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THE FIRST NAME IN MUTUAL FUNDS
Semiannual Report
October 31, 1995
MFS(R) LIMITED MATURITY FUND
[Front cover
A photo of two people talking.]
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<TABLE>
<S> <C>
MFS(R) LIMITED MATURITY FUND
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and President Investors Bank & Trust Company
Richard B. Bailey* - Private Investor; INVESTOR INFORMATION
Former Chairman and Director (until 1991), For MFS stock and bond market outlooks,
Massachusetts Financial Services Company; call toll free: 1-800-637-4458 anytime from
Director, Cambridge Bancorp; Director, a touch-tone telephone.
Cambridge Trust Company
For information on MFS mutual funds,
Peter G. Harwood - Private Investor call your financial adviser or, for an
information kit, call toll free:
J. Atwood Ives - Chairman and Chief Executive 1-800-637-2929 any business day from
Officer, Eastern Enterprises 9 a.m. to 5 p.m. Eastern time (or leave
a message anytime).
Lawrence T. Perera - Partner,
Hemenway & Barnes
William J. Poorvu - Adjunct Professor, INVESTOR SERVICE
Harvard University Graduate School of MFS Service Center, Inc.
Business Administration P.O. Box 2281
Boston, MA 02107-9906
Charles W. Schmidt - Private Investor
Arnold D. Scott* - Senior Executive Vice For general information, call toll free:
President, Director and Secretary, 1-800-225-2606 any business day from
Massachusetts Financial Services Company 8 a.m. to 8 p.m. Eastern time.
Jeffrey L. Shames* - President and Director, For service to speech- or hearing-impaired,
Massachusetts Financial Services Company call toll free: 1-800-637-6576 any business
Elaine R. Smith - Independent Consultant day from 9 a.m. to 5 p.m. Eastern time.
David B. Stone - Chairman, North American (To use this service, your phone must be equipped with a
Management Corp. (investment adviser) 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 telephone.
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741 --------------------------------------------------------
TOP RATED SERVICE
PORTFOLIO MANAGER
Geoffrey L. Kurinsky* NUMBER For the second year in a row, MFS earned
1 a #1 ranking in DALBAR, Inc's.
TREASURER DALBAR Broker/Dealer Survey, Main Office
W. Thomas London* Operations Service Quality category.
The firm achieved a 3.49 overall score - on
ASSISTANT TREASURER a scale of 1 to 4 - in the 1995 survey. A total of
James O. Yost* 71 firms responded, offering input on the quality
of service they receive from 36 mutual fund companies
SECRETARY nationwide. The survey contained questions about service
Stephen E. Cavan* quality in 17 categories, including "knowledge of phone
service contacts," "accuracy of transaction processing,"
ASSISTANT SECRETARY and "overall ease of doing business with the firm."
James R. Bordewick, Jr.* --------------------------------------------------------
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
The past six months have been positive ones for fixed-income markets, as the
reduction in interest rates resulted in price appreciation from fixed-income
securities as well as the traditional coupon income which these securities
provide. The markets' performance was helped by both the slower rate of economic
growth during this period and continuing good news on the inflation front.
During the six-month period ended October 31, 1995, Class A shares of the Fund
provided a total return of + 4.99%, Class B shares + 4.47%, and Class C shares +
4.40%. A discussion of the Fund's performance may be found in the Portfolio
Performance and Strategy section of this letter. Complete performance data can
be found on page four of this report.
Economic Outlook
Moderate, but sustainable, growth appears to be the hallmark of the economic
expansion's fifth year. While initial estimates showed the U.S. economy growing
at an annual rate of 4.2% in the third quarter, this surprisingly strong growth
was mainly driven by a pickup in consumer spending and an increase in business
and government outlays. Although impressive, this growth rate is not expected to
continue in coming months. Recent retail sales have been disappointing, in part
because of rising levels of consumer debt. An extended period of lower mortgage
rates seems to have relieved much of the pent-up demand for housing. Growth is
not expected to get much help from the manufacturing sector, either, as order
flows from manufacturers have moderated. Export activity, meanwhile, is also
expected to remain modest as continued weakness abroad has limited demand for
many U.S. goods. However, the Federal Reserve Board's consistent and, so far,
successful efforts to fight inflation seem to be giving consumers and businesses
enough longer term confidence to help maintain modest growth in real (adjusted
for inflation) gross domestic product into 1996.
