<PAGE>
[Logo] M F S (R) SEMIANNUAL REPORT
INVESTMENT MANAGEMENT SEPTEMBER 30, 2000
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) MASSACHUSETTS
HIGH INCOME TAX FREE FUND
MFS(R) NEW YORK
HIGH INCOME TAX FREE FUND
<PAGE>
<TABLE>
MFS(R) MASSACHUSETTS HIGH INCOME TAX FREE FUND
MFS(R) NEW YORK HIGH INCOME TAX FREE FUND
<S> <C>
TRUSTEES TREASURER
Marshall N. Cohan+ -- Private Investor James O. Yost*
Lawrence H. Cohn, M.D.+ -- Chief of Cardiac ASSISTANT TREASURERS
Surgery, Brigham and Women's Hospital; Professor Mark E. Bradley*
of Surgery, Harvard Medical School Robert R. Flaherty*
Laura F. Healy*
The Hon. Sir J. David Gibbons, KBE+ -- Chief Ellen Moynihan*
Executive Officer, Edmund Gibbons Ltd.;
Chairman, Colonial Insurance Company, Ltd. SECRETARY
Stephen E. Cavan*
Abby M. O'Neill+ -- Private Investor
ASSISTANT SECRETARY
Walter E. Robb, III+ -- President and Treasurer, James R. Bordewick, Jr.*
Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting CUSTODIAN
Group, Inc. (office services) State Street Bank and Trust Company
Arnold D. Scott* -- Senior Executive Vice INVESTOR INFORMATION
President, Director, and Secretary, MFS Investment For information on MFS mutual funds, call your
Management investment professional or, for an information
kit, call toll free: 1-800-637-2929 any business
Jeffrey L. Shames* -- Chairman and Chief Executive day from 9 a.m. to 5 p.m. Eastern time (or leave a
Officer, MFS Investment Management message anytime).
J. Dale Sherratt+ -- President, Insight Resources, INVESTOR SERVICE
Inc. (acquisition planning specialists) MFS Service Center, Inc.
P.O. Box 2281
Ward Smith+ -- Former Chairman (until 1994), NAACO Boston, MA 02107-9906
Industries (holding company)
For general information, call toll free:
INVESTMENT ADVISER 1-800-225-2606 any business day from 8 a.m. to 8
Massachusetts Financial Services Company p.m. Eastern time.
500 Boylston Street
Boston, MA 02116-3741 For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from 9
DISTRIBUTOR a.m. to 5 p.m. Eastern time. (To use this service,
MFS Fund Distributors, Inc. 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
CHAIRMAN AND PRESIDENT stock and bond outlooks, call toll free:
Jeffrey L. Shames* 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
PORTFOLIO MANAGER
Michael W. Roberge* WORLD WIDE WEB
www.mfs.com
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company,
one-security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes managers will have when they read the daily notes is, "I could
never perform as well at any other investment company, because nowhere else
could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years in
the investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance by
finding opportunities before they are generally recognized by the market, and by
avoiding mistakes whenever possible. Original Research does, we believe, make a
difference.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
October 16, 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.
MANAGEMENT REVIEW AND OUTLOOK
MFS(R) Massachusetts High Income Tax Free Fund
Dear Shareholders,
For the six months ended September 30, 2000, the fund provided a total return of
3.72%. These returns include the reinvestment of any distributions but exclude
the effects of any sales charges and compare to a 3.97% return over the same
period for the fund's benchmark, the Lehman Brothers Municipal Bond Index (the
Lehman Index), an unmanaged index of investment-grade bonds. During the same
period, the average Massachusetts municipal debt fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance, returned 3.46%.
The fund seeks to provide high current income exempt from federal income tax and
Massachusetts personal income tax. The fund is nondiversified and may invest in
a small number of issuers. Most of the fund's assets are invested in municipal
securities and participation interests in municipal securities, which represent
securities pooled by multiple issuers and backed by a letter of credit or a
guarantee from a bank.
Over the period, the fund was underweighted in lower-rated bonds, which have
tended to underperform so far this year. Our relative overweighting in
higher-rated issues was the major factor in our outperformance compared to our
Lipper peers. Our average credit quality was lower than the Lehman Index,
however, which is the main reason we underperformed that benchmark. Going
forward, we believe that the relative performance of lower-rated bonds may
improve, and we intend to increase our weighting in that area on a selective
basis.
