<PAGE> 1
[LOGO M F S]
MFS Government Limited Maturity Fund
[Graphics]
Learning financial basics the easy way (see page 22)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter from the Chairman................................................... 1
Portfolio Manager's Overview............................................... 3
Portfolio Manager's Profile................................................ 5
Fund Facts................................................................. 6
Performance Summary........................................................ 6
Portfolio of Investments................................................... 9
Financial Statements....................................................... 10
Notes to Financial Statements.............................................. 16
Independent Auditors' Report............................................... 21
The ABCs of Investing...................................................... 22
The MFS Family of Funds(R)................................................. 24
Trustees and Officers...................................................... 25
</TABLE>
- -------------------------------------------------------------------------------
HIGHLIGHTS
- FOR THE YEAR ENDED DECEMBER 31, 1996, CLASS A SHARES OF THE FUND PROVIDED A
TOTAL RETURN AT NET ASSET VALUE OF 2.98%, CLASS B SHARES 2.08%, AND CLASS C
SHARES 2.12%.
- WHILE ECONOMIC MOMENTUM EASED IN LATE SUMMER, AND U.S. TREASURY YIELDS
DECLINED, MORE RECENT ECONOMIC DATA SUGGEST GROWTH HAS RETURNED TO SOMEWHAT
ABOVE-TREND LEVELS.
- THE FUND HAS A 50% POSITION IN MORTGAGE SECURITIES. WE CONTINUE TO BELIEVE
THAT THIS IS AN ATTRACTIVE SECTOR, AS YIELD SPREADS REMAIN FAVORABLE,
ISSUANCE PATTERNS LIGHT, AND THE LEVEL OF MORTGAGE REFINANCINGS LOW.
- -------------------------------------------------------------------------------
<PAGE> 3
LETTER FROM THE CHAIRMAN
Dear Shareholders:
[LOGO PHOTOGRAPH OF After more than six years of expansion, the U.S.
A. KEITH BRODKIN] economy appears headed toward another year of at
least moderate growth in 1997, although a few
signs point to the possibility of a modest rise in
inflation during the year. On the positive side,
the pattern of moderate growth and inflation set
over the past few years now seems fairly well
entrenched in the economy and, short of a major
international or domestic crisis, appears to have
enough momentum to remain on track for some time. Also, recent gains in such
important sectors as housing, automobiles, industrial production, and exports
indicate a fair amount of underlying strength in the economy. However, some
reason for caution can be seen in the continuing high level of consumer debt and
the attendant rise in personal bankruptcies, as well as in the modestly
disappointing level of holiday sales. Also, the ongoing tightness in labor
markets, and price rises in such important sectors as energy, could add some
inflationary pressures to the economy. Given these somewhat conflicting
indicators, we expect real (inflation-adjusted) growth to revolve around 2% in
1997, which would represent a modest decline from 1996.
In the bond markets, conflicting signals over the strength of the economy
have created near-term volatility. Even comments by Federal Reserve Chairman
Alan Greenspan late in 1996 created some uncertainty over the Federal Reserve
Board's next move. However, we expect the Fed to maintain its anti-inflationary
stance should signs of more rapid economic growth and, particularly, higher
inflation resurface. While inflationary forces largely remained in check in
1996, the continued strength in the labor market and rising energy prices mean
that a pickup in inflation is still possible. At the same time, the U.S. budget
deficit continues to decline and, as a percentage of gross domestic product, is
now less than 1%, which we consider a positive development for the bond markets.
Although interest rates may move higher over the coming months, we believe that,
at current levels, fixed-income markets remain equitably valued.
1
<PAGE> 4
LETTER FROM THE CHAIRMAN - continued
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/S/ A. KEITH BRODKIN
A. Keith Brodkin
Chairman and President
January 12, 1997
2
<PAGE> 5
PORTFOLIO MANAGER'S OVERVIEW
[LOGO PHOTOGRAPH OF Dear Shareholders:
STEVEN E. NOTHERN] Expectations in the fixed-income markets have
shifted over the past 12 months. Early in 1996,
expectations were for continued lowering of
short-term interest rates by the Federal Reserve
Board. Stronger economic conditions during the
second quarter, however, pushed growth sharply
above the Fed's long-term targeted trend rate of
2.0% to 2.5%, precluding further easing. The
market responded to this above-trend growth with a
sharp sell-off, as yields on two-year U.S. Treasuries moved from 5.17% on
January 1, 1996 to 6.12% by the end of June. As economic momentum eased in late
summer, however, market participants increasingly believed that economic growth
was once again slipping to a below-trend pace, and two-year Treasury yields
dropped back to the 5.60% level by the end of November. The latest economic data
suggest growth has returned to somewhat above-trend levels. Unemployment remains
low and consumer confidence high; with the U.S. economy now bumping up against
capacity constraints, the risk is that the inflation rate could continue to inch
upward. This has caused expectations to once again turn negative in the final
month of the year, with rising yields reversing much of the sharp rally enjoyed
by the bond markets since late summer.
For the year, two-year Treasury yields, which stood at 5.17% on January 1,
1996, rose to 5.88% by December 31, 1996, while yields on five-year Treasuries
rose from 5.39% to 6.21% over the same period. An investment in two-year
Treasuries during this period would have produced a total return of 4.80%, and
an investment in five-year Treasuries would have produced a total return of
2.43%.