Interest Rates
Given the unexpected strength of the economy in the third quarter, prospects for
further decreases in short-term interest rates by the Federal Reserve seem
uncertain in the near term. Long-term rates, meanwhile, have moved noticeably
downward in recent months in anticipation of more modest fourth-quarter growth
with continued low inflation. While there have been some increases in commodity
prices, companies have found it difficult to pass these on at the consumer level
as they continue to fight for market share. Additionally, unit labor costs
remain under control and seem to be growing at a pace that is near or below the
ongoing inflation rate. Thus, with long-term government bonds yielding over 6%
in an environment of 2% to 3% inflation, real rates of return in the
fixed-income markets remain relatively attractive.
Portfolio Performance and Strategy
The Fund's performance over the past six months was mainly a result of the
significant decline in short-term interest rates during the period. Rates on
three-year Treasury securities dropped from 6 5/8% at the beginning of the
period to 5 3/4% on October 31. The reduction was triggered by the slowing pace
of economic growth, which led the Federal Reserve to lower interest rates on
July 6. The Fund's performance was also aided by its significant exposure to
investment-grade securities. Corporate securities, which made up as much as 80%
of the portfolio during the period, outperformed Treasury securities in the 1-
to 5-year range by approximately 70 basis points (0.70%). Corporate securities
typically outperform Treasuries during periods of economic growth, although
principal value and interest on Treasury securities are guaranteed by the U.S.
Government if held to maturity.
The Fund also benefited from owning positions in the media and cable
sectors, which were the best performing sectors of the corporate bond market.
Companies in which the Fund had positions, including Time Warner, News America
Holdings and Telecommunications, Inc., have benefited from their ability to
reduce debt and from public perceptions of them as solid, investment-grade
credits. On the other hand, bonds of RJR Nabisco and Long Island Lighting
detracted from performance during this period, as both have been the focus of
restructuring efforts. We continue to hold positions in both of these companies
because we believe they will provide positive returns over the long term.
Toward the end of the period, we began to reduce our exposure to the
corporate bond market. Along with signs of potential economic weakness in
October, which is typically not good for corporate bonds, the rich valuation of
this sector suggests that the risk/reward environment for owning corporate bonds
is less favorable at this point. By the end of October, the Fund's position in
investment-grade corporate bonds had been reduced from 80% of the portfolio to
60%. The proceeds have been invested in Treasuries and asset-backed securities.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin /s/ Geoffrey L. Kurinsky
------------------ --------------------------
A. Keith Brodkin Geoffrey L. Kurinsky
Chairman and President Portfolio Manager
November 10, 1995
PORTFOLIO MANAGER PROFILE
Geoffrey Kurinsky began his career at MFS in 1987 in the Fixed Income
Department. Mr. Kurinsky is a graduate of the University of Massachusetts and
Boston University's Graduate School of Management. He was named Assistant Vice
President in 1988 and Vice President in 1989. In 1992, he became Portfolio
Manager of MFS Limited Maturity Fund. He was named Senior Vice President in
1993.
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, under normal market conditions, invests substantially all of its
assets in debt securities rated within the four highest grades as determined by
Standard and Poor's Ratings Group (AAA, AA, A or BBB), Fitch Investors Services,
Inc. 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.
PERFORMANCE SUMMARY
Because mutual funds like MFS Limited Maturity Fund are designed for investors
with long-term goals, we have provided cumulative results as well as the average
annual total returns for Class A, Class B and Class C shares for the applicable
time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
Class A Investment Results
(net asset value change including reinvested distributions)
2/26/92+ -
6 Months 1 Year 10/31/95
- -------------------------------------------------------------------------------
Cumulative Total Return* 4.99% +9.41% +24.62%
- -------------------------------------------------------------------------------
Average Annual Total Return* -- +9.41% + 6.16%
- -------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the Securities and Exchange Commission
(the SEC), with all distributions reinvested and reflecting the maximum sales
charge of 2.50% on the initial investment for the 1-year period ended September
30, 1995 and for the period from February 26, 1992 (+) to September 30, 1995,
were + 5.93% and + 5.32%, respectively.
