<PAGE>
[Logo] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) MUNICIPAL
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 ................................................... 10
Federal Tax Information ................................................... 10
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 22
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 5.02%, CLASS B SHARES 4.22%, AND CLASS
C SHARES 4.13%. (SEE PERFORMANCE SUMMARY FOR MORE INFORMATION.)
o A GREATER EMPHASIS HAS BEEN PLACED ON ACHIEVING A COMPETITIVE YIELD FOR THE
FUND. WITH THE FUND'S AVERAGE MATURITY A RELATIVELY SHORT THREE YEARS, WE
BELIEVE IT MAKES SENSE TO SEEK A SLIGHTLY HIGHER YIELD.
o THE FUND HAS BENEFITED FROM THE INCREASING FISCAL STRENGTH OF MOST
MUNICIPALITIES, WHOSE REVENUES HAVE INCREASED AND WHOSE FISCAL RESTRAINT
HAS IMPROVED.
o AMONG SECTORS, THE FUND HAS SEEN GOOD PERFORMANCE FROM WATER AND SEWER
AUTHORITIES AS WELL AS ELECTRIC UTILITIES, WHICH ARE REQUIRED OR ESSENTIAL
SERVICES.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
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[Photo of Jeffrey L. Shames]
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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 John P. Kihn]
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John P. Kihn
For the 12 months ended April 30, 1998, Class A shares of the Fund provided a
total return of 5.02%, Class B shares 4.22%, and Class C shares 4.13%. These
returns include the reinvestment of distributions but exclude the effects of
any sales charges and compare to returns of 5.54% and 6.74% for the Lehman
Brothers Municipal Bond Three-Year and Five-Year indices, respectively. These
are unmanaged indices of investment-grade, fixed-rate municipal bonds. The
Fund's returns also compare to a 5.29% return for the average short/
intermediate term municipal bond fund as compiled by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance.
Q. YOU HAVE MADE A CHANGE IN HOW THE FUND IS MANAGED IN RECENT MONTHS. COULD YOU
TALK ABOUT THAT?
A. We have placed a greater emphasis on yield. With the Fund's average
maturity being so short, that is, between three and four years and usually
closer to three years, we believe it makes sense to seek a slightly
higher yield.
Q. WHAT ARE YOU DOING TO TRY AND GET A HIGHER YIELD?
A. We have been able to sell off some of the Fund's shorter-term, lower-
yielding securities. Then, as we have purchased newer securities, we have
tended to buy issues with higher yields. We have selectively increased the
Fund's weighting in "BBB"-rated securities and gradually increased the
portfolio's average maturity.
Q. IS IT GETTING HARDER TO FIND "BBB"-SECURITIES THAT YOU'RE COMFORTABLE OWNING
IN THIS ENVIRONMENT OF IMPROVING MUNICIPAL FINANCES?
A. It wasn't hard at the beginning of the year, but it's become a little more
difficult lately. We are analyzing very carefully "BBB" credits that come
to market. "A" and "AA" issues are also available, but we don't think they
have been as attractively priced. For example, there are some "AA" bonds
that have the same yield or less than "AAA"-insured bonds.
Q. HOW WOULD YOU DESCRIBE THE FIXED-INCOME ENVIRONMENT OF THE PAST YEAR?
A. Interest rates generally declined in 1997 after fluctuating at the
beginning of the year. We saw a similar trend at the beginning of this
year. Despite the general choppiness, there has been a flattening of the
yield curve. Generally, interest-rate levels reflect inflation
expectations, and the flattening yield curve reflects expectation of a
slowing economy.
Q. WHAT ABOUT THE MUNICIPAL MARKET? HOW WOULD YOU DESCRIBE THAT ENVIRONMENT?
A. One of the biggest themes of the past year or two has been the fiscal
strength of most municipalities. With very few exceptions, most of them are
in their best financial shape in many years. Their receipts are up and
their fiscal restraint has improved, so instead of spending all the money
coming in, they seem to be maintaining or adding to their reserves. In
terms of other sectors, we have liked water and sewer authorities as well
as electric utilities. Basically, these are required or essential services,
and we prefer to skew the portfolio toward such services when we can. We've
done well with cyclical holdings because the economy's been strong, but at
some point we might want to trade some of our cyclical exposure for more
essential services holdings.
Q. HAVE THERE BEEN ANY MAJOR NEW DEVELOPMENTS IN THIS MARKET SINCE THE LAST
REPORT?
