS(R) LARGE CAP
VALUE FUND
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) EMERGING OPPORTUNITIES FUND
The fund seeks long-term growth of capital.
MFS(R) LARGE CAP VALUE FUND
The fund seeks long-term growth of capital.
- --------------------------------------------------------------------------------
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.
- ---------------------------------------------
To view MFS' statement concerning regulatory
issues affecting the mutual fund industry and
the firm, please visit www.mfs.com.
- ---------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
PERFORMANCE SUMMARY 1
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ----------------------------------------------------
FINANCIAL STATEMENTS 14
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 24
- ----------------------------------------------------
TRUSTEES AND OFFICERS 29
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 10/31/03
- --------------------------------------------------------------------------------
Currently, each fund offers Class A and Class I shares, which are available for
purchase at net asset value only by residents of the Commonwealth of
Massachusetts who are employees (or certain relatives of employees) of MFS and
its affiliates or members of the governing boards of the various funds sponsored
by MFS.
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Performance results include the deduction of the
maximum sales charge and reflect the percentage change in the net asset value,
including reinvestment of dividends and capital gains distributions. Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. (See Notes to
Performance Summary for more information.)
Visit mfs.com for the most current performance results.
Market volatility can significantly affect short-term performance, and more
recent returns may be different from those shown.
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.
MFS EMERGING OPPORTUNITIES FUND
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share class inception date 6-mo 1-yr 3-yr Life*
- ------------------------------------------------------------------------------
A 5/2/00 -- 52.56% -1.50% 0.80%
- ------------------------------------------------------------------------------
I 6/1/00 -- 52.55% -1.40% 0.89%
- ------------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative Benchmarks
- ------------------------------------------------------------------------------
Average mid cap core fund+ 24.90% 30.88% 0.19% 1.57%
- ------------------------------------------------------------------------------
Russell MidCap Growth Index# 28.75% 39.30% -13.08% -11.85%
- ------------------------------------------------------------------------------
Russell 2500 Growth Index#*** 34.33% 44.76% -8.41% -8.90%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
- --------------------
Average annual
with sales charge**
- --------------------
- ------------------------------------------------------------------------------
A -- 43.78% -3.43% -0.89%
- ------------------------------------------------------------------------------
I class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
Share class 6-mo 1-yr 3-yr Life*
- ------------------------------------------------------------------------------
A 36.04% 52.56% -4.44% 2.82%
- ------------------------------------------------------------------------------
I 36.08% 52.55% -4.14% 3.14%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
* For the period from the commencement of the fund's investment operations,
May 2, 2000, through October 31, 2003. Index information is from May 1,
2000.
** Takes into account the maximum sales charge of 5.75%.
*** Effective December 31, 2002, the fund no longer uses the Russell 2500 Growth
Index as a benchmark because we believe the Russell MidCap Growth Index
better reflects the fund's investment policies and objectives.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
THE RUSSELL MIDCAP GROWTH INDEX - measures the performance of U.S. mid-cap
growth stocks.
THE RUSSELL 2500 GROWTH INDEX - measures the performance of U.S. small- and
mid-cap growth stocks.
It is not possible to invest directly in an index.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
Investing in small companies is riskier than investing in more-established
companies.
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.
Investing in mid-sized companies is riskier than investing in more-established
companies.
When concentrating on one issuer, the portfolio is sensitive to changes in the
value of these securities.
These risks may increase share price volatility. Please see the prospectus for
further information regarding these and other risk considerations.
MFS LARGE CAP VALUE FUND
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share class inception date 6-mo 1-yr 3-yr Life*
- ------------------------------------------------------------------------------
A 5/4/99 -- 16.08% -0.66% 4.28%
- ------------------------------------------------------------------------------
I 5/5/99 -- 15.69% -0.47% 4.60%
- ------------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative Benchmarks
- ------------------------------------------------------------------------------
Average large
cap value fund+ 15.95% 20.77% -3.07% -1.34%
- ------------------------------------------------------------------------------
Russell 1000 Value
Index# 16.74% 22.87% -0.86% -0.04%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
- --------------------
Average annual
with sales charge**
- --------------------
- ------------------------------------------------------------------------------
A -- 9.41% -2.60% 2.92%
- ------------------------------------------------------------------------------
I class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A 12.56% 16.08% -1.96% 20.74%
- ------------------------------------------------------------------------------
I 11.98% 15.69% -1.40% 22.36%
- ------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
* For the period from the commencement of the fund's investment operations,
May 4, 1999, through October 31, 2003. Index information is from May 1, 1999.
** Takes into account the maximum sales charge of 5.75%.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
THE RUSSELL 1000 VALUE INDEX - measures the performance of large-cap U.S.
value stocks.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
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.
Performance has not been adjusted to take into account differences in
class-specific operating expenses (such as Rule 12b-1 fees). Because I share
expenses are lower than those of A, performance shown for this share class is
lower than it would have been had it been offered for the entire period.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Any such subsidy or waiver is voluntary and may
be revised or rescinded at any time without notice. Without such subsides and
waivers the fund's performance results would be less favorable. Please see the
prospectus and financial statements for complete details.
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 regarding these and other risk considerations.
This publication is authorized for distribution only when preceded or
accompanied by a prospectus for the portfolio being offered.
- -------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) - 10/31/03 MFS(R) EMERGING OPPORTUNITIES FUND
- -------------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund as of 10/31/03.
It is categorized by broad-based asset classes.
Stocks - 88.7%
- -------------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -------------------------------------------------------------------------------------------------------
U.S. Stocks - 78.6%
- -------------------------------------------------------------------------------------------------------
Banks & Credit Companies - 2.0%
- -------------------------------------------------------------------------------------------------------
Conseco, Inc.* 1,100 $22,440
- -------------------------------------------------------------------------------------------------------
Investors Financial Services Corp. 300 10,599
- -------------------------------------------------------------------------------------------------------
$33,039
- -------------------------------------------------------------------------------------------------------
Biotechnology - 4.2%
- -------------------------------------------------------------------------------------------------------
Affymetrix, Inc.* 400 $10,252
- -------------------------------------------------------------------------------------------------------
Amgen, Inc.* 200 12,352
- -------------------------------------------------------------------------------------------------------
Dendreon Corp.* 600 5,052
- -------------------------------------------------------------------------------------------------------
Dyax Corp.* 900 4,410
- -------------------------------------------------------------------------------------------------------
Millipore Corp.* 500 21,925
- -------------------------------------------------------------------------------------------------------
Serologicals Corp.* 1,000 16,000
- -------------------------------------------------------------------------------------------------------
$69,991
- -------------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 7.1%
- -------------------------------------------------------------------------------------------------------
Cox Radio, Inc., "A"* 900 $19,908
- -------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., "A"* 300 11,496
- -------------------------------------------------------------------------------------------------------
Entercom Communications Corp., "A"* 300 13,743
- -------------------------------------------------------------------------------------------------------
Harris Interactive, Inc.* 1,800 11,970
- -------------------------------------------------------------------------------------------------------
LIN TV Corp., "A"* 500 11,275
- -------------------------------------------------------------------------------------------------------
LodgeNet Entertainment Corp.* 1,100 19,998
- -------------------------------------------------------------------------------------------------------
Westwood One, Inc.* 1,000 29,930
- -------------------------------------------------------------------------------------------------------
$118,320
- -------------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 2.0%
- -------------------------------------------------------------------------------------------------------
Affiliated Managers Group, Inc.* 200 $14,500
- -------------------------------------------------------------------------------------------------------
Ameritrade Holding Corp.* 1,400 19,096
- -------------------------------------------------------------------------------------------------------
$33,596
- -------------------------------------------------------------------------------------------------------
Business Services - 6.6%
- -------------------------------------------------------------------------------------------------------
Digitas, Inc.* 2,800 $24,360
- -------------------------------------------------------------------------------------------------------
DST Systems, Inc.* 300 11,346
- -------------------------------------------------------------------------------------------------------
EVCI Career Colleges, Inc.* 3,800 18,050
- -------------------------------------------------------------------------------------------------------
Lightbridge, Inc.* 900 8,640
- -------------------------------------------------------------------------------------------------------
Manpower, Inc. 300 13,920
- -------------------------------------------------------------------------------------------------------
Monster Worldwide, Inc.* 600 15,282
- -------------------------------------------------------------------------------------------------------
Resources Connection, Inc.* 400 9,892
- -------------------------------------------------------------------------------------------------------
School Specialty, Inc.* 300 8,364
- -------------------------------------------------------------------------------------------------------
$109,854
- -------------------------------------------------------------------------------------------------------
Chemicals - 0.5%
- -------------------------------------------------------------------------------------------------------
Lyondell Chemical Co. 530 $7,579
- -------------------------------------------------------------------------------------------------------
Computer Software - 4.4%
- -------------------------------------------------------------------------------------------------------
BEA Systems, Inc.* 500 $6,950
- -------------------------------------------------------------------------------------------------------
Getty Images, Inc.* 350 15,645
- -------------------------------------------------------------------------------------------------------
Networks Associates, Inc.* 1,200 16,716
- -------------------------------------------------------------------------------------------------------
Roxio, Inc.* 1,900 19,361
- -------------------------------------------------------------------------------------------------------
VERITAS Software Corp.* 400 14,460
- -------------------------------------------------------------------------------------------------------
$73,132
- -------------------------------------------------------------------------------------------------------
Consumer Services - 4.0%
- -------------------------------------------------------------------------------------------------------
Career Education Corp.* 1,000 $53,550
- -------------------------------------------------------------------------------------------------------
Corinthian Colleges, Inc.* 200 12,384
- -------------------------------------------------------------------------------------------------------