Class B Investment Results
(net asset value change including reinvested distributions)
9/07/93+ -
6 Months 1 Year 10/31/95
- -------------------------------------------------------------------------------
Cumulative Total Return++ +4.47% +8.57% +8.05%
- -------------------------------------------------------------------------------
Average Annual Total Return++ -- +8.57% +3.67%
- -------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the SEC, with all distributions
reinvested and reflecting the current maximum contingent deferred sales charge
(CDSC) of 4% for the 1-year period ended September 30, 1995 and for the period
from September 7, 1993+ to September 30, 1995, were + 3.93% and + 1.69%,
respectively.
Class C Investment Results
(net asset value change including reinvested distributions)
7/01/94+
6 Months 1 Year 10/31/95
- -------------------------------------------------------------------------------
Cumulative Total Return(S) +4.40% +8.49% +9.88%
- -------------------------------------------------------------------------------
Average Annual Total Return(S) -- +8.49% +7.32%
- -------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the SEC, with all distributions
reinvested for the 1-year period ended September 30, 1995 and for the period
from July 1, 1994+ to September 30, 1995, were + 7.86% and + 7.29%,
respectively.
All results represent past performance and are not necessarily an indication of
future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
*These results do not include the sales charge. If the charge had been
included, the results would have been lower.
+Commencement of offering of this class of shares.
++These results do not include any CDSC. If the charge had been included, the
results would have been lower.
(S)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.
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - October 31, 1995
Bonds - 88.5%
- -----------------------------------------------------------------------------
S&P Principal Amount
Bond Rating Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Banks and Credit Companies - 17.1%
BBB- Advanta Corp., 7.07s, 1997 $ 5,000 $ 5,064,050
BBB+ Banponce Financial Corp.,
7.72s, 2000 4,500 4,686,345
A- Chase Manhattan Corp.,
8.8S, 2000 5,000 5,161,650
A+ Citicorp, 8.8s, 2000 5,000 5,159,750
------------
$ 20,071,795
- -----------------------------------------------------------------------------
Corporate Asset Backed - 11.6%
A First Chicago Master Trust,
8.23s, 1996 $ 1,000 $ 1,023,680
NR Merrill Lynch Home Equity
Loan, "B" 9.3s, 2016+ 1,865 1,904,190
NR Merrill Lynch Mortgage
Investors, Inc., 9.7s, 2010 1,563 1,607,425
NR Merrill Lynch Mortgage
Investors, Inc., 9.75s, 2010 505 519,162
NR Merrill Lynch Mortgage
Investors, Inc., 8.3s, 2011 51 52,009
NR Merrill Lynch Mortgage
Investors, Inc., 10s, 2011 48 50,904
NR Merrill Lynch Mortgage
Investors, Inc., 7.385s, 2021 2,750 2,801,755
NR Merrill Lynch Mortgage
Investors, Inc.,
8.18561s, 2022 5,488 5,673,164
------------
$ 13,632,289
- -----------------------------------------------------------------------------
Financial Institutions - 9.1%
A Countrywide Funding Corp.,
6.57s, 1997 $ 500 $ 503,935
A Lehman Brothers Holdings,
Inc., 7.375s, 2007 5,000 5,164,900
BBB- United Cos., Financial Corp.,
7s, 1998 5,000 5,050,450
------------
$ 10,719,285
- -----------------------------------------------------------------------------
Food and Beverage Products - 8.9%
BBB- Borden, Inc., 9.875s, 1997 $ 1,290 $ 1,363,246
BBB- RJR Nabisco, Inc., 8.3s, 1999 5,000 5,257,300
BBB- RJR Nabisco, Inc., 8.3s,
1999, Senior Notes 1,500 1,584,990
BBB- RJR Nabisco, Inc., 8s, 2000 2,250 2,296,958
------------
$ 10,502,494
- -----------------------------------------------------------------------------
Foreign - U.S. Dollars - 3.9%
BBB- Republic of Colombia, 8.75s, 1999 $ 3,000 $ 3,116,520
BBB- Republic of Greece, 9.75s, 1999 1,300 1,422,187
------------
$ 4,538,707
- -----------------------------------------------------------------------------
Iron and Steel - 3.9%
BB+ USX Corp., 7.19s, 1999 $ 4,500 $ 4,593,510
- -----------------------------------------------------------------------------
