<PAGE>
[Logo] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) LIMITED
MATURITY FUND
ANNUAL REPORT o APRIL 30, 1998
NOW TWO MFS(R) IRA CHOICES (see page 28)
<PAGE>
IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS INVESTMENT MANAGEMENT(SM)
[Photo of A. Keith Brodkin] On February 2, 1998, Keith Brodkin, a friend
and leader to everyone at MFS, died
unexpectedly at age 62. His thoughtful
letters to shareholders on the markets and
economy have been an integral part of
MFS shareholder reports like this one for
many years.
Keith joined MFS in 1970 as the firm's first
fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his stewardship,
MFS has achieved significant growth in total assets under management, rising
from some $25 billion in 1991 to the over $80 billion today entrusted to us by
three million individual and institutional investors worldwide. Under Keith's
leadership, MFS has carefully but steadily built its domestic and international
investment capabilities through the introduction of a range of new products and
a still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
A Discussion with the Portfolio Manager ................................... 4
Portfolio Manager's Profile ............................................... 7
Fund Facts ................................................................ 8
Performance Summary ....................................................... 8
Portfolio Concentration ................................................... 11
Federal Tax Information ................................................... 11
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 21
Independent Auditors' Report .............................................. 27
Now two MFS(R) IRA choices ................................................ 28
Trustees and Officers ..................................................... 29
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HIGHLIGHTS
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o FOR THE 12 MONTHS ENDED APRIL 30, 1998, CLASS A SHARES OF THE FUND PROVIDED
A TOTAL RETURN AT NET ASSET VALUE OF 5.97%, CLASS B SHARES 4.98%, CLASS C
SHARES 4.94%, AND CLASS I SHARES 5.98%. (SEE PERFORMANCE SUMMARY FOR MORE
INFORMATION.)
o THE CORPORATE BOND MARKET HAD A DIFFICULT TIME IN THE FOURTH QUARTER OF
1997, PARTLY DUE TO THE TURMOIL IN ASIA. THE FUND DID HAVE SOME EXPOSURE TO
ASIA, WHICH HURT RETURNS, AS DID OUR GENERAL OVERWEIGHTING IN CORPORATE
BONDS.
o SO FAR IN 1998, HOWEVER, THE FUND IS PERFORMING BETTER AS A MORE NORMAL
ENVIRONMENT HAS RETURNED TO THE CORPORATE MARKET, AND THE ADDITIONAL YIELD
WE HAVE RECEIVED FROM OUR OVERWEIGHTING IN CORPORATE BONDS HAS HELPED
RETURNS.
o BECAUSE THE ECONOMY IS STILL GROWING, THE FUND IS RELATIVELY OVERWEIGHTED
IN THE INVESTMENT-GRADE CORPORATE MARKET, AT ABOUT 60% OF ASSETS, WITH
OVERWEIGHTINGS IN THE CABLE AND TELECOMMUNICATIONS AND FINANCIAL SERVICES
AREAS.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
- ----------------------------
[Photo of Jeffrey L. Shames]
- ----------------------------
Jeffrey L. Shames
Dear Shareholders:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly
accepted measures, equity valuations appear to have risen to a point at which
the stock market has become more vulnerable to changes in the investment
environment such as rising inflation and interest rates or a slowing economy.
As a result, while we continue to hold a favorable long-term outlook for the
equity markets, we also believe that a market correction is possible in the
near term. In such a correction, equity prices would remain relatively flat or
decline, possibly for an extended period.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive
than most fixed-income investments, while low inflation helps control
companies' costs, such as for raw materials, wages, and benefits. The near-
term outlook for a continuation of this environment appears relatively
favorable. However, this year has seen a marked slowdown in corporate
earnings. This means that as equity prices continue to rise, price-to-earnings
(P/E) ratios, or the amount an investor pays for a stock in relation to the
company's earnings per share, also go up. A year ago, the average P/E ratio
for stocks in the unmanaged Standard & Poor's 500 Composite Index stood at
approximately 21; this spring, the average P/E was 33% higher, at about 28. In
some cases, such as with some of the newer companies associated with the
Internet, P/Es have soared to levels that are unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 8% to 10% this year. However, just as no one can predict
market cycles, so too no one can predict economic cycles -- except to say that
these cycles do exist and that an economic slowdown at some point is
inevitable.
Given this reality, we believe it is prudent to remind investors of the need
to take a long-term view and to diversify their investments across a range of
asset classes, including mutual funds that focus on bonds and international
investments as well as on the U.S. stock market. The likelihood of an eventual
market correction also makes it important for us to use original, bottom-up
research to find companies that we think can keep growing or gain market share
in the face of the occasional downturn. To help achieve this, and to provide
the broadest possible coverage of industry sectors and individual companies,
MFS continues to increase its number of full-time research analysts. These
analysts thoroughly investigate each company's earnings potential and position
in its industry as well as the overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation.
Every year, both fixed-income and equity managers meet with thousands of
credit issuers and companies. They also attend many presentations, closely
follow sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research to
both the equity and fixed-income markets is the best way to provide favorable
long-term performance for our shareholders -- regardless of changes in the
overall market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
May 14, 1998
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JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED
MFS IN 1983. AFTER FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO
MANAGER, HE WAS NAMED CHIEF EQUITY OFFICER IN 1987 AND PRESIDENT AND A
MEMBER OF THE BOARD OF DIRECTORS IN 1993. MR. SHAMES WAS APPOINTED
CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY 1998.
