<PAGE> 1
[MFS LOGO] Annual Report
for Year Ended
April 30, 1997
MFS(R) LIMITED MATURITY FUND
LEARNING FINANCIAL BASICS THE EASY WAY (see page 27)
<PAGE> 2
TABLE OF CONTENTS
Letter from the Chairman ...................................... 1
A Discussion with the Portfolio Manager ....................... 3
Portfolio Manager's Profile ................................... 6
Fund Facts .................................................... 7
Performance Summary ........................................... 7
Portfolio Concentration ....................................... 9
Tax Form Summary .............................................. 9
Portfolio of Investments ...................................... 11
Financial Statements .......................................... 13
Notes to Financial Statements ................................. 19
Independent Auditors' Report .................................. 26
The ABCs of Investing ......................................... 27
The MFS Family of Funds(R) .................................... 28
Trustees and Officers ......................................... 29
HIGHLIGHTS
- FOR THE 12 MONTHS ENDED APRIL 30, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 5.83%, CLASS B SHARES
4.99%, CLASS C SHARES 5.08%, AND CLASS I SHARES 5.83%.
- THE FUND'S PERFORMANCE WAS POSITIVELY AFFECTED BY ITS OVERWEIGHTING IN
INVESTMENT-GRADE CORPORATE SECURITIES, WHICH OUTPERFORMED TREASURY
SECURITIES BY ALMOST 50 BASIS POINTS (0.50%) OVER THE PAST YEAR.
(PRINCIPAL VALUE AND INTEREST ON TREASURY SECURITIES ARE GUARANTEED BY
THE U.S. GOVERNMENT IF HELD TO MATURITY.)
- AT THE SAME TIME, THE FUND'S UNDERWEIGHTING IN MORTGAGE-BACKED
SECURITIES WAS DETRIMENTAL TO ITS PERFORMANCE, AS THE RETURNS IN THIS
SECTOR WERE STRONGER THAN ANTICIPATED, WITH MORTGAGE SECURITIES
OUTPERFORMING TREASURIES BY ABOUT 150 BASIS POINTS (1.50%).
- ONE OF THE FUND'S BIGGEST WEIGHTINGS IS IN THE UTILITY SECTOR. AS A
RESULT OF VARIOUS RESTRUCTURING PLANS SPARKED BY DEREGULATION, WE
ANTICIPATE THAT MANY OF THE LOWER-RATED CREDITS IN THE ELECTRIC
UTILITY INDUSTRY WILL EVENTUALLY BECOME HIGHER RATED.
<PAGE> 3
LETTER FROM THE CHAIRMAN
[PHOTO: A. Keith Brodkin]
Dear Shareholders:
After more than six years of expansion, the U.S. economy is experiencing
another year of growth in 1997, although a few signs point to the possibility
of a modest rise in inflation during the year. On the positive side, the
pattern of moderate growth and inflation set over the past few years now seems
fairly well entrenched in the economy and, short of a major international or
domestic crisis, appears to have enough momentum to remain on track for some
time. Also, gains in such important sectors as housing, automobiles,
industrial production, and exports indicate a fair amount of underlying
strength in the economy. Some of that strength was seen in the first quarter,
when the U.S. economy grew at an annualized rate of 5.6% (based on preliminary
estimates), a pace that would be inflationary in the unlikely event that it
were to continue. The ongoing tightness in the labor market could also add some
inflationary pressures to the economy. At the same time, there is some reason
for caution as a result of the continuing high level of consumer debt and
rising personal bankruptcies. Given these somewhat conflicting indicators, we
expect real (inflation-adjusted) growth to revolve around 2% in 1997, with the
strength of the first quarter moderating as we move through the balance of
the year.
In the bond markets, conflicting signals over the strength of the economy
have also created near-term volatility, and the Federal Reserve Board has begun
taking measured steps to control inflation by raising short-term interest rates.
Although we do not expect a repeat of the rapid growth in the first quarter, we
would expect the Fed to raise interest rates at least one more time in reaction
to the economic momentum that was built up during the period. While inflationary
forces largely remained in check in 1996, the continued strength in the labor
market suggests that a pickup in inflation is still possible. At the same time,
the U.S. budget deficit continues to decline and, as a percentage of gross
domestic product, is now approaching 1%, which we consider a positive
development for the bond markets. Although interest rates
1
<PAGE> 4
LETTER FROM THE CHAIRMAN - continued
may remain volatile over the coming months, we believe that, at current levels,
fixed-income markets remain equitably valued.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/S/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
May 14, 1997
2
<PAGE> 5
A DISCUSSION WITH THE PORTFOLIO MANAGER
[PHOTO: GEOFFREY L. KURINSKY]
For the 12 months ended April 30, 1997, Class A shares of the Fund
provided a total return of 5.83%, Class B shares 4.99%, Class C shares 5.08%,
and Class I shares 5.82%. These returns assume the reinvestment of
distributions but exclude the effects of any sales charges and compare to a
6.23% return for the Merrill Lynch One- to Five-Year Government/Corporate Bond
Index (a total return index comprised of coupon-bearing U.S. Treasury issues,
debt of agencies of the U.S. government, and corporate debt rated "Baa" or
higher by Moody's Investors Services). The returns of the Fund's Class A and
Class I shares were comparable to the 5.80% return for the average short-term
investment-grade debt fund as reported by Lipper Analytical Services, an
independent firm that reports mutual fund performance.
Q. Could you talk about some of the reasons for the Fund's performance relative
to its benchmark indices?
