<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
MFS(R) MUNICIPAL
BOND FUND
SEMIANNUAL REPORT o FEBRUARY 29, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 22
Notes to Financial Statements ............................................. 27
Trustees and Officers ..................................................... 33
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
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that this
new communication medium is changing forever the way we work, play, and shop.
One might also argue that investing in this new technology represents the
investment opportunity of a lifetime. The question for any investor is whether
and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no
doubt that Internet-delivered information and brokerage services enable
individual investors to be well informed and to trade at bargain prices. But
we believe the numbers and facts argue that, for most of us, mutual funds
purchased through an investment professional will continue to be one of the
best products for long-term investing in this new millennium.
According to a survey by the Investment Company Institute, the national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of
course that doesn't tell us how well they did owning those funds or stocks,
but another statistic gives us a clue. In the third quarter of 1999, during a
period of volatility in the greatest bull market in history, a quarter of the
7,500 stocks tracked by Morningstar, a popular rating service, lost more than
20% of their value. But during the same period, fewer than 1% of the mutual
funds tracked by Morningstar -- 6 out of 10,000 funds -- were down by a
similar amount.(2) So an investor's chance of picking one of those losing
stocks was about 25 times greater than his or her chance of picking an equally
losing fund.
The numbers also show that a majority of Americans seek professional advice
when buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through an investment professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up as well as down markets. And for many
investors, working with an investment professional may be the best way to
develop a plan. Although the Internet abounds with calculators for developing
all sorts of investment plans, none has your investment professional's high
level of experience and an understanding of your unique situation. And no
calculator can counsel you during a down market, when you may be tempted to
abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns dozens
or even hundreds of holdings is better positioned to survive a disappointment
in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost inevitable
part of investing. Few mutual funds, of course, are going to be up when the
overall market is down. But as the numbers above from the third quarter of
1999 demonstrate, mutual funds may be less likely to suffer the extreme
downturns experienced by a large number of individual holdings when the market
heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights. The
diversification and professional management of mutual funds help make them
inherently less risky than individual stock picking, and funds are available
in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
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)
March 15, 2000
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(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore Sun's
Dollars and Sense Conference, 10/99. In the period 7/1/99 through 9/ 30/99,
of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or more; of the
10,000 mutual funds tracked by Morningstar, six lost 20% or more. Mutual
fund results are at net asset value; if sales charges had been reflected,
results would have been lower.
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.
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MANAGEMENT REVIEW AND OUTLOOK
[Photo of Geoffrey L. Schechter]
Geoffrey L. Schechter
For the six months ended February 29, 2000, Class A shares of the Fund
provided a total return of -0.43% and Class B shares -0.82%. These returns
include the reinvestment of any distributions but exclude the effects of any
sales charges. During the same period, the Fund's benchmark, the Lehman
Brothers Municipal Bond Index (the Lehman Index), an unmanaged index of
approximately 40,000 investment-grade bonds, returned -0.02%, and the average
municipal bond fund tracked by Lipper Inc., an independent firm that reports
mutual fund performance, returned -1.31%.
Q. THIS HAS NOT BEEN A GOOD MARKET FOR BONDS -- YET THE FUND OUTPERFORMED ITS
LIPPER CATEGORY AVERAGE. WHY IS THIS SO?
A. Without a doubt, we feel this has been one of the worst markets for bonds
since 1994. Strong economic growth and tight labor markets, combined with
the Federal Reserve Board's decision to raise the Fed Funds rate in an
effort to forestall inflationary pressures, caused interest rates to rise,
thereby driving bond prices lower. This has hurt performance, especially
that of funds with longer maturities. The Fund underperformed the Lehman
Index because the index is comprised of a much broader mix of short- and
long-term bonds, whereas the Fund consists of mostly long-term securities.
As interest rates rose throughout the course of the past six months, long-
term securities declined more than short-term securities.
The Lipper category average, on the other hand, simply compares us to our
peer group. We are pleased that, in spite of these trying times, the Fund
posted a six-month return that is somewhat better than that of the average
actively managed muni bond fund.
Q. HOW HAS YOUR INVESTMENT STRATEGY HELPED YOU TO MEET THE FUND'S OBJECTIVES?
A. One key component of our strategy has been to maintain a duration -- a
measure of the Fund's sensitivity to interest-rate changes -- that is
slightly shorter than that of our benchmark, and we have been successful in
doing that. Over the course of the past six months, our duration was
approximately eight and three-quarters years, a figure which was around 3%
to 5% shorter than comparable funds that comprise the Lipper peer group.
While we don't believe in making interest-rate bets, we felt that our
economic environment warranted caution, and this benefited the Fund.
Another component of our strategy has been to make sure that our
shareholders are fairly compensated for any investment the Fund makes. With
yield differentials historically narrow between "BBB"-rated and "A"-rated
municipal bonds, we felt that there was no longer a financial incentive to
invest in lower-grade securities. As a result, we continued to upgrade the
Fund's credit quality, decreasing our exposure to "BBB"-rated bonds (from 8%
to 4%). This strategy benefited the Fund as yield spreads between
"AAA"-rated and "BBB"- rated securities widened during the past six months,
causing lower-rated securities to underperform. With spreads currently at
their widest levels since December 1996 we are now looking to add exposure
to lower-quality securities.
Q. WHAT SECTOR WAS THE MOST ATTRACTIVE TO YOU -- AND WHY?
A. Our analysts have positive outlooks on many sectors, most notably tax-
backed (including general obligation debt), utilities, and education. One
sector that we have been emphasizing recently is the housing sector. We
continue 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 secured by federal agencies such as the
Government National Mortgage Association (Ginnie Mae), the Federal National
Mortgage Corporation (Fannie Mae), and the Federal Home Loan Mortgage
Association (Freddie Mac). The U.S. government guarantees (either directly
or indirectly) the underlying mortgages of these bonds; therefore, there is
minimal credit risk associated with them. Our focus also has been on
specific structures that have low volatility and may minimize prepayment
risk normally found in housing bonds.
Q. WHAT ROLE DOES MFS ORIGINAL RESEARCH(R) PLAY IN YOUR DECISION-MAKING
PROCESS?
A. Experience has shown that mistakes are extremely costly for a fund manager.
Even a well-diversified mutual fund such as this one can take a long time to
recover from a few bad investments. That is why Original Research(SM) is so
important to the investment decision-making process.
