<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) LIMITED
MATURITY FUND
SEMIANNUAL REPORT o OCTOBER 31, 2000
---------------------------------------
MUTUAL FUND GIFT KITS (See page 30)
---------------------------------------
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
Trustees and Officers ..................................................... 33
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
--------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company,
one-security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with
the multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of
Original Research(SM) is doing our best to project a company's future earnings
and determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled
but that we believe still have the potential to be market leaders. For
example, a quarterly earnings shortfall of a few cents may cause the market to
temporarily lose confidence in a company. If we believe the business remains
fundamentally strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help
performance. In fixed-income investing this means, among other things, trying
to be better than our peers at avoiding bond issuers that may default. In
equity investing, avoiding mistakes means we strive to know a company and its
industry well enough to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form
of daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without
barriers between equity and fixed-income, international and domestic, or value
and growth investment areas. We believe this allows each of our portfolio
managers -- and thus each of our investors -- to potentially benefit from any
relevant item of Original Research.
John Ballen, our President and Chief Investment Officer, has often said that
the thought he hopes managers will have when they read the daily notes is, "I
could never perform as well at any other investment company, because nowhere
else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years in
the investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance by
finding opportunities before they are generally recognized by the market, and by
avoiding mistakes whenever possible. Original Research does, we believe, make a
difference.
As always, we appreciate your confidence in MFS 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(R)
November 16, 2000
A prospectus containing more complete information on any MFS product, including
charges and expenses, can be obtained from your investment professional. Please
read it carefully before you invest or send money. Investments in mutual funds
will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of James J. Calmas]
James J. Calmas
For the six months ended October 31, 2000, Class A shares of the fund provided a
total return of 4.38%, Class B shares 3.85%, Class C shares 3.79%, and Class I
shares 4.32%. These returns include the reinvestment of any distributions but
exclude the effects of any sales charges, and compare to a 4.29% return over the
same period for the fund's benchmark, the Lehman Brothers One- to Three-Year
Government/Corporate Bond Index (the Lehman Index), an unmanaged index 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 Service, Inc.
During the same period, the average short-term investment-grade debt fund
tracked by Lipper Inc., an independent firm that reports mutual fund
performance, returned 3.94%.
Q. FOR THE FIRST TIME IN A WHILE, BOND INVESTORS HAD SOMETHING TO CHEER ABOUT,
AS ALMOST EVERY SECTOR OF THE BOND MARKET OUTPERFORMED THE BROADER EQUITY
MARKET. WHAT DO YOU FEEL DROVE THIS RALLY?
A. The bond market has rallied recently amid increasing evidence that economic
growth is moderating and that the Federal Reserve Board (the Fed) may be
finished tightening interest rates. In response, most bonds posted strong
gains over the past few months, especially U.S. Treasuries, which benefited
from the flight to quality, an improved interest rate outlook, and a
favorable supply-and-demand environment for long-term U.S. government bonds.
Q. DO YOU SEE THIS RALLY CONTINUING?
A. Given encouraging signs that the economy is moderating, we don't expect the
Fed to raise rates anytime soon. However, we also don't anticipate that the
Fed will cut rates in the near term. As a result, while we have found
attractive investment opportunities in the corporate, mortgage-backed, and
asset-backed sectors of the bond market, much of the government bond
sector's near-term upside may be limited, given the significant appreciation
we've already experienced.
Q. GIVEN THE PARTICULARLY STRONG PERFORMANCE IN THE TREASURY MARKET, DID YOU
MAKE ANY CHANGES TO THE PORTFOLIO TO TAKE ADVANTAGE OF THIS TREND?
A. We generally don't maintain significant exposure to Treasuries because the
primary objective of this portfolio is to use the extensive credit analysis
capabilities of MFS Original Research(R) to choose bonds that we believe
offer the best possible returns relative to comparable government bonds. As
a result, we tend to maintain a large exposure to spread products (corporate
bonds, asset-backed bonds, and mortgage-backed securities) that generally
have provided higher yields and greater potential for price appreciation
than Treasury bonds of comparable duration -- duration is a measure of a
bond's interest rate sensitivity. (Principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity.)
Q. HOW WERE THE PORTFOLIO'S ASSETS ALLOCATED DURING THE PERIOD?
A. Corporate bonds and asset-backed securities, or bonds backed by a pool of
loans such as credit cards, made up for the bulk of the portfolio. The
majority of these positions were invested in very high-quality securities --
mostly "AAA"-rated. The remainder of the portfolio was invested in
mortgage-backed securities, agency bonds such as the Federal National
Mortgage Association, and Treasuries, all of which have generally aided the
portfolio's performance during the past six months.
Q. GIVEN THE PORTFOLIO'S SIGNIFICANT EXPOSURE TO INVESTMENT-GRADE CORPORATE
AND ASSET-BACKED BONDS, WHAT'S YOUR OUTLOOK FOR THESE SECTORS?
A. We were a bit concerned about spread products in the early part of the year;
however, as yields became increasingly attractive relative to Treasuries,
this environment helped the performance of corporate and asset-backed
bonds. As a result, we've recently increased our exposure to these sectors.
Furthermore, given the significant rally in Treasuries, we believe investors
have factored in most of the good news. Consequently, we've seen the
investment-grade and asset-backed sectors as being attractively valued
relative to government bonds. Recently, we have started to see investors
return to the corporate market because of the attractive yields offered by
what we view as high-quality issuers.