Our performance was also helped by our underweighting in health care issues,
which have suffered nationally due to government cutbacks in Medicare funding.
The situation was exacerbated in Massachusetts by high-profile problems with
Harvard Pilgrim, an HMO that went into receivership. However, we believe that
the health care sector's problems make it an area of great opportunity, as
issues are currently selling at attractive prices. We think we have the research
capability to select good securities in that sector and avoid problem issuers,
thus positioning the fund to potentially take advantage of what we believe will
be an improving climate for health care firms. Two positive signs we currently
see are an apparent intent by Congress to restore some funding cuts and
increases in the level of HMO payments to hospitals.
Another significant area in the fund is the university and secondary school
sector. Massachusetts is a mecca of education, and many of the schools tend to
have favorable credit characteristics and offer attractive risk/reward
opportunities.
Respectfully,
/s/ Michael W. Roberge
Michael W. Roberge
Portfolio Manager
<PAGE>
MFS(R) New York High Income Tax Free Fund
Dear Shareholders,
For the six months ended September 30, 2000, the fund provided a total return of
4.71%. These returns include the reinvestment of any distributions but exclude
the effects of any sales charges and compare to a 3.97% return over the same
period for the fund's benchmark, the Lehman Index. During the same period, the
average New York municipal debt fund tracked by Lipper Inc., returned 3.49%.
The fund seeks to provide high current income exempt from federal income tax and
New York state and city income taxes. The fund is nondiversified and may invest
in a small number of issuers. Most of the fund's assets are invested in
municipal securities and participation interests in municipal securities, which
represent securities pooled by multiple issuers and backed by a letter of credit
or a guarantee from a bank.
Over the period, the fund was underweighted in lower-rated bonds, which have
tended to underperform so far this year. Our relative overweighting in
higher-rated issues was the major factor in our outperformance compared to the
Lehman Index and to our peers. At present, most of the fund is invested in
high-grade issues as we search for suitable high-yield New York bond
opportunities. Over time, we expect to be able to add more yield (and therefore
more risk) to the portfolio. However, this is made somewhat difficult by the
small size of the fund because we need to ensure that any particular high-yield
issue does not represent an overly large weighting in the portfolio.
Respectfully,
/s/ Michael W. Roberge
Michael W. Roberge
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.
The portfolios are actively managed, and current holdings may be different.
<PAGE>
PERFORMANCE SUMMARY
Currently, each fund offers only Class A shares, which are available for
purchase at net asset value only by: (1) residents of the Commonwealth of
Massachusetts or the State of New York (as applicable) who are employees (or
certain relatives of employees) of MFS and its affiliates; or (2) members of the
governing boards of the various funds sponsored by MFS.
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 include the maximum applicable sales
charge and reflect the percentage change in net asset value, including the
reinvestment of dividends. (See Notes to Performance Summary.)
<TABLE>
TOTAL RATES OF RETURN THROUGH SEPTEMBER 30, 2000
MFS MASSACHUSETTS HIGH INCOME TAX FREE FUND
<CAPTION>
CLASS A
6 Months 1 Year Life*
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +3.72% +6.26% +5.20%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +6.26% +4.46%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +1.21% +0.17%
-------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, August 2, 1999, through
September 30, 2000.
MFS NEW YORK HIGH INCOME TAX FREE FUND
<CAPTION>
CLASS A
6 Months 1 Year Life*
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +4.71% +7.41% +7.17%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +7.41% +6.14%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +2.31% +1.79%
-------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, August 2, 1999, through
September 30, 2000.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge.
All performance results reflect any applicable 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
include the reinvestment of dividends and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
Both funds are nondiversified and have more risk than diversified funds.
Investments in shares of the fund should not be considered to constitute a
complete investment program. Please see the Prospectus for details.
Lower-rated securities may provide greater returns, but they are also associated
with greater-than-average risk. These risks may increase share price volatility.