For example, our analysts have been concerned about the health care sector
since 1997, when the Balanced Budget Reconciliation Act was passed. This
legislation slowed the rate at which hospitals are reimbursed by the federal
government and insurance companies. Since that time, we have purposely
reduced our exposure to "BBB"-rated bonds, particularly "BBB"-rated hospital
bonds. This has been one of the worst-performing sectors of the municipal
market over the past six months.
While it didn't surprise us that cuts in Medicaid and health insurance
reimbursement rates would hit earnings hard (especially for metropolitan
hospitals), many investors were unprepared for this sector's recent dramatic
drop in value. Despite real problems in this sector, the decline in
performance may be due, in part, to market overreaction. This presents us
with an attractive buying opportunity. Using our Original Research process,
we are slowly and selectively investing in health care organizations that
exhibit improving credit quality and strong, competitive positions in their
regions.
Q. YOU TOUT THE IMPORTANCE OF ORIGINAL RESEARCH. CAN YOU EXPLAIN HOW THIS
APPROACH HAS BENEFITED FUND SHAREHOLDERS?
A. Let's look at the housing sector again. While this has been one of the
best-performing sectors in the municipal market, many investors have avoided
housing bonds because of their prepayment risk (the risk that homeowners
will pay off their loans early). Our research uncovered investment
opportunities in which older, high-coupon bonds would be prepaid before the
ones in which we have invested. We believe minimizing prepayment risk should
help produce a more stable income stream, no matter what happens to interest
rates.
Whether markets are up or down, MFS analysts focus on assessing industries
and issuers that have the best prospects for long-term success. Because each
sector (and the individual issuers within it) responds differently to
economic developments, bottom-up research -- that is, understanding the
issuer from the ground up -- remains critical to identifying opportunities
that will ultimately bear fruit.
Q. IN SPITE OF THE ROUGH RIDE, WHY DO YOU FEEL THAT IT WOULD BE WISE FOR
MUNICIPAL BOND INVESTORS TO STAY THE COURSE?
A. Key indicators -- job growth, retail sales, auto sales, housing
construction, corporate credit quality -- tell us that the economy remains
healthy. We believe this bodes well for the municipal bond market.
Additionally, our nation's cities, towns, and counties have been well
managed, for the most part, and are experiencing strong revenue growth and
budget surpluses. Again, we believe this is another positive sign for tax-
exempt bondholders.
In our opinion, an experienced muni bond fund manager is better able to
judge investment opportunities, such as "BBB"-rated bonds, that individuals
may not be able to evaluate themselves. And the opportunity to reinvest
dividends with the same absolute yield makes the reinvestment process
typically more consistent than buying an individual bond.
Lastly, investing in a high-quality municipal bond fund offers important
portfolio diversification. While many have come to expect extraordinary
returns in today's high-flying equity market, we do not think this will last
forever. It is prudent to spread your portfolio among a host of different
types of investments to balance your risk. We believe a professionally
managed municipal bond fund such as this one offers that all-important
diversification.
/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.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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GEOFFREY L. SCHECHTER IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
AND PORTFOLIO MANAGER OF MFS(R) 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 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 other
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>
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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: $1.3 BILLION NET ASSETS AS OF FEBRUARY
29, 2000
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes to
Performance Summary.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH FEBRUARY 29, 2000
<TABLE>
CLASS A
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -0.43% -3.53% +10.05% +24.81% +84.82%
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Average Annual Total Return Excluding Sales Charge -- -3.53% + 3.24% + 4.53% + 6.33%
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Average Annual Total Return Including Sales Charge -- -8.11% + 1.58% + 3.52% + 5.82%
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CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years
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Cumulative Total Return Excluding Sales Charge -0.82% -4.30% +7.46% +19.66% +74.18%
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Average Annual Total Return Excluding Sales Charge -- -4.30% +2.43% + 3.66% + 5.71%
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Average Annual Total Return Including Sales Charge -- -7.91% + 1.5% + 3.33% + 5.71%
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</TABLE>
<PAGE>
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,
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 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.
<PAGE>
PORTFOLIO CONCENTRATION AS OF FEBRUARY 29, 2000
QUALITY (U.S. PORTION ONLY)
Source: Standard & Poor's and Moody's
"AAA" 64.5%
"AA" 14.0%
"A" 17.0%
"BBB" 3.8%
Not Rated 0.1%
Other 0.6%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 29, 2000
<CAPTION>
Municipal Bonds - 97.7%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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<S> <C> <C>
General Obligation - 15.8%
