<PAGE>
[Logo] M F S Annual Report for
THE FIRST NAME IN MUTUAL FUNDS Year Ended
April 30, 1995
MFS(R) LIMITED MATURITY FUND
[A 6 1/4" by 8 1/4" photo of a house.]
<PAGE>
<TABLE>
<S> <C>
MFS(R) LIMITED MATURITY FUND
TRUSTEES CUSTODIAN
A. Keith Brodkin<F1> - Chairman and President Investors Bank & Trust Company
Richard B. Bailey<F1> - Private Investor; AUDITORS
Former Chairman and Director (until 1991), Deloitte & Touche LLP
Massachusetts Financial Services Company
INVESTOR INFORMATION
Peter G. Harwood - Private Investor For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
J. Atwood Ives - Chairman and Chief Executive a touch-tone telephone.
Officer, Eastern Enterprises
For information on MFS mutual funds,
Lawrence T. Perera - Partner, Hemenway & Barnes call your financial adviser or, for an
information kit, call toll free:
William J. Poorvu - Adjunct Professor, Harvard 1-800-637-2929 any business day from
University Graduate School of Business 9 a.m. to 5 p.m. Eastern time (or leave
Administration a message anytime).
Charles W. Schmidt - Private Investor; INVESTOR SERVICE
Former Senior Vice President and Group Executive MFS Service Center, Inc.
(until 1990), Raytheon Company P.O. Box 2281
Boston, MA 02107-9906
Arnold D. Scott<F1> - Senior Executive Vice President
and Secretary, Massachusetts Financial Services Company For current account service, call toll free:
1-800-225-2606 any business day from
Jeffrey L. Shames<F1> - President, Massachusetts 8 a.m. to 8 p.m. Eastern time.
Financial Services Company
For service to speech- or hearing-impaired,
Elaine R. Smith - Independent Consultant call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time. (To use this
David B. Stone - Chairman, North American service, your phone must be equipped with a
Management Corp. (Investment Advisers) Telecommunications Device for the Deaf.)
INVESTMENT ADVISER For share prices, account balances and
Massachusetts Financial Services Company exchanges, call toll free: 1-800-MFS-TALK
500 Boylston Street (1-800-637-8255) anytime from a touch-tone
Boston, Massachusetts 02116-3741 telephone.
PORTFOLIO MANAGER
Geoffrey L. Kurinsky<F1> TOP-RATED SERVICE
NUMBER MFS was rated first when securities firms
TREASURER 1 evaluated the quality of service they receive
W. Thomas London<F1> DALBAR from 40 mutual fund companies. MFS got high
marks for answering calls quickly, processing
transactions accurately and sending statements
ASSISTANT TREASURER out on time.
James O. Yost<F1> (Source: 1994 DALBAR Survey)
SECRETARY
Stephen E. Cavan<F1>
ASSISTANT SECRETARY
James R. Bordewick, Jr.<F1>
Cover photo: Through their wide range of
investments, MFS mutual funds help you
share in America's growth.
<FN>
<F1>Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
Although yields on short-term U.S. Treasury securities began and ended the
Fund's fiscal year at approximately the same level of 6.25%, interest rates
fluctuated widely during the 12 months ended April 30, 1995. The stronger pace
of economic activity during 1994 sparked a series of Federal Reserve Board
actions to tighten monetary policy and restrain inflationary pressures. Interest
rates rose from 6.25% on October 31, 1994 to nearly 8% by the end of December,
but as it became apparent that the Federal Reserve's initiatives were successful
in slowing the pace of growth and that fears of higher rates of inflation were
overblown, yields started to decline and ended the fiscal year on April 30 at
the same 6.25% level. For the 12 months ended April 30, 1995, Class A shares of
the Fund provided a total return of +6.09% and Class B shares +5.20%. Class C
shares of the Fund became available on July 1, 1994, and provided a total return
of +5.25% for the 10 months ended April 30, 1995. These returns assume the
reinvestment of distributions but exclude the effects of any sales charges.