Q. WHAT SECTORS LOOK ATTRACTIVE TO YOU RIGHT NOW?
A. We like the finance, telecommunications, and utilities sectors. In general,
we've focused on high-quality issues of companies with strong cash flows and
positive fundamental business prospects. As our views on interest rates, the
economy, and the business prospects for these companies have improved, we've
increased our exposure in the finance and utilities sectors because we
believe these bonds are now poised to benefit from more stable interest rate
conditions. In addition, we felt that many of these bonds were undervalued
given the pressure they came under during a previously difficult interest
rate environment. In the telecommunications sector, we have found
attractively priced securities of companies that we believe offered strong
cash flows.
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current 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.
It is not possible to invest directly in an index.
<PAGE>
-------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
-------------------------------------------------------------------------------
JAMES J. CALMAS IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
PORTFOLIO MANAGER OF THE LIMITED MATURITY PORTFOLIOS OF OUR MUTUAL FUNDS AND
VARIABLE ANNUITIES.
JIM JOINED MFS IN 1988 AND WAS NAMED ASSISTANT VICE PRESIDENT IN 1991, VICE
PRESIDENT IN 1993, AND PORTFOLIO MANAGER IN 1998. HE IS A GRADUATE OF
DARTMOUTH COLLEGE AND HOLDS AN M.B.A. DEGREE FROM THE AMOS TUCK SCHOOL OF
BUSINESS ADMINISTRATION OF DARTMOUTH COLLEGE.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
-------------------------------------------------------------------------------
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 charges and expenses, for any MFS product
is available from your investment professional, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
-------------------------------------------------------------------------------
FUND FACTS
-------------------------------------------------------------------------------
OBJECTIVE: SEEKS TO PROVIDE 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: $271.8 MILLION NET ASSETS AS OF OCTOBER 31, 2000
-------------------------------------------------------------------------------
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including the reinvestment of dividends. (See Notes to
Performance Summary.)
<TABLE>
TOTAL RATES OF RETURN THROUGH OCTOBER 31, 2000
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +4.38% +5.91% +13.47% +28.35% +59.95%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +5.91% + 4.30% + 5.12% + 5.56%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +3.27% + 3.43% + 4.59% + 5.25%
-----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +3.85% +4.96% +10.57% +23.08% +50.51%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +4.96% + 3.41% + 4.24% + 4.82%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +0.98% + 2.51% + 3.92% + 4.82%
-----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +3.79% +5.02% +10.31% +22.86% +51.25%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +5.02% + 3.33% + 4.20% + 4.88%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +4.03% + 3.33% + 4.20% + 4.88%
-----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years Life*
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales
Charge +4.32% +6.09% +13.69% +28.76% +60.46%
-----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +6.09% + 4.37% + 5.19% + 5.60%
-----------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, February 26, 1992, through
October 31, 2000.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 2.50% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Peformance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class B, C, and I share performance includes the performance of the fund's Class
A shares for periods prior to their inception (blended performance). Class B and
C blended performance has been adjusted to take into account the CDSC applicable
to Class B and C shares rather than the initial sales charge (load) applicable
to Class A shares. Class I share blended performance has been adjusted to
account for the fact that Class I shares have no sales charge. These blended
performance figures have not been adjusted to take into account differences in
class-specific operating expenses. Because operating expenses of Class B and C
shares are higher than those of Class A, the blended Class B and C share
performance is higher than it would have been had Class B and C shares been
offered for the entire period. Conversely, because operating expenses of Class I
shares are lower than those of Class A, the blended Class I share performance is
lower than it would have been had Class I shares been offered for the entire
period.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and assume
the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 2000
QUALITY RATINGS
Source: Standard & Poor's and Moody's
"AAA" 27.8%
"BBB" 23.6%
"A" 23.0%
Governments 13.8%
"AA" 8.9%
Other 2.2%
"BB" 0.7%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- October 31, 2000
Bonds - 97.0%
<CAPTION>
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 80.6%
Aerospace and Defense - 0.8%
Raytheon Co., 5.7s, 2003 $ 2,253 $ 2,151,795
--------------------------------------------------------------------------------------------------------
Automotive - 3.1%
DaimlerChrysler NA Holding Corp., 6.63s, 2001 $ 1,449 $ 1,442,784
Ford Capital BV, 9.875s, 2002 1,800 1,868,400
Ford Motor Credit Co., 5.75s, 2004 3,486 3,328,921
General Motors Acceptance Corp., 7s, 2002 1,898 1,899,215