In this environment, Class A shares of the Fund provided a total return of
2.98%, Class B shares 2.08%, and Class C shares 2.12% for the 12 months ended
December 31, 1996. These returns assume the reinvestment of distributions but
exclude the effects of any sales charges. During this same period, the Lehman
Brothers One- to Five-Year Government Bond Index (the Lehman Index), a
market-weighted index comprised of debt issued by the U.S. government and its
agencies with remaining maturities of one to five years, returned 4.60%. The
performance of the Fund lagged that of the broader market index for the year.
Early in the year, we had been suspect about the economy's ability to sustain an
above-trend surge, and were not
3
<PAGE> 6
PORTFOLIO MANAGER'S OVERVIEW - continued
positioned for the sharp sell-off caused by the cessation of Federal Reserve
easing of interest rates and by the failure of federal budget negotiations in
January. Also, we had not anticipated the growth slowdown later in the year,
believing that the move to lower rates was unjustified based on economic
fundamentals. Consequently, we maintained overall portfolio durations that were
slightly short to the broader market index, detracting from relative performance
during the second half of the year.
The Fund is a short-maturity (securities with remaining maturities of five
years or less)government-only fund that limits its overall interest rate
sensitivity to approximately that of a three-year Treasury. (While U.S. Treasury
securities fluctuate in value, they are guaranteed as to the timely payment of
interest and, if held to maturity, provide a guaranteed return of principal.)
The portfolio is currently positioned for stable to rising yields in the near
term, and it is 10% to 15% less sensitive to market price movements than the
Lehman Index, with a focus on securities which add incremental yield to the
Fund. In order to help protect principal in a rising interest rate environment,
we will continue to maintain above-average cash positions.
The portfolio currently has a 50% position in mortgage securities. We
remain optimistic about the mortgage market and continue to believe that this is
an attractive sector. Yield spreads remain favorable, issuance patterns light,
and prepayment volatility muted given the low level of mortgage refinancing.
Also, there are many potential buyers in the marketplace, especially for
securities exhibiting moderate price volatility. Portfolio positions are
concentrated in five- and 15-year balloon agency pass-throughs. These issues
have a price sensitivity comparable to two- and three-year Treasuries, with
yield advantages of 0.50% to 0.80%. Other positions represented are 30-year,
high-coupon agency pass-throughs, which yield 1.10% more than three-year
Treasuries, and very stable short-maturity collateralized mortgage obligations.
These short issues yield 0.40% and 0.50% more than two-year Treasuries.
4
<PAGE> 7
PORTFOLIO MANAGER'S OVERVIEW - continued
Our ability to invest in both Treasury and mortgage-backed securities
within a range of maturities has proven helpful in this rapidly changing
environment. The Fund will, however, continue to adhere to its policy of
avoiding any exposure to futures, option contracts, or the more volatile
mortgage-derivative securities. As always, we will continue to maintain our
commitment to providing competitive returns over the long term.
Respectfully,
/S/Steven E. Nothern
Steven E. Nothern
Portfolio Manager
- -------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
STEVEN E. NOTHERN BEGAN HIS CAREER AT MFS IN 1986 IN THE FIXED INCOME
DEPARTMENT. A GRADUATE OF MIDDLEBURY COLLEGE AND BOSTON UNIVERSITY'S GRADUATE
SCHOOL OF MANAGEMENT, HE WAS NAMED ASSISTANT VICE PRESIDENT IN 1987, VICE
PRESIDENT IN 1989 AND SENIOR VICE PRESIDENT IN 1993. IN 1992, HE BECAME
PORTFOLIO MANAGER OF MFS GOVERNMENT LIMITED MATURITY FUND. MR. NOTHERN IS A
CHARTERED FINANCIAL ANALYST.
NOTE TO SHAREHOLDERS: EFFECTIVE JANUARY 1, 1997, KEVIN M. CRONIN SUCCEEDS MR.
NOTHERN AS PORTFOLIO MANAGER OF THE FUND. MR. CRONIN JOINED MFS IN 1993 AS A
MEMBER OF THE FIXED INCOME DEPARTMENT AND IS A VICE PRESIDENT OF MFS. HE ALSO
MANAGES FIXED-INCOME PORTFOLIOS FOR MFS INSTITUTIONAL ADVISORS, INC. MR. CRONIN
IS A GRADUATE OF WESLEYAN UNIVERSITY AND HAS AN M.B.A. FROM BOSTON COLLEGE. HE
IS A CHARTERED FINANCIAL ANALYST. MR. NOTHERN WILL CONTINUE TO MANAGE MFS
GOVERNMENT SECURITIES FUND AS WELL AS THE GOVERNMENT SECURITIES PORTIONS OF THE
MFS CLOSED-END FUNDS.
- -------------------------------------------------------------------------------
5
<PAGE> 8
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
FUND FACTS
STRATEGY: THE FUND'S INVESTMENT OBJECTIVE IS TO PRESERVE
CAPITAL AND PROVIDE HIGH CURRENT INCOME
(COMPARED TO A PORTFOLIO ENTIRELY INVESTED IN
MONEY MARKET INSTRUMENTS).
