<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) MUNICIPAL
BOND FUND
ANNUAL REPORT o AUGUST 31, 1999
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DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 34)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 21
Notes to Financial Statements ............................................. 26
Independent Auditors' Report .............................................. 31
MFS' Year 2000 Readiness Disclosure ....................................... 33
Trustees and Officers ..................................................... 37
MFS ORIGINAL RESEARCH(SM)
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
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
The current investment and economic environment bears little resemblance to last
year's. One year ago, global economies were floundering, and the crisis in Asia
threatened an already weak U.S. economy. Corporate earnings were flat, and
economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low. Many
corporations are focused on improving their profitability, and investors have
been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999 will average 12% - 15%.
Global economies also are showing signs of strength, and the Asian crisis has
passed. In fact, Japan's economic woes seem to have reached bottom. Although the
process is in its infancy, some Japanese corporations not only are talking about
restructuring and cost cutting, they also are beginning to take action, looking
within to become more competitive and improve returns on equity. While still
lagging the United States, Europe is beginning to restructure and consolidate.
These signs of international growth have contributed to concerns that the U.S.
economy now may be too strong. In June, and again in August, the Fed raised
rates by one-quarter of a percentage point to help ward off the specter of
inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current market
many investors are taking on additional risk - whether through day trading or
investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago. We
believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top 25
stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged index
of common stock total return performance, are still the most overvalued. Such
extreme overvaluation makes the stock market sensitive to interest-rate news and
any negative earnings surprises. The Year 2000 (Y2K) computer problem is another
factor causing investor concern. While we believe corporate America is well
prepared to address any Y2K situations that may arise at year-end, no one can
predict investor behavior. In our opinion, it is investor behavior that has the
greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is through our
continuing commitment to MFS Original Research(R) and our fundamental investment
tenet of long-term investing. Whether markets are up or down, MFS analysts focus
on analyzing industries and visiting companies to determine the long-term
winners and the prices that will make them attractive opportunities. Because all
companies will not benefit equally from the improving international environment,
bottom-up research remains critical to identifying those that we believe are
successfully restructuring, consolidating, and gaining market share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at attractive
prices. For this reason, we are continuing to expand our domestic and
international capabilities to ensure that MFS has primary, in-house research on
companies worldwide. We believe that we have built the right investment team,
backed by MFS Original Research, to take advantage of those opportunities for
our shareholders.
We appreciate your confidence 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)
September 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Geoffrey L. Schechter]
Geoffrey L. Schechter
For the 12 months ended August 31, 1999, Class A shares of the Fund provided a
total return of -1.08% and Class B shares -1.87%. These returns, which include
the reinvestment of any distributions but exclude the effects of any sales
charges, compare to a 0.50% return over the same period for the Lehman Brothers
Municipal Bond Index (the Lehman Index), an unmanaged index of investment-grade
bonds, and to a -1.63% return for the average municipal bond fund tracked by
Lipper Analytical Services, Inc., an independent firm that reports mutual fund
performance.
Q. WHAT ROLE DID THE OVERALL ECONOMY PLAY IN THE PORTFOLIO'S UNDERPERFORMANCE
OVER THE PAST YEAR?
A. Over the past year, the Federal Reserve Board (the Fed) has both lowered and
raised short-term rates, but the economy has remained consistently strong.
The yield on the 30-year municipal general obligation bond began the year at
4.86% and ended at 5.52%, lowering bond prices and negatively affecting the
Fund's performance. Back in August 1998, Asia was in crisis, Russia
defaulted, and investors fled to the safety of U.S. government bonds. These
factors continued to drive yields to their lowest levels of the year.
Concerned then that the crisis could spread to the U.S. economy, one of our
first actions was to reduce our exposure to New York City and state
obligations, believing that Wall Street would be the first to feel what
looked like a global crisis. The economy has proven more resilient. Economic
growth remains strong, unemployment remains low, and global growth has turned
upward. Investors are now concerned that continued economic growth will lead
to an increase in inflation. This has led the Fed to raise interest rates.
Municipal bond interest rates went up 60 to 70 basis points (0.60% to 0.70%),
hurting the longer-duration bonds that typify our portfolio. The Lehman
Index, on the other hand, includes a broader mix of short- and long-term
bonds.
Q. WERE THERE PARTICULAR BOND ISSUES THAT PERFORMED POORLY?
A. In terms of sectors, the only significant source of underperformance was
health care, hospitals in particular. Cuts in Medicaid and health insurance
reimbursement rates have hit hospital earnings hard, with metropolitan
hospitals suffering the most. We had about the same weighting of health care
bonds as the Lehman Index did -- between 3% and 5%. On the other hand, we are
benefiting by having a smaller health care weighting than Lipper's average
municipal bond fund.
Q. WHICH ISSUES HELPED PERFORMANCE?
A. Short-maturity bonds outperformed over the period. With yields higher across
the maturity spectrum year over year, these bonds experienced smaller price
declines than long-maturity bonds.
Q. WHAT SECTORS DID YOU FAVOR DURING THE PERIOD?
A. We have been accumulating housing bonds, which now represent about 6% of the
Fund's assets. These bonds generally have low volatility and provide
incremental yield over similarly rated securities in other sectors, but they
present minimal credit risk. They are issued by housing agencies that provide
below-market-rate mortgages to people in targeted income brackets. The
mortgages are often secured by Ginnie Mae (Government National Mortgage
Association), Fannie Mae (Federal National Mortgage Association), or Freddie
Mac (Federal Home Loan Mortgage Corporation), although they're still tax
exempt. Another sector we like is utilities, and although some investors are
cautious about the sector, we believe it is an area in which deregulation has
spurred competition and represents value. At the end of the period, about 17%
of the Fund was invested in the utilities sector.
Q. WERE THERE ANY SHIFTS IN CREDIT QUALITY?
A. We have continued to upgrade the credit quality of the Fund during the past
12 months. Today the portfolio is almost 80% "AA" or higher, a 9% increase
over last year. The yield difference between an "AAA"-rated and a "BBB"-rated
general obligation bond has been extremely narrow. However, over the past
year, this difference has widened by 15 basis points (0.15%). We believe that
these spreads, although wider this year than last, do not represent value. We
prefer to give up a small amount of yield to upgrade the credit quality of
the portfolio.
Q. HOW DOES THE SUPPLY OF MUNICIPALS THIS YEAR COMPARE WITH LAST YEAR, AND WHAT
EFFECT HAS IT HAD ON THE PORTFOLIO?
A. The supply is down 24% through the first eight months of 1999 compared to the
same period in 1998. This reflects the higher absolute rates during 1999 and
the inability of municipalities to refinance outstanding high-cost debt with
new low-cost debt. The reduction in the new issuance has resulted in the
yield on municipal bonds declining modestly relative to U.S. Treasury bonds.
This ratio was 95% at the beginning of 1999 and declined to 92% at the end of
the period. We feel these yield ratios remain very attractive.