Telecommunications - 3.5%
BBB- Telecomminications, Inc., 7.375s, 2000 $ 4,000 $ 4,055,040
- -----------------------------------------------------------------------------
U.S. Government and Agency
Obligations - 14.5%
GOV Federal Home Loan Mortgage
Corp., 9.5s, 2025 $ 3,189 $ 3,367,575
GOV Federal National Mortgage
Assn., 8.5s, 2007 122 126,718
GOV Federal National Mortgage
Assn., 9.5s, 2025 6,096 6,338,173
GOV Government National Mortgage
Assn., 12.5s, 2011 601 701,358
GOV U.S. Treasury Notes, 9.125s, 1999 1,500 1,658,670
GOV U.S. Treasury Notes, 6.125s, 2000 2,100 2,125,914
GOV U.S. Treasury Notes, 6.75s, 2000 2,605 2,699,431
------------
$ 17,017,839
- -----------------------------------------------------------------------------
Utilities - Electric - 16.0%
BB Central Maine Power, 7.5s, 1997 $ 4,500 $ 4,554,225
BBB- Long Island Lighting Co., 7.625s, 1998 7,500 7,665,375
BBB- Louisiana Power & Light Co.,
10.67s, 2017 2,500 2,688,325
BBB- System Energy Resources, 7.38s, 2000 3,895 3,875,525
------------
$ 18,783,450
- -----------------------------------------------------------------------------
Total Bonds (Identified Cost, $102,332,846) $103,914,409
- -----------------------------------------------------------------------------
Repurchase Agreement - 1.2%
- -----------------------------------------------------------------------------
Issuer
- -----------------------------------------------------------------------------
Lehman Brothers, dated 10/31/95, due 11/01/95,
total to be received $1,408,229 (secured by
U.S. Treasury Bond, 8.75s, due 8/15/20,
market value $1,439,215), at Cost
and Value $ 1,408 $ 1,408,000
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $103,740,846) $105,322,409
Other Assets, Less Liabilities - 10.3% 12,033,989
=============================================================================
Net Assets - 100.0% $117,356,398
- -----------------------------------------------------------------------------
+Restricted security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
October 31, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $103,740,846) $105,322,409
Receivable for investments sold 10,536,971
Receivable for Fund shares sold 120,538
Interest receivable 1,682,354
Deferred organization expenses 6,033
Other assets 7,664
------------
Total assets $117,675,969
------------
Liabilities:
Cash overdraft $ 32,487
Distributions payable 204,582
Payable for Fund shares reacquired 51,419
Payable for daily variation margin on open futures
contracts 3,125
Payable to affiliates -
Management fee 3,841
Distribution fee 12,534
Accrued expenses and other liabilities 11,583
------------
Total liabilities $ 319,571
------------
Net assets $117,356,398
============
Net assets consist of:
Paid-in capital $120,880,701
Unrealized appreciation on investments 1,489,937
Accumulated net realized loss on investments (4,978,651)
Accumulated distributions in excess of net investment
income (35,589)
------------
Total $117,356,398
============
Shares of beneficial interest outstanding 16,286,429
==========
Class A shares:
Net asset value and redemption price per share
(net assets of $88,701,388 / 12,307,805 shares of
beneficial interest outstanding) $7.21
=====
Offering price per share (100/97.5) $7.39
=====
Class B shares:
Net asset value and offering price per share
(net assets of $22,244,529 / 3,089,630 shares of
beneficial interest outstanding) $7.20
=====
Class C shares:
Net asset value, offering price, and redemption price per
share
(net assets of $6,410,481 / 888,994 shares of beneficial
interest outstanding) $7.21
=====
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
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
Six Months Ended October 31, 1995
- ------------------------------------------------------------------------------
Net investment income:
Interest income $ 4,553,429
-----------
Expenses -
Management fee $ 227,269
Trustees' compensation 11,943
Shareholder servicing agent fee (Class A) 66,386
Shareholder servicing agent fee (Class B) 21,764
Shareholder servicing agent fee (Class C) 3,886
Distribution and service fee (Class A) 66,347
Distribution and service fee (Class B) 87,630