Please see the Prospectus for details.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- September 30, 2000
<TABLE>
MFS MASSACHUSETTS HIGH INCOME TAX FREE FUND
Municipal Bonds - 97.8%
-------------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 40.3%
Boston, MA, 5.75s, 2019 $200 $ 203,050
Chelmsford, MA, 6s, 2018### 100 104,296
Commonwealth of Massachusetts, 6s, 2013 25 26,880
Holyoke, MA, 8s, 2001 75 76,065
Lawrence, MA, AMBAC, 9.75s, 2002 350 375,249
Lowell, MA, FGIC, 5.75s, 2004 100 103,666
Narragansett, MA Regional School District, AMBAC, 6.5s, 2016 100 108,974
Northbridge, MA, 7.6s, 2001 200 204,536
Puerto Rico Municipal Finance Agency, RITES, FSA, 8.42s, 2016+(++) 30 33,868
Springfield, MA, Municipal Purpose Loan, FSA, 6.25s, 2019 500 530,960
Worcester, MA, FSA, 6s, 2016 200 211,764
----------
$1,979,308
-------------------------------------------------------------------------------------------------------
State and Local Appropriation - 6.1%
Massachusetts Bay Transportation Authority (General
Transportation Systems), RITES, 8.161s, 2016+(++) $165 $ 195,086
Massachusetts Development Finance Agency, Visual &
Performing Arts Project, 6s, 2015 100 106,144
----------
$ 301,230
-------------------------------------------------------------------------------------------------------
Refunded and Special Obligations - 7.9%
Commonwealth of Massachusetts, 6.5s, 2006 $100 $ 110,642
Commonwealth of Massachusetts, FGIC, 6.75s, 2004 150 163,507
Commonwealth of Massachusetts, FGIC, 7s, 2007 100 115,113
----------
$ 389,262
-------------------------------------------------------------------------------------------------------
Airport and Port Revenue - 4.2%
Massachusetts Port Authority, 6s, 2015 $100 $ 105,667
Massachusetts Port Authority (US Airways), MBIA, 5s, 2006 100 100,838
----------
$ 206,505
-------------------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 1.7%
Puerto Rico Electric Power Authority, Power Rev., RITES, FSA,
6.92s, 2015+(++) $ 80 $ 80,958
-------------------------------------------------------------------------------------------------------
Health Care Revenue - 4.1%
Massachusetts Development Finance Agency (Massachusetts
Biomedical Research), 6.375s, 2016 $ 50 $ 51,206
Massachusetts Health & Education Facilities Authority
(Caritas Christi), 5.7s, 2015 20 17,512
Massachusetts Health & Education Facilities Authority
(Jordan Hospital), 5.25s, 2018 100 80,993
Massachusetts Health & Education Facilities Authority
(North Adams Regional Hospital), 6.625s, 2018 25 23,270
Massachusetts Health & Education Facilities Authority
(South Shore Hospital), 5.625s, 2019 30 27,920
----------
$ 200,901
-------------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.1%
Massachusetts Housing Finance Agency, MBIA, 5.35s, 2010 $100 $ 102,408
-------------------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.9%
Territory of Virgin Islands, Public Finance Authority, 5.5s, 2022 $ 50 $ 45,628
-------------------------------------------------------------------------------------------------------
Solid Waste Revenue - 1.0%
Massachusetts Development Finance Agency, Resource
Recovery Rev., 6.7s, 2014 $ 25 $ 25,587
Massachusetts Development Finance Agency, Resource
Recovery Rev. (Waste Management, Inc.), 6.9s, 2029 25 25,478
----------
$ 51,065
-------------------------------------------------------------------------------------------------------
Student Loan Revenue - 2.1%
Massachusetts Educational Financing Authority, MBIA, 6.05s, 2017 $100 $ 101,563
-------------------------------------------------------------------------------------------------------
Universities - 13.8%
Massachusetts Development Finance Agency Rev. (Eastern
Nazarene College), 5.625s, 2019 $ 50 $ 45,929
Massachusetts Development Finance Agency Rev
(Massachusetts College of Pharmacy), 6.625s, 2020 50 50,663
Massachusetts Development Finance Agency Rev. (Williston
Northampton School), 6.5s, 2028 200 186,500
Massachusetts Health & Educational Facilities Authority
(Harvard University), RITES, 8.241s, 2020+(++) 90 108,244
Massachusetts Health & Educational Facilities Authority
(Simmons College), AMBAC, 5.75s, 2015 100 103,587
