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)
Susan S. Newton
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: October 31*
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Date of reporting period: October 31, 2005
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* This Form N-CSR filing pertains to the MFS Inflation-Adjusted Bond Fund, a
series of the Registrant. The remaining series of the Registrant do not have
a fiscal year end of October 31.
ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) INFLATION-ADJUSTED BOND FUND 10/31/05
ANNUAL REPORT
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LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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MANAGEMENT REVIEW 3
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PERFORMANCE SUMMARY 4
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EXPENSE TABLE 7
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PORTFOLIO OF INVESTMENTS 9
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FINANCIAL STATEMENTS 10
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NOTES TO FINANCIAL STATEMENTS 21
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 29
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TRUSTEES AND OFFICERS 30
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 35
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PROXY VOTING POLICIES AND INFORMATION 39
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QUARTERLY PORTFOLIO DISCLOSURE 39
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FEDERAL TAX INFORMATION 39
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CONTACT INFORMATION BACK COVER
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THE 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.
M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
Most investors are familiar with the basic principles of investing - focus on
the long term and keep your assets diversified across different investment
categories. Still, it is surprising how often we forget these basic lessons.
Certainly, the dot-com euphoria that overtook Wall Street in the late 1990s
had many people hoping they could become millionaires overnight. But the
market decline that started in the spring of 2000 taught everyone how
misguided those hopes had been.
Now, less than five years after the market taught a harsh lesson in the
follies of speculative investing, we are seeing a number of trends that
suggest many investors, including professionals, are hoping for overnight
miracles again. We see a steady stream of market "gurus" on television news
shows, promising to teach amateur investors the strategies that will allow
them to get rich quick. Hedge funds - which by their nature move in and out of
investments rapidly - have soared in popularity over the past five years. We
are reminded every day that we live in a "what have you done for me lately?"
world, but this mindset should not influence how we invest and manage our
money. In fact, investors often fall short of their goals because they trade
in and out of investments too frequently and at inopportune times.
Throughout our entire 80-year history, MFS' money management process has
focused on long-term investment opportunities. We firmly believe that one of
the best ways to realize long-term financial goals - be it a college
education, a comfortable retirement, or a secure family legacy - is to follow
a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. And rebalance assets regularly to maintain a desired asset
allocation.*
This long-term approach requires diligence and patience, two traits that in
our experience are essential to capitalizing on the many opportunities the
financial markets can offer.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
December 15, 2005
*Asset allocation, diversification, and rebalancing does not guarantee a profit
or protect against a loss. The opinions expressed in this letter are those of
MFS, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE*
Bonds 96.5%
Cash & Other Net Assets 3.5%
MARKET SECTORS*
U.S. Treasury Securities 95.6%
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Cash & Other Net Assets 3.5%
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U.S. Government Agencies 0.9%
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CREDIT QUALITY OF BONDS**
AAA 99.0%
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Not Rated 1.0%
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PORTFOLIO FACTS
Average Duration***** 5.9
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Average Life*** 10.3 yrs.
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Average Maturity*** 10.4 yrs.
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Average Credit Quality of Rated
Securities**** AAA
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Average Short Term Quality A-1
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* For purposes of this graphical presentation, the bond c
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
** Each security is assigned a rating from Moody's Investors Service. If
not rated by Moody's, the rating will be that assigned by Standard &
Poor's. Likewise, if not assigned a rating by Standard & Poor's, it will
be based on the rating assigned by Fitch, Inc. For those portfolios that
hold a security which is not rated by any of the three agencies, the
security is considered Not Rated. Holdings in U.S. Treasuries and
government agency mortgage-backed securities, if any, are included in
the "AAA"-rating category. Percentages are based on the total market
value of investments as of 10/31/05.
*** The average maturity shown is calculated using the final stated maturity
on the portfolio's holdings without taking into account any holdings
which have been pre-refunded to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
**** The Average Credit Quality of Rated Securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
***** Duration is a measure of how much a bond fund's price is likely to
fluctuate with general changes in interest rates, e.g., if rates rise
1.00%, a fund with a 5-year duration is likely to lose about 5.00% of
its value.
Percentages are based on net assets as of 10/31/05, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
For the twelve months ended October 31, 2005, Class A shares of the MFS
Inflation-Adjusted Bond Fund provided a total return of 1.85%, at net asset
value. In comparison, the fund's benchmark, the Lehman Brothers U.S. TIPS
Index, returned 2.94%.
DETRACTORS FROM PERFORMANCE
Over the course of the reporting period, duration (a measure of a bond's
sensitivity to changes in interest rates) was the largest detractor from
relative performance. Among specific positions that detracted the most from
relative performance were short-maturity TIPS bonds. These positions were
adversely affected over the reporting period as rates rose markedly on the
shorter end of the real yield curve.
CONTRIBUTORS TO PERFORMANCE
The fund did enjoy a slight yield advantage over the benchmark. In addition,
the negative impact of our duration exposure was mitigated to some extent by
yield curve positioning. The yield curve tended to flatten over the reporting
period with short term rates rising and longer term rates declining. A number
of longer maturity TIPS were among the fund's top contributors relative to the
benchmark, as these positions benefited from the fall in longer term
interest rates.
Respectfully,
Erik Weisman
Portfolio Manager
The views expressed in this report are those of the portfolio manager only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or an indication of
trading intent on behalf of any MFS Fund. References to specific securities are
not recommendations of such securities, and may not be representative of any MFS
Fund's current or future investments.
PERFORMANCE SUMMARY THROUGH 10/31/05
The following chart illustrates the historical performance of the fund's
original share class in comparison to its benchmark. Performance results
include the deduction of the maximum applicable sales charge and reflect the
percentage change in net asset value, including reinvestment of dividends and
capital gains distributions. Benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown. (See Notes to Performance Summary.)
VISIT MFS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. (FOR THE MOST
RECENT MONTH-END PERFORMANCE FOR CLASS I SHARES CALL 1-888-808-6374.) MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE
DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's operations, September 30,
2003, through October 31, 2005. Index information is from October 1, 2003.)
MFS Inflation-Adjusted Lehman Brothers
Bond Fund - Class A U.S. TIPS Index
9/03 $ 9,525 $10,000
10/03 9,543 10,054
10/04 10,139 10,859
10/05 10,327 11,178
TOTAL RETURNS THROUGH 10/31/05
AVERAGE ANNUAL WITHOUT SALES CHARGE
Share class Class inception date 1-yr Life*
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A 9/30/03 1.85% 3.95%
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B 9/01/04 1.04% 3.43%
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C 9/01/04 1.15% 3.53%
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I 9/30/03 2.02% 4.04%
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R 9/01/04 1.58% 3.78%
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R1 4/01/05 1.24% 3.65%
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R2 4/01/05 1.42% 3.74%
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R3 9/01/04 1.32% 3.64%
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R4 4/01/05 1.71% 3.87%
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R5 4/01/05 1.88% 3.96%
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AVERAGE ANNUAL
Comparative benchmarks
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Average treasury inflation protected
securities+ 2.13% 4.42%
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Lehman Brothers U.S. TIPS Index# 2.94% 5.49%
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AVERAGE ANNUAL WITH SALES CHARGE
Share class
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A -2.98% 1.55%
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B -2.84% 2.05%
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C 0.17% 3.53%
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Class I, R, R1, R2, R3, R4, and R5 shares do not have a sales charge. Please
see Notes to Performance Summary for more details.