A. The ratio of credit-rating upgrades to downgrades has been extraordinary.
According to Moody's Investors Service, 258 issuers were upgraded, versus
101 being downgraded during the past calendar year. You see that
occasionally in the corporate market, but it's quite unusual in the
municipal market, in which politics tends to create more spending, not
less. For whatever reason, and it may grow out of voting patterns,
municipalities have decided they should spend more conservatively. As a
result of strengthening credits, the yield spread between the highest- and
lowest-rated investment-grade securities has narrowed, which has allowed
lower-quality investment-grade bonds to outperform.
Q. WHAT ABOUT THE RISE IN BOND INSURANCE? COULD YOU TELL US HOW THIS HAS
AFFECTED THE MUNICIPAL MARKET AND HOW YOU MANAGE THE FUND?
A. A lot of bonds rated "AAA" are covered by bond insurance. Close to half of
the Fund's holdings are insured. The insurers have become much bigger
players, and they've taken away a lot of the credit plays, which has made
it a little more difficult to find good deals. At the same time, we feel
the underlying credit strength of the insurance companies is very
important, and we evaluate the creditworthiness of all the insurers.
Q. COULD YOU TALK ABOUT SOME SECTORS IN WHICH THE FUND IS INVESTED?
A. We've seen decent value in health care, mostly in hospitals, and in some
housing-related bonds although, for a shorter-term fund like this, most
housing issues don't fit the prospectus requirements because securities
from that group tend to be longer term in nature. We have also found tax-
backed bonds to be relatively attractive.
Q. DO YOU SEE ANY RISKS FOR THE MUNICIPAL MARKET GOING FORWARD, AND HOW CAN YOU
POSITION THE FUND TO MANAGE THOSE RISKS?
A. The biggest risk is yield. With this type of fund, if interest rates were
to go down a lot, you couldn't replace the higher-yielding bonds and get
the same yield. Because so many bonds in this type of portfolio mature
every year, it can be a big issue.
Q. LOOKING AHEAD, WHAT CHANGES DO YOU SEE IN YOUR INVESTMENT ENVIRONMENT, AND
HOW ARE YOU POSITIONING THE FUND FOR THEM?
A. We're neutral to bullish on interest rates. That is, we think they'll stay
about where they are now but, over time, they may move down a bit. We also
don't expect spreads between credit qualities to tighten much more from
here, and we expect a continuation of the theme of better fiscal restraint
at the municipal level. If anything, we think that trend will expand.
/s/ John P. Kihn
John P. Kihn
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.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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NOTE TO SHAREHOLDERS: EFFECTIVE DECEMBER 15, 1997, THE FUND IS BEING
MANAGED BY JOHN P. KIHN, WHO SUCCEEDS ROBERT A. DENNIS.
JOHN P. KIHN IS A VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(SM) AND
PORTFOLIO MANAGER OF MFS(R) MUNICIPAL INCOME FUND, MFS(R) MUNICIPAL LIMITED
MATURITY FUND, AND MFS(R) FLORIDA, NEW YORK, AND TENNESSEE MUNICIPAL BOND
FUNDS. MR. KIHN JOINED MFS AS A QUANTITATIVE ANALYST IN OCTOBER 1997 AFTER
WORKING AS A SENIOR QUANTITATIVE ANALYST WITH A MAJOR INVESTMENT MANAGEMENT
FIRM. MR. KIHN EARNED A BACHELOR'S DEGREE IN ECONOMICS FROM THE UNIVERSITY OF
CALIFORNIA, BERKELEY, A MASTER'S DEGREE IN BUSINESS ECONOMICS FROM THE
UNIVERSITY OF CALIFORNIA, SANTA BARBARA, AND A DOCTORATE DEGREE IN ACCOUNTING
AND FINANCE FROM THE LONDON SCHOOL OF ECONOMICS.
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 EXEMPT FROM
FEDERAL INCOME TAXES AS IS CONSISTENT WITH PROTECTION
OF SHAREHOLDERS' CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: MARCH 17, 1992
CLASS INCEPTION: CLASS A MARCH 17, 1992
CLASS B SEPTEMBER 7, 1993
CLASS C JULY 1, 1994
SIZE: $48.5 MILLION NET ASSETS AS OF APRIL 30, 1998
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS Municipal
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 different classes. It is not possible
to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from April 1, 1992, through April 30, 1998)
MFS Municipal Lehman Brothers Lehman Brothers Consumer
Limited Maturity Municipal Bond Municipal Bond Price Index
Fund - Class A Three-Year Index Five-Year Index -- U.S.