A. The performance of the Fund's Class A shares over the past year was roughly
equivalent to that of the average fund in the Lipper category. Since interest
rates on two-year Treasuries were constrained to a tight range of 5 5/8% to
6 1/2%, the portfolio's duration, or interest-rate sensitivity, has had little
impact on the Fund's performance versus its peer group. The Fund's policy
generally is managed so as to keep the duration within about 15% of the average
for the Lipper universe, which is two years, so duration is usually not the most
important ingredient in its performance. Performance was positively affected by
the Fund's overweighting in investment-grade corporate securities, which
outperformed Treasury securities by almost 50 basis points (0.50%) over the past
year. (Principal value and interest on Treasury securities are guaranteed by the
U.S. government if held to maturity.) The Fund's holdings in corporates averaged
around 70% of the portfolio during the year, which is roughly double the average
for similar funds in Lipper's category.
On the negative side, the Fund's underweighting in mortgage-backed
securities was detrimental to performance, as this sector turned in strong
results, outperforming Treasury securities by about 150 basis points (1.50%).
The Fund maintained an average 10% weighting in mortgage-backed securities,
versus 18% for the average fund in the Lipper category.
3
<PAGE> 6
A DISCUSSION WITH THE PORTFOLIO MANAGER - continued
Q. In general, how would you describe the fixed-income environment over the past
year?
A. It was a relatively tranquil year in these markets, as the economy continued
to grow steadily and inflationary pressures remained dormant. As is typical
during periods of low volatility and steady growth, corporate and mortgage-
backed securities outperformed Treasury securities. This is a relatively good
environment for limited maturity investors. The Fund's net asset value averaged
$7.09 for the period and throughout remained at plus or minus 1%.
Q. How is your outlook for the fixed-income markets reflected in your weighting
in high-grade corporate bonds, which is now about 70% of the portfolio?
A. Environments like this, characterized by steady economic growth and low
inflation, are ideal for the cash flows of corporate America and, by extension,
high-grade corporate securities. Corporate securities generally underperform the
markets during periods of recession, when cash flows are declining or negative.
Despite the fact that the yield premium for corporate securities is as low today
as it has been in 10 years, we believe our outlook for continued strong growth
is consistent with the prospect of this sector's continuing to outperform
Treasury securities.
Q. One of your biggest weightings is in the utility sector, at about 21% of the
portfolio. What is it that you like about this sector, and are there any
utilities you particularly favor?
A. Under various restructuring plans sparked by deregulation in the electric
utility industry, many credits that are now rated low ("BBB" by Standard &
Poor's) will eventually become higher rated. Improvements in credit ratings are
generally accompanied by narrowing yield premiums, which means higher prices
compared to Treasury securities. Our favorite companies in this sector include
Long Island Lighting, Gulf States Utilities, and Systems Energy Resources.
Q. You also have about 22% of assets in the entertainment sector. Would you talk
about this sector and any companies you like there?
A. The companies in this sector are continuing their migration from their former
status as high-yield credits to solid investment-grade credits. They have
already made the crossover to lower investment-grade levels in the past two to
three years, and we believe that their continued focus on debt reduction and
increasing cash flows will result in further credit upgrades in upcoming months.
Still, we have chosen a "basket" approach to this sector to help reduce
4
<PAGE> 7
A DISCUSSION WITH THE PORTFOLIO MANAGER - continued
volatility in case any one company faces a bumpy road. Our favorite companies
include Telecommunications, Inc., the nation's largest cable television
operator, and Continental Cablevision, which is in the process of being
purchased by U.S. West Corp. On the programming side, we have major commitments
to Time Warner and Paramount (which are owned by Viacom, Inc. and News America
Holdings, respectively).
Q. We've talked about some sectors and industries that helped the Fund over the
past year; now, would you mind talking about any positions that did not perform
as well as you hoped?
A. The Fund maintains positions in a couple of companies that have been
adversely affected by the deteriorating patterns in consumer-debt delinquencies.
Advanta Corp., a credit-card issuer, had a significant pickup in delinquencies,
resulting in an unexpected loss in the first quarter of 1997. United Financial
Companies has seen some increase in delinquencies on home-equity loans. Although
we are very concerned about these trends and speak with company managements
frequently, we believe the securities of both of these companies represent good
value at current prices.
Q. You have almost 80% of the Fund's assets in securities rated "BBB," the
lowest of the investment-grade categories. Why do you feel comfortable with that
position?
A. For the same reason we like the corporate asset class as a whole. As long as
the pace of economic activity is strong, securities of lower-quality issuers
perform well. In addition, we have focused on sectors that are continuing in a
period of secular credit-quality improvement; that is, that are moving toward
higher ratings, such as the utility and cable sectors discussed above.
Q. As you look ahead, what changes do you see in the general economic
environment and your market, and how are you positioning the Fund for those
changes?
A. We are watching the current pace of economic growth and inflation very
closely. While the economy has been growing at a steady pace, we are on the
lookout for signs of an economic slowdown. If we see any of these signs, we will
increase the duration of the portfolio to take advantage of a likely move to
lower interest rates. If we see signs of a protracted slowdown, we will reduce
our exposure to investment-grade securities. Finally, inflation is the enemy of
every bond investor, and it has failed to show up in the current cycle, despite
the strong pace of growth and resource utilization. If we begin to see signs of
inflation, we will reduce the duration of the portfolio to help protect the Fund
5
<PAGE> 8
A DISCUSSION WITH THE PORTFOLIO MANAGER - continued
against the potential for lower bond prices that could result from higher
interest rates.
/S/ Geoffrey L. Kurinsky
Geoffrey L. Kurinsky
Portfolio Manager
PORTFOLIO MANAGER'S PROFILE
GEOFFREY L. 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 MANAGEMENT, HE WAS NAMED ASSISTANT VICE
PRESIDENT IN 1988, VICE PRESIDENT IN 1989, AND SENIOR VICE PRESIDENT IN
1993. HE HAS MANAGED MFS(R) LIMITED MATURITY FUND SINCE ITS INCEPTION IN
1992.