* For the period from the commencement of the fund's investment operations,
September 30, 2003, through October 31, 2005. Index information is from
October 1, 2003.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
Lehman Brothers U.S. TIPS Index - consists of inflation-protection securities
issued by the U.S. Treasury.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results including sales charge reflect the deduction of the maximum
4.75% sales charge. Class B results including sales charge reflect the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%. Class C results including sales charge
(assuming redemption within one year from the end of the prior month of
purchase) reflect the deduction of the 1% CDSC. Class R shares have no initial
sales charge or CDSC and are available only to existing Class R shareholders.
Class I, R1, R2, R3, R4, and R5 shares have no initial sales charge or CDSC.
Class I shares are only available to certain eligible investors, and Class R1,
R2, R3, R4, and R5 shares are only available 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.
This 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 share class to which it
is blended, and lower performance for share classes with lower operating
expenses than the share class to which it is blended.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Without such subsidies and waivers the fund's
performance results would be less favorable. Please see the prospectus and
financial statements for complete details.
From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
MAY 1, 2005 THROUGH OCTOBER 31, 2005.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and
(2) ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period May 1, 2005 through
October 31, 2005.
ACTUAL EXPENSES
The first line for each share class in the table below provides information
about actual account values and actual expenses. You may use the information
in this line, together with the amount you invested, to estimate the expenses
that you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table below provides information
about hypothetical account values and hypothetical expenses based on the
fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
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Expenses
Annualized Beginning Ending Paid During
Share Expense Account Value Account Value Period**
Class Ratio 5/01/05 10/31/05 5/01/05-10/31/05
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Actual 0.64% $1,000.00 $ 992.80 $3.21
A ----------------------------------------------------------------------
Hypothetical* 0.64% $1,000.00 $1,021.98 $3.26
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Actual 1.49% $1,000.00 $ 989.60 $7.47
B ----------------------------------------------------------------------
Hypothetical* 1.49% $1,000.00 $1,017.69 $7.58
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Actual 1.49% $1,000.00 $ 990.60 $7.48
C ----------------------------------------------------------------------
Hypothetical* 1.49% $1,000.00 $1,017.69 $7.58
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Actual 0.50% $1,000.00 $ 994.50 $2.51
I ----------------------------------------------------------------------
Hypothetical* 0.50% $1,000.00 $1,022.68 $2.55
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Actual 1.00% $1,000.00 $ 992.10 $5.02
R ----------------------------------------------------------------------
Hypothetical* 1.00% $1,000.00 $1,020.16 $5.09
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Actual 1.69% $1,000.00 $ 988.70 $8.47
R1 ----------------------------------------------------------------------
Hypothetical* 1.69% $1,000.00 $1,016.69 $8.59
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Actual 1.38% $1,000.00 $ 990.20 $6.92
R2 ----------------------------------------------------------------------
Hypothetical* 1.38% $1,000.00 $1,018.25 $7.02
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Actual 1.18% $1,000.00 $ 990.90 $5.92
R3 ----------------------------------------------------------------------
Hypothetical* 1.18% $1,000.00 $1,019.26 $6.01
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Actual 0.91% $1,000.00 $ 992.50 $4.57
R4 ----------------------------------------------------------------------
Hypothetical* 0.91% $1,000.00 $1,020.62 $4.63
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Actual 0.60% $1,000.00 $ 994.00 $3.02
R5 ----------------------------------------------------------------------
Hypothetical* 0.60% $1,000.00 $1,022.18 $3.06
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* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
Effective October 1, 2005 the fund's Class R1, Class R2, and Class R3's
retirement plan administration and services fee was reduced (as described in
Note 3 of the Notes to the Financial Statements). Had this fee reduction been
in effect throughout the entire six month period, the annualized expense ratio
would have been 1.61%, 1.26%, and 1.10% for Class R1, Class R2, and Class R3,
respectively, and the actual expenses paid during the period would have been
approximately $8.07, $6.32, and $5.52 for Class R1, Class R2, and Class R3,
respectively.
PORTFOLIO OF INVESTMENTS - 10/31/05
The Portfolio of Investments is a complete list of all
securities owned by your fund. It is categorized by broad-based
asset classes.
Bonds - 95.9%
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ISSUER PAR AMOUNT $ VALUE
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U.S. Government Agencies - 0.9%
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Small Business Administration, 4.76%, 2025 $ 93,000 $ 90,769
Small Business Administration, 5.09%, 2025 78,000 77,669
---------------
$ 168,438
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U.S. Treasury Inflation Protected Obligations - 94.4%
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U.S. Treasury Bonds, 2.375%, 2025 $ 2,856,506 $ 2,972,440
U.S. Treasury Bonds, 3.625%, 2028 1,078,128 1,370,780
U.S. Treasury Bonds, 3.375%, 2032 354,016 452,352
U.S. Treasury Notes, 3.375%, 2007 416,445 427,279
U.S. Treasury Notes, 3.625%, 2008 791,291 827,950
U.S. Treasury Notes, 3.875%, 2009 1,069,256 1,144,354
U.S. Treasury Notes, 0.875%, 2010 1,828,464 1,757,183
U.S. Treasury Notes, 3.5%, 2011 1,233,188 1,335,793
U.S. Treasury Notes, 3%, 2012 1,465,665 1,567,174
U.S. Treasury Notes, 1.875%, 2013 746,281 742,228
U.S. Treasury Notes, 2%, 2014 2,722,740 2,730,290
U.S. Treasury Notes, 1.625%, 2015 1,835,703 1,780,704
---------------
$ 17,108,527
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U.S. Treasury Obligations - 0.6%
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U.S. Treasury Bonds, 5.5%, 2028 $ 100,000 $ 109,356
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Total Bonds (Identified Cost, $17,699,647) $ 17,386,321
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Short-Term Obligations - 5.6% <
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BNP Paribas Financial, 4.03%, due 11/01/05 $ 716,000 $ 716,000
New Center Asset Trust, 4.02%, due 11/01/05 289,000 289,000
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Total Short-Term Obligations, at Amortized Cost $ 1,005,000
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Total Investments (Identified Cost, $18,704,647) $ 18,391,321
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Other Assets, Less Liabilities - (1.5)% (269,575)
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Net Assets - 100.0% $ 18,121,746
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> The rate shown represents an annualized yield at time of purchase.
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Assets and Liabilities
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of the fund.
AT 10/31/05
ASSETS
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Investments, at value (identified cost, $18,704,647) $18,391,321
Cash 422
Receivable for fund shares sold 15,715
Interest receivable 105,027
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Total assets $18,512,485
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LIABILITIES
- -------------------------------------------------------------------------------------------------------
Distributions payable $22,087
Payable for investments purchased 286,190
Payable for fund shares reacquired 1,476
Payable to investment adviser 21,786
Payable to affiliates
Management fee 513
Shareholder servicing costs 1,857
Distribution and service fees 721
Administrative services fee 94
Retirement plan administration and services fees 7
Accrued expenses and other liabilities 56,008
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Total liabilities $390,739
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Net assets $18,121,746
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NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------------
Paid-in capital $18,571,121
Unrealized appreciation (depreciation) on investments (313,326)
Accumulated net realized gain (loss) on investments (138,439)
Accumulated undistributed net investment income 2,390
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Net assets $18,121,746
- -------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 1,825,913
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Class A shares
- -------------------------------------------------------------------------------------------------------
Net assets $8,830,772
Shares outstanding 889,873
- -------------------------------------------------------------------------------------------------------
Net asset value per share $9.92
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$9.92) $10.41
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class B shares
- -------------------------------------------------------------------------------------------------------
Net assets $4,818,172
Shares outstanding 485,668
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.92
- -------------------------------------------------------------------------------------------------------
Class C shares
- -------------------------------------------------------------------------------------------------------
Net assets $2,548,055
Shares outstanding 256,432
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.94
- -------------------------------------------------------------------------------------------------------
Class I shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,338,969
Shares outstanding 134,917
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $9.92
- -------------------------------------------------------------------------------------------------------
Class R shares
- -------------------------------------------------------------------------------------------------------
Net assets $128,938
Shares outstanding 12,988
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $9.93
- -------------------------------------------------------------------------------------------------------
Class R1 shares
- -------------------------------------------------------------------------------------------------------
Net assets $50,241
Shares outstanding 5,064
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $9.92
- -------------------------------------------------------------------------------------------------------
Class R2 shares
- -------------------------------------------------------------------------------------------------------
Net assets $50,332
Shares outstanding 5,073
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $9.92
- -------------------------------------------------------------------------------------------------------
Class R3 shares
- -------------------------------------------------------------------------------------------------------
Net assets $255,234
Shares outstanding 25,715
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $9.93
- -------------------------------------------------------------------------------------------------------
Class R4 shares
- -------------------------------------------------------------------------------------------------------
Net assets $50,472
Shares outstanding 5,087
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $9.92
- -------------------------------------------------------------------------------------------------------
Class R5 shares
- -------------------------------------------------------------------------------------------------------
Net assets $50,561
Shares outstanding 5,096
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $9.92
- -------------------------------------------------------------------------------------------------------
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 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.