$65,934
- -------------------------------------------------------------------------------------------------------
Electrical Equipment - 1.7%
- -------------------------------------------------------------------------------------------------------
Rockwell Automation, Inc. 900 $27,945
- -------------------------------------------------------------------------------------------------------
Electronics - 6.7%
- -------------------------------------------------------------------------------------------------------
American Superconductor Corp.* 1,360 $13,124
- -------------------------------------------------------------------------------------------------------
Amphenol Corp., "A"* 200 11,750
- -------------------------------------------------------------------------------------------------------
DuPont Photomasks, Inc.* 300 6,954
- -------------------------------------------------------------------------------------------------------
Intest Corp.* 2,500 16,375
- -------------------------------------------------------------------------------------------------------
Mindspeed Technologies, Inc.* 2,700 13,824
- -------------------------------------------------------------------------------------------------------
Novellus Systems, Inc.* 200 8,258
- -------------------------------------------------------------------------------------------------------
PMC-Sierra, Inc.* 700 12,719
- -------------------------------------------------------------------------------------------------------
Silicon Image, Inc.* 725 5,097
- -------------------------------------------------------------------------------------------------------
White Electronic Designs Corp.* 900 9,900
- -------------------------------------------------------------------------------------------------------
Xilinx, Inc.* 400 12,680
- -------------------------------------------------------------------------------------------------------
$110,681
- -------------------------------------------------------------------------------------------------------
Entertainment - 1.2%
- -------------------------------------------------------------------------------------------------------
Walt Disney Co. 900 $20,376
- -------------------------------------------------------------------------------------------------------
Gaming & Lodging - 2.1%
- -------------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 500 $14,855
- -------------------------------------------------------------------------------------------------------
Station Casinos, Inc.* 700 20,825
- -------------------------------------------------------------------------------------------------------
$35,680
- -------------------------------------------------------------------------------------------------------
Internet - 1.1%
- -------------------------------------------------------------------------------------------------------
GSI Commerce, Inc.* 1,100 $10,736
- -------------------------------------------------------------------------------------------------------
SCO Group, Inc.* 400 6,760
- -------------------------------------------------------------------------------------------------------
$17,496
- -------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.5%
- -------------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc.* 300 $12,075
- -------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.* 2,100 28,980
- -------------------------------------------------------------------------------------------------------
$41,055
- -------------------------------------------------------------------------------------------------------
Medical Equipment - 9.0%
- -------------------------------------------------------------------------------------------------------
Aradigm Corp.* 4,900 $10,437
- -------------------------------------------------------------------------------------------------------
Cytyc Corp.* 3,300 42,669
- -------------------------------------------------------------------------------------------------------
DENTSPLY International, Inc. 300 13,257
- -------------------------------------------------------------------------------------------------------
Guidant Corp. 100 5,101
- -------------------------------------------------------------------------------------------------------
Invitrogen Corp.* 400 25,436
- -------------------------------------------------------------------------------------------------------
STAAR Surgical Co.* 1,400 13,874
- -------------------------------------------------------------------------------------------------------
Thermo Electron Corp.* 900 19,782
- -------------------------------------------------------------------------------------------------------
Thoratec Corp.* 1,200 18,468
- -------------------------------------------------------------------------------------------------------
$149,024
- -------------------------------------------------------------------------------------------------------
Oil Services - 1.1%
- -------------------------------------------------------------------------------------------------------
BJ Services Co.* 200 $6,562
- -------------------------------------------------------------------------------------------------------
Smith International, Inc.* 300 11,169
- -------------------------------------------------------------------------------------------------------
$17,731
- -------------------------------------------------------------------------------------------------------
Pharmaceuticals - 2.4%
- -------------------------------------------------------------------------------------------------------
Inspire Pharmaceutical, Inc.* 1,000 $18,620
- -------------------------------------------------------------------------------------------------------
Schering Plough Corp. 1,400 21,378
- -------------------------------------------------------------------------------------------------------
$39,998
- -------------------------------------------------------------------------------------------------------
Printing & Publishing - 2.6%
- -------------------------------------------------------------------------------------------------------
Bowne & Co., Inc. 900 $13,500
- -------------------------------------------------------------------------------------------------------
Meredith Corp. 400 19,408
- -------------------------------------------------------------------------------------------------------
Playboy Enterprises, Inc., "B"* 700 10,843
- -------------------------------------------------------------------------------------------------------
$43,751
- -------------------------------------------------------------------------------------------------------
Special Products & Services - 0.4%
- -------------------------------------------------------------------------------------------------------
Weight Watchers International, Inc.* 200 $7,380
- -------------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.8%
- -------------------------------------------------------------------------------------------------------
Georgia Gulf Corp. 500 $13,450
- -------------------------------------------------------------------------------------------------------
Specialty Stores - 0.7%
- -------------------------------------------------------------------------------------------------------
PETsMART, Inc. 470 $12,036
- -------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.9%
- -------------------------------------------------------------------------------------------------------
Corning, Inc.* 1,300 $14,274
- -------------------------------------------------------------------------------------------------------
Telephone Services - 6.0%
- -------------------------------------------------------------------------------------------------------
Cincinnati Bell, Inc.* 1,800 $9,198
- -------------------------------------------------------------------------------------------------------
Citizens Communications Co.* 1,300 16,185
- -------------------------------------------------------------------------------------------------------
NTL, Inc.* 1,000 61,730
- -------------------------------------------------------------------------------------------------------
Spectrasite, Inc.* 320 12,400
- -------------------------------------------------------------------------------------------------------
$99,513
- -------------------------------------------------------------------------------------------------------
Trucking - 1.5%
- -------------------------------------------------------------------------------------------------------
Expeditors International of Washington, Inc. 300 $11,262
- -------------------------------------------------------------------------------------------------------
Swift Transportation, Inc.* 600 13,458
- -------------------------------------------------------------------------------------------------------
$24,720
- -------------------------------------------------------------------------------------------------------
Wireless Communications - 7.1%
- -------------------------------------------------------------------------------------------------------
American Tower Corp., "A"* 4,000 $46,400
- -------------------------------------------------------------------------------------------------------
Crown Castle International Corp.* 3,300 41,778
- -------------------------------------------------------------------------------------------------------
NEXTEL Communications, Inc., "A"* 1,000 24,200
- -------------------------------------------------------------------------------------------------------
SBA Communications Corp.* 1,400 5,698
- -------------------------------------------------------------------------------------------------------
$118,076
- -------------------------------------------------------------------------------------------------------
Total U.S. Stocks $1,304,631
- -------------------------------------------------------------------------------------------------------
Foreign Stocks - 10.1%
- -------------------------------------------------------------------------------------------------------
Bermuda - 1.8%
- -------------------------------------------------------------------------------------------------------
Central European Media, "A" (Broadcast & Cable TV)* 700 $20,986
- -------------------------------------------------------------------------------------------------------
Marvell Technology Group Ltd. (Electronics)* 200 8,774
- -------------------------------------------------------------------------------------------------------
$29,760
- -------------------------------------------------------------------------------------------------------
Brazil - 1.7%
- -------------------------------------------------------------------------------------------------------
Embraer-Empresa Brasileira de Aeronautica, ADR (Aerospace) 1,100 $28,545
- -------------------------------------------------------------------------------------------------------
Canada - 2.5%
- -------------------------------------------------------------------------------------------------------
BOMBARDIER, Inc., "B" (Aerospace) 2,300 $10,323
- -------------------------------------------------------------------------------------------------------
Inmet Mining Corp. (Metals & Mining)* 1,800 16,294
- -------------------------------------------------------------------------------------------------------
Intrawest Corp. (Gaming & Lodging) 900 15,129
- -------------------------------------------------------------------------------------------------------
$41,746
- -------------------------------------------------------------------------------------------------------
Germany - 0.7%
- -------------------------------------------------------------------------------------------------------
Amadeus AG (Business Services) 1,850 $12,029
- -------------------------------------------------------------------------------------------------------
Ireland - 0.6%
- -------------------------------------------------------------------------------------------------------
Ryanair Holdings PLC (Airlines)* 200 $10,300
- -------------------------------------------------------------------------------------------------------
Japan - 0.9%
- -------------------------------------------------------------------------------------------------------
Heiwa Corp. (Leisure & Toys) 1,000 $14,458
- -------------------------------------------------------------------------------------------------------
Luxembourg - 1.9%
- -------------------------------------------------------------------------------------------------------
Millicom International Cellular S.A. (Wireless
Communications)* 500 $30,785
- -------------------------------------------------------------------------------------------------------
Total Foreign Stocks $167,623
- -------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,251,634) $1,472,254
- -------------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.5%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -------------------------------------------------------------------------------------------------------
New Center Asset Trust, due 11/03/03, at Amortized Cost $59 $58,997
- -------------------------------------------------------------------------------------------------------
Repurchase Agreement - 8.2%
- -------------------------------------------------------------------------------------------------------
Merrill Lynch, dated 10/31/03, due 11/03/03, total to be
received $136,012 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account),
at Cost $136 $136,000
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,446,631) $1,667,251
- -------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.4)% (6,839)
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,660,412
- -------------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
- -------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) - 10/31/03 MFS(R) LARGE CAP VALUE FUND
- -------------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund as of 10/31/03.