Distribution and service fee (Class C) 26,045
Custodian fee 21,937
Postage 7,830
Auditing fees 6,200
Printing 5,574
Amortization of organization expenses 2,306
Legal fees 2,013
Miscellaneous 59,868
-----------
Total expenses $ 616,998
Fees paid indirectly (2,916)
Preliminary refund of expenses pursuant to reimbursement
agreement 22,402
-----------
Net expenses $ 636,484
-----------
Net investment income $ 3,916,945
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 2,017,957
Futures contracts (1,198,941)
-----------
Net realized gain on investments $ 819,016
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 713,635
Futures contracts (139,860)
-----------
Net unrealized gain on investments $ 573,775
-----------
Net realized and unrealized gain on investments $ 1,392,791
-----------
Increase in net assets from operations $ 5,309,736
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Six Months
Ended
October 31,
1995 Year Ended
(Unaudited) April 30, 1995
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,916,945 $ 7,248,470
Net realized gain (loss) on investments 819,016 (3,398,821)
Net unrealized gain on investments 573,775 2,524,452
------------ ------------
Increase in net assets from operations $ 5,309,736 $ 6,374,101
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (2,965,737) $ (6,069,321)
From net investment income (Class B) (594,231) (875,473)
From net investment income (Class C) (153,123) (212,068)
----------- -----------
Total distributions declared to
shareholders $ (3,713,091) $ (7,156,862)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 29,516,643 $ 56,036,281
Net asset value of shares issued to
shareholders in reinvestment of
distributions 2,714,823 5,481,250
Cost of shares reacquired (24,028,820) (65,546,283)
------------ ------------
Increase (decrease) in net assets from
Fund share transactions $ 8,202,646 $ (4,028,752)
------------ ------------
Total increase (decrease) in net
assets $ 9,799,291 $ (4,811,513)
Net assets:
At beginning of period 107,557,107 112,368,620
------------ ------------
At end of period (including accumulated
distributions
in excess of net investment income of
$35,589 and $239,443, respectively) $117,356,398 $107,557,107
============ ============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Six Months Ended Year Ended April 30,
October 31, 1995 ----------------------------------------
(Unaudited) 1995 1994 1993 1992(1)
- ------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 7.10 $ 7.14 $ 7.46 $ 7.29 $ 7.31
------ ------ ------ ------ ------
Income from investment
operations(4) -
Net investment income(9) $ 0.26 $ 0.46 $ 0.44 $ 0.48 $ 0.08
Net realized and
unrealized gain (loss) on
investment transactions 0.09 (0.04) (0.32) 0.17(8) (0.02)(8)
------ ------ ------ ------ ------
Total from investment
operations $ 0.35 $ 0.42 $ 0.12 $ 0.65 $ 0.06
------ ------ ------ ------ ------
Less distributionsdeclared
to shareholders(3) -
From net investment
income $(0.24) $(0.46) $(0.42) $(0.48) $(0.08)
In excess of net
investment income -- -- (0.02) -- --
------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.24) $(0.46) $(0.44) $(0.48) $(0.08)
------ ------ ------ ------ ------
Net asset value - end
of period $ 7.21 $ 7.10 $ 7.14 $ 7.46 $ 7.29
====== ====== ====== ====== ======
Total return(3) 4.99%(3) 6.09% 1.61% 9.17% 4.98%(2)
Ratios (to average net
assets)/Supplemental
data(9):
Expenses(5) 0.95%(2) 0.95% 0.85% 0.60% 0.55%(2)
Net investment income 7.05%(2) 6.54% 5.99% 6.40% 6.22%(2)
Portfolio turnover 177% 498% 861% 472% 72%
Net assets at end of period
(000 omitted) $88,701 $85,773 $100,297 $67,470 $4,924
(1) For the period from the commencement of investment operations, February 26,
1992, to April 30, 1992.
(2) Annualized.
(3) Not annualized.
(4) Per share data for the periods subsequent to April 30, 1994 is based on
average shares outstanding.
(5) For periods ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(6) 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.
(7) For the year ended April 30, 1993, the per share distribution from net
realized gain on investments was $0.0021.
(8) 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.