YEAR ENDED 10/31/05
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Interest income $514,103
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $49,262
Distribution and service fees 57,564
Shareholder servicing costs 16,493
Administrative services fee 4,540
Retirement plan administration and services fees 431
Independent trustees' compensation 1,019
Custodian fee 15,484
Printing 31,589
Postage 580
Auditing fees 35,200
Legal fees 2,184
Registration fees 115,786
Shareholder solicitation expenses 942
Miscellaneous 13,983
- ------------------------------------------------------------------------------------------------------
Total expenses $345,057
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (354)
Reduction of expenses by investment adviser and distributor (246,147)
- ------------------------------------------------------------------------------------------------------
Net expenses $98,556
- ------------------------------------------------------------------------------------------------------
Net investment income $415,547
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $(68,255)
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(368,491)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments $(436,746)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $(21,199)
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements 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.
PERIODS ENDED
YEAR ENDED --------------------------------
10/31/05 10/31/04** 4/30/04*
CHANGE IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Net investment income $415,547 $33,188 $22,035
Net realized gain (loss) on investments (68,255) (11,947) 3,217
Net unrealized gain (loss) on investments (368,491) 80,307 (25,142)
- --------------------------------------------------------------------------------------------------------------
Change in net assets from operations $(21,199) $101,548 $110
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------
From net investment income
Class A $(213,813) $(10,879) $(9,271)
Class B (115,769) (570) --
Class C (59,013) (278) --
Class I (69,708) (23,168) (15,406)
Class R (4,160) (245) --
Class R1 (1,146) -- --
Class R2 (1,238) -- --
Class R3 (2,091) (228) --
Class R4 (1,381) -- --
Class R5 (1,471) -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(469,790) $(35,368) $(24,677)
- --------------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $16,108,174 $891,228 $1,571,714
- --------------------------------------------------------------------------------------------------------------
Redemption fees $6 $-- $--
- --------------------------------------------------------------------------------------------------------------
Total change in net assets $15,617,191 $957,408 $1,547,147
- --------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------
At beginning of period $2,504,555 $1,547,147 $--
- --------------------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed
net investment income of $2,390, $10,230 and $5,652,
respectively) $18,121,746 $2,504,555 $1,547,147
- --------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, September 30, 2003, through April 30, 2004.
** During 2004, the fund changed its fiscal year-end from April 30 to October 31, resulting in a 6 month fiscal year.
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 years (or
life of a particular share class, if shorter). 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
share class (assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
fund's independent registered public accounting firm, whose report, together with the fund's financial statements, are included
in this report.
CLASS A
YEAR ENDED
YEARS ENDED 10/31 4/30
------------------------------------- -------------------
2005 2004### 2004*
Net asset value, beginning of period $10.24 $9.85 $10.00
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Net investment income# $0.46 $0.20 $0.16
Net realized and unrealized gain (loss) on investments (0.27) 0.40 (0.13)
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.19 $0.60 $0.03
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------
From net investment income $(0.51) $(0.21) $(0.18)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.92 $10.24 $9.85
- --------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 1.85 6.09++ 0.33++
- --------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 3.22 17.87+ 5.20+
Expenses after expense reductions## 0.64 0.55+ 0.50+
Net investment income 4.64 3.93+ 2.72+
Portfolio turnover 203 90 141
Net assets at end of period (000 Omitted) $8,831 $647 $503
- --------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS B
YEARS ENDED 10/31
-------------------------------------------
2005 2004**
Net asset value, beginning of period $10.23 $10.20
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income# $0.37 $0.00+++
Net realized and unrealized gain (loss) on investments (0.26) 0.08
- ----------------------------------------------------------------------------------------------------------
Total from investment operations $0.11 $0.08
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------
From net investment income $(0.42) $(0.05)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.92 $10.23
- ----------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 1.04 0.82++
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 3.87 18.54+
Expenses after expense reductions## 1.49 1.52+
Net investment income 3.69 0.26+
Portfolio turnover 203 90
Net assets at end of period (000 Omitted) $4,818 $310
- ----------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS C
YEARS ENDED 10/31
---------------------------------------
2005 2004**
Net asset value, beginning of period $10.24 $10.20
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss)# $0.38 $(0.00)+++
Net realized and unrealized gain (loss) on investments (0.26) 0.09
- ----------------------------------------------------------------------------------------------------------
Total from investment operations $0.12 $0.09
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------
From net investment income $(0.42) $(0.05)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.94 $10.24
- ----------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 1.15 0.92++
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 3.87 18.51+
Expenses after expense reductions## 1.49 1.49+
Net investment income (loss) 3.74 (0.17)+
Portfolio turnover 203 90
Net assets at end of period (000 Omitted) $2,548 $85
- ----------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS I
YEAR ENDED
YEARS ENDED 10/31 4/30
------------------------------------- -------------------
2005 2004### 2004*
Net asset value, beginning of period $10.24 $9.85 $10.00
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Net investment income# $0.43 $0.20 $0.16
Net realized and unrealized gain (loss) on investments (0.22) 0.40 (0.13)
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.21 $0.60 $0.03
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------
From net investment income $(0.53) $(0.21) $(0.18)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.92 $10.24 $9.85
- --------------------------------------------------------------------------------------------------------------------
Total return (%)&*** 2.02 6.12++ 0.33++
- --------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.88 17.52+ 4.86+
Expenses after expense reductions## 0.50 0.50+ 0.50+
Net investment income 4.23 4.01+ 2.74+
Portfolio turnover 203 90 141
Net assets at end of period (000 Omitted) $1,339 $1,382 $1,044
- --------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R
YEARS ENDED 10/31
--------------------------------------------
2005 2004**
Net asset value, beginning of period $10.24 $10.20
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income# $0.42 $0.00+++
Net realized and unrealized gain (loss) on investments (0.26) 0.10
- ----------------------------------------------------------------------------------------------------------
Total from investment operations $0.16 $0.10
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------
From net investment income $(0.47) $(0.06)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.93 $10.24
- ----------------------------------------------------------------------------------------------------------
Total return (%)&*** 1.58 1.01++
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 3.38 18.02+
Expenses after expense reductions## 1.00 1.00+
Net investment income 4.15 0.15+
Portfolio turnover 203 90
Net assets at end of period (000 Omitted) $129 $40
- ----------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R1 CLASS R2
YEAR ENDED YEAR ENDED
10/31/05** 10/31/05**
Net asset value, beginning of period $10.10 $10.10
- -------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income# $0.24 $0.25
Net realized and unrealized gain (loss) on investments (0.19) (0.18)
- -------------------------------------------------------------------------------------------------------
Total from investment operations $0.05 $0.07
- -------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income $(0.23) $(0.25)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.92 $9.92
- -------------------------------------------------------------------------------------------------------
Total return (%)&*** 0.47++ 0.65++
- -------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 4.08+ 3.78+
Expenses after expense reductions## 1.69+ 1.38+
Net investment income 3.97+ 4.29+
Portfolio turnover 203 203
Net assets at end of period (000 Omitted) $50 $50
- -------------------------------------------------------------------------------------------------------
CLASS R3
YEARS ENDED 10/31
---------------------------------------------
2005 2004**###
Net asset value, beginning of period $10.24 $10.20
- ---------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------
Net investment income (loss)# $0.29 $(0.00)+++
Net realized and unrealized gain (loss) on investments (0.15)^ 0.10
- ---------------------------------------------------------------------------------------------------
Total from investment operations $0.14 $0.10
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------
From net investment income $(0.45) $(0.06)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $9.93 $10.24
- ---------------------------------------------------------------------------------------------------
Total return (%)&*** 1.32 0.96++
- ---------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------
Expenses before expense reductions## 3.59 18.27+
Expenses after expense reductions## 1.21 1.25+
Net investment income (loss) 3.77 (0.10)+
Portfolio turnover 203 90
Net assets at end of period (000 Omitted) $255 $40
- ---------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R4 CLASS R5
YEAR ENDED YEAR ENDED
10/31/05** 10/31/05**
Net asset value, beginning of period $10.10 $10.10
- -------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income# $0.28 $0.30
Net realized and unrealized gain (loss) on investments (0.18) (0.19)
- -------------------------------------------------------------------------------------------------------
Total from investment operations $0.10 $0.11
- -------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income $(0.28) $(0.29)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.92 $9.92
- -------------------------------------------------------------------------------------------------------
Total return (%)&*** 0.93++ 1.10++
- -------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 3.28+ 2.98+
Expenses after expense reductions## 0.90+ 0.60+
Net investment income 4.76+ 5.06+
Portfolio turnover 203 203
Net assets at end of period (000 Omitted) $50 $51
- -------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years
resulted in a per share impact of less than $0.01.