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4/92 $ 9,746 $10,000 $10,000 $10,000
4/94 10,950 11,194 11,437 10,581
4/96 11,918 12,447 12,891 11,211
4/98 12,956 13,740 14,400 11,666
AVERAGE ANNUAL TOTAL RETURNS THROUGH APRIL 30, 1998
<TABLE>
<CAPTION>
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C>
Average Annual Total Return +5.02% +4.54% +3.88% +4.73%
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SEC Results +2.39% +3.67% +3.35% +4.30%
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<CAPTION>
CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C>
Average Annual Total Return +4.22% +3.75% +3.09% +4.03%
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SEC Results +0.22% +2.81% +2.72% +4.03%
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<CAPTION>
CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C>
Average Annual Total Return +4.13% +3.66% +3.22% +4.19%
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SEC Results +3.13% +3.66% +3.22% +4.19%
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<CAPTION>
COMPARATIVE INDICES
1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C>
Average short/intermediate term municipal bond fund** +5.29% +4.75% +4.34% +4.80%
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Lehman Brothers Municipal Bond Three-Year Index+ +5.54% +5.46% +4.75% +5.29%
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Lehman Brothers Municipal Bond Five-Year Index+ +6.74% +6.08% +5.34% +6.08%
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Consumer Price Index+# +1.44% +2.27% +2.45% +2.63%
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* For the period from the commencement of the Fund's investment operations, March 17, 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.
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.
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
"AAA 49.5%
"BBB" 24.5%
"AA" 17.0%
"A" 7.3%
Not Rated 1.7%
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.
FOR FEDERAL INCOME TAX PURPOSES, 100% OF THE TOTAL DIVIDENDS PAID BY THE
FUND FROM NET INVESTMENT INCOME DURING THE YEAR ENDED APRIL 30, 1998, IS
DESIGNATED AS AN EXEMPT-INTEREST DIVIDEND.
<PAGE>
PORTFOLIO OF INVESTMENTS -- April 30, 1998
<TABLE>
Municipal Bonds - 98.1%
<CAPTION>
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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<S> <C> <C>
General Obligation - 21.9%
Bridgeport, CT, AMBAC, 5.25s, 1999 $1,155 $ 1,174,981
Commonwealth of Puerto Rico, 5.5s, 2001 500 517,345
Harrisburg, PA, 0s, 2004 825 619,022
Honolulu, HI, FGIC, 5s, 2002 350 358,747
Indianapolis, IN, Local Public Improvement Bond Bank, 6.25s, 2001 1,000 1,047,600
Irving, TX, Independent School District, 0s, 2003 350 282,261
Lawrence, MA, AMBAC, 9.7s, 2001 1,000 1,140,340
Milwaukee, WI, Metropolitan Sewage District, 6.7s, 2001 500 536,790
New York City, NY, 5s, 2001 650 659,061
New York City, NY, 5.5s, 2001 275 282,931
New York City, NY, 6.125s, 2001 600 628,476
New York City, NY, 5.7s, 2002 500 521,080
New York City, NY, 5.3s, 2003 500 514,060
North Slope Borough, AK, MBIA, 0s, 2001 600 534,366
State of Louisiana, FGIC, 6s, 2000 500 520,520
State of New Jersey, 5.5s, 2002 850 889,636
Stephenville, TX, Independent School District, 0s, 2004 500 384,050
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$10,611,266
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State and Local Appropriation - 14.9%
Metro Transportation Authority, NY, 5s, 2003 $ 350 $ 355,418
Michigan Building Authority Rev., 6.2s, 2002 1,000 1,076,710
Michigan Building Authority Rev., 5.4s, 2003 375 394,406
New York Dormitory Authority Rev. (City University), 5s, 2000 500 506,895
New York Dormitory Authority Rev. (City University), 5s, 2003 1,060 1,076,409