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<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
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[Photo of James J. Calmas]
- --------------------------
James J. Calmas
For the 12 months ended April 30, 1998, Class A shares of the Fund provided a
total return of 5.97%, Class B shares 4.98%, Class C shares 4.94%, and Class I
shares 5.98%. These returns include the reinvestment of distributions but
exclude the effects of any sales charges and compare to a 7.88% return for the
Merrill Lynch One- to Five-Year Government/Corporate Bond Index (the Merrill
Lynch Index), and to a 7.15% return for the Lehman Brothers One-to- Three Year
Government/Corporate Bond Index (the Lehman Index), a total return index
consisting of all U.S. government agency, Treasury securities, and all
investment-grade corporate debt securities with maturities of one to three
years. The Fund is replacing the Merrill Lynch 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) with the Lehman Index because we feel the Lehman Index better
reflects the universe in which the Fund invests. The Fund's returns also
compare to a 6.67% average return provided by the average short-term
investment-grade debt fund as reported by Lipper Analytical Services, Inc., an
independent firm that reports mutual fund performance.
Q. COULD YOU TALK ABOUT SOME THINGS THAT CONTRIBUTED TO THE FUND'S
PERFORMANCE OVER THE PAST YEAR?
A. The corporate bond market had a very difficult time in the fourth quarter of
1997, partly due to the turmoil in Asia. The Fund did have some exposure to
Asia, which hurt returns, as did our general overweighting in corporates.
Corporates do add value over time but, unfortunately, this was a period when
interest rates on less-liquid securities went up more than interest rates in
general, so the securities' prices went down. However, for the first four
months of this year, the Fund is doing much better as we have returned to a
more normal environment in the corporate market, while the additional yield
we have received from our overweighting in corporate bonds has helped our
returns. Also, the Fund currently has no exposure to Southeast Asia.
Q. HOW WOULD YOU DESCRIBE THE OVERALL FIXED-INCOME ENVIRONMENT?
A. It's quite good. We have very low inflation, growth is relatively steady,
and commodity prices are low. Continued pressure from Asian imports should
keep prices low. However, the rapid rise of asset prices over the past
three years, particularly in the stock market and now the real estate
market, could be a concern if it prompts the Federal Reserve Board (the
Fed) to raise interest rates.
Q. HOW IS THIS VIEW REFLECTED IN THE FUND'S CURRENT ALLOCATIONS?
A. Because the economy is still growing, we're relatively overweighted in the
investment-grade corporate market, at about 60% of the Fund's assets. Our
big overweightings are in the cable and telecommunications area, a sector
in which we think reduced debt levels make securities more attractive.
Companies such as Continental Cable and Telecommunications, Inc. have very
strong cash flows and a favorable operating environment. The other major
corporate sector is financial services, mainly brokerage and consumer
finance companies, in which we're seeing attractive yield spreads with
companies such as Lehman Brothers. Another major allocation shift is an
increase in our holdings of securities backed by credit card receivables,
home equity loans, and some commercial real estate. These are all "AAA"-
rated securities that trade at "A"-rated spreads, and we're extremely
comfortable with them.
Q. WHAT CAN YOU TELL US ABOUT THE PORTFOLIO'S CURRENT STRATEGY?
A. The strategy is to look for high-quality bonds with good yield and to
provide a return greater than that of money market instruments. We've
increased some of the Fund's holdings in asset-backed securities, and we
will continue to do that when we can find higher-rated bonds offering more
favorable yields. The yield curve is very flat, with longer-term yields
declining toward short-term yields, so we think the real return will come
from adding yield.
Q. HOW DO CHANGES IN THE LONGER-TERM PART OF THE FIXED-INCOME MARKET, SUCH AS
WITH THE 30-YEAR TREASURY BOND, AFFECT THE LIMITED-MATURITY SEGMENT?
A. The longer-term end of the market reflects a series of short-term
expectations, so the long term can be looked at as a forecast of what
might happen in the short term. Generally speaking, if investors feel the
Fed is going to raise rates, short-term rates will move more than longer-
term rates because the Fed has more of an impact on the short end of the
yield curve. This is one of the reasons we think we're in a benign
interest-rate environment, because the yield curve is very flat.
Q. WHAT ABOUT THE PORTFOLIO'S DURATION, OR SENSITIVITY TO CHANGES IN
INTEREST RATES?
A. The duration is just about two years, which is only slightly longer than
that of the average short-term investment-grade fund as tracked by Lipper.
As I mentioned, given our strategy of looking for additional yield, we
think this is a better position for the Fund, one that reflects our view
that we are in a period of stability for short-term interest rates.
Q. YOU HAVE ABOUT 60% OF THE PORTFOLIO INVESTED IN SECURITIES RATED "BBB,"
THE LOWEST OF THE INVESTMENT-GRADE CATEGORIES. HOW DOES THIS REFLECT
YOUR OUTLOOK?
A. It's a reflection of our current search for yield. When we can buy bonds
that we think have attractive yield spreads and can move up in quality, we
do.