/s/ Geoffrey L. Schechter
Geoffrey L. Schechter
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.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
- --------------------------------------------------------------------------------
GEOFFREY L. SCHECHTER IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
PORTFOLIO MANAGER OF MFS MUNICIPAL BOND FUND. HE IS ALSO A MANAGER OF THE MFS(R)
SOUTH CAROLINA, NORTH CAROLINA, GEORGIA, VIRGINIA, AND WEST VIRGINIA MUNICIPAL
BOND FUNDS.
MR. SCHECHTER JOINED MFS AS INVESTMENT OFFICER IN 1993 AFTER WORKING AS A
MUNICIPAL CREDIT ANALYST WITH A MAJOR INSURANCE COMPANY. HE WAS NAMED PORTFOLIO
MANAGER IN 1993, ASSISTANT VICE PRESIDENT IN 1994, AND VICE PRESIDENT IN 1995.
MR. SCHECHTER IS A GRADUATE OF THE UNIVERSITY OF TEXAS AND HAS AN M.B.A. DEGREE
FROM BOSTON UNIVERSITY. HE IS A CHARTERED FINANCIAL ANALYST AND A CERTIFIED
PUBLIC ACCOUNTANT.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
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 all charges and expenses, for any other MFS
product is available from your financial consultant, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM
FEDERAL INCOME TAXES AS IS CONSISTENT WITH PROTECTION
OF SHAREHOLDERS' CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS DECEMBER 16, 1976
CLASS INCEPTION: CLASS A DECEMBER 16, 1976
CLASS B SEPTEMBER 7, 1993
SIZE: $1.5 BILLION NET ASSETS AS OF AUGUST 31, 1999
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and reflect
the percentage change in net asset value, including reinvestment of dividends.
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. (See Notes to Performance Summary for more information.) It is not
possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended August 31, 1999)
[Graphic Omitted]
MFS Municipal Lehman Brothers
Bond Fund Municipal
- Class A Bond Index
- ----------------------------------------------------
August, 1989 $ 9,525 $10,000
August, 1991 11,206 11,897
August, 1993 14,218 14,838
August, 1995 15,114 16,176
August, 1997 17,045 18,597
August, 1999 18,174 20,307
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH AUGUST 31, 1999
CLASS A
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Cumulative Total Return -1.08% +14.88% +29.03% +90.80%
- -------------------------------------------------------------------------------
Average Annual Total Return -1.08% + 4.73% + 5.23% + 6.67%
- -------------------------------------------------------------------------------
SEC Results -5.78% + 3.05% + 4.21% + 6.16%
- -------------------------------------------------------------------------------
CLASS B
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Cumulative Total Return -1.87% +12.02% +23.52% +80.52%
- -------------------------------------------------------------------------------
Average Annual Total Return -1.87% + 3.85% + 4.32% + 6.08%
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SEC Results -5.60% + 2.96% + 3.99% + 6.08%
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COMPARATIVE INDICES
1 Year 3 Years 5 Years 10 Years
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Average general municipal bond fund** -1.63% + 5.04% + 5.50% + 6.72%
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Lehman Brothers Municipal Bond Index+ +0.50% + 6.05% + 6.45% + 7.34%
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** Source: Lipper Analytical Services, Inc.
+ Standard & Poor's Micropal, Inc.
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
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.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax. See the
prospectus for details.
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 1999
QUALITY RATINGS
"AAA" 67.0%
"AA" 11.6%
"A" 13.1%
"BBB" 7.7%
Other 0.6%
<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 1999
<TABLE>
<CAPTION>
Municipal Bonds - 98.0%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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<S> <C> <C>
General Obligation - 15.0%
Birmingham, AL, 5.75s, 2019 $ 1,000 $ 1,019,200
Chicago, IL, Board of Education, AMBAC, 5.4s, 2017 3,000 2,904,630
Chicago, IL, Board of Education, MBIA, 6.25s, 2012 2,500 2,730,600
Chicago, IL, Capital Appreciation, AMBAC, 0s, 2011 5,000 2,585,250
Chicago, IL, Capital Appreciation, AMBAC, 0s, 2012 2,550 1,238,153
Chicago, IL, Capital Appreciation, FGIC, 0s, 2012 10,000 4,855,500
Clark County, NV, School District, MBIA, 7s, 2010 4,000 4,613,720
Clark County, NV, School District, Series B, FGIC,
5.5s, 2016 5,000 4,950,050
Commonwealth of Massachusetts, 6.5s, 2008 6,300 6,948,585
Commonwealth of Massachusetts, 5s, 2014 5,500 5,261,465
Commonwealth of Massachusetts, 5s, 2017 18,940 17,620,450
Commonwealth of Massachusetts, FGIC, 7s, 2009 7,000 8,017,660
Cook County, IL, MBIA, 5.625s, 2016 3,230 3,192,338
Cypress-Fairbanks, TX, Independent School District,
PSF-GTD, 5s, 2018 3,500 3,225,600
Detroit, MI, 6.25s, 2009 5,235 5,535,908
Detroit/Wayne County, MI, Stadium, FGIC, 5.5s, 2017 6,000 5,939,160
District of Columbia, MBIA, 6.5s, 2010 5,705 6,282,175
Florida Board of Education, Capital Outlay,
9.125s, 2014 1,735 2,342,164
Fort Bend, TX, Independent School District, PSF,
5.5s, 2015 3,700 3,695,264
Grapevine-Colleyville, TX, Independent School Dist.,
PSF, 0s, 2010 5,000 2,816,500
Highland Park Texas Independent School Dis,
5.125s, 2016 2,525 2,420,137
Jackson MI Public Schools, FGIC, 6s, 2013 1,500 1,575,195
Lewisville, TX, Independent School District, PSF,
5s, 2018 8,500 7,842,100
Manchester, NH, 5.875s, 2019 2,270 2,311,087
New York City, NY, 7.5s, 2002 12,500 13,347,125
New York City, NY, 7.5s, 2006 3,625 3,900,500
New York City, NY, 7.65s, 2006 160 172,701
New York City, NY, 7.5s, 2007 15,500 16,659,555
New York City, NY, 7.7s, 2009 60 64,645
New York City, NY, 5.75s, 2013 8,500 8,738,425
New York City, NY, 5.75s, 2014 9,500 9,706,815