* For the period from the commencement of the fund's investment operations, September 30,
2003, through April 30, 2004.
** For the period from the class' inception, September 1, 2004 (Class B, C, R, and R3) and
April 1, 2005 (Classes R1, R2, R4, and R5) through the stated period end.
*** Certain expenses have been reduced without which performance would have been lower.
+ 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.
### During 2004, the fund changed its fiscal year-end from April 30 to October 31.
(+) Total returns do not include any applicable sales charges.
^ 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.
& From time to time the fund may receive proceeds from litigation settlements, without
which performance would be lower.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(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 U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
INVESTMENT VALUATIONS - Bonds and other fixed income securities, including
restricted fixed income securities, (other than short-term obligations) in the
fund's portfolio are valued at an evaluated bid price as reported by an
independent pricing service, or to the extent a valuation is not reported by a
pricing service, such securities are valued on the basis of quotes from
brokers and dealers. 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. Short-term obligations with a remaining maturity in excess of 60
days will be valued upon dealer-supplied valuations. All other short-term
obligations in the fund's portfolio are valued at amortized cost, which
approximates market value as determined by the Board of Trustees. When pricing
service information or market quotations are not readily available, securities
are priced at fair value as determined under the direction of the Board of
Trustees.
INFLATION-ADJUSTED DEBT SECURITIES - The fund generally invests in inflation-
adjusted debt securities issued by the U.S. Treasury. The fund may also invest
in inflation-adjusted debt securities issued by U.S. Government agencies and
instrumentalities other than the U.S. Treasury and by other entities such as
U.S. and foreign corporations and foreign governments. The principal value of
these debt securities is adjusted by references to changes in the Consumer Price
Index or another general price or wage index. These debt securities typically
pay a fixed rate of interest, but this fixed rate is applied to the
inflation-adjusted principal amount. The principal paid at maturity of the debt
security is typically equal to the inflation-adjusted principal amount, or the
security's original par value, whichever is greater. Other types of
inflation-adjusted securities may use other methods to adjust for other measures
of inflation.
SHORT TERM FEES - For purchases made on or after July 1, 2004 and before April
1, 2005, the fund charged a 2% redemption fee (which was retained by the fund)
on proceeds from Class A, Class B, Class C, and Class I shares redeemed or
exchanged within 5 business days following their acquisition (either by
purchase or exchange). Effective April 1, 2005, the fund no longer charges a
redemption fee. See the fund's prospectus for details. Any redemption fees
charged are accounted for as an addition to paid-in capital.
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 U.S. generally accepted accounting principles. All discount is accreted for
tax reporting purposes as required by federal income tax regulations.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss in
the Statement of Operations, or in unrealized gain/loss if the security is still
held by the fund.
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, for the year ended October 31, 2005, 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 amortization and accretion on debt securities and wash sales.
The tax character of distributions declared for the year ended October 31, 2005,
the period ended October 31, 2004 and the period ended April 30, 2004 was as
follows:
10/31/05 10/31/04 4/30/04
Distributions declared from:
Ordinary income $469,790 $35,368 $24,677
During the year ended October 31, 2005, accumulated undistributed net investment
income increased by $46,403, accumulated net realized loss on investments
increased by $46,402, and paid-in capital decreased by $1 due to differences
between book and tax accounting for amortization and accretion on debt
securities. This change had no effect on the net assets or net asset value per
share.
As of October 31, 2005, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $131,351
Undistributed long-term capital gain 7,128
Unrealized appreciation (depreciation) (457,140)
Other temporary differences (130,714)
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 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 contractually
agreed to waive a portion of its fee in the amount of $14,625, which is shown as
a reduction of total expenses in the Statement of Operations. This reduction in
the management fee may be rescinded by MFS only with the approval of the fund's
Board of Trustees. The management fee incurred for the year ended October 31,
2005 was equivalent to an annual effective rate of 0.35% of the fund's average
daily net assets.
MFS has contractually agreed to pay a portion of the fund's operating expenses,
exclusive of management, distribution and service, retirement plan
administration and services, and certain other fees and expenses, such that the
fund's operating expenses do not exceed 0.15% of the fund's average daily net
assets annually. This new arrangement will be in effect until February 28, 2006.
Prior to March 1, 2005, MFS contractually agreed, subject to reimbursement, to
bear a portion of the fund's operating expenses, exclusive of management,
distribution and service, retirement plan administration and services, and
certain other fees and expenses, such that these operating expenses did not
exceed 0.15% of the fund's average daily net assets annually for Class A, Class
B, Class C, Class I, and Class R shares. This reimbursement agreement terminated
on February 28, 2005. The fund will not be required to reimburse MFS $83,652 for
unreimbursed expenses. For the year ended October 31, 2005, any reduction
resulting from these agreements amounted to $223,093 and is reflected as a
reduction of total expenses in the Statement of Operations.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $21,879 for the year ended October 31, 2005, as
its portion of the initial sales charge on sales of Class A shares of the
fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD. Another component of the plan is a service
fee paid to MFD which subsequently pays a portion of this fee to financial
intermediaries that enter into sales or service agreements with MFD, or its
affiliates, based on the average daily net assets of accounts attributable to
such intermediaries.