Economic Outlook
As the economy enters its fifth year of expansion, it is evidencing a decidedly
decelerating trend from its robust pace of 1994, when gross domestic product
expanded by 4.1%. Estimated growth in this year's first quarter diminished to an
annual rate of 2.8%. Consumer spending slowed considerably during the quarter
and was accompanied by a correspondingly large increase in inventories. As we
begin the year's second quarter, the evidence suggests that the economy has
entered a phase of less-than-full-potential growth, as the April unemployment
rate showed a second consecutive monthly increase. We expect the economy to
continue to grow at this more subdued pace. We do not anticipate that the
slowdown will deteriorate into a recession and, conversely, we remain mindful of
the potential for a reliquified consumer sector to reassert itself as the year
progresses.
Interest Rates
As evidence of a slowdown has continued to mount, the fixed-income markets have
become increasingly convinced that the Federal Reserve has concluded its
monetary-tightening initiatives. Furthermore, as the economy has diminished in
its ability to create jobs and in its usage of available productive capacity,
apprehension concerning a cyclical upturn in inflation has receded. As a result,
long-term U.S. Treasury bond yields have declined to near 7.00% as of April 30,
1995, down from 7.87% at the beginning of the year and from their cyclical peak
of 8.15% in November 1994. Despite higher costs at the crude and intermediate
stages of production, prices have not increased appreciably at the consumer
level. For the 12 months ended in April of this year, the Consumer Price Index,
a popular measure of change in prices, increased by a still moderate 3.1%.
Continued benign growth in labor costs and the inability of many businesses to
effectively raise prices have combined to extend the favorable price
environment. Nevertheless, we do anticipate a minor cyclical pickup in
inflationary pressure this year to the 3% - 3 1/2% range.
The decline in interest rates has been particularly precipitous during the
past month, leaving the market potentially vulnerable to a near-term correction.
However, we believe continuing moderate growth will result in interest rates
trending near to, and possibly somewhat lower than, present levels during the
balance of this year.
Portfolio Performance and Strategy
The Fund's favorable performance was due to its overweighted position in
the lower-quality end of the investment-grade corporate bond market. Corporate
restructurings undertaken to compete in the global economy have resulted in
higher levels of profitability and improved financial conditions for many
American corporations. The Fund has focused on these types of corporations,
anticipating that the prices of their debt should appreciate in relation to U.S.
Treasury securities (although principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity). Some
examples of these holdings include USX Corp. in the steel and oil sector and
General Motors and Ford in the auto sector. The Fund also maintained an
overweighting in the financial services sector, which has benefited from lower
interest rates and improved profit margins resulting from the improved credit
quality of loan portfolios and from downsizing. In addition to major names like
Citicorp and Chase Manhattan Bank, the Fund has invested in credit-card banks
such as Advanta Corp. and Capital One Bank. Despite the volatility of interest
rates, the high margins on the credit-card business have enabled these firms to
prosper.
Looking forward, the prospects for a slowing economy have caused us to
reduce the Fund's exposure to the investment-grade corporate sector. After
allocating as much as 75% of the Fund's total net assets into this sector during
the past year, we recently have reduced our exposure to approximately 60%. As a
result, the cash position of the Fund has increased from about 5% to 15% of
total net assets, and the portion invested in U.S. Treasury securities has
increased from 5% to 15%. Currently, the average quality level of the portfolio
is "A". This is consistent with our efforts to maintain a high-quality
portfolio, since A-rated securities carry the third highest rating awarded by
the rating agencies.
We are maintaining a neutral posture on the near-term direction of interest
rates and, thus, the interest rate sensitivity of the portfolio is comparable to
a 2 1/2-year Treasury. If it becomes apparent that the economy is headed toward
a recessionary period, we will consider moving to a more aggressive 3 1/2- to
4-year level in the portfolio.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
- ------------------ ------------------
A 1 1/2" by 1 5/8" A 1 1/2" by 1 5/8"
photo of A. Keith photo of Geoffrey L.
Brodkin, Chairman Kurinsky, Portfolio
and President. Manager.
- ------------------ ------------------
/s/A. Keith Brodkin /s/Geoffrey L. Kurinsky
A. Keith Brodkin Geoffrey L. Kurinsky
Chairman and President Portfolio Manager
May 17, 1995
PORTFOLIO MANAGER PROFILE
Geoffrey Kurinsky began his career at MFS in 1987 in the Fixed Income
Department. A graduate of the University of Massachusetts and Boston
University's Graduate School of Business Administration, he was named Assistant
Vice President in 1988, Vice President in 1989 and Senior Vice President in
1993. In 1992, he was named Portfolio Manager for MFS Limited Maturity Fund. Mr.
Kurinsky is a Certified Public Accountant.