6
<PAGE> 9
<TABLE>
<S> <C>
FUND FACTS
STRATEGY: 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.
COMMENCEMENT OF
INVESTMENT
OPERATIONS: CLASS A: FEBRUARY 26, 1992
CLASS B: SEPTEMBER 7, 1993
CLASS C: JULY 1, 1994
CLASS I: JANUARY 2, 1997
SIZE: $147.5 MILLION NET ASSETS AS OF APRIL 30, 1997
</TABLE>
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS Limited
Maturity Fund - Class A shares in comparison to various market indicators. Class
A share performance results reflect the deduction of the 2.50% maximum sales
charge; benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown, based on differences in loads and fees paid by shareholders
investing in the different classes. It is not possible to invest in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from March 1, 1992, through April 30, 1997)
[GRAPH]
<TABLE>
<CAPTION>
Merrill Lynch One-
to Five-Year
Government/Corporate MFS Limited Maturity Consumer Price
Bond Index Fund - Class A Index - U.S.
-------------------- -------------------- --------------
<S> <C> <C> <C>
3/92 10,000 9,747 10,000
4/93 11,130 10,732 10,390
4/94 11,280 10,905 10,635
4/95 11,970 11,569 10,960
4/96 12,859 12,436 11,268
4/97 13,660 13,162 11,583
</TABLE>
7
<PAGE> 10
PERFORMANCE SUMMARY - continued
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Life of
AS OF APRIL 30, 1997 1 Year 3 Years 5 Years Fund+
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Limited Maturity Fund (Class A) including
2.50% sales charge (SEC results) +3.23% +5.59% +5.47% +5.46%
- -------------------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class A) at net asset
value +5.83% +6.47% +6.01% +5.97%
- -------------------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class B) with CDSC (SEC
results) +1.04% +4.68% +5.04% +5.19%
- -------------------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class B) at net asset
value +4.99% +5.57% +5.35% +5.34%
- -------------------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class C) with CDSC (SEC
results) +4.10% +5.64% +5.51% +5.49%
- -------------------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class C) at net asset
value +5.08% +5.64% +5.51% +5.49%
- -------------------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class I) with CDSC (SEC
results) +5.83% +6.47% +6.01% +5.97%
- -------------------------------------------------------------------------------------------
MFS Limited Maturity Fund (Class I) at net asset
value +5.83% +6.47% +6.01% +5.97%
- -------------------------------------------------------------------------------------------
Average short-term investment- grade debt fund* +5.80% +5.78% +5.45% +5.36%
- -------------------------------------------------------------------------------------------
Merrill Lynch One- to Five-Year
Government/Corporate Bond Index++ +6.23% +6.59% +6.27% +7.73%
- -------------------------------------------------------------------------------------------
Consumer Price Index** +2.80% +2.89% +2.85% +3.60%
- -------------------------------------------------------------------------------------------
</TABLE>
+For the period from the commencement of the Fund's investment operations,
February 26, 1992, through April 30, 1997.
++Source: CDA/Wiesenberger.
*Source: Lipper Analytical Services.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
Class A share SEC results include the maximum 2.50% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares,
which became available on January 2, 1997, have no sales charge or Rule 12b-1
fees and are only available to certain institutional investors.
8
<PAGE> 11
PERFORMANCE SUMMARY - continued
Class B and Class C share results include the performance and the operating
expenses (e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods prior
to the commencement of offering of Class B and Class C shares. Because operating
expenses attributable to Class B and Class C shares are higher than those of
Class A shares, Class B, and Class C share performance generally would have been
lower than Class A share performance. The Class A share performance included in
the Class B and Class C share SEC performance has been adjusted to reflect the
CDSC generally applicable to Class B and Class C shares rather than the sales
charge generally applicable to Class A shares.
Class I share results include the performance and operating expenses (e.g., Rule
12b-1 fees) of Class A shares for periods prior to the commencement of offering
of Class I shares. Because operating expenses attributable to Class A shares are
greater than those of Class I shares, Class I share performance generally would
have been higher than Class A share performance. The Class A share performance
included in the Class I share SEC performance has been adjusted to reflect the
fact that Class I shares have no initial sales charge. These results represent
the percentage change in net asset value.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time.
9
<PAGE> 12
PORTFOLIO CONCENTRATION AS OF APRIL 30, 1997
[PIE CHART] LARGEST SECTORS
High Grade Corporates 59.0%
Cash 3.0%
Asset-Backed 4.0%
U.S. Treasuries 6.0%
Yankee 6.0%
Mortgage-Backed Securities 9.0%
Miscellaneous 13.0%
For a more complete breakdown, refer to the Portfolio of Investments.
TAX FORM SUMMARY
IN JANUARY 1997, SHAREHOLDERS WERE MAILED A TAX FORM SUMMARY REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 1996.