It is categorized by broad-based asset classes.
Stocks - 91.6%
- -------------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -------------------------------------------------------------------------------------------------------
U.S. Stocks - 83.9%
- -------------------------------------------------------------------------------------------------------
Aerospace - 0.1%
- -------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 25 $765
- -------------------------------------------------------------------------------------------------------
Banks & Credit Companies - 15.8%
- -------------------------------------------------------------------------------------------------------
Bank of America Corp. 135 $10,224
- -------------------------------------------------------------------------------------------------------
Bank One Corp. 198 8,405
- -------------------------------------------------------------------------------------------------------
Citigroup, Inc. 365 17,301
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. 136 9,750
- -------------------------------------------------------------------------------------------------------
FleetBoston Financial Corp. 230 9,290
- -------------------------------------------------------------------------------------------------------
Mellon Financial Corp. 304 9,080
- -------------------------------------------------------------------------------------------------------
SouthTrust Corp. 100 3,185
- -------------------------------------------------------------------------------------------------------
SunTrust Banks, Inc. 134 8,987
- -------------------------------------------------------------------------------------------------------
U.S. Bancorp 148 4,029
- -------------------------------------------------------------------------------------------------------
Wachovia Corp. 74 3,394
- -------------------------------------------------------------------------------------------------------
$83,645
- -------------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 1.9%
- -------------------------------------------------------------------------------------------------------
Comcast Corp. "Special A"* 160 $5,219
- -------------------------------------------------------------------------------------------------------
Cox Communications, Inc., "A"* 140 4,770
- -------------------------------------------------------------------------------------------------------
$9,989
- -------------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 3.5%
- -------------------------------------------------------------------------------------------------------
Franklin Resources, Inc. 80 $3,793
- -------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 114 6,749
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 114 6,255
- -------------------------------------------------------------------------------------------------------
T. Rowe Price Group, Inc. 45 1,852
- -------------------------------------------------------------------------------------------------------
$18,649
- -------------------------------------------------------------------------------------------------------
Chemicals - 3.4%
- -------------------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 123 $5,585
- -------------------------------------------------------------------------------------------------------
Dow Chemical Co. 172 6,483
- -------------------------------------------------------------------------------------------------------
PPG Industries, Inc. 105 6,053
- -------------------------------------------------------------------------------------------------------
$18,121
- -------------------------------------------------------------------------------------------------------
Computer Software - 1.1%
- -------------------------------------------------------------------------------------------------------
Microsoft Corp. 223 $5,832
- -------------------------------------------------------------------------------------------------------
Computer Software - Systems - 2.0%
- -------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 255 $5,689
- -------------------------------------------------------------------------------------------------------
International Business Machines Corp. 52 4,653
- -------------------------------------------------------------------------------------------------------
$10,342
- -------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 3.0%
- -------------------------------------------------------------------------------------------------------
Colgate-Palmolive Co. 20 $1,064
- -------------------------------------------------------------------------------------------------------
Gillette Co. 130 4,147
- -------------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 125 6,601
- -------------------------------------------------------------------------------------------------------
Procter & Gamble Co. 41 4,030
- -------------------------------------------------------------------------------------------------------
$15,842
- -------------------------------------------------------------------------------------------------------
Electrical Equipment - 2.1%
- -------------------------------------------------------------------------------------------------------
Emerson Electric Co. 100 $5,675
- -------------------------------------------------------------------------------------------------------
General Electric Co. 191 5,541
- -------------------------------------------------------------------------------------------------------
$11,216
- -------------------------------------------------------------------------------------------------------
Electronics - 1.7%
- -------------------------------------------------------------------------------------------------------
Intel Corp. 25 $826
- -------------------------------------------------------------------------------------------------------
Texas Instruments, Inc. 286 8,271
- -------------------------------------------------------------------------------------------------------
$9,097
- -------------------------------------------------------------------------------------------------------
Energy - Independent - 1.5%
- -------------------------------------------------------------------------------------------------------
Devon Energy Corp. 165 $8,003
- -------------------------------------------------------------------------------------------------------
Energy - Integrated - 5.0%
- -------------------------------------------------------------------------------------------------------
ConocoPhillips Co. 65 $3,715
- -------------------------------------------------------------------------------------------------------
ExxonMobil Corp. 450 16,461
- -------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp. 175 6,170
- -------------------------------------------------------------------------------------------------------
$26,346
- -------------------------------------------------------------------------------------------------------
Entertainment - 2.0%
- -------------------------------------------------------------------------------------------------------
Viacom, Inc., "B" 138 $5,502
- -------------------------------------------------------------------------------------------------------
Walt Disney Co. 225 5,094
- -------------------------------------------------------------------------------------------------------
$10,596
- -------------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.5%
- -------------------------------------------------------------------------------------------------------
Kroger Co.* 150 $2,624
- -------------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 2.9%
- -------------------------------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 372 $5,338
- -------------------------------------------------------------------------------------------------------
Kellogg Co. 215 7,123
- -------------------------------------------------------------------------------------------------------
PepsiCo, Inc. 60 2,869
- -------------------------------------------------------------------------------------------------------
$15,330
- -------------------------------------------------------------------------------------------------------
Forest & Paper Products - 1.4%
- -------------------------------------------------------------------------------------------------------
International Paper Co. 190 $7,477
- -------------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.7%
- -------------------------------------------------------------------------------------------------------
Hilton Hotels Corp. 125 $1,980
- -------------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Co. 55 1,855
- -------------------------------------------------------------------------------------------------------
$3,835
- -------------------------------------------------------------------------------------------------------
General Merchandise - 0.4%
- -------------------------------------------------------------------------------------------------------
May Department Stores Co. 75 $2,097
- -------------------------------------------------------------------------------------------------------
Insurance - 4.6%
- -------------------------------------------------------------------------------------------------------
Allstate Corp. 198 $7,821
- -------------------------------------------------------------------------------------------------------
Chubb Corp. 107 7,149
- -------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 86 4,721
- -------------------------------------------------------------------------------------------------------
MetLife, Inc. 145 4,553
- -------------------------------------------------------------------------------------------------------
$24,244
- -------------------------------------------------------------------------------------------------------
Machinery & Tools - 0.9%
- -------------------------------------------------------------------------------------------------------
Deere & Co. 80 $4,850
- -------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.1%
- -------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.* 45 $621
- -------------------------------------------------------------------------------------------------------
Medical Equipment - 0.1%
- -------------------------------------------------------------------------------------------------------
Baxter International, Inc. 25 $665
- -------------------------------------------------------------------------------------------------------
Metals & Mining - 1.1%
- -------------------------------------------------------------------------------------------------------
Alcoa, Inc. 170 $5,367
- -------------------------------------------------------------------------------------------------------
Phelps Dodge Corp.* 10 617
- -------------------------------------------------------------------------------------------------------
$5,984
- -------------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.9%
- -------------------------------------------------------------------------------------------------------
National Fuel Gas Co. 140 $3,129
- -------------------------------------------------------------------------------------------------------
WGL Holdings, Inc. 53 1,465
- -------------------------------------------------------------------------------------------------------
$4,594
- -------------------------------------------------------------------------------------------------------
Oil Services - 4.2%
- -------------------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 155 $3,489
- -------------------------------------------------------------------------------------------------------
Noble Corp.* 246 8,445
- -------------------------------------------------------------------------------------------------------
Schlumberger Ltd. 225 10,569
- -------------------------------------------------------------------------------------------------------
$22,503
- -------------------------------------------------------------------------------------------------------
Pharmaceuticals - 5.2%
- -------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 21 $533
- -------------------------------------------------------------------------------------------------------
Eli Lilly & Co. 53 3,531
- -------------------------------------------------------------------------------------------------------
Johnson & Johnson Co. 110 5,536
- -------------------------------------------------------------------------------------------------------
Merck & Co., Inc. 35 1,549
- -------------------------------------------------------------------------------------------------------
Pfizer, Inc. 192 6,067
- -------------------------------------------------------------------------------------------------------
Schering Plough Corp. 330 5,039
- -------------------------------------------------------------------------------------------------------
Wyeth 115 5,076
- -------------------------------------------------------------------------------------------------------
$27,331
- -------------------------------------------------------------------------------------------------------
Printing & Publishing - 2.8%
- -------------------------------------------------------------------------------------------------------
New York Times Co., "A" 148 $7,034
- -------------------------------------------------------------------------------------------------------
