<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) MUNICIPAL
BOND FUND
ANNUAL REPORT o AUGUST 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 10
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 23
Notes to Financial Statements ............................................. 28
Independent Auditors' Report .............................................. 34
Trustees and Officers ..................................................... 37
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
--------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- make us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company, one-
security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flows, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as front-line workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flows, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes each manager will have when they read the daily notes is, "I
could never perform as well at any other investment company, because nowhere
else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in it's
January 10, 2000 issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people tend to stick around -- the average
MFS tenure of our portfolio managers is 11 years, with over 16 years in the
investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 35 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance,
by finding opportunities before they are generally recognized by the market and
by avoiding mistakes whenever possible. Original Research does, we believe, make
a difference.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
September 15, 2000
A prospectus containing more complete information on any MFS product, including
all charges and expenses, can be obtained from your investment professional.
Please read it carefully before you invest or send money. Investments in mutual
funds will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
For the 12 months ended August 31, 2000, Class A shares of the fund provided a
total return of 6.51% and Class B shares 5.70%. These returns include the
reinvestment of any distributions but exclude the effects of any sales charges
and compare to a 6.77% return for the fund's benchmark, the Lehman Brothers
Municipal Bond Index (the Lehman Index), an unmanaged index of approximately
40,000 investment-grade bonds. During the same period, the average general
municipal debt fund tracked by Lipper Inc., an independent firm that reports
mutual fund performance, returned 5.10%.
Q. WHAT HELPED THE FUND PERFORM BETTER THAN ITS LIPPER PEERS?
A. A higher overall credit quality was the main reason the fund was able to
outperform its Lipper peers. Similar funds had higher weightings than we did
in bonds rated "BBB" and below. Over the past 12 months, lower-quality
credits underperformed, so our focus on higher-quality investment-grade
municipal bonds was the major reason we did better. We also believe our
ability to choose spots on the yield curve through quantitative research
helped us relative to our competitors. We focused on the 15- to 20-year
segment of the yield curve and were able to capture almost as much yield as
even longer-term municipal bonds, but at much lower risk.
Q. WHAT WAS THE INTEREST RATE ENVIRONMENT LIKE DURING THE PAST 12 MONTHS?
A. One could divide the past year into two distinct periods. The first took
place from August 1999 until May 2000. During that period, interest rates
were generally on the rise, peaking first in January and again in May of
2000. The Federal Reserve Board (the Fed) tightened monetary policy by
raising short-term interest rates four times in order to stem growth and
head off inflation. Interest rates were driven higher by rising inflation
and inflationary expectations due to strong economic growth, low
unemployment, strong job creation, higher labor costs, and climbing oil
prices. During the second period, from mid-May through August 31, 2000,
rates generally declined as economic activity moderated. Housing sales
declined from their peaks, retail sales slowed, job creation diminished, and
labor costs (as measured by average hourly earnings) moderated. All of these
signs pointed to an economy that was still growing, but at a slower pace
than we had seen over the preceding nine months. Investors became heartened
as this evidence seemed to confirm that the Fed's monetary policy had
succeeded in slowing the economy just enough to avoid inflation without
causing a recession.
Q. HOW DID THE MUNICIPAL MARKET FARE COMPARED TO THE OTHER SECTORS OF THE
FIXED-INCOME MARKET?
A. Compared to Treasuries, municipal bonds performed better during the period
when interest rates were rising, then lagged as rates leveled off.
(Principal value and interest on Treasury securities are guaranteed by the
U.S. government if held to maturity.) Historically, municipal bonds have
tended to outperform Treasuries during periods of rising interest rates and
to lag Treasuries when interest rates decline. Municipal bond
underperformance was exacerbated during the second part of the fiscal year
due to two moves taken by the U.S. Treasury. First, the Treasury announced
it would issue less debt going forward because the government's lending
needs had declined as a result of the federal budget surplus. Second, the
Treasury began to buy back some of its outstanding debt, particularly
longer-term issues that pay higher interest. Market participants became
particularly enamored of Treasury bonds, fearing that perhaps Treasuries
would become scarce. This demand drove a strong rally in Treasury bonds.
Municipal bonds performed basically in line with taxable bond sectors such
as agencies, mortgage-backed securities, and corporate bonds. We felt
municipal bond prices at the end of the fiscal year were not attractive
enough to spawn increased demand. In addition, it appeared to us that
property and casualty insurance companies -- traditional buyers of municipal
bonds -- generally were not profitable enough to spark the kind of demand
that might send municipal bond prices higher.
Offsetting the muted demand for municipals, issuance was down about 20% year
to date through August 2000 compared to the same period in 1999. As with
Treasuries, the healthy economy has reduced the need for municipalities to
come to market with debt because their revenues have been healthy enough to
sustain their projects. With both reduced demand and diminished supply, the
municipal market has remained relatively balanced.
Q. DID YOU ADJUST THE FUND'S STRATEGY BASED ON THE MARKET ENVIRONMENT?
A. Our broad strategies with the fund remained unchanged. We pursue a
research-driven approach, relying on both fundamental, bottom-up credit
analysis as well as strong quantitative research. As usual, we did not make
any significant interest-rate bets because we don't believe they are an
effective method of adding value for shareholders. As a result, we kept the
fund's duration -- a measure of its sensitivity to changes in interest rates
-- neutral to the Lehman Index and at times a bit conservative during the
first part of the year when interest rates were on the rise. For the last
four or five months of the period, we maintained a neutral interest-rate
stance so the fund could participate in the overall bond market rally.
Beyond that, our main focus was to add value through both yield curve and
credit analysis.
More recently, we've looked to add some investments in lower-quality credits
because we think they've fallen to very attractive valuations relative to
higher-quality bonds. Indeed, spreads between "AAA"- and "BBB"-rated
securities have been at their widest level in four years. In particular, we
have been looking to add bonds that our team of analysts believe will
compensate the fund well for their added risk, as long as our research
convinces us that the issuer is stable.
Q. WHICH SECTORS DID YOU FIND PARTICULARLY ATTRACTIVE?
A. Due to the strength of state and local governments, we've focused on general
obligation and tax-backed bonds of municipalities with historically
conservative managements. We feel that strong budget surpluses nationwide
will be sustained by strong revenue growth. We've also continued to
accumulate bonds issued by agencies that provide below-market-rate mortgages
to people in targeted income brackets. These bonds provide incremental
income and are often secured by federal agencies such as the Government
National Mortgage Association, the Federal National Mortgage Association,
and the Federal Home Loan Mortgage Corporation. Our focus also has been on
specific securities that have low volatility and may minimize prepayment
risk normally found in housing bonds.
We were also positive on the utilities sector, which offered great
opportunities created by the uncertainty brought on by deregulation. We've
looked for utilities that we believe enjoy a competitive advantage by
carrying little debt and by providing relatively low-cost power.