New York Dormitory Authority Rev. (State University), 4.9s, 2000 250 253,558
New York Medical Care Facilities Finance Agency Rev., 5.9s, 2000 175 180,922
New York Urban Development (Correctional Facilities), 5.5s, 2001 375 383,977
New York Urban Development (Correctional Facilities), 5.5s, 2001 1,000 1,023,940
New York Urban Development Corp. Rev., 6s, 2002 1,000 1,047,220
Ohio Building Authority Rev., 5.25s, 2003 400 415,680
State of Utah, Building Ownership Authority, 5.5s, 2000 500 513,480
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$ 7,228,615
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Refunded and Special Obligations - 2.0%
Colorado Health Facilities Authority Rev., National
Benevolent Assn., 4.5s, 2002 $ 280 $ 277,852
Mississippi Gulf Coast Regional Wastewater Authority
Rev., MBIA, 4.5s, 2004(S)(S) 500 493,000
San Antonio, TX, Water Rev., FGIC, 5.8s, 1999 175 178,315
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$ 949,167
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Airport and Port Revenue - 4.5%
Atlanta, GA, Airport Facilities Rev., AMBAC, 5.5s, 2001 $ 500 $ 515,000
Denver, CO, City & County Airport Rev., 5.5s, 1999 650 659,288
Indianapolis, IN, Airport Authority Rev., FGIC, 5s, 1999 1,000 1,011,010
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$ 2,185,298
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Electric and Gas Utility Revenue - 13.1%
Intermountain Power Agency, UT, Power Supply Rev., MBIA,
5.25s, 1999 $ 500 $ 507,185
Intermountain Power Agency, UT, Power Supply Rev., FSA,
5.25s, 2001 500 513,250
Municipal Electric Authority, GA, MBIA, 5s, 2002 600 611,388
North Carolina Municipal Power, MBIA, 5s, 2001 500 506,910
Sacramento, CA, Municipal Utility District Electric
Rev., FGIC, 6s, 2001 620 652,432
Southern California Public Power Authority, Power
Project Rev., FSA, 5s, 2004(S)(S) 500 511,035
Washington Public Power Supply System Rev., 5s, 2000 1,500 1,521,615
Washington Public Power Supply System Rev., 5.45s, 2000 1,500 1,535,355
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$ 6,359,170
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Health Care Revenue - 7.4%
Delaware County, PA, Hospital Rev. (Crozer-Chester
Medical Center), 4.75s, 2005 $ 500 $ 490,075
Denison, TX, Hospital Authority (Texoma Medical Center,
Inc.), 5.25s, 2001 215 218,995
Michigan Hospital Finance Authority Rev. (Genesys Health
System), 5.5s, 2007 750 771,780
Michigan Hospital Finance Authority Rev. (Mercy Health
Services), 5.5s, 2000 500 514,160
Missouri Health & Educational Facilities Authority Rev
(Freeman Health Systems), 4.65s, 2003 450 445,986
New York Dormitory Authority Rev., Secured Hospital (St
Clare's Hospital), 4.5s, 2003 300 298,458
New York Dormitory Authority Rev. (Manhattan Eye, Ear &
Throat Hospital), 4.6s, 2001 500 501,720
Stillwater, OK, Medical Center Authority (Stillwater
Medical Center), 5.55s, 2001 335 340,675
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$ 3,581,849
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Industrial Revenue (Corporate Guarantee) - 0.8%
De Soto Parish, LA, Pollution Control Rev
(International Paper Co.), 5.05s, 2002 $ 350 $ 361,368
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Insured Health Care Revenue - 8.0%
Delaware County, IN, Hospital Authority (Ball Memorial
Hospital), AMBAC, 6.625s, 2001 $1,600 $ 1,670,672
Huntsville, AL, Health Care Authority, MBIA, 4.3s, 2002 500 497,880
Illinois Educational Facilities Authority Rev. (Sherman
Health Systems), AMBAC, 5s, 2003 250 255,095
Illinois Health Facilities Authority Rev. (Holy Family
Medical Center), MBIA, 5s, 2004 325 329,816
Indiana Health Facilities Hospital Rev. (Sisters of St.