(9) The investment adviser did not impose a portion of its management fee and
assumed some of the operating expenses of the Fund for certain of the
periods indicated. If these fees had been incurred by the Fund and if the
expense reimbursement agreement had not been in effect, the net investment
income per share and the ratios would have been:
Net investment income $ 0.26 $ 0.46 $ 0.42 $ 0.43 $ 0.07
Ratios (to average
net assets):
Expenses(5) 0.91%(2) 0.97% 1.07% 1.29% 1.44%(2)
Net investment income 7.09%(2) 6.52% 5.77% 5.70% 5.33%(2)
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended April 30, Six Months Ended
October 31, 1995 -------------------- October 31, 1995 Year Ended
(Unaudited) 1995 1994<F1> (Unaudited) April 30, 1995<F2>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Class C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.10 $ 7.14 $ 7.50 $ 7.11 $ 7.08
------ ------ ------ ------ ------
Income from investment operations<F5> -
Net investment income<F7> $ 0.23 $ 0.41 $ 0.21 $ 0.22 $ 0.37
Net realized and unrealized gain (loss) on investment
transactions 0.09 (0.05) (0.33) 0.09 (0.01)
------ ------ ------ ------ ------
Total from investment operations $ 0.32 $ 0.36 $(0.12) $ 0.31 $ 0.36
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.22) $(0.40) $(0.23) $ 0.21) $(0.33)
In excess of net investment income -- -- (0.01) -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.22) $(0.40) $(0.24) $(0.21) $(0.33)
------ ------ ------ ------ ------
Net asset value - end of period $ 7.20 $ 7.10 $ 7.14 $ 7.21 $ 7.11
====== ====== ====== ====== ======
Total return 4.47%<F4> 5.20% (1.69%)<F4> 4.40%<F4> 5.25%<F4>
Ratios (to average net assets)/Supplemental data<F7>:
Expenses<F6> 1.68%<F3> 1.81% 1.74%<F3> 1.80%<F3> 1.85%<F3>
Net investment income 6.30%<F3> 5.73% 4.90%<F3> 6.20%<F3> 6.01%<F3>
Portfolio turnover 177% 498% 861% 177% 498%
Net assets at end of period (000 omitted) $22,245 $17,334 $12,072 $6,410 $4,450
<FN>
<F1>For the period from the commencement of offering of Class B shares,
September 7, 1993, to April 30, 1994.
<F2>For the period from the commencement of offering of Class C shares, July 1,
1994, to April 30, 1994.
<F3>Annualized.
<F4>Not annualized.
<F5>Per share data for the periods subsequent to April 30, 1994 is based on
average shares outstanding.
<F6>For periods ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
<F7>The investment adviser did not impose a portion of its management fee and
assumed some of the operating expenses of the Fund for certain of the
periods indicated. If these fees had been incurred by the Fund and if the
expense reimbursement agreement had not been in effect, the net investment
income per share and the ratios would have been:
Net investment income $ 0.23 $ 0.41 $ 0.20 $ 0.22 $ 0.37
Ratios (to average net assets):
Expenses<F6> 1.71%<F3> 1.82% 1.96%<F3> 1.76%<F3> 1.88%<F3>
Net investment income 6.27%<F3> 5.72% 4.68%<F3> 6.24%<F3> 5.98%<F3>
See notes to financial statements
</TABLE>
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Notes to Financial Statements (Unaudited)
(1) Business and Organization
MFS Limited Maturity Fund (the Fund) is a diversified series of MFS Series
Trust IX (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
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 market 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.
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 rate or securities prices.
Investments in interest rate futures for purposes other than hedging may be made
to modify the duration of the portfolio without incurring additional transaction
costs involved in buying and selling the underlying securities. Should interest
rates or securities prices move unexpectedly, the Fund may not achieve the
anticipated benefits of the futures contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Interest
payments received in additional securities are recorded on the ex- interest date
in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. This fee is reduced according to an expense
offset arrangement with State Street Bank, the dividend disbursing agent, which
provides for partial reimbursement of custody fees based on a formula developed
to measure the value of cash deposited by the Fund with the custodian and with
the dividend disbursing agent. This amount is shown as a reduction of 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 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 a 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.
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).
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. 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.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate of
0.40% of average daily net assets.
Under a temporary expense reimbursement agreement with MFS, MFS has voluntarily
agreed to pay 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 October 31, 1995, the
aggregate unreimbursed expenses owed to MFS by the Fund amounted to $126,107
after $22,402 net reimbursement in the current period.