OBJECTIVE AND POLICIES
The Fund's primary investment objective is to provide as high a level of current
income as is believed to be consistent with prudent investment risk. The Fund's
secondary objective is to protect shareholders' capital.
The Fund invests under normal market conditions substantially all of its assets
in debt securities rated within the four highest grades as determined by
Standard and Poor's Corporation or Moody's Investors Services, Inc. and
comparable unrated securities, securities which are issued or guaranteed by the
U.S. government or its agencies or instrumentalities, commercial paper,
repurchase agreements, and cash or cash equivalents. Under normal market
conditions, substantially all of the securities in the Fund's portfolio will
have remaining maturities of five years or less.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
PERFORMANCE
The information on the following page illustrates the historical performance of
MFS Limited Maturity Fund Class A shares in comparison to various market
indicators. Fund results reflect the deduction of the 2.50% maximum sales
charge; benchmark comparisons are unmanaged and do not reflect any fees or
expenses. You cannot invest in an index. All results reflect the reinvestment of
all dividends and capital gains.
Class B shares were offered effective September 7, 1993. Information on Class B
share performance appears on the following page.
Class C shares were offered effective July 1, 1994. Information on Class C share
performance appears on the following page.
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the Period from March 1, 1992 to April 30, 1995)
Line graph representing the growth of a $10,000 investment for the life-of-class
period ended April 30, 1995. The graph is scaled from $9,000 to $14,000 in
$1,000 segments. The years are marked from 1992 to 1995. There are three lines
drawn to scale. One is a solid line representing MFS Limited Maturity Fund
(Class A), a second line of short dashes represents the Merrill Lynch 1-5 Year
Government/Corporate Bond Index, and a third line of long dashes represents
the Consumer Price Index.
MFS Limited Maturity
Fund (Class A) $11,568
Merrill Lynch 1-5 Year Government/
Corporate Bond Index $12,001
Consumer Price Index $10,905
Life of Class
AVERAGE ANNUAL TOTAL RETURNS through
1 Year 3 Years 4/30/95
- ------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class A)
including 2.50% sales charge +3.48% +4.68% +4.70%<F1>
- ------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class A) at net
asset value +6.09% +5.58% +5.54%<F1>
- ------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class B) with
CDSC+ +1.22% -- -0.22%<F2>
- ------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class B) without
CDSC +5.20% -- +2.07%<F2>
- ------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class C) -- -- +5.25%<F4>
- ------------------------------------------------------------------------------
Average short-term investment-grade debt
fund +4.78% +4.88% +4.87%<F5>
- ------------------------------------------------------------------------------
Merrill Lynch One- to Five-Year Government/
Corporate Bond Index +6.40% +5.99% +5.93%<F5>
- ------------------------------------------------------------------------------
Consumer Price Index +3.05% +2.88% +2.94%<F5>
- ------------------------------------------------------------------------------
In the above table, we have included the average annual total returns of all
average short-term investment-grade debt funds (including the Fund) tracked by
Lipper Analytical Services, Inc. (an independent firm which reports mutual fund
performance) for the applicable time periods (124, 51 and 48 funds for the 1-
and 3-year periods ended April 30, 1995 and for the period from March 1, 1992 to
April 30, 1995, respectively). Because these returns do not reflect any
applicable sales charges, we have also included the Fund's results at net asset
value (no sales charge) for comparison. All results are historical and,
therefore, are not an indication of future results. The principal value and
income return of an investment in a mutual fund will vary with changes in market
conditions, and shares, when redeemed, may be worth more or less than their
original cost.
[FN]
<F1>For the period from the commencement of offering of Class A shares, February
26, 1992 to April 30, 1995.
<F2>For the period from the commencement of offering of Class B shares,
September 7, 1993 to April 30, 1995.
<F3>These returns reflect the maximum contingent deferred sales charge (CDSC)
of 4%.
<F4>For the period from the commencement of offering of Class C shares, July 1,
1994 to April 30, 1995. Class C shares have no initial sales charge or CDSC
but, along with Class B shares, have higher annual fees and expenses than
Class A shares.
<F5>Benchmark comparisons begin on March 1, 1992.