Tribune Co. 156 7,652
- -------------------------------------------------------------------------------------------------------
$14,686
- -------------------------------------------------------------------------------------------------------
Railroad & Shipping - 2.3%
- -------------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Railway Co. 220 $6,367
- -------------------------------------------------------------------------------------------------------
Union Pacific Corp. 89 5,571
- -------------------------------------------------------------------------------------------------------
$11,938
- -------------------------------------------------------------------------------------------------------
Real Estate - 1.1%
- -------------------------------------------------------------------------------------------------------
Equity Residential Properties Trust 205 $5,996
- -------------------------------------------------------------------------------------------------------
Restaurants - 1.0%
- -------------------------------------------------------------------------------------------------------
McDonald's Corp. 220 $5,502
- -------------------------------------------------------------------------------------------------------
Telephone Services - 4.9%
- -------------------------------------------------------------------------------------------------------
AT&T Corp. 318 $5,912
- -------------------------------------------------------------------------------------------------------
BellSouth Corp. 213 5,604
- -------------------------------------------------------------------------------------------------------
SBC Communications, Inc. 365 8,753
- -------------------------------------------------------------------------------------------------------
Verizon Communications, Inc. 176 5,913
- -------------------------------------------------------------------------------------------------------
$26,182
- -------------------------------------------------------------------------------------------------------
Tobacco - 1.0%
- -------------------------------------------------------------------------------------------------------
Altria Group, Inc. 117 $5,441
- -------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 3.7%
- -------------------------------------------------------------------------------------------------------
Entergy Corp. 50 $2,695
- -------------------------------------------------------------------------------------------------------
Exelon Corp. 65 4,124
- -------------------------------------------------------------------------------------------------------
FirstEnergy Corp. 40 1,376
- -------------------------------------------------------------------------------------------------------
FPL Group, Inc. 24 1,530
- -------------------------------------------------------------------------------------------------------
NiSource, Inc. 45 932
- -------------------------------------------------------------------------------------------------------
Pinnacle West Capital Corp. 9 329
- -------------------------------------------------------------------------------------------------------
PPL Corp. 95 3,792
- -------------------------------------------------------------------------------------------------------
TXU Corp. 200 4,564
- -------------------------------------------------------------------------------------------------------
$19,342
- -------------------------------------------------------------------------------------------------------
Wireless Communications - 1.0%
- -------------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc.* 500 $3,625
- -------------------------------------------------------------------------------------------------------
Telephone & Data Systems, Inc. 27 1,690
- -------------------------------------------------------------------------------------------------------
$5,315
- -------------------------------------------------------------------------------------------------------
Total U.S. Stocks $445,000
- -------------------------------------------------------------------------------------------------------
Foreign Stocks - 7.7%
- -------------------------------------------------------------------------------------------------------
Australia - 0.7%
- -------------------------------------------------------------------------------------------------------
BHP Billiton Ltd. (Metals & Mining) 460 $3,818
- -------------------------------------------------------------------------------------------------------
Finland - 0.6%
- -------------------------------------------------------------------------------------------------------
Nokia Corp., ADR (Telecommunications - Wireline) 200 $3,398
- -------------------------------------------------------------------------------------------------------
Netherlands - 0.2%
- -------------------------------------------------------------------------------------------------------
Akzo Nobel N.V. (Specialty Chemicals) 40 $1,263
- -------------------------------------------------------------------------------------------------------
Switzerland - 1.0%
- -------------------------------------------------------------------------------------------------------
Novartis AG (Pharmaceuticals) 135 $5,137
- -------------------------------------------------------------------------------------------------------
United Kingdom - 5.2%
- -------------------------------------------------------------------------------------------------------
BP PLC, ADR (Energy - Integrated) 232 $9,832
- -------------------------------------------------------------------------------------------------------
Diageo PLC (Alcoholic Beverages)* 250 2,939
- -------------------------------------------------------------------------------------------------------
Reed Elsevier PLC (Printing & Publishing) 1,070 8,311
- -------------------------------------------------------------------------------------------------------
Vodafone Group PLC, ADR (Wireless Communications) 293 6,197
- -------------------------------------------------------------------------------------------------------
$27,279
- -------------------------------------------------------------------------------------------------------
Total Foreign Stocks $40,895
- -------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $451,679) $485,895
- -------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 1.7%
- -------------------------------------------------------------------------------------------------------
U.S. Stocks - 1.7%
- -------------------------------------------------------------------------------------------------------
Insurance - 1.1%
- -------------------------------------------------------------------------------------------------------
Chubb Corp., 7s 80 $2,220
- -------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc., 6s 70 3,848
- -------------------------------------------------------------------------------------------------------
$6,068
- -------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.6%
- -------------------------------------------------------------------------------------------------------
Motorola, Inc., 7s 75 $3,171
- -------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $8,821) $9,239
- -------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.0%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -------------------------------------------------------------------------------------------------------
New Center Asset Trust, due 11/03/03, at Amortized Cost $21 $20,999
- -------------------------------------------------------------------------------------------------------
Repurchase Agreement - 2.8%
- -------------------------------------------------------------------------------------------------------
Merrill Lynch, dated 10/31/03, due 11/03/03, total to be
received $15,001 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account), at
Cost $15 $15,000
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $496,499) $531,133
- -------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.1)% (720)
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $530,413
- -------------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
PORTFOLIO FOOTNOTES:
* Non-income producing security.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- -----------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities composing
the total value of your fund.
MFS EMERGING OPPORTUNITIES FUND
AT 10/31/03
ASSETS
Investments, at value (identified cost, $1,446,631) $1,667,251
- -----------------------------------------------------------------------------------------------------
Cash 416
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 95,620
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 18
- -----------------------------------------------------------------------------------------------------
Total assets $1,763,305
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $102,852
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 30
- -----------------------------------------------------------------------------------------------------
Reimbursement fee 11
- -----------------------------------------------------------------------------------------------------
Total liabilities $102,893
- -----------------------------------------------------------------------------------------------------
Net assets $1,660,412
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $1,737,336
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies 220,620
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (293,858)
- -----------------------------------------------------------------------------------------------------
Accumulated net investment loss (3,686)
- -----------------------------------------------------------------------------------------------------
Total $1,660,412
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding $173,523
- -----------------------------------------------------------------------------------------------------
Class A shares
Net assets $494,606
- -----------------------------------------------------------------------------------------------------
Shares outstanding 51,771
- -----------------------------------------------------------------------------------------------------
Net asset value per share $9.55
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$9.55) $10.13
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $1,165,806
- -----------------------------------------------------------------------------------------------------
Shares outstanding 121,752
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.58
- -----------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the price of Class A shares is reduced. A contingent deferred sales charge
may be imposed on redemptions of Class A shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- -----------------------------------------------------------------------------------------------------
MFS LARGE CAP VALUE FUND
AT 10/31/03
ASSETS
Investments, at value (identified cost, $496,499) $531,133
- -----------------------------------------------------------------------------------------------------
Cash 185
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 3,447
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 863
- -----------------------------------------------------------------------------------------------------
Total assets $535,628
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $5,200
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 12
- -----------------------------------------------------------------------------------------------------
Reimbursement fee 3
- -----------------------------------------------------------------------------------------------------
Total liabilities $5,215
- -----------------------------------------------------------------------------------------------------
Net assets $530,413
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $529,856
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies 34,634
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions (39,279)
- -----------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 5,202
- -----------------------------------------------------------------------------------------------------
Total $530,413
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding $53,775
- -----------------------------------------------------------------------------------------------------
Class A shares
Net assets $530,393
- -----------------------------------------------------------------------------------------------------
Shares outstanding 53,773
- -----------------------------------------------------------------------------------------------------
Net asset value per share $9.86
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$9.86) $10.46
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $20.47
- -----------------------------------------------------------------------------------------------------
Shares outstanding 2.047
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $10.00
- -----------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the price of Class A shares is reduced. A contingent deferred sales charge
may be imposed on redemptions of Class A shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
- -----------------------------------------------------------------------------------------------------
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.
