N-CSR 1 d669971.txt MFS MUNICIPAL SERIES TRUST UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4096 -------------------------------------------------------------------------------- MFS MUNICIPAL SERIES TRUST -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 500 Boylston Street, Boston, Massachusetts 02116 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Susan S. Newton Massachusetts Financial Services Company 500 Boylston Street Boston, Massachusetts 02116 -------------------------------------------------------------------------------- (Name and address of agents for service) Registrant's telephone number, including area code: (617) 954-5000 -------------------------------------------------------------------------------- Date of fiscal year end: March 31 -------------------------------------------------------------------------------- Date of reporting period: March 31, 2007 -------------------------------------------------------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. M F S(R) INVESTMENT MANAGEMENT [graphic omitted] 3/31/07 Annual report MFS(R) MUNICIPAL SERIES TRUST For the states of: Alabama, Arkansas, California, Florida, Georgia, Maryland, and Massachusetts MSTA_ANN MFS(R) Municipal Series Trust Alabama, Arkansas, California, Florida, Georgia, Maryland, and Massachusetts LETTER FROM THE CEO 1 --------------------------------------------------- PORTFOLIO COMPOSITION 2 --------------------------------------------------- MANAGEMENT REVIEW 5 --------------------------------------------------- PERFORMANCE SUMMARY 6 --------------------------------------------------- EXPENSE TABLES 13 --------------------------------------------------- PORTFOLIO OF INVESTMENTS 16 --------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 46 --------------------------------------------------- STATEMENTS OF OPERATIONS 50 --------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 52 --------------------------------------------------- FINANCIAL HIGHLIGHTS 56 --------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 71 --------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 80 --------------------------------------------------- TRUSTEES AND OFFICERS 81 --------------------------------------------------- BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 84 --------------------------------------------------- PROXY VOTING POLICIES AND INFORMATION 84 --------------------------------------------------- QUARTERLY PORTFOLIO DISCLOSURE 84 --------------------------------------------------- FEDERAL TAX INFORMATION 84 --------------------------------------------------- MFS(R) PRIVACY NOTICE 85 --------------------------------------------------- CONTACT INFORMATION BACK COVER --------------------------------------------------- THE 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. ----------------------------------------------------------------------------- NOT FDIC INSURED o MAY LOSE VALUE o NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF ----------------------------------------------------------------------------- LETTER FROM THE CEO [Photo of Robert J. Manning] Dear Shareholders: The past year has been a great example of why investors should keep their eyes on the long term. In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit its all-time high of 12,787. Less than a week later, stocks sold off around the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets and a reason investors should make sure they have an investment plan that can ride out the peaks and troughs. If you are focused on a long-term investment strategy, the short-term ups and downs of the markets should not necessarily dictate portfolio action on your part. Both the bond and stock markets are inherently cyclical. In our view, investors who remain committed to a long-term plan are more likely to achieve their financial goals. We believe you should not let the headlines guide you in your investment decisions and that there is no sense in reacting to short- term volatility. In any market environment, we believe individual investors are best served by following a three-pronged investment strategy of allocating their holdings across the major asset classes, diversifying within each class, and regularly rebalancing their portfolios to maintain their desired allocations. Of course, these strategies cannot guarantee a profit or protect against a loss. Investing and planning for the long term require diligence and patience, two traits that in our experience are essential to capitalizing on the many opportunities the financial markets can offer -- through both up and down economic cycles. Respectfully, /s/ Robert J. Manning Robert J. Manning Chief Executive Officer and Chief Investment Officer MFS Investment Management(R) May 15, 2007 The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed. PORTFOLIO COMPOSITION MFS(R) Alabama Municipal Bond Fund PORTFOLIO STRUCTURE(i) Bonds 107.0% Cash & Other New Assets (7.0)% TOP FIVE INDUSTRIES (i) Utilities - Municipal Owned 16.5% ------------------------------------------------ Water & Sewer Utility Revenue 16.5% ------------------------------------------------ Healthcare Revenue - Hospitals 15.2% ------------------------------------------------ General Obligations - General Purpose 13.9% ------------------------------------------------ State & Local Agencies 9.1% ------------------------------------------------ CREDIT QUALITY OF BONDS (r) AAA 56.2% ------------------------------------------------ AA 12.6% ------------------------------------------------ A 4.1% ------------------------------------------------ BBB 9.4% ------------------------------------------------ B 0.2% ------------------------------------------------ Not Rated 17.5% ------------------------------------------------ PORTFOLIO FACTS Average Duration (d)(i) 5.2 ------------------------------------------------ Average Life (i)(m) 13.3 yrs. ------------------------------------------------ Average Maturity (i)(m) 15.9 yrs. ------------------------------------------------ Average Credit Quality of Rated Securities (long-term) (a) AA ------------------------------------------------ Average Credit Quality of Rated Securities (short-term) (a) A-1 ------------------------------------------------ MFS(R) Arkansas Municipal Bond Fund PORTFOLIO STRUCTURE(i) Bonds 105.0% Cash & Other New Assets (5.0)% TOP FIVE INDUSTRIES (i) Universities - Colleges 18.3% ------------------------------------------------ General Obligations - General Purpose 11.7% ------------------------------------------------ Water & Sewer Utility Revenue 10.0% ------------------------------------------------ Healthcare Revenue - Hospitals 9.7% ------------------------------------------------ Single Family Housing - State 9.1% ------------------------------------------------ CREDIT QUALITY OF BONDS (r) AAA 62.3% ------------------------------------------------ AA 7.3% ------------------------------------------------ A 6.7% ------------------------------------------------ BBB 10.1% ------------------------------------------------ BB 0.2% ------------------------------------------------ B 0.6% ------------------------------------------------ Not Rated 12.8% ------------------------------------------------ PORTFOLIO FACTS