<PAGE>
PORTFOLIO OF INVESTMENTS - April 30, 1995
<TABLE>
<CAPTION>
Bonds - 85.4%
- ---------------------------------------------------------------------------------------------------------
S&P
Bond Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Aerospace and Defense - 4.8%
BBB McDonnell Douglas Corp., 8.5s, 2000 $ 5,000 $ 5,146,100
- ---------------------------------------------------------------------------------------------------------
Automotive - 0.7%
A+ Ford Motor Credit Co., 5.6s, 1995 $ 750 $ 748,958
- ---------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 19.4%
BBB Advanta Corp., 7.07s, 1997 $ 5,000 $ 4,963,500
BBB- Capital One Bank, 8.125s, 2000 4,390 4,450,363
A- Chase Manhattan Corp., 8.8s, 2000 5,000 5,153,100
A Citicorp, 8.8s, 2000 5,000 5,241,650
A First Chicago Corp., 8.23s, 1996 1,000 1,020,610
------------
$ 20,829,223
- ---------------------------------------------------------------------------------------------------------
Corporate Asset-Backed - 9.6%
NR Merrill Lynch Home Equity Loan, "B", 9.3s, 2016<F1> $ 1,900 $ 1,918,601
NR Merrill Lynch Mortgage Investors, Inc., 9.7s, 2010 1,963 1,994,018
NR Merrill Lynch Mortgage Investors, Inc., 9.75s, 2010 629 642,654
NR Merrill Lynch Mortgage Investors, Inc., 8.3s, 2011 58 57,899
NR Merrill Lynch Mortgage Investors, Inc., 10s, 2011 55 57,220
NR Merrill Lynch Mortgage Investors, Inc., 8.18561s, 2022 5,576 5,624,487
------------
$ 10,294,879
- ---------------------------------------------------------------------------------------------------------
Entertainment - 9.2%
BBB- News America Holdings, Inc., 7.5s, 2000 $ 5,000 $ 4,952,350
BBB- Time Warner, Inc., 7.95s, 2000 5,000 4,999,600
------------
$ 9,951,950
- ---------------------------------------------------------------------------------------------------------
Financial Institutions - 6.4%
A Bear Stearns Cos., Inc., 7.625s, 2000 $ 4,500 $ 4,494,195
A Countrywide Funding Corp., 6.57s, 1997 500 493,570
BBB+ General Motors Acceptance Corp., 5.95s, 1998 2,000 1,905,380
------------
$ 6,893,145
- ---------------------------------------------------------------------------------------------------------
Foreign - U.S. Dollars - 4.0%
BBB- Republic of Colombia, 8.75s, 1999 $ 3,000 $ 2,955,000
NR Republic of Greece, 9.75s, 1999 1,300 1,347,450
------------
$ 4,302,450
- ---------------------------------------------------------------------------------------------------------
Forest and Paper Products - 4.4%
BB+ Boise Cascade Corp., 10.125s, 1997 $ 4,450 $ 4,728,125
- ---------------------------------------------------------------------------------------------------------
Iron and Steel - 4.1%
BB+ USX Corp., 7.19s, 1999 $ 4,500 $ 4,418,010
- ---------------------------------------------------------------------------------------------------------
U.S. Government and Agency Obligations - 14.9%
GOV Federal National Mortgage Assn., 8.5s, 2007 $ 125 $ 128,849
GOV Government National Mortgage Assn.,
12.5s, 2011 672 758,979
GOV U.S. Treasury Notes, 7.875s, 1996 5,000 5,080,469
GOV U.S. Treasury Notes, 7.125s, 1998 10,000 10,113,281
------------
$ 16,081,578
- ---------------------------------------------------------------------------------------------------------
Utilities - Electric - 7.9%
BBB- Commonwealth Edison Co., 5.5s, 1995 $ 1,000 $ 996,200
BBB- Long Island Lighting Co., 7.625s, 1998 7,500 7,483,725
------------
$ 8,479,925
- ---------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $91,006,415) $ 91,874,343
- ---------------------------------------------------------------------------------------------------------
Repurchase Agreement - 15.4%
- ---------------------------------------------------------------------------------------------------------
Lehman Brothers, dated 4/28/95, due 5/01/95, total to be
received $16,569,142 (secured by U.S. Treasury Bond, 9.125s,
due 5/15/09, market value $16,892,272), at Cost and Value $16,561 $ 16,561,000
- ---------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $107,567,415) $108,435,343
Other Assets, Less Liabilities - (0.8)% (878,236)
- ---------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $107,557,107
- ---------------------------------------------------------------------------------------------------------