MFS EMERGING OPPORTUNITIES FUND
SIX MONTHS ENDED 10/31/03
NET INVESTMENT INCOME (LOSS)
Income
- -----------------------------------------------------------------------------------------------------
Dividends $2,108
- -----------------------------------------------------------------------------------------------------
Interest 529
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (8)
- -----------------------------------------------------------------------------------------------------
Total investment income $2,629
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $4,636
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 680
- -----------------------------------------------------------------------------------------------------
Administrative fee 45
- -----------------------------------------------------------------------------------------------------
Custodian fee 2,461
- -----------------------------------------------------------------------------------------------------
Printing 5,953
- -----------------------------------------------------------------------------------------------------
Postage 50
- -----------------------------------------------------------------------------------------------------
Auditing fees 10,051
- -----------------------------------------------------------------------------------------------------
Legal fees 247
- -----------------------------------------------------------------------------------------------------
Dividend expense on securities sold short 133
- -----------------------------------------------------------------------------------------------------
Professional services 1,700
- -----------------------------------------------------------------------------------------------------
Miscellaneous 569
- -----------------------------------------------------------------------------------------------------
Total expenses $26,525
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (28)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (20,182)
- -----------------------------------------------------------------------------------------------------
Net expenses $6,315
- -----------------------------------------------------------------------------------------------------
Net investment loss $(3,686)
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $230,738
- -----------------------------------------------------------------------------------------------------
Securities sold short (8,203)
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions (77)
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions $222,458
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation
- -----------------------------------------------------------------------------------------------------
Investments $157,518
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency translation $157,518
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency $379,976
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $376,290
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
- -----------------------------------------------------------------------------------------------------
MFS LARGE CAP VALUE FUND
SIX MONTHS ENDED 10/31/03
NET INVESTMENT INCOME (LOSS)
Income
- -----------------------------------------------------------------------------------------------------
Dividends $5,721
- -----------------------------------------------------------------------------------------------------
Interest 206
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (37)
- -----------------------------------------------------------------------------------------------------
Total investment income $5,890
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $1,916
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 280
- -----------------------------------------------------------------------------------------------------
Administrative fee 20
- -----------------------------------------------------------------------------------------------------
Custodian fee 3,854
- -----------------------------------------------------------------------------------------------------
Printing 615
- -----------------------------------------------------------------------------------------------------
Postage 4
- -----------------------------------------------------------------------------------------------------
Auditing fees 14,306
- -----------------------------------------------------------------------------------------------------
Professional services 1,700
- -----------------------------------------------------------------------------------------------------
Miscellaneous 463
- -----------------------------------------------------------------------------------------------------
Total expenses $23,158
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (113)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (20,491)
- -----------------------------------------------------------------------------------------------------
Net expenses $2,554
- -----------------------------------------------------------------------------------------------------
Net investment income $3,336
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $1,873
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions 25
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions $1,898
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -----------------------------------------------------------------------------------------------------
Investments $54,132
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies (17)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency translation $54,115
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency $56,013
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $59,349
- -----------------------------------------------------------------------------------------------------
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.
MFS EMERGING OPPORTUNITIES FUND
SIX MONTHS
ENDED YEAR ENDED
10/31/03 4/30/03
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment loss $(3,686) $(3,219)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions 222,458 (180,186)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation 157,518 45,936
- ------------------------------------------------------------------ --------------------------------
Increase (decrease) in net assets from operations $376,290 $(137,469)
- ------------------------------------------------------------------ ---------- ---------------
Net increase in net assets from fund share transactions $343,340 $138,419
- ------------------------------------------------------------------ ---------- ---------------
Total increase in net assets $719,630 $950
- ------------------------------------------------------------------ ---------- ---------------
NET ASSETS
At beginning of period $940,782 $939,832
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated net investment loss
of $3,686 and $0, respectively) $1,660,412 $940,782
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
MFS LARGE CAP VALUE FUND
SIX MONTHS
ENDED YEAR ENDED
10/31/03 4/30/03
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $3,336 $7,331
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions 1,898 (29,829)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign currency
translation 54,115 (37,073)
- ---------------------------------------------------------------- ------------ ---------------
Increase (decrease) in net assets from operations $59,349 $(59,571)
- ---------------------------------------------------------------- ------------ ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (Class A) $-- $(6,930)
- ---------------------------------------------------------------- ----------------------------------
From net investment income (Class I) -- (3)
- ---------------------------------------------------------------- ------------ ---------------
Total distributions declared to shareholders $-- $(6,933)
- ---------------------------------------------------------------- ------------ ---------------
Net increase (decrease) in net assets from fund share
transactions $(3,265) $9,025
- ---------------------------------------------------------------- ------------ ---------------
Total increase (decrease) in net assets $56,084 $(57,479)
- ---------------------------------------------------------------- ------------ ---------------
NET ASSETS
At beginning of period $474,329 $531,808
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed net
investment income of $5,202 and $1,866, respectively) $530,413 $474,329
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 fiscal
years. Certain information reflects financial results for a single fund share. The total returns in the table represent the
rate by which an investor would have earned (or lost) on an investment in the series (assuming reinvestment of all
distributions). This information has been audited by the fund's independent auditors, whose report, together with the fund's
financial statements, are included in this report.
MFS EMERGING OPPORTUNITIES FUND
SIX MONTHS YEAR ENDED 4/30
ENDED ------------------------- PERIOD ENDED
10/31/03 2003 2002 4/30/01*
CLASS A (UNAUDITED)
Net asset value, beginning of period $7.02 $8.30 $7.79 $10.00
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.02) $(0.03) $(0.03) $(0.03)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign currency 2.55 (1.25) 0.54 (1.51)
- ------------------------------------------------- --------- ----------- ----------- ----------------
Total from investment operations $2.53 $(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 $9.55 $7.02 $8.30 $7.79
- ------------------------------------------------- --------- ----------- ----------- ----------------
Total return (%)(+) 36.04++ (15.42) 6.55 (16.13)++
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses## 1.02+ 1.02 1.04 1.03+
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.55)+ (0.42) (0.36) (0.35)+
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 174 252 129 169
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $495 $454 $387 $503
- ---------------------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually 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 $(0.16) $(0.37) $(0.44) $(0.27)
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 4.28+ 6.16 6.50 3.45+
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (3.81)+ (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 Highlights - continued
MFS EMERGING OPPORTUNITIES FUND
SIX MONTHS YEAR ENDED 4/30
ENDED ------------------------- PERIOD ENDED
10/31/03 2003 2002 4/30/01*
CLASS I (UNAUDITED)
Net asset value, beginning of period $7.04 $8.29 $7.79 $10.00
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.03) $(0.03) $(0.03) $(0.04)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.57 (1.22) 0.53 (1.50)
- ---------------------------------------------- ------------ ----------- ----------- ----------------
Total from investment operations $2.54 $(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 $9.58 $7.04 $8.29 $7.79
- ---------------------------------------------- ------------ ----------- ----------- ----------------
Total return (%) 36.08++ (15.08) 6.42 (16.13)++
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses## 1.02+ 1.02 1.04 1.03+
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.63)+ (0.44) (0.38) (0.36)+
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 174 252 129 169
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000
Omitted) $1,165 $487 $552 $795
- ---------------------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually 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 $(0.16) $(0.38) $(0.46) $(0.30)
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 4.28+ 6.16 6.50 3.45+
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (3.89)+ (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 Highlights - continued
MFS LARGE CAP VALUE FUND
SIX MONTHS YEAR ENDED 4/30
ENDED --------------------------------------- PERIOD ENDED
10/31/03 2003 2002 2001 4/30/00*
CLASS A (UNAUDITED)
Net asset value, beginning of period $8.76 $10.02 $11.01 $10.23 $10.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.06 $0.14 $0.11 $0.12 $0.12
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 1.04 (1.27) (0.56) 1.54 0.66
- -------------------------------------- ------------ ---------- ---------- ---------- ---------------
Total from investment
operations $1.10 $(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 $9.86 $8.76 $10.02 $11.01 $10.23
- -------------------------------------- ------------ ---------- ---------- ---------- ---------------
Total return (%)(+) 12.56++ (11.28) (3.94) 16.40 8.14++
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses## 1.04+ 1.04 1.04 1.04 1.04+
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.30+ 1.55 1.17 1.13 1.13+
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 25 61 58 67 100
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $530 $474 $532 $533 $519
- -----------------------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually 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 $(0.32) $(0.53) $(0.63) $(0.38) $(0.57)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 9.06+ 8.62 9.09 5.69 7.74+
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (6.72)+ (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 Highlights - continued
MFS LARGE CAP VALUE FUND
SIX MONTHS YEAR ENDED 4/30
ENDED --------------------------------------- PERIOD ENDED
10/31/03 2003 2002 2001 4/30/00*
CLASS I (UNAUDITED)
Net asset value, beginning of period $8.93 $10.17 $11.13 $10.28 $10.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.10 $0.11 $0.15 $0.20 $0.11
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.97 (1.22) (0.57) 1.53 0.72
- -------------------------------------- ------------ ---------- ---------- ---------- ---------------
Total from investment operations $1.07 $(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 $10.00 $8.93 $10.17 $11.13 $10.28
- -------------------------------------- ------------ ---------- ---------- ---------- ---------------
Total return (%) 11.98++ (10.91) (3.63) 17.14 8.65++
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses## 0.34+ 1.04 1.04 1.04 1.04+
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 2.10+ 1.27 1.44 1.83 1.12+
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 25 61 58 67 100
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $20 $179 $203 $223 $206
- -----------------------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually 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 $(0.28) $(0.57) $(0.63) $(0.31) $(0.59)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 8.36+ 8.62 9.09 5.69 7.74+
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (5.92)+ (6.31) (6.63) (2.83) (5.58)+
- -----------------------------------------------------------------------------------------------------------------------------
* From 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 (unaudited)
- --------------------------------------------------------------------------------
(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. 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. 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 - Each 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.
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.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with accounting principles generally accepted in the United States of America.