Q. WHAT DO YOU SEE AS THE BIGGEST RISK TO THE FUND IN THE NEXT SEVERAL
MONTHS?
A. The biggest risk is if the economy becomes stronger than we predicted.
Also, if the Asian economy rebounds much more quickly than we expected, the
Fed may become concerned about inflation and raise interest rates. On the
other hand, if the stock market does take a dip, for whatever reason, that
could spark a big rally in bond rates.
Q. WHAT DO YOU SEE FOR THE FIXED-INCOME ENVIRONMENT GOING FORWARD, AND HOW
MIGHT THIS IMPACT THE PORTFOLIO?
A. We see a steady scenario in which growth continues in the United States,
inflation is constrained, the world economy continues to open up, and
productivity continues to increase. These are all long-term trends that
should allow interest rates to stay at current levels, or even go down
farther in the future. Interest rates in the United States are among the
highest of the developed countries. Also, once we see a reduction in the
oversupply of corporate issues, corporate yield spreads should narrow. So
we're going to continue to have large corporate exposure.
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
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PORTFOLIO MANAGER'S PROFILE
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NOTE TO SHAREHOLDERS: EFFECTIVE JANUARY 1, 1998, THE FUND IS BEING
MANAGED BY JAMES J. CALMAS, WHO SUCCEEDS GEOFFREY L. KURINSKY.
JAMES J. CALMAS IS A VICE PRESIDENT -- INVESTMENTS IN THE FIXED INCOME
DEPARTMENT OF MFS(R) INVESTMENT MANAGEMENT(SM) AND IS PORTFOLIO MANAGER OF
MFS(R) LIMITED MATURITY FUND AND MFS(R) MERIDIAN(SM) LIMITED MATURITY FUND.
MR. CALMAS JOINED MFS IN 1988 AND WAS NAMED ASSISTANT VICE PRESIDENT IN
1991 AND VICE PRESIDENT IN 1993.
MR. CALMAS IS A GRADUATE OF DARTMOUTH COLLEGE AND HOLDS AN M.B.A. FROM
THE AMOS TUCK SCHOOL OF BUSINESS ADMINISTRATION OF DARTMOUTH COLLEGE.
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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS AS HIGH A LEVEL OF CURRENT INCOME AS IS BELIEVED
TO BE CONSISTENT WITH PRUDENT INVESTMENT RISK. THE FUND
ALSO SEEKS TO PROTECT SHAREHOLDERS' CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: FEBRUARY 26, 1992
CLASS INCEPTION: CLASS A FEBRUARY 26, 1992
CLASS B SEPTEMBER 7, 1993
CLASS C JULY 1, 1994
CLASS I JANUARY 2, 1997
SIZE: $156.2 MILLION NET ASSETS AS OF APRIL 30, 1998
PERFORMANCE SUMMARY
The information below and on the following page 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 charges and fees paid by shareholders investing in the
different classes. It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from March 1, 1992, through April 30, 1998)
Merrill Lynch Lehman Brothers
MFS Limited One- to Five-Year One- to Three-Year
Maturity Fund Government/Corporate Government/Corporate Consumer Price
Class A Bond Index Bond Index Index U.S.
---------- ---------- ------- ----------
3/92 $ 9,747 $10,000 $10,000 $10,000
4/93 10,732 11,130 10,910 10,390
4/94 10,905 11,280 11,110 10,640
4/95 11,569 11,970 11,750 10,960
4/96 12,436 12,859 12,560 11,270
4/98 13,948 14,736 14,291 11,724
AVERAGE ANNUAL TOTAL RETURNS AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
10 Years/
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Average Annual Total Return +5.97% +6.43% +5.38% +5.97%
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SEC Results +3.32% +5.54% +4.85% +5.54%
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<CAPTION>
CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
10 Years/
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Average Annual Total Return +4.98% +5.49% +4.53% +5.31%
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SEC Results +1.02% +4.60% +4.19% +5.31%
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<CAPTION>
CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
10 Years/
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Average Annual Total Return +4.94% +5.49% +4.68% +5.40%
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SEC Results +3.95% +5.49% +4.68% +5.40%
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<CAPTION>
CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
10 Years/
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Average Annual Total Return +5.98% +6.45% +5.39% +5.99%
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES
10 Years/
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Average short-term investment-grade
debt fund+ +6.67% +6.38% +5.24% +6.22%
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Merrill Lynch One- to Five-Year Government/
Corporate Bond index++ +7.88% +7.18% +5.77% +6.53%
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Lehman Brothers One- to Three-Year
Government/Corporate Bond Index+ +7.15% +6.75% +5.55% +5.96%
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Consumer Price Index++** +1.44% +2.27% +2.45% +2.67%
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* For the period from the commencement of the Fund's investment operations, February 26, 1992, through
April 30, 1998.
+ Source: Lipper Analytical Services, Inc.
++ Source: CDA/Wiesenberger.
** The Consumer Price Index is published by the U.S. Bureau of Labor Statistics and measures the cost of
living (inflation).
</TABLE>
Class A share ("A") SEC results include the maximum 2.50% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
B and C results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of A for periods prior to the inception of B and C.