Massachusetts Industrial Finance Agency (Concord
Academy), 5.5s, 2027 50 45,524
Massachusetts Industrial Finance Agency (Dana Hall
School), 5.9s, 2027 50 47,177
Massachusetts Industrial Finance Agency (Tabor Academy),
5.4s, 2018 100 91,661
----------
$ 679,285
-------------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 13.6%
Massachusetts Water Pollution Abatement Trust, 5.5s, 2013 $ 25 $ 25,558
Massachusetts Water Pollution Abatement Trust, 5.75s, 2016 25 25,665
Massachusetts Water Pollution Abatement Trust, 5.75s, 2017 125 127,561
Massachusetts Water Resources Authority, FGIC, 6s, 2017 200 210,444
Massachusetts Water Resources Authority, RITES, FGIC,
8.613s, 2019+(++) 225 279,355
----------
$ 668,583
-------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $4,704,089) $4,806,696
Other Assets, Less Liabilities - 2.2% 109,363
-------------------------------------------------------------------------------------------------------
Net assets - 100.0% $4,916,059
-------------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- September 30, 2000
<TABLE>
MFS NEW YORK HIGH INCOME TAX FREE FUND
Municipal Bonds - 97.8%
-------------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 9.9%
Erie County, NY, Public Improvement, 5.625s, 2012 $ 15 $ 15,672
Nassau County, NY, FSA, 5.25s, 2008 15 15,400
New York, NY, 5.75s, 2014 5 5,140
Puerto Rico Municipal Finance Agency, RITES, FSA, 8.42s, 2016+ 15 16,934
--------
$ 53,146
-------------------------------------------------------------------------------------------------------
State and Local Appropriation - 24.8%
Metropolitan Transportation Authority, NY, Transportation
Facilities Rev., MBIA, 5s, 2014 $ 20 $ 19,355
New York Dormitory Authority Rev. (Mental Health Services
Facilities), 6s, 2007 25 26,469
New York Dormitory Authority Rev. (Mental Health Services
Facilities), MBIA, 5.75s, 2020 5 5,051
New York Dormitory Authority Rev. (Office Facilities -
Audit & Control), MBIA, 5.25s, 2011 25 25,515
New York Dormitory Authority Rev. (State University), AMBAC,
5.5s, 2009 25 26,208
New York Thruway Authority Rev., Highway & Bridges, FGIC,
5.75s, 2013 5 5,264
New York Urban Development Corp. Rev. (Correctional Facilities), FSA,
5.25s, 2014 25 25,133
--------
$132,995
-------------------------------------------------------------------------------------------------------
Refunded and Special Obligations - 7.2%
Islip, NY, Community Development Agency Rev. (New York
Institute of Technology), 7.5s, 2006 $ 10 $ 11,494
New York Medical Care Facilities Financing Agency Rev
(Mental Health Services), 6.375s, 2004 20 21,630
New York, NY, 6.125s, 2006 5 5,410
--------
$ 38,534
-------------------------------------------------------------------------------------------------------
Airport and Port Revenue - 5.9%
Niagara, NY, Frontier Authority Airport Rev. (Buffalo -
Niagara International Airport), MBIA, 5.5s, 2009 $ 20 $ 20,618
Port Authority NY & NJ, Special Obligation (JFK
International), MBIA, 6.25s, 2015 10 10,924
--------
$ 31,542
-------------------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 5.6%
Long Island, NY, Power Authority, Electric Systems Rev., FSA, 5s, 2015 $ 10 $ 9,576
Puerto Rico Electric Power Authority, RITES, FSA, 6.92s, 2015+(++) 20 20,240
--------
$ 29,816
-------------------------------------------------------------------------------------------------------
Health Care Revenue - 1.7%
New York City, NY, Health & Hospital Corp. Rev., 5.25s, 2017 $ 10 $ 9,211
-------------------------------------------------------------------------------------------------------
Solid Waste Revenue - 3.8%
Rockland County, NY, Solid Waste Management Authority, 4.8s, 2005 $ 20 $ 20,184
-------------------------------------------------------------------------------------------------------
Turnpike Revenue - 18.4%
Metropolitan Transportation Authority, NY, FGIC, 5.875s, 2018 $ 20 $ 20,613
New York Thruway Authority Rev., Highway & Bridges, AMBAC, 5.75s, 2017 5 5,145
New York Thruway Authority Rev., Highway & Bridges, FSA, 5.8s, 2018 20 20,584
Triborough Bridge & Tunnel Authority, NY, 5.5s, 2006 25 25,981
Triborough Bridge & Tunnel Authority, NY, 5.75s, 2011 25 26,579
--------
$ 98,902