New York City, NY, 5.75s, 2015 11,085 11,315,014
New York City, NY, Unrefunded 1999 Series B,
7.5s, 2008 8,660 9,299,714
Rockwall, TX, Independent School District, PSF,
0s, 2014 2,000 861,980
San Antonio, TX, 5s, 2020,(S)(S) 2,990 2,656,196
State of California, 5.5s, 2013 8,000 8,229,120
State of California, 5s, 2017 10,000 9,397,000
State of Florida, Broward County Expressway
Authority, 10s, 2014 4,350 6,239,466
State of Washington, 6.75s, 2010 3,880 4,387,116
State of Washington, 6s, 2012 4,360 4,659,401
--------------
$ 219,557,664
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State and Local Appropriation - 20.5%
California Public Works Board, Lease Rev. (California
State University), 5.3s, 2015 $ 6,655 $ 6,526,425
California Public Works Board, Lease Rev. (California
State University), 5.5s, 2015 9,820 9,828,151
California Public Works Board, Lease Rev. (Department
of Corrections), AMBAC, 5.25s, 2013 6,795 6,826,597
California Public Works Board, Lease Rev. (University
of California), 5.5s, 2014 4,500 4,585,275
Chicago, IL, Board of Education, MBIA, 6.25s, 2009 5,160 5,585,236
Chicago, IL, Board of Education, MBIA, 6.25s, 2015 20,295 21,743,048
Delaware Valley, PA, Regional Finance Authority,
AMBAC, 7.147s, 2018, (++) 16,250 16,151,687
Indiana St. Office Building Commission, Miami
Correctional Phase 1 A, AMBAC, 5.5s, 2016 4,690 4,638,082
Indiana St. Office Building Commission, Miami
Correctional Phase 1 A, AMBAC, 5.5s, 2017 1,400 1,370,110
Kansas City, MO, Municipal Assistance, MBIA,
5.125s, 2015 5,195 4,980,498
King County, IL, Washington Lease Rev. (King Street
Center), MBIA, 5.125s, 2017 6,975 6,543,805
Los Angeles County, CA, Public Works Financing
Authority (Multiple Capital Facilities), AMBAC,
5.125s, 2017 4,900 4,703,020
Massachusetts Bay Transportation Authority,
6.1s, 2013 10,200 10,927,362
Massachusetts Bay Transportation Authority,
5.875s, 2015 4,500 4,698,090
Massachusetts Bay Transportation Authority, 7s, 2021 10,185 11,739,536
Massachusetts Bay Transportation Authority, FGIC,
5s, 2023 17,970 16,158,265
Metropolitan Government of Nashville & Davidson
County, TN, 7s, 2011 5,280 5,582,069
Metropolitan Transportation Authority, NY, Commuter
Facilities Rev., MBIA, 5.5s, 2011 3,430 3,522,438
Metropolitan Transportation Authority, NY, Service
Contract, 5.75s, 2013 5,600 5,759,712
New York Dormitory Authority Rev., Mental Health
Services Facilities, 6s, 2007 1,475 1,566,745
New York Dormitory Authority Rev., Mental Health
Services Facilities, 5.75s, 2010 2,000 2,077,240
New York Dormitory Authority Rev., Mental Health
Services Facilities, 5s, 2018 2,500 2,274,700
New York Dormitory Authority Rev. (City University),
5.75s, 2013 25,150 25,867,278
New York Dormitory Authority Rev. (City University),
5.75s, 2013 5,000 5,142,600
New York Dormitory Authority Rev. (City University),
AMBAC, 5.25s, 2015 5,000 4,903,800
New York Dormitory Authority Rev. (State University),
5s, 2013 3,660 3,463,751
New York Dormitory Authority Rev. (State University),
5.5s, 2013 7,875 7,924,849
New York Thruway Authority, Local Highway & Bridges,
5.25s, 2013 6,000 5,805,420
New York Urban Development Corp., 5.5s, 2016 14,690 14,731,573
New York Urban Development Corp., Correctional
Facilities, 5.5s, 2014 5,000 4,998,250
New York Urban Development Corp., Correctional
Facilities, FSA, 5.5s, 2014 4,525 4,604,459
New York Urban Development Corp., Correctional
Facilities, 5.375s, 2015 11,405 11,116,681
Ohio St. Building Authority, State Facilities Adult
Correctional Series A, 5.5s, 2013 4,000 4,044,480
Philadelphia, PA, Municipal Authority, MBIA,
5.4s, 2017 5,000 4,888,550
Rhode Island Convention Center Authority, MBIA,
5.25s, 2015 20,870 20,427,139
San Bernardino, CA, Joint Powers Financing Authority
Lease Rev. (California Dept. of Transportation),
5.5s, 2014 10,000 10,039,200
Santa Clara County, CA, Certificates of
Participation, AMBAC, 6.25s, 2016 8,210 8,607,364
Wayne County, MI, MBIA, 5.25s, 2016 5,750 5,598,603
--------------
$ 299,952,088
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Refunded and Special Obligations - 13.4%
Austin, TX, Utility Systems Rev., 10.75s 2010 $ 2,615 $ 2,741,488
Chicago, IL, Public Building Commission Mortgage
Rev., ETM, 7.125s 2015 6,590 6,783,878
Clark County, NV, School District, MBIA, 7s 2009 10,050 10,633,905
Commonwealth of Massachusetts, 6.875s 2010 4,825 5,145,959
Davenport, IA, Hospital Rev. (St. Luke's Hospital),
AMBAC, 7.4s 2020 2,715 2,850,451
District of Columbia, MBIA, 6.5s 2010 295 328,037
Florida Board of Education, Capital Outlay, ETM,
9.125s 2014 265 354,655
Illinois Health Facilities Authority Rev.,
Prerefunded Series A, MBIA, 5.7s, 2011 1,495 1,603,522
Maryland Health & Higher Education Facilities
Authority Rev. (University of Maryland Medical
System), FGIC, 7s 2017 7,945 8,498,051
Massachusetts Health & Educational Facilities
(University Hospital), MBIA, 7.25s 2019 4,500 4,717,170
Massachusetts Port Authority Rev., "C", ETM, 13s 2013 3,500 5,481,280
Missouri Regional Convention & Sports Complex
Authority, 6.8s 2011 8,950 9,727,576
Missouri Regional Convention & Sports Complex
Authority, 6.9s 2021 21,520 23,385,569
New York City, NY, 7.65s 2006 4,840 5,282,182
New York City, NY, 7.7s 2009 3,940 4,304,411
New York City, NY, 8s 2018 2,475 2,689,805
New York City, NY, Prerefunded 1999 Series B,
7.5s, 2008 1,340 1,456,245
New York Urban Development Corp., Correctional
Facilities, 7.625s 2006 7,570 8,062,429
New York Urban Development Corp., Correctional
Facilities, 7.375s 2018 4,000 4,349,280
Pennsylvania Convention Center Authority Rev., ETM,
6.7s 2016 41,195 46,753,441
Philadelphia, PA, Municipal Authority Rev., FGIC,
7.1s 2011 6,000 6,481,560
Philadelphia, PA, School District, MBIA, 7s 2005 9,440 10,000,830
Rhode Island Depositors Economic Protection Corp.,
FSA, 5.75s 2014 9,800 10,277,574