COMMENCEMENT OF
INVESTMENT
OPERATIONS: SEPTEMBER 26, 1988
SIZE: $283.8 MILLION NET ASSETS AS OF DECEMBER 31, 1996
- --------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY
The information below and on the following page illustrates the historical
performance of MFS Government 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 the differences in
loads and fees paid by shareholders investing in the different classes. You
cannot invest in an index. All results are historical and assume the
reinvestment of dividends and capital gains.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT]
(For the Period from October 1, 1988 to December 31, 1996)
[CHART]
MFS Government Consumer Lehman Brothers
Limited Maturity Price Index- 1-5 Year
Class A US Government Bond Index
9747 10000 10000
9808 10126 10076
10841 10597 11247
11362 11244 12357
12321 11588 13958
13122 11921 14892
14040 12252 15916
13934 12580 15759
15378 12890 17774
15836 13353 18590
6
<PAGE> 9
PERFORMANCE SUMMARY - continued
<TABLE>
<CAPTION>
Life of
AVERAGE ANNUAL TOTAL RETURNS 1 Year 3 Years 5 Years Fund+
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Government Limited Maturity Fund
(Class A) including 2.50% sales charge + 0.43% + 3.22% + 4.62% + 5.72%
- --------------------------------------------------------------------------------
MFS Government Limited Maturity Fund
(Class A)
at net asset value + 2.98% + 4.09% + 5.15% + 6.05%
- --------------------------------------------------------------------------------
MFS Government Limited Maturity Fund
(Class B)
with CDSC - 1.79% + 2.26% + 4.19% + 5.65%
- --------------------------------------------------------------------------------
MFS Government Limited Maturity Fund
(Class B) without CDSC + 2.08% + 3.15% + 4.51% + 5.65%
- --------------------------------------------------------------------------------
MFS Government Limited Maturity Fund
(Class C)
with CDSC + 1.15% + 3.25% + 4.64% + 5.74%
- --------------------------------------------------------------------------------
MFS Government Limited Maturity Fund
(Class C) without CDSC + 2.12% + 3.25% + 4.64% + 5.74%
- --------------------------------------------------------------------------------
Average short-term U.S. government fund + 4.35% + 4.43% + 4.72% + 7.81%
- --------------------------------------------------------------------------------
Lehman Brothers 1 - 5 Year Government
Bond Index** + 4.59% + 5.31% + 5.90% + 7.84%
- --------------------------------------------------------------------------------
Consumer Price Index*++ + 3.56% + 2.91% + 2.88% + 3.56%
- --------------------------------------------------------------------------------
<FN>
* The Consumer Price Index is a popular measure of change in prices.
+ For the period from the commencement of investment operations, September 26,
1988 to December 31, 1996.
** Source: Lipper Analytical Services.
++ Source: CDA/Wiesenberger. Benchmark comparisons begin on August 1, 1988.
</TABLE>
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
Class B results, including the contingent deferred sales charge (CDSC), reflect
the applicable CDSC which declines over six years as follows: 4%, 4%, 3%, 3%,
2%, 1%, 0%. Class C shares have no initial sales charge but, along with Class B
shares, have higher annual fees and expenses than Class A shares. As of April 1,
1996, Class C shares redeemed within 12 months of purchase will be subject to a
1% CDSC.
Class B and Class C share performance includes the performance of the Fund's
Class A shares for periods prior to the commencement of offering of Class B
shares on September 7, 1993 and of Class C shares on August 1, 1994. Sales
charges and operating expenses for Class A, Class B, and Class C shares differ.
The Class A share performance, which is included within the Class B and Class C
share performance, including the CDSC, has been adjusted to reflect the CDSC
generally applicable to Class B and Class C shares rather than the initial sales
charge generally applicable to Class A shares. Class B and Class C share
performance has not been adjusted, however, to reflect differences in operating
expenses (e.g., Rule 12b-1 fees), which generally are lower for Class A shares.
Fund results reflect any applicable expense subsidies and waivers, without which
the performance results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
7
<PAGE> 10
PORTFOLIO STRUCTURE AS OF DECEMBER 31, 1996
[PIE CHART]
U.S. Treasuries 48%
Government Agencies 45%
Mortgage Backed 4%
Other 3%
- -------------------------------------------------------------------------------
TAX FORM SUMMARY
IN JANUARY 1997, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY
REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE
CALENDAR YEAR 1996.