-------------------------------------------------------------------------------------------------------
Universities - 12.6%
New York Dormitory Authority Rev. (New York University), MBIA,
5.75s, 2013 $ 20 $ 21,219
New York Dormitory Authority Rev. (Pace University), MBIA, 6s, 2019 10 10,441
New York Dormitory Authority Rev. (State University), FSA, 6s, 2014 15 15,837
New York Dormitory Authority Rev. (State University), FSA, 6s, 2018 10 10,465
New York Dormitory Authority Rev. (University of Rochester), MBIA,
5.25s, 2015 10 9,836
--------
$ 67,798
-------------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 4.0%
New York Environmental Facilities Corp., Pollution Control
Rev., 5.75s, 2012 $ 20 $ 21,308
-------------------------------------------------------------------------------------------------------
Other - 3.9%
Suffolk County, NY, Judical Facilities Rev. (John P
Cohalan Complex), AMBAC, 5.5s, 2008 $ 20 $ 20,928
-------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $514,495) $524,364
Other Assets, Less Liabilities - 2.2% 11,825
-------------------------------------------------------------------------------------------------------
Net assets - 100.0% $536,189
-------------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
Portfolio footnotes:
(++) Inverse floating rate security.
+ Restricted security.
### Security segregated as collateral for an open futures contract.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
Statements of Assets and Liabilities (Unaudited)
-------------------------------------------------------------------------------------------------------------
<CAPTION>
MASSACHUSETTS NEW YORK
HIGH INCOME HIGH INCOME
SEPTEMBER 30, 2000 TAX FREE FUND TAX FREE FUND
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $4,704,089 $514,495
Unrealized appreciation 102,607 9,869
---------- --------
Total investments, at value $4,806,696 $524,364
Cash 5,607 8,365
Interest receivable 92,401 8,602
Other assets 14,050 --
---------- --------
Total assets $4,918,754 $541,331
---------- --------
Liabilities:
Distributions payable $ 2,320 $ 1
Payable for daily variation margin on open futures contracts 375 --
Payable for investments purchased --
5,141
---------- --------
Total liabilities $ 2,695 $ 5,142
---------- --------
Net assets $4,916,059 $536,189
========== ========
Net assets consist of:
Paid-in-capital $4,788,945 $530,318
Unrealized appreciation on investments 106,638 9,869
Accumulated undistributed net realized gain (loss) on
investments 18,999 (3,924)
Accumulated undistributed (distributions in excess of) net
investment income 1,477 (74)
---------- --------
Total $4,916,059 $536,189
========== ========
Shares of beneficial interest outstanding 496,459 53,076
======= ======
Class A shares:
Net asset value per share
(net assets / shares of beneficial interest outstanding) $ 9.90 $10.10
====== ======
Offering price per share (100 / 95.25 of net asset value per share) $10.39 $10.60
====== ======
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.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Statements of Operations (Unaudited)
------------------------------------------------------------------------------------------------------------
<CAPTION>
MASSACHUSETTS NEW YORK
HIGH INCOME HIGH INCOME
SIX MONTHS ENDED SEPTEMBER 30, 2000 TAX FREE FUND TAX FREE FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income:
Interest Income $172,974 $ 13,557
-------- --------
Expenses -
Management fee $ 12,607 $ 1,039
Shareholder servicing agent fee 3,152 260
Administrative fee 552 45
Custodian fee 6,879 4,236
Printing 4,511 1,063
Postage 277 --
Auditing fees 5,001 5,000
Legal fees -- 347
Miscellaneous 2,290 965
-------- --------
Total expenses $ 35,269 $ 12,955
Fees paid indirectly (1,016) (94)
Reduction of expenses by investment adviser (34,253) (12,861)
-------- --------
Net expenses $ -- $ --
-------- --------
Net investment income $172,974 $ 13,557
-------- --------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 53,308 $ (662)
Futures contracts (36,044) --
-------- --------
Net realized gain (loss) on investments $ 17,264 $ (662)
-------- --------
Change in unrealized appreciation -