For some time, we've been cautious about the health care sector. However,
we've recently added to the fund's health care stake by establishing
positions in rural hospitals that have enjoyed high market share and little
competition.
Q. DID YOU FAVOR ANY STATES OR REGIONS?
A. No. We have seen strength everywhere due to the sustained success of the
U.S. economy and conservative fiscal management by state governments.
Q. WHAT IS YOUR OUTLOOK FOR THE REST OF 2000 AND THE BEGINNING OF 2001?
A. It looks as if the economy is moderating, which would be a good environment
for bonds. Slower growth would help relieve inflationary pressures without
hurting the credit quality of the markets. We're cautiously optimistic, and
we will look out for risks posed by such factors as tight labor markets, or
any sudden re-acceleration of growth. No matter what the economic
environment, our main goal will be to add value through thorough credit and
quantitative research.
/s/ Michael L. Dawson /s/ Geoffrey L. Schechter
Michael L. Dawson Geoffrey L. Schechter
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' PROFILES
--------------------------------------------------------------------------------
MICHAEL L. DAWSON IS ASSISTANT VICE PRESIDENT AND A PORTFOLIO MANAGER OF ALL
STATE MUNICIPAL BOND FUNDS AT MFS INVESTMENT MANAGEMENT(R). HE ALSO MANAGES
OTHER NATIONAL MUNICIPAL BOND PORTFOLIOS. HE JOINED MFS IN 1998 AND WAS NAMED
ASSISTANT VICE PRESIDENT AND PORTFOLIO MANAGER IN 1999. PRIOR TO JOINING MFS,
MR. DAWSON WORKED IN INSTITUTIONAL SALES -- FIXED INCOME FOR FIDELITY CAPITAL
MARKETS AND GOLDMAN SACHS. PRIOR TO THAT, HE WAS A RESEARCH ANALYST IN THE
MUNICIPAL BOND GROUP AT FRANKLIN TEMPLETON. HE IS A GRADUATE OF SANTA CLARA
UNIVERSITY AND RECEIVED AN M.B.A. DEGREE FROM BABSON COLLEGE IN MAY 1999.
GEOFFREY L. SCHECHTER, CFA, IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
AND A PORTFOLIO MANAGER OF OUR 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
GLOBAL, ISSUER-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 MFS
product is available from your investment professional, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
--------------------------------------------------------------------------------
FUND FACTS
--------------------------------------------------------------------------------
OBJECTIVE: SEEKS 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: $1.3 BILLION NET ASSETS AS OF AUGUST 31, 2000
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.) 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, 2000)
MFS Lehman Brothers
Municipal Municipal
Bond Fund - Class A Bond Index
------------------- ---------------
August, 1990 $ 9,525 $10,000
August, 1992 12,021 12,427
August, 1994 13,543 13,963
August, 1996 15,212 15,997
August, 1998 17,666 18,988
August, 2000 18,631 20,375
TOTAL RATES OF RETURN THROUGH AUGUST 31, 2000
<TABLE>
<CAPTION>
CLASS A
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +6.51% +13.56% +28.07% +95.41%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +6.51% + 4.33% + 5.07% + 6.93%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +1.45% + 2.65% + 4.06% + 6.41%
---------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +5.70% +10.82% +22.76% +83.46%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +5.70% + 3.48% + 4.19% + 6.26%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +1.72% + 2.60% + 3.86% + 6.26%
---------------------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES(+)
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average general municipal debt fund+ +5.10% + 3.83% + 5.02% + 6.77%
---------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +6.77% + 5.25% + 6.03% + 7.38%
---------------------------------------------------------------------------------------------------------
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%.
Class B share performance includes the performance of the fund's Class A shares
for periods prior to its inception (blended performance). Class B performance
has been adjusted to take into account the CDSC applicable to Class B shares
rather than the initial sales charge (load) applicable to Class A shares. This
blended performance has not been adjusted to take into account differences in
class-specific operating expenses. Because operating expenses of Class B shares
are higher than those of Class A, the blended Class B share performance is
higher than it would have been had Class B shares been offered for the entire
period.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and assume
the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
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, 2000
QUALITY RATINGS
"AAA" 63.3%
"AA" 15.2%
"A" 14.1%
"BBB" 3.6%
Not Rated 3.8%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 2000
Municipal Bonds - 98.4%
------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
------------------------------------------------------------------------------
General Obligation - 17.6%
Birmingham, AL, 5.75s, 2019 $ 1,000 $ 1,027,710
Chicago, IL, FGIC, 6.125s, 2020 3,785 3,964,598
Chicago, IL, Board of Education, MBIA, 6.25s, 2012 2,500 2,780,100
Chicago, IL, Board of Education, AMBAC, 5.4s, 2017 3,000 2,989,320
Chicago, IL, Board of Education, FGIC, 5.875s, 2017 3,715 3,841,459
Chicago, IL, Board of Education, RITES, FGIC,
5.887s, 2019+ (++) 5,000 4,778,600
Chicago, IL, Capital Appreciation, AMBAC, 0s, 2012 2,550 1,347,752
Chicago, IL, RITES, 6.554s, 2018+ (++) 5,900 6,022,838
Clark County, NV, School District, "A", MBIA,
7s, 2010 4,000 4,662,480
Clark County, NV, School District, "B", FGIC,
5.5s, 2016 5,000 5,052,250
Commonwealth of Massachusetts, 6s, 2015 3,700 3,962,774
Commonwealth of Massachusetts, 5s, 2017 18,940 18,042,055
Cranston, RI, FGIC, 6.375s, 2017 830 901,438
Delaware County, OH, 6.25s, 2016 1,000 1,086,260
Detroit, MI, 6.25s, 2009 5,235 5,510,256
Detroit/Wayne County, MI, Stadium, FGIC, 5.5s, 2017 6,000 6,056,460
District of Columbia, MBIA, 6.5s, 2010 5,705 6,392,738
Dodgeland, WI, School District, FGIC, 6s, 2016 3,525 3,714,010
Florida Board of Education, Capital Outlay,
9.125s, 2014 1,735 2,336,160
Forsyth County, GA, School District, 6s, 2015 725 785,175
Forsyth County, GA, School District, 6s, 2016 865 931,328
Hidalgo County, TX, AMBAC, 6s, 2016 1,005 1,063,109
Highland Park, TX, Independent School District,
5.125s, 2016 2,525 2,470,334
Houston County, AL, AMBAC, 6.25s, 2019 3,315 3,560,940
Jackson, MI, Public Schools System, FGIC, 6s, 2013 1,500 1,628,520
Kane Cook DuPage County, IL, School District, FSA,