- -------------------------------------------------------------------------------
8
<PAGE> 11
PORTFOLIO OF INVESTMENTS - December 31, 1996
<TABLE>
Bonds - 97.1%
<CAPTION>
- ------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. Federal Agencies - 45.1%
Federal Home Loan Mortgage Corp., 6.5s, 2001 $ 9,123 $ 9,136,114
Federal Home Loan Mortgage Corp., 7s, 2001 23,769 23,932,463
Federal Home Loan Mortgage Corp., 7.625s, 2022 9,503 9,455,918
Federal Home Loan Mortgage Corp., 8.5s,
2024 - 2026 13,186 13,676,500
Federal National Mortgage Assn., 7s, 2010 23 22,548
Federal National Mortgage Assn., 7.1s, 2001 5,450 5,438,065
Federal National Mortgage Assn., 7.5s,
2009 - 2099 42,986 43,577,280
Federal National Mortgage Assn., 8s, 2001 6,844 6,961,184
Federal National Mortgage Assn., 8.5s,
2001 - 2010 15,290 15,910,733
------------
$128,110,805
- ------------------------------------------------------------------------------
U.S. Government Guaranteed - 52.0%
Government National Mortgage Association - 4.1%
GNMA, 7.5s, 2009 $ 25 $ 25,147
GNMA, 8.5s, 2002 - 2010 3,803 3,972,064
GNMA, 9s, 2001 - 2007 7,208 7,554,672
------------
$ 11,551,883
- ------------------------------------------------------------------------------
U.S. Treasury Obligations - 47.9%
U.S. Treasury Notes, 8.75s, 1997 $29,000 $ 29,693,390
U.S. Treasury Notes, 7.75s, 1999 33,500 35,002,140
U.S. Treasury Notes, 9.125s, 1999 30,900 33,019,431
U.S. Treasury Notes, 6.125s, 2001 5,000 4,981,250
U.S. Treasury Notes, 6.25s, 2001 13,000 13,012,220
U.S. Treasury Notes, 6.625s, 2001 20,000 20,318,800
------------
$136,027,231
- ------------------------------------------------------------------------------
Total U.S. Government Guaranteed $147,579,114
- ------------------------------------------------------------------------------
Total Bonds (Identified Cost, $277,907,948) $275,689,919
- ------------------------------------------------------------------------------
Repurchase Agreement - 2.1%
- ------------------------------------------------------------------------------
Investments in repurchase agreements with
Goldman Sachs, in a joint trading account
($5,784,000 par), dated 12/31/96, due
1/01/97, total to be received by the Fund,
$5,786,121, collateralized by various U.S.
Treasury and federal agency obligations
(with $65,939,000 par and valued at
$65,464,808), at Cost $ 5,784 $ 5,784,000
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $283,691,948) $281,473,919
Other Assets, Less Liabilities - 0.8% 2,360,381
- ------------------------------------------------------------------------------
Net Assets - 100.0% $283,834,300
- ------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
9
<PAGE> 12
FINANCIAL STATEMENTS
<TABLE>
Statement of Assets and Liabilities
<CAPTION>
- --------------------------------------------------------------------------------
December 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $283,691,948) $281,473,919
Cash 231,840
Receivable for Fund shares sold 691,598
Receivable for investments sold 9,205,505
Interest receivable 2,630,012
Other assets 3,330
------------
Total assets $294,236,204
------------
Liabilities:
Payable for Fund shares reacquired $ 576,872
Payable for investments purchased 9,131,172
Distributions payable 504,766
Payable to affiliates -
Distribution fee 24,930
Management fee 9,286
Shareholder servicing agent fee 3,682
Accrued expenses and other liabilities 151,196
------------
Total liabilities $ 10,401,904
------------
Net assets $283,834,300
------------
Net assets consist of:
Paid-in capital $307,166,208
Unrealized depreciation on investments (2,218,029)
Accumulated net realized loss on investments (21,023,868)
Accumulated distributions in excess of net investment income (90,011)
------------
Total $283,834,300
============
Shares of beneficial interest outstanding 33,770,105
============
Class A shares:
Net asset value and redemption price per share
(net assets of $226,976,084 / 26,989,613 shares of
beneficial interest outstanding) $ 8.41
============
Offering price per share (100/97.5 of net asset value per
share) $ 8.63
============
Class B shares:
Net asset value and offering price per share
(net assets of $34,643,156 / 4,127,694 shares of
beneficial interest outstanding) $ 8.39
============
Class C shares:
Net asset value and offering price per share
(net assets of $22,215,060 / 2,652,798 shares of
beneficial interest outstanding) $ 8.37
============
On sales of $100,000 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.