Francis Health), MBIA, 5s, 2002 250 254,410
Jackson County, MI, Hospital Finance Authority (Foote
Memorial Hospital), AMBAC, 4.375s, 2002 200 199,338
Spartanburg County, SC, Health Service, MBIA, 4.5s, 2002 675 675,466
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$ 3,882,677
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Multi-Family Housing Revenue - 4.6%
New York Dormitory Authority Rev., Albany County State
Service Contract, 5s, 2003 $ 180 $ 182,659
Rhode Island Housing & Mortgage Finance Corp., AMBAC, 5.15s, 2001 1,000 1,025,660
Rhode Island Housing & Mortgage Finance Corp., AMBAC, 5.25s, 2002 1,000 1,032,470
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$ 2,240,789
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Single Family Housing Revenue - 0.7%
Alaska Housing Finance Corp., MBIA, 4.55s, 2002 $ 350 $ 350,690
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Solid Waste Revenue - 2.1%
Delaware County, PA, Industrial Development Authority
Rev. (Recovery Facilities), 5.5s, 2000 $1,000 $ 1,017,310
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Student Loan Revenue - 2.6%
Alaska Student Loan Corp. Rev., AMBAC, 5s, 2003 $ 400 $ 407,112
Colorado Student Obligation Bond Authority, 6.125s, 1998 40 40,402
Louisiana Public Facilities Authority (Student Loan Rev.), 6.5s, 2002 770 810,479
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$ 1,257,993
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Turnpike Revenue - 2.1%
New Jersey Transit Corp., FSA, 5s, 2000 $1,000 $ 1,014,360
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Universities - 4.0%
California Educational Facilities Authority Rev
(College & University), 5.15s, 2000 $ 360 $ 363,816
District of Columbia (Georgetown University), MBIA, 5.5s, 2001 500 514,960
Metropolitan Nashville, TN, Vanderbilt University, 5.25s, 2001 500 513,045
State of New Hampshire, Higher Education & Health (New
Hampshire College), 5.65s, 2003 345 348,288
State of Utah, Board Regents Rev. (University of Utah
Hospital), AMBAC, 5s, 2002 200 204,486
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$ 1,944,595
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Water and Sewer Utility Revenue - 2.6%
Philadelphia, PA, Water & Sewer Rev., MBIA, 0s, 2002 $ 500 $ 410,355
San Antonio, TX, Water Revenue, FGIC, 5.8s, 1999 825 840,122
-----------
$ 1,250,477
- --------------------------------------------------------------------------------------------------------
Other - 6.8%
Connecticut Special Assessment, AMBAC, 5s, 1999 $1,000 $ 1,017,930
Michigan Underground Storage, AMBAC, 5s, 1999 1,000 1,010,460
State of Minnesota Rev., AMBAC, 5s, 1999 500 506,790
Virgin Islands Public Finance Authority, "D", 6s, 2006(S)(S) 750 772,312
-----------
$ 3,307,492
- --------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $46,979,835) $47,543,116
- --------------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 2.5%
- --------------------------------------------------------------------------------------------------------
St. Lucie County, FL, Pollution Control Rev., due 05/01/ 98,
at Amortized Cost $1,200 $ 1,200,000
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $48,179,835) $48,743,116
Other Assets, Less Liabilities - (0.6)% (279,046)
- --------------------------------------------------------------------------------------------------------
Net assets - 100.0% $48,464,070
- --------------------------------------------------------------------------------------------------------
(S)(S) When-issued security. At April 30, 1998, the Fund had sufficient cash and/or securities at
least equal to the value of the when-issued security.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------
APRIL 30, 1998
- --------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $48,179,835) $48,743,116
Receivable for Fund shares sold 217,943
Receivable for investments sold 1,345,996
Interest receivable 677,863
-----------
Total assets $50,984,918
-----------
Liabilities:
Notes payable $ 489,164
Distributions payable 55,982
Payable for Fund shares reacquired 168,791
Payable for investments purchased 1,786,622
Payable to affiliates -
Management fee 389
Distribution and service fee 12,184
Accrued expenses and other liabilities 7,716
-----------
Total liabilities $ 2,520,848
-----------
Net assets $48,464,070
===========
Net assets consist of:
Paid-in capital $48,570,077
Unrealized appreciation on investments 563,281
Accumulated net realized loss on investments (698,822)
Accumulated undistributed net investment income 29,534
-----------
Total $48,464,070
===========
Shares of beneficial interest outstanding 6,407,506
=========
Class A shares:
Net asset value per share
(net assets of $37,595,456 / 4,969,553 shares of
beneficial interest outstanding) $7.57
=====
Offering price per share (100 / 97.5) $7.76
=====
Class B shares:
Net asset value and offering price per share
(net assets of $7,618,264 / 1,008,323 shares of
beneficial interest outstanding) $7.56
=====
Class C shares:
Net asset value and offering price per share
(net assets of $3,250,350 / 429,630 shares of beneficial
interest outstanding) $7.57
=====
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 $2,348,905
----------
Expenses -
Management fee $ 194,231
Trustees' compensation 12,186
Shareholder servicing agent fee 60,554
Distribution and service fee (Class A) 58,119
Distribution and service fee (Class B) 62,952