Birmingham, AL, 5.75s, 2019 $ 1,000 $ 989,470
Chicago, IL, Board of Education, AMBAC, 5.4s, 2017 3,000 2,832,330
Chicago, IL, Board of Education, MBIA, 6.25s, 2012 2,500 2,666,775
Chicago, IL, Board of Education, RITES,
FGIC, 6.75s, 2019(++) 5,000 4,114,800
Chicago, IL, Capital Appreciation, AMBAC, 0s, 2011 5,000 2,563,100
Chicago, IL, Capital Appreciation, AMBAC, 0s, 2012 2,550 1,224,280
Chicago, IL, City Colleges Chicago, Capital
Improvement, FGIC, 6s, 2011 1,570 1,637,824
Clark County, NV, School District, "A", MBIA, 7s, 2010 4,000 4,483,040
Clark County, NV, School District, "B", FGIC, 5.5s, 2016 5,000 4,831,450
Commonwealth of Massachusetts, 5s, 2014 4,750 4,367,435
Commonwealth of Massachusetts, 5s, 2017 18,940 16,848,835
Cook County, IL, MBIA, 5.625s, 2016 3,230 3,152,222
Cranston, RI, FGIC, 6.375s, 2017 830 869,300
Detroit, MI, 6.25s, 2009 5,235 5,397,599
Detroit/Wayne County, MI, Stadium, FGIC, 5.5s, 2017 6,000 5,774,820
District of Columbia, MBIA, 6.5s, 2010 5,705 6,144,171
Florida Board of Education, Capital Outlay, 9.125s, 2014 1,735 2,256,073
Forsyth County, GA, School District, 6s, 2015 725 743,937
Forsyth County, GA, School District, 6s, 2016 865 887,594
Hamilton, OH, City School District, 6.15s, 2012 940 1,000,404
Highland Park, TX, Independent School District, 5.125s, 2016 2,525 2,338,529
Houston County, AL, AMBAC, 6.25s, 2019 3,315 3,395,952
Jackson, MI, Public Schools System, FGIC, 6s, 2013 1,500 1,548,705
Lewisville, TX, Independent School District, PSF, 5s, 2018 8,500 7,436,565
Manchester, NH, 5.875s, 2019 2,270 2,250,206
Mobile County, AL, 6s, 2014 3,200 3,251,008
New York City, NY, 7.5s, 2002 12,500 13,066,750
New York City, NY, 7.5s, 2006 3,625 3,844,313
New York City, NY, 7.65s, 2006 160 170,112
New York City, NY, 7.5s, 2007 15,500 16,437,750
New York City, NY, 7.7s, 2009 60 63,755
New York City, NY, FGIC, 5.75s, 2013 8,500 8,557,460
New York City, NY, FGIC, 5.75s, 2014 9,500 9,500,095
New York City, NY, FGIC, 5.75s, 2015 11,085 11,015,608
New York City, NY, "B", 7.5s, 2008 8,660 9,180,639
Rockwall, TX, Independent School District, PSF, 0s, 2014 2,000 829,820
San Antonio, TX, 5s, 2020 2,990 2,583,091
State of California, 5.5s, 2013### 5,000 5,082,250
State of California, 5s, 2017 10,000 9,046,400
State of California, RITES, 7.469s, 2012(++) 6,000 6,196,320
State of California, RITES, 7.969s, 2017(++) 6,875 6,900,162
State of Florida, Broward County Expressway Authority,
10s, 2014 4,350 6,007,611
State of Washington, 6.75s, 2010 3,880 4,285,421
State of Washington, 6s, 2012 4,360 4,558,380
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$ 210,332,361
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State and Local Appropriation - 20.5%
California Public Works Board, Lease Rev. (California
State University), 5.3s, 2015 $ 6,655 $ 6,380,548
California Public Works Board, Lease Rev. (Department
of Corrections), AMBAC, 5.25s, 2013 6,795 6,746,483
California Public Works Board, Lease Rev. (University
of California), 5.5s, 2014 4,500 4,538,295
Chicago, IL, Board of Education, MBIA, 6.25s, 2009 5,160 5,487,660
Chicago, IL, Board of Education, MBIA, 6.25s, 2015 20,295 21,416,705
Delaware Valley, PA, Regional Finance Authority,
RITES, AMBAC, 7.066s, 2018(++) 16,250 15,184,650
Indiana Office Building Commission, Miami
Correctional Phase 1A, AMBAC, 5.5s, 2016 4,690 4,512,577
Indiana Office Building Commission, Miami
Correctional Phase 1A, AMBAC, 5.5s, 2017 1,400 1,332,030
Kentucky Property & Buildings Commission, Project
Number 65, 5.9s, 2016 4,500 4,535,775
Kentucky Property & Buildings Commission, Project
Number 65, FSA, 5.85s, 2015 4,000 4,034,440
King County, IL, Washington Lease Rev. (King Street
Center), MBIA, 5.125s, 2017 6,975 6,296,402
Los Angeles County, CA, Public Works Financing
Authority (Multiple Capital Facilities), AMBAC,
5.125s, 2017 4,900 4,561,214
Massachusetts Bay Transportation Authority, 6.1s, 2013 10,200 10,766,508
Massachusetts Bay Transportation Authority, 5.875s, 2015 4,500 4,602,645
Massachusetts Bay Transportation Authority, 7s, 2021 10,185 11,307,693
Massachusetts Bay Transportation Authority, FGIC, 5s, 2023 17,970 15,343,145
Metropolitan Government of Nashville & Davidson
County, TN, 7s, 2011 5,280 5,517,389
Metropolitan Transportation Authority, NY, Commuter
Facilities Rev., MBIA, 5.5s, 2011 3,430 3,450,306
Metropolitan Transportation Authority, NY, Service
Contract, 5.75s, 2013 5,600 5,644,464
New York Dormitory Authority Rev., Mental Health
Services Facilities, 6s, 2007 1,475 1,529,014
New York Dormitory Authority Rev., Mental Health
Services Facilities, 5.75s, 2010 2,000 2,029,580
New York Dormitory Authority Rev., Mental Health
Services Facilities, 5s, 2018 2,500 2,169,950
New York Dormitory Authority Rev. (City University),
5.75s, 2013 25,150 25,349,691
New York Dormitory Authority Rev. (City University),
5.75s, 2013 5,000 5,039,700
New York Dormitory Authority Rev. (City University),
AMBAC, 5.25s, 2015 5,000 4,682,800
New York Dormitory Authority Rev. (State University),
5s, 2013 3,660 3,374,300
New York Dormitory Authority Rev. (State University),
5.5s, 2013 7,000 6,887,440
New York Thruway Authority, Local Highway & Bridges,
5.25s, 2013 6,000 5,719,080
New York Urban Development Corp., 5.5s, 2016 14,690 14,104,457
New York Urban Development Corp., Correctional
Facilities, 5.5s, 2014 5,000 4,884,500
New York Urban Development Corp., Correctional
Facilities, 5.375s, 2015 11,405 10,814,221
New York Urban Development Corp., Correctional
Facilities, FSA, 5.5s, 2014 4,525 4,475,813
Ohio Building Authority, State Facilities Adult
Correctional Series A, 5.5s, 2013 4,000 3,957,120
Philadelphia, PA, Municipal Authority, MBIA, 5.4s, 2017 5,000 4,748,550
Rhode Island Convention Center Authority, MBIA, 5.25s, 2015 8,370 7,954,681
San Bernardino, CA, Joint Powers Financing Authority