Because operating expenses of B and C are higher than those of A, B and C
performance generally would have been lower than A performance. The A
performance included in the B and C SEC performance has been adjusted to
reflect the CDSC generally applicable to B and C rather than the initial sales
charge generally applicable to A.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of I. Because operating expenses
of A are greater than those of I, I performance generally would have been
higher than A performance. The A performance included in the I performance has
been adjusted to reflect the fact that I have no initial
sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and
capital gains.
PORTFOLIO CONCENTRATION AS OF APRIL 30, 1998
QUALITY RATINGS
"BBB" 60.5%
"AAA" 19.2%
Governments 10.6%
"A" 7.1%
"BB" 2.6%
FEDERAL TAX INFORMATION
IN JANUARY 1999, SHAREHOLDERS WILL BE MAILED A FORM 1099 REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR
1998.
<PAGE>
PORTFOLIO OF INVESTMENTS -- April 30, 1998
Bonds - 94.9%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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U.S. Bonds - 87.2%
Banks and Credit Companies - 17.3%
ADVANTA Corp., 6.574s, 2000 $ 3,780 $ 3,621,580
Contifinancial Corp., 7.5s, 2002 4,576 4,554,264
Lehman Brothers Holdings, Inc., 7.375s, 2007 5,000 5,265,900
MBNA Corp., 6.963s, 2002## 3,000 3,045,630
Providian National Bank, 6.7s, 2003 3,800 3,829,688
United Cos. Financial Corp., 7s, 1998 3,750 3,750,600
United Cos. Financial Corp., 9.35s, 1999 2,870 2,919,192
------------
$ 26,986,854
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Consumer Goods and Services - 3.6%
Fingerhut Cos., Inc., 7.375s, 1999 $ 5,500 $ 5,583,655
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Corporate Asset Backed - 17.6%
Aames Mortgage Trust, 6.75s, 2021 $ 3,889 $ 3,913,306
Banamex Credit Card Merchant Voucher,
6.25s, 2003## 7,800 7,797,563
Charming Shoppes Master Trust, 7s, 1999 4,019 4,047,856
Green Tree Financial Corp., 6.04s, 2029 4,106 4,095,735
Merrill Lynch Mortgage Investors, Inc.,
9.7s, 2010 22 22,020
Merrill Lynch Mortgage Investors, Inc.,
9.75s, 2010 46 46,386
Merrill Lynch Mortgage Investors, Inc.,
8.3s, 2011 22 22,136
Merrill Lynch Mortgage Investors, Inc.,
10s, 2011 15 14,716
Merrill Lynch Mortgage Investors, Inc.,
8.173s, 2022 1,289 1,292,216
Merrill Lynch Mortgage Investors, Inc.,
6.31s, 2026 3,115 3,128,849
Nomura Depositor Trust, 5.905s, 2034## 3,166 3,163,026
------------
$ 27,543,809
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Government National Mortgage Association - 5.2%
GNMA, 7.5s, 2007 - 2011 $ 7,495 $ 7,742,793
GNMA, 12.5s, 2011 333 390,598
------------
$ 8,133,391
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Industrial - 3.8%
Amerco Backed Assets, 6.65%s, 1999## $ 5,850 $ 5,861,583
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.4%
Columbia/HCA Healthcare Corp., 6.5s, 1999 $ 2,342 $ 2,313,428
Hospital Corp. of America, 0s, 1999 1,628 1,495,448
------------
$ 3,808,876
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Oils - 3.0%
Lasmo USA, Inc., 7.125s, 2003 $ 4,550 $ 4,643,844
- --------------------------------------------------------------------------------
Telecommunications and Cable - 16.2%
Continental Cablevision, Inc., 11s, 2007 $10,535 $ 11,578,702
Tele-Communications, Inc., 10.125s, 2001 7,045 7,732,944
WorldCom, Inc., 8.875s, 2006 5,550 6,049,334
------------
$ 25,360,980
- --------------------------------------------------------------------------------
U.S. Federal Agencies - 4.2%
Federal Home Loan Mortgage Corp.,
6.288s, 2027 $ 6,532 $ 6,585,052
- --------------------------------------------------------------------------------
U.S. Treasury Obligations - 4.5%
U.S. Treasury Notes, 9.125s, 1999 $ 2,074 $ 2,146,922
U.S. Treasury Notes, 6.25s, 2001 2,765 2,815,986
U.S. Treasury Notes, 5.75s, 2002 2,000 2,005,000
------------
$ 6,967,908
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Utilities - Electric - 9.4%
Edison Mission Energy Funding Corp.,
6.77s, 2003## $ 2,329 $ 2,356,502
Gulf States Utilities Co., 8.21s, 2002 6,000 6,199,500
Long Island Lighting Co., 9.625s, 2024 2,500 2,515,800
Salton Sea Funding Corp., 6.69s, 2000 1,075 1,078,885
Salton Sea Funding Corp., 7.02s, 2000 2,523 2,544,150
------------
$ 14,694,837
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Total U.S. Bonds $136,170,789
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Foreign Bonds - 7.7%
Chile - 2.1%
Empresa Electric Guacolda S.A., 7.6s, 2001## $ 3,305 $ 3,323,111
- --------------------------------------------------------------------------------
China - 1.1%
Hero Asian BVI Ltd., 9.11s, 2001## $ 1,695 $ 1,768,667
- --------------------------------------------------------------------------------
Colombia - 2.0%
Republic of Colombia, 8.75s, 1999 $ 3,000 $ 3,078,750
- --------------------------------------------------------------------------------
Supra-National - 2.5%
Corporacion Andina De Fomento, 7.1s, 2003 $ 3,800 $ 3,848,260
- --------------------------------------------------------------------------------
Total Foreign Bonds $ 12,018,788
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Total Bonds (Identified Cost, $148,383,387) $148,189,577
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Repurchase Agreement - 3.0%
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Goldman Sachs, dated 4/30/98, due 5/01/98, total
to be received $396,568,688 (secured by
various U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 4,673 $ 4,673,000
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $153,056,387) $152,862,577
Other Assets, Less Liabilities - 2.1% 3,304,838