6.5s, 2017 1,345 1,462,405
Kane Cook DuPage County, IL, School District, FSA,
6.375s, 2019 1,245 1,334,329
Lane County, OR, School District, 6.25s, 2016 1,150 1,241,908
Lane County, OR, School District, 6.25s, 2017 1,000 1,078,320
Leander, TX, Independent School District, PSF-GTD,
0s, 2018 4,885 1,631,541
Lewisville, TX, Independent School District, PSF,
5s, 2018 8,500 8,036,070
Linn County, OR, Community School District, MBIA,
6.125s, 2016 1,225 1,317,720
Linn County, OR, Community School District, MBIA,
6.125s, 2018 1,000 1,066,470
Linn County, OR, Community School District, MBIA,
6.125s, 2020 1,240 1,313,656
Manchester, NH, 5.875s, 2019 2,270 2,340,370
Mobile County, AL, 6s, 2014 3,200 3,371,744
New York City, NY, 7.5s, 2002 12,500 12,998,250
New York City, NY, 7.5s, 2006 3,625 3,820,569
New York City, NY, 7.65s, 2006 10 10,560
New York City, NY, 7.5s, 2007 15,500 16,329,715
New York City, NY, 7.7s, 2009 60 63,407
New York City, NY, FGIC, 5.75s, 2013 8,500 8,941,830
New York City, NY, FGIC, 5.75s, 2014 9,500 9,903,940
New York City, NY, FGIC, 5.75s, 2015 11,085 11,475,635
New York City, NY, "B", 7.5s, 2008 7,060 7,442,864
Rockwall, TX, Independent School District, PSF,
0s, 2014 2,000 919,720
San Antonio, TX, 5s, 2020 2,990 2,752,175
Snohomish County, WA, School District, 6s, 2014 1,690 1,806,458
Southlake, TX, AMBAC, 0s, 2018 1,835 626,634
Southlake, TX, AMBAC, 0s, 2021 3,150 864,801
State of California, RITES, 6.977s, 2012+ (++) 6,000 6,894,600
State of California, 5.5s, 2013 5,000 5,399,650
State of California, RITES, 7.477s, 2017+ (++) 6,875 7,648,644
State of Florida, Broward County Expressway
Authority, 10s, 2014 4,350 6,232,897
State of Washington, 6.75s, 2010 3,880 4,442,057
State of Washington, 6s, 2012 4,360 4,745,816
Wasco County, OR, FSA, 6s, 2017 1,360 1,451,474
--------------
$ 233,874,893
------------------------------------------------------------------------------
State and Local Appropriation - 18.2%
California Public Works Board, Lease Rev.
(University of California), 5.5s, 2014 $ 4,500 $ 4,826,970
Chicago, IL, Board of Education, MBIA, 6.25s, 2009 5,160 5,653,967
Chicago, IL, Board of Education, MBIA, 6.25s, 2015 20,295 22,336,068
Delaware Valley, PA, Regional Finance Authority,
RITES, AMBAC, 6.435s, 2018(++) 16,250 16,710,687
Fayette County, GA (Criminal Justice Center),
6.25s, 2020 1,000 1,071,450
Indiana Office Building Commission, Miami
Correctional Phase 1A, AMBAC, 5.5s, 2016 4,690 4,729,443
Indiana Office Building Commission, Miami
Correctional Phase 1A, AMBAC, 5.5s, 2017 1,400 1,407,210
Kentucky Property & Buildings Commission, Project
Number 65, FSA, 5.85s, 2015 4,000 4,302,440
Kentucky Property & Buildings Commission, Project
Number 65, FSA, 5.9s, 2016 4,500 4,736,295
Massachusetts Bay Transportation Authority,
6.1s, 2013 10,200 11,239,890
Massachusetts Bay Transportation Authority,
5.875s, 2015 4,500 4,819,770
Massachusetts Bay Transportation Authority, 7s, 2021 10,185 12,038,568
Massachusetts Bay Transportation Authority, FGIC,
5s, 2023 10,000 9,273,700
Metropolitan Government of Nashville & Davidson
County, TN, 7s, 2011 5,280 5,504,875
Metropolitan Transportation Authority, NY, Service
Contract, 5.75s, 2013 5,600 5,862,080
New York Dormitory Authority Rev. (City University),
5.75s, 2013 25,150 26,447,237
New York Dormitory Authority Rev. (City University),
5.75s, 2013 5,000 5,257,900
New York Dormitory Authority Rev. (City University),
AMBAC, 5.25s, 2015 5,000 4,978,050
New York Dormitory Authority Rev. (State University),
5s, 2013 3,660 3,564,511
New York Dormitory Authority Rev. (State University),
5.5s, 2013 7,000 7,216,860
New York Dormitory Authority Rev., Mental Health
Services Facilities, 6s, 2007 1,475 1,572,704
New York Dormitory Authority Rev., Mental Health
Services Facilities, 5.75s, 2010 2,000 2,118,060
New York Dormitory Authority Rev., Mental Health
Services Facilities, 5s, 2018 2,500 2,339,075
New York Thruway Authority, Local Highway & Bridges,
5.25s, 2013 6,000 5,981,340
New York Urban Development Corp., 5.5s, 2016 14,690 14,828,380
New York Urban Development Corp., Correctional
Facilities, 5.5s, 2014 5,000 5,126,550
New York Urban Development Corp., Correctional
Facilities, FSA, 5.5s, 2014 4,525 4,705,774
New York Urban Development Corp., Correctional
Facilities, 5.375s, 2015 11,405 11,384,129
Philadelphia, PA, Municipal Authority, MBIA,
5.4s, 2017 5,000 5,007,000
Rhode Island Convention Center Authority, MBIA,
5.25s, 2015 8,370 8,401,471
San Bernardino, CA, Joint Powers Financing Authority
Lease Rev. (California Dept. of Transportation),
5.5s, 2014 10,000 10,336,200
Santa Clara County, CA, Certificates of
Participation, AMBAC, 6.25s, 2016 8,210 8,386,515
--------------
$ 242,165,169
------------------------------------------------------------------------------
Refunded and Special Obligations - 16.0%
Chicago, IL, Public Building Commission Mortgage
Rev., MBIA ETM, 7.125s, 2015 $ 6,590 $ 7,063,030
Clark County, NV, School District, MBIA, 7s, 2001 10,050 10,343,259
Commonwealth of Massachusetts, 6.875s, 2001 4,825 5,018,000
Commonwealth of Massachusetts, ETM, 6.5s, 2008 6,050 6,745,629
Commonwealth of Massachusetts, FGIC, ETM, 7s, 2009 7,000 8,153,110
District of Columbia, MBIA, 6.5s, 2010 295 333,860
Florida Board of Education, Capital Outlay, ETM,
9.125s, 2014 265 357,890
Intermountain Power Agency, UT, AMBAC, 6s, 2009 9,000 9,842,940
Intermountain Power Agency, UT, ETM, 6.15s, 2014 28,220 30,256,638
Maryland Health & Higher Education Facilities
Authority Rev. (University of Maryland Medical
System), FGIC, 7s, 2001 7,945 8,274,002
Massachusetts Port Authority, "C", ETM, 13s, 2013 3,500 5,536,580
Missouri Regional Convention & Sports Complex
Authority, 6.8s, 2003 8,950 9,538,910
Missouri Regional Convention & Sports Complex
Authority, 6.9s, 2003 21,520 22,994,766
New York City, NY, 8s, 2001 2,475 2,596,077
New York City, NY, 7.65s, 2002 4,990 5,288,252
New York City, NY, 7.7s, 2002 3,940 4,178,134
New York City, NY, "B", 7.5s, 2002 2,940 3,107,698
New York Urban Development Corp., Correctional
Facilities, 7.375s, 2002 4,000 4,233,560
Pennsylvania Convention Center Authority Rev., ETM,
6.7s, 2016 26,195 30,043,046
Philadelphia, PA, Municipal Authority Rev., FGIC,
7.1s, 2001 6,000 6,306,660
Philadelphia, PA, School District, MBIA, 7s, 2001 8,130 8,384,713
Rhode Island Depositors Economic Protection Corp.,
ETM, FSA, 5.75s, 2014 9,800 10,355,856
State of Florida, Jacksonville Transportation
Authority, ETM, 9.2s, 2015 2,000 2,726,860
Washington Public Power Supply System Rev.