Lease Rev. (California Dept. of Transportation),
5.5s, 2014 10,000 9,906,900
Santa Clara County, CA, Certificates of
Participation, AMBAC, 6.25s, 2016 8,210 8,484,214
Wayne County, MI, MBIA, 5.25s, 2016 5,750 5,406,668
--------------
$ 273,177,608
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Refunded and Special Obligations - 13.1%
Austin, TX, Utility Systems Rev., 10.75s, 2000 $ 2,615 $ 2,649,361
Chicago, IL, Public Building Commission Mortgage
Rev., MBIA ETM, 7.125s, 2015 6,590 6,763,449
Clark County, NV, School District, MBIA, 7s, 2001 10,050 10,444,865
Commonwealth of Massachusetts, 6.875s, 2001 4,825 5,057,179
Commonwealth of Massachusetts, 6.5s, 2008 6,300 6,817,230
Commonwealth of Massachusetts, FGIC, 7s, 2009 7,000 7,793,380
District of Columbia, MBIA, 6.5s, 2010 295 320,488
Florida Board of Education, Capital Outlay,
ETM, 9.125s, 2014 265 344,389
Illinois Health Facilities Authority Rev., "A",
BIA, 5.7s, 2008 1,495 1,555,368
Maryland Health & Higher Education Facilities
Authority Rev. (University of Maryland Medical
System), FGIC, 7s, 2001 7,945 8,342,091
Massachusetts Port Authority, "C", ETM, 13s, 2013 3,500 5,345,480
Missouri Regional Convention & Sports Complex
Authority, 6.8s, 2003 8,950 9,503,826
Missouri Regional Convention & Sports Complex
Authority, 6.9s, 2003 21,520 22,849,290
New York City, NY, 8s, 2001 2,475 2,631,073
New York City, NY, 7.65s, 2002 4,840 5,168,781
New York City, NY, 7.7s, 2002 3,940 4,211,230
New York City, NY, "B", 7.5s, 2008 1,340 1,426,122
New York Urban Development Corp., Correctional
Facilities, 7.375s, 2002 4,000 4,262,080
Pennsylvania Convention Center Authority Rev.,
ETM, 6.7s, 2016 26,195 28,939,188
Philadelphia, PA, Municipal Authority Rev., FGIC,
7.1s, 2001 6,000 6,348,000
Philadelphia, PA, School District, MBIA, 7s, 2001 9,440 9,822,886
Rhode Island Depositors Economic Protection Corp.,
ETM, FSA, 5.75s, 2014 9,800 9,960,426
State of Florida, Jacksonville Transportation
Authority, ETM, 9.2s, 2015 2,000 2,643,500
Washington Public Power Supply System Rev. (Nuclear
Project #2), 7.625s, 2001 10,815 11,316,708
--------------
$ 174,516,390
- ------------------------------------------------------------------------------------------------------
Airport and Port Revenue - 1.2%
Connecticut Airport Rev. (Bradley International
Airport), FGIC, 7.65s, 2012 $ 5,000 $ 5,531,800
Massachusetts Port Authority Rev., "C", 6.125s, 2017 1,500 1,529,520
Niagara, NY, Frontier Transport Authority (Buffalo
Niagara International Airport), MBIA, 5.875s, 2013 1,485 1,509,072
Philadelphia, PA, Parking Authority Rev., FSA,
5.625s, 2015 3,710 3,654,461
Port of Seattle, WA, MBIA, 5.5s, 2021 4,000 3,732,320
--------------
$ 15,957,173
- ------------------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 19.5%
Austin, TX, Utility Systems Rev., AMBAC, 6.75s, 2012## $ 2,500 $ 2,779,525
Beaver County, PA, Industrial Development Authority,
Pollution Control Rev. (Ohio Edison Co.), 4.65s, 2033 4,500 4,228,335
Farmington, NM, Pollution Control Rev., 6.3s, 2016 2,195 2,088,937
Farmington, NM, Pollution Control Rev., 5.8s, 2022 4,880 4,248,577
Georgia Municipal Electric Authority Rev., AMBAC, 6.5s, 2017 8,510 9,152,165
Georgia Municipal Electric Authority Rev., FGIC, 5.5s, 2020 5,045 4,815,553
Intermountain Power Agency, UT, 6.15s, 2014 44,600 45,529,910
Intermountain Power Agency, UT, AMBAC, 6s, 2021 9,000 9,464,940
Intermountain Power Agency, UT, MBIA, 6s, 2016 10,000 10,084,300
Intermountain Power Agency, UT, MBIA, 5s, 2019## 9,330 8,158,712
Long Island, NY, Power Authority Rev., FSA, 0s, 2010 9,900 5,462,424
Long Island, NY, Power Authority Rev., FSA, 0s, 2011 8,885 4,607,050
Massachusetts Municipal Wholesale Electric Co., MBIA, 6.75s, 2017 6,030 6,264,507
Matagorda County, TX (Reliant Energy), 5.95s, 2030 10,000 8,719,500
McAlester, OK, Public Works Authority, Utility System
Rev., FSA, 5.75s, 2020 5,900 5,669,192
Mercer County, ND, Pollution Control Rev. (Antelope
Valley Station), AMBAC, 7.2s, 2013 4,000 4,545,360
Michigan Strategic Fund, Limited Obligation Rev
(Detroit Edison), MBIA, 7s, 2008 3,000 3,341,340
North Carolina Eastern Municipal Power, MBIA, 5.7s, 2013 7,000 6,940,360
North Carolina Eastern Municipal Power, MBIA, 5.625s, 2014 7,735 7,597,085
North Carolina Eastern Municipal Power, MBIA, 5.125s, 2017 13,425 12,068,001
North Carolina Eastern Municipal Power, MBIA, 6.5s, 2018 9,250 9,918,867
North Carolina Municipal Power Agency (Catawba
Electric), 6.375s, 2013 1,500 1,488,240
Northern California Transmission Agency, MBIA, 7s, 2013 4,000 4,624,840
Piedmont, SC, Municipal Power Agency, FGIC, 6.25s, 2021 4,150 4,317,245
Puerto Rico Electric Power Authority Power, RITES,
FSA, 6.959s, 2015(++) 2,500 2,309,900
Puerto Rico Electric Power Authority Power, RITES,
FSA, 6.959s, 2016(++) 3,000 2,707,500
Washington Public Power Supply System Rev. (Nuclear
Project #1), FSA, 5.125s, 2014 12,500 11,525,000
Washington Public Power Supply System Rev. (Nuclear
Project #1), MBIA, 5.75s, 2010 13,100 13,246,589
Washington Public Power Supply System Rev. (Nuclear
Project #1), MBIA, 5.75s, 2011 7,500 7,554,075
Washington Public Power Supply System Rev. (Nuclear
Project #2), MBIA, 5.625s, 2010 10,000 10,029,500
Washington Public Power Supply System Rev. (Nuclear
Project #2), MBIA, 5.7s, 2012 15,000 14,966,700
Washington Public Power Supply System Rev. (Nuclear
Project #3), 7.125s, 2016 5,145 5,781,231
Washington Public Power Supply System Rev. (Nuclear
Project #3), FGIC, 0s, 2005 6,895 5,174,215
--------------
$ 259,409,675
- ------------------------------------------------------------------------------------------------------
Health Care Revenue - 2.8%
Baxter County, AR, Hospital Rev., 5.375s, 2014 $ 1,000 $ 820,550
Baxter County, AR, Hospital Rev., 5.6s, 2021 2,000 1,568,280
Bell County, TX, Health Facilities Development Corp.