------------
$ 8,539,320
--------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 4.4%
American Express Co., 6.875s, 2005 $ 1,525 $ 1,515,758
Fleet Boston Corp., 9.9s, 2001 3,237 3,286,332
GS Escrow Corp., 6.75s, 2001 1,922 1,897,468
Wells Fargo Co., 7.2s, 2003 2,744 2,762,851
Wells Fargo Co., 7.8s, 2010 2,543 2,579,797
------------
$ 12,042,206
--------------------------------------------------------------------------------------------------------
Conglomerates - 1.2%
General Electric Capital Corp., 6.52s, 2002 $ 3,294 $ 3,286,417
--------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.5%
Hasbro, Inc., 7.95s, 2003 $ 1,348 $ 1,246,361
--------------------------------------------------------------------------------------------------------
Corporate Asset Backed - 21.8%
Americredit Automobile Receivable Trust, 5.78s, 2003 $ 2,050 $ 2,033,231
Amresco Residential Securities Mortgage Loan, 5.94s, 2015 2,607 2,580,884
Banamex Credit Card Merchant Voucher, 6.25s, 2003## 5,218 5,160,787
BankBoston Home Equity Loan Trust, 5.89s, 2013 3,225 3,178,893
California Infrastructure, 6.17s, 2003 2,081 2,075,360
Case Equipment Receivables Trust, 5.285s, 2002 77 77,034
Commerce 2000, 7.9s, 2011## 1,460 1,460,913
Commonwealth Edison Transition Funding Trust, 5.29s, 2003 1,931 1,900,643
Discover Card Master Trust I, 5.85s, 2006 2,124 2,076,868
DLJ Commercial Mortgage Corp., 0s, 2005 28,200 931,012
DLJ Mortgage Acceptance Corp., 8.1s, 2004 1,096 1,131,568
First Chicago Master Trust II, 6.9s, 2003 2,975 2,980,563
Fleet Credit Card Master Trust, 6.84s, 2007 1,305 1,309,476
Ford Credit Auto Owner Trust, 6.2s, 2002 1,505 1,501,432
Ford Credit Auto Owner Trust, 7.5s, 2003## 1,110 1,110,347
Ford Credit Auto Owner Trust, 6.58s, 2004 990 989,922
GE Capital Mortgage Services, Inc., 6.035s, 2020 4,435 4,351,699
GMAC Commercial Mortgage Security Inc., 7.42s, 2004 1,430 1,391,345
Green Tree Financial Corp., 6.91s, 2028 1,794 1,788,258
Green Tree Financial Corp., 6.04s, 2029 471 471,035
Green Tree Financial Corp., 6.39s, 2029 197 196,512
GS Mortgage Securities Corp. II, 6.06s, 2030 673 653,936
MBNA Master Credit Card Trust II, 5.25s, 2006 1,000 965,620
Merrill Lynch Mortgage Investors, Inc., 5.65s, 2030 2,948 2,828,962
Morgan Stanley Group, Inc., 6.01s, 2030 1,167 1,129,834
Partners First Credit Card Master Trust, 6.72s, 2027 5,050 5,051,578
Peco Energy Transition Trust, 5.48s, 2003 433 430,765
Pemex Finance Ltd., 5.72s, 2003 3,014 2,930,726
Premier Auto Trust, 5.88s, 2001 87 87,035
Providian Home Equity Loan Trust, 6.91s, 2025 934 934,136
Residential Asset Securities Corp., 7.735s, 2025 875 885,579
Residential Funding Mortgage Securities I, 7.97s, 2010 1,525 1,538,106
Starwood Asset Receivables Trust, 6.92s, 2022 1,155 1,154,514
Student Loan Trust, 6.748s, 2004 538 536,955
Student Loan Trust, 6.948s, 2009 1,500 1,483,005
------------
$ 59,308,533
--------------------------------------------------------------------------------------------------------
Entertainment - 2.8%
Seagram (Joseph E) & Sons, Inc., 5.79s, 2001 $ 3,981 $ 3,947,360
Time Warner Pass-Through Asset Trust, 6.1s, 2001## 3,683 3,634,532
------------
$ 7,581,892
--------------------------------------------------------------------------------------------------------
Financial Institutions - 8.3%
Associates Corp. North America, 5.8s, 2004 $ 2,710 $ 2,603,226
Countrywide Home Loan, Inc., 6.85s, 2004 4,137 4,069,691
FleetBoston Financial Corp., 7.25s, 2005 2,405 2,417,674
Lehman Brothers Holdings, Inc., 6.25s, 2003 5,057 4,940,285
Merrill Lynch & Co., 6.06s, 2001 3,960 3,918,578
Morgan Stanley Dean Witter, 7.125s, 2003 4,523 4,540,414
------------
$ 22,489,868
--------------------------------------------------------------------------------------------------------
Food and Beverage Products - 2.8%
Coca-Cola Bottling Co., 8.56s, 2002 $ 3,869 $ 3,939,067
Whitman Corp., 6s, 2004 3,890 3,695,578
------------
$ 7,634,645
--------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.7%
Georgia-Pacific Corp., 9.95s, 2002 $ 1,740 $ 1,795,436
--------------------------------------------------------------------------------------------------------
Insurance - 0.6%
AIG Sunamerica, 7.4s, 2003## $ 1,684 $ 1,712,864
--------------------------------------------------------------------------------------------------------
Oils - 1.1%
Phillips Petroleum Co., 8.5s, 2005 $ 2,760 $ 2,908,433
--------------------------------------------------------------------------------------------------------
Railroads - 1.2%
Union Pacific Corp., 5.78s, 2001 $ 103 $ 101,309
Union Pacific Corp., 6.34s, 2003 3,350 3,259,114
------------
$ 3,360,423
--------------------------------------------------------------------------------------------------------
Supermarkets - 0.9%
Safeway, Inc., 5.875s, 2001 $ 2,430 $ 2,402,079
--------------------------------------------------------------------------------------------------------
Telecommunications and Cable - 7.6%
Cox Communications, Inc., 7s, 2001 $ 3,222 $ 3,214,267
GTE Corp., 9.1s, 2003 4,535 4,744,925
Sprint Corp., 9.5s, 2003 907 950,300
Sprint Spectrum LP, 11s, 2006 4,642 4,998,599
Telecomunica De Puerto Rico, 6.15s, 2002 4,194 4,098,796
U.S. West Communications, Inc., 7.625s, 2003 2,538 2,570,563
------------
$ 20,577,450
--------------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 13.1%
Agency for Intl Development (Israel), 6.625s, 2003 $ 3,000 $ 3,009,060
Federal Home Loan Bank, 6.75s, 2002 2,000 2,008,120
Federal Home Loan Mortgage Corp., 5.5s, 2002 2,000 1,972,180
Federal Home Loan Mortgage Corp., 5.83s, 2013 1,001 1,000,623
Federal Home Loan Mortgage Corp., 7.07s, 2015 1,140 1,139,644