(Nuclear Project #2), 7.625s, 2001 10,815 11,140,748
--------------
$ 212,820,218
------------------------------------------------------------------------------
Airport and Port Revenue - 1.1%
Connecticut Airport Rev. (Bradley International
Airport), FGIC, 7.65s, 2012 $ 5,000 $ 5,551,650
Denver, CO, City & County Airport Rev., RITES,
7.5s, 2017+ (++) 2,500 2,680,925
Massachusetts Port Authority Rev. "C", 6.125s, 2017 1,500 1,606,485
Niagara, NY, Frontier Transport Authority (Buffalo
Niagara International Airport), MBIA, 5.875s, 2013 1,485 1,569,704
Port of Seattle, WA, FGIC, 5.5s, 2021 4,000 3,975,240
--------------
$ 15,384,004
------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 15.6%
Austin, TX, Utility Systems Rev., AMBAC,
6.75s, 2012 $ 2,500 $ 2,892,425
Farmington, NM, Pollution Control Rev., 6.3s, 2016 2,195 2,145,612
Farmington, NM, Pollution Control Rev., 5.8s, 2022 4,880 4,421,768
Georgia Municipal Electric Authority Rev., AMBAC,
6.5s, 2017 8,510 9,584,813
Intermountain Power Agency, UT, 6.15s, 2014 16,380 17,315,134
Intermountain Power Agency, UT, MBIA, 6s, 2016 10,000 10,482,200
Intermountain Power Agency, UT, MBIA, 5s, 2019 9,330 8,837,842
Long Island, NY, Power Authority Rev., FSA, 0s, 2011 8,135 4,629,791
Massachusetts Municipal Wholesale Electric Co.,
MBIA, 6.75s, 2017 6,030 6,301,652
Matagorda County, TX (Reliant Energy), 5.95s, 2030 5,500 5,029,640
Mercer County, ND, Pollution Control Rev. (Antelope
Valley Station), AMBAC, 7.2s, 2013 4,000 4,715,600
Michigan Strategic Fund, Limited Obligation Rev.
(Detroit Edison), MBIA, 7s, 2008 3,000 3,436,740
North Carolina Eastern Municipal Power, MBIA,
5.7s, 2013 7,000 7,282,170
North Carolina Eastern Municipal Power, MBIA,
5.625s, 2014 7,735 7,933,944
North Carolina Eastern Municipal Power, MBIA,
5.125s, 2017 13,425 12,953,514
North Carolina Eastern Municipal Power, MBIA,
6.5s, 2018 9,250 10,406,528
North Carolina Municipal Power Agency, No. 1,
(Catawba Electric Rev.), 6.375s, 2013 1,500 1,555,980
Northern California Transmission Agency, MBIA,
7s, 2013 4,000 4,890,480
Piedmont, SC, Municipal Power Agency, FGIC,
6.25s, 2021 4,150 4,560,103
Puerto Rico Electric Power Authority, RITES, FSA,
6.477s, 2015+ (++) 2,500 2,576,425
Puerto Rico Electric Power Authority, RITES, FSA,
6.477s, 2016+ (++) 3,000 3,044,820
Washington Public Power Supply System Rev. (Nuclear
Project #1), MBIA, 5.75s, 2010 13,100 13,781,331
Washington Public Power Supply System Rev. (Nuclear
Project #1), MBIA, 5.75s, 2011 7,500 7,855,350
Washington Public Power Supply System Rev. (Nuclear
Project #1), FSA, 5.125s, 2014 12,500 12,283,000
Washington Public Power Supply System Rev. (Nuclear
Project #2), MBIA, 5.625s, 2010 10,000 10,439,800
Washington Public Power Supply System Rev. (Nuclear
Project #2), MBIA, 5.7s, 2012 15,000 15,593,700
Washington Public Power Supply System Rev. (Nuclear
Project #3), FGIC, 0s, 2005 6,895 5,456,772
Washington Public Power Supply System Rev. (Nuclear
Project #3), 7.125s, 2016 5,145 6,061,942
--------------
$ 206,469,076
------------------------------------------------------------------------------
Health Care Revenue - 3.4%
Baxter County, AR, Hospital Rev., 5.375s, 2014 $ 1,000 $ 874,230
Baxter County, AR, Hospital Rev., 5.6s, 2021 2,000 1,689,300
Bell County, TX, Health Facilities Development Corp.
Rev. (Buckner Retirement Facility), 5.25s, 2019 2,500 2,157,900
Denver, CO, Health & Hospital Rev., 5.375s, 2028 4,350 3,510,972
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital), 5.25s, 2020 4,345 3,872,742
Harris County, TX, Health Facilities, Project Series
A (Texas Childrens Hospital), 5.375s, 2015 4,300 4,174,397
Illinois Educational Facilities Authority Rev.
(Centegra Health Systems), 5.25s, 2024 5,500 4,596,900
Illinois Health Facilities Authority (Condell Medical
Center), 6.35s, 2015 5,000 5,080,150
Iowa Finance Authority (Genesis Medical Center),
6.125s, 2016 2,195 2,204,570
Lufkin, TX, Health Facilities Development Corp.,
(Memorial Health System of East Texas),
6.875s, 2026 1,375 1,290,781
Lufkin, TX, Health Facilities Development Corp.,
(Memorial Health System of East Texas),
5.7s, 2028 495 385,496
Marion County, FL, Hospital District Rev.,
5.625s, 2019 2,610 2,484,511
Maryland Health & Higher Educational Facilities
(University of Maryland Medical System),
6.75s, 2030 1,000 1,016,590
Massachusetts Health & Education Facilities Authority
(Caritas Christi), 5.7s, 2015 2,500 2,227,975
Michigan Hospital Finance Authority Rev. (Mercy
Health Services), 5.625s, 2016 8,375 8,185,558
Richland County, OH, Hospital Facilities Rev.,
6.375s, 2022 1,000 997,800
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.7s, 2016 770 725,040
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.5s, 2027 275 247,063
--------------
$ 45,721,975
------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 0.9%
Dallas Fort Worth, TX, International Airport Facility
Rev. (American Airlines), 5.95s, 2029 $ 1,250 $ 1,255,575
Massachusetts Development Finance Agency (Springfield
Resources Recovery), 5.625s, 2019 6,920 6,634,896
Sweetwater County, WY, Solid Waste Disposal Rev. (FMC
Corp.) Project Series A, 7s, 2024 4,000 4,076,280
--------------
$ 11,966,751
------------------------------------------------------------------------------
Insured Health Care Revenue - 6.6%
Albany-Dougherty County, GA, Hospital
Authority Rev.