Distribution Fee Plan Table:
SERVICE
TOTAL ANNUAL FEE DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE RETAINED AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) BY MFD(3) FEE
Class A 0.10% 0.25% 0.35% 0.15% $406 $14,519
Class B 0.75% 0.25% 1.00% 1.00% -- 27,597
Class C 0.75% 0.25% 1.00% 1.00% 4 14,337
Class R 0.25% 0.25% 0.50% 0.50% 1 451
Class R1 0.50% 0.25% 0.75% 0.75% 189 222
Class R2 0.25% 0.25% 0.50% 0.50% 126 148
Class R3 0.25% 0.25% 0.50% 0.50% 204 216
Class R4 -- 0.25% 0.25% 0.25% 63 74
- -------------------------------------------------------------------------------
Total Distribution and Service Fees $57,564
(1) In accordance with the distribution plan for certain classes, the fund
pays distribution and/or service fees up to these annual percentage rates
of each class' average daily net assets.
(2) The annual effective rates represent actual fees incurred under the
distribution plan for the year ended October 31, 2005 based on each class'
average daily net assets. 0.10% of the Class A service fee is currently
being waived under a contractual waiver arrangement. For the year ended
October 31, 2005, this waiver amounted to $4,250 and is reflected as a
reduction of total expenses in the Statement of Operations. 0.10% of the
Class A distribution fee is currently being waived under a contractual
waiver arrangement. For the year ended October 31, 2005, this waiver
amounted to $4,121 and is reflected as a reduction of total expenses in
the Statement of Operations.
(3) For the year ended October 31, 2005, MFD retained these service fees.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months of purchase.
Class B shares are subject to a contingent deferred sales charge in the event
of a shareholder redemption within six years of purchase. MFD retained all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended October 31, 2005, were as follows:
AMOUNT
Class A $--
Class B $3,699
Class C $530
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS.
MFSC receives a fee from the fund, for its services as shareholder servicing
agent, set periodically under the supervision of the fund's Board of Trustees.
For the year ended October 31, 2005, the fee was $10,894, which equated to
0.1087% annually of the fund's average daily net assets. MFSC also receives
payment from the fund for out-of-pocket and sub-accounting expenses paid by
MFSC on behalf of the fund. For the year ended October 31, 2005, these costs
amounted to $3,807.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. Effective July 1, 2005, the fund's annual fixed amount is $10,000.
The administrative services fee incurred for the year ended October 31, 2005
was equivalent to an annual effective rate of 0.0453% of the fund's average
daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain Class R shares. These
services include various administrative, recordkeeping, and communication/
educational services with respect to the retirement plans which invest in
these shares, and may be provided directly by MFS or by a third party. For the
year ended October 31, 2005, the fund paid an annual retirement plan
administration and services fee up to the following annual percentage rates of
each class' average daily net assets:
AMOUNT
FEE EFFECTIVE TOTAL RETAINED
RATE RATE(1) AMOUNT BY MFS
Class R1 0.45% 0.44% $133 $132
Class R2 0.40% 0.38% 118 118
Class R3 0.25% 0.23% 106 104
Class R4 0.15% 0.15% 44 44
Class R5 0.10% 0.10% 30 30
- -------------------------------------------------------------------------------
Total Retirement Plan Administration
and Services Fees $431 $428
(1) Effective October 1, 2005, MFS has contractually agreed to waive a portion
of the retirement plan administration and service fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
For the year ended October 31, 2005 this waiver amounted to $13 and is
reflected as a reduction of total expenses in the Statement of Operations.
This agreement will continue until September 30, 2007.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
Independent Trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to 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, MFD, and MFSC.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse the fund for a portion of the payments made by the funds to
Tarantino LLC in the amount of $45, which is shown as a reduction of total
expenses in the Statement of Operations. Additionally, MFS has agreed to bear
all expenses associated with office space, other administrative support, and
supplies provided to the ICCO. The funds can terminate the Agreement with
Tarantino LLC at any time under the terms of the Agreement.
(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 $34,444,697 $19,222,636
- -------------------------------------------------------------------
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 $18,848,461
----------------------------------------------------------
Gross unrealized depreciation $(457,140)
Gross unrealized appreciation --
----------------------------------------------------------
Net unrealized appreciation (depreciation) $(457,140)
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
Year ended 10/31/05 Period ended 10/31/04*
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 952,909 $9,698,933 10,948 $111,480
Shares issued to shareholders in
reinvestment of distributions 18,680 188,595 1,207 12,150
Shares reacquired (144,917) (1,468,226) -- --
- -----------------------------------------------------------------------------------------------------------
Net change 826,672 $8,419,302 12,155 $123,630
Year ended 10/31/05 Period ended 10/31/04**
SHARES AMOUNT SHARES AMOUNT
CLASS B SHARES
Shares sold 551,989 $5,620,493 30,250 $308,128
Shares issued to shareholders in
reinvestment of distributions 8,599 86,898 56 571
Shares reacquired (105,226) (1,065,745) -- --
- -----------------------------------------------------------------------------------------------------------
Net change 455,362 $4,641,646 30,306 $308,699
CLASS C SHARES
Shares sold 272,913 $2,781,571 8,259 $84,020
Shares issued to shareholders in
reinvestment of distributions 3,603 36,472 25 258
Shares reacquired (28,368) (287,725) -- --
- -----------------------------------------------------------------------------------------------------------
Net change 248,148 $2,530,318 8,284 $84,278
Year ended 10/31/05 Period ended 10/31/04*
SHARES AMOUNT SHARES AMOUNT
CLASS I SHARES
Shares sold 79,595 $812,800 30,362 $309,009
Shares issued to shareholders in
reinvestment of distributions 6,743 68,417 2,554 25,723
Shares reacquired (86,332) (875,900) (4,050) (40,624)
- -----------------------------------------------------------------------------------------------------------
Net change 6 $5,317 28,866 $294,108
Year ended 10/31/05 Period ended 10/31/04**
SHARES AMOUNT SHARES AMOUNT
CLASS R SHARES
Shares sold 13,915 $141,284 3,923 $40,020
Shares issued to shareholders in
reinvestment of distributions 410 4,152 24 245
Shares reacquired (5,284) (54,234) -- --
- -----------------------------------------------------------------------------------------------------------
Net change 9,041 $91,202 3,947 $40,265
Period ended 10/31/05***
SHARES AMOUNT
CLASS R1 SHARES
Shares sold 4,951 $50,000
Shares issued to shareholders in
reinvestment of distributions 113 1,146
- ----------------------------------------------------------------------------
Net change 5,064 $51,146
CLASS R2 SHARES
Shares sold 4,951 $50,000
Shares issued to shareholders in
reinvestment of distributions 122 1,238
- ----------------------------------------------------------------------------
Net change 5,073 $51,238
Year ended 10/31/05 Period ended 10/31/04**
SHARES AMOUNT SHARES AMOUNT
CLASS R3 SHARES
Shares sold 21,562 $213,062 3,924 $40,020
Shares issued to shareholders in
reinvestment of distributions 207 2,091 22 228
- -----------------------------------------------------------------------------------------------------------
Net change 21,769 $215,153 3,946 $40,248
Period ended 10/31/05***
SHARES AMOUNT
CLASS R4 SHARES
Shares sold 4,950 $50,000
Shares issued to shareholders in
reinvestment of distributions 137 1,381
- -------------------------------------------------------------------------
Net change 5,087 $51,381
CLASS R5 SHARES
Shares sold 4,951 $50,000
Shares issued to shareholders in
reinvestment of distributions 145 1,471
- -------------------------------------------------------------------------
Net change 5,096 $51,471
* During 2004, the fund changed its fiscal year-end from April 30 to October 31.
** For the period from the inception of Class B, Class C, Class R, and Class R3 shares, September 1, 2004,
through October 31, 2004.