- --------------------------------------------------------------------------------
Net Assets - 100.0% $156,167,415
- --------------------------------------------------------------------------------
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------
APRIL 30, 1998
- --------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $153,056,387) $152,862,577
Cash 228
Receivable for Fund shares sold 1,820,533
Interest receivable 2,394,521
Other assets 1,327
------------
Total assets $157,079,186
------------
Liabilities:
Distributions payable $ 246,633
Payable for Fund shares reacquired 475,659
Payable to affiliates -
Management fee 1,686
Shareholder servicing agent fee 474
Distribution and service fee 60,246
Administrative fee 63
Accrued expenses and other liabilities 127,010
------------
Total liabilities $ 911,771
------------
Net assets $156,167,415
============
Net assets consist of:
Paid-in capital $164,397,169
Unrealized depreciation on investments (193,810)
Accumulated net realized loss on investments (7,354,273)
Accumulated distributions in excess of net investment
income (681,671)
------------
Total $156,167,415
============
Shares of beneficial interest outstanding 22,362,542
==========
Class A shares:
Net asset value per share
(net assets of $95,341,645 / 13,644,385 shares of
beneficial interest outstanding) $6.99
=====
Offering price per share (100 / 97.5) $7.17
=====
Class B shares:
Net asset value and offering price per share
(net assets of $39,228,656 / 5,628,455 shares of
beneficial interest outstanding) $6.97
=====
Class C shares:
Net asset value and offering price per share
(net assets of $20,131,452 / 2,879,683 shares of
beneficial interest outstanding) $6.99
=====
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $1,465,662 / 210,019 shares of
beneficial interest outstanding) $6.98
=====
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
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- --------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
Net investment income:
Interest income $11,855,482
-----------
Expenses -
Management fee $ 628,100
Trustees' compensation 20,818
Shareholder servicing agent fee 195,360
Distribution and service fee (Class A) 142,807
Distribution and service fee (Class B) 374,751
Distribution and service fee (Class C) 209,344
Administrative fee 22,192
Custodian fee 27,784
Printing 46,141
Postage 22,945
Auditing fees 32,199
Legal fees 3,009
Miscellaneous 124,174
-----------
Total expenses $ 1,849,624
Fees paid indirectly (21,121)
Reimbursement of expenses to investment adviser 53,595
-----------
Net expenses $ 1,882,098
-----------
Net investment income $ 9,973,384
-----------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $ (940,954)
Futures contracts (1,432,003)
-----------
Net realized loss on investments $(2,372,957)
-----------
Change in unrealized appreciation on investments $ 710,434
-----------
Net realized and unrealized loss on investments $(1,662,523)
-----------
Increase in net assets from operations $ 8,310,861
===========
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 9,973,384 $ 9,200,518
Net realized loss on investments (2,372,957) (771,679)
Net unrealized gain (loss) on invesments 710,434 (542,752)
------------ ------------
Increase in net assets from operations $ 8,310,861 $ 7,886,087
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (6,198,763) $ (6,384,077)
From net investment income (Class B) (2,228,639) (1,840,820)
From net investment income (Class C) (1,187,764) (942,712)
From net investment income (Class I) (130,641) (32,909)
In excess of net investment income (Class A) -- (295,355)
In excess of net investment income (Class B) -- (85,164)
In excess of net investment income (Class C) -- (43,614)
In excess of net investment income (Class I) -- (1,523)
------------ ------------
Total distributions declared to shareholders $ (9,745,807) $ (9,626,174)
------------ ------------
Net increase in net assets from Fund share transactions $ 10,052,470 $ 10,762,755
------------ ------------
Total increase in net assets $ 8,617,524 $ 9,022,668
Net assets:
At beginning of period 147,549,891 138,527,223
------------ ------------
At end of period (including accumulated distributions in
excess of net investment income of $681,671 and $821,120,
respectively) $156,167,415 $147,549,891
============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997 1996 1995 1994 1993 1992*
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 7.04 $ 7.12 $ 7.10 $ 7.14 $ 7.46 $ 7.29 $ 7.31
------ ------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.48 $ 0.47 $ 0.48 $ 0.46 $ 0.44 $ 0.48 $ 0.08
Net realized and unrealized
gain (loss) on investments (0.07) (0.06) 0.03 (0.04) (0.32) 0.17(S)(S) (0.02)(S)(S)
------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.41 $ 0.41 $ 0.51 $ 0.42 $ 0.12 $ 0.65 $ 0.06
------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders(++) -
From net investment income $(0.46) $(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 $(0.46) $(0.49) $(0.49) $(0.46) $(0.44) $(0.48) $(0.08)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $ 6.99 $ 7.04 $ 7.12 $ 7.10 $ 7.14 $ 7.46 $ 7.29
====== ====== ====== ====== ====== ====== ======
Total return(+) 5.97% 5.83% 7.50% 6.09% 1.61% 9.17% 4.98%+
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.89% 0.94% 0.95% 0.95% 0.85% 0.60% 0.55%+
Net investment income 6.70% 6.57% 6.73% 6.54% 5.99% 6.40% 6.22%+
Portfolio turnover 288% 489% 385% 498% 861% 472% 72%
Net assets at end of period
(000 omitted) $95,342 $91,887 $98,582 $85,773 $100,297 $67,470 $4,924
* For the period from the commencement of the Fund's investment operations, February 26, 1992, through 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.