(Phoebe Putney Memorial Hospital, Inc.), CARS,
AMBAC, 6.62s, 2013(++) $ 1,550 $ 1,603,506
District of Columbia, Hospital Rev. (Medlantic
Healthcare), MBIA, 5.25s, 2019 6,750 6,498,157
Illinois Development Finance Authority Rev., "A"
(Provena Health), MBIA, 5.25s, 2012 5,900 5,936,757
Illinois Health Facilities Authority Rev., Unrefunded
Balance, MBIA, 5.7s, 2011 3,005 3,131,511
Michigan Hospital Finance Authority Rev. (Mercy Mount
Clemens), MBIA, 5.75s, 2017 2,900 2,969,716
Michigan Hospital Finance Authority Rev. (Sisters of
Mercy Hospital), MBIA, 5.375s, 2014 9,000 9,170,100
North Central, TX, Health Facility Development Corp.
Rev. (Texas Health Resources System), MBIA,
5s, 2017 6,000 5,664,180
North Texas Health Facilities Development Corp.
(United Regional Health Care Systems, Inc.), MBIA,
5s, 2014 8,980 8,730,895
Peninsula Ports Authority, VA (Whittaker Memorial),
FHA, 8.7s, 2023 1,595 1,925,739
Pennsylvania Higher Educational Facilities (Allegheny
Delaware Valley), MBIA, 5.3s, 2006 1,975 2,008,851
Pennsylvania Higher Educational Facilities (Allegheny
Delaware Valley), MBIA, 5.875s, 2016 5,000 5,102,400
Sayre, PA, Health Care Facilities Authority Rev.
(Guthrie Healthcare Systems), AMBAC, 7s, 2011 6,000 6,192,780
Sierra View, CA, Local Health Care District Rev.,
ACA, 5.25s, 2018 5,000 4,824,950
Tarrant County, TX, Health Facilities Development
Corp. (Fort Worth Osteopathic), MBIA, 6s, 2021 6,000 6,336,900
Tarrant County, TX, Health Facilities Development
Corp. (Texas Health Resources), MBIA, 5.25s, 2018 8,605 8,345,215
Washington County, PA, Hospital Authority Rev.
(Washington Hospital), AMBAC, 7.15s, 2017 9,000 9,256,770
--------------
$ 87,698,427
------------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.2%
California Statewide Community Development Authority
(Equity Residential), 5.2s, 2029 $ 1,850 $ 1,855,013
California Statewide Community Development Authority
(Irvine Apartments), 5.25s, 2025 3,500 3,448,760
Colorado Housing Finance Authority, FHA, 8.3s, 2023 4,000 4,228,280
Panhandle,TX, Regional Housing Finance, 6.625s, 2020 670 681,578
Panhandle, TX, Regional Housing Finance, 6.75s, 2031 3,330 3,415,581
San Bernardino County, CA, Housing Authority Rev.,
(Equity Residential Redlands), 5.2s, 2029 2,000 2,005,420
--------------
$ 15,634,632
------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.5%
Illinois Dedicated Tax Rev. (Civic Center), AMBAC,
6.25s, 2011 $ 3,640 $ 4,036,906
Illinois Sales Tax Rev., 0s, 2009 8,965 5,801,072
Illinois Sales Tax Rev., 6.5s, 2022 5,000 5,545,150
Metropolitan Atlanta, GA, Rapid Transit Authority,
6.25s, 2018 4,580 5,008,367
Pennsylvania Turnpike Commission Oil, AMBAC,
5.25s, 2018 10,520 10,336,321
Territory of Virgin Islands, Public Finance
Authority, 5.5s, 2022 2,000 1,869,000
--------------
$ 32,596,816
------------------------------------------------------------------------------
Single Family Housing Revenue - 7.1%
California Housing Finance Agency Rev., Home
Mortgage, FSA, 0s, 2019 $ 27,715 $ 9,216,623
California Housing Finance Agency Rev., Home
Mortgage, MBIA, 0s, 2027 6,395 1,468,740
California Housing Finance Agency Rev., Home
Mortgage, MBIA, 0s, 2028 4,340 1,030,837
California Housing Finance Agency Rev., Home
Mortgage, MBIA, 0s, 2029 10,000 2,424,600
California Rural Home Mortgage Finance Authority,
GNMA/FNMA, 6.55s, 2030 1,765 1,877,130
California Rural Home Mortgage Finance Authority,
GNMA/FNMA, 6.1s, 2031 1,000 1,113,300
Chicago, IL, Single Family Mortgage Rev., FNMA/GNMA,
7.05s, 2030 900 968,778
Colorado Housing Finance Authority, 7.15s, 2014 440 475,706
Colorado Housing Finance Authority, 6.05s, 2016 1,250 1,296,700
Colorado Housing Finance Authority, 7.45s, 2016 1,395 1,545,409
Colorado Housing Finance Authority, 6.75s, 2021 1,080 1,163,851
Colorado Housing Finance Authority, FHA/VA MTGS,
8.4s, 2021 800 885,848
Colorado Housing Finance Authority, 6.55s, 2025 1,105 1,178,460
Colorado Housing Finance Authority, 7.4s, 2027 1,280 1,361,600
Colorado Housing Finance Authority, 6.8s, 2030 2,200 2,373,404
Colorado Housing Finance Authority, 7.25s, 2031 2,000 2,226,360
Denver, CO, City and County (Metro Mayors Caucus),
GNMA/FNMA/FHLMC, 6.5s, 2031 3,600 4,009,428
Jefferson Parish, LA, Home Mortgage Authority,
FNMA/GNMA, 7.5s, 2026 1,000 1,102,130
Jefferson Parish, LA, Home Mortgage Authority Rev.,
GNMA, 6.75s, 2030 1,345 1,436,541
Lee County, FL, Housing Authority Rev., GNMA,
7s, 2031 775 829,335
Louisiana Housing Finance Agency, FNMA/GNMA,
7.55s, 2031 2,520 2,815,772
Lubbock, TX, Housing Finance Corp., GNMA/FNMA,
6.1s, 2030 3,645 3,767,035
Maricopa County, AR, GNMA/FNMA/FHLMC, 6s, 2024 500 558,750
Maryland Community Development Administration,
7.3s, 2025 6,495 6,644,255
Mississippi Home Corp., GNMA, 7.55s, 2027 1,685 1,826,051
Missouri Housing Development Commission, GNMA/FNMA,
6.7s, 2030 4,450 4,723,675
Missouri Housing Development Commission, GNMA/FNMA
7.45s, 2031 1,000 1,111,000
Nebraska Investment Finance Authority,
GNMA/FNMA/FHLMC, 5.6s, 2020 3,400 3,383,782
New Hampshire State Housing Finance Authority,
6.85s, 2030 6,200 6,625,196
New Mexico Mortgage Finance Authority, Single Family
Mortgage, GNMA/FNMA, 7.1s, 2030 1,200 1,310,556
New Mexico Mortgage Finance Authority, Single Family