Rev. (Buckner Retirement Facility), 5.25s, 2019 2,500 1,937,350
Denver, CO, Health & Hospital Rev., 5.375s, 2028 4,350 3,255,627
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital), 5.25s, 2020 4,345 3,618,038
Harris County, TX, Health Facilities, Project Series
A (Texas Childrens Hospital), 5.375s, 2013 3,890 3,678,578
Harris County, TX, Health Facilities, Project Series
A (Texas Childrens Hospital), 5.375s, 2015 4,300 3,923,191
Illinois Educational Facilities Authority Rev
(Centegra Health Systems), 5.25s, 2024 5,500 4,139,630
Lufkin, TX, Health Facilities Development Corp. (Memorial
Health System of East Texas), 6.875s, 2026 1,375 1,269,441
Marion County, FL, Hospital District Rev., 5.625s, 2019 2,610 2,224,164
Massachusetts Health & Education Facilities Authority
(Caritas Christi), 5.7s, 2015 2,500 2,033,725
Michigan Hospital Finance Authority Rev. (Mercy
Health Services), 5.625s, 2016 8,375 7,758,014
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.7s, 2016 770 714,622
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.5s, 2027 275 242,800
--------------
$ 37,184,010
- ------------------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 0.8%
Massachusetts Development Finance Agency Rev
(Springfield Resources Recovery), 5.625s, 2019 $ 7,170 $ 6,528,142
Sweetwater County, WY, Solid Waste Disposal Rev. (FMC
Corp.), Project Series A, 7s, 2024 4,000 4,014,440
--------------
$ 10,542,582
- ------------------------------------------------------------------------------------------------------
Insured Health Care Revenue - 8.7%
Albany-Dougherty County, GA, Hospital Authority Rev
(Phoebe Putney Memorial Hospital, Inc.), RITES,
AMBAC, 7.12s, 2013(++) $ 1,550 $ 1,543,676
District of Columbia, Hospital Rev. (Medlantic
Healthcare), MBIA, 5.25s, 2019 6,750 6,237,675
Illinois Development Finance Authority Rev. (Provena
Health), MBIA, 5.75s, 2016 5,980 5,818,361
Illinois Development Finance Authority Rev. (Provena
Health), Series A, MBIA, 5.25s, 2012 5,900 5,618,039
Illinois Educational Facilities Authority Rev
(Alexian Brothers Health Systems), FSA, 5.25s, 2013 2,685 2,519,040
Illinois Educational Facilities Authority Rev. (Holy
Family Medical Center), MBIA, 5.125s, 2017 6,975 6,214,376
Illinois Health Facilities Authority Rev., Unrefunded
Balance, MBIA, 5.7s, 2011 3,005 3,009,838
Lauderdale County & Florence, AL, Health Care
Authority Rev. (Coffee Health Group), MBIA,
5.75s, 2012 2,500 2,436,350
Michigan Hospital Finance Authority Rev. (Mercy Mount
Clemens), MBIA, 5.75s, 2017 2,900 2,834,170
Michigan Hospital Finance Authority Rev. (Sisters of
Mercy Hospital), MBIA, 5.375s, 2014 9,000 8,754,840
New York Dormitory Authority Rev. (Brookdale
Hospital), AMBAC, 5.2s, 2014 4,915 4,580,239
New York Dormitory Authority Rev. (Interfaith Medical
Center), AMBAC, 5.25s, 2014 4,320 4,046,112
New York Dormitory Authority Rev. (Wyckoff Heights
Medical Center), AMBAC, 5.2s, 2014 2,500 2,329,725
North Central, TX, Health Facility Development Corp.
Rev. (Texas Health Resources System), MBIA, 5s, 2017 6,000 5,270,760
North Texas Health Facilities Development Corp.
(United Regional Health Care Systems, Inc.), MBIA, 5s, 2014 8,980 8,144,950
Peninsula Ports Authority, VA (Whittaker Memorial),
FHA, 8.7s, 2023 1,595 1,721,914
Pennsylvania Higher Educational Facilities (Allegheny
Delaware Valley), MBIA, 5.3s, 2006 1,975 1,923,828
Pennsylvania Higher Educational Facilities (Allegheny
Delaware Valley), MBIA, 5.875s, 2016 5,000 4,743,950
Sayre, PA, Health Care Facilities Authority Rev
(Guthrie Healthcare Systems), AMBAC, 7s, 2011 6,000 6,236,400
Sierra View, CA, Local Health Care District Rev.,
ACA, 5.25s, 2018 5,000 4,443,000
Spartanburg County, SC, Health Service District,
Inc., MBIA, 5.125s, 2017 5,575 5,044,650
Tarrant County, TX, Health Facilities Development
Corp. (Fort Worth Osteopathic), MBIA, 6s, 2021 6,000 5,970,480
Tarrant County, TX, Health Facilities Development
Corp. (Texas Health Resources), MBIA, 5.25s, 2018 8,605 7,768,594
Washington County, PA, Hospital Authority Rev
(Washington Hospital), AMBAC, 7.15s, 2017 9,000 9,248,310
--------------
$ 116,459,277
- ------------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.8%
California Statewide Community Development Authority
(Equity Residential), 5.2s, 2029 $ 1,850 $ 1,768,286
California Statewide Community Development Authority
(Irvine Apartments), 5.2s, 2025 3,500 3,250,240
Colorado Housing Finance Authority, FHA, 8.3s, 2023 4,000 4,170,040
San Bernardino County, CA, Housing Authority Rev
(Equity Residential Redlands), 5.2s, 2029 2,000 1,911,660
--------------
$ 11,100,226
- ------------------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.6%
Illinois Dedicated Tax Rev. (Civic Center), AMBAC,
6.25s, 2011 $ 3,640 $ 3,843,622
Illinois Sales Tax Rev., 0s, 2009 8,965 5,338,209
Illinois Sales Tax Rev., 6.5s, 2022 5,000 5,318,500
Metropolitan Atlanta, GA, Rapid Transit Authority,
6.25s, 2018 4,580 4,775,062
Territory of Virgin Islands Public Finance Authority,
5.5s, 2022 2,000 1,722,140
--------------
$ 20,997,533
- ------------------------------------------------------------------------------------------------------
Single Family Housing Revenue - 5.5%
California Housing Finance Agency Rev., Home
Mortgage, FSA, 0s, 2019 $27,715 $ 8,503,794
California Housing Finance Agency Rev., Home
Mortgage, MBIA, 0s, 2027 6,500 1,435,395
California Housing Finance Agency Rev., Home
Mortgage, MBIA, 0s, 2028 4,455 1,010,171
California Housing Finance Agency Rev., Home
Mortgage, MBIA, 0s, 2029 10,000 2,321,600
California Rural Home Mortgage Finance Authority,
GNMA, 5.2s, 2030 1,800 1,869,930
Chicago, IL, Single Family Mortgage, GNMA/FNMA,
7.05s, 2030 900 955,818
Colorado Housing Finance Authority, 7.15s, 2014 470 494,713
Colorado Housing Finance Authority, 6.05s, 2016 1,250 1,263,400
Colorado Housing Finance Authority, 7.45s, 2016 1,395 1,503,656
Colorado Housing Finance Authority, 6.75s, 2021 1,080 1,129,216
Colorado Housing Finance Authority, 6.55s, 2025 1,105 1,146,272
Colorado Housing Finance Authority, 7.4s, 2027 1,360 1,431,386