Average Duration (d)(i) 6.2 ------------------------------------------------ Average Life (i)(m) 15.5 yrs. ------------------------------------------------ Average Maturity (i)(m) 16.5 yrs. ------------------------------------------------ Average Credit Quality of Rated Securities (long-term) (a) AA ------------------------------------------------ Average Credit Quality of Rated Securities (short-term) (a) A-1 ------------------------------------------------ MFS(R) California Municipal Bond Fund PORTFOLIO STRUCTURE(i) Bonds 105.4% Cash & Other New Assets (5.4)% TOP FIVE INDUSTRIES (i) General Obligations - Schools 17.6% ------------------------------------------------ State & Local Agencies 14.3% ------------------------------------------------ General Obligations - General Purpose 11.5% ------------------------------------------------ Healthcare Revenue - Hospitals 10.0% ------------------------------------------------ Tax Assessment 8.2% ------------------------------------------------ CREDIT QUALITY OF BONDS (r) AAA 50.8% ------------------------------------------------ AA 6.1% ------------------------------------------------ A 15.5% ------------------------------------------------ BBB 15.3% ------------------------------------------------ BB 0.5% ------------------------------------------------ B 0.6% ------------------------------------------------ Not Rated 11.2% ------------------------------------------------ PORTFOLIO FACTS Average Duration (d)(i) 6.4 ------------------------------------------------ Average Life (i)(m) 15.3 yrs. ------------------------------------------------ Average Maturity (i)(m) 18.8 yrs. ------------------------------------------------ Average Credit Quality of Rated Securities (long-term) (a) AA ------------------------------------------------ Average Credit Quality of Rated Securities (short-term) (a) A-1 ------------------------------------------------ MFS(R) Florida Municipal Bond Fund PORTFOLIO STRUCTURE(i) Bonds 108.2% Cash & Other New Assets (8.2)% TOP FIVE INDUSTRIES (i) Healthcare Revenue - Hospitals 19.1% ------------------------------------------------ Water & Sewer Utility Revenue 13.7% ------------------------------------------------ General Obligations - General Purpose 13.4% ------------------------------------------------ Transportation - Special Tax 8.6% ------------------------------------------------ General Obligations - Schools 6.4% ------------------------------------------------ CREDIT QUALITY OF BONDS (r) AAA 54.5% ------------------------------------------------ AA 7.9% ------------------------------------------------ A 6.9% ------------------------------------------------ BBB 10.5% ------------------------------------------------ BB 0.6% ------------------------------------------------ B 0.3% ------------------------------------------------ Not Rated 19.3% ------------------------------------------------ PORTFOLIO FACTS Average Duration (d)(i) 6.1 ------------------------------------------------ Average Life (i)(m) 16.2 yrs. ------------------------------------------------ Average Maturity (i)(m) 17.3 yrs. ------------------------------------------------ Average Credit Quality of Rated Securities (long-term) (a) AA ------------------------------------------------ Average Credit Quality of Rated Securities (short-term) (a) A-1 ------------------------------------------------ MFS(R) Georgia Municipal Bond Fund PORTFOLIO STRUCTURE(i) Bonds 107.4% Cash & Other New Assets (7.4)% TOP FIVE INDUSTRIES (i) Water & Sewer Utility Revenue 31.8% ------------------------------------------------ Healthcare Revenue - Hospitals 10.6% ------------------------------------------------ Universities - Colleges 9.5% ------------------------------------------------ General Obligations - Schools 7.0% ------------------------------------------------ Single Family Housing - State 6.3% ------------------------------------------------ CREDIT QUALITY OF BONDS (r) AAA 37.6% ------------------------------------------------ AA 24.8% ------------------------------------------------ A 7.8% ------------------------------------------------ BBB 9.2% ------------------------------------------------ BB 0.4% ------------------------------------------------ B 0.2% ------------------------------------------------ Not Rated 20.0% ------------------------------------------------ PORTFOLIO FACTS Average Duration (d)(i) 5.6 ------------------------------------------------ Average Life (i)(m) 12.3 yrs. ------------------------------------------------ Average Maturity (i)(m) 15.1 yrs. ------------------------------------------------ Average Credit Quality of Rated Securities (long-term) (a) AA ------------------------------------------------ Average Credit Quality of Rated Securities (short-term) (a) A-1 ------------------------------------------------ MFS(R) Maryland Municipal Bond Fund PORTFOLIO STRUCTURE(i) Bonds 103.5% Cash & Other New Assets (3.5)% TOP FIVE INDUSTRIES (i) Healthcare Revenue - Hospitals 19.1% ------------------------------------------------ General Obligations - Improvement 15.3% ------------------------------------------------ Universities - Colleges 13.1% ------------------------------------------------ General Obligations - General Purpose 6.1% ------------------------------------------------ Water & Sewer Utility Revenue 5.6% ------------------------------------------------ CREDIT QUALITY OF BONDS (r) AAA 39.2% ------------------------------------------------ AA 16.0% ------------------------------------------------ A 17.6% ------------------------------------------------ BBB 14.5% ------------------------------------------------ BB 1.0% ------------------------------------------------ B 0.2% ------------------------------------------------ Not Rated 11.5% ------------------------------------------------ PORTFOLIO FACTS Average Duration (d)(i) 6.2 ------------------------------------------------ Average Life (i)(m) 16.1 yrs. ------------------------------------------------ Average Maturity (i)(m) 17.3 yrs. ------------------------------------------------ Average Credit Quality of Rated Securities (long-term) (a) AA- ------------------------------------------------ Average Credit Quality of Rated Securities (short-term) (a) A-1 ------------------------------------------------ MFS(R) Massachusetts Municipal Bond Fund PORTFOLIO STRUCTURE(i) Bonds 106.6% Cash & Other New Assets (6.6)% TOP FIVE INDUSTRIES (i) Universities - Colleges 21.2% ------------------------------------------------ General Obligations - General Purpose 14.8% ------------------------------------------------ Healthcare Revenue - Hospitals 12.0% ------------------------------------------------ General Obligations - Improvement 7.9% ------------------------------------------------ General Obligations - Schools 7.3% ------------------------------------------------ CREDIT QUALITY OF BONDS (r) AAA 42.8% ------------------------------------------------ AA 20.1% ------------------------------------------------ A 7.4% ------------------------------------------------ BBB 11.8% ------------------------------------------------ BB 0.6% ------------------------------------------------ Not Rated 17.3% ------------------------------------------------ PORTFOLIO FACTS Average Duration (d)(i) 5.7 ------------------------------------------------ Average Life (i)(m) 13.3 yrs. ------------------------------------------------ Average Maturity (i)(m) 16.2 yrs. ------------------------------------------------ Average Credit Quality of Rated Securities (long-term) (a) AA ------------------------------------------------ Average Credit Quality of Rated Securities (short-term) (a) A-1 ------------------------------------------------ (a) The average credit quality of rated securities is based upon a market weighted average of portfolio holdings that are rated by public rating agencies. (d) Duration is a measure of how much a bond's price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. (i) For purposes of this presentation, the bond component includes both accrued interest amounts and the equivalent exposure from any derivative holdings, if applicable. (m) The average maturity shown is calculated using the final stated maturity on the portfolio's holdings without taking into account any holdings which have been pre-refunded or pre-paid to an earlier date or which have a mandatory put date prior to the stated maturity. The average life shown takes into account these earlier dates. (r) Each security is assigned a rating from Moody's Investors Service. If not rated by Moody's, the rating will be that assigned by Standard & Poor's. Likewise, if not assigned a rating by Standard & Poor's, it will be based on the rating assigned by Fitch, Inc. For those portfolios that hold a security which is not rated by any of the three agencies, the security is considered Not Rated. Holdings in U.S. Treasuries and government agency mortgage-backed securities, if any, are included in the "AAA"-rating category. Percentages are based on the total market value of investments as of 3/31/07. From time to time "Cash & Other Net Assets" may be negative due to timing of cash receipts and/or equivalent exposure from any derivative holdings. Percentages are based on net assets as of 3/31/07, unless otherwise noted. The portfolio is actively managed and current holdings may be different. MANAGEMENT REVIEW FACTORS THAT AFFECTED PERFORMANCE During the period, duration(d) positioning relative to the benchmark, the Lehman Brothers Municipal Bond Index, had a neutral effect on relative performance for all funds except the Arkansas and Maryland funds, where the effect was positive. Yield curve(y) positioning was also neutral for all funds, with the exception of the Alabama, Georgia, and Massachusetts funds, where the effect was negative. In comparison to the benchmark, the negative impact on the funds noted above was due to relative underexposure to the short end of the curve (represented by bonds with durations of 0 - to - 4 years), during a period when interest rates were decreasing. Credit quality had a neutral effect on all funds relative to the benchmark during the period. Notable positive contributions came from the health care and housing sectors. These sectors were generally positive contributors across all of the funds on a relative basis. The credit enhanced sectors had a positive impact on the California and Georgia funds but hurt the relative performance of the Alabama and Maryland funds. Our positioning in pre-refunded bonds had a negative impact on the Arkansas, Georgia, and Massachusetts funds. Positioning in education-related bonds boosted performance in the California and Maryland funds. Respectfully, Michael Dawson Portfolio Manager (d) Duration is a measure of how much a bond's price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. (y) A yield curve graphically depicts the yields of different maturity bonds of the same credit quality and type; a normal yield curve is upward sloping, with short-term rates lower than long-term rates. The views expressed in this report are those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market and other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio's current or future investments. PERFORMANCE SUMMARY THROUGH 3/31/07 The following information illustrates the historical performance of each fund's original share class in comparison to its benchmark. Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. Each fund's results have been compared to the Lehman Brothers Municipal Bond Index, a market-value-weighted index representative of the tax-exempt bond market. However, while this index is considered the benchmark for the performance of municipal bond funds, it is comprised of municipal bonds issued nationwide, while each of the funds is limited to investing in the bonds of a particular state. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmark comparisons are unmanaged; do not reflect sales charges, commissions or expenses; and cannot be invested in directly. (See Notes to Performance Summary.) It is not possible to invest directly in an index. PERFORMANCE DATA SHOWN REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE SO YOUR SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN QUOTED. FOR MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT MFS.COM. THE PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Alabama Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,451 11,072 3/99 10,977 11,757 3/00 10,887 11,748 3/01 12,084 13,031 3/02 12,453 13,522 3/03 13,707 14,859 3/04 14,407 15,730 3/05 14,752 16,149 3/06 15,191 16,765 3/07 15,898 17,676 MFS(R) ALABAMA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr --------------------------------------------------------------------------- A 2/01/90 4.66% 5.01% 5.26% --------------------------------------------------------------------------- B 9/07/93 3.88% 4.20% 4.47% --------------------------------------------------------------------------- AVERAGE ANNUAL Comparative benchmark --------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% --------------------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class --------------------------------------------------------------------------- A -0.31% 3.99% 4.75% With Initial Sales Charge (4.75%) --------------------------------------------------------------------------- B -0.11% 3.86% 4.47% With CDSC (Declining over six years from 4% to 0%) (x) --------------------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Arkansas Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,483 11,072 3/99 10,965 11,757 3/00 10,940 11,748 3/01 12,082 13,031 3/02 12,573 13,522 3/03 13,768 14,859 3/04 14,391 15,730 3/05 14,699 16,149 3/06 15,164 16,765 3/07 15,925 17,676 MFS(R) ARKANSAS MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ------------------------------------------------------------------------- A 2/03/92 5.02% 4.84% 5.27% ------------------------------------------------------------------------- B 9/07/93 4.21% 4.02% 4.46% ------------------------------------------------------------------------- AVERAGE ANNUAL Comparative benchmark ------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ------------------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ------------------------------------------------------------------------- A 0.03% 3.83% 4.76% With Initial Sales Charge (4.75%) ------------------------------------------------------------------------- B 0.21% 3.68% 4.46% With CDSC (Declining over six years from 4% to 