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:
MFS LARGE CAP VALUE FUND
--------------------------------
4/30/03 4/30/02
Distributions declared from:
- ------------------------------------------------------------------------------
Ordinary income $6,933 $15,709
- ------------------------------------------------------------------------------
Long-term capital gain -- 10,087
- ------------------------------------------------------------------------------
Total distributions declared $6,933 $25,796
- ------------------------------------------------------------------------------
The MFS Emerging Opportunities Fund paid no distributions for the years ended
April 30, 2003 and April 30, 2002.
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)
- --------------------------------------------------------------------------------
Post-October capital loss deferral (83,502) (10,720)
- --------------------------------------------------------------------------------
Unrealized appreciation (depreciation) 62,937 (22,327)
- --------------------------------------------------------------------------------
Post-October capital loss deferrals represent losses realized during the
current fiscal year, but recognized for tax purposes in the next fiscal year.
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 MFS LARGE CAP
EXPIRATION DATE: OPPORTUNITIES FUND VALUE FUND
April 30, 2010 $(258,269) $--
- -------------------------------------------------------------------------------
April 30, 2011 (174,380) (27,594)
- -------------------------------------------------------------------------------
Total $(432,649) $(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 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
contractually agreed to pay all of the fund's operating expenses, exclusive of
management fees. The fund in turn will pay MFS an expense reimbursement fee not
greater than 0.25% of average daily net assets for Class A and Class I. 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 October 31,
2003 aggregate unreimbursed expenses amounted to $5,110 and $6,128 for MFS
Emerging Opportunities Fund and MFS Large Cap Value Fund, respectively. The
reimbursement plan for each fund expired on September 1, 2003. MFS instituted a
new plan through September 1, 2004.
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
not to exceed the following annual percentage rates of the funds' average daily
net assets:
First $2 billion 0.0175%
----------------------------------------------
Next $2.5 billion 0.0130%
----------------------------------------------
Next $2.5 billion 0.0005%
----------------------------------------------
In excess of $7 billion 0.0000%
----------------------------------------------
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales of Class A shares of each fund for the six
months ended October 31, 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 funds will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of each fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of up
to 0.25% per annum of each fund's average daily net assets attributable to Class
A shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.10% per annum of each fund's average daily net assets
attributable to Class A shares. 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 six months ended
October 31, 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 each fund's average daily net assets at an annual rate of 0.11%.
(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) $2,332,985 $120,071
- --------------------------------------------------------------------------------
SALES
Investments (non-U.S. government
securities) $1,981,051 $121,179
- --------------------------------------------------------------------------------
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 $1,446,796 $499,345
- -------------------------------------------------------------------------------
Gross unrealized appreciation $247,154 $46,164
- -------------------------------------------------------------------------------
Gross unrealized depreciation (26,699) (14,376)
- -------------------------------------------------------------------------------
Net unrealized appreciation $220,455 $31,788
- -------------------------------------------------------------------------------
(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:
MFS EMERGING OPPORTUNITIES FUND
------------------------------------------
SIX MONTHS
ENDED 10/31/03 YEAR ENDED 4/30/03
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 15,958 $138,746 26,674 $175,429
- --------------------------------------------------------------------------------
Shares reacquired (28,871) (265,893) (8,645) (56,454)
- --------------------------------------------------------------------------------
Net increase (decrease) (12,913) $(127,147) 18,029 $118,975
- --------------------------------------------------------------------------------
CLASS I SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 58,061 $515,644 41,849 $279,220
- --------------------------------------------------------------------------------
Shares reacquired (5,447) (45,157) (39,312) (259,776)
- --------------------------------------------------------------------------------
Net increase 52,614 $470,487 2,537 $19,444
- --------------------------------------------------------------------------------
MFS LARGE CAP VALUE FUND
------------------------------------------
SIX MONTHS
ENDED 10/31/03 YEAR ENDED 4/30/03
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 43 $410 353 $3,097
- --------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions -- -- 791 6,929
- --------------------------------------------------------------------------------
Shares reacquired (372) (3,503) (104) (1,001)
- --------------------------------------------------------------------------------
Net increase (decrease) (329) $(3,093) 1,040 $9,025
- --------------------------------------------------------------------------------
CLASS I SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 2 $20 -- $--
- --------------------------------------------------------------------------------
Shares reacquired (20) (192) -- --
- --------------------------------------------------------------------------------
Net decrease (18) $(172) -- $--
- --------------------------------------------------------------------------------
(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 six months ended
October 31, 2003, was $5, and $2, respectively. Each fund had no borrowings
during the period.
(7) SUBSEQUENT EVENTS
On December 17, 2003, the Board of Trustees of MFS Series Trust IX approved
the termination and liquidation of MFS Large Cap Value Fund effective on or
about December 31, 2003.
(8) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the fund's investment adviser,
has been contacted by the Office of the New York State Attorney General ("NYAG")
and the United States Securities and Exchange Commission ("SEC") in connection
with their investigations of practices in the mutual fund industry identified as
"market timing" mutual fund shares. MFS is cooperating with respect to these
investigations. MFS has been informed that the SEC is considering whether to
institute an enforcement action against MFS alleging false and misleading
disclosure in certain MFS fund prospectuses and breach of fiduciary duty
concerning market timing. The NYAG has also indicated that it is considering
whether to commence an enforcement proceeding against MFS relating to these
practices. Certain other regulatory authorities are also conducting
investigations into these practices within the industry and have requested that
MFS provide information to them.
In December 2003, MFS and Sun Life Financial Inc., along with certain MFS funds
and Trustees who serve on the Board of Trustees of these MFS funds, were named
as defendants in class action lawsuits filed in the United States District
Court, District of Massachusetts seeking damages of unspecified amounts. The
lawsuits were purportedly filed on behalf of people who purchased, owned and/or
redeemed shares of MFS funds during specified periods. The suits allege that
certain defendants permitted market timing and late trading in the MFS funds
which allegedly caused financial injury to the funds" shareholders. The
defendants are reviewing the allegations and will respond appropriately.
Additional lawsuits based upon similar allegations may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
sanctions, penalties, damages or injunctions regarding MFS, restitution to
mutual fund shareholders and/or other financial penalties and structural changes
in the governance of MFS' mutual fund business.
Although MFS does not believe that these lawsuits will have a material adverse
effect on the funds, there can be no assurance that these suits, the ongoing
adverse publicity and/or other developments resulting from related regulatory
investigations or developments will not result in increased fund redemptions,
reduced sales of fund shares, or other adverse consequences for the funds.
- ---------------------------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- ---------------------------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust IX, of which the funds
are 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) Chairman ABBY M. O'NEILL (born 04/27/28) Trustee
Massachusetts Financial Services Company, Chairman Private investor; Rockefeller Financial Services, Inc.
(investment advisers), Chairman and Chief Executive Officer
JOHN W. BALLEN(2) (born 09/12/59) Trustee and President
Massachusetts Financial Services Company, Chief Executive LAWRENCE T. PERERA (born 06/23/35) Trustee
Officer and Director Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59) Trustee WILLIAM J. POORVU (born 04/10/35) Trustee
Massachusetts Financial Services Company, President, Private investor; Harvard University Graduate School of
Chief Investment Officer and Director Business Administration, Class of 1961 Adjunct Professor
in Entrepreneurship Emeritus; 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 planning specialists),
Brigham and Women's Hospital, Chief of Cardiac Surgery; President; Wellfleet Investments (investor in health care
Harvard Medical School, Professor of Surgery companies), Managing General Partner (since 1993); Cambridge
Nutraceuticals (professional nutritional products),
WILLIAM R. GUTOW (born 09/27/41) Trustee Chief Executive Officer (until May 2001)
Private investor and real estate consultant; Capitol
Entertainment Management Company (video franchise), ELAINE R. SMITH (born 04/25/46) Trustee
Vice Chairman Independent health care industry consultant
J. ATWOOD IVES (born 05/01/36) Trustee WARD SMITH (born 09/13/30) Trustee
Private investor; KeySpan Corporation (energy related Private investor
services), Director; Eastern Enterprises (diversified
services company), Chairman, Trustee and Chief Executive
Officer (until November 2000)
OFFICERS
JOHN W. BALLEN (born 09/12/59) Trustee and President ROBERT R. FLAHERTY (born 09/18/63) Assistant Treasurer
Massachusetts Financial Services Company, Chief Executive Massachusetts Financial Services Company, Vice President
Officer and Director (since August 2000); UAM Fund Services, Senior Vice
President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant Secretary
and Assistant Clerk RICHARD M. HISEY (born 08/29/58) Treasure
Massachusetts Financial Services Company, Senior Vice Massachusetts Financial Services Company, Senior Vice
President and Associate General Counsel President (since July 2002); The Bank of New York,
Senior Vice President (September 2000 to July 2002);
STEPHEN E. CAVAN (born 11/06/53) Secretary and Clerk Lexington Global Asset Managers, Inc., Executive Vice
Massachusetts Financial Services Company, Senior Vice President and Chief Financial Officer (prior to September
President, General Counsel and Secretary 2000); Lexington Funds, Treasurer (prior to September 2000)
STEPHANIE A. DESISTO (born 10/01/53) Assistant Treasurer ELLEN MOYNIHAN (born 11/13/57) Assistant Treasurer
Massachusetts Financial Services Company, Vice President Massachusetts Financial Services Company, Vice President
(since April 2003); Brown Brothers Harriman & Co., Senior
Vice President (November 2002 to April 2003); ING Groep JAMES O. YOST (born 06/12/60) Assistant Treasurer
N.V./Aeltus Investment Management, Senior Vice President Massachusetts Financial Services Company,
(prior to November 2002) 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 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 110 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").