</TABLE>
See notes to financial statements
10
<PAGE> 13
FINANCIAL STATEMENTS - continued
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
Net investment income:
Interest income $ 21,845,689
------------
Expenses -
Management fee $ 1,185,293
Trustees' compensation 41,656
Shareholder servicing agent fee (Class A) 363,114
Shareholder servicing agent fee (Class B) 74,543
Shareholder servicing agent fee (Class C) 30,547
Distribution and service fee (Class A) 363,114
Distribution and service fee (Class B) 325,993
Distribution and service fee (Class C) 203,644
Custodian fee 126,148
Postage 38,351
Auditing fees 34,250
Printing 20,109
Legal fees 5,533
Miscellaneous 150,226
------------
Total expenses $ 2,962,521
Fees paid indirectly (43,583)
------------
Net expenses $ 2,918,938
------------
Net investment income $ 18,926,751
------------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) $ (4,741,975)
Change in unrealized depreciation (6,064,184)
------------
Net realized and unrealized loss on investments $(10,806,159)
------------
Increase in net assets from operations $ 8,120,592
============
</TABLE>
See notes to financial statements
11
<PAGE> 14
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- ----------------------------------------------------------------------------------
Year Ended December 31, 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 18,926,751 $ 19,387,987
Net realized loss on investments (4,741,975) (3,334,299)
Net unrealized gain (loss) on investments (6,064,184) 11,705,046
------------- ------------
Increase in net assets from operations $ 8,120,592 $ 27,758,734
------------- ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (15,042,192) $(16,740,225)
From net investment income (Class B) (1,810,243) (1,710,513)
From net investment income (Class C) (1,094,415) (459,749)
------------- -------------
Total distributions declared to shareholders $ (17,946,850) $(18,910,487)
------------- ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 92,855,987 $ 98,891,174
Net asset value of shares issued to shareholders
in reinvestment of distributions 11,747,911 12,202,052
Cost of shares reacquired (111,021,792) (104,337,806)
------------- ------------
Increase (decrease) in net assets from Fund
share transactions $ (6,417,894) $ 6,755,420
------------- ------------
Total increase (decrease) in net assets $ (16,244,152) $ 15,603,667
Net assets:
At beginning of period 300,078,452 284,474,785
------------- ------------
At end of period (including accumulated
distributions in excess of net investment income
of $90,011 and $213,793, respectively) $ 283,834,300 $300,078,452
============= ============
</TABLE>
See notes to financial statements
12
<PAGE> 15
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
- ----------------------------------------------------------------------------------------
<CAPTION>
Year Ended December 31, 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------
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 $ 8.68 $ 8.42 $ 8.99 $ 8.98 $ 9.06 $ 9.09
-------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income $ 0.56 $ 0.59 $ 0.54 $ 0.52 $ 0.49 $ 0.52
Net realized and
unrealized gain
(loss) on
investments (0.30) 0.25 (0.61) 0.10 0.07 0.21
-------- -------- -------- -------- -------- --------
Total from
investment
operations $ 0.26 $ 0.84 $ (0.07) $ 0.62 $ 0.56 $ 0.73
-------- -------- -------- -------- -------- --------
Less distributions
declared to
shareholders -
From net investment
income $ (0.53) $ (0.58) $ (0.50) $ (0.51) $ (0.45) $ (0.49)
From net realized gain
on investments -- -- -- (0.10) (0.14) --
From paid-in capital -- -- -- -- (0.05) (0.27)
-------- -------- -------- -------- -------- --------
Total
distributions
declared to
shareholders $ (0.53) $ (0.58) $ (0.50) $ (0.61) $ (0.64) $ (0.76)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $ 8.41 $ 8.68 $ 8.42 $ 8.99 $ 8.98 $ 9.06
-------- -------- -------- -------- -------- --------
Total return++ 2.98% 10.36% (0.76)% 7.00% 6.51% 8.44%
Ratios (to average net
assets)/Supplemental
data:
Expenses## 0.84% 0.88% 0.89% 1.14% 1.38% 1.33%
Net investment income 6.55% 6.91% 6.28% 5.62% 5.50% 5.89%
Portfolio turnover 301% 447% 328% 247% 391% 1,256%
Net assets at end of
period (000 omitted) $226,976 $248,955 $257,154 $345,597 $296,788 $365,644
<FN>
++ 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.
# Per share data for periods subsequent to December 31, 1993 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
13
<PAGE> 16
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
- ------------------------------------------------------------------------------------
<CAPTION>
Year Ended
Year Ended February 28, Year Ended
December 31, -------------------- December 31,
1990sec. 1990 1989* 1996
- ------------------------------------------------------------------------------------
Class A Class B
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout each
period):
Net asset value - beginning of
period $ 9.33 $ 9.51 $ 9.63 $ 8.67
-------- -------- -------- --------
Income from investment
operations# -
Net investment income $ 0.53 $ 0.69 $ 0.23 $ 0.47
Net realized and unrealized
gain (loss) on investments -- 0.10 (0.11) (0.30)
------- -------- -------- --------
Total from investment
operations $ 0.53 $ 0.79 $ 0.12 $ 0.17
-------- -------- -------- --------
Less distributions declared to
shareholders -
From net investment income $ (0.48) $ (0.67) $ (0.17) $ (0.45)
From net realized gain on
investments -- (0.14) (0.02) --
From paid-in capital (0.29) (0.16) (0.05) --
-------- -------- -------- --------
Total distributions
declared to
shareholders $ (0.77) $ (0.97) $ (0.24) $ (0.45)
-------- -------- -------- --------
Net asset value - end of
period $ 9.09 $ 9.33 $ 9.51 $ 8.39
-------- -------- -------- --------
Total return++ 7.39%+ 8.43% 3.02%+ 2.08%
Ratios (to average net
assets)/Supplemental data:
Expenses## 1.40%+ 1.43% 1.41%+ 1.72%
Net investment income 7.01%+ 7.16% 6.97%+ 5.67%
Portfolio turnover 845% 615% 170% 301%
Net assets at end of period
(000 omitted) $427,849 $350,011 $117,584 $ 34,643
<FN>
sec. For the 10 months ended December 31, 1990.
* For the period from the commencement of investment operations, September 26,
1988 to February 28, 1989.
+ 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.