0%) (x) ------------------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS California Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,621 11,072 3/99 11,321 11,757 3/00 11,161 11,748 3/01 12,365 13,031 3/02 12,749 13,522 3/03 13,997 14,859 3/04 14,727 15,730 3/05 15,189 16,149 3/06 15,830 16,765 3/07 16,670 17,676 MFS(R) CALIFORNIA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ------------------------------------------------------------------------- A 6/18/85 5.30% 5.51% 5.76% ------------------------------------------------------------------------- B 9/07/93 4.51% 4.70% 4.93% ------------------------------------------------------------------------- C 1/03/94 4.36% 4.56% 4.80% ------------------------------------------------------------------------- AVERAGE ANNUAL Comparative benchmark ------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ------------------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ------------------------------------------------------------------------- A 0.30% 4.49% 5.24% With Initial Sales Charge (4.75%) ------------------------------------------------------------------------- B 0.51% 4.37% 4.93% With CDSC (Declining over six years from 4% to 0%) (x) ------------------------------------------------------------------------- C 3.36% 4.56% 4.80% With CDSC (1% for 12 months) (x) ------------------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Florida Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,493 11,072 3/99 11,044 11,757 3/00 10,892 11,748 3/01 12,060 13,031 3/02 12,484 13,522 3/03 13,658 14,859 3/04 14,368 15,730 3/05 14,834 16,149 3/06 15,447 16,765 3/07 16,207 17,676 MFS(R) FLORIDA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr --------------------------------------------------------------------------- A 2/03/92 4.92% 5.36% 5.46% --------------------------------------------------------------------------- B 9/07/93 4.12% 4.56% 4.63% --------------------------------------------------------------------------- AVERAGE ANNUAL Comparative benchmark --------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% --------------------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class --------------------------------------------------------------------------- A -0.07% 4.34% 4.95% With Initial Sales Charge (4.75%) --------------------------------------------------------------------------- B 0.12% 4.23% 4.63% With CDSC (Declining over six years from 4% to 0%) (x) --------------------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Georgia Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,574 11,072 3/99 11,093 11,757 3/00 10,946 11,748 3/01 12,129 13,031 3/02 12,497 13,522 3/03 13,743 14,859 3/04 14,421 15,730 3/05 14,747 16,149 3/06 15,121 16,765 3/07 15,808 17,676 MFS(R) GEORGIA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr --------------------------------------------------------------------------- A 6/06/88 4.55% 4.81% 5.20% --------------------------------------------------------------------------- B 9/07/93 3.77% 4.09% 4.45% --------------------------------------------------------------------------- AVERAGE ANNUAL Comparative benchmark --------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% --------------------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class --------------------------------------------------------------------------- A -0.42% 3.80% 4.69% With Initial Sales Charge (4.75%) --------------------------------------------------------------------------- B -0.23% 3.75% 4.45% With CDSC (Declining over six years from 4% to 0%) (x) --------------------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Maryland Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,531 11,072 3/99 11,052 11,757 3/00 10,911 11,748 3/01 12,031 13,031 3/02 12,463 13,522 3/03 13,611 14,859 3/04 14,286 15,730 3/05 14,623 16,149 3/06 15,070 16,765 3/07 15,806 17,676 MFS(R) MARYLAND MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr --------------------------------------------------------------------------- A 10/31/84 4.88% 4.87% 5.19% --------------------------------------------------------------------------- B 9/07/93 4.21% 4.19% 4.52% --------------------------------------------------------------------------- AVERAGE ANNUAL Comparative benchmark --------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% --------------------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class --------------------------------------------------------------------------- A -0.10% 3.85% 4.68% With Initial Sales Charge (4.75%) --------------------------------------------------------------------------- B 0.21% 3.85% 4.52% With CDSC (Declining over six years from 4% to 0%) (x) --------------------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Massachusetts Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,474 11,072 3/99 11,010 11,757 3/00 10,836 11,748 3/01 11,968 13,031 3/02 12,319 13,522 3/03 13,603 14,859 3/04 14,259 15,730 3/05 14,634 16,149 3/06 15,195 16,765 3/07 15,924 17,676 MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr --------------------------------------------------------------------------- A 4/09/85 4.80% 5.27% 5.27% --------------------------------------------------------------------------- B 9/07/93 4.12% 4.59% 4.60% --------------------------------------------------------------------------- AVERAGE ANNUAL Comparative benchmark --------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% --------------------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class --------------------------------------------------------------------------- A -0.18% 4.25% 4.76% With Initial Sales Charge (4.75%) --------------------------------------------------------------------------- B 0.12% 4.25% 4.60% With CDSC (Declining over six years from 4% to 0%) (x) --------------------------------------------------------------------------- CDSC - Contingent Deferred Sales Charge. (f) Source: FactSet Research Systems Inc. (x) Assuming redemption at the end of the applicable period. NOTES TO PERFORMANCE SUMMARY Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial statements for complete details. A 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. From time to time the funds may receive proceeds from litigation settlements, without which performance would be lower. EXPENSE TABLES FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD, OCTOBER 1, 2006, THROUGH MARCH 31, 2007 As a shareholder of the funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments and redemption fees on certain exchanges and redemptions, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the funds and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period October 1, 2006 through March 31, 2007. ACTUAL EXPENSES The first line for each share class in the following tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each share class in the following tables provides information about hypothetical account values and hypothetical expenses based on each fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in each fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees. Therefore, the second line for each share class in the tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. MFS(R) ALABAMA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Paid