10
<PAGE> 13
PORTFOLIO OF INVESTMENTS - April 30, 1997
Bonds - 97.2%
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banks and Finance - 17.9%
BB ADVANTA Corp., 6.574s, 2000 $3,780 $ 3,686,558
NR Banamex Credit Corp., 6.25s, 2003## 7,800 7,440,030
BBB- Capital One Bank, 6.97s, 2002 3,000 2,969,490
A Countrywide Funding Corp., 6.57s, 1997 500 500,605
A Lehman Brothers Holdings, Inc., 7.375s, 2007 5,000 5,077,100
BBB- United Cos. Financial Corp., 7s, 1998 3,750 3,752,550
BBB- United Cos. Financial Corp., 9.35s, 1999 2,870 3,008,248
-----------
$ 26,434,581
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 3.7%
BBB- Fingerhut Cos., Inc., 7.375s, 1999 $5,500 $ 5,497,415
- ----------------------------------------------------------------------------------------------
Corporate Asset Backed - 4.4%
NR CST Export, 97-1, 8.22s, 2004 $3,000 $ 2,996,250
NR Merrill Lynch Mortgage Investors, Inc., 9.7s, 513 519,109
2010
NR Merrill Lynch Mortgage Investors, Inc., 9.75s, 204 207,068
2010
NR Merrill Lynch Mortgage Investors, Inc., 8.3s, 33 32,848
2011
NR Merrill Lynch Mortgage Investors, Inc., 10s, 28 29,492
2011
NR Merrill Lynch Mortgage Investors, Inc., 8.19s, 2,666 2,677,093
2022
-----------
$ 6,461,860
- ----------------------------------------------------------------------------------------------
Entertainment - 21.8%
BBB Continental Cablevision, Inc., 11s, 2007 $7,000 $ 7,877,170
BBB- NWCG Holdings Corp., 0s, 1999 9,360 8,073,000
BB+ Paramount Communications, Inc., 7.5s, 2002 4,000 3,976,920
BBB- TCI Communications, Inc., 7.385s, 2001 5,000 4,946,800
BBB- Tele-Communications, Inc., 10.125s, 2001 3,000 3,247,470
BBB- Time Warner, Inc., 6.1s, 2001## 4,330 4,100,986
-----------
$ 32,222,346
- ----------------------------------------------------------------------------------------------
Food and Beverage Products - 4.6%
BBB- Great Atlantic & Pacific Tea Co., Inc., 9.125s, $3,500 $ 3,567,620
1998
BBB- RJR Nabisco, Inc., 8s, 2001 3,250 3,202,453
-----------
$ 6,770,073
- ----------------------------------------------------------------------------------------------
Foreign - U.S. Dollars - 5.7%
BBB- Hero Asia BVI Co. Ltd., 9.11s, 2001## $2,090 $ 2,166,278
BBB- Republic of Colombia, 8.75s, 1999 3,000 3,138,750
NR United Mexican States, Floating Rate, 2001## 3,000 3,030,000
-----------
$ 8,335,028
- ----------------------------------------------------------------------------------------------
Forest and Paper Products - 3.5%
BBB- Boise Cascade Co., 9.9s, 2001 $4,715 $ 5,184,614
- ----------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
PORTFOLIO OF INVESTMENTS - continued
Bonds - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government and Agency Obligations - 14.9%
GOV Federal National Mortgage Assn., 7.5s, 2001 $3,571 $ 3,605,100
GOV Government National Mortgage Assn., 7.5s, 8,782 8,885,790
2007 - 2011
GOV Government National Mortgage Assn., 12.5s, 2011 448 517,637
GOV U.S.Treasury Notes, 6.25s, 1999 5,085 5,084,186
GOV U.S.Treasury Notes, 6.625s, 2002 3,850 3,857,200
-----------
$ 21,949,913
- ----------------------------------------------------------------------------------------------
Utilities - Electric - 20.7%
BB Central Maine Power Co., 7.5s, 1997 $4,500 $ 4,502,340
BBB Edison Mission Energy Funding Corp., 6.77s, 2,653 2,626,265
2003##
BBB- Empresa Electrica Guacolda S.A., 7.6s, 2001## 3,305 3,326,879
BBB- Gulf States Utilities Co., 8.21s, 2002 6,000 6,122,880
BBB- Long Island Lighting Co., 9.625s, 2024 2,500 2,614,325
BBB- Louisiana Power & Light Co., 10.67s, 2017 2,500 2,674,775
BBB- Salton Sea Funding Corp., 6.69s, 2000 695 693,380
BBB- Salton Sea Funding Corp., 7.02s, 2000 4,000 4,006,360
BBB- Systems Energy Resources, 7.8s, 2000 4,000 4,001,080
-----------
$ 30,568,284
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $144,153,323) $143,424,114
Other Assets, Less Liabilities - 2.8% 4,125,777
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $147,549,891
- ----------------------------------------------------------------------------------------------
</TABLE>
##SEC 144A Rule restriction.
See notes to financial statements
12
<PAGE> 15
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
April 30, 1997
-----------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $144,153,323) $143,424,114
Cash 107,686
Receivable for Fund shares sold 993,086
Receivable for investments sold 1,006,393
Interest receivable 2,539,742
Other assets 1,420
-----------
Total assets $148,072,441
-----------
Liabilities:
Distributions payable $ 238,624
Payable for Fund shares reacquired 179,487
Payable for daily variation margin on open futures contracts 43,843
Payable to affiliates -
Management fee 1,594
Distribution fee 57,148
Accrued expenses and other liabilities 1,854
-----------
Total liabilities $ 522,550
-----------
Net assets $147,549,891
-----------
Net assets consist of:
Paid-in capital $154,344,699
Unrealized depreciation on investments (904,244)
Accumulated net realized loss on investments (5,069,444)
Accumulated distributions in excess of net investment income (821,120)
-----------
Total $147,549,891
-----------
Shares of beneficial interest outstanding 20,952,583
--------
Class A shares:
Net asset value per share
(net assets of $91,887,487 / 13,046,497 shares of beneficial
interest outstanding) $7.04
----
Offering price per share (100 / 97.5) $7.22
----
Class B shares:
Net asset value and offering price per share
(net assets of $34,875,396 / 4,958,818 shares of beneficial
interest outstanding) $7.03
----
Class C shares:
Net asset value and offering price per share
(net assets of $18,861,581 / 2,673,934 shares of beneficial
interest outstanding) $7.05
----
Class I shares:
Net asset value, offering price and redemption price per share
(net assets of $1,925,427 / 273,334 shares of beneficial
interest outstanding) $7.04
-----
</TABLE>
On sales of $50,000 or more, the offering price of Class A
shares is reduced. A contingent deferred sales charge may be
imposed on redemptions of Class A, Class B, and Class C shares.