Distribution and service fee (Class C) 30,166
Administrative fee 6,876
Custodian fee 18,499
Printing 35,667
Postage 5,137
Auditing fees 29,034
Legal fees 1,286
Registration fee 36,130
Interest Expense 239
Miscellaneous 15,793
----------
Total expenses $ 566,869
Reduction of expenses by investment adviser (40,574)
Reduction of expenses pursuant to reimbursement agreement (18,905)
Fees paid indirectly (8,136)
----------
Net expenses $ 499,254
----------
Net investment income $1,849,651
----------
Realized and unrealized gain on investments:
Realized gain on investment transactions (identified cost
basis) $ 174,996
Change in unrealized appreciation on investments 276,447
----------
Net realized and unrealized gain on investments $ 451,443
----------
Increase in net assets from operations $2,301,094
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,849,651 $ 2,111,635
Net realized gain on investments 174,996 56,348
Net unrealized gain (loss) on invesments 276,447 (260,759)
----------- ------------
Increase in net assets from operations $ 2,301,094 $ 1,907,224
----------- ------------
Distributions declared to shareholders -
From net investment income (Class A) $(1,537,831) $ (1,788,875)
From net investment income (Class B) (218,920) (218,897)
From net investment income (Class C) (94,027) (97,816)
----------- ------------
Total distributions declared to shareholders $(1,850,778) $ (2,105,588)
----------- ------------
Fund share (principal) transactions -
Decrease in net assets from Fund share transactions $(2,739,830) $(10,197,380)
----------- ------------
Total decrease in net assets $(2,289,514) $(10,395,744)
Net assets:
At beginning of period 50,753,584 61,149,328
----------- ------------
At end of period (including accumulated undistributed net
investment income of $29,534 and $30,661, respectively) $48,464,070 $ 50,753,584
=========== ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.50 $ 7.53 $ 7.45 $ 7.47
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.30 $ 0.29 $ 0.30 $ 0.28
Net realized and unrealized gain (loss) on
investments 0.07 (0.03) 0.08 (0.02)
------ ------ ------ ------
Total from investment operations $ 0.37 $ 0.26 $ 0.38 $ 0.26
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.30) $(0.29) $(0.30) $(0.28)
In excess of net investment income(++) -- -- -- (0.00)
------ ------ ------ ------
Total distributions declared to shareholders $(0.30) $(0.29) $(0.30) $(0.28)
------ ------ ------ ------
Net asset value - end of period $ 7.57 $ 7.50 $ 7.53 $ 7.45
====== ====== ====== ======
Total return(+) 5.02% 3.51% 5.11% 3.55%
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.87% 0.95% 0.95% 0.95%
Net investment income 3.97% 3.86% 4.00% 3.74%
Portfolio turnover 51% 78% 43% 50%
Net assets at end of period (000 omitted) $37,595 $40,953 $50,387 $64,329
# Per share data for the periods subsequent to April 30, 1994, are based on average shares outstanding.
## For the 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, 1995, the per share distributions in excess of the net investment income were $0.002.
(S) 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. In
addition, the investment adviser voluntarily waived a portion of their management fee and the distributor did not
impose a portion of its service fee. If these fees had been incurred by the Fund, and if other expenses had not been
limited to 0.40%, the net investment income per share and the ratios would have been:
Net investment income $ 0.30 $ 0.29 $ 0.30 $ 0.28
Ratios (to average net assets):
Expenses## 1.01% 1.02% 0.99% 0.95%
Net investment income 3.85% 3.79% 3.96% 3.74%
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
EIGHT MONTHS
ENDED YEAR ENDED AUGUST 31,
APRIL 30, ---------------------------------
1994 1993 1992*
- ---------------------------------------------------------------------------------------------------------------------
CLASS A
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.72 $ 7.43 $ 7.31
------ ------ ------
Income from investment operations -
Net investment income(S) $ 0.19 $ 0.31 $ 0.15
Net realized and unrealized gain (loss) on investments (0.22) 0.30 0.12
------ ------ ------
Total from investment operations $(0.03) $ 0.61 $ 0.27
------ ------ ------
Less distributions declared to shareholders -
From net investment income(+++) $(0.19) $(0.31) $(0.15)
From net realized gain on investments -- (0.01) --
In excess of net investment income(++) (0.00) -- --
In excess of net realized gain on investments (0.03) -- --
------ ------ ------
Total distributions declared to shareholders $(0.22) $(0.32) $(0.15)
------ ------ ------
Net asset value - end of period $ 7.47 $ 7.72 $ 7.43
====== ====== ======
Total return(+) (0.59)%+ 8.47% 8.26%+
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.89%+ 0.68% 0.55%+
Net investment income 3.72%+ 4.04% 4.25%+
Portfolio turnover 48% 69% 8%
Net assets at end of period (000 omitted) $83,367 $87,192 $21,312
* For the period from the commencement of the Fund's investment operations, March 17, 1992, through August 31, 1992.
+ Annualized.
(+) 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 eight months ended April 30, 1994, the per share distributions in excess of the net investment income were
$0.002.
(+++) For the year ended August 31, 1992, the per share distributions from net investment income includes a per share
distribution from paid-in capital of $0.0007.