Mortgage, GNMA/FNMA, 6.8s, 2031 2,500 2,684,325
Oklahoma Housing Finance Agency, 6.8s, 2016 975 1,025,876
Pima County, AZ, Industrial Development Authority,
GNMA, 7.05s, 2030 2,800 3,082,016
San Bernardino County, CA, GNMA/FNMA, 6.45s, 2020 1,750 1,920,713
Sedgwick & Shawnee Counties, KS, GNMA, 6.875s, 2026 3,355 3,620,079
Texas Housing & Community Affairs, Residential
Mortgage Rev., GNMA/FNMA, 7.1s, 2021 9,835 10,553,840
--------------
$ 93,637,701
------------------------------------------------------------------------------
Solid Waste Revenue - 0.2%
Northeast Maryland Waste Disposal Authority
(Southwest County Resource Recovery), MBIA,
7.2s, 2005 $ 3,000 $ 3,293,790
------------------------------------------------------------------------------
Special Assessment District - 0.5%
Chico, CA, Public Finance Authority Rev. (Southeast
Chico Redevelopment), FGIC, 6.625s, 2021 $ 6,435 $ 6,572,645
------------------------------------------------------------------------------
Student Loan Revenue - 0.4%
Arizona Student Loan Acquisition Authority, 5.8s,
2016 $ 2,500 $ 2,545,000
Arizona Student Loan Acquisition Authority, 5.85s,
2017 2,800 2,852,584
--------------
$ 5,397,58
------------------------------------------------------------------------------
Turnpike Revenue - 3.3%
E 470 Public Highway Authority, CO, MBIA, 0s, 2017 $ 5,000 $ 1,775,700
Illinois Regional Transport Authority, MBIA,
6.25s, 2016 2,870 3,152,465
Illinois Regional Transport Authority, MBIA,
6.25s, 2018 4,400 4,813,380
New Jersey Economic Development Authority Rev.,
Transportation Project Sublease Series A, FSA,
6s, 2016 1,325 1,399,187
New Jersey Transportation Trust Fund Authority,
Transportation Systems, 5.25s, 2016 8,500 8,452,570
New Jersey Turnpike Authority, RITES, 6.55s,
2020+ (++) 5,000 4,957,600
New York Thruway Authority Service Contract, Local
Highway & Bridge, "A2", MBIA, 5.375s, 2016 5,000 5,010,250
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s,
2012 2,200 970,222
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s,
2013 7,000 2,864,610
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s,
2014 6,500 2,465,905
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s,
2015 7,300 2,564,782
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s,
2016 1,900 617,595
Texas Turnpike Authority, Dallas Thruway Rev.
(President George Bush Turnpike), AMBAC, 5s, 2016 4,500 4,353,615
--------------
$ 43,397,881
------------------------------------------------------------------------------
Universities - 2.2%
Clark County, NV, Economic Development Rev.
(Alexander Dawson School), 5.5s, 2020 $ 6,000 $ 5,885,820
Maine Finance Authority (Waynflete School), 6.5s,
2024 1,500 1,534,485
Massachusetts Development Finance Agency Rev. (Mass
College of Pharmacy), 6.625s, 2020 350 358,915
Massachusetts Health & Higher Education Authority
(Harvard University), RITES, 8.182s, 2020+ (++) 8,410 10,448,920
New York Dormitory Authority Rev. (University of
Rochester), MBIA, 5.25s, 2015 3,805 3,788,296
Ohio State University, 6s, 2017 500 525,465
Texas A & M University, Permanent University Fund,
0s, 2007 6,695 4,807,412
University of Akron, OH, General Receipts, FGIC, 6s,
2015 1,000 1,072,680
University of New Mexico, MBIA, 5.75s, 2020 500 520,410
--------------
$ 28,942,403
------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 0.9%
Forsyth County, GA, Water & Sewage Authority, 6.25s,
2019 $ 1,000 $ 1,072,320
Forsyth County, GA, Water & Sewage Authority, 6.25s,
2021 1,055 1,127,932
Houston, TX, Water & Sewer Systems Rev., FGIC, 5s,
2018 10,000 9,481,800
--------------
$ 11,682,052
------------------------------------------------------------------------------
Other - 0.7%
Alabama Building Renovation Authority, AMBAC, 6s,
2015 $ 1,610 $ 1,700,917
Alabama Building Renovation Authority, AMBAC, 6s,
2016 1,705 1,805,663
Orange County, CA, California Recovery Certificates,
MBIA, 6s, 2026 5,000 5,185,800
Rail Connections Inc., MA, Rev., 0s, 2015 375 149,955
Rail Connections Inc., MA, Rev., 0s, 2016 450 165,294
Rail Connections Inc., MA, Rev., 0s, 2017 975 330,710
--------------
$ 9,338,339
------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $1,245,255,359) $1,306,594,356
------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.4%
------------------------------------------------------------------------------
Bartow County, GA, Development Authority, Pollution
Control Rev., (Georgia Power Co.), due 09/01/00 $ 190 $ 190,000
Massachusetts Health Educational Facilities Rev.
(Berklee College Of Music), due 09/07/00 110 110,000
New Castle, PA, Area Hospital Authority, (Jameson
Memorial Hospital), due 09/07/00 600 600,000
Pinellas County, FL, Health Facility Authority, due
09/01/00 300 300,000
Sevier County, TN, Public Building Authority, due
09/07/00 3,850 3,850,000
------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Amortized Cost and
Value $ 5,050,000
------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,250,305,359) $1,311,644,356
Other Assets, Less Liabilities - 1.2% 15,419,749
------------------------------------------------------------------------------
Net assets - 100.0% $1,327,064,105
------------------------------------------------------------------------------
+ Restricted security.