See notes to financial statements
13
<PAGE> 16
FINANCIAL STATEMENTS - continued
Statement of Operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Year Ended April 30, 1997
- ------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Interest Income $10,960,475
-----------
Expenses -
Management fee $ 573,843
Administrative fee 3,750
Trustees' compensation 21,166
Shareholder servicing agent fee 63,841
Shareholder servicing agent fee (Class A) 96,736
Shareholder servicing agent fee (Class B) 44,464
Shareholder servicing agent fee (Class C) 15,569
Distribution and service fee (Class A) 144,717
Distribution and service fee (Class B) 306,258
Distribution and service fee (Class C) 161,296
Printing 51,949
Custodian fee 48,728
Auditing fees 36,467
Postage 22,618
Amortization of organization expenses 3,753
Legal fees 3,578
Miscellaneous 111,618
-----------
Total expenses $ 1,710,351
Fees paid indirectly (3,158)
Refund of expenses to investment adviser 52,764
-----------
Net expenses $ 1,759,957
-----------
Net investment income $ 9,200,518
-----------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $ (550,918)
Futures contracts (220,761)
-----------
Net realized loss on investments $ (771,679)
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 379,726
Futures contracts (922,478)
-----------
Net unrealized loss on investments $ (542,752)
-----------
Net realized and unrealized loss on investments $(1,314,431)
-----------
Increase in net assets from operations $ 7,886,087
-----------
</TABLE>
See notes to financial statements
14
<PAGE> 17
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Year Ended April 30, 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income $ 9,200,518 $ 7,954,234
Net realized gain (loss) on investments (771,679) 1,310,598
Net unrealized loss on investments (542,752) (1,277,654)
------------- -------------
Increase in net assets from operations $ 7,886,087 $ 7,987,178
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (6,384,077) $ (6,197,868)
From net investment income (Class B) (1,840,820) (1,273,328)
From net investment income (Class C) (942,712) (483,038)
From net investment income (Class I) (32,909) --
In excess of net investment income (Class A) (295,355) (105,605)
In excess of net investment income (Class B) (85,164) (37,487)
In excess of net investment income (Class C) (43,614) (27,955)
In excess of net investment income (Class I) (1,523) --
------------- -------------
Total distributions declared to shareholders $ (9,626,174) $ (8,125,281)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 179,171,541 $ 78,771,957
Net asset value of shares issued to shareholders in
reinvestment of distributions 6,883,872 5,979,726
Cost of shares reacquired (175,292,658) (53,643,464)
------------- -------------
Increase in net assets from Fund share transactions $ 10,762,755 $ 31,108,219
------------- -------------
Total increase in net assets $ 9,022,668 $ 30,970,116
Net assets:
At beginning of period $ 138,527,223 $ 107,557,107
------------- -------------
At end of period (including accumulated distributions
in excess of net investment income of $821,120 and
$530,649, respectively) $ 147,549,891 $ 138,527,223
------------- -------------
</TABLE>
See notes to financial statements
15
<PAGE> 18
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
- ------------------------------------------------------------------------------------------
<CAPTION>
Year Ended April 30, 1997 1996 1995 1994 1993 1992*
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning
of period $ 7.12 $ 7.10 $ 7.14 $ 7.46 $ 7.29 $ 7.31
------- ------- ------- -------- ------- -------
Income from investment
operations# -
Net investment
income[sec.] $ 0.47 $ 0.48 $ 0.46 $ 0.44 $ 0.48 $ 0.08
Net realized and
unrealized gain (loss)
on investments (0.06) 0.03 (0.04) (0.32) 0.17+ (0.02)+
------- ------- ------- -------- ------- -------
Total from
investment
operations $ 0.41 $ 0.51 $ 0.42 $ 0.12 $ 0.65 $ 0.06
------- ------- ------- -------- ------- -------
Less distributions
declared to
shareholders++++ -
From net investment
income $ (0.47) $ (0.48) $ (0.46) $ (0.42) $ (0.48) $ (0.08)
In excess of net
investment income (0.02) (0.01) -- (0.02) -- --
------- ------- ------- -------- ------- -------
Total distributions
declared to
shareholders $ (0.49) $ (0.49) $ (0.46) $ (0.44) $ (0.48) $ (0.08)
------- ------- ------- -------- ------- -------
Net asset value - end of
period $ 7.04 $ 7.12 $ 7.10 $ 7.14 $ 7.46 $ 7.29
------ ------ ------ ------- ------ ------
Total return++ 5.83% 7.50% 6.09% 1.61% 9.17% 4.98%+
Ratios (to average net assets)/Supplemental data[SEC.]:
Expenses## 0.94% 0.95% 0.95% 0.85% 0.60% 0.55%+
Net investment income 6.57% 6.73% 6.54% 5.99% 6.40% 6.22%+
Portfolio turnover 489% 385% 498% 861% 472% 72%
Net assets at end of
period (000 omitted) $91,887 $98,582 $85,773 $100,297 $67,470 $ 4,924
* For the period from the commencement of investment operations, February 26, 1992,
to April 30, 1992.
+ Annualized.
# Per share data for the periods subsequent to April 30, 1994, are based on average
shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
+ 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.
++ 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.
++++ For the year ended April 30, 1993, the per share distribution from net realized
gain on investments was $0.0021.