Colorado Housing Finance Authority, 6.8s, 2030 2,200 2,272,820
Jefferson Parish, LA, Home Mortgage Authority Rev.,
GNMA, 6.75s, 2030 1,350 1,411,749
Lee County, FL, Housing Finance Authority Rev., GNMA,
7s, 2031 775 816,168
Lubbock, TX, Housing Finance Corp., GNMA, 6.1s, 2030 3,700 3,756,573
Maryland Community Development Administration,
7.3s, 2025 6,780 6,942,517
Mississippi Home Corp., GNMA, 7.55s, 2027 1,685 1,795,603
Missouri Housing Development Commission, Mortgage
Rev., 6.45s, 2029 985 1,019,790
Missouri Housing Development Commission, Mortgage
Rev., GNMA, 6.7s, 2030 4,500 4,705,245
Nebraska Investment Finance Authority, "F", GNMA/
FNMA, 5.6s, 2020 3,770 3,527,589
New Mexico Mortgage Finance Authority, Single Family
Mortgage, GNMA/FNMA, 7.1s, 2030(S)(S) 1,200 1,281,396
New Mexico Mortgage Finance Authority, Single Family
Mortgage, GNMA/FNMA, 6.8s, 2031 2,500 2,639,925
Oklahoma Housing Finance Agency, 6.8s, 2016 995 1,038,442
Oklahoma Housing Finance Agency, 6.8s, 2026 995 1,037,636
Pima County, AZ, Industrial Development Authority,
GNMA, 7.05s, 2030 2,800 2,991,128
Sedgwick & Shawnee Counties, KS, GNMA, 6.5s, 2022 1,525 1,553,075
Sedgwick & Shawnee Counties, KS, GNMA, 5.5s, 2026 3,375 3,498,660
Texas Housing & Community Affairs, Residential
Mortgage Rev., GNMA/FNMA, 7.1s, 2021 10,000 10,566,900
--------------
$ 73,920,567
- ------------------------------------------------------------------------------------------------------
Solid Waste Revenue - 0.2%
Northeast Maryland Waste Disposal Authority
(Southwest County Resource Recovery),
MBIA, 7.2s, 2005 $ 3,000 $ 3,265,740
- ------------------------------------------------------------------------------------------------------
Special Assesment District - 0.5%
Chico, CA, Public Finance Authority Rev. (Southeast
Chico Redevelopment), FGIC, 6.625s, 2021 $ 6,435 $ 6,568,719
- ------------------------------------------------------------------------------------------------------
Student Loan Revenue - 0.4%
Arizona Student Loan Acquisition Authority,
5.8s, 2016 $ 2,500 $ 2,460,600
Arizona Student Loan Acquisition Authority,
5.85s, 2017 2,800 2,754,556
--------------
$ 5,215,156
- ------------------------------------------------------------------------------------------------------
Turnpike Revenue - 2.8%
New Jersey Economic Development Authority Rev.,
Transportation Project Sublease Series A, FSA,
6s, 2016 $ 1,325 $ 1,347,499
New Jersey Transportation Trust Fund Authority,
Transportation Systems, 5.25s, 2016 8,500 7,923,870
New York Thruway Authority Service Contract, Local
Highway & Bridge, Series A2, MBIA, 5.375s, 2016 5,000 4,788,350
Pennsylvania Turnpike Commission Oil, Senior Series
A, AMBAC, 5.25s, 2018 10,520 9,604,970
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2012 2,200 911,372
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2013 7,000 2,684,220
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2014 6,500 2,304,835
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2015 7,300 2,391,334
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2016 1,900 574,408
Texas Turnpike Authority, Dallas Thruway Rev
(President George Bush Turnpike), AMBAC, 5s, 2016 4,500 4,102,650
--------------
$ 36,633,508
- ------------------------------------------------------------------------------------------------------
Universities - 2.1%
Clark County, NV, Economic Development Rev
(Alexander Dawson School), 5.5s, 2020 $ 6,000 $ 5,460,360
Maine Finance Authority (Waynflete School),
6.5s, 2024 1,500 1,453,440
Massachusetts Development Finance Agency (Mass
College of Pharmacy), "B", 6.625s, 2020 400 397,024
Massachusetts Health & Higher Education Authority,
RITES, 8.526s, 2020(++) 8,410 9,485,807
New York Dormitory Authority Rev. (University of
Rochester), MBIA, 5.25s, 2014 1,795 1,695,754
New York Dormitory Authority Rev. (University of
Rochester), MBIA, 5.25s, 2015 3,805 3,581,951
Ohio State University, 6s, 2017 500 506,475
Texas A & M University, Permanent University Fund,
0s, 2007 6,695 4,490,270
University of Akron, OH, General Receipts, FGIC,
6s, 2015 1,000 1,024,270
--------------
$ 28,095,351
- ------------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 0.7%
Houston, TX, Water & Sewer Systems Rev., FGIC,
5s, 2018 $10,000 $ 8,772,500
- ------------------------------------------------------------------------------------------------------
Other - 0.7%
Alabama Building Renovation Authority, AMBAC,
6s, 2015 $ 1,610 $ 1,625,295
Alabama Building Renovation Authority, AMBAC,
6s, 2016 1,705 1,722,629
Boise City, ID, Urban Renewalagy (Ada County Courts),
AMBAC, 6s, 2015 1,000 1,015,280
Orange County, CA, California Recovery Certificates,
MBIA, 6s, 2026 5,000 5,019,250
Rail Connections Inc., MA, Rev., 0s, 2015 375 131,168
Rail Connections Inc., MA, Rev., 0s, 2016 450 145,674
Rail Connections Inc., MA, Rev., 0s, 2017 975 291,788
--------------
$ 9,951,084
- ------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $1,300,540,918) $1,302,099,460
- ------------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.5%
- ------------------------------------------------------------------------------------------------------
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 03/01/00 $ 300 $ 300,000
Kansas City, MO, Industrial Development Hospital,
due 03/01/00 500 500,000
Knoxville, TN, Utilities Board Rev., due 03/01/00 500 500,000
Massachusetts Health & Educational Facilities
Authority,
due 03/01/00 3,000 3,000,000
New York City, NY, due 03/01/00 50 50,000
New York City, NY, Municipal Water Finance Authority
Rev., due 03/01/00 200 200,000
Piedmont, SC, Municipal Power Agency Electric Rev.,
due 03/01/00 500 500,000
Pinellas County, FL, Health Facility Authority, due
03/01/00 1,810 1,810,000
Sevier County, TN, Public Building Authority, Local
Government Improvement, due 03/01/00 500 500,000
- ------------------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Amortized Cost $ 7,360,000
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,307,900,918) $1,309,459,460
Other Assets, Less Liabilities - 1.8% 23,881,316