Federal National Mortgage Assn., 6.75s, 2003 3,449 3,424,256
Federal National Mortgage Assn., 6.137s, 2011 878 858,086
Federal National Mortgage Assn., 7s, 2015 4,773 4,744,803
Federal National Mortgage Assn., 7.5s, 2015 6,078 6,121,445
Government National Mortgage Assn., 7s, 2009 - 2010 34 34,412
Government National Mortgage Assn., 7.5s, 2007 - 2011 3,787 3,839,935
Government National Mortgage Assn., 8s, 2030 4,469 4,546,665
Government National Mortgage Assn., 8.5s, 2001 - 2008 2,281 2,337,064
Government National Mortgage Assn., 9.25s, 2001 355 359,892
Government National Mortgage Assn., 12.5s, 2011 209 236,787
------------
$ 35,632,972
--------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 1.4%
U.S. Treasury Notes, 5s, 2001 $ 900 $ 895,779
U.S. Treasury Notes, 6.25s, 2001 765 764,641
U.S. Treasury Notes, 6.75s, 2005 2,078 2,154,304
------------
$ 3,814,724
--------------------------------------------------------------------------------------------------------
Utilities - Electric - 7.0%
Allegheny Energy, Inc., 7.75s, 2005 $ 1,565 $ 1,582,246
Connecticut Light & Power Co., 7.875s, 2001 1,186 1,188,787
Connecticut Light & Power Co., 7.875s, 2024 1,513 1,518,613
Dominion Resources, Inc., 7.6s, 2003 2,410 2,432,992
Edison Mission Energy Funding Corp., 6.77s, 2003## 1,411 1,370,354
Entergy Mississippi, Inc., 6.2s, 2004 1,500 1,422,525
Gulf States Utilities Co., 8.21s, 2002 1,528 1,536,526
Midamerican Funding LLC, 5.85s, 2001 5,003 4,981,172
Narragansett Electric Co., 7.83s, 2002 779 791,145
National Rural Utilities, 7.375s, 2003 2,118 2,148,118
------------
$ 18,972,478
--------------------------------------------------------------------------------------------------------
Utilities - Gas - 1.3%
Columbia Gas Systems, Inc., 6.39s, 2000 $ 3,544 $ 3,539,712
--------------------------------------------------------------------------------------------------------
Total U.S. Bonds $218,997,608
--------------------------------------------------------------------------------------------------------
Foreign Bonds - 16.4%
Argentina - 1.6%
Republic of Argentina, 0s, 2001 $ 4,579 $ 4,432,472
--------------------------------------------------------------------------------------------------------
Australia - 1.1%
Medallion Trust, 7.032s, 2031 (Corporate Asset Back) $ 1,746 $ 1,748,355
Westpac Banking, 9.125s, 2001 (Banks and Credit Cos.) 1,175 1,193,494
------------
$ 2,941,849
--------------------------------------------------------------------------------------------------------
Canada - 1.9%
AT&T Canada, Inc., 12s, 2007 (Telecommunications) $ 2,582 $ 2,883,887
Province of Quebec, 8.8s, 2003 2,246 2,352,011
------------
$ 5,235,898
--------------------------------------------------------------------------------------------------------
Chile - 1.0%
Empresa Electric Guacolda S.A., 7.6s, 2001 (Utilities
- Electric)## $ 1,520 $ 1,509,421
Enersis S.A., 6.6s, 2026 (Utilities - Electric) 1,232 1,189,816
------------
$ 2,699,237
--------------------------------------------------------------------------------------------------------
China - 0.2%
Hero Asian BVI Co. Ltd., 9.11s, 2001 (Utilities)## $ 539 $ 528,692
--------------------------------------------------------------------------------------------------------
Finland - 0.3%
Kansallis-Osake, 10s, 2002 (Banks and Credit Cos.) $ 776 $ 805,752
--------------------------------------------------------------------------------------------------------
Germany - 4.1%
Deutsche Telekom International Finance, 7.75s, 2005
(Telecommunications and Cable) $ 4,230 $ 4,300,302
KFW International Finance, Inc., 9.4s, 2004 (Banks
and Credit Cos.) 1,660 1,811,077
Landesbank Baden Wurttemberg, 7.875s, 2004 (Banks and
Credit Cos.) 4,945 5,088,682
------------
$ 11,200,061
--------------------------------------------------------------------------------------------------------
Iceland - 0.7%
Republic of Iceland, 6.125s, 2004 $ 1,942 $ 1,909,724
--------------------------------------------------------------------------------------------------------
Netherlands - 0.9%
KPN NV, 7.5s, 2005 (Telecommunications and Cable)## $ 2,593 $ 2,562,506
--------------------------------------------------------------------------------------------------------
Norway - 1.8%
Union Bank of Norway, 7.35s, 2049 (Banks and Credit Cos.)## $ 4,839 $ 4,773,819
--------------------------------------------------------------------------------------------------------
South Korea - 0.5%
Export-Import Bank Korea, 7.1s, 2007 (Banks and Credit Cos.) $ 1,471 $ 1,456,766
--------------------------------------------------------------------------------------------------------
Spain - 1.0%
Telefonica Europe BV, 7.35s, 2005 (Telecommunications
and Cable) $ 2,586 $ 2,589,181
--------------------------------------------------------------------------------------------------------
Sweden - 0.9%
AB Spintab, 6.8s, 2049 (Banks and Credit Cos.)## $ 2,570 $ 2,517,644
--------------------------------------------------------------------------------------------------------
United Kingdom - 0.4%
Royal Bank Scotland, 8.817s, 2049 (Banks and Credit Cos.) $ 990 $ 1,029,927
--------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 44,683,528
--------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $266,372,523) $263,681,136
--------------------------------------------------------------------------------------------------------
Repurchase Agreement - 3.0%
--------------------------------------------------------------------------------------------------------
Goldman Sachs, dated 10/31/00, due 11/01/00, total to
be received $8,010,464 (secured by various U.S.