State of Florida, Jacksonville Transportation
Authority, ETM, 9.2s 2015 2,000 2,711,360
Washington Public Power Supply System Rev. (Nuclear
Project #2), 7.625s 2010 10,815 11,503,916
--------------
$ 196,074,574
- --------------------------------------------------------------------------------------------------
Airport and Port Revenue - 1.9%
Connecticut Airport Rev. (Bradley International
Airport), FGIC, 7.65s, 2012 $ 5,000 $ 5,626,500
Greater Orlando Aviation Authority, Amt. Series A,
FGIC 5.25s, 2010 3,200 3,236,096
Minneapolis and St. Paul Minnesota, Amt. Series B,
FGIC, 5.625s, 2012 6,365 6,471,295
Philadelphia, PA, Parking Authority Rev., Airport,
FSA, 5.625s, 2015 3,710 3,735,933
Port of Seattle, WA, FGIC, 5.5s, 2021 4,000 3,905,200
Tucson, AZ, Airport Authority Rev., MBIA, 5.7s, 2013 5,000 5,121,050
--------------
$ 28,096,074
- --------------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 18.5%
Austin, TX, Utility Systems Rev., AMBAC,
6.75s, 2012### $ 2,500 $ 2,837,675
Beaver County, PA, Industrial Development Authority,
Pollution Control Rev. (Ohio Edison Co.),
4.65s, 2033 8,500 8,248,995
Georgia Municipal Electric Authority Rev., AMBAC,
6.5s, 2017 8,510 9,421,251
Georgia Municipal Electric Authority Rev., FGIC,
5.5s, 2020 5,045 5,026,031
Intermountain Power Agency, UT, 6.15s, 2014 44,600 47,089,126
Intermountain Power Agency, UT, AMBAC, 6s, 2021 9,000 9,691,380
Intermountain Power Agency, UT, MBIA, 6s, 2016 10,000 10,283,200
Intermountain Power Agency, UT, MBIA, 5s, 2019### 9,330 8,465,296
Long Island, NY, Power Authority Rev., FSA, 0s, 2010 10,000 5,614,300
Long Island, NY, Power Authority Rev., FSA, 0s, 2011 9,600 5,059,488
Massachusetts Municipal Wholesale Electric Co., MBIA,
6.75s, 2017 6,030 6,399,518
Matagorda County, TX (Reliant Energy), 5.95s, 2030 8,000 7,568,160
McAlester, OK, Public Works Authority, Utility System
Rev., FSA, 5.75s, 2020 5,900 5,822,474
Mercer County, ND, Pollution Control Rev. (Antelope
Valley Station), AMBAC, 7.2s, 2013 4,000 4,663,960
Michigan Strategic Fund, Limited Obligation Rev.
(Detroit Edison), MBIA, 7s, 2008 3,000 3,426,150
North Carolina Eastern Municipal Power, MBIA,
5.7s, 2013 7,000 7,158,410
North Carolina Eastern Municipal Power, MBIA,
5.625s, 2014 7,735 7,867,965
North Carolina Eastern Municipal Power, MBIA,
5.125s, 2017 13,425 12,691,458
North Carolina Eastern Municipal Power, MBIA,
6.5s, 2018 9,250 10,297,192
Northern California Transmission Agency, MBIA,
7s, 2013 4,000 4,654,000
Philadelphia, PA, Gas Works Revenue, Second Series,
FSA, 5.5s, 2013 3,000 3,013,020
Piedmont, SC, Municipal Power Agency, FGIC,,
6.25s 2021 4,150 4,515,947
Puerto Rico Electric Power Authority, Power Rev.,
FSA, 5.25s, 2015 5,000 4,966,800
Puerto Rico Electric Power Authority, Power Rev.,
FSA, 5.25s, 2016 6,000 5,926,020
Washington Public Power Supply System Rev. (Nuclear
Project #1), MBIA, 5.75s, 2010 13,100 13,625,048
Washington Public Power Supply System Rev. (Nuclear
Project #1), MBIA, 5.75s, 2011 7,500 7,741,500
Washington Public Power Supply System Rev. (Nuclear
Project #1), FSA, 5.125s, 2014 12,500 11,987,875
Washington Public Power Supply System Rev. (Nuclear
Project #2), MBIA, 5.625s, 2010 10,000 10,313,100
Washington Public Power Supply System Rev. (Nuclear
Project #2), MBIA, 5.7s, 2012 15,000 15,366,750
Washington Public Power Supply System Rev. (Nuclear
Project #3), FGIC, 0s, 2005 6,895 5,212,206
Washington Public Power Supply System Rev. (Nuclear
Project #3), 7.125s, 2016 5,145 5,949,112
--------------
$ 270,903,407
- --------------------------------------------------------------------------------------------------
Health Care Revenue - 3.3%
Baxter County, AR, Hospital Rev., 5.375s, 2014 $ 1,000 $ 940,330
Baxter County, AR, Hospital Rev., 5.6s, 2021 2,000 1,847,700
Bell County, TX, Health Facilities Development Corp.
Rev. (Buckner Retirement Facility), 5.25s, 2019 2,500 2,243,725
Denver, CO, Health & Hospital Rev., 5.375s, 2028 4,350 3,841,094
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital), 5.25s, 2020 4,345 3,934,484
Harris County Texas Health Facilities, Project Series
A (Texas Childrens Hospital), 5.375s, 2013 3,890 3,800,491
Harris County Texas Health Facilities, Project Series
A (Texas Childrens Hospital), 5.375s, 2015 4,300 4,135,439
Illinois Educational Facilities Authority Rev.
(Centegra Health Systems), 5.25s, 2024 5,500 4,852,595
Lufkin, TX, Health Facilities Development Corp.
(Memorial Health System of East Texas),
6.875s, 2026 1,385 1,459,014
Marion County Florida Hospital District Revenue,
Refunding and Improvement Health Systems Munroe
Registered, 5.625s, 2019 2,610 2,507,949
Massachusetts Health & Educational Facilities
(Caritas Christi), 5.7s, 2015 2,500 2,366,900
Michigan Hospital Finance Authority Rev. (Genesys
Regional Medical), 5.5s, 2027 9,000 7,959,690
Michigan Hospital Finance Authority Rev. (Mercy
Health Services), 5.625s, 2016 8,375 8,216,294
--------------
$ 48,105,705
- --------------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 0.6%
Massachusetts Development Finance Agency (Springfield
Resources Recovery), 5.625s, 2019 $ 7,170 $ 6,883,702
Scioto County, OH (Norfolk Southern Corp.),
5.3s, 2013 2,500 2,380,650
--------------
$ 9,264,352
- --------------------------------------------------------------------------------------------------
Insured Health Care Revenue - 8.4%
Albany-Dougherty County, GA, Hospital Authority Rev.
(Phoebe Putney Memorial Hospital, Inc.), AMBAC,
7.47s, 2013(++) $ 1,550 $ 1,576,660
District of Columbia, Hospital Rev. (Medlantic
Healthcare), MBIA, 5.25s, 2019 6,750 6,491,002
Illinois Development Finance Authority Rev. (Provena
Health), (Provena Health), MBIA, 5.75s, 2016 5,980 6,005,176
Illinois Development Finance Authority Rev. (Provena
Health), Series A, MBIA, 5.25s, 2012 5,900 5,822,238
Illinois Educational Facilities Authority Rev.