*** For the period from the inception of Class R1, Class R2, Class R4, and Class R5 shares, April 1, 2005,
through October 31, 2005.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 Federal Reserve
funds rate plus 0.35%. 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 calendar quarter. The commitment fee
allocated to the fund for the year ended October 31, 2005 was $66, and is
included in miscellaneous expense. The fund had no significant borrowings
during the year ended October 31, 2005.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of MFS Series Trust IX and the Shareholders of
MFS Inflation-Adjusted Bond Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Inflation Adjusted Bond Fund
(the "Fund") (one of the series comprising MFS Series Trust IX), as of October
31, 2005, the related statement of operations for the year then ended,
and the statement of changes in net assets and the financial highlights for
the year then ended, the six month period ended October 31, 2004 and the
period September 30, 2003 (commencement of operations) to April 30, 2004.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statement and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Fund is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Fund's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. Our
procedures included confirmation of securities owned as of October 31, 2005,
by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion the financial statements and financial highlights referred to
above present fairly, in all material aspects, the financial position of MFS
Inflation Adjusted Bond Fund as of October 31, 2005, the results of its
operations for the year then ended and the statement of changes in net assets
and the financial highlights for the year then ended, the six month period
ended October 31, 2004 and the period September 30, 2003 (commencement of
operations) to April 30, 2004, in conformity with accounting principles
generally accepted in the United States of America.
Deloite & Touche LLP
Boston, Massachusetts
December 22, 2005
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 2, 2005, are listed below, together with their
principal occupations during the past five years. (Their titles may have varied during that period.) The
address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS DURING
POSITION(s) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS &
NAME, DATE OF BIRTH WITH FUND SINCE(1) OTHER DIRECTORSHIPS(2)
- ------------------- ---------------- --------------- ----------------------------
INTERESTED TRUSTEES
Robert J. Manning(3) Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment
Officer and Director
Robert C. Pozen(3) Trustee February 2004 Massachusetts Financial Services
(born 08/08/46) Company, Chairman (since February
2004); Harvard Law School
(education), John Olin Visiting
Professor (since July 2002);
Secretary of Economic Affairs, The
Commonwealth of Massachusetts
(January 2002 to December 2002);
Fidelity Investments, Vice
Chairman (June 2000 to December
2001); Fidelity Management &
Research Company (investment
adviser), President (March 1997 to
July 2001); Bell Canada
Enterprises (telecommunications),
Director; Medtronic, Inc. (medical
technology), Director; Telesat
(satellite communications),
Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair February 1992 Private investor; Eastern
(born 05/01/36) of Trustees Enterprises (diversified services
company), Chairman, Trustee and
Chief Executive Officer (until
November 2000)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 03/11/37) Senior Cardiac Surgeon, Chief of
Cardiac Surgery (until 2005);
Harvard Medical School, Professor
of Surgery; Brigham and Women's
Hospital Physicians' Organization,
Chair (2000 to 2004)
David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining
(born 05/30/42) products and service provider),
Vice Chairman/Director (since
April 2001); Encinitos Ventures
(private investment company),
Principal (1997 to April 2001);
Lincoln Electric Holdings, Inc.
(welding equipment manufacturer),
Director
William R. Gutow Trustee December 1993 Private investor and real estate
(born 09/27/41) consultant; Capitol Entertainment
Management Company (video
franchise), Vice Chairman
Michael Hegarty Trustee December 2004 Retired; AXA Financial (financial
(born 12/21/44) services and insurance), Vice
Chairman and Chief Operating
Officer (until May 2001); The
Equitable Life Assurance Society
(insurance), President and Chief
Operating Officer (until May 2001)
Amy B. Lane Trustee January 2004 Retired; Merrill Lynch & Co.,
(born 02/08/53) Inc., Managing Director,
Investment Banking Group (1997 to
February 2001); Borders Group,
Inc. (book and music retailer),
Director; Federal Realty
Investment Trust (real estate
investment trust), Trustee
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys),
(born 06/23/35) Partner
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 09/23/38) (acquisition planning
specialists), President; Wellfleet
Investments (investor in health
care companies), Managing General
Partner (since 1993); Cambridge
Nutraceuticals (professional
nutritional products), Chief
Executive Officer (until May 2001)
Laurie J. Thomsen Trustee March 2005 Private investor; Prism Venture
(born 08/05/57) Partners (venture capital), Co-
founder and General Partner (until
June 2004); St. Paul Travelers
Companies (commercial property
liability insurance), Director
OFFICERS
Maria F. Dwyer(3) President November 2005 Massachusetts Financial Services
(born 12/01/58) Company, Executive Vice President
and Chief Regulatory Officer
(since March 2004); Fidelity
Management & Research Company,
Vice President (prior to March
2004); Fidelity Group of Funds,
President and Treasurer (prior to
March 2004)
Tracy Atkinson(3) Treasurer September 2005 Massachusetts Financial Services
(born 12/30/64) Company, Senior Vice President
(since September 2004);
PricewaterhouseCoopers LLP,
Partner (prior to September 2004)
Christopher R. Bohane(3) Assistant July 2005 Massachusetts Financial Services
(born 1/18/74) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law
firm), Associate (prior to April
2003); Nvest Services Company,
Assistant Vice President and
Associate Counsel (prior to
January 2001)
Jeffrey N. Carp(3) Secretary and September 2004 Massachusetts Financial Services
(born 12/19/56) Clerk Company, Executive Vice President,
General Counsel and Secretary
(since April 2004); Hale and Dorr
LLP (law firm), Partner (prior to
April 2004)
Ethan D. Corey(3) Assistant July 2005 Massachusetts Financial Services
(born 11/21/63) Secretary and Company, Special Counsel (since
Assistant Clerk December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(3) Assistant July 2005 Massachusetts Financial Services
(born 8/10/68) Treasurer Company, Vice President (since
June 2005); JP Morgan Investor
Services, Vice President (January
2001 to June 2005); State Street
Bank, Vice President and Corporate
Audit Manager (prior to January
2001)
Timothy M. Fagan(3) Assistant September 2005 Massachusetts Financial Services
(born 7/10/68) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since September 2005);
John Hancock Advisers, LLC, Vice
President and Chief Compliance
Officer (September 2004 to August
2005), Senior Attorney (prior to
September 2004); John Hancock
Group of Funds, Vice President and
Chief Compliance Officer
(September 2004 to December 2004)
Mark D. Fischer(3) Assistant July 2005 Massachusetts Financial Services
(born 10/27/70) Treasurer Company, Vice President (since May
2005); JP Morgan Investment
Management Company, Vice President
(prior to May 2005)
Brian T. Hourihan(3) Assistant September 2004 Massachusetts Financial Services
(born 11/11/64) Secretary and Company, Vice President, Senior
Assistant Clerk Counsel and Assistant Secretary
(since June 2004); Affiliated
Managers Group, Inc., Chief Legal
Officer/Centralized Compliance
Program (January to April 2004);
Fidelity Research & Management
Company, Assistant General Counsel
(prior to January 2004)
Ellen Moynihan(3) Assistant April 1997 Massachusetts Financial Services
(born 11/13/57) Treasurer Company, Vice President
Susan S. Newton(3) Assistant May 2005 Massachusetts Financial Services
(born 03/07/50) Secretary and Company, Senior Vice President and
Assistant Clerk Associate General Counsel (since
April 2005); John Hancock
Advisers, LLC, Senior Vice
President, Secretary and Chief
Legal Officer (prior to April
2005); John Hancock Group of
Funds, Senior Vice President,
Secretary and Chief Legal Officer
(prior to April 2005)
Susan A. Pereira(3) Assistant July 2005 Massachusetts Financial Services
(born 11/05/70) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since June 2004); Bingham
McCutchen LLP (law firm),
Associate (January 2001 to June
2004); Preti, Flaherty, Beliveau,
Pachios & Haley, LLC, Associate
(prior to January 2001)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 03/07/44) Compliance compliance services), Principal
Officer (since June 2004); CRA Business
Strategies Group (consulting
services), Executive Vice
President (April 2003 to June
2004); David L. Babson & Co.