(++) Inverse floating rate security.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
------------------------------------------------------------------------------
AUGUST 31, 2000
------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,250,305,359) $1,311,644,356
Cash 29,558
Receivable for investments sold 475,455
Receivable for fund shares sold 2,502,646
Interest receivable 16,477,391
Other assets 22,007
--------------
Total assets $1,331,151,413
--------------
Liabilities:
Distributions payable $ 2,510,145
Payable for fund shares reacquired 1,238,970
Payable to affiliates -
Management fee 14,417
Shareholder servicing agent fee 3,621
Distribution and service fee 4,672
Administrative fee 634
Accrued expenses and other liabilities 314,849
--------------
Total liabilities $ 4,087,308
--------------
Net assets $1,327,064,105
==============
Net assets consist of:
Paid-in capital $1,275,891,580
Unrealized appreciation on investments 61,338,997
Accumulated distributions in excess of net realized
gain on investments (13,272,999)
Accumulated undistributed net investment income 3,106,527
--------------
Total $1,327,064,105
==============
Shares of beneficial interest outstanding 129,001,651
===========
Class A shares:
Net asset value and redemption price per share
(net assets of $1,256,800,912 / 122,163,904
shares of beneficial interest outstanding) $10.29
======
Offering price per share (100 / 95.25) $10.80
======
Class B shares:
Net asset value and offering price per share
(net assets of $70,263,193 / 6,837,747
shares of beneficial interest outstanding) $10.28
======
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, 2000
------------------------------------------------------------------------------
Net investment income:
Interest income $ 79,843,939
------------
Expenses -
Management fee $ 5,490,909
Trustees' compensation 66,111
Shareholder servicing agent fee 1,346,513
Distribution and service fee (Class B) 562,966
Administrative fee 182,621
Custodian fee 335,663
Printing 46,500
Postage 75,526
Auditing fees 35,349
Legal fees 9,757
Miscellaneous 285,982
------------
Total expenses $ 8,437,897
Fees paid indirectly (311,642)
------------
Net expenses $ 8,126,255
------------
Net investment income $ 71,717,684
------------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) -
Investment transactions $(12,349,448)
Futures contracts (344,235)
------------
Net realized loss on investments $(12,693,683)
------------
Change in unrealized appreciation (depreciation) -
Investments $ 23,593,514
Futures contracts (194,465)
------------
Net unrealized gain on investments $ 23,399,049
------------
Net realized and unrealized gain on investments $ 10,705,366
------------
Increase in net assets from operations $ 82,423,050
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
----------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 71,717,684 $ 77,218,828
Net realized gain (loss) on investments (12,693,683) 19,746,309
Net unealized gain (loss) on investments 23,399,049 (110,665,661)
--------------- ---------------
Increase (decrease) in net assets from operations $ 82,423,050 $ (13,700,524)
--------------- ---------------
Distributions declared to shareholders -
From net investment income (Class A) $ (68,514,103) $ (74,017,246)
From net investment income (Class B) (3,288,567) (3,352,797)
From net realized gain on investments (Class A) (8,329,020) (14,781,390)
From net realized gain on investments (Class B) (460,316) (768,647)
In excess of net realized gain on investments (Class A) (12,225,459) --
In excess of net realized gain on investments (Class B) (675,657) --
--------------- ---------------
Total distributions declared to shareholders $ (93,493,122) $ (92,920,080)
--------------- ---------------
Net decrease in net assets from fund share transactions $ (124,835,503) $ (151,198,802)
--------------- ---------------
Total decrease in net assets $ (135,905,575) $ (257,819,406)
Net assets:
At beginning of period 1,462,969,680 1,720,789,086
--------------- ---------------
At end of period (including accumulated undistributed net
investment income of $3,106,527 and $2,819,630, respectively) $ 1,327,064,105 $ 1,462,969,680
=============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $10.35 $11.09 $10.99 $10.75 $10.83
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.54 $ 0.53 $ 0.54 $ 0.57 $ 0.59
Net realized and unrealized gain (loss) on
investments 0.09 (0.64) 0.28 0.24 (0.09)
------ ------ ------ ------ ------
Total from investment operations $ 0.63 $(0.11) $ 0.82 $ 0.81 $ 0.50
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.54) $(0.53) $(0.54) $(0.57) $(0.58)
From net realized gain on investments (0.06) (0.10) (0.18) -- --
In excess of net realized gain on
investments (0.09) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.69) $(0.63) $(0.72) $(0.57) $(0.58)
------ ------ ------ ------ ------
Net asset value - end of period $10.29 $10.35 $11.09 $10.99 $10.75
====== ====== ====== ====== ======
Total return(+) 6.51% (1.08)% 7.78% 7.75% 4.67%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.58% 0.57% 0.60% 0.60% 0.60%
Net investment income 5.32% 4.87% 4.90% 5.29% 5.37%
Portfolio turnover 25% 30% 79% 91% 84%
Net assets at end of period (000,000 Omitted) $1,257 $1,385 $1,639 $1,660 $1,798
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
CLASS B
------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $10.34 $11.08 $10.99 $10.74 $11.10
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.46 $ 0.44 $ 0.45 $ 0.48 $ 0.49
Net realized and unrealized gain (loss) on
investments 0.09 (0.64) 0.28 0.25 (0.37)
------ ------ ------ ------ ------
Total from investment operations $ 0.55 $(0.20) $ 0.73 $ 0.73 $ 0.12
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.46) $(0.44) $(0.46) $(0.48) $(0.48)
From net realized gain on investments (0.06) (0.10) (0.18) -- --
In excess of net realized gain on
investments (0.09) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.61) $(0.54) $(0.64) $(0.48) $(0.48)
------ ------ ------ ------ ------
Net asset value - end of period $10.28 $10.34 $11.08 $10.99 $10.74
====== ====== ====== ====== ======
Total return 5.70% (1.87)% 6.85% 6.84% 3.69%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.37% 1.37% 1.40% 1.46% 1.55%
Net investment income 4.55% 4.07% 4.10% 4.42% 4.42%
Portfolio turnover 25% 30% 79% 91% 84%
Net assets at end of period (000,000 Omitted) $70 $78 $81 $76 $71
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<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 are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. Futures
contracts listed on commodities exchanges are reported at market value using
closing settlement prices. Securities for which there are no such quotations or
valuations are valued in good faith, at fair value, by the Trustees.
Futures Contracts - The fund may enter into futures contracts for the delayed
delivery of securities or contracts based on financial indices at a fixed price
on a future date. In entering such contracts, the fund is required to deposit
with the broker either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
the fund each day, depending on the daily fluctuations in the value of the
contract, and are recorded for financial statement purposes as unrealized gains
or losses by the fund. The fund's investment in futures contracts is designed to
hedge against anticipated future changes in interest rates or securities prices.
Investments in interest rate futures for purposes other than hedging may be made
to modify the duration of the portfolio without incurring the additional
transaction costs involved in buying and selling the underlying securities.
Should interest rates or securities prices move unexpectedly, the fund may not
achieve the anticipated benefits of the futures contracts and may realize a
loss.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount is 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 reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. This amount is shown as a reduction of total expenses on the Statement of
Operations.
Tax Matters and Distributions - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net tax-exempt
and net taxable 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 the 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 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, 2000, $371,883 was reclassified from accumulated
distributions in excess of net realized gain on investments to accumulated
undistributed net investment income, due to differences between book and tax
accounting for market discount on tax-exempt obligations. This change had no
effect on the net assets or net asset value per share.