(Alexian Brothers Health Systems), FSA, 5.25s, 2013 2,685 2,621,070
Illinois Educational Facilities Authority Rev. (Holy
Family Medical Center), MBIA, 5.125s, 2017 6,975 6,474,544
Illinois Health Facilities Authority Rev., Unrefunded
Balance, MBIA, 5.7s, 2011 3,005 3,093,167
Lancaster County, NE, Hospital Authority Rev. (Bryan
Memorial Hospital), MBIA, 5.375s, 2017 4,250 4,119,015
Lauderdale County & Florence, AL, Health Care
Authority Rev. (Coffee Health Group), MBIA,
5.75s, 2012 2,500 2,548,300
Michigan Hospital Finance Authority Rev. (Sisters of
Mercy Hospital), MBIA, 5.375s, 2014 9,000 9,039,060
New York Dormitory Authority Rev. (Brookdale
Hospital), AMBAC, 5.2s, 2014 4,915 4,806,133
New York Dormitory Authority Rev., Secured Hospital
(Interfaith Medical Center), AMBAC, 5.25s, 2014 4,320 4,237,272
New York Dormitory Authority Rev. (Wyckoff Heights
Medical Center), AMBAC, 5.2s, 2014 2,500 2,444,625
North Central, TX, Health Facility Development Corp.
Rev. (Texas Health Resources System), MBIA,
5s, 2017 6,000 5,488,380
North Texas Health Facilities Development Corp.
(United Regional Health Care Systems, Inc.), MBIA,
5s, 2014 8,980 8,461,674
Peninsula Ports Authority, VA (Whittaker Memorial),
FHA, 8.7s, 2023 1,595 1,605,368
Pennsylvania Higher Educational Facilities (Allegheny
Delaware Valley), MBIA, 5.3s, 2006 1,975 1,970,378
Pennsylvania Higher Educational Facilities (Allegheny
Delaware Valley), MBIA, 5.875s, 2016 5,000 4,903,600
Sayre, PA, Health Care Facilities Authority Rev.
(Guthrie Healthcare Systems), AMBAC, 7s, 2011 6,000 6,294,600
Sierra View, CA, Local Health Care District Rev.,
ACA, 5.25s, 2018 5,000 4,632,150
Spartanburg County, SC, Health Service District,
Inc., MBIA, 5.125s, 2017 6,125 5,787,206
Tarrant County, TX, Health Facilities Development
Corp. (Fort Worth Osteopathic), MBIA, 6s, 2021 6,000 6,260,340
Tarrant County, TX, Health Facilities Development
Corp. (Texas Health Resources), MBIA, 5.25s, 2018 8,605 8,136,716
Washington County, PA, Hospital Authority Rev.
(Washington Hospital), AMBAC, 7.15s, 2017 9,000 9,359,100
--------------
$ 122,177,774
- --------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.8%
California Statewide Community Development Authority
(Equity Residential), 5.2s, 2029 $ 1,850 $ 1,815,997
California Statewide Community Development Authority
(Irvine Apartments), 5.25s, 2025 3,500 3,339,350
Colorado Housing Finance Authority, FHA, 8.3s, 2023 4,000 4,187,240
San Bernardino County California, Equity Residential
Redlands A, 5.2s, 2029 2,000 1,963,240
--------------
$ 11,305,827
- --------------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.5%
Illinois Dedicated Tax Rev. (Civic Center), AMBAC,
6.25s, 2011 $ 3,640 $ 3,937,533
Illinois Sales Tax Rev., 0s, 2009 8,965 5,403,923
Illinois Sales Tax Rev., 6.5s, 2022 5,000 5,481,150
Metropolitan Atlanta, GA, Rapid Transit Authority,
6.25s, 2018 4,580 4,867,853
Territory of Virgin Islands Public Finance Authority,
5.5s, 2022 2,000 1,897,240
--------------
$ 21,587,699
- --------------------------------------------------------------------------------------------------
Single Family Housing Revenue - 6.0%
Broward County Florida Housing Finance Authority,
Refunding Series B, MBIA, 4.95s, 2032 $ 7,000 $ 6,759,760
California Housing Finance Agency Rev., Home Mortgage
Series B, MBIA, 0s, 2029 10,000 2,299,600
California Housing Finance Agency Rev., Home Mortgage
Series F, MBIA, 0s, 2028 4,455 998,410
California Housing Finance Agency Rev., Capital
Appreciation Series D 2, 0s, 2030 15,675 2,987,342
California Rural Home Mortgage Finance Authority,
GNMA, 5.2s, 2030 1,800 1,898,874
Chicago Illinois Single Family Mortgage Rev.,
Collateral Series A, GNMA, 6.35s, 2030 2,200 2,328,018
Colorado Housing Finance Authority, 7.15s, 2014 525 565,205
Colorado Housing Finance Authority, 6.05s, 2016 1,250 1,300,587
Colorado Housing Finance Authority, 6.55s, 2025 1,125 1,195,965
Colorado Housing Finance Authority, 7.4s, 2027 1,510 1,622,012
Colorado Housing Finance Authority, 6.35s, 2029 4,500 4,668,120
Colorado Housing Finance Authority, 6.45s, 2030 3,500 3,662,680
Colorado Housing Finance Authority, 6.8s, 2030 2,200 2,351,558
Jefferson Parish, LA, Home Mortgage Authority Rev.,
GNMA, 6.75s, 2030 1,350 1,449,670
Lee County Florida Housing Finance Authority, Multi
Cmty Program Series A 4, GNMA, 7s, 2031 775 834,722
Lubbock Texas Housing Single Family Mortgage, Program
Series A, GNMA, 6.1s, 2030 3,700 3,847,852
Maryland Community Development Administration,
7.3s, 2025 6,875 7,185,269
Mississippi Home Corp., GNMA, 7.55s, 2027 1,490 1,613,938
Mississippi Home Corp., GNMA/FNMA, 5s, 2030 4,000 4,190,160
Mississippi Home Corp., GNMA/FNMA, 5.25s, 2031 3,500 3,673,040
Missouri Housing Development Commission, Mortgage
Rev., GNMA, 6.3s, 2029 1,145 1,190,331
Missouri Housing Development Commission Meeting Rev.,
GNMA, 6.3s, 2030 3,500 3,664,955
Missouri Housing Development Commission Meeting Rev.,
GNMA, 6.7s, 2030 4,500 4,825,980
Missouri St. Housing Development Commission Mortgage,
Amt. Single Family Series E 1, GNMA/FNMA,
6.45s, 2029 1,000 1,058,980
New Mexico Mortgage Finance Authority, 6.75s, 2029 2,000 2,145,100
New Mexico Mortgage Finance Authority, GNMA/FNMA,
6.25s, 2030 5,110 5,365,857
New Mexico Mortgage Finance Authority, GNMA/FNMA,
6.25s, 2030 2,220 2,323,874
Oklahoma Housing Finance Agency, 6.8s, 2026 1,000 1,066,210
Oklahoma Housing Finance Agency Single Family,
Mortgage Series B 1, 6.8s, 2016 1,000 1,066,290
Pima County, AZ, Industrial Development Authority,
GNMA, 6.2s, 2030 4,000 4,180,240
Sedgwick & Shawnee Counties, KS, GNMA, 6.5s, 2022 1,575 1,657,451
Sedgwick & Shawnee Counties, KS, GNMA, 5.5s, 2026 3,375 3,599,134
--------------
$ 87,577,184
- --------------------------------------------------------------------------------------------------
Solid Waste Revenue - 0.2%
Northeast Maryland Waste Disposal Authority
(Southwest County Resource Recovery), MBIA,