Treasury and Federal Agency obligations in a
jointly traded account), at Cost $ 8,009 $ 8,009,000
--------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $274,381,523) $271,690,136
Other Assets, Less Liabilities - 0.0% 93,322
--------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $271,783,458
--------------------------------------------------------------------------------------------------------
## SEC Rule 144A restriction.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
-------------------------------------------------------------------------------
OCTOBER 31, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $274,381,523) $271,690,136
Cash 633
Receivable for investments sold 1,007,952
Receivable for fund shares sold 559,217
Interest receivable 3,967,799
Other assets 2,282
------------
Total assets $277,228,019
------------
Liabilities:
Distributions payable $ 385,387
Payable for investments purchased 1,547,207
Payable for fund shares reacquired 3,340,881
Payable to affiliates -
Management fee 2,624
Shareholder servicing agent fee 750
Distribution and service fee 11,780
Administrative fee 131
Accrued expenses and other liabilities 155,801
------------
Total liabilities $ 5,444,561
------------
Net assets $271,783,458
============
Net assets consist of:
Paid-in capital $289,103,534
Unrealized depreciation on investments (2,691,387)
Accumulated net realized loss on investments (14,501,350)
Accumulated distributions in excess of net investment income (127,339)
------------
Total $271,783,458
============
Shares of beneficial interest outstanding 40,388,703
==========
Class A shares:
Net asset value per share
(net assets of $173,419,757 / 25,743,511 shares of
beneficial interest outstanding) $6.74
=====
Offering price per share (100 / 97.5 of net asset value
per share) $6.91
=====
Class B shares:
Net asset value and offering price per share
(net assets of $75,483,252 / 11,245,884 shares of beneficial
interest outstanding) $6.71
=====
Class C shares:
Net asset value and offering price per share
(net assets of $22,056,532 / 3,276,661 shares of beneficial
interest outstanding) $6.73
=====
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $823,917 / 122,647 shares of beneficial
interest outstanding) $6.72
=====
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 (Unaudited)
-------------------------------------------------------------------------------
SIX MONTHS ENDED OCTOBER 31, 2000
-------------------------------------------------------------------------------
Net investment income:
Interest income $ 9,381,645
------------
Expenses -
Management fee $ 531,384
Trustees' compensation 5,863
Shareholder servicing agent fee 132,939
Distribution and service fee (Class A) 124,670
Distribution and service fee (Class B) 350,450
Distribution and service fee (Class C) 111,106
Administrative fee 23,263
Custodian fee 62,203
Printing 62,771
Postage 18,757
Auditing fees 44,852
Legal fees 15,732
Miscellaneous 144,883
------------
Total expenses $ 1,628,873
Fees paid indirectly (45,621)
Reduction of expenses by investment adviser (22,632)
------------
Net expenses $ 1,560,620
------------
Net investment income $ 7,821,025
------------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $ (1,364,817)
Futures contracts (90,388)
------------
Net realized loss on investments $ (1,455,205)
------------
Change in unrealized appreciation on investments $ 2,080,548
------------
Net realized and unrealized gain on investments $ 625,343
------------
Increase in net assets from operations $ 8,446,368
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
-------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 APRIL 30, 2000
(UNAUDITED)
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,821,025 $ 11,180,033
Net realized loss on investments (1,455,205) (3,111,640)
Net unrealized gain (loss) on investments 2,080,548 (3,195,332)
------------ ------------
Increase in net assets from operations $ 8,446,368 $ 4,873,061
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (5,126,147) $ (7,150,744)
From net investment income (Class B) (2,086,582) (2,548,364)
From net investment income (Class C) (590,420) (1,166,057)
From net investment income (Class I) (23,985) (80,787)
------------ ------------
Total distributions declared to shareholders $ (7,827,134) $(10,945,952)
------------ ------------
Net increase (decrease) in net assets from fund share
transactions $ 86,688,003 $(22,106,338)
------------ ------------
Total increase (decrease) in net assets $ 87,307,237 $(28,179,229)
Net assets:
At beginning of period 184,476,221 212,655,450
------------ ------------
At end of period (including accumulated distributions in
excess of net investment income of $127,339 and $121,230,
respectively) $271,783,458 $184,476,221