[SEC.] The investment adviser did not impose a portion of its management fee and/or
assumed some of the operating expenses of the Fund for certain of the periods
indicated. If these fees and/or expenses 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 $ 0.47 $ 0.48 $ 0.46 $ 0.42 $ 0.43 $ 0.07
Ratios (to average
net assets):
Expenses## 0.89% 0.91% 0.97% 1.07% 1.29% 1.44%+
Net investment income 6.62% 6.77% 6.52% 5.77% 5.70% 5.33%+
</TABLE>
See notes to financial statements
16
<PAGE> 19
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Year Ended April 30, 1997 1996 1995 1994**
- --------------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.11 $ 7.10 $ 7.14 $ 7.50
------- ------- ------- --------
Income from investment operations# -
Net investment income[sec.] $ 0.41 $ 0.42 $ 0.41 $ 0.21
Net realized and unrealized gain (loss)
on investments (0.05) 0.03 (0.05) (0.33)
------- ------- ------- --------
Total from investment operations $ 0.36 $ 0.45 $ 0.36 $ (0.12)
------- ------- ------- --------
Less distributions declared to
shareholders -
From net investment income $ (0.42) $ (0.42) $ (0.40) $ (0.23)
In excess of net investment income (0.02) (0.02) -- (0.01)
------- ------- ------- --------
Total distributions declared to
shareholders $ (0.44) $ (0.44) $ (0.40) $ (0.24)
------- ------- ------- --------
Net asset value - end of period $ 7.03 $ 7.11 $ 7.10 $ 7.14
------- ------- ------- --------
Total return++ 4.99% 6.52% 5.20% (1.69)%++
Ratios (to average net assets)/Supplemental data[SEC.]:
Expenses## 1.78% 1.75% 1.81% 1.74%+
Net investment income 5.75% 5.90% 5.73% 4.90%+
Portfolio turnover 489% 385% 498% 861%
Net assets at end of period (000 omitted) $34,875 $26,464 $17,334 $ 12,072
** For the period from the commencement of offering of Class B shares, September 7,
1993, to April 30, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to April 30, 1994, are based on average
shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
[SEC.] The investment adviser did not impose a portion of its management fee and/or
assumed some of the operating expenses of the Fund for certain of the periods
indicated. If these fees and/or expenses 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 $ 0.41 $ 0.42 $ 0.41 $ 0.20
Ratios (to average net assets):
Expenses## 1.77% 1.77% 1.82% 1.96%+
Net investment income 5.76% 5.88% 5.72% 4.68%+
</TABLE>
See notes to financial statements
17
<PAGE> 20
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Year Ended April 30, 1997 1996 1995*** 1997****
- ----------------------------------------------------------------------------------------
Class C Class I
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.13 $ 7.11 $ 7.08 $ 7.08
------- ------- ------- -------
Income from investment operations# -
Net investment income[section] $ 0.41 $ 0.41 $ 0.37 $ 0.15
Net realized and unrealized gain (loss)
on investments (0.06) 0.04 (0.01) (0.03)
------- ------- ------- -------
Total from investment operations $ 0.35 $ 0.45 $ 0.36 $ 0.12
------- ------- ------- -------
Less distributions declared to
shareholders -
From net investment income $ (0.41) $ (0.41) $ (0.33) $ (0.15)
In excess of net investment income (0.02) (0.02) -- (0.01)
------- ------- ------- -------
Total distributions declared to
shareholders $ (0.43) $ (0.43) $ (0.33) $ (0.16)
------- ------- ------- -------
Net asset value - end of period $ 7.05 $ 7.13 $ 7.11 $ 7.04
------- ------- ------- -------
Total return 5.08% 6.44% 5.25%++ 1.72%++
Ratios (to average net assets)/Supplemental data[SECTION]:
Expenses## 1.80% 1.80% 1.85%+ 1.17%+
Net investment income 5.80% 5.76% 6.01%+ 8.68%+
Portfolio turnover 489% 385% 498% 489%
Net assets at end of period (000 omitted) $18,862 $13,842 $ 4,450 $ 1,925
*** For the period from the commencement of offering of Class C shares, July 1,
1994, to April 30, 1995.
**** For the period from the commencement of offering of Class I shares, January 2,
1997, to April 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
[SECTION] The investment adviser did not impose a portion of its management fee and/or
assumed some of the operating expenses of the Fund for certain of the periods
indicated. If these fees and/or expenses 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 $ 0.41 $ 0.41 $ 0.37 $ 0.15
Ratios (to average net assets):
Expenses## 1.81% 1.75% 1.88%+ 1.17%+
Net investment income 5.80% 5.81% 5.98%+ 8.68%+
</TABLE>
See notes to financial statements
18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
MFS Limited Maturity Fund (the Fund) is a diversified series of MFS Series Trust
IX (the Trust). The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - 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. The
Fund, along with other affiliated entities of Massachusetts Financial Services
Company (MFS), may utilize a joint trading account for the purpose of entering
into one or more repurchase agreements.
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 Fund
operations.
19
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS - continued
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities, currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit 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 or exchange rates or
securities prices. Investments in interest rate futures for purposes other than
hedging may be made to modify the duration of the portfolio without incurring
the additional transaction costs involved in buying and selling the underlying
securities. Should interest or exchange rates or securities prices move
unexpectedly, the Fund may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
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
Funds'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 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.
20
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS - continued
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 tax 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, 1997, $135,185 and $69,145 were
reclassified from paid-in capital to accumulated distributions in excess of net
investment income and accumulated net realized loss on investments,
respectively, 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.
At April 30, 1997, the Fund, for federal income tax purposes, had a capital loss
carryforward of $4,844,580 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, 2003 ($3,619,464) and April 30, 2005 ($1,225,116).
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B, Class C, and Class I shares. The four classes of shares differ in their
respective distribution and service fees. All shareholders bear the common
expenses of the Fund pro rata based on 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 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,
distribution and service fees. The Fund in turn will 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,
1997, the aggregate unreimbursed expenses owed to MFS by the Fund amounted to
$53,595, after $52,764 net reimbursement 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 officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service
21
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS - continued
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 $5,141 for the year ended April 30, 1997.