7.2s, 2005 $ 3,000 $ 3,345,690
- --------------------------------------------------------------------------------------------------
Special Assesment District - 0.4%
Chico, CA, Public Finance Authority Rev. (Southeast
Chico Redevelopment), FGIC, 6.625s, 2021 $ 6,435 $ 6,626,377
- --------------------------------------------------------------------------------------------------
Student Loan Revenue - 0.2%
Michigan Higher Education Student Loan, Refunding
Student Loan Series XII Q, AMBAC, 5.2s, 2010 $ 2,500 $ 2,455,825
- --------------------------------------------------------------------------------------------------
Turnpike Revenue - 3.0%
Florida Turnpike Authority Turnpike Rev., Department
of Transportation, FGIC, 5.25s, 2014 $ 8,115 $ 7,972,987
New Jersey Economic Development Authority Rev.,
Transportation Project Sublease Series A, FSA,
6s, 2016 1,325 1,369,361
New Jersey Transport Trust Fund Authority,
Transportation Systems, 5.625s, 2012,(S)(S) 1,200 1,239,912
New Jersey Transport Trust Fund Authority,
Transportation Systems, 5.625s, 2014(S)(S) 1,000 1,028,570
New Jersey Transport Trust Fund Authority,
Transportation Systems Series A, 5.625s, 2013(S)(S) 600 616,320
New Jersey Transportation Trust Fund Authority,
5.25s, 2016 8,500 8,275,855
New York St. Thruway Authority Service Contract,
Local Highway Bridge Series A 2, MBIA, 5.375s, 2016 5,000 4,931,450
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2012 2,200 1,016,554
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2013 7,000 3,026,800
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2014 6,500 2,627,560
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2015 7,300 2,734,726
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2016 1,900 663,784
Texas Turnpike Authority, Dallas North Thruway Rev.,
FGIC, 5.5s, 2015 4,000 3,978,280
Texas Turnpike Authority, Dallas Thruway Rev.
(President George Bush Turnpike), AMBAC, 5s, 2016 4,500 4,198,410
--------------
$ 43,680,569
- --------------------------------------------------------------------------------------------------
Universities - 3.0%
Clark County NV Economic Development, (Alexander
Dawson School), 5.5s, 2020 $ 6,000 $ 5,598,600
Massachusetts Health & Educational Facilities
(Harvard University), 6.25s, 2020 17,000 18,514,870
New York Dormitory Authority Rev. (New York
University), MBIA, 5.75s, 2013 3,255 3,389,692
New York Dormitory Authority Rev. (University of
Rochester), MBIA, 5.25s, 2014 1,795 1,768,990
New York Dormitory Authority Rev. (University of
Rochester), MBIA, 5.25s, 2015 3,805 3,712,044
Texas A & M University, Permanent University Fund,
0s, 2007 6,695 4,550,525
Texas A & M University Rev., Financing Systems,
5.2s, 2012 3,000 2,971,260
University of Akron OH General Receipt, FGIC,
6s, 2015 1,000 1,040,400
West Virginia University Rev., University Systems
West Virginia University Series A, MBIA, 5.5s, 2018 2,160 2,149,718
--------------
$ 43,696,099
- --------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 0.7%
Houston, TX, Water & Sewer Systems Rev., FGIC,
5s, 2018 $ 10,000 $ 9,098,700
Rio Rancho New Mexico Water Systems Rev., Refunding,
AMBAC, 5s, 2013 1,140 1,086,238
--------------
$ 10,184,938
- --------------------------------------------------------------------------------------------------
Other - 0.7%
Orange County, CA, California Recovery Certificates,
MBIA, 6s, 2026 $ 5,000 $ 5,152,150
Pittsburgh and Allegheny County Pennsylvania, Hotel
Room, 5.25s, 2015 4,000 3,867,560
Rail Connections Inc., MA Rev., 0s, 2015 375 133,954
Rail Connections Inc., MA Rev., 0s, 2016 450 149,247
Rail Connections Inc., MA Rev., 0s, 2017 975 300,222
--------------
$ 9,603,133
- --------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $1,396,449,496) $1,434,194,979
- --------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.6%
- --------------------------------------------------------------------------------------------------
Capital Projects Finance Authority Florida Rev.,
Adjusted Capital Projects Loan Program Series A,
due 09/02/99 3,100 3,100,000
East Baton Rouge, LA, Pollution Control Rev. (Exxon
Corp.), due 09/01/99 1,000 1,000,000
Georgia Hospital Financing Authority Rev. (Hospital
Loan Program), due 09/01/99 910 910,000
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 09/01/99 75 75,000
Harris County, TX, Health Facilities Development,
Special Facilities Rev. (Texas Medical Center), due
09/01/99 5,000 5,000,000
Harris County, TX, Industrial Development Corp.
(Shell Oil Co.), due 09/01/99 9,400 9,400,000
Illinois Educational Facilities Authority Rev.,
University Chicago Hosps, due 09/01/99 10 10,000
Kansas City, MO, Industrial Development Hospital,
due 09/01/99 10 10,000
Lehigh County Pennsylvania General Purpose Authority,
Hospital Lehigh Vly Health Series B, due 09/01/99 2,100 2,100,000
New York City, NY, due 09/01/99 10 10,000
Piedmont Municipal Power Agency Electric, Variable
Refunding Series D, due 09/01/99 300 300,000
Pinellas County, FL, Health Facility Authority, due
09/01/99 825 825,000
- --------------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at cost $ 22,740,000
- --------------------------------------------------------------------------------------------------
Non-Floating Rate Demand Note - 0.0%
- --------------------------------------------------------------------------------------------------
Burke County, GA, Development Authority, Pollution
Control Rev. (Georgia Power Co.), 3s, 1999,
(Identified Cost $10,000) 10 10,000
- --------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,419,199,496) $1,456,944,979
Other Assets, Less Liabilities - 0.4% 6,024,701
- --------------------------------------------------------------------------------------------------
Net assets - 100.0% $1,462,969,680
- --------------------------------------------------------------------------------------------------
(++) Inverse floating rate security.