(+) 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.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated. Subject to
reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the Fund, exclusive of
management, distribution, and service fees, at not more than 0.40% of average daily net assets. If these fees had been
incurred by the Fund, and/or actual expenses were over/under this limitation, the net investment income per share and
the ratios would have been:
Net investment income $ 0.48 $ 0.47 $ 0.48 $ 0.46 $ 0.42 $ 0.43 $ 0.07
Ratios (to average net assets):
Expenses## 0.87% 0.89% 0.91% 0.97% 1.07% 1.29% 1.44%+
Net investment income 6.72% 6.62% 6.77% 6.52% 5.77% 5.70% 5.33%+
(S)(S) The per share amount is not in accordance with the net realized and unrealized gain (loss) for the period because of the
timing of sales of Fund shares and the amount of per share realized and unrealized gains and losses at such time.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997 1996 1995 1994**
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.03 $ 7.11 $ 7.10 $ 7.14 $ 7.50
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.41 $ 0.41 $ 0.42 $ 0.41 $ 0.21
Net realized and unrealized gain (loss) on
investments (0.07) (0.05) 0.03 (0.05) (0.33)
------ ------ ------ ------ ------
Total from investment operations $ 0.34 $ 0.36 $ 0.45 $ 0.36 $(0.12)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.40) $(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 $(0.40) $(0.44) $(0.44) $(0.40) $(0.24)
------ ------ ------ ------ ------
Net asset value - end of period $ 6.97 $ 7.03 $ 7.11 $ 7.10 $ 7.14
====== ====== ====== ====== ======
Total return 4.98% 4.99% 6.52% 5.20% (1.69)%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.70% 1.78% 1.75% 1.81% 1.74%+
Net investment income 5.80% 5.75% 5.90% 5.73% 4.90%+
Portfolio turnover 288% 489% 385% 498% 861%
Net assets at end of period (000 omitted) $39,229 $34,875 $26,464 $17,334 $12,072
** For the period from the inception of Class B, September 7, 1993, through 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.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated. Subject to reimbursement
by the Fund, the investment adviser voluntarily agreed to maintain expenses of the Fund, exclusive of management,
distribution, and service fees, at not more than 0.40% of average daily net assets. If these fees had been incurred by the
Fund, and/or actual expenses were over/under this limitation, the net investment income per share and the ratios would have
been:
Net investment income $ 0.41 $ 0.41 $ 0.42 $ 0.41 $ 0.20
Ratios (to average net assets):
Expenses## 1.68% 1.77% 1.77% 1.82% 1.96%+
Net investment income 5.82% 5.76% 5.88% 5.72% 4.68%+
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997 1996 1995***
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.05 $ 7.13 $ 7.11 $ 7.08
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.41 $ 0.41 $ 0.41 $ 0.37
Net realized and unrealized gain (loss) on
investments (0.07) (0.06) 0.04 (0.01)
------ ------ ------ ------
Total from investment operations $ 0.34 $ 0.35 $ 0.45 $ 0.36
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.40) $(0.41) $(0.41) $(0.33)
In excess of net investment income -- (0.02) (0.02) --
------ ------ ------ ------
Total distributions declared to shareholders $(0.40) $(0.43) $(0.43) $(0.33)
------ ------ ------ ------
Net asset value - end of period $ 6.99 $ 7.05 $ 7.13 $ 7.11
====== ====== ====== ======
Total return 4.94% 5.08% 6.44% 5.25%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.74% 1.80% 1.80% 1.85%+