At August 31, 2000, the fund, for federal income tax purposes, had a capital
loss carryforward of $2,836,016 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on August 31, 2008.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that differ in their respective distribution and service fees.
All shareholders bear the common expenses of the fund based on 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%
In excess of $200 million 0.187% In excess of $16 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. Included in Trustees' compensation is a net
periodic pension expense of $23,871 for the year ended August 31, 2000.
Administrator - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$122,107 for the year ended August 31, 2000, as its portion of the sales charge
on sales of Class A shares of the fund.
The Trustees have adopted a distribution plan for Class 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 received no portion of the service fee, for Class B, for the
year ended August 31, 2000. Fees incurred under the distribution plan during the
year ended August 31, 2000, were 0.79% of average daily net assets attributable
to Class B shares 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, 2000, were $22 and $181,862 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 annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$334,131,128 and $475,545,317, 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 $1,250,307,206
--------------
Gross unrealized appreciation $ 71,890,038
Gross unrealized depreciation (10,552,888)
--------------
Net unrealized appreciation $ 61,337,150
==============
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
<TABLE>
<CAPTION>
Class A shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 21,409,896 $ 214,074,774 86,556,394 $ 951,673,399
Shares issued to shareholders in
reinvestment of distributions 5,370,090 53,894,466 4,967,172 54,089,815
Shares reacquired (38,453,166) (385,421,732) (105,494,679) (1,159,458,546)
--------------- --------------- --------------- ---------------
Net decrease (11,673,180) $ (117,452,492) (13,971,113) $ (153,695,332)
=============== =============== =============== ===============
<CAPTION>
Class B shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,147,122 $ 11,490,923 1,660,763 $ 18,143,122
Shares issued to shareholders in
reinvestment of distributions 276,350 2,770,673 236,006 2,566,087
Shares reacquired (2,158,456) (21,644,607) (1,676,695) (18,212,679)
--------------- --------------- --------------- ---------------
Net increase (decrease) (734,984) $ (7,383,011) 220,074 $ 2,496,530
=============== =============== =============== ===============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. Interest is charged to
each fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the fund for the year ended August 31,
2000, was $10,499. 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. 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. There were no
outstanding financial instruments with off-balance sheet risk at the end of the
period.
(8) Restricted Securities
The fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At August 31, 2000, the
fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting 3.7% of net assets which may not be publicly sold
without registration under the Securities Act of 1933. The fund does not have
the right to demand that such securities be registered. The value of these
securities is determined by valuations furnished by dealers or by a pricing
service, or if not available, in good faith, at fair value, by the Trustees.
<TABLE>
<CAPTION>
DATE OF PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Chicago, IL, RITES, 6.554s, 2018 03/20/00 $5,900,000 $5,701,613 $ 6,022,838
Chicago, IL, Board of Education, RITES,
FGIC, 5.887s, 2019 02/09/00 5,000,000 3,984,600 4,778,600
Denver, CO, City & County Airport Rev.,
RITES, 7.5s, 2017 08/28/00 2,500,000 2,683,700 2,680,925
Massachusetts Health & Higher Education
Authority (Harvard University), RITES,
8.182s, 2020 11/08/99 8,410,000 9,569,030 10,448,920
New Jersey Turnpike Authority, RITES,
6.55s, 2020 04/19/00 5,000,000 4,639,110 4,957,600
Puerto Rico Electric Power Authority,
RITES, FSA, 6.477s, 2015 09/16/99 2,500,000 2,441,250 2,576,425
Puerto Rico Electric Power Authority,
RITES, FSA, 6.477s, 2016 09/16/99 3,000,000 2,854,200 3,044,820
State of California, RITES, 6.977s, 2012 11/08/99 6,000,000 6,303,508 6,894,600
State of California, RITES, 7.477s, 2017 01/03/00 6,875,000 6,766,513 7,648,644
-----------
$49,053,372
===========
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust IV and Shareholders of MFS Municipal Bond
Fund:
We have audited the accompanying statements of assets and liabilities of MFS
Municipal Bond Fund (one of the series comprising MFS Series Trust IV),
including the portfolio of investments, as of August 31, 2000, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 August 31, 2000, by correspondence with the custodian. 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
Municipal Bond Fund as of August 31, 2000, the results of its operations, the
changes in its net assets and the financial highlights for the respective stated
periods, in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 5, 2000
<PAGE>
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
--------------------------------------------------------------------------------
IN JANUARY 2001, 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 2000.
THE FUND HAS DESIGNATED $20,364,509 AS A CAPITAL GAIN DIVIDEND FOR THE YEAR
ENDED AUGUST 31, 2000.
<PAGE>
MFS(R) MUNICIPAL BOND FUND
TRUSTEES SECRETARY
J. Atwood Ives+ - Chairman and Chief Stephen E. Cavan*
Executive Officer, Eastern Enterprises
(diversified services company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ - Partner, Hemenway
& Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ - Adjunct Professor,
Harvard University Graduate School of AUDITORS
Business Administration Deloitte & Touche LLP
Charles W. Schmidt+ - Private Investor INVESTOR INFORMATION
For information on MFS mutual funds,
Arnold D. Scott* - Senior Executive call your investment professional
Vice President, Director, and Secretary, or, for an information kit, call
MFS Investment Management toll free: 1-800-637-2929 any
business day from 9 a.m. to 5 p.m.
Jeffrey L. Shames* - Chairman and Chief Eastern time (or leave a message
Executive Officer, MFS Investment anytime).
Management
INVESTOR SERVICE
Elaine R. Smith+ - Independent Consultant MFS Service Center, Inc.
P.O. Box 2281
David B. Stone+ - Chairman, North Boston, MA 02107-9906
American Management Corp.
(investment adviser) For general information, call toll
free: 1-800-225-2606 any business
INVESTMENT ADVISER day from 8 a.m. to 8 p.m. Eastern
Massachusetts Financial Services Company time.
500 Boylston Street
Boston, MA 02116-3741 For service to speech- or
hearing-impaired, call toll free:
DISTRIBUTOR 1-800-637-6576 any business day from
MFS Fund Distributors, Inc. 9 a.m. to 5 p.m. Eastern time. (To
500 Boylston Street use this service, your phone must be
Boston, MA 02116-3741 equipped with a Telecommunications
Device for the Deaf.)
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames* For share prices, account balances,
exchanges, or stock and bond
PORTFOLIO MANAGERS outlooks, call toll free:
Michael L. Dawson* 1-800-MFS-TALK (1-800-637-8255)
Geoffrey L. Schechter* anytime from a touch-tone telephone.
TREASURER WORLD WIDE WEB
James O. Yost* www.mfs.com
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
+ Independent Trustee
*MFS Investment Management
<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)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MMB-2 10/00 44M 17/217