### Security segregated as collateral for an open futures contract.
(S)(S) When-issued security. At August 31, 1999, the Fund had sufficient cash and/or securities at
least equal to the value of the when-issued security.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
AUGUST 31, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,419,199,496) $1,456,944,979
Cash 61,736
Receivable for daily variation margin on open futures
contracts 20,062
Receivable for Fund shares sold 445,139
Receivable for investments sold 5,000
Interest receivable 18,455,197
Other assets 22,007
--------------
Total assets $1,475,954,120
--------------
Liabilities:
Distributions payable $ 2,605,994
Payable for Fund shares reacquired 2,608,764
Payable for investments purchased 1,565,925
Payable for when-issued investments purchased 5,783,883
Payable to affiliates -
Management fee 48,753
Shareholder servicing agent fee 11,950
Distribution and service fee 10,441
Administrative fee 1,698
Accrued expenses and other liabilities 347,032
--------------
Total liabilities $ 12,984,440
--------------
Net assets $1,462,969,680
==============
Net assets consist of:
Paid-in capital $1,400,727,083
Unrealized appreciation on investments 37,939,948
Accumulated undistributed net realized gain on
investments 21,483,019
Accumulated undistributed net investment income 2,819,630
--------------
Total $1,462,969,680
==============
Shares of beneficial interest outstanding 141,409,815
==============
Class A shares:
Net asset value and redemption price per share
(net assets of $1,384,694,933 / 133,837,084 shares of
beneficial interest outstanding) $10.35
======
Offering price per share (100 / 95.25) $10.87
======
Class B shares:
Net asset value and offering price per share
(net assets of $78,274,747 / 7,572,731 shares of
beneficial interest outstanding) $10.34
======
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 and
Class B shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1999
- --------------------------------------------------------------------------------
Net investment income:
Interest income $ 86,676,775
-------------
Expenses -
Management fee $ 6,186,761
Trustees' compensation 79,909
Shareholder servicing agent fee 1,717,758
Distribution and service fee (Class B) 653,959
Administrative fee 187,013
Custodian fee 375,999
Printing 53,883
Postage 105,789
Auditing fees 35,055
Legal fees 10,412
Miscellaneous 399,776
-------------
Total expenses $ 9,806,314
Fees paid indirectly (348,367)
-------------
Net expenses $ 9,457,947
-------------
Net investment income $ 77,218,828
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 21,227,114
Futures contracts (1,480,805)
-------------
Net realized gain on investments $ 19,746,309
-------------
Change in unrealized appreciation (depreciation) --
Investments $(113,554,510)
Futures contracts 2,888,849
-------------
Net unrealized loss on investments $(110,665,661)
-------------
Net realized and unrealized loss on investments $ (90,919,352)
-------------
Decrease in net assets from operations $ (13,700,524)
=============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- --------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 77,218,828 $ 83,801,139
Net realized gain on investments 19,746,309 23,909,104
Net unealized gain (loss) on investments (110,665,661) 22,847,429
--------------- ---------------
Increase (decrease) in net assets from operations $ (13,700,524) $ 130,557,672
--------------- ---------------
Distributions declared to shareholders -
From net investment income (Class A) $ (74,017,246) $ (81,123,493)
From net investment income (Class B) (3,352,797) (3,212,719)
From net realized gain on investments (Class A) (14,781,390) (28,342,272)
From net realized gain on investments (Class B) (768,647) (1,279,318)
--------------- ---------------
Total distributions declared to shareholders $ (92,920,080) $ (133,957,802)
--------------- ---------------
Net decrease in net assets from Fund share transactions $ (151,198,802) $ (32,044,145)
--------------- ---------------
Total decrease in net assets $ (257,819,406) $ (15,444,275)
Net assets:
At beginning of period 1,720,789,086 1,736,233,361
--------------- ---------------
At end of period (including accumulated undistributed
net investment income of $2,819,630 and $4,362,625,
respectively) $ 1,462,969,680 $ 1,720,789,086
=============== ===============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $11.09 $10.99 $10.75 $10.83 $10.68
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.53 $ 0.54 $ 0.57 $ 0.59 $ 0.60
Net realized and unrealized gain (loss) on
investments (0.64) 0.28 0.24 (0.09) 0.15
------ ------ ------ ------ ------
Total from investment operations $(0.11) $ 0.82 $ 0.81 $ 0.50 $ 0.75
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.53) $(0.54) $(0.57) $(0.58) $(0.60)
From net realized gain on investments (0.10) (0.18) -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.63) $(0.72) $(0.57) $(0.58) $(0.60)
------ ------ ------ ------ ------
Net asset value - end of period $10.35 $11.09 $10.99 $10.75 $10.83
====== ====== ====== ====== ======
Total return(+) (1.08)% 7.78% 7.75% 4.67% 7.31%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.57% 0.60% 0.60% 0.60% 0.61%
Net investment income 4.87% 4.90% 5.29% 5.37% 5.70%
Portfolio turnover 30% 79% 91% 84% 90%
Net assets at end of period (000,000 omitted) $1,385 $1,639 $1,660 $1,798 $1,949
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this offset arrangement.
(+) 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 AUGUST 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $11.08 $10.99 $10.74 $11.10 $10.67
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.44 $ 0.45 $ 0.48 $ 0.49 $ 0.49
Net realized and unrealized gain (loss) on
investments (0.64) 0.28 0.25 (0.37) 0.16
------ ------ ------ ------ ------
Total from investment operations $(0.20) $ 0.73 $ 0.73 $ 0.12 $ 0.65
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.44) $(0.46) $(0.48) $(0.48) $(0.49)
From net realized gain on investments (0.10) (0.18) -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.54) $(0.64) $(0.48) $(0.48) $(0.49)
------ ------ ------ ------ ------
Net asset value - end of period $10.34 $11.08 $10.99 $10.74 $10.83
====== ====== ====== ====== ======
Total return (1.87)% 6.85% 6.84% 3.69% 6.35%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.37% 1.40% 1.46% 1.55% 1.60%
Net investment income 4.07% 4.10% 4.42% 4.42% 4.68%
Portfolio turnover 30% 79% 91% 84% 90%
Net assets at end of period (000,000 omitted) $78 $81 $76 $71 $56
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this offset arrangement.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Municipal Bond Fund (the Fund) is a diversified series of MFS Series Trust
IV (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, forward contracts, and swap
agreements, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data, without exclusive
reliance upon exchange or over-the-counter prices. Short-term obligations, which
mature in 60 days or less, are valued at amortized cost, which approximates
market value. Futures contracts listed on commodities exchanges are reported at
market value using closing settlement prices. Securities for which there are no
such quotations or valuations are valued at fair value as determined in good
faith by the Trustees.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit 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
security 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 premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Some
securities may be purchased on a "when-issued" or "forward delivery" basis,
which means that the securities will be delivered to the Fund at a future date,
usually beyond customary settlement time.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. Distributions paid by the Fund from
net interest received on tax-exempt municipal bonds are not includable by
shareholders as gross income for federal income tax purposes because the Fund
intends to meet certain requirements of the Code applicable to regulated
investment companies, which will enable each Fund to pay exempt-interest
dividends. The portion of such interest, if any, earned on private activity
bonds issued after August 7, 1986, may be considered a tax-preference item to
shareholders.