# Per share data for periods subsequent to December 31, 1993 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
14
<PAGE> 17
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993** 1996 1995 1994***
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
<CAPTION>
Class B 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 $ 8.41 $ 8.98 $ 9.17 $ 8.65 $ 8.39 $ 8.62
------- ------- ------- ------- ------- ------
Income from investment
operations# -
Net investment income $ 0.51 $ 0.47 $ 0.12 $ 0.48 $ 0.51 $ 0.17
Net realized and
unrealized gain (loss)
on investments 0.25 (0.62) (0.17) (0.30) 0.25 (0.20)
------- ------- ------- ------- ------- ------
Total from investment
operations $ 0.76 $ (0.15) $ (0.05) $ 0.18 $ 0.76 $ (0.03)
------- ------- ------- ------- ------- ------
Less distributions declared
to shareholders -
From net investment
income $ (0.50) $ (0.42) $ (0.11) $ (0.46) $ (0.50) $ (0.20)
From net realized gain on
investments -- -- (0.03) -- -- --
------- ------- ------- ------- ------- ------
Total distributions
declared to
shareholders $ (0.50) $ (0.42) $ (0.14) $ (0.46) $ (0.50) $ (0.20)
------- ------- ------- ------- ------- ------
Net asset value - end of
period $ 8.67 $ 8.41 $ 8.98 $ 8.37 $ 8.65 $ 8.39
------- ------- ------- ------- ------- ------
Total return 9.31% (1.65)% (1.54)%+ 2.12% 9.33% (0.33)%++
Ratios (to average net
assets)/Supplemental
data:
Expenses## 1.74% 1.79% 1.83%+ 1.69% 1.73% 1.62%+
Net investment income 6.02% 5.42% 4.58%+ 5.68% 5.87% 6.10%
Portfolio turnover 447% 328% 247% 301% 447% 328%
Net assets at end of period
(000 omitted) $33,759 $ 23,918 $ 11,268 $ 22,215 $17,365 $ 3,403
** For the period from the commencement of offering of Class B shares, September
7, 1993 to December 31, 1993.
*** For the period from the commencement of offering of Class C shares, August 1,
1994 to December 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for periods subsequent to December 31, 1993 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Government Limited Maturity Fund (the Fund) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, 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.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the Fund to obtain those securities in the
event of a default under the repurchase agreement. The Fund monitors, on a daily
basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement. The
Fund, along with other affiliated entities of Massachusetts Financial Services
Company (MFS), may utilize a joint trading account for the purpose of entering
into one or more repurchase agreements.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both 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.
Some government securities may be purchased on a "when-issued" or
"forward-delivery" basis, which means that the
16
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS - continued
securities will be delivered to the Fund at a future date usually beyond
customary settlement time.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure 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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return and, consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV. Distributions to shareholders are recorded on the
ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended December 31, 1996, $856,119 was reclassified from
accumulated net realized loss on investments to accumulated distributions in
excess of net investment income due to differences between book and tax
accounting for mortgage-backed securities. This change had no effect on the net
assets or net asset value per share.
At December 31, 1996, the Fund, for federal income tax purposes, had a capital
loss carryforward of $20,968,145, which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on December 31, 2002 ($14,381,215), December 31, 2003 ($2,302,419)
and December 31, 2004 ($4,284,511).
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the average
daily net assets of each class,
17
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS - continued
without distinction between share classes. Dividends are declared separately for
each class. No class has preferential dividend rights; differences in per share
dividend rates are generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate of
0.40% of average daily net assets.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $11,181 for the year ended
December 31, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$27,345 for the year ended December 31, 1996, as its portion of the sales charge
on sales of Class A shares of the Fund. The Trustees have adopted separate
distribution plans for Class A, Class B and Class C shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum (reduced to a maximum of 0.15% per annum for an indefinite
period) of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer, a distribution fee to MFD of
up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares, commissions to dealers and payments to MFD wholesalers for sales
at or above a certain dollar level, and other such distribution-related expenses
that are approved by the Fund. MFD retains the service fee for accounts not
attributable to a securities dealer which amounted to $13,230 for the year ended
December 31, 1996. 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 December 31, 1996 were 0.15%
of average daily net assets attributable to Class A shares on an annualized
basis.
The Class B and Class C distribution plans provide that the Fund will pay MFD a
monthly distribution fee of 0.75% per annum, and a service fee of up to 0.25%
per
18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS - continued
annum, of the Fund's average daily net assets attributable to Class B and Class
C shares. The service fee is currently being reduced to 0.15% on Class B shares
held over one year. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended to
be additional consideration for services rendered by the dealer with respect to
Class B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $1,814 and $127 for Class
B and Class C shares, respectively, for the year ended December 31, 1996. Fees
incurred under the distribution plans during the year ended December 31, 1996
were 0.96% and 1.00% of average daily net assets attributable to Class B and
Class C shares on an annualized basis, respectively.