Investments $ 40,074 $ 11,313
Futures contracts 9,875 --
-------- --------
Net unrealized gain on investments $ 49,949 $ 11,313
-------- --------
Net realized and unrealized gain on investments $ 67,213 $ 10,651
-------- --------
Increase in net assets from operations $240,187 $ 24,208
======== ========
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Statements of Changes in Net Assets
------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 2000 MARCH 31, 2000*
MASSACHUSETTS HIGH INCOME TAX FREE FUND (UNAUDITED)
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income $ 172,974 $ 111,954
Net realized gain on investments 17,264 1,735
Net unrealized gain on investments 49,949 56,689
----------- ----------
Increase in net assets from operations $ 240,187 $ 170,378
----------- ----------
Distributions declared to shareholders from net investment
income $ (172,174) $ (111,277)
----------- ----------
Net increase (decrease) in net assets from fund share
transactions $(1,824,413) $6,613,358
----------- ----------
Total increase (decrease) in net assets $(1,756,400) $6,672,459
Net assets:
At beginning of period 6,672,459 --
----------- ----------
At end of period $ 4,916,059 $6,672,459
----------- ----------
Accumulated undistributed net investment income included in
net assets at end of period $ 1,477 $ 677
=========== ==========
* For the period from the commencement of the fund's investment operations, August 2, 1999, through
March 31, 2000.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Statements of Changes in Net Assets - continued
------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 2000 MARCH 31, 2000*
NEW YORK HIGH INCOME TAX FREE FUND (UNAUDITED)
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 13,557 $ 16,490
Net realized loss on investments (662) (3,262)
Net unrealized gain (loss) on investments 11,313 (1,444)
-------- --------
Increase in net assets from operations $ 24,208 $ 11,784
-------- --------
Distributions declared to shareholders -
From net investment income $(13,578) $(16,490)
In excess of net investment income -- (53)
-------- --------
Total distributions declared to shareholders $(13,578) $(16,543)
-------- --------
Net increase in net assets from fund share transactions $ 13,572 $516,746
-------- --------
Total increase in net assets $ 24,202 $511,987
Net assets:
At beginning of period 511,987 --
-------- --------
At end of period $536,189 $511,987
-------- --------
Accumulated distributions in excess of net investment income
included in net assets at end of period $ (74) $ (53)
======== ========
* For the period from the commencement of the fund's investment operations, August 2, 1999, through
March 31, 2000.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights
--------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 2000 MARCH 31, 2000*
MASSACHUSETTS HIGH INCOME TAX FREE FUND (UNAUDITED)
--------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.81 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.27 $ 0.33
Net realized and unrealized gain (loss) on investments 0.09 (0.20)
------ ------
Total from investment operations $ 0.36 $ 0.13
------ ------
Less distributions declared to shareholders from net investment
income $(0.27) $(0.32)
------ ------
Net asset value - end of period $ 9.90 $ 9.81
====== ======
Total return(+) 3.72%++ 1.42%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.03%+
Net investment income 5.49%+ 5.27%+
Portfolio turnover 17% 65%
Net assets at end of period (000 Omitted) $4,916 $6,672
(S) The investment adviser voluntarily agreed under a temporary expense agreement to pay all of the
fund's operating expenses, in excess of 0.00% of average daily net assets. In addition, the
investment adviser voluntarily waived its fee for the periods indicated. To the extent actual
expenses were over this limitation and the waiver had not been in place, the net investment income
per share and the ratios would have been:
Net investment income $ 0.22 $ 0.16
Ratios (to average net assets):
Expenses## 1.12%+ 2.60%+
Net investment income 4.40%+ 2.70%+
* For the period from the commencement of the fund's investment operations, August 2, 1999, through
March 31, 2000.