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 of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $1,833 for the period ended
October 31, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$16,087 for the period ended October 31, 1995, 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%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum (reduced to a maximum of 0.15% per annum for an indefinite
period) 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 retains the service fee for accounts not
attributable to a securities dealer which amounted to $7,506 for the period
ended October 31, 1995. MFD is not imposing the 0.10% distribution fees for an
indefinite period. Fees incurred under the distribution plan during the period
ended October 31, 1995 were 0.15% of average daily net assets attributable to
Class A shares on an annualized basis.
The Class B and Class C distribution plans provide that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a 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. Except in the case of the first year service fee, the service fee is
reduced to 0.15% per annum of the Fund's average daily net assets attributable
to Class B shares. 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. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $1,155 and $873 for Class
B shares and Class C shares, respectively, for the period ended October 31,
1995. Fees incurred under the distribution plans during the period ended October
31, 1995 were 0.88% and 1.00% of average daily net assets attributable to Class
B and Class C shares on an annualized basis.
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 12 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 period ended October 31, 1995 were $2,701 and $13,512
for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of average daily net assets for 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
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U.S. Government securities $106,464,857 $115,739,161
============ ============
Investments (non-U.S. Government securities) $ 93,605,177 $ 75,221,226
============ ============
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 $103,740,846
============
Gross unrealized appreciation $ 1,764,366
Gross unrealized depreciation (182,803)
------------
Net unrealized appreciation $ 1,581,563
============
(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:
Class A Shares
Six Months Ended Year Ended
October 31, 1995 April 30, 1995
--------------------------- ---------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
Shares sold 2,239,939 $16,115,363 3,921,821 $27,684,487
Shares
issued to
shareholders in
reinvestment of
distributions 298,860 2,152,854 655,143 4,624,574
Shares
reacquired (2,307,917) (16,619,771) (6,542,877) (46,091,355)
---------- ----------- ---------- -----------
Net increase
(decrease) 230,882 $ 1,648,446 (1,965,913) $13,782,294)
========== =========== ========== ===========
Class B Shares
Six Months Ended Year Ended
October 31, 1995 April 30, 1995
--------------------------- ---------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
Shares sold 1,394,094 $10,033,239 2,497,691 $17,640,259
Shares issued to
shareholders in
reinvestment of
distributions 63,089 454,117 99,556 701,588
Shares
reacquired (810,533) (5,831,212) (1,845,637) (13,014,943)
---------- ----------- ---------- -----------
Net increase 646,650 $ 4,656,144 751,610 $ 5,326,904
========== =========== ========== ===========
Class C Shares
Six Months Ended Year Ended
October 31, 1995 April 30, 1995*
--------------------------- ---------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
Shares sold 466,988 $ 3,368,041 1,524,637 $10,711,535
Shares
issued to
shareholders in
reinvestment of
distributions 14,964 107,852 22,123 155,088
Shares
reacquired (219,147) (1,577,837) (920,571) (6,439,985)
---------- ----------- ---------- -----------
Net increase 262,805 $ 1,898,056 626,189 $ 4,426,638
========== =========== ========== ===========
*For the period from the commencement of offering of Class C shares, July 31,
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 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 period ended October
31, 1995 was $724.
(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 October 31, 1995,
is as follows:
Futures Contracts
Unrealized
Expiration Contracts Position Depreciation
- -------------------------------------------------------------------------
December 1995 100 Treasury Notes Short $91,626
=======
At October 31, 1995, the Fund had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
(8) Restricted Securities
The Fund may invest not more than 15% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At October 31,
1995, the Fund owned the following restricted security (constituting 1.62% of
total assets) which may not be publicly sold without registration under the
Securities Act of 1933 (the 1933 Act). 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.
Date of Par Amount
Description Acquisition (000 Omitted) Cost Value
- ------------------------------------------------------------------------------
Merrill Lynch Home
Equity Loan, "B",
9.3s, 2016 12/30/92 $1,865 $1,907,125 $1,904,190
==========
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
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MFS(R) LIMITED [LOGO: NUMBER 1 DALBAR BULK RATE
MATURITY FUND TOP-RATED SERVICE] U.S. POSTAGE
PAID
PERMIT #55638
500 Boylston Street BOSTON, MA
Boston, MA 02116 -------------
[LOGO: M F S(R)
THE FIRST NAME IN MUTUAL FUNDS]
MLM-3 12/95 10M 36/236/336