- ------------------------------------------------------------------------------------------------------
Net assets - 100.0% $1,333,340,776
- ------------------------------------------------------------------------------------------------------
(++) Inverse floating rate security.
## Rule 144A security.
### Security segregated as collateral for an open futures contract.
(S)(S) When-issued security. At February 29, 2000, the Fund had sufficient cash and/or securities at
least equal to the value of the when-issued security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
FEBRUARY 29, 2000
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,307,900,918) $1,309,459,460
Cash 70,492
Receivable for Fund shares sold 3,978,579
Receivable for investments sold 17,662,306
Interest receivable 17,460,264
Other assets 22,007
--------------
Total assets $1,348,653,108
--------------
Liabilities:
Distributions payable $ 2,557,741
Payable for daily variation margin on open futures
contracts 62,625
Payable for Fund shares reacquired 1,319,315
Payable for investments purchased 9,746,114
Payable for when-issued investments purchased 1,299,961
Payable to affiliates -
Management fee 14,999
Shareholder servicing agent fee 3,604
Distribution and service fee 6,402
Administrative fee 518
Accrued expenses and other liabilities 301,053
--------------
Total liabilities $ 15,312,332
--------------
Net assets $1,333,340,776
==============
Net assets consist of:
Paid-in capital $1,336,031,377
Unrealized appreciation on investments 1,215,658
Accumulated net realized loss on investments (6,865,086)
Accumulated net investment income 2,958,827
--------------
Total $1,333,340,776
==============
Shares of beneficial interest outstanding 134,975,969
==============
Class A shares:
Net asset value and redemption price per share
(net assets of $1,261,794,898 / 127,726,587 shares of
beneficial interest outstanding) $ 9.88
======
Offering price per share (100 / 95.25) $10.37
======
Class B shares:
Net asset value and offering price per share
(net assets of $71,545,878 / 7,249,382 shares of
beneficial interest outstanding) $ 9.87
======
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 (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 29, 2000
- -------------------------------------------------------------------------------
Net investment income:
Interest income $ 40,834,970
------------
Expenses -
Management fee $ 2,791,617
Trustees' compensation 40,700
Shareholder servicing agent fee 687,035
Distribution and service fee (Class B) 290,722
Administrative fee 70,627
Custodian fee 172,691
Printing 24,315
Postage 36,214
Auditing fees 17,899
Legal fees 2,163
Miscellaneous 115,368
------------
Total expenses $ 4,249,351
Fees paid indirectly (159,412)
------------
Net expenses $ 4,089,939
------------
Net investment income $ 36,745,031
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (6,738,471)
Futures contracts 80,818
------------
Net realized loss on investments $ (6,657,653)
------------
Change in unrealized depreciation -
Investments $(36,186,941)
Futures contracts (537,349)
------------
Net unrealized loss on investments $(36,724,290)
------------
Net realized and unrealized loss on investments $(43,381,943)
------------
Decrease in net assets from operations $ (6,636,912)
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 36,745,031 $ 77,218,828
Net realized gain (loss) on investments (6,657,653) 19,746,309
Net unrealized loss on investments (36,724,290) (110,665,661)
------------- -------------
Decrease in net assets from operations $ (6,636,912) $ (13,700,524)
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (34,923,432) $ (74,017,246)
From net investment income (Class B) (1,682,402) (3,352,797)
From net realized gain on investments (Class A) (20,554,478) (14,781,390)
From net realized gain on investments (Class B) (1,135,974) (768,647)
------------- -------------
Total distributions declared to shareholders $ (58,296,286) $ (92,920,080)
------------- -------------
Net decrease in net assets from Fund share
transactions $ (64,695,706) $(151,198,802)
------------- -------------
Total decrease in net assets $(129,628,904) $(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 $2,958,827
and $2,819,630, respectively) $1,333,340,776 $1,462,969,680
============= =============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED --------------------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $10.35 $11.09 $10.99 $10.75 $10.83 $10.68
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.27 $ 0.53 $ 0.54 $ 0.57 $ 0.59 $ 0.60
Net realized and unrealized gain
(loss) on investments (0.31) (0.64) 0.28 0.24 (0.09) 0.15
------ ------ ------ ------ ------ ------
Total from investment
operations $(0.04) $(0.11) $ 0.82 $ 0.81 $ 0.50 $ 0.75
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.27) $(0.53) $(0.54) $(0.57) $(0.58) $(0.60)
From net realized gain on
investments (0.16) (0.10) (0.18) -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.43) $(0.63) $(0.72) $(0.57) $(0.58) $(0.60)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.88 $10.35 $11.09 $10.99 $10.75 $10.83
====== ====== ====== ====== ====== ======
Total return(+) (0.43)%++ (1.08)% 7.78% 7.75% 4.67% 7.31%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.57%+ 0.57% 0.60% 0.60% 0.60% 0.61%
Net investment income 5.34%+ 4.87% 4.90% 5.29% 5.37% 5.70%
Portfolio turnover 12% 30% 79% 91% 84% 90%
Net assets at end of period
(000,000 omitted) $1,262 $1,385 $1,639 $1,660 $1,798 $1,949
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ------------------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $10.34 $11.08 $10.99 $10.74 $11.10 $10.67
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.23 $ 0.44 $ 0.45 $ 0.48 $ 0.49 $ 0.49
Net realized and unrealized gain
(loss) on investments (0.31) (0.64) 0.28 0.25 (0.37) 0.16
------ ------ ------ ------ ------ ------
Total from investment
operations $(0.08) $(0.20) $ 0.73 $ 0.73 $ 0.12 $ 0.65
------ ------ ------ ------ ------ ------
Less distributions declared to