<FN>
<F1>Restricted security.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
April 30, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $91,006,415) $ 91,874,343
Repurchase agreement, at value (identified cost, $16,561,000) 16,561,000
------------
Total investments, at value (identified cost, $107,567,415) $108,435,343
Cash 912
Receivable for daily variation margin on open futures contracts 28,125
Receivable for investments sold 13,462,110
Receivable for Fund shares sold 41,158
Interest receivable 1,287,885
Deferred organization expenses 8,339
Other assets 5,175
------------
Total assets $123,269,047
------------
Liabilities:
Distributions payable $ 145,893
Payable for investments purchased 15,340,195
Payable for Fund shares reacquired 196,680
Payable to affiliates -
Management fee 3,534
Distribution fee 16,039
Accrued expenses and other liabilities 9,599
------------
Total liabilities $ 15,711,940
------------
Net assets $107,557,107
------------
Net assets consist of:
Paid-in capital $112,678,055
Unrealized appreciation on investments 916,162
Accumulated net realized loss on investments (5,797,667)
Accumulated distributions in excess of net investment income (239,443)
------------
Total $107,557,107
------------
Shares of beneficial interest outstanding 15,146,092
------------
Class A shares:
Net asset value and redemption price per share
(net assets of $85,772,722 / 12,076,923 shares of beneficial
interest outstanding) $7.10
-----
Offering price per share (100/97.5) $7.28
<F9>Class B shares:
Net asset value and offering price per share
(net assets of $17,333,887 / 2,442,980 shares of beneficial
interest outstanding) $7.10
-----
Class C shares:
Net asset value, offering price, and redemption price per share
(net assets of $4,450,498 / 626,189 shares of beneficial
interest outstanding) $7.11
-----
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares. See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- -------------------------------------------------------------------------------
Year Ended April 30, 1995
- -------------------------------------------------------------------------------
Net investment income:
Interest income $ 8,483,678
------------
Expenses -
Management fee $ 453,367
Trustees' compensation 21,614
Shareholder servicing agent fee (Class A) 141,224
Shareholder servicing agent fee (Class B) 33,865
Shareholder servicing agent fee (Class C) 5,261
Distribution and service fee (Class A) 141,693
Distribution and service fee (Class B) 154,703
Distribution and service fee (Class C) 35,437
Custodian fee 43,975
Printing 38,249
Auditing fees 34,250
Postage 17,443
Amortization of organization expenses 4,573
Miscellaneous 130,381
------------
Total expenses $ 1,256,035
Reduction of expenses by investment adviser (20,827)
------------
Net expenses $ 1,235,208
------------
Net investment income $ 7,248,470
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (2,222,098)
Futures contracts (1,176,723)
------------
Net realized loss on investments $ (3,398,821)
------------
Change in unrealized appreciation (depreciation) -
Investments $ 2,476,218
Futures contracts 48,234
------------
Net unrealized gain on investments $ 2,524,452
------------
Net realized and unrealized loss on investments $ (874,369)
------------
Increase in net assets from operations $ 6,374,101
------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended April 30, 1995 1994
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,248,470 $ 5,591,257
Net realized loss on investments (3,398,821) (2,581,304)
Net unrealized gain (loss) on investments 2,524,452 (1,943,588)
------------ ------------
Increase in net assets from operations $ 6,374,101 $ 1,066,365
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (6,069,321) $ (5,029,684)
From net investment income (Class B) (875,473) (202,316)
From net investment income (Class C) (212,068) --
In excess of net investment income (Class A) -- (302,722)
In excess of net investment income (Class B) -- (12,507)
------------ ------------
Total distributions declared to shareholders $ (7,156,862) $ (5,547,229)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 56,036,281 $136,000,527