A contingent deferred sales charge is imposed on shareholder redemption of Class
A shares, on purchases of $1 million or more, in the event of a shareholder
redemption within 12 months following the share purchase. A contingent deferred
sales charge is imposed on shareholder redemptions of Class B shares in the
event of a shareholder redemption within six years of purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class C shares in
the event of a shareholder redemption within 12 months of purchases made on or
after April 1, 1996. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended December 31,
1996 were $6,765, $131,522 and $2,718 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 average daily net assets of each class of shares at an
effective annual rate of up to 0.15%, up to 0.22% and up to 0.15% attributable
to Class A, Class B and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ----------------------------------------------------------------------------------
<S> <C> <C>
U.S. government securities $835,900,576 $849,500,403
============ ============
</TABLE>
The cost and unrealized depreciation in value of the investments owned by the
Fund, as computed on a federal income tax basis, are as follows:
<TABLE>
<S> <C>
Aggregate cost $283,758,452
============
Gross unrealized depreciation $ (2,457,322)
Gross unrealized appreciation 172,789
------------
Net unrealized depreciation $ (2,284,533)
============
</TABLE>
19
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS - continued
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Class A Shares
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
1996 1995
--------------------------- ---------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,719,260 $ 48,727,419 6,429,099 $ 55,071,853
Shares issued to
shareholders in
reinvestment of
distributions 1,141,768 9,677,959 1,254,515 10,748,996
Shares reacquired (8,536,403) (72,327,666) (9,556,148) (81,707,574)
---------- ------------ ---------- ------------
Net decrease (1,675,375) $(13,922,288) (1,872,534) $(15,886,725)
========== ============ ========== ============
</TABLE>
Class B Shares
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
1996 1995
--------------------------- ---------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,611,809 $ 22,099,165 2,787,579 $ 23,805,586
Shares issued to
shareholders in
reinvestment of
distributions 135,194 1,143,275 123,565 1,057,296
Shares reacquired (2,513,098) (21,287,379) (1,862,226) (15,909,193)
---------- ------------ ---------- ------------
Net increase 233,905 $ 1,955,061 1,048,918 $ 8,953,689
========== ============ ========== ============
</TABLE>
Class C Shares
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
1996 1995
--------------------------- ---------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,592,106 $ 22,029,403 2,341,030 $ 20,013,735
Shares issued to
shareholders in
reinvestment of
distributions 109,719 926,677 46,197 395,760
Shares reacquired (2,056,120) (17,406,747) (785,621) (6,721,039)
---------- ------------ --------- ------------
Net increase 645,705 $ 5,549,333 1,601,606 $ 13,688,456
========== ============ ========== ============
<FN>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS, or an affiliate of MFS, in an unsecured line of credit
with a bank which permits borrowings up to $350 million, collectively.
Borrowings may be made to temporarily finance the acquisition 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 December 31, 1996 was $3,108.
</TABLE>
20
<PAGE> 23
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of MFS Government Limited Maturity Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Government Limited Maturity Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
three years in the period then ended. 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 audit. The financial highlights for the periods prior to the year
ended December 31, 1994 indicated herein, were audited by other auditors whose
report dated January 19, 1994 expressed an unqualified opinion on those
statements and financial highlights.
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 securities owned as of
December 31, 1996, by correspondence with the custodian or other appropriate
auditing procedures where replies from brokers were not received. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Government Limited Maturity Fund at December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and financial highlights for each of the
three years in the period then ended, in conformity with generally accepted
accounting principles.
Boston, Massachusetts /S/Ernst & Young LLP
February 3, 1997
---------------------------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
21
<PAGE> 24
Introducing a quick and easy way to learn some financial basics:
THE ABCs OF INVESTING
part of MFS(R) Heritage Planning(SM)
[Picture of children with blocks]
This series of brief messages provides an overview of investment topics,
including:
* Dollar-cost Averaging: a simple method of investing that could work for
anyone
* Interest Rate Changes: What every fixed-income investor should know
* Lump-sum Rollovers: how to handle a windfall
* Professional Financial Advisers: why even smart investors may need one
* Straw into Gold: tips for weaving small lifestyle changes into dollars to
invest
* Weathering Market Downturns: how to maintain perspective
* Basic Steps Smart Investors Take Automatically
The series will include messages on other topics as they become available.
You can read through each topic quickly -- in five minutes at most. Of course,
these materials are not designed to turn you into an expert. Your financial
adviser can provide more information on any of the ABC subjects. A
conversation with your adviser might also provide an opportune occasion to
review your portfolio and to assess your present and future financial needs.
To request your free copy of THE ABCS OF INVESTING series, call MFS at
1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time.
As part of MFS Heritage Planning, your adviser has access to a wide range of
MFS materials he or she would be happy to share with you on topics related to
the intergenerational concerns of people today. These include financing
college tuition and a secure retirement, eldercare, tax-smart gifting
strategies, estate and health care planning, and other issues.
22
<PAGE> 25
It's Easy to Contact Us
[LOGO]
MFS AUTOMATED INFORMATION
ACCOUNT INFORMATION:
Call 1-800-MFS-TALK (1-800-637-8255)
anytime.
INVESTMENT OUTLOOK:
Call 1-800-637-4458 anytime for the MFS outlook
on the bond and stock markets.
[LOGO]
MFS PERSONAL SERVICE
ACCOUNT SERVICE/LITERATURE:
Call 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
PRODUCT INFORMATION:
Call 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time.
IRA SERVICE:
Call 1-800-637-1255 any business day
from 9 a.m. to 5 p.m. Eastern time.
SERVICE FOR THE HEARING-IMPAIRED:
Call 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time (TDD required).
[LOGO]
MFS ADDRESSES
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
WORLD WIDE WEB:
www.mfs.com
23
<PAGE> 26
THE MFS FAMILY OF FUNDS(R)
AMERICA'S OLDEST MUTUAL FUND GROUP
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-225-2606
any business day from 8 a.m. to 8 p.m. Eastern time (or leave a message
anytime). This material should be read carefully before investing or sending
money.