Net investment income 5.76% 5.80% 5.76% 6.01%+
Portfolio turnover 288% 489% 385% 498%
Net assets at end of period (000 omitted) $20,131 $18,862 $13,842 $4,450
*** For the period from the inception of Class C, July 1, 1994, through April 30, 1995.
+ 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.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated. Subject to reimbursement
by the Fund, the investment adviser voluntarily agreed to maintain expenses of the Fund, exclusive of management,
distribution, and service fees, at not more than 0.40% of average daily net assets. If these fees had been incurred by the
Fund, and/or actual expenses were over/under this limitation, the net investment income per share and the ratios would have
been:
Net investment income $ 0.41 $ 0.41 $ 0.41 $ 0.37
Ratios (to average net assets):
Expenses## 1.72% 1.81% 1.75% 1.88%+
Net investment income 5.78% 5.80% 5.81% 5.98%+
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997****
- --------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.04 $ 7.08
------ ------
Income from investment operations# -
Net investment income(S) $ 0.48 $ 0.15
Net realized and unrealized loss on investments (0.07) (0.03)
------ ------
Total from investment operations $ 0.41 $ 0.12
------ ------
Less distributions declared to shareholders -
From net investment income $(0.47) $(0.15)
In excess of net investment income -- (0.01)
------ ------
Total distributions declared to shareholders $(0.47) $(0.16)
------ ------
Net asset value - end of period $ 6.98 $ 7.04
====== ======
Total return 5.98% 1.72%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.74% 1.17%+
Net investment income 6.75% 8.68%+
Portfolio turnover 288% 489%
Net assets at end of period (000 omitted) $1,466 $1,925
**** For the period from the inception of Class I, January 2, 1997, through 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.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated.
Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses
of the Fund, exclusive of management, distribution, and service fees, at not more than 0.40% of
average daily net assets. If these fees had been incurred by the Fund, and/or actual expenses were
over/under this limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.49 $ 0.15
Ratios (to average net assets):
Expenses## 0.72% 1.17%+
Net investment income 6.77% 8.68%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Limited Maturity Fund (the Fund) is a diversified series of MFS 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 listed on commodities exchanges are reported at
market value using closing settlement prices. 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 collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the Fund to obtain those
securities in the event of a default under the repurchase agreement. The Fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the Fund
under each such repurchase agreement. The Fund, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a
joint trading account for the purpose of entering into one or more repurchase
agreements.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or contracts based on financial indices at a fixed
price on a future date. In entering such contracts, the Fund is required to
deposit with the broker either in cash or securities an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the contract, and are recorded for financial statement purposes as
unrealized gains or losses by the Fund. The Fund's investment in futures
contracts is designed to hedge against anticipated future changes in interest
rates. Investments in interest rate futures for purposes other than hedging
may be made to modify the duration of the portfolio without incurring the
additional transaction costs involved in buying and selling the underlying
securities. Should interest rates move unexpectedly, the Fund may not achieve
the anticipated benefits of the futures contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement 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 custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of 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 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 net realized gains. During
the year ended April 30, 1998, $88,128 was reclassified from distributions in
excess of net investment income to accumulated net realized loss on
investments 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, 1998, the Fund, for federal income tax purposes, had a capital loss
carryforward of $5,601,702 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), April 30, 2005 ($1,432,459), and April 30,
2006, ($549,779).
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses. Class B shares will
convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with MFS to
provide overall investment advisory and administrative services, and general
office facilities. The management fee is computed daily and paid monthly at an
annual rate of 0.40% of average daily net assets. The Fund has a temporary
expense reimbursement agreement whereby MFS has voluntarily agreed to pay all
of the Fund's operating expenses, exclusive of management, distribution, and
service fees. The Fund in turn will pay MFS an expense reimbursement fee not
greater than 0.40% 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, 1998, the Fund has
reimbursed MFS for all expenses paid by MFS under the reimbursement agreement
and the agreement has been terminated.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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 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 $4,178
for the year ended April 30, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$44,250 for the year ended April 30, 1998, 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 paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and a distribution fee to MFD
of up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $26,500 for the year ended April 30, 1998.
Fees incurred under the distribution plan during the year ended April 30, 1998,
were 0.15% of average daily net assets attributable to Class A shares on an
annualized basis. Payment of the remaining 0.10% per annum Class A service fee
and of the 0.10% per annum Class A distribution fee will be implemented on such
date as the Trustees of the Trust may determine.
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. 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 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 $8,384 and $1,421 for
Class B and Class C shares, respectively, for the year ended April 30, 1998.
Fees incurred under the distribution plan during the year ended April 30,
1998, were 0.96% and 1.00% of average daily net assets attributable to Class B
and Class C shares on an annualized basis, respectively. Except in the case of
the 0.25% per annum Class B service fee paid upon the sale of Class B shares
in the first year, the Class B service fee is 0.15% per annum and may increase
to a maximum of 0.25% per annum on such date as the Trustees of the Trust may
determine.