During Annualized Beginning Ending Period(p) Expense Account Value Account Value 10/01/06- Share Class Ratio 10/01/06 3/31/07 3/31/07 -------------------------------------------------------------------------------- Actual 1.13% $1,000.00 $1,016.30 $5.68 A --------------------------------------------------------------------- Hypothetical (h) 1.13% $1,000.00 $1,019.30 $5.69 -------------------------------------------------------------------------------- Actual 1.91% $1,000.00 $1,012.50 $9.58 B --------------------------------------------------------------------- Hypothetical (h) 1.91% $1,000.00 $1,015.41 $9.60 -------------------------------------------------------------------------------- (h) 5% class return per year before expenses. (p) Expenses paid is equal to each class' annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. Expenses paid do not include any applicable sales charges (loads) or redemption fees. If these transaction costs had been included, your costs would have been higher. MFS(R) ARKANSAS MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Paid During Annualized Beginning Ending Period(p) Expense Account Value Account Value 10/01/06- Share Class Ratio 10/01/06 3/31/07 3/31/07 -------------------------------------------------------------------------------- Actual 0.88% $1,000.00 $1,017.70 $4.43 A --------------------------------------------------------------------- Hypothetical (h) 0.88% $1,000.00 $1,020.54 $4.43 -------------------------------------------------------------------------------- Actual 1.66% $1,000.00 $1,013.80 $8.33 B --------------------------------------------------------------------- Hypothetical (h) 1.66% $1,000.00 $1,016.65 $8.35 -------------------------------------------------------------------------------- MFS(R) CALIFORNIA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Paid During Annualized Beginning Ending Period(p) Expense Account Value Account Value 10/01/06- Share Class Ratio 10/01/06 3/31/07 3/31/07 -------------------------------------------------------------------------------- Actual 0.84% $1,000.00 $1,020.40 $4.23 A --------------------------------------------------------------------- Hypothetical (h) 0.84% $1,000.00 $1,020.74 $4.23 -------------------------------------------------------------------------------- Actual 1.63% $1,000.00 $1,014.90 $8.19 B --------------------------------------------------------------------- Hypothetical (h) 1.63% $1,000.00 $1,016.80 $8.20 -------------------------------------------------------------------------------- Actual 1.75% $1,000.00 $1,015.90 $8.80 C -------------------------------------------------------------------- Hypothetical (h) 1.75% $1,000.00 $1,016.21 $8.80 ------------------------------------------------------------------------------- MFS(R) FLORIDA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Paid During Annualized Beginning Ending Period(p) Expense Account Value Account Value 10/01/06- Share Class Ratio 10/01/06 3/31/07 3/31/07 -------------------------------------------------------------------------------- Actual 0.95% $1,000.00 $1,017.00 $4.78 A --------------------------------------------------------------------- Hypothetical (h) 0.95% $1,000.00 $1,020.19 $4.78 -------------------------------------------------------------------------------- Actual 1.73% $1,000.00 $1,013.20 $8.68 B --------------------------------------------------------------------- Hypothetical (h) 1.73% $1,000.00 $1,016.31 $8.70 -------------------------------------------------------------------------------- MFS(R) GEORGIA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Paid During Annualized Beginning Ending Period(p) Expense Account Value Account Value 10/01/06- Share Class Ratio 10/01/06 3/31/07 3/31/07 -------------------------------------------------------------------------------- Actual 1.21% $1,000.00 $1,012.30 $6.07 A --------------------------------------------------------------------- Hypothetical (h) 1.21% $1,000.00 $1,018.90 $6.09 -------------------------------------------------------------------------------- Actual 1.97% $1,000.00 $1,008.60 $9.87 B --------------------------------------------------------------------- Hypothetical (h) 1.97% $1,000.00 $1,015.11 $9.90 -------------------------------------------------------------------------------- (h) 5% class return per year before expenses. (p) Expenses paid is equal to each class' annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. Expenses paid do not include any applicable sales charges (loads) or redemption fees. If these transaction costs had been included, your costs would have been higher. MFS(R) MARYLAND MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Paid During Annualized Beginning Ending Period(p) Expense Account Value Account Value 10/01/06- Share Class Ratio 10/01/06 3/31/07 3/31/07 -------------------------------------------------------------------------------- Actual 1.02% $1,000.00 $1,017.40 $5.13 A --------------------------------------------------------------------- Hypothetical (h) 1.02% $1,000.00 $1,019.85 $5.14 -------------------------------------------------------------------------------- Actual 1.68% $1,000.00 $1,013.20 $8.43 B --------------------------------------------------------------------- Hypothetical (h) 1.68% $1,000.00 $1,016.55 $8.45 -------------------------------------------------------------------------------- MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Paid During Annualized Beginning Ending Period(p) Expense Account Value Account Value 10/01/06- Share Class Ratio 10/01/06 3/31/07 3/31/07 -------------------------------------------------------------------------------- Actual 1.12% $1,000.00 $1,016.20 $5.63 A --------------------------------------------------------------------- Hypothetical (h) 1.12% $1,000.00 $1,019.35 $5.64 -------------------------------------------------------------------------------- Actual 1.78% $1,000.00 $1,012.90 $8.93 B --------------------------------------------------------------------- Hypothetical (h) 1.78% $1,000.00 $1,016.06 $8.95 -------------------------------------------------------------------------------- (h) 5% class return per year before expenses. (p) Expenses paid is equal to each class' annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. Expenses paid do not include any applicable sales charges (loads) or redemption fees. If these transaction costs had been included, your costs would have been higher. PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) ALABAMA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes. Municipal Bonds - 105.2%
ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------- Airport & Port Revenue - 2.5% ------------------------------------------------------------------------------------------------------------------- Alabama Docks Department Facilities Rev., MBIA, 5.5%, 2008 (c) $ 1,000,000 $ 1,046,310 Alabama Port Authority Docks Facility, MBIA, 5.25%, 2011 (c) 1,000,000 1,058,930 ------------------------------------------------------------------------------------------------------------------- $ 2,105,240 ------------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 13.7% ------------------------------------------------------------------------------------------------------------------- Boaz, AL, School Warrants, "A", XLCA, 5%, 2025 $ 1,000,000 $ 1,050,080 Boaz, AL, School Warrants, "A", XLCA, 5%, 2029 650,000 680,901 Fairfield, AL, Refunding Warrants, AMBAC, 5.25%, 2025 1,030,000 1,099,834 Gadsden, AL, Warrants, "B", AMBAC, 5.125%, 2028 1,500,000 1,594,395 Hoover, AL, "B", 6%, 2010 (c) 500,000 534,885 Houston County, AL, AMBAC, 6.25%, 2009 (c) 750,000 810,787 Jefferson County, AL, School Warrants, FSA, 5.5%, 2020 1,750,000 1,829,923 Mobile County, AL, 6%, 2009 (c) 1,345,000 1,414,765 Morgan County, AL, Warrants, AMBAC, 5%, 2028 1,380,000 1,448,848 Puerto Rico Commonwealth, Public Improvement, "A", 5.25%, 2030 1,000,000 1,070,970 ------------------------------------------------------------------------------------------------------------------- $ 11,535,388 ------------------------------------------------------------------------------------------------------------------- General Obligations - Improvement - 6.3% ------------------------------------------------------------------------------------------------------------------- Birmingham, AL, "A", 5.75%, 2017 $ 1,000,000 $ 1,071,080 Birmingham, AL, "B", 5.75%, 2009 (c) 1,820,000 1,915,368 Birmingham, AL, "B", 5.75%, 2009 (c) 180,000 189,509 Montgomery, AL, Warrants, MBIA, 5.1%, 2021 1,005,000 1,053,260 Puerto Rico Municipal Finance Agency, FSA, 5.5%, 2009 (c)(u) 1,000,000 1,051,850 ------------------------------------------------------------------------------------------------------------------- $ 5,281,067 ------------------------------------------------------------------------------------------------------------------- General Obligations - Schools - 5.7% ------------------------------------------------------------------------------------------------------------------- Bessemer, AL, School Warrants, AMBAC, 5.5%, 2020 $ 2,015,000 $ 2,142,066 Phenix City, AL, AMBAC, 5.65%, 2021 1,500,000 1,618,665 Tuscaloosa, AL, Warrants, 5.7%, 2010 (c) 1,000,000 1,062,020 ------------------------------------------------------------------------------------------------------------------- $ 4,822,751 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 15.0% ------------------------------------------------------------------------------------------------------------------- Alabama Special Care Facilities Financing Authority (Ascension Health Senior Credit), "C-2", 5%, 2036 $ 750,000 $ 775,417 Alabama Special Care Facilities Financing Authority (Daughters of Charity), ETM, AMBAC, 5%, 2025 (c) 1,500,000 1,508,715 Alexander City, AL, Special Care Facilities Financing Authority Medical Facilities Rev. (Russell Hospital Corp.), "A", 5.75%, 2036 500,000 524,815 Birmingham Medical Center, East Alabama, Special Health Care Facilities, Eastern Health Systems, "B", 5%, 2018 500,000 503,245 Birmingham, AL, Baptist Health Systems, "A", (Baptist Medical Center), 5.625%, 2015 300,000 318,666 Birmingham, AL, Baptist Medical Center, Special Care Facilities Rev. (Baptist Health Systems, Inc.), "A", 5%, 2030 200,000 204,626 Health Care Authority For Baptist Health, "D", 5%, 2021 400,000 412,688 Houston County, AL, Health Care Authority, AMBAC, 6.125%, 2009 (c) 1,000,000 1,068,070 Huntsville, AL, Health Care Authority Rev., 5.625%, 2011 (c) 1,050,000 1,137,045 Huntsville, AL, Health Care Authority Rev., "A", MBIA, 5%, 2023 1,000,000 1,019,390 Lauderdale County & Florence, AL, Health Care Authority Rev. (Eliza Coffee Memorial Hospital), MBIA, 5.75%, 2008 (c) 1,000,000 1,025,570 Lauderdale County & Florence, AL, Health Care Authority Rev., "A" (Coffee Health Group), MBIA, 5.75%, 2014 1,000,000 1,050,870 Marshall County, AL, Health Care Authority Rev., "A", 5.75%, 2032 1,065,000 1,124,683 Montgomery, AL, Medical Clinic Board Health Care Facility Rev. (Jackson Hospital & Clinic), 5.25%, 2031 500,000 519,805 Montgomery, AL, Special Care Facilities, Financing Authority Rev. (Baptist Health), "A-2", MBIA, 0% to 2007, 5% to 2014 (c) 1,135,000 1,174,793 Valley, AL, Special Care Facilities Financing Authority, "A" (Lanier Memorial Hospital), 5.65%, 2022 225,000 228,917 ------------------------------------------------------------------------------------------------------------------- $ 12,597,315 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Metals - 0.6% ------------------------------------------------------------------------------------------------------------------- Mobile County, AL, Industrial Development Authority Rev. (Ipsco, Inc.), 6.875%, 2030 $ 500,000 $ 527,120 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 0.5% ------------------------------------------------------------------------------------------------------------------- Fairfield, AL, Environment Improvement Rev. (USX Corp.), 5.4%, 2016 $ 400,000 $ 427,672 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Paper - 3.8% ------------------------------------------------------------------------------------------------------------------- Butler, AL, Industrial Development Board, Solid Waste Disposal Rev. (Georgia Pacific Corp.), 5.75%, 2028 $ 200,000 $ 204,944 Camden, AL, Industrial Development Board Exempt Rev., "B" (Weyerhaeuser), 6.375%, 2024 500,000 547,370 Mobile, AL, Industrial Development Board Improvement Rev., "A" (International Paper Co.), 6.35%, 2016 650,000 685,419 Mobile, AL, Industrial Development Board Improvement Rev., "B" (International Paper Co.), 6.45%, 2019 350,000 369,128 Phenix City, AL, Environmental Improvement Rev., "A" (MeadWestvaco), 6.35%, 2035 750,000 815,205 Selma, AL, Industrial Development Board, "A" (International Paper Co.), 6.7%, 2018 500,000 532,420 ------------------------------------------------------------------------------------------------------------------- $ 3,154,486 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Other - 1.6% ------------------------------------------------------------------------------------------------------------------- Birmingham, AL, Downtown Redevelopment Authority Rev. (Social Security Administrative Building), ETM, 12.5%, 2010 (c) $ 1,160,000 $ 1,315,881 ------------------------------------------------------------------------------------------------------------------- Multi-Family Housing Revenue - 2.5% ------------------------------------------------------------------------------------------------------------------- Alabama Housing Finance Authority, Multi-Family Residential Development Rev., FHA, 7.25%, 2023 $ 1,065,000 $ 1,072,743 Alabama Housing Finance Authority, Multi-Family Residential Development Rev., "K" (South Bay Apartments), FNMA, 5.875%, 2021 960,000 1,010,333 Birmingham, AL, Multi-Family Housing Rev., "C" (Beaconview Apartments), 8%, 2030 (d) 395,000 19,750 ------------------------------------------------------------------------------------------------------------------- $ 2,102,826 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 0.8% ------------------------------------------------------------------------------------------------------------------- Alabama Housing Finance Authority, Collateral Home Mortgage Bond Program II, "B", 5.15%, 2019 $ 50,000 $ 51,175 Alabama Housing Finance Authority, Single Family Mortgage Rev., Collateral Home Mortgage Bond Program II, "A-2", GNMA, 5.4%, 2022 545,000 554,379 Alabama Housing Finance