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
SIX MONTHS ENDED -----------------------------------------------------------------------
OCTOBER 31, 2000 2000 1999 1998 1997 1996
(UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 6.66 $ 6.87 $ 6.99 $ 7.04 $ 7.12 $ 7.10
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.21 $ 0.40 $ 0.43 $ 0.48 $ 0.47 $ 0.48
Net realized and unrealized gain
(loss) on investments 0.08 (0.22) (0.14) (0.07) (0.06) 0.03
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.29 $ 0.18 $ 0.29 $ 0.41 $ 0.41 $ 0.51
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.21) $(0.39) $(0.41) $(0.46) $(0.47) $(0.48)
In excess of net investment
income -- -- -- -- (0.02) (0.01)
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.21) $(0.39) $(0.41) $(0.46) $(0.49) $(0.49)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 6.74 $ 6.66 $ 6.87 $ 6.99 $ 7.04 $ 7.12
====== ====== ====== ====== ====== ======
Total return(+) 4.38%++ 2.71% 4.26% 5.97% 5.83% 7.50%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.92%+ 0.86% 0.84% 0.89% 0.94% 0.95%
Net investment income 6.21%+ 5.87% 6.14% 6.70% 6.57% 6.73%
Portfolio turnover 26% 74% 278% 288% 489% 385%
Net assets at end of period (000
Omitted) $173,420 $115,752 $134,086 $95,342 $91,887 $98,582
(S) Subject to reimbursement by the fund, the investment adviser agreed under a temporary expense reimbursement agreement to
pay all of the fund's operating expenses, exclusive of management and distribution and service fees. In consideration, the
fund pays a fee not greater than 0.40% of average daily net assets. To the extent actual expenses were over/ under this
limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.21 -- -- $ 0.48 $ 0.47 $ 0.48
Ratios (to average net assets):
Expenses## 0.94%+ -- -- 0.87% 0.89% 0.91%
Net investment income 6.19%+ -- -- 6.72% 6.62% 6.77%
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
SIX MONTHS ENDED ---------------------------------------------------------------------
OCTOBER 31, 2000 2000 1999 1998 1997 1996
(UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------------
CLASS B
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 6.64 $ 6.85 $ 6.97 $ 7.03 $ 7.11 $ 7.10
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.19 $ 0.34 $ 0.38 $ 0.41 $ 0.41 $ 0.42
Net realized and unrealized gain
(loss) on investments 0.06 (0.21) (0.14) (0.07) (0.05) 0.03
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.25 $ 0.13 $ 0.24 $ 0.34 $ 0.36 $ 0.45
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.18) $(0.34) $(0.36) $(0.40) $(0.42) $(0.42)
In excess of net investment income -- -- -- -- (0.02) (0.02)
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.18) $(0.34) $(0.36) $(0.40) $(0.44) $(0.44)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 6.71 $ 6.64 $ 6.85 $ 6.97 $ 7.03 $ 7.11
====== ====== ====== ====== ====== ======
Total return 3.85%++ 1.91% 3.48% 4.98% 4.99% 6.52%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.69%+ 1.65% 1.61% 1.70% 1.78% 1.75%
Net investment income 5.44%+ 5.09% 5.33% 5.80% 5.75% 5.90%
Portfolio turnover 26% 74% 278% 288% 489% 385%
Net assets at end of period (000
Omitted) $75,483 $45,214 $52,883 $39,229 $34,875 $26,464
(S) Subject to reimbursement by the fund, the investment adviser agreed under a temporary expense reimbursement agreement to
pay all of the fund's operating expenses exclusive of management and distribution and service fees. In consideration, the
fund pays a fee not greater than 0.40% of average daily net assets. To the extent actual expenses were over/ under this
limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.18 -- -- $ 0.41 $ 0.41 $ 0.42
Ratios (to average net assets):
Expenses## 1.71%+ -- -- 1.68% 1.77% 1.77%
Net investment income 5.42%+ -- -- 5.82% 5.76% 5.88%
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30,
SIX MONTHS ENDED ---------------------------------------------------------------------
OCTOBER 31, 2000 2000 1999 1998 1997 1996
(UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------------
CLASS C
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 6.66 $ 6.86 $ 6.99 $ 7.05 $ 7.13 $ 7.11
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.18 $ 0.34 $ 0.36 $ 0.41 $ 0.41 $ 0.41
Net realized and unrealized gain
(loss) on investments 0.07 (0.21) (0.14) (0.07) (0.06) 0.04
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.25 $ 0.13 $ 0.22 $ 0.34 $ 0.35 $ 0.45
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.18) $(0.33) $(0.35) $(0.40) $(0.41) $(0.41)
In excess of net investment income -- -- -- -- (0.02) (0.02)
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.18) $(0.33) $(0.35) $(0.40) $(0.43) $(0.43)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 6.73 $ 6.66 $ 6.86 $ 6.99 $ 7.05 $ 7.13
====== ====== ====== ====== ====== ======