(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
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street 225 Franklin Street, Boston, MA 02110
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS
Eric B. Fischman(1)
David M. Calabro(1)
A general description of the MFS Funds proxy voting policies is available without charge, upon request, by
calling 1-800-225-2606, by visiting the About MFS section of mfs.com or by visiting the SEC's website at
http://www.sec.gov
(1) MFS Investment Management
MFS(R) EMERGING OPPORTUNITIES FUND
MFS(R) LARGE CAP VALUE FUND
[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
INCA-SEM-12/03 260
MFS(R) Mutual Funds
SEMIANNUAL REPORT 10/31/03
MFS(R) RESEARCH BOND FUND J
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) RESEARCH BOND FUND J
The fund seeks to provide total return (high current income and long-term
growth of capital).
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
To view MFS' statement concerning regulatory issues affecting the mutual fund
industry and the firm, please visit www.mfs.com.
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TABLE OF CONTENTS
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MFS PRIVACY POLICY
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PERFORMANCE RE-CAP 1
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PERFORMANCE SUMMARY 2
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FINANCIAL STATEMENTS 4
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NOTES TO FINANCIAL STATEMENTS 8
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TRUSTEES AND OFFICERS 11
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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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PERFORMANCE RE-CAP
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Dear Shareholders,
For the six months ended October 31, 2003, the fund provided a total return of
0.99%, 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 semiannual report dated October 31, 2003.
Respectfully,
/s/ Michael W. Roberge
Michael W. Roberge
Portfolio Manager
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.
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PERFORMANCE SUMMARY THROUGH 10/31/03
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Currently, the fund offers only Class B shares.
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Performance results include the deduction of the
maximum sales charge and reflect the percentage change in net asset value,
including reinvestment of dividends. (See Notes to Performance Summary for
more information.)
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN.
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.
TOTAL RETURNS
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Average annual
without sales charge
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Class
Share class inception date 6 months 1-yr 3-yr Life*
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B 10/17/2002 -- 7.22% 8.82% 6.95%
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Average annual
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Comparative Benchmarks
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Average A-rated corporate debt fund+ 0.82% 6.25% 7.61% 5.40%
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Lehman Brothers Government/Credit
Index# 0.62% 6.17% 8.91% 6.62%
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Periods less than one year are actual, not annualized.
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Average annual
with sales charge
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B -- 3.22% 7.96% 6.79%
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Cumulative
without sales charge
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B 0.99% 7.22% 28.85% 38.28%
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Periods less than one year are actual, not annualized.
* For the period from the commencement of the MFS Research Bond Fund's
investment operations, January 4, 1999, through October 31, 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 DEFINITION
LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX -- measures the performance of all
debt obligations of the U.S. Treasury and U.S. government agencies, and all
investment-grade domestic corporate debt.
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 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, Class R1 shares on December 31, 2002, and Class R2 shares on October
31, 2003. 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.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Any such subsidy or waiver is voluntary and
may be revised or rescinded at any time without notice. Without such subsidies
and waivers the fund's performance results would be less favorable. In
particular, prior to January 1, 2002, the portfolio was available only to MFS
employees and had limited assets. Between February 1, 1999, and December 29,
2000, a significant portion of the portfolio's fees and expenses were waived
or paid for by the adviser. Had applicable expense subsidies or waivers not
been in effect, performance would have been lower. Please see the prospectus
and financial statements for complete details.
KEY RISK CONSIDERATIONS
Investments in securities involves risks relating to interest rates, currency
exchange rates, market conditions and the economic and political conditions of
the countries where investments are made.
Investments in lower-rated securities may provide greater returns, but they
are also associated with greater than average risk.
As a non-diversified portfolio, the portfolio invests in a limited number of
companies and may have more risk because a change in one security's value may
have a more significant effect on the portfolio's net asset value. An
investment in the portfolio is not a complete investment program.
These risks may increase share price volatility. Please see the prospectus for
further information on these and other risk considerations.
A prospectus containing more complete information, including investment
objectives, risks, charges, and expenses, for any of the MFS products can be
obtained from your investment professional. You should read and consider the
information carefully before investing.
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FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
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This statement represents your fund's balance sheet, which details the assets and liabilities composing
the total value of your fund.
AT 10/31/03
ASSETS
Investments in MFS Research Bond Fund, at value
(identified cost, $192,871,676) $195,120,141
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Cash 25
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Receivable for investments sold 1,353,845
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Receivable for fund shares sold 317,041
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Dividends receivable 865,230
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Total assets $197,656,282
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LIABILITIES
Distribution payable $693,555
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Payable for investments purchased 317,041
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Payable for fund shares repurchased 1,353,845
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Payable to affiliates -
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Distribution and service fee 172,068
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Reimbursement fee 8,604
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Total liabilities $2,545,113
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Net assets $195,111,169
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NET ASSETS CONSIST OF
Paid-in capital $192,559,127
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Unrealized appreciation on investments 2,248,465
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Accumulated undistributed net realized gain on investments 633,908
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Accumulated distributions in excess of net investment income (330,331)
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Total $ 195,111,169
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Shares of beneficial interest outstanding 18,695,272
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Class B shares
Net asset value and offering price per share
(net assets/shares of beneficial interest outstanding) $10.44
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See notes to financial statements.
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FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
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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 SIX MONTHS ENDED 10/31/03
NET INVESTMENT INCOME
Income
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Dividend income from underlying fund $5,013,441
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Expenses
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Management fee $479,144
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Trustees" compensation 2,484
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Distribution and service fee (Class B) 955,716
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Administrative fee 7,610
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Printing 33,447
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Legal fees 22,475
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Custodian fee 20,820
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Auditing fees 7,050
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Miscellaneous 16,827
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Total expenses $1,545,573
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Fees paid indirectly (1,169)
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Reduction of expenses by investment adviser (540,902)
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Net expenses $1,003,502
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Net investment income $4,009,939
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (identified cost basis)
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Investment transactions $394,055
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Change in unrealized depreciation
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Investments $(2,799,509)
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Net realized and unrealized loss on investments $(2,405,454)
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Increase in net assets from operations $1,604,485
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See notes to financial statements.
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FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
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This statement describes the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
PERIOD ENDED
FOR SIX MONTHS ENDED 10/31/03 2003 2003*
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $4,009,939 $2,706,202
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Net realized gain on investments 394,055 239,853
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Net unrealized gain (loss) on investments (2,799,509) 5,047,974
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Increase in net assets from operations $1,604,485 $7,994,029
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Distributions declared to shareholders from net investment
income (Class B) $(4,078,513) $(2,967,959)
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Net increase in net assets from fund share transactions $22,805,508 $169,753,619
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Total increase in net assets $20,331,480 $174,779,689
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NET ASSETS
At beginning of period $174,779,689 $--
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At end of period (including accumulated distributions in
excess of net investment
income of $330,331 and $261,757, respectively) $195,111,169 $174,779,689
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* For the period from the commencement of the fund's investment operations, October 17, 2002 through
April 30, 2003.
See notes to financial statements.
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FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you understand the fund's financial performance for
the semiannual period and the past 5 fiscal years (or, if shorter, the period of the fund's operation).
Certain information reflects financial results for a single fund share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the fund
(assuming reinvestment of all distributions) held for the entire period.
FOR SIX
MONTHS ENDED PERIOD ENDED
10/31/2003 4/30/2003*
CLASS B (UNAUDITED)
Net asset value, beginning of period $10.56 $10.00
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INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.22 $0.27
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Capital gain distribution from underlying fund -- $0.01
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Net realized and unrealized gain (loss) on investments
and foreign currency (0.12) 0.52
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Total from investment operations $0.10 $0.80
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Less distributions declared to shareholders from net
investment income $(0.22) $(0.24)
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Net asset value, end of period $10.44 $10.56
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Total return (%) 0.99++ 7.66++
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RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses##(1) 1.05+ 1.05+
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Net investment income 4.18+ 4.48+
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Portfolio turnover(2) 87 141
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Net assets at end of period (000 Omitted) $195,111 $174,780
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(S) The investment adviser contractually 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 contractually 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 per share and ratios would have been:
Net investment income $0.19 $0.23
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RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses##(1) 1.61+ 1.75+
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Net investment income 3.62+ 3.78+
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* 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. In addition to the fees and expenses which the fund bears
directly, the fund indirectly bears a pro rata share of the fees and expenses of the MFS Research
Bond Fund I share class in which it invests.