sharheolders -
From net investment income $(0.23) $(0.44) $(0.46) $(0.48) $(0.48) $(0.49)
From net realized gain on
investments (0.16) (0.10) (0.18) -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.39) $(0.54) $(0.64) $(0.48) $(0.48) $(0.49)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.87 $10.34 $11.08 $10.99 $10.74 $10.83
====== ====== ====== ====== ====== ======
Total return (0.82)%++ (1.87)% 6.85% 6.84% 3.69% 6.35%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.36%+ 0.37% 1.40% 1.46% 1.55% 1.60%
Net investment income 4.55%+ 4.07% 4.10% 4.42% 4.42% 4.68%
Portfolio turnover 12% 30% 79% 91% 84% 90%
Net assets at end of period
(000,000 omitted) $72 $78 $81 $76 $71 $56
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS 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 at fair value as determined 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 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 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 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
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:
<TABLE>
<CAPTION>
BASED ON AVERAGE NET ASSETS BASED ON GROSS INCOME
- --------------------------------------------- -----------------------------------------
<S> <C> <S> <C>
First $200 million 0.220% First $16 million 4.12%
In excess of $200 million 0.187% Next $144 million 3.51%
In excess of $2 billion 0.168% In excess of $160 million 3.16%
</TABLE>
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
$16,535 for the six months ended February 29, 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 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
$72,316 for the six months ended February 29, 2000, 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 six months ended February 29, 2000. Fees
incurred under the distribution plan during the six months ended February 29,
2000, were 0.79% 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 six months ended February 29, 2000,
were $22 and $105,849 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%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$166,326,907 and $256,689,937, 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 $1,307,900,918
-------------
Gross unrealized appreciation $ 41,894,948
Gross unrealized depreciation (40,336,406)
-------------
Net unrealized appreciation $ 1,558,542
=============
(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>
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 13,645,659 $ 136,447,771 86,556,394 $ 951,673,399
Shares issued to shareholders
in reinvestment of
distributions 3,504,236 35,104,639 4,967,172 54,089,815
Shares reacquired (23,260,392) (232,975,024) (105,494,679) (1,159,458,546)
----------- ------------- ------------ ---------------
Net decrease (6,110,497) $ (61,422,614) (13,971,113) $ (153,695,332)
=========== ============= ============ ===============
Class B Shares
<CAPTION>
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
- ------------------------------------------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 830,033 $ 8,306,642 1,660,763 $ 18,143,122
Shares issued to shareholders
in reinvestment of
distributions 184,265 1,844,255 236,006 2,566,087
Shares reacquired (1,337,647) (13,423,989) (1,676,695) (18,212,679)
----------- ------------- ------------ ---------------
Net increase (decrease) (323,349) $ (3,273,092) 220,074 $ 2,496,530
=========== ============= ============ ===============
</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 six months ended February 29, 2000, was $5,516. The Fund
had no borrowings during the period.
(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.
<TABLE>
Futures Contracts
<CAPTION>
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds March 2000 167 Short $(269,278)
Municipal Bond Index March 2000 167 Long (73,606)
---------
$(342,884)
=========
</TABLE>
At February 29, 2000, the Fund had sufficient cash and/or securities to cover
any margin requirements under these contracts.
<PAGE>
<TABLE>
MFS(R) MUNICIPAL BOND FUND
<S> <C>
TRUSTEES SECRETARY
J. Atwood Ives+ - Chairman and Chief Executive Stephen E. Cavan*
Officer, Eastern Enterprises (diversified services
company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ - Partner, Hemenway
& Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ - Adjunct Professor, Harvard
University Graduate School of Business INVESTOR INFORMATION
Administration For information on MFS mutual funds, call your
investment professional or, for an information
Charles W. Schmidt+ - Private Investor kit, call toll free: 1-800-637-2929 any business
day from 9 a.m. to 5 p.m. Eastern time (or leave a
Arnold D. Scott* - Senior Executive message anytime).
Vice President, Director, and Secretary,
INVESTOR SERVICE
MFS Investment Management MFS Service Center, Inc.
P.O. Box 2281
Jeffrey L. Shames* - Chairman and Chief Boston, MA 02107-9906
Executive Officer, MFS Investment Management
For general information, call toll free:
Elaine R. Smith+ - Independent Consultant 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
David B. Stone+ - Chairman, North American
Management Corp. (investment adviser) For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from 9
INVESTMENT ADVISER a.m. to 5 p.m. Eastern time. (To use this service,
Massachusetts Financial Services Company your phone must be equipped with a
500 Boylston Street Telecommunications Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances, exchanges, or
DISTRIBUTOR stock and bond outlooks, call toll free:
MFS Fund Distributors, Inc. 1-800-MFS-TALK (1-800-637-8255) anytime from a
500 Boylston Street touch-tone telephone.
Boston, MA 02116-3741
World Wide Web
CHAIRMAN AND PRESIDENT www.mfs.com
Jeffrey L. Shames*
PORTFOLIO MANAGER
Geoffrey L. Schechter*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) MUNICIPAL BOND FUND ------------
BULK RATE
[Logo] M F S(R) U.S. POSTAGE
INVESTMENT MANAGEMENT PAID
We invented the mutual fund(R) MFS
------------
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-3 4/00 47M 17/217