(S) 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. In
addition, the investment adviser voluntarily waived a portion of their management fee and the distributor did not
impose a portion of its service fee. If these fees had been incurred by the Fund, and if other expenses had not been
limited to 0.40%, the net investment income per share and the ratios would have been:
Net investment income $ 0.18 $ 0.28 $ 0.13
Ratios (to average net assets):
Expenses 1.12%+ 1.16% 1.16%+
Net investment income 3.49%+ 3.57% 3.64%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
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 $ 7.49 $ 7.52 $ 7.44 $ 7.46 $ 7.75
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.24 $ 0.23 $ 0.25 $ 0.21 $ 0.14
Net realized and unrealized gain (loss) on
investments 0.07 (0.03) 0.07 (0.02) (0.26)
------ ------ ------ ------ ------
Total from investment operations $ 0.31 $ 0.20 $ 0.32 $ 0.19 $(0.12)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.24) $(0.23) $(0.24) $(0.21) $(0.13)
In excess of net investment income(++) -- -- -- (0.00) (0.01)
In excess of net realized gain on investments -- -- -- -- (0.03)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.24) $(0.23) $(0.24) $(0.21) $(0.17)
------ ------ ------ ------ ------
Net asset value - end of period $ 7.56 $ 7.49 $ 7.52 $ 7.44 $ 7.46
====== ====== ====== ====== ======
Total return 4.22% 2.71% 4.34% 2.67% (2.37)%+
Ratios (to average net assets)/
Supplemental data(S):
Expenses 1.64% 1.73% 1.70% 1.80% 1.74%+
Net investment income 3.20% 3.08% 3.25% 2.88% 2.79%+
Portfolio turnover 51% 78% 43% 50% 48%
Net assets at end of period (000 omitted) $7,618 $6,503 $7,749 $7,792 $7,415
** For the period from the inception of Class B, September 7, 1993, through April 30, 1994.
+ Annualized.
# Per share data for the periods subsequent to April 30, 1994, are based on average shares outstanding.
## For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
(++) For the year ended April 30, 1995, the per share distributions in excess of the net investment income were $0.001.
(S) 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. In
addition, the investment adviser voluntarily waived a portion of their management fee and the distributor did not
impose a portion of its service fee. If these fees had been incurred by the Fund, and if other expenses had not been
limited to 0.40%, the net investment income per share and the ratios would have been:
Net investment income $ 0.24 $ 0.23 $ 0.25 $ 0.21 $ 0.12
Ratios (to average net assets):
Expenses## 1.78% 1.80% 1.74% 1.80% 2.05%+
Net investment income 3.08% 3.01% 3.21% 2.88% 2.48%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
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 $ 7.50 $ 7.53 $ 7.45 $ 7.45
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.23 $ 0.23 $ 0.23 $ 0.21
Net realized and unrealized gain (loss) on
investments 0.08 (0.03) 0.08 (0.02)
------ ------ ------ ------
Total from investment operations $ 0.31 $ 0.20 $ 0.31 $ 0.19
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.24) $(0.23) $(0.23) $(0.19)
In excess of net investment income(++) -- -- -- (0.00)
------ ------ ------ ------
Total distributions declared to shareholders $(0.24) $(0.23) $(0.23) $(0.19)
------ ------ ------ ------
Net asset value - end of period $ 7.57 $ 7.50 $ 7.53 $ 7.45
====== ====== ====== ======
Total return 4.13% 2.64% 4.23% 2.53%+
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.72% 1.80% 1.80% 1.79%+
Net investment income 3.11% 3.03% 3.16% 2.77%+
Portfolio turnover 51% 78% 43% 50%
Net assets at end of period (000 omitted) $3,250 $3,297 $3,013 $1,934
*** For the period from the inception of Class C, July 1, 1994, through April 30, 1995.
+ Annualized.
# Per share data for the periods subsequent to April 30, 1994, are based on average shares outstanding.
## For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
(++) For the period ended April 30, 1995, the per share distributions in excess of the net investment income were $0.001.
(S) 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. In
addition, the investment adviser voluntarily waived a portion of their management fee and the distributor did not
impose a portion of its service fee. If these fees had been incurred by the Fund, and if other expenses had not been
limited to 0.40%, the net investment income per share and the ratios would have been:
Net investment income $ 0.23 $ 0.22 $ 0.23 $ 0.21
Ratios (to average net assets):
Expenses## 1.86% 1.87% 1.84% 1.79%+
Net investment income 2.99% 2.96% 3.12% 2.77%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Municipal 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. 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.
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 is amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily 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 net 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.