(investment adviser), Managing
Director, Chief Administrative
Officer and Director (February
1997 to March 2003)
James O. Yost(3) Assistant September 1990 Massachusetts Financial Services
(born 06/12/60) Treasurer Company, Senior Vice President
- ------------
(1) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously
since appointment unless indicated otherwise.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(3) "Interested person" of the Trust 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 fund, as a result of
position with MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
Each Trustee has been elected by shareholders and each Trustee and officer holds office until his or her
successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal.
Messrs. Ives and Sherratt and Mses. Lane and Thomsen are members of the Trust's Audit Committee.
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. As of December 31, 2004, each Trustee served as a board member of 99 funds within the MFS
Family of Funds.
The Trust held a shareholders' meeting in 2005, and will hold a shareholders' meeting at least once every five
years thereafter, to elect Trustees.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request by calling 1-800-225-2606.
- -----------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110
DISTRIBUTOR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
MFS Fund Distributors, Inc. Deloitte & Touche LLP
500 Boylston Street, Boston, MA 02116-3741 200 Berkeley Street, Boston, MA 02116
PORTFOLIO MANAGER
Erik Weisman
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of
Trustees and a majority of the non-interested ("independent") Trustees, voting
separately, annually approve the continuation of the Fund's investment
advisory agreement with MFS. The Trustees consider matters bearing on the Fund
and its advisory arrangements at their meetings throughout the year, including
a review of performance data at each regular meeting. In addition, the
independent Trustees met several times over the course of three months
beginning in May and ending in July, 2005 ("contract review meetings") for the
specific purpose of considering whether to approve the continuation of the
investment advisory agreement for the Fund and the other investment companies
that the Board oversees (the "MFS Funds"). The independent Trustees were
assisted in their evaluation of the Fund's investment advisory agreement by
independent legal counsel, from whom they received separate legal advice and
with whom they met separately from MFS during various contract review
meetings. The independent Trustees were also assisted in this process by the
MFS Funds' Independent Chief Compliance Officer, a full-time senior officer
appointed by and reporting to the independent Trustees.
In connection with their deliberations regarding the continuation of the
investment advisory agreement, the Trustees, including the independent
Trustees, considered such information and factors as they believed, in light
of the legal advice furnished to them and their own business judgment, to be
relevant. The investment advisory agreement for the Fund was considered
separately, although the Trustees also took into account the common interests
of all MFS Funds in their review. As described below, the Trustees considered
the nature, quality, and extent of the various investment advisory,
administrative, and shareholder services performed by MFS under the existing
investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and
relied upon materials which included, among other items: (i) information
provided by Lipper Inc. on the investment performance of the Fund for the one-
year period ended December 31, 2004 and the investment performance of a group
of funds with substantially similar investment classifications/objectives (the
"Lipper performance universe"), as well as the investment performance of a
group of funds identified by objective criteria suggested by MFS ("peer
funds"), (ii) information provided by Lipper Inc. on the Fund's advisory fees
and other expenses and the advisory fees and other expenses of comparable
funds identified by Lipper (the "Lipper expense group"), as well as the
advisory fees and other expenses of peer funds identified by objective
criteria suggested by MFS, (iii) information provided by MFS on the advisory
fees of comparable portfolios of other clients of MFS, including institutional
separate account and other clients, (iv) information as to whether and to what
extent applicable expense waivers, reimbursements or fee "breakpoints" are
observed for the Fund, (v) information regarding MFS' financial results and
financial condition, including MFS' and certain of its affiliates' estimated
profitability from services performed for the Fund and the MFS Funds as a
whole, (vi) MFS' views regarding the outlook for the mutual fund industry and
the strategic business plans of MFS, (vii) descriptions of various functions
performed by MFS for the Funds, such as compliance monitoring and portfolio
trading practices, and (viii) information regarding the overall organization
of MFS, including information about MFS' senior management and other personnel
providing investment advisory, administrative and other services to the Fund
and the other MFS Funds. The comparative performance, fee and expense
information prepared and provided by Lipper Inc. was not independently
verified and the independent Trustees did not independently verify any
information provided to them by MFS.
The Trustees' conclusion as to the continuation of the investment advisory
agreement was based on a comprehensive consideration of all information
provided to the Trustees and not the result of any single factor. Some of the
factors that figured particularly in the Trustees' deliberations are described
below, although individual Trustees may have evaluated the information
presented differently from one another, giving different weights to various
factors. It is also important to recognize that the fee arrangements for the
Fund and other MFS Funds are the result of years of review and discussion
between the independent Trustees and MFS, that certain aspects of such
arrangements may receive greater scrutiny in some years than others, and that
the Trustees' conclusions may be based, in part, on their consideration of
these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed
the Fund's Class A total return investment performance as well as the
performance of peer groups of funds for the one-year period ended
December 31, 2004. The Fund's performance was in the 91st percentile
relative to the other funds in the universe for this one-year period (the
1st percentile being the best performers and the 100th percentile
being the worst performers). Because the Fund commenced investment operations,
in 2003, no performance percentile for the three- or five-year period was
available. Because of the passage of time, this performance is likely to
differ from the performance results for more recent periods, including those
shown elsewhere in this report.
In the course of their deliberations, the Trustees took into account
information provided by MFS in connection with the contract review meetings,
as well as during investment review meetings conducted with portfolio
management personnel during the course of the year, as to MFS's efforts to
improve the Fund's performance, including the assumption of primary portfolio
management responsibilities by one of the Fund's portfolio managers in March,
2005. After reviewing these and related factors, the Trustees concluded,
within the context of their overall conclusions regarding the investment
advisory agreement, that they were satisfied with MFS' responses and efforts
relating to investment performance.
In assessing the reasonableness of the Fund's advisory fee, the Trustees
considered, among other information, the Fund's advisory fee and the total
expense ratio of the Fund's Class A shares as a percentage of average net
assets and the advisory fee and total expense ratios of peer groups of funds
based on information provided by Lipper Inc. and MFS. The Trustees considered
whether the Fund was subject to any fee waivers or reductions or expense
limitations. The Trustees also considered that, according to the Lipper data,
the Fund's effective advisory fee rate and total expense ratio were each lower
than the Lipper expense group median.
The Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered information
provided by MFS as to the generally broader scope of services provided by MFS
to the Fund in comparison to institutional accounts, the higher demands placed
on MFS' investment personnel and trading infrastructure as a result of the
daily cash in-flows and out-flows of the Fund, and the impact on MFS and
expenses associated with the more extensive regulatory regime to which the
Fund is subject in comparison to institutional accounts.
The Trustees also considered whether the Fund is likely to benefit from any
economies of scale in the management of the Fund in the event of growth in
assets of the Fund. They noted that the Fund's advisory fee rate schedule is
not currently subject to any breakpoints. Taking into account fee waivers or
reductions or expense limitations, if any, the Trustees determined not to
recommend any advisory fee breakpoints for the Fund at this time.
The Trustees also considered information prepared by MFS relating to MFS' costs
and profits with respect to the Fund, the MFS Funds considered as a group, and
other investment companies and accounts advised by MFS, as well as MFS'
methodologies used to determine and allocate its costs to the MFS Funds, the
Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described herein, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that the advisory fees charged to the Fund
represent reasonable compensation in light of the nature and quality of the
services being provided by MFS to the Fund.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Fund.