Total return 3.79%++ 1.99% 3.23% 4.94% 5.08% 6.44%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.77%+ 1.71% 1.69% 1.74% 1.80% 1.80%
Net investment income 5.31%+ 5.03% 5.19% 5.76% 5.80% 5.76%
Portfolio turnover 26% 74% 278% 288% 489% 385%
Net assets at end of period (000
Omitted) $22,056 $22,825 $24,228 $20,131 $18,862 $13,842
(S) Subject to reimbursement by the fund, the investment adviser agreed under a temporary expense reimbursement agreement to
pay all of the fund's operating expenses exclusive of management and distribution and service fees. In consideration, the
fund pays a fee not greater than 0.40% of average daily net assets. To the extent actual expenses were over/ under this
limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.18 -- -- $ 0.41 $ 0.41 $ 0.41
Ratios (to average net assets):
Expenses## 1.79%+ -- -- 1.72% 1.81% 1.75%
Net investment income 5.29%+ -- -- 5.78% 5.80% 5.81%
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
PERIOD
YEAR ENDED APRIL 30, ENDED
SIX MONTHS ENDED ------------------------------------------ APRIL 30,
OCTOBER 31, 2000 2000 1999 1998 1997*
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------
CLASS I
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 6.65 $ 6.85 $ 6.98 $ 7.04 $ 7.08
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.21 $ 0.42 $ 0.43 $ 0.48 $ 0.15
Net realized and unrealized gain (loss) on
investments 0.07 (0.22) (0.14) (0.07) (0.03)
------ ------ ------ ------ ------
Total from investment operations $ 0.28 $ 0.20 $ 0.29 $ 0.41 $ 0.12
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.21) $(0.40) $(0.42) $(0.47) $(0.15)
In excess of net investment income -- -- -- -- (0.01)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.21) $(0.40) $(0.42) $(0.47) $(0.16)
------ ------ ------ ------ ------
Net asset value - end of period $ 6.72 $ 6.65 $ 6.85 $ 6.98 $ 7.04
====== ====== ====== ====== ======
Total return 4.32%++ 3.02% 4.28% 5.98% 1.72%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.77%+ 0.71% 0.69% 0.74% 1.17%+
Net investment income 6.32%+ 6.00% 6.21% 6.75% 8.68%+
Portfolio turnover 26% 74% 278% 288% 489%
Net assets at end of period (000 Omitted) $ 824 $ 684 $1,459 $1,466 $1,925
(S) Subject to reimbursement by the fund, the investment adviser agreed under a temporary expense reimbursement agreement to
pay all of the fund's operating expenses exclusive of management and distribution and service fees. In consideration, the
fund pays a fee not greater than 0.40% of average daily net assets. To the extent actual expenses were over/ under this
limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.21 -- -- $ 0.49 $ 0.15
Ratios (to average net assets):
Expenses## 0.79%+ -- -- 0.72% 1.17%+
Net investment income 6.30%+ -- -- 6.77% 8.68%+
* For the period from the inception of Class I shares, January 2, 1997, through April 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Limited Maturity Fund (the fund) is a diversified series of MFS Series Trust
IX (the trust). The trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
(2) Significant Accounting Policies
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 in good faith, at fair value, by 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 or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio without
incurring the additional transaction costs involved in buying and selling the
underlying securities. Should interest rates or securities prices move
unexpectedly, the fund may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
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 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 total 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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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 distributions from paid-in
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, 2000, the fund, for federal income tax purposes, had a capital loss
carryforward of $11,613,985 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), April
30, 2006, ($549,779), April 30, 2007, ($2,183,364), and April 30, 2008,
($3,828,919).
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that differ in their respective distribution and service fees.
All shareholders bear the common expenses of the fund based on daily net assets
of each class, without distinction between share classes. Dividends are declared
separately for each class. 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
the fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee, which is shown as a reduction of total
expenses in the Statement of Operations.
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. Included in Trustees' compensation is a net
periodic pension expense of $3,601 for the six months ended October 31, 2000.