Authority, Single Family Mortgage Rev., Collateral Home Mortgage Bond Program II, "B", 5.15%, 2019 55,000 56,292 ------------------------------------------------------------------------------------------------------------------- $ 661,846 ------------------------------------------------------------------------------------------------------------------- State & Local Agencies - 9.0% ------------------------------------------------------------------------------------------------------------------- Alabama Building Renovation Authority, AMBAC, 6%, 2014 $ 1,515,000 $ 1,621,535 Alabama Building Renovation Finance Authority, FSA, 4.5%, 2031 500,000 499,970 Alabama Public School & College, Capital Improvement, "A", 5%, 2019 500,000 520,065 Alabama Public School & College, Capital Improvement, "C", 5.75%, 2017 1,000,000 1,057,020 Alabama Public School & College, Capital Improvement, "C", 5.75%, 2018 1,035,000 1,093,788 Montgomery County, AL, Public Building Authority Rev., MBIA, 5%, 2031 500,000 529,455 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2013 (u) 1,000,000 1,093,170 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2016 (u) 1,000,000 1,119,170 ------------------------------------------------------------------------------------------------------------------- $ 7,534,173 ------------------------------------------------------------------------------------------------------------------- Tax - Other - 1.2% ------------------------------------------------------------------------------------------------------------------- Virgin Islands Public Finance Authority, "A", 5.5%, 2018 $ 1,000,000 $ 1,029,470 ------------------------------------------------------------------------------------------------------------------- Tobacco - 0.5% ------------------------------------------------------------------------------------------------------------------- Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 445,000 $ 463,272 ------------------------------------------------------------------------------------------------------------------- Universities - Colleges - 7.4% ------------------------------------------------------------------------------------------------------------------- Alabama Board of Education Rev., Refunding & Improvement (Southern Union State Community College), MBIA, 5%, 2022 $ 1,000,000 $ 1,046,610 Alabama Private Colleges & Universities, Facilities Authority Rev. (Tuskegee University), ASSD GTY, 4.75%, 2026 1,000,000 1,025,530 Auburn University, General Fee Rev., AMBAC, 5%, 2029 1,000,000 1,050,230 Mobile, AL, Spring Hill College, Educational Building Authority Rev., "A", 5.25%, 2034 1,360,000 1,450,059 University of Alabama, General Rev., "A", MBIA, 5%, 2029 1,000,000 1,052,000 University of Alabama, University Rev., General Fee, FGIC, 5%, 2021 525,000 553,828 ------------------------------------------------------------------------------------------------------------------- $ 6,178,257 ------------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 16.5% ------------------------------------------------------------------------------------------------------------------- Alabama Municipal Electric Power Authority, "A", MBIA, 5%, 2023 $ 1,000,000 $ 1,056,310 Guam Power Authority Rev., AMBAC, 5.25%, 2013 (u) 1,000,000 1,045,700 Guam Power Authority Rev., AMBAC, 5%, 2018 (u) 9,000,000 9,323,280 Puerto Rico Electric Power Authority Rev., "II", 5.25%, 2031 875,000 925,225 Southeastern Alabama Gas District Systems Rev., "A", AMBAC, 5.5%, 2010 (c) 1,000,000 1,072,500 Tuskegee, AL, Utilities Board, AMBAC, 5.5%, 2022 400,000 408,532 ------------------------------------------------------------------------------------------------------------------- $ 13,831,547 ------------------------------------------------------------------------------------------------------------------- Utilities - Other - 1.3% ------------------------------------------------------------------------------------------------------------------- Foley, AL, Utilities Board Utilities Rev., FSA, 5%, 2025 $ 1,000,000 $ 1,057,810 ------------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 16.3% ------------------------------------------------------------------------------------------------------------------- Alabama Drinking Water Finance Authority, Revolving Fund Loan, "A", AMBAC, 6%, 2021 $ 725,000 $ 774,648 Alabama Drinking Water Finance Authority, Revolving Fund Loan, "C", AMBAC, 5.75%, 2018 1,000,000 1,070,150 Alabama Water Pollution Control Authority, Revolving Fund Loan, AMBAC, 5.75%, 2019 1,000,000 1,044,100 Alabama Water Pollution Control Authority, Revolving Fund Loan, "B", AMBAC, 5.5%, 2016 1,000,000 1,006,580 Alabama Water Pollution Control Authority, Revolving Fund Loan, "B", AMBAC, 5.5%, 2020 1,380,000 1,388,832 Alabaster, AL, Sewer Rev., AMBAC, 5%, 2029 750,000 786,952 Bessemer, AL, Water Rev., Warrants, "A", AMBAC, 5.75%, 2026 1,000,000 1,014,940 Birmingham, AL, Waterworks & Sewer Board Rev., "A", AMBAC, 4.375%, 2032 1,000,000 979,940 Birmingham, AL, Waterworks & Sewer Board Rev., "A", FGIC, 5%, 2034 1,365,000 1,436,294 Birmingham, AL, Waterworks & Sewer Board Rev., "B", MBIA, 5%, 2013 (c) 525,000 559,702 Jasper, AL, Waterworks & Sewer Board, "A", AMBAC, 5.2%, 2011 (c) 750,000 800,588 Limestone County, AL, Water Authority, FGIC, 5.5%, 2009 (c) 2,650,000 2,751,840 Ozark, AL, Utilities Board Water & Sewer Rev., AMBAC, 5%, 2031 100,000 104,773 ------------------------------------------------------------------------------------------------------------------- $ 13,719,339 ------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $84,656,390) $ 88,345,460 ------------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 0.6% ------------------------------------------------------------------------------------------------------------------- Jefferson County, AL, Sewer Rev., Warrants Rev., "B-4", 3.7%, due 4/05/07, at Identified Cost and Value $ 475,000 $ 475,000 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $85,131,390) (k) $ 88,820,460 ------------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (5.8)% (4,839,310) ------------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $ 83,981,150 ------------------------------------------------------------------------------------------------------------------- SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------- INTEREST RATE SWAPS 12/01/07 USD 2,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $12,137 8/15/22 USD 1,750,000 Goldman Sachs 5.286% (fixed rate) 3-Month LIBOR (4,814) 9/12/19 USD 1,000,000 Goldman Sachs 5.145% (fixed rate) 3-Month LIBOR (8,343) ------------------------------------------------------------------------------------------------------------------- $(1,020) ------------------------------------------------------------------------------------------------------------------- At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) ARKANSAS MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 102.3% ------------------------------------------------------------------------------------------------------------------- ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------- Airport and Port Revenue - 0.6% ------------------------------------------------------------------------------------------------------------------- Little