Administrator - Effective March 1, 1997, the Trust has an administrative
services agreement with MFS to provide the Trust with certain financial, legal,
compliance, shareholder communications, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an administrative fee up to 0.015% per annum of the Fund's average daily net
assets, provided that the administrative fee is not assessed on Fund assets that
exceed $3 billion.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$57,812 for the year ended April 30, 1997, as its portion of the sales charge on
sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD 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 $21,394 for the year ended April 30, 1997.
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, 1997, were
0.15% of average daily net assets attributable to Class A shares on an
annualized basis.
The Fund's distribution plan provides 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. The
service fee is currently being reduced to 0.15% on Class B shares held over one
year. 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
22
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS - continued
to a securities dealer, which amounted to $5,362 and $573 for Class B and Class
C shares, respectively, for the year ended April 30, 1997. Fees incurred under
the distribution plan during the year ended April 30, 1997, were 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis.
Purchases over $1 million of Class A shares and certain purchases by retirement
plans are subject to a contingent deferred sales charge in the event of a
shareholder redemption within 12 months following such 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. A contingent
deferred sales charge is imposed on shareholder redemptions of Class C shares in
the event of a shareholder redemption within twelve months of purchases made on
or after April 1, 1996. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended April 30, 1997,
were $19,436, $60,596, and $13,740 for Class A, Class B, and Class C 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 the fund's average daily net assets at an effective annual rate of
0.13%. Prior to January 1, 1997, the fee was 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:
<TABLE>
<CAPTION>
Purchases Sales
----------------------------------------------------------------------------------
<S> <C> <C>
U.S. government securities $442,768,329 $467,114,907
Investments (non-U.S. government securities) $253,928,444 $220,205,780
</TABLE>
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:
<TABLE>
<S> <C>
Aggregate cost $144,153,323
------------
Gross unrealized depreciation $ (1,018,626)
Gross unrealized appreciation 289,417
------------
Net unrealized depreciation $ (729,209)
------------
</TABLE>
23
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS - continued
(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
<TABLE>
<CAPTION>
Year Ended April 30, 1997 Year Ended April 30, 1996
--------------------------- --------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 18,594,948 $ 131,842,272 5,978,674 $ 43,102,663
Shares issued to shareholders
in reinvestment of
distributions 679,953 4,817,456 638,556 4,600,038
Transfer to Class I (208,928) (1,608,228) -- --
Shares reacquired (19,861,941) (140,565,252) (4,851,688) (34,933,425)
----------- ------------- ---------- ------------
Net increase (decrease) (795,968) $ (5,513,752) 1,765,542 $ 12,769,276
----------- ------------- ---------- ------------
<CAPTION>
Class B Shares
Year Ended April 30, 1997 Year Ended April 30, 1996
--------------------------- --------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,460,355 $ 31,584,299 2,854,814 $ 20,545,660
Shares issued to shareholders
in reinvestment of
distributions 179,795 1,272,096 135,072 971,974
Shares reacquired (3,401,650) (24,063,061) (1,712,548) (12,331,259)
----------- ------------- ---------- ------------
Net increase 1,238,500 $ 8,793,334 1,277,338 $ 9,186,375
----------- ------------- ---------- ------------
<CAPTION>
Class C Shares
Year Ended April 30, 1997 Year Ended April 30, 1996
--------------------------- --------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,857,379 $ 13,187,162 2,095,271 $ 15,123,634
Shares issued to shareholders
in reinvestment of
distributions 107,096 759,821 56,575 407,714
Shares reacquired (1,182,437) (8,400,483) (886,139) (6,378,780)
----------- ------------- ---------- ------------
Net increase 782,038 $ 5,546,500 1,265,707 $ 9,152,568
----------- ------------- ---------- ------------
</TABLE>
Class I Shares
<TABLE>
<CAPTION>
Year Ended April 30,
1997*
------------------------
Shares Amount
---------------------------------------------------------
<S> <C> <C>
Shares sold 152,170 $ 949,580
Shares issued to shareholders in
reinvestment of distributions 4,893 34,499
Transfer from Class A 208,928 1,608,228
Shares reacquired (92,657) (655,634)
------- ----------
Net increase 273,334 $1,936,673
------- ----------
</TABLE>
*For the period from commencement of offering of Class I shares, January 2,
1997, to April 30, 1997.
24
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS - continued
(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 $400 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,
1997, was $1,420.
(7) FINANCIAL INSTRUMENTS
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange contracts
and futures contracts. The notional or contractual amounts of these instruments
represent the investment the Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered. A
summary of obligations under these financial instruments at April 30, 1997, is
as follows:
Futures Contracts
<TABLE>
<CAPTION>
Unrealized
Appreciation
Expiration Contracts Position (Depreciation)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
September 1997 77 Treasury Notes Long $ 9,241
June 1997 234 Treasury Notes Short (184,276)
---------
$(175,035)
---------
</TABLE>
At April 30, 1997, the Fund had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
25
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust IX and Shareholders of MFS Limited Maturity
Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Limited Maturity Fund, a series of MFS
Series Trust IX, as of April 30, 1997, the related statement of operations for
the year then ended, the statement of changes in net assets for the years ended
April 30, 1997 and 1996, and the financial highlights for each of the years in
the six-year period ended April 30, 1997. 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, 1997, by correspondence with the custodian. 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, 1997, 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
May 30, 1997
---------------------------------------------------------------------
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.