(2) Portfolio turnover rate reflects that of the Portfolio in which the fund invests. +Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS (unaudited)
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(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
elsewhere in this report. The percentage of ownership of the MFS Research Bond
Fund owned by the fund at October 31, 2003 was 22.72%.
INVESTMENT VALUATIONS - Investments in the underlying funds are valued at the
net asset value per share of each underlying fund as of the close of the regular
trading on the New York Stock Exchange. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market value.
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 funds
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:
Distributions declared from 4/30/03
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Ordinary income $2,967,959
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As of April 30, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $605,732
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Unrealized appreciation 5,047,974
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Other temporary differences (627,636)
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(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, 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
not to exceed the following annual percentage rates of the fund's average
daily net assets:
First $2 billion 0.0175%
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Next $2.5 billion 0.0130%
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Next $2.5 billion 0.0005%
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In excess of $7 billion 0.0000%
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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 of 0.20% 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 actual and maximum distribution and service fees for each class of
shares are as follows:
CLASS B
Distribution Fee 0.75%
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Service Fee 0.25%
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Total Distribution Plan 1.00%
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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
six months ended October 31, 2003, were as follows:
CLASS B
Contingent Deferred Sales Charges Imposed $4,372
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(4) PORTFOLIO SECURITIES
Purchases and sales of shares of MFS Research Bond Fund, aggregated
$30,483,563 and $7,758,138, 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 $192,871,676
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Gross unrealized appreciation $2,248,465
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Gross unrealized depreciation --
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Net unrealized appreciation $2,248,465
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(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:
Six months ended 10/31/03 Period ended 4/30/03*
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 2,870,312 $30,483,583 17,199,580 $176,428,815
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Shares reacquired (730,080) (7,678,075) (644,540) (6,675,196)
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Net increase 2,140,232 $22,805,508 16,555,040 $169,753,619
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* 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. The commitment fee allocated to the fund for the six months
ended October 31, 2003, was $710. The fund had no borrowings during the period.
(7) SUBSEQUENT EVENTS
On November 20, 2003, the Trustees approved the exchange of all shares held of
the MFS Research Bond Fund for a proportionate interest in the underlying
portfolio securities of the MFS Research Bond Fund. This so called "in-kind"
transaction is scheduled to occur on or about December 19, 2003 and will have no
impact on net assets and net asset value.
(8) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the fund's investment adviser,
has been contacted by the Office of the New York State Attorney General ("NYAG")
and the United States Securities and Exchange Commission ("SEC") in connection
with their investigations of practices in the mutual fund industry identified as
"market timing" mutual fund shares. MFS is cooperating with respect to these
investigations. MFS has been informed that the SEC is considering whether to
institute an enforcement action against MFS alleging false and misleading
disclosure in certain MFS fund prospectuses and breach of fiduciary duty
concerning market timing. The NYAG has also indicated that it is considering
whether to commence an enforcement proceeding against MFS relating to these
practices. MFS continues to discuss these matters with the SEC and the NYAG.
Certain other regulatory authorities are also conducting investigations into
these practices within the industry and have requested that MFS provide
information to them.
In December 2003, MFS and Sun Life Financial Inc., along with certain MFS funds
and Trustees who serve on the Board of Trustees of these MFS funds, were named
as defendants in class action lawsuits filed in the United States District
Court, District of Massachusetts seeking damages of unspecified amounts. The
lawsuits were purportedly filed on behalf of people who purchased, owned and/or
redeemed shares of MFS funds during specified periods. The suits allege that
certain defendants permitted market timing and late trading in the MFS funds
which allegedly caused financial injury to the funds" shareholders. The
defendants are reviewing the allegations and will respond appropriately.
Additional lawsuits based upon similar allegations may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
sanctions, penalties, damages or injunctions regarding MFS, restitution to
mutual fund shareholders and/or other financial penalties and structural
changes in the governance of MFS" mutual fund business.
Although MFS does not believe that these lawsuits will have a material adverse
effect on the funds, there can be no assurance that these suits, the ongoing
adverse publicity and/or other developments resulting from related regulatory
investigations or developments will not result in increased fund redemptions,
reduced sales of fund shares, or other adverse consequences for the funds.
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TRUSTEES AND OFFICERS
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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) Chairman ABBY M. O'NEILL (born 04/27/28) Trustee
Massachusetts Financial Services Company, Chairman Private investor; Rockefeller Financial Services, Inc.
(investment advisers), Chairman and Chief Executive Officer
JOHN W. BALLEN(2) (born 09/12/59) Trustee and President
Massachusetts Financial Services Company, LAWRENCE T. PERERA (born 06/23/35) Trustee
Chief Executive Officer and Director Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59) Trustee WILLIAM J. POORVU (born 04/10/35) Trustee
Massachusetts Financial Services Company, President, Private investor; Harvard University Graduate School of
Chief Investment Officer and Director Business Administration, Class of 1961 Adjunct Professor
in Entrepreneurship Emeritus; 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 planning specialists),
Brigham and Women's Hospital, Chief of Cardiac Surgery; President; Wellfleet Investments (investor in health care
Harvard Medical School, Professor of Surgery companies), Managing General Partner (since 1993); Cambridge
Nutraceuticals (professional nutritional products), Chief
WILLIAM R. GUTOW (born 09/27/41) Trustee Executive Officer (until May 2001)
Private investor and real estate consultant; Capitol
Entertainment Management Company (video franchise), ELAINE R. SMITH (born 04/25/46) Trustee
Vice Chairman Independent health care industry consultant
J. ATWOOD IVES (born 05/01/36) Trustee WARD SMITH (born 09/13/30) Trustee
Private investor; KeySpan Corporation (energy related Private investor
services), Director; Eastern Enterprises (diversified
services company), Chairman, Trustee and Chief Executive
Officer (until November 2000)
OFFICERS
JOHN W. BALLEN (born 09/12/59) Trustee and President ROBERT R. FLAHERTY (born 09/18/63) Assistant Treasurer
Massachusetts Financial Services Company, Chief Executive Massachusetts Financial Services Company, Vice President
Officer and Director (since August 2000); UAM Fund Services, Senior Vice
President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59)
Assistant Secretary and Assistant Clerk RICHARD M. HISEY (born 08/29/58) Treasurer
Massachusetts Financial Services Company, Senior Vice Massachusetts Financial Services Company, Senior Vice
President and Associate General Counsel President (since July 2002); The Bank of New York, Senior
Vice President (September 2000 to July 2002); Lexington
STEPHEN E. CAVAN (born 11/06/53) Secretary and Clerk Global Asset Managers, Inc., Executive Vice President
Massachusetts Financial Services Company, Senior Vice and Chief Financial Officer (prior to September 2000);
President, General Counsel and Secretary Lexington Funds, Treasurer (prior to September 2000)
STEPHANIE A. DESISTO (born 10/01/53) Assistant Treasurer ELLEN MOYNIHAN (born 11/13/57) Assistant Treasurer
Massachusetts Financial Services Company, Vice President Massachusetts Financial Services Company, Vice President
(since April 2003); Brown Brothers Harriman & Co., Senior
Vice President (November 2002 to April 2003); ING Groep JAMES O. YOST (born 06/12/60) Assistant Treasurer
N.V./Aeltus Investment Management, Senior Vice President Massachusetts Financial Services Company,
(prior to November 2002) 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 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 110 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").
(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
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
DIRECTOR OF FIXED INCOME RESEARCH
Michael W. Roberge(1)
CUSTODIANS
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
JP Morgan Chase Bank
One Chase Manhattan Plaza
New York, NY 10081
(1) MFS Investment Management
MFS(R) RESEARCH BOND FUND J
[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
RBJ SEM 12/03 100
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a Code of Ethics pursuant to Section 406 of the
Sarbanes-Oxley Act and as defined in the instructions to Form N-CSR that
applies to the Registrant's principal executive officer and principal financial
and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Messrs. J. Atwood Ives and Ward Smith, members of the Audit Committee, have
been determined by the Board of Trustees in their reasonable business judgment
to meet the definition of "audit committee financial expert" as such term is
defined in the instructions to Form N-CSR. In addition, Messrs. Ives and Smith
are both "independent" members of the Audit Committee as defined in the
instructions to Form N-CSR.
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 (beginning with annual N-CSR filings
at the end of February, 2004 for December 31, 2003 reporting period.)]
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not required at this time. [Required for reporting periods ending after January
1, 2004 (beginning with N-CSR's filed at the end of March 2004, for January 31,
2004 reporting period).]
ITEM 10. 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 required 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 changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the registrant's last fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 11. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) 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: Code of Ethics attached hereto.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) 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)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(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.
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)* JOHN W. BALLEN
----------------------------------------------------
John W. Ballen, President
Date: January 5, 2004
--------------------
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)* JOHN W. BALLEN
----------------------------------------------------
John W. Ballen, President
(Principal Executive Officer)
Date: January 5, 2004
------------------
By (Signature and Title)* RICHARD M. HISEY
----------------------------------------------------
Richard M. Hisey, Treasurer
(Principal Financial Officer and Accounting Officer)
Date: January 5, 2004
------------------
* Print name and title of each signing officer under his or her signature.