The Trustees also considered current and developing conditions in the
financial services industry, including the entry into the industry of large
and well-capitalized companies which are spending, and appear to be prepared
to continue to spend, substantial sums to engage personnel and to provide
services to competing investment companies. In this regard, the Trustees also
considered the financial resources of MFS and its ultimate parent, Sun Life
Financial Inc. The Trustees also considered the advantages and possible
disadvantages to the Fund of having an adviser which also serves other
investment companies as well as other accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative, transfer agency, and distribution services provided to the
Fund by MFS and its affiliates under agreements and plans other than the
investment advisory agreement, including any 12b-1 fees the Fund pays to MFS
Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the
nature, extent and quality of certain other services MFS performs or arranges
for on the Fund's behalf, including securities lending programs, directed
expense payment programs, class action recovery programs, and MFS' interaction
with third-party service providers, principally custodians and sub-custodians.
The Trustees concluded that the various non-advisory services provided by MFS
and its affiliates on behalf of the Funds were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund's
portfolio brokerage commissions to pay for research and other similar services
(including MFS' general policy to pay directly for third-party research), and
various other factors. Additionally, the Trustees considered so-called "fall-
out benefits" to MFS such as reputational value derived from serving as
investment manager to the Fund.
Based on their evaluation of factors that they deemed to be material,
including those factors described above, the Board of Trustees, including a
majority of the independent Trustees, concluded that the Fund's investment
advisory agreement with MFS should be continued for an additional one-year
period, commencing August 1, 2005.
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement will be available on or before
December 1, 2005 by clicking on the Fund's name under "Select a fund" on the
MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures
is available without charge, upon request, by calling 1-800-225-2606, by
visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://
www.sec.gov, and copies of this information may be obtained, upon payment of a
duplicating fee, by electronic request at the following e-mail address:
publicinfo@sec.gov or by writing the Public Reference Section at the above
address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
FEDERAL TAX INFORMATION (unaudited)
In January 2006, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2005.
CONTACT INFORMATION
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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
- -------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
IAB-ANN-12/05 10M
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 Form N-CSR that applies to the
Registrant's principal executive officer and principal financial and accounting
officer. The Registrant has amended its Code of Ethics to reflect that the
Registrant's Principal Financial Officer and Principal Executive Officer have
changed.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Mr. J. Atwood Ives and Mses. Amy B. Lane and Laurie J. Thomsen, 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 Form N-CSR. In addition, Mr. Ives
and Mses. Lane and Thomsen are "independent" members of the Audit Committee as
defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEMS 4(a) THROUGH 4(d) AND 4(g):
The Board of Trustees has appointed Deloitte & Touche LLP ("Deloitte") to serve
as independent accountants to the MFS Inflation-Adjusted Bond Fund, a series of
the Registrant (the "Fund"). The tables below set forth the audit fees billed
to the Fund as well as fees for non-audit services provided to the Fund and/or
to the Fund's investment adviser, Massachusetts Financial Services Company
("MFS") and to various entities either controlling, controlled by, or under
common control with MFS that provide ongoing services to the Funds ("MFS
Related Entities").
For the fiscal years ended October 31, 2005 and 2004, audit fees billed to the
Fund by Deloitte were as follows:
Audit Fees
FEES BILLED BY DELOITTE: 2005 2004
---- ----
MFS Inflation-Adjusted Bond $24,572 $12,300
Fund
TOTAL
For the fiscal years ended October 31, 2005 and 2004, fees billed by Deloitte
for audit-related, tax and other services provided to the Funds and for
audit-related, tax and other services provided to MFS and MFS Related Entities
were as follows:
Audit-Related Fees(1) Tax Fees(2) All Other Fees(3)
FEES BILLED BY DELOITTE: 2005 2004 2005 2004 2005 2004
---- ---- ---- ---- ---- ----
To MFS Inflation- $0 $0 $8,150 $3,600 $0 $0
Adjusted Bond Fund
TOTAL FEES BILLED BY DELOITTE
TO ABOVE FUND:
To MFS and MFS Related $959,191 $928,350 $62,000 $35,000 $830,675 $32,500
Entities of MFS
Inflation-Adjusted Bond
Fund*
AGGREGATE FEES FOR NON-AUDIT
SERVICES:
2005 2004
---- ----
To MFS Inflation-Adjusted $1,915,562 $1,035,450
Bond Fund, MFS and MFS
Related Entities#
* This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to the
operations and financial reporting of the Funds (portions of which services also related to the operations and
financial reporting of other funds within the MFS Funds complex).
# This amount reflects the aggregate fees billed by DELOITTE for non-audit services rendered to the Funds and for
non-audit services rendered to MFS and the MFS Related Entities.
(1) The fees included under "Audit-Related Fees" are fees related to assurance and related services that are reasonably
related to the performance of the audit or review of financial statements, but not reported under "Audit Fees,"
including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters and internal
control reviews.
(2) The fees included under "Tax Fees" are fees associated with tax compliance, tax advice and tax planning, including
services relating to the filing or amendment of federal, state or local income tax returns, regulated investment
company qualification reviews and tax distribution and analysis.
(3) The fees included under "All Other Fees" are fees for products and services provided by Deloitte other than those
reported under "Audit Fees," "Audit-Related Fees" and "Tax Fees," including fees for services related to sales tax
refunds, consultation on internal cost allocations, consultation on allocation of monies pursuant to an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, and
analysis of certain portfolio holdings verses investment styles.
For periods prior to May 6, 2003, the amounts shown above under "Audit-Related
Fees," "Tax Fees" and "All Other Fees" relate to permitted non-audit services
that would have been subject to pre-approval if the Securities and Exchange
Commission's rules relating to pre-approval of non-audit services had been in
effect.
ITEM 4(e)(1):
Set forth below are the policies and procedures established by the Audit
Committee of the Board of Trustees relating to the pre-approval of audit and
non-audit related services: To the extent required by applicable law,
pre-approval by the Audit Committee of the Board is needed for all audit and
permissible non-audit services rendered to the Funds and all permissible
non-audit services rendered to MFS or MFS Related Entities if the services
relate directly to the operations and financial reporting of the Registrant.
Pre-approval is currently on an engagement-by-engagement basis. In the event
pre-approval of such services is necessary between regular meetings of the
Audit Committee and it is not practical to wait to seek pre-approval at the
next regular meeting of the Audit Committee, pre-approval of such services may
be referred to the Chair of the Audit Committee for approval; provided that the
Chair may not pre-approve any individual engagement for such services exceeding
$50,000 or multiple engagements for such services in the aggregate exceeding
$100,000 between such regular meetings of the Audit Committee. Any engagement
pre-approved by the Chair between regular meetings of the Audit Committee shall
be presented for ratification by the entire Audit Committee at its next
regularly scheduled meeting.
ITEM 4(e)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and
All Other Fees paid by the Fund and MFS and MFS Related Entities relating
directly to the operations and financial reporting of the Registrant disclosed
above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X (which permits audit committee approval after
the start of the engagement with respect to services other than audit, review
or attest services, if certain conditions are satisfied).
ITEM 4(f): Not applicable.
ITEM 4(h): The Registrant's Audit Committee has considered whether the
provision by a Registrant's independent registered public accounting firm of
non-audit services to MFS and MFS Related Entities that were not pre-approved
by the Committee (because such services were provided prior to the
effectiveness of SEC rules requiring pre-approval or because such services did
not relate directly to the operations and financial reporting of the
Registrant) was compatible with maintaining the independence of the independent
registered public accounting firm as the Registrant's principal auditors.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments of the Registrant is included as part of the report
to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940 (the "Act")) 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 second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. 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
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By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: December 22, 2005
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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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: December 22, 2005
-----------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: December 22, 2005
-----------------
* Print name and title of each signing officer under his or her signature.