STOCK
- -------------------------------------------------------------------
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS(R) Capital Growth Fund
MFS(R) Emerging Growth Fund
MFS(R) Gold & Natural Resources Fund
MFS(R) Growth Opportunities Fund
MFS(R) Managed Sectors Fund
MFS(R) OTC Fund
MFS(R) Research Fund
MFS(R) Research Growth and Income Fund
MFS(R) Value Fund
STOCK AND BOND
- -------------------------------------------------------------------
MFS(R) Total Return Fund
MFS(R) Utilities Fund
BOND
- -------------------------------------------------------------------
MFS(R) Bond Fund
MFS(R) Government Mortgage Fund
MFS(R) Government Securities Fund
MFS(R) High Income Fund
MFS(R) Intermediate Income Fund
MFS(R) Strategic Income Fund
LIMITED MATURITY BOND
- -------------------------------------------------------------------
MFS(R) Government Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Municipal Limited Maturity Fund
WORLD
- -------------------------------------------------------------------
MFS(R)/Foreign & Colonial Emerging Markets
Equity Fund
MFS(R)/Foreign & Colonial International
Growth Fund
MFS(R)/Foreign & Colonial International
Growth and Income Fund
MFS(R) World Asset Allocation Fundsm
MFS(R) World Equity Fund
MFS(R) World Governments Fund
MFS(R) World Growth Fund
MFS(R) World Total Return Fund
NATIONAL TAX-FREE BOND
- -------------------------------------------------------------------
MFS(R) Municipal Bond Fund
MFS(R) Municipal High Income Fund
MFS(R) Municipal Income Fund
STATE TAX-FREE BOND
- -------------------------------------------------------------------
Alabama, Arkansas, California, Florida, Georgia, Maryland,
Massachusetts, Mississippi, New York, North Carolina, Pennsylvania,
South Carolina, Tennessee, Virginia,
West Virginia
MONEY MARKET
- -------------------------------------------------------------------
MFS(R) Cash Reserve Fund
MFS(R) Government Money Market Fund
MFS(R) Money Market Fund
24
<PAGE> 27
MFS[REGISTRATION MARK] GOVERNMENT LIMITED MATURITY FUND
TRUSTEES
A. Keith Brodkin* - Chairman and President
RICHARD B. BAILEY* - Private Investor; Former Chairman and Director (until
1991), Massachusetts Financial Services Company; Director, Cambridge Bancorp;
Director, Cambridge Trust Company
MARSHALL N. COHAN - Private Investor
LAWRENCE H. COHN, M.D. - Chief of Cardiac Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School
THE HON. SIR J. DAVID GIBBONS, KBE - Chief Executive Officer, Edmund Gibbons
Ltd.; Chairman, Bank of N.T. Butterfield & Son Ltd.
ABBY M. O'NEILL - Private Investor; Director, Rockefeller Financial Services,
Inc. (investment advisers)
WALTER E. ROBB, III - President and Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); President, Benchmark Consulting Group, Inc.
(office services); Trustee, Landmark Funds (mutual funds)
ARNOLD D. SCOTT* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
JEFFREY L. SHAMES* - President and Director, Massachusetts Financial Services
Company
J. DALE SHERRATT - President, Insight Resources, Inc. (acquisition planning
specialists)
WARD SMITH - Former Chairman (until 1994), NACCO Industries; Director,
Sundstrand Corporation
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
STEVEN E. NOTHERN*
TREASURER
W. THOMAS LONDON*
ASSISTANT TREASURER
JAMES O. YOST*
SECRETARY
STEPHEN E. CAVAN*
ASSISTANT SECRETARY
JAMES R. BORDEWICK, JR.*
* Affiliated with the Investment Adviser
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Ernst & Young LLP
INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
INVESTOR SERVICE
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606 any business day from 8
a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances and exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone telephone.
WORLD WIDE WEB
www.mfs.com
[DALBAR #1 LOGO] For the third year in a row, MFS earned a #1 ranking in the
DALBAR, Inc. Broker/Dealer Survey, Main Office Operations Service Quality
Category. The firm achieved a 3.48 overall score on a scale of 1 to 4 in the
1996 survey. A total of 110 firms responded, offering input on the quality of
service they received from 29 mutual fund companies nationwide. The survey
contained questions about service quality in 15 categories, including "knowledge
of phone service contacts," "accuracy of transaction processing," and "overall
ease of doing business with the firm."
25
<PAGE> 28
[Set horizontally on page]
MFS(R) GOVERNMENT LIMITED MATURITY FUND [DALBAR #1 Logo]
BULK RATE
500 Boylston Street U.S. POSTAGE
Boston, MA 02116 PAID
PERMIT #55638
[MFS(SM) Logo] BOSTON, MA
INVESTMENT MANGEMENT
WE INVENTED THE MUTUAL FUND(TM)
(C) 1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116
MGL-2 2/97/20M 28/228/328
<PAGE> 29
MFS(R) GOVERNMENT LIMITED MATURITY [DALBAR LOGO]
FUND ---------------------
500 Boylston Street BULK RATE
Boston, MA 02116 U.S. POSTAGE
LOGO PAID
PERMIT #55638
BOSTON, MA
---------------------
(C)1997 MFS Fund Distributors, Inc., MGL-2 2/97/20M 28/228/328
500 Boylston Street, Boston, MA 02116