Certain Class A shares and Class C shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within 12 months
following purchase. A contingent deferred sales charge is imposed on
shareholder redemptions of Class B shares in the event of a shareholder
redemption within six years of purchase MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
April 30, 1998, were $9,603, $92,222, and $21,936 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 0.1125%. Prior to January 1, 1998, the fee was calculated as a
percentage of the average daily net assets at an effective annual rate of up
to 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
U.S. government securities $288,030,968 $295,873,155
------------ ------------
Investments (non-U.S. government securities) $148,778,106 $136,254,562
------------ ------------
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 $153,166,244
------------
Gross unrealized appreciation $ 745,655
Gross unrealized depreciation (1,049,322)
------------
Net unrealized depreciation $ (303,667)
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED APRIL 30, 1998 YEAR ENDED APRIL 30, 1997
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 63,435,881 $ 445,921,523 18,594,948 $ 131,842,272
Shares issued to shareholders
in reinvestment of
distributions 632,833 4,458,800 679,953 4,817,456
Transfer to Class I -- -- (208,928) (1,608,228)
Shares reacquired (63,470,826) (446,086,457) (19,861,941) (140,565,252)
----------- ------------- ----------- -------------
Net increase (decrease) 597,888 $ 4,293,866 (795,968) $ (5,513,752)
=========== ============= =========== =============
<CAPTION>
Class B Shares
YEAR ENDED APRIL 30, 1998 YEAR ENDED APRIL 30, 1997
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,477,191 $ 31,495,141 4,460,355 $ 31,584,299
Shares issued to shareholders
in reinvestment of
distributions 209,931 1,476,294 179,795 1,272,096
Shares reacquired (4,017,485) (28,243,968) (3,401,650) (24,063,061)
----------- ------------- ----------- -------------
Net increase 669,637 $ 4,727,467 1,238,500 $ 8,793,334
=========== ============= =========== =============
<CAPTION>
Class C Shares
YEAR ENDED APRIL 30, 1998 YEAR ENDED APRIL 30, 1997
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,081,330 $ 14,705,683 1,857,379 $ 13,187,162
Shares issued to shareholders
in reinvestment of
distributions 116,955 825,247 107,096 759,821
Shares reacquired (1,992,536) (14,059,660) (1,182,437) (8,400,483)
----------- ------------- ----------- -------------
Net increase 205,749 $ 1,471,270 782,038 $ 5,546,500
=========== ============= =========== =============
<CAPTION>
Class I Shares
YEAR ENDED APRIL 30, 1998 PERIOD ENDED APRIL 30, 1997*
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 128,478 $ 910,579 152,170 $ 949,580
Shares issued to shareholders
in reinvestment of
distributions 18,451 130,116 4,893 34,499
Transfer from Class A -- -- 208,928 1,608,228
Shares reacquired (210,244) (1,480,828) (92,657) (655,634)
----------- ------------- ----------- -------------
Net increase (decrease) (63,315) $ (440,133) 273,334 $ 1,936,673
=========== ============= =========== =============
* For the period from the inception of Class I, January 2, 1997, through April 30, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $805 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
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, 1998, was $872.
(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 includes
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.
At April 30, 1998, the Fund had no open futures contracts.
<PAGE>
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 (one of
the series constituting MFS Series Trust IX) as of April 30, 1998, the related
statement of operations for the year then ended, the statement of changes in
net assets for the years ended April 30, 1998 and 1997, and the financial
highlights for each of the years in the seven-year period ended April 30,
1998. These financial statements and financial highlights are the
responsibility of the Trust'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, 1998 by correspondence with the custodian and
brokers. 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, 1998, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 5, 1998
<PAGE>
MFS(R) Limited Maturity Fund
<TABLE>
<S> <C>
Trustees Custodian
Richard B. Bailey* - Private Investor; State Street Bank and Trust Company
Former Chairman and Director (until 1991),
MFS Investment Management Auditors
Deloitte & Touche LLP
Peter G. Harwood - Private Investor
Investor Information
J. Atwood Ives - Chairman and Chief Executive For MFS stock and bond market outlooks,
Officer, Eastern Enterprises call toll free: 1-800-637-4458 anytime from
a touch-tone telephone.
Lawrence T. Perera - Partner, Hemenway &
Barnes For information on MFS mutual funds, call your
financial adviser or, for an information kit,
William J. Poorvu - Adjunct Professor, Harvard call toll free: 1-800-637-2929 any business
University Graduate School of Business day from 9 a.m. to 5 p.m. Eastern time (or
Administration leave a message anytime).
Charles W.Schmidt - Private Investor Investor Service
MFSService Center, Inc.
Arnold D. Scott* - Senior Executive Vice P.O. Box 2281
President, Director, and Secretary, MFS Boston, MA 02107-9906
Investment Management
For general information, call toll free:
Jeffrey L. Shames* - Chairman, Chief Executive 1-800-225-2606 any business day from
Officer, and Director, MFS Investment 8 a.m. to 8 p.m. Eastern time.
Management
For service to speech- or hearing-impaired,
Elaine R. Smith - Independent Consultant call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time. (To
David B. Stone - Chairman, North American use this service, your phone must be equipped
Management Corp. (investment advisers) with a Telecommunications Device for the
Deaf.)
Investment Adviser
Massachusetts Financial Services Company For share prices, account balances, and
500 Boylston Street exchanges, call toll free: 1-800-MFS-TALK
Boston, MA 02116-3741 (1-800-637-8255) anytime from a touch-tone
telephone.
Distributor
MFS Fund Distributors, Inc. World Wide Web
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
Portfolio Manager
James J. Calmas* For the fourth year in a row,
MFS earned a #1 ranking in the
Treasurer [Dalbar Logo] DALBAR, Inc. Broker/Dealer
W. Thomas London* Survey, Main Office Operations
Service Quality Category. The
Assistant Treasurers firm achieved a 3.42 overall score on a
Mark E. Bradley* scale of 1 to 4 in the 1997 survey. A total
Ellen Moynihan* of 111 firms responded, offering input on
James O. Yost* the quality of service they received from 29
mutual fund companies nationwide. The survey
Secretary contained questions about service quality in
Stephen E. Cavan* 11 categories, including "knowledge of
operations contact," "keeping you informed,"
Assistant Secretary and "ease of doing business" with the firm.
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
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