At April 30, 1998, the Fund, for federal income tax purposes, had a capital
loss carryforward of $698,822, 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, ($623,925), April 30, 2004, ($32,070), and April
30, 2005, ($42,827).
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 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. 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
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. The investment adviser has voluntarily agreed to
waive a portion of its fee, which is reflected as a reduction of expenses in
the Statement of Operations.
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 aggregate unreimbursed expenses owed to MFS by the Fund
amounted to $210,822.
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 $4,543
for the year ended April 30, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$6,681 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 (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 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 $13,617
for the year ended April 30, 1998. Payment of the 0.10% per annum Class A
distribution fee will commence on such date as the Trustees of the Trust may
determine. 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.
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. Except in the case of the 0.25% per annum Class B
service fee paid by the Fund upon the sale of Class B shares in the first
year, the Class B service fee is currently set at 0.15% per annum and may be
increased to a maximum of 0.25% per annum on such date as the Trustees of the
Trust may determine. MFD retains the service fee for accounts not attributable
to a securities dealer, which amounted to $1,631 and $64 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 0.92% and
1.00% of average daily net assets attributable to Class B and Class C shares
on an annualized basis, respectively.
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 $4, $22,607, and $2,729 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
0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$25,028,397 and $26,861,671, respectively.
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 $48,179,835
-----------
Gross unrealized appreciation $ 593,227
Gross unrealized depreciation (29,946)
-----------
Net unrealized appreciation $ 563,281
===========
(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 2,109,268 $ 15,995,108 1,574,476 $ 11,862,568
Shares issued to shareholders in
reinvestment of distributions 131,414 997,128 160,862 1,211,040
Shares reacquired (2,733,116) (20,723,328) (2,966,712) (22,348,637)
---------- ------------ ---------- ------------
Net decrease (492,434) $ (3,731,092) (1,231,374) $ (9,275,029)
========== ============ ========== ============
<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 341,799 $ 2,591,558 222,124 $ 1,670,226
Shares issued to shareholders in
reinvestment of distributions 15,368 116,495 15,642 117,619
Shares reacquired (217,312) (1,644,108) (399,994) (3,007,251)
---------- ------------ ---------- ------------
Net increase (decrease) 139,855 $ 1,063,945 (162,228) $ (1,219,406)
========== ============ ========== ============
<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 168,203 $ 1,277,137 199,462 $ 1,502,376
Shares issued to shareholders in
reinvestment of distributions 11,712 88,876 12,406 93,436
Shares reacquired (189,973) (1,438,696) (172,386) (1,298,757)
---------- ------------ ---------- ------------
Net increase (decrease) (10,058) $ (72,683) 39,482 $ 297,055
========== ============ ========== ============
</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 $249. The Fund and other affiliated funds also
participate in a $20 million uncommitted, unsecured line of credit provided by
State Street Bank and Trust Company under a line of credit agreement. Borrowing
may be made to temporarily finance the repurchase of fund shares. During the
year ended April 30, 1998, the maximum amount outstanding, and the amount
outstanding at April 30, 1998, was $489,164. Interest expense incurred on the
borrowings amounted to $209 for the period ended, and the weighted average
interest rate on borrowings was 6.3%.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust IX and Shareholders of
MFS Municipal Limited Maturity Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Municipal 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 four-year period ended April 30, 1998, the
eight-month period ended April 30, 1994, and each of the years in the two-year
period ended August 31, 1993. 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, 1998 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Municipal
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) Municipal 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, call
Officer, Eastern Enterprises 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
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive P.O. Box 2281
Vice President, Director, and Secretary, Boston, MA 02107-9906
MFS Investment Management
For general information, call toll free:
Jeffrey L. Shames* - Chairman, Chief 1-800-225-2606 any business day from
Executive Officer, and Director, 8 a.m. to 8 p.m. Eastern time.
MFS Investment 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
For the fourth year in a row,
Portfolio Manager MFS earned a #1 ranking in the
John P. Kihn* [Dalbar Logo] DALBAR, Inc. Broker/Dealer
Survey, Main Office Operations
Treasurer Service Quality Category. The
W. Thomas London* firm achieved a 3.42 overall score on a
scale of 1 to 4 in the 1997 survey. A total
Assistant Treasurers of 111 firms responded, offering input on
Mark E. Bradley* the quality of service they received from 29
Ellen Moynihan* mutual fund companies nationwide. The survey
James O. Yost* contained questions about service quality in
11 categories, including "knowledge of
Secretary operations contact," "keeping you informed,"
Stephen E. Cavan* and "ease of doing business" with the firm.
Assistant Secretary
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
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(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
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