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. During
the year ended August 31, 1999, $1,391,780 and $295,282 were reclassified from
accumulated undistributed net investment income and accumulated net realized
gain on investments, respectively, to paid-in capital, due to differences
between book and tax accounting for market discount on tax-exempt obligations
and distributions. This change had no effect on the net assets or net asset
value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. 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 the following annual rates:
BASED ON AVERAGE NET ASSETS BASED ON GROSS INCOME
------------------------------------- ---------------------------------
First $200 million 0.220% First $16 million 4.12%
Next $1.8 billion 0.187% Next $144 million 3.51%
In excess of $2 billion 0.168% In excess of $160 million 3.16%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $27,842 for the year ended
August 31, 1999.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$211,969 for the year ended August 31, 1999, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan relating to Class B 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 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 shares. Except in the
case of the 0.25% per annum Class B service fee paid by the Fund upon the sale
of Class B shares in the first year, payment of the Class B service fee will be
suspended until such date as the trustees of the trust may determine. 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 shares. The service fee is
intended to be consideration for services rendered by the dealer with respect to
Class B shares. MFD retains the service fee for accounts not attributable to a
securities dealer. MFD received no portion of the service fee for Class B, for
the year ended August 31, 1999. Fees incurred under the distribution plan during
the year ended August 31, 1999, were 0.80% of average daily net assets
attributable to Class B on an annualized basis.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the year ended August 31, 1999, were $17,882 , and
$234,623 for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.10%. Prior to April 1, 1999, the fee was calculated as a percentage of the
Fund's average daily net assets at an effective annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$477,036,970 and $657,357,049, respectively.
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 $ 1,419,201,343
---------------
Gross unrealized appreciation $ 61,521,897
Gross unrealized depreciation (23,778,261)
---------------
Net unrealized appreciation $ 37,743,636
===============
(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>
Class A Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1998
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 86,556,394 $ 951,673,399 188,701,226 $ 2,080,177,975
Shares issued to
shareholders in
reinvestment of
distributions 4,967,172 54,089,815 6,076,636 66,922,592
Shares reacquired (105,494,679) (1,159,458,546) (197,997,596) (2,184,102,786)
------------ --------------- ------------ ---------------
Net decrease (13,971,113) $ (153,695,332) (3,219,734) $ (37,002,219)
============ =============== ============ ===============
</TABLE>
<TABLE>
Class B Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1998
-------------------------------------- --------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,660,763 $ 18,143,122 1,770,410 $ 19,544,891
Shares issued to
shareholders in
reinvestment of
distributions 236,006 2,566,087 254,719 2,802,449
Shares reacquired (1,676,695) (18,212,679) (1,576,595) (17,389,266)
------------ --------------- ------------ ---------------
Net increase 220,074 $ 2,496,530 448,534 $ 4,958,074
============ =============== ============ ===============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $820 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended August 31, 1999, was $10,936. The Fund had no 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 and foreign currency exchange 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.
<TABLE>
Future Contracts
<CAPTION>
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bond Index September 1999 75 Long $(456,906)
Municipal Bond Index September 1999 94 Short 306,567
Municipal Bond Index December 1999 37 Long 40,375
U.S. Treasury Bonds September 1999 77 Short 281,960
U.S. Treasury Bonds December 1999 37 Short 22,469
---------
$ 194,465
=========
</TABLE>
At August 31, 1999, the Fund had sufficient cash and/or securities to cover any
margin requirements under these contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust IV and Shareholders of MFS Municipal Bond
Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Municipal Bond Fund (one of the series
constituting MFS Series Trust IV) as of August 31, 1999, the related statement
of operations for the year then ended, the statement of changes in net assets
for the years ended August 31, 1999 and 1998, and the financial highlights for
each of the years in the five-year period ended August 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
August 31, 1999 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Municipal Bond
Fund at August 31, 1999, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 7, 1999
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY OR FORM
1099-DIV, IF APPLICABLE, REPORTING THE FEDERAL TAX STATUS OF ALL
DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 1999.
THE FUND HAS DESIGNATED $10,278,482 AS A CAPITAL GAIN DIVIDEND.
- --------------------------------------------------------------------------------
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products. With that in mind, we created a
separately funded Year 2000 Program Management Office in 1996 comprised of a
specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers and
software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking steps
to ascertain the Y2K readiness of MFS' internal systems and is working with our
external systems vendors to determine whether they expect their systems to be
ready.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness. Each year, MFS' research analysts and portfolio managers conduct
more than 1,000 on-site meetings with companies whose securities are, or may be,
held in fund and client portfolios, and host an additional 1,500 meetings at
MFS' headquarters. When assessing the Y2K readiness of these companies, MFS'
research analysts and portfolio managers may rely upon discussions at these
meetings as well as SEC disclosure documents and third-party reports.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS, shareholders of MFS funds, participants in retirement
plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com or contact the MFS Year 2000 Program
Management Office by e-mail at [email protected] or by letter at 500 Boylston Street,
Boston, MA 02116-3741.
<PAGE>
<TABLE>
MFS(R) MUNICIPAL BOND FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Former Stephen E. Cavan*
Chairman and Director (until 1991), MFS
Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
J. Atwood Ives - Chairman and Chief Executive
Officer, Eastern Enterprises (diversified CUSTODIAN
services company) State Street Bank and Trust Company
Lawrence T. Perera - Partner, Hemenway & Barnes AUDITORS
(attorneys) Deloitte & Touche LLP
William J. Poorvu - Adjunct Professor, Harvard INVESTOR INFORMATION
University Graduate School of Business For MFS stock and bond market outlooks,
Administration call toll free: 1-800-637-4458
anytime from a touch-tone telephone.
Charles W. Schmidt - Private Investor
For information on MFS mutual funds, call your
Arnold D. Scott* - Senior Executive Vice financial consultant or, for an information
President, Director, and Secretary, MFS kit, call toll free: 1-800-637-2929 any
Investment Management business day from 9 a.m. to 5 p.m. Eastern time
(or leave a message anytime).
Jeffrey L. Shames* - Chairman, Chief Executive
Officer, and Director, MFS Investment INVESTOR SERVICE
Management MFS Service Center, Inc.
P.O. Box 2281
Elaine R. Smith - Independent Consultant Boston, MA 02107-9906
David B. Stone - Chairman and Director, North For general information, call toll free:
American Management Corp. (investment advisers) 1-800-225-2606 any business day from 8 a.m. to
8 p.m. Eastern time.
INVESTMENT ADVISER
Massachusetts Financial Services Company For service to speech- or hearing-impaired,
500 Boylston Street call toll free: 1-800-637-6576 any business day
Boston, MA 02116-3741 from 9 a.m. to 5 p.m. Eastern time. (To use
this service, your phone must be equipped with
DISTRIBUTOR a Telecommunications Device for the Deaf.)
MFS Fund Distributors, Inc.
500 Boylston Street For share prices, account balances, and
Boston, MA 02116-3741 exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
CHAIRMAN AND PRESIDENT telephone.
Jeffrey L. Shames*
WORLD WIDE WEB
PORTFOLIO MANAGER www.mfs.com
Geoffrey L. Schechter*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MFS(R) MUNICIPAL BOND FUND ------------
BULK RATE
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)1999 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MMB-2 10/99 46.5M 17/217