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 incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$24,949 for the six months ended October 31, 2000, 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 $10,556 for the six months ended October
31, 2000. Fees incurred under the distribution plan during the six months ended
October 31, 2000, 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 dates 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 $3,464 and $129 for Class B and Class C shares, respectively, for
the six months ended October 31, 2000. Fees incurred under the distribution plan
during the six months ended October 31, 2000, were 0.92% and 1.00% of average
daily net assets attributable to Class B and Class C shares, respectively, on an
annualized basis. 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 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 six months ended October
31, 2000, were $28,488, $83,607, and $4,295 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 annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were
as follows:
PURCHASES SALES
-------------------------------------------------------------------------------
U.S. government securities $12,624,503 $20,030,281
----------- -----------
Investments (non-U.S. government securities) $54,634,608 $50,031,959
----------- -----------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $274,381,523
------------
Gross unrealized depreciation $ (3,688,157)
Gross unrealized appreciation 996,770
------------
Net unrealized depreciation $ (2,691,387)
============
(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. Transactions in
fund shares were as follows:
<TABLE>
<CAPTION>
Class A shares
SIX MONTHS ENDED OCTOBER 31, 2000 YEAR ENDED APRIL 30, 2000
--------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 26,156,970 $176,478,406 22,797,169 $ 154,386,404
Shares issued to shareholders
in reinvestment of distributions 559,706 3,757,354 1,055,732 7,110,448
Shares reacquired (18,341,619) (122,974,005) (26,002,105) (176,062,772)
----------- ------------ ----------- -------------
Net increase (decrease) 8,375,057 $ 57,261,755 (2,149,204) $ (14,565,920)
=========== ============ =========== =============
<CAPTION>
Class B shares
SIX MONTHS ENDED OCTOBER 31, 2000 YEAR ENDED APRIL 30, 2000
--------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,813,710 $ 52,625,935 4,403,639 $ 29,668,417
Shares issued to shareholders
in reinvestment of distributions 211,461 1,414,222 271,278 1,823,269
Shares reacquired (3,587,290) (23,979,368) (5,592,317) (37,604,735)
----------- ------------ ----------- -------------
Net increase (decrease) 4,437,881 $ 30,060,789 (917,400) $ (6,113,049)
=========== ============ =========== =============
<CAPTION>
Class C shares
SIX MONTHS ENDED OCTOBER 31, 2000 YEAR ENDED APRIL 30, 2000
--------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 799,620 $ 5,579,888 3,062,035 $ 20,658,157
Shares issued to shareholders
in reinvestment of distributions 47,879 321,015 106,089 714,980
Shares reacquired (997,892) (6,674,128) (3,270,557) (22,068,080)
----------- ------------ ----------- -------------
Net decrease (150,393) $ (773,225) (102,433) $ (694,943)
=========== ============ =========== =============
<CAPTION>
Class I shares
SIX MONTHS ENDED OCTOBER 31, 2000 YEAR ENDED APRIL 30, 2000
--------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 16,674 $ 118,445 141,817 $ 952,660
Shares issued to shareholders
in reinvestment of distributions 3,582 23,979 11,967 80,608
Shares reacquired (562) (3,740) (263,697) (1,765,694)
----------- ------------ ----------- -------------
Net increase (decrease) 19,694 $ 138,684 (109,913) $ (732,426)
=========== ============ =========== =============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. 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 six months ended
October 31, 2000, was $1,032. The fund had no significant borrowings during the
year.
(7) Financial Instruments
The fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates. These financial instruments include futures contracts.
The notional or contractual amounts of these instruments represent the
investment the fund has in particular classes of financial instruments and does
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. At October 31,
2000, there were no open futures contracts.
(8) Acquisition
At the close of business on May 19, 2000, the fund acquired all of the assets
and liabilities of the MFS Intermediate Income Fund. The acquisition was
accomplished by a tax-free exchange of 7,576,541 and 6,075,085 shares of Class A
and Class B of the fund, valued at $50,232,469 and $40,156,312, respectively,
for all of the assets and liabilities of MFS Intermediate Income Fund. MFS
Intermediate Income Fund then converted all of its outstanding shares of the
fund and distributed those shares to its shareholders. MFS Intermediate Income
Fund net assets on that date amounted to $90,388,781, including $(2,732,491) of
unrealized depreciation, were combined with the net assets of the fund. The
aggregate net assets of the fund after the acquisition were $270,818,925.
<PAGE>
<TABLE>
MFS(R) LIMITED MATURITY FUND
<S> <C>
TRUSTEES SECRETARY
J. Atwood Ives+ - Chairman and Chief Executive Stephen E. Cavan*
Officer, Eastern Enterprises (diversified services
company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ - Partner, Hemenway
& Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ - Adjunct Professor, Harvard
University Graduate School of Business INVESTOR INFORMATION
Administration For information on MFS mutual funds, call your
investment professional or, for an information
Charles W. Schmidt+ - Private Investor kit, call toll free: 1-800-637-2929 any business
day from 9 a.m. to 5 p.m. Eastern time (or leave a
Arnold D. Scott* - Senior Executive message anytime).
Vice President, Director, and Secretary,
INVESTOR SERVICE
MFS Investment Management MFS Service Center, Inc.
Jeffrey L. Shames* - Chairman and Chief P.O. Box 2281
Executive Officer, MFS Investment Management Boston, MA 02107-9906
Elaine R. Smith+ - Independent Consultant For general information, call toll free:
1-800-225-2606 any business day from
David B. Stone+ - Chairman, 8 a.m. to 8 p.m. Eastern time.
North American Management Corp.
(investment adviser) For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business day
INVESTMENT ADVISER from 9 a.m. to 5 p.m. Eastern time. (To use
Massachusetts Financial Services Company this service, your phone must be equipped with
500 Boylston Street a Telecommunications Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances, exchanges, or
DISTRIBUTOR stock and bond outlooks, call toll free:
MFS Fund Distributors, Inc. 1-800-MFS-TALK (1-800-637-8255) anytime from a
500 Boylston Street touch-tone telephone.
Boston, MA 02116-3741
WORLD WIDE WEB
CHAIRMAN AND PRESIDENT www.mfs.com
Jeffrey L. Shames*
PORTFOLIO MANAGER
James J. Calmas*
TREASURER
James O. Yost*
ASSISTANT TREASURERS
Mark E. Bradley*
Robert R. Flaherty*
Laura F. Healy*
Ellen Moynihan*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) LIMITED ------------
MATURITY FUND PRSRT STD
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MLM-3 12/00 28M 36/236/336/836