+ 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>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
--------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 2000 MARCH 31, 2000*
NEW YORK HIGH INCOME TAX FREE FUND (UNAUDITED)
--------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.90 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.26 $ 0.33
Net realized and unrealized gain (loss) on investments 0.20 (0.10)
------ ------
Total from investment operations $ 0.46 $ 0.23
------ ------
Less distributions declared to shareholders -
From net investment income $(0.26) $(0.33)
In excess of net investment income -- (0.00)+++
------ ------
Total distributions declared to shareholders $(0.26) $(0.33)
------ ------
Net asset value - end of period $10.10 $ 9.90
====== ======
Total return(+) 4.71%++ 2.35%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.04%+ 0.04%+
Net investment income 5.20%+ 5.01%+
Portfolio turnover 8% 19%
Net assets at end of period (000 Omitted) $536 $512
(S) The investment adviser voluntarily agreed under a temporary expense agreement to pay all of the
fund's operating expenses, in excess of 0.00% of average daily net assets. In addition, the
investment adviser voluntarily waived its fee for the periods indicated. To the extent actual
expenses were over this limitation and the waiver had not been in place, the net investment
income/(loss) per share and the ratios would have been:
Net investment income (loss) $ 0.01 $ (0.10)
Ratios (to average net assets):
Expenses## 4.98%+ 6.55%+
Net investment income (loss) 0.26%+ (1.50)%+
* For the period from the commencement of the fund's investment operations, August 2, 1999, through
March 31, 2000.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# 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>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Massachusetts High Income Tax Free Fund and MFS New York High Income Tax
Free Fund are each non-diversified series of MFS Municipal Series Trust (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. Because each
fund invests primarily in the securities of a single state and its political
subdivisions, each fund is vulnerable to the effects of changes in the legal and
economic environment of the particular state. Each fund can invest up to 75% of
its portfolio in high-yield securities rated below investment grade. Investments
in high-yield securities involve greater degrees of credit and market risk than
investments in higher-rated securities and tend to be more sensitive to economic
conditions.
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 - Each fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the funds are 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 funds 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 funds. Each 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, each
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. Interest
payments received in additional securities are recorded on the ex-interest date
in an amount equal to the value of the security on such date. Each fund uses the
effective interest method for reporting interest income on payment-in-kind (PIK)
bonds. Some securities may be purchased on a "when-issued" or "forward
delivery" basis, which means that the securities will be delivered to the funds
at a future date, usually beyond customary settlement time. Legal fees and other
related expenses incurred to preserve and protect the value of a security owned
are added to the cost of the security; other legal fees are expensed. Capital
infusions made directly to the security issuer, which are generally
non-recurring, incurred to protect or enhance the value of high-yield debt
securities, are reported as additions to the cost basis of the security. Costs
that are incurred to negotiate the terms or conditions of capital infusions or
that are expected to result in a plan of reorganization are reported as realized
losses. Ongoing costs incurred to protect or enhance an investment, or costs
incurred to pursue other claims or legal actions, are expensed.
Fees Paid Indirectly - Each 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 - Each 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 each fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because each fund intends to meet certain requirements of
the Code applicable to regulated investment companies, which will enable each
fund to pay exempt-interest dividends. The portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986, may be considered
a tax-preference item to shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The funds
distinguish 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.
At March 31, 2000, the following funds, for federal income tax purposes, had a
capital loss carryforward which may be applied against any net taxable realized
gains of each succeeding year until the earlier of its utilization or
expiration.
MASSACHUSETTS NEW YORK
HIGH INCOME HIGH INCOME
EXPIRATION DATE TAX FREE FUND TAX FREE FUND
--------------------------------------------------------------------------------
March 31, 2008 $(344) $(682)
(3) Transactions with Affiliates
Investment Adviser - Each fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at an annual rate of 0.40%
of each fund's average daily net assets. The investment adviser has voluntarily
agreed to waive its fee with respect to each fund, which is shown as a reduction
of total expenses in the Statements of Operations. The investment adviser has
also voluntarily agreed to pay each fund's operating expenses exclusive of
management fees such that each fund's aggregate expenses do not exceed 0.00% of
its average daily net assets. This is reflected as a reduction of total expenses
in the Statements of Operations.
Each 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 trust from MFS. Certain officers and Trustees of the
trust are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Trustees currently are not receiving any
payments for their services for the funds.
Administrator - Each fund has an administrative services agreement with MFS to
provide the trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each 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, did not
receive any sales charges for the six months ended September 30, 2000, on sales
of Class A shares of each fund.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each fund's distribution plan provides that the fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of up
to 0.25% per annum of each fund's average daily net assets attributable to Class
A shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.10% per annum of each fund's average daily net assets
attributable to Class A shares. Distribution and service fees under the Class A
distribution plan will commence on such date as the Trustees may determine.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following purchase. There
were no contingent deferred sales charges imposed on Class A shares during the
six months ended September 30, 2000.