26
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INTRODUCING A QUICK AND EASY WAY TO LEARN SOME FINANCIAL BASICS:
THE ABCS OF INVESTING
part of MFS(R) Heritage Planning(SM)
[Picture]
This series of brief messages provides an overview of investment topics,
including:
* Dollar-cost Averaging: a simple method of investing that could work for
anyone
* Interest Rate Changes: what every fixed-income investor should know
* Lump-sum Rollovers: how to handle a windfall
* Professional Financial Advisers: why even smart investors may need one
* Straw into Gold: tips for weaving small lifestyle changes into dollars to
invest
* Weathering Market Downturns: how to maintain perspective
* Basic Steps Smart Investors Take Automatically
The series will include messages on other topics as they become available.
You can read through each topic quickly in five minutes at most. Of course,
these materials are not designed to turn you into an expert. Your financial
adviser can provide more information on any of the ABC subjects. A conversation
with your adviser might also provide an opportune occasion to review your
portfolio and to assess your present and future financial needs.
To request your free copy of The ABCs of Investing series, call MFS at
1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time.
As part of MFS Heritage Planning, your adviser has access to a wide range of MFS
materials he or she would be happy to share with you on topics related to the
intergenerational concerns of people today. These include financing college
tuition and a secure retirement, eldercare, tax-smart gifting strategies, estate
and health care planning, and other issues.
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<PAGE> 30
THE MFS FAMILY OF FUNDS(R)
AMERICA'S OLDEST MUTUAL FUND GROUP
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-225-2606
any business day from 8 a.m. to 8 p.m. Eastern time. This material should be
read carefully before investing or sending money.
STOCK
- --------------------------------------------------------------------------------
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS(R) Capital Growth Fund
MFS(R) Emerging Growth Fund
MFS(R) Gold & Natural Resources Fund
MFS(R) Growth Opportunities Fund
MFS(R) Managed Sectors Fund
MFS(R) OTC Fund
MFS(R) Research Fund
MFS(R) Research Growth and Income Fund
MFS(R) Strategic Growth Fund
MFS(R) Value Fund
STOCK AND BOND
- --------------------------------------------------------------------------------
MFS(R) Total Return Fund
MFS(R) Utilities Fund
BOND
- --------------------------------------------------------------------------------
MFS(R) Bond Fund
MFS(R) Government Mortgage Fund
MFS(R) Government Securities Fund
MFS(R) High Income Fund
MFS(R) Intermediate Income Fund
MFS(R) Strategic Income Fund
Limited Maturity Bond
MFS(R) Government Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Municipal Limited Maturity Fund
WORLD
- --------------------------------------------------------------------------------
MFS(R)/Foreign & Colonial Emerging Markets Equity Fund
MFS(R)/Foreign & Colonial International Growth Fund
MFS(R)/Foreign & Colonial International Growth and Income Fund
MFS(R) World Asset Allocation Fund(SM)
MFS(R) World Equity Fund
MFS(R) World Governments Fund
MFS(R) World Growth Fund
MFS(R) World Total Return Fund
NATIONAL TAX-FREE BOND
- --------------------------------------------------------------------------------
MFS(R) Municipal Bond Fund
MFS(R) Municipal High Income Fund
MFS(R) Municipal Income Fund
STATE TAX-FREE BOND
- --------------------------------------------------------------------------------
Alabama, Arkansas, California, Florida, Georgia, Maryland, Massachusetts,
Mississippi, New York, North Carolina, Pennsylvania, South Carolina,
Tennessee, Virginia, West Virginia
MONEY MARKET
- --------------------------------------------------------------------------------
MFS(R) Cash Reserve Fund
MFS(R) Government Money Market Fund
MFS(R) Money Market Fund
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MFS(R) LIMITED MATURITY FUND
TRUSTEES
A. KEITH BRODKIN* - Chairman and President
RICHARD B. BAILEY* - Private Investor;
Former Chairman and Director (until 1991), Massachusetts Financial Services
Company; Director, Cambridge Bancorp; Director, Cambridge Trust Company
PETER G. HARWOOD - Private Investor
J. ATWOOD IVES - Chairman and Chief Executive Officer, Eastern Enterprises
LAWRENCE T. PERERA - Partner, Hemenway & Barnes
WILLIAM J. POORVU - Adjunct Professor, Harvard University Graduate School of
Business Administration
CHARLES W.SCHMIDT - Private Investor
ARNOLD D. SCOTT* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
JEFFREY L. SHAMES* - President and Director, Massachusetts Financial Services
Company
ELAINE R. SMITH - Independent Consultant
DAVID B. STONE - Chairman, North American Management Corp. (investment
advisers)
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
GEOFFREY L. KURINSKY*
TREASURER
W. THOMAS LONDON*
ASSISTANT TREASURER
JAMES O. YOST*
SECRETARY
STEPHEN E. CAVAN*
ASSISTANT SECRETARY
JAMES R. BORDEWICK, JR.*
CUSTODIAN
Investors Bank & Trust Company
*Affiliated with the Investment Adviser
AUDITORS
Deloitte & Touche LLP
INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
INVESTOR SERVICE
MFSService Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances, and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.
World Wide Web
www.mfs.com
[DALBAR Logo] For the third year in a row, MFS earned a #1 ranking in the
DALBAR, Inc. Broker/Dealer Survey, Main Office Operations Service Quality
Category. The firm achieved a 3.48 overall score on a scale of 1 to 4 in the
1996 survey. A total of 110 firms responded, offering input on the quality of
service they received from 29 mutual fund companies nationwide. The survey
contained questions about service quality in 15 categories, including "knowledge
of phone service contacts," "accuracy of transaction processing," and "overall
ease of doing business with the firm."
29
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MFS(R) LIMITED [LOGO] BULK RATE
MATURITY FUND U.S. POSTAGE
PAID
500 Boylston Street MFS
Boston, MA 02116-3741 ----------------------
[LOGO: MFS]SM
INVESTMENT MANGEMENT
We invented the mutual fundSM
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741 MLM-2 6/97 9.5M 36/236/336/836
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