Net asset value of shares issued to
shareholders in reinvestment of
distributions 5,481,250 4,091,855
Cost of shares reacquired (65,546,283) (90,712,878)
------------ ------------
Increase (decrease) in net assets from Fund
share transactions $ (4,028,752) $ 49,379,504
------------ ------------
Total increase (decrease) in net assets $ (4,811,513) $ 44,898,640
Net assets:
At beginning of period 112,368,620 67,469,980
------------ ------------
At end of period (including accumulated
distributions in excess of net investment
income of $223,621 and $315,229,
respectively) $107,557,107 $112,368,620
------------ ------------
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended April 30, 1995 1994 1993 1992<F1> 1995 1994<F2> 1995<F3>
- -------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 7.14 $ 7.46 $ 7.29 $ 7.31 $ 7.14 $ 7.50 $ 7.08
------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F6> -
Net investment
income<F10> $ 0.46 $ 0.44 $ 0.48 $ 0.08 $ 0.41 $ 0.21 $ 0.37
Net realized and
unrealized gain
(loss) on
investments (0.04) (0.32) 0.17<F7> (0.02)<F7> (0.05) (0.33) (0.01)
------ ------ ------ ------ ------ ------ ------
Total from
investment
operations $ 0.42 $ 0.12 $ 0.65 $ 0.06 $ 0.36 $(0.12) $ 0.36
------ ------ ------ ------ ------ ------ ------
Less distributions
declared to
shareholders<F8> -
From net investment
income $(0.46) $(0.42) $(0.48) $(0.08) $(0.40) $(0.23) $(0.33)
In excess of net
investment income -- (0.02) -- -- -- (0.01) --
------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.46) $(0.44) $(0.48) $(0.08) $(0.40) $(0.24) $(0.33)
------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $ 7.10 $ 7.14 $ 7.46 $ 7.29 $ 7.10 $ 7.14 $ 7.11
------ ------ ------ ------ ------ ------ ------
Total return<F9> 6.09% 1.61% 9.17% 4.98%<F4> 5.20% (1.69)%<F5> 5.25%<F5>
Ratios (to average
net assets)/
Supplemental data<F10>:
Expenses 0.95% 0.85% 0.60% 0.55%<F4> 1.81% 1.74%<F4> 1.85%<F4>
Net investment
income 6.54% 5.99% 6.40% 6.22%<F4> 5.73% 4.90%<F4> 6.01%<F4>
Portfolio turnover 498% 861% 472% 72% 498% 861% 498%
Net assets at
end of period
(000 omitted) $85,773 $100,297 $67,470 $4,924 $17,334 $12,072 $4,450
<FN>
<F1>For the period from the commencement of investment operations, February 26, 1992 to April 30, 1992.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to April 30, 1994.
<F3>For the period from the commencement of offering of Class C shares, July 1, 1994 to April 30, 1995.
<F4>Annualized.
<F5>Not annualized.
<F6>Per share data for the periods subsequent to April 30, 1994 are based on average shares outstanding.
<F7>The per share amount is not in accord 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.
<F8>For the year ended April 30, 1993, the per share distribution from net realized gain on investments was $0.0021.
<F9>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F10>The investment adviser did not impose a portion of its management fee and assumed some of the operating expenses of the Fund
for the periods indicated. If these fees and expenses had been incurred by the Fund, the net investment income per share and
the ratios would have been:
Net investment
income $ 0.46 $ 0.42 $ 0.43 $ 0.07 $ 0.41 $ 0.20 $ 0.37
Ratios (to average
net assets):
Expenses 0.97% 1.07% 1.29% 1.44%<F4> 1.82% 1.96%<F4> 1.88%<F4>
Net investment
income 6.52% 5.77% 5.70% 5.33%<F4> 5.72% 4.68%<F4> 5.98%<F4>
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Limited Maturity Fund (the Fund) is a diversified series of MFS Fixed Income
Trust (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
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates value. Futures contracts,
options and options on futures contracts listed on commodities exchanges are
valued at closing settlement prices. Over-the- counter options are valued by
brokers through the use of a pricing model which takes into account closing bond
valuations, implied volatility and short-term repurchase rates. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the Fund to obtain those securities in the
event of a default under the repurchase agreement. The Fund monitors, on a daily
basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of
operations of the Fund.
Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying security may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income producing strategy reflecting the view of
the Fund's management on the direction of interest rates.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or contracts based on financial indices at a fixed price
on a future date. In entering such contracts, the Fund is required to deposit
either in cash or securities an amount equal to a certain percentage of the
contract amount. Subsequent payments are made or received by the Fund each day,
depending on the daily fluctuations in the value of the underlying security, and
are recorded for financial statement purposes as unrealized gains or losses by
the Fund. The Fund's investment in futures contracts is designed to hedge
against anticipated future changes in interest rates or securities prices. The
Fund may also invest in futures contracts for non- hedging purposes. For
example, interest rate futures may be used in modifying the duration of the
portfolio without incurring the additional transaction costs involved in buying
and selling the underlying securities. Should interest rates or securities
prices move unexpectedly, the Fund may not achieve the anticipated benefits of
the futures contracts and may realize a loss.
Security Loans - The Fund may lend its securities to member banks of the Federal
Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. The loans are collateralized at all times by cash or
securities with a market value at least equal to the market value of securities
loaned. As with other extensions of credit, the Fund may bear the risk of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Fund receives compensation for lending its
securities in the form of fees or from all or a portion of the income from
investment of the collateral. The Fund would also continue to earn income on the
securities loaned. At April 30, 1995, the Fund had no securities on loan.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Interest payments received in additional securities are recorded on the
ex-interest date in an amount equal to the fair value of the security on such
date.
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. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Distributions to
shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as return of
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 accumulated net realized
gains. During the year ended April 30, 1995, $15,822 was reclassified from
accumulated net realized loss on investments to accumulated distributions in
excess of net investment income, due to differences between book and tax
accounting for mortgage-backed securities. This change had no effect on the net
assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees.
Shareholders of each class also bear certain expenses that pertain only to that
particular class. All shareholders bear the common expenses of the Fund pro rata
based on the average daily net assets of each class, without distinction between
share classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses, including distribution
and shareholder service fees.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee, computed daily and paid monthly at an annual rate of 0.40% of
average daily net assets, amounted to $453,367.
Under an expense reimbursement agreement with MFS, MFS has voluntarily agreed to
pay temporarily all of the Fund's operating expenses, exclusive of management
and distribution fees. The Fund will in turn pay MFS an expense reimbursement
fee not greater than 0.40% of average daily net assets. To the extent that the
expense reimbursement fee exceeds the Fund's actual expenses, the excess will be
applied to amounts paid by MFS in prior years. At April 30, 1995, the aggregate
unreimbursed expenses owed to MFS by the Fund amounted to $148,508, including
$20,827 incurred in the current year.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all its independent Trustees. Included in Trustees' compensation is a net
periodic pension expense of $5,401 for the year ended April 30, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$32,223 as its portion of the sales charge on sales of Class A shares of the
Fund.
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Class A Distribution Plan provides that the Fund will pay MFD up to 0.35% of
its average daily net assets attributable to Class A shares annually in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, a distribution fee to MFD of up to 0.10%
per annum of the Fund's average daily net assets attributable to Class A shares,
commissions to dealers and payments to MFD wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. MFD is not imposing the 0.10% distribution fee for an
indefinite period. Fees incurred under the distribution plan during the year
ended April 30, 1995 were 0.15% of average daily net assets attributable to
Class A shares on an annualized basis and amounted to $141,693 (of which MFD
retained $20,104).
The Class B and Class C Distribution Plans provide that the Fund will pay MFD a
monthly distribution fee, equal to 0.75% per annum, and a quarterly service fee
of up to 0.25% per annum, of the Fund's average daily net assets attributable to
Class B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer. For Class B and Class C shares, the service
fees retained amounted to $1,495 and $582, respectively. MFD will pay to
securities dealers that enter into a sales agreement with MFD, all or a portion
of the service fee attributable to Class B and Class C shares, and will pay to
such securities dealers all of the distribution fee attributable to Class C
shares. The service fee is intended to be additional consideration for services
rendered by the dealer with respect to Class B and Class C shares. Fees incurred
under the distribution plans during the year ended April 30, 1995 were 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis and amounted to $154,703 and $35,437, respectively.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within twelve months following the share purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the year ended April 30, 1995 amounted to $54,304 for
Class B shares.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
$141,224, $33,865 and $5,261 for Class A, Class B and Class C shares,
respectively, for its services as shareholder servicing agent. The fee is
calculated as a percentage of the average daily net assets of each class of
shares at an effective annual rate of up to 0.15%, up to 0.22% and up to 0.15%
attributable to Class A, Class B and Class C shares, respectively.