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 each 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, and
short-term obligations, were as follows:
MASSACHUSETTS NEW YORK
HIGH INCOME HIGH INCOME
TAX FREE FUND TAX FREE FUND
-------------------------------------------------------------------------------
Purchases $1,029,686 $52,073
---------- -------
Sales $2,851,602 $38,360
---------- -------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by each fund, as computed on a federal income tax basis, are
as follows:
MASSACHUSETTS NEW YORK
HIGH INCOME HIGH INCOME
TAX FREE FUND TAX FREE FUND
-------------------------------------------------------------------------------
Aggregate cost $4,704,089 $514,495
---------- --------
Gross unrealized appreciation $ 117,333 $ 9,881
Gross unrealized depreciation (14,726) (12)
---------- --------
Net unrealized appreciation $ 102,607 $ 9,869
========== ========
(5) Shares of Beneficial Interest
Each 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>
MASSACHUSETTS HIGH INCOME NEW YORK HIGH INCOME
TAX FREE FUND TAX FREE FUND
------------------------- --------------------
SIX MONTHS ENDED SEPTEMBER 30, 2000 SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 83,402 $ 805,695 -- $ --
Shares issued to shareholders in reinvestment
of distributions 16,256 173,392 1,365 13,572
Shares reacquired (283,147) (2,803,500) -- --
------- ----------- ------ --------
Net increase (decrease) (183,489) $(1,824,413) 1,365 $ 13,572
======== =========== ====== ========
<CAPTION>
Class A shares
MASSACHUSETTS HIGH INCOME NEW YORK HIGH INCOME
TAX FREE FUND TAX FREE FUND
------------------------- --------------------
PERIOD ENDED MARCH 31, 2000* SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 722,031 $ 7,020,749 50,021 $500,210
Shares issued to shareholders in reinvestment
of distributions 9,798 95,094 1,690 16,536
Shares reacquired (51,881) (502,485) -- --
------- ----------- ------ --------
Net increase 679,948 $ 6,613,358 51,711 $516,746
======== =========== ====== ========
* For the period from the commencement of each fund's investment operations, August 2, 1999, through
March 31, 2000.
</TABLE>
(6) Line of Credit
The funds 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 funds had no borrowings during the period.
(7) Financial Instruments
Each fund trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include futures contracts. The notional or contractual
amounts of these instruments represent the investment the fund has in
particular classes of financial instruments and does not necessarily represent
the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Futures Contracts
Massachusetts High Income Tax Free Fund
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION APPRECIATION
-------------------------------------------------------------------------------
Municipal Bond Index December 2000 4 Short $4,031
At September 30, 2000, the fund had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) Restricted Securities
Each fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At September 30, 2000,
each fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting 14.2% and 6.9% of the MFS Massachusetts High
Income Tax Free Fund and MFS New York High Income Tax Free Fund's net assets,
respectively, which may not be publicly sold without registration under the
Securities Act of 1933. Each 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 PRINCIPAL
FUND DESCRIPTION ACQUISITION AMOUNT COST VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts Massachusetts Bay Transportation Authority
High Income (General Transportation Systems), RITES,
Tax Free Fund 8.161s, 2016 5/04/2000 $165,000 $187,166 $195,086
Massachusetts Health & Educational
Facilities Authority (Harvard), RITES,
8.241s, 2020 11/18/1999 90,000 102,690 108,244
Massachusetts Water Resources Authority,
RITES, FGIC, 8.613s, 2019 3/28/2000 225,000 266,112 279,355
Puerto Rico Electric Power Authority, Power
Rev., RITES, FSA, 6.92s, 2015 9/23/1999 80,000 78,120 80,958
Puerto Rico Municipal Finance Agency,
RITES, FSA, 8.42s, 2016 1/13/2000 30,000 31,186 33,868
--------
$697,511
========
New York Puerto Rico Electric Power Authority,
High Income RITES, FSA, 6.92s, 2015 9/23/1999 $ 20,000 $ 19,530 $ 20,240
Tax Free Fund Puerto Rico Municipal Finance Agency,
RITES, FSA, 8.42s, 2016 1/13/2000 15,000 15,567 16,934
--------
$ 37,174
========
</TABLE>
--------------------------------------------
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.
<PAGE>
MFS(R) MASSACHUSETTS HIGH INCOME TAX FREE FUND
MFS(R) NEW YORK HIGH INCOME TAX FREE FUND
[Logo] M F S(R)
INVESTMENT MANAGEMENT
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.
INC-3MST 11/00 1M