(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 $299,842,635 $317,542,762
------------- -------------
Investments (non-U.S. government securities) $193,180,575 $173,468,437
------------- -------------
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $107,567,415
-------------
Gross unrealized appreciation $ 1,290,946
Gross unrealized depreciation (423,018)
-------------
Net unrealized appreciation $ 867,928
-------------
At April 30, 1995, the Fund, for federal income tax purposes, had a capital loss
carryforward of $4,246,490 which may be applied against any net taxable realized
gains of each succeeding year until the earlier of its utilization or expiration
on April 30, 2002 ($141,540) and April 30, 2003 ($4,104,950).
(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 (without par value).
Transactions in Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
Year Ended April 30, 1995 1994
--------------------------------- ----------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,921,821 $ 27,684,487 16,033,440 $118,182,057
Shares issued to shareholders in
reinvestment of distributions 655,143 4,624,574 531,402 3,912,804
Shares reacquired (6,542,877) (46,091,355) 11,571,972) (85,173,901)
---------- ----------- ---------- ------------
Net increase (decrease) (1,965,913) $(13,782,294) 4,992,870 $ 36,920,960
---------- ------------ --------- ------------
<CAPTION>
Class B Shares
Year Ended April 30,
1995 1994<F1>
--------------------------------- ----------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,497,691 $ 17,640,259 2,423,342 $ 17,818,470
Shares issued to shareholders in
reinvestment of
distributions 99,556 701,588 24,554 179,051
Shares reacquired (1,845,637) (13,014,943) (756,526) (5,538,977)
---------- ------------ --------- ------------
Net increase 751,610 $ 5,326,904 1,691,370 $ 12,458,544
---------- ------------ --------- ------------
<FN>
<F1>For the period from the commencement of offering of Class B shares,
September 7, 1993 to April 30, 1994.
</TABLE>
Class C Shares
Year Ended April 30,
1995**
---------------------------------
Shares Amount
- -----------------------------------------------------------------
Shares sold 1,524,637 $ 10,711,535
Shares issued to shareholders in
reinvestment of
distributions 22,123 155,088
Shares reacquired (920,571) (6,439,985)
-------- -----------
Net increase 626,189 $ 4,426,638
-------- -----------
**For the period from the commencement of offering of Class C shares, July 1,
1994 to April 30, 1995.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS, or an affiliate of MFS, in an unsecured line of credit
with a bank which permits borrowings up to $350 million, collectively.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended April 30, 1995 was $1,738.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates. These financial instruments include futures contracts.
The notional or contractual amounts of these instruments represent the
investment the Fund has in particular classes of financial instruments and does
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations under these financial instruments at April 30, 1995, is as follows:
Futures Contracts
Unrealized
Expiration Contracts Position Appreciation
- ------------------------------------------------------------------------------
July 1995 200 Treasury Notes Short $48,234
------
At April 30, 1995, the Fund had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
(8) Restricted Security
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At April 30, 1995, the
Fund owned the following restricted security (constituting 1.78% of net assets)
which may not be publicly sold without registration under the Securities Act of
1933. The Fund does not have the right to demand that such security be
registered. The value of this security is determined by valuations supplied by a
pricing service or brokers or, if not available, in good faith by or at the
direction of the Trustees.
Par Amount
Description Date of Acquisition (000 Omitted) Cost Value
- ------------------------------------------------------------------------------
Merrill Lynch Home Equity
Loan, "B", 9.3s, 2016 12/30/92 $1,900 $1,907,125 $1,918,601
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Fixed Income Trust and Shareholders of MFS Limited
Maturity Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Limited Maturity Fund (one of the series
constituting MFS Fixed Income Trust) as of April 30, 1995, the related statement
of operations for the year then ended, the statement of changes in net assets
for the years ended April 30, 1995 and 1994, and the financial highlights for
each of the years in the four-year period ended April 30, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
April 30, 1995 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Limited Maturity
Fund at April 30, 1995, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 2, 1995
---------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) Limited
Maturity Fund [Seal] BULK RATE
1 U.S. POSTAGE
500 Boylston Street TOP-RATED SERVICES P A I D
Boston, MA 02116 PERMIT #55638
BOSTON, MA
[Logo] MFS
THE FIRST NAME IN MUTUAL FUNDS
MLM-2 6/95 9.5M 36/236/336