Rock, AR, Airport Rev., "A", FSA, 5.25%, 2019 $ 800,000 $ 825,000 ------------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 11.5% ------------------------------------------------------------------------------------------------------------------- Arkansas College Savings, "A", 0%, 2017 $ 1,840,000 $ 1,205,071 Commonwealth of Puerto Rico, MBIA, 5.75%, 2010 (c)(u) 6,000,000 6,383,460 Commonwealth of Puerto Rico, 5.5%, 2019 (u) 2,500,000 2,678,325 Commonwealth of Puerto Rico, Public Improvement, "A", 5.25%, 2027 2,000,000 2,146,660 Commonwealth of Puerto Rico, Public Improvement, "A", CIFG, 5%, 2034 1,000,000 1,051,360 Puerto Rico Public Buildings Authority Rev. (State Office Building), "F", XLCA, 5.25%, 2025 2,000,000 2,287,720 ------------------------------------------------------------------------------------------------------------------- $ 15,752,596 ------------------------------------------------------------------------------------------------------------------- General Obligations - Improvement - 6.1% ------------------------------------------------------------------------------------------------------------------- Puerto Rico Municipal Finance Agency, FSA, 5.5%, 2009 (c)(u) $ 1,470,000 $ 1,546,220 Puerto Rico Municipal Finance Agency, FSA, 5.5%, 2009 (c)(u) 6,500,000 6,837,025 ------------------------------------------------------------------------------------------------------------------- $ 8,383,245 ------------------------------------------------------------------------------------------------------------------- General Obligations - Schools - 6.2% ------------------------------------------------------------------------------------------------------------------- Arkansas, Capital Appreciation, College Savings, "B", 0%, 2012 $ 1,200,000 $ 979,752 Arkansas, Capital Appreciation, College Savings, "B", 0%, 2013 1,000,000 782,620 Arkansas, Capital Appreciation, College Savings, "B", 0%, 2014 1,150,000 863,075 Arkansas, Capital Appreciation, College Savings, "B", 0%, 2015 1,100,000 789,305 Little Rock, AR, School District Construction, "C", FSA, 5%, 2017 1,000,000 1,041,930 Little Rock, AR, School District, "A", FSA, 5.4%, 2010 (c) 1,000,000 1,047,340 Northwest Arkansas Community College District, Capital Improvement, AMBAC, 5%, 2028 1,380,000 1,462,000 Pine Bluff, AR, School District Construction, MBIA, 4.75%, 2033 1,500,000 1,518,735 ------------------------------------------------------------------------------------------------------------------- $ 8,484,757 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 9.6% ------------------------------------------------------------------------------------------------------------------- Arkansas Development Finance Authority Rev. (Washington Regional Medical Center), 7.25%, 2010 (c) $ 500,000 $ 547,300 Arkansas Development Finance Authority, Health Refunding Rev. (Sister of Mercy), "A", MBIA, 5%, 2013 4,200,000 4,322,094 Batesville, AR, Medical District Rev. (White River Medical Center), 5.5%, 2024 750,000 783,915 Baxter County, AR, Hospital Rev. (Baxter Regional Hospital), 5%, 2026 1,000,000 1,027,150 Baxter County, AR, Hospital Rev., Refunding & Improvement, "B", 5.6%, 2009 (c) 1,500,000 1,566,090 Crittenden County, AR, Hospital Rev., Refunding & Improvement, 7.15%, 2025 750,000 759,750 Jefferson County, AR, Hospital Rev., Refunding & Improvement (Regional Medical Center), 5.8%, 2021 1,000,000 1,063,930 Little Rock, AR, Health Facilities Hospital Board Rev. (Baptist Medical Center), 6.9%, 2009 400,000 426,184 North Little Rock, AR, Health Facilities Board Rev. (Baptist Health Facilities), 5.7%, 2022 500,000 518,120 Sebastian County, AR, Health Facilities Improvement Rev. (Sparks Regional Medical Center), "A", 5.25%, 2021 1,000,000 1,038,080 Washington County, AR, Hospital Rev. (Regional Medical Center), "A", 5%, 2035 1,000,000 1,022,020 ------------------------------------------------------------------------------------------------------------------- $ 13,074,633 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Long Term Care - 1.0% ------------------------------------------------------------------------------------------------------------------- Arkansas Development Finance Authority Rev. (Evangelical Lutheran Project), "B", AMBAC, 5.375%, 2009 (c) $ 1,315,000 $ 1,389,035 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 0.3% ------------------------------------------------------------------------------------------------------------------- Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 $ 335,000 $ 368,423 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Paper - 1.2% ------------------------------------------------------------------------------------------------------------------- Arkansas Development Finance Authority, Industrial Facilities Rev. (Potlatch Corp.), "A", 7.75%, 2025 $ 250,000 $ 282,280 Camden, AR, Environmental Improvement Rev. (International Paper Co.), "A", 5%, 2018 750,000 764,175 Pine Bluff, AR, Environmental Improvement (International Paper Co.), "A", 5.55%, 2022 250,000 255,823 Pine Bluff, AR, Environmental Refunding (International Paper Co.), "A", 6.7%, 2020 300,000 321,597 ------------------------------------------------------------------------------------------------------------------- $ 1,623,875 ------------------------------------------------------------------------------------------------------------------- Multi-Family Housing Revenue - 0.8% ------------------------------------------------------------------------------------------------------------------- Fort Smith, AR, Residential Housing Facilities Board Rev. (Gorman Towers), "A", GNMA, 5.45%, 2037 $ 1,000,000 $ 1,033,770 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - Local - 7.3% ------------------------------------------------------------------------------------------------------------------- Harrison, AR, Residential Housing Facilities Board, Single Family Mortgage Rev., FGIC, ETM, 7.4%, 2011 (c) $ 4,000,000 $ 4,579,240 Lonoke County, AR, Residential Housing Facilities Rev., "A-2", FNMA, 7.9%, 2011 64,639 65,325 Pulaski County, AR, Public Facilities Board Rev., "A", GNMA, 5.75%, 2034 1,835,000 1,877,352 Pulaski County, AR, Public Facilities Board Rev., "C", FNMA, 0%, 2014 2,750,000 1,990,175 Sherwood, AR, Residential Housing Facilities Board, Single Family Rev., MBIA, 7.5%, 2010 (c) 1,250,000 1,399,900 ------------------------------------------------------------------------------------------------------------------- $ 9,911,992 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 8.9% ------------------------------------------------------------------------------------------------------------------- Arkansas Development Finance Authority Rev., "1", 0%, 2011 $ 75,000 $ 53,221 Arkansas Development Finance Authority Rev., Mortgage Backed Securities Program, "B", GNMA, 5%, 2029 195,000 200,368 Arkansas Development Finance Authority Rev., Mortgage Backed Securities Program, "B", GNMA, 4.45%, 2034 945,000 948,874 Arkansas Development Finance Authority Rev., Mortgage Backed Securities Program, "C", GNMA, 5.35%, 2027 1,560,000 1,596,535 Arkansas Development Finance Authority Rev., Mortgage Backed Securities Program, "C", 5.625%, 2035 1,730,000 1,837,710 Arkansas Development Finance Authority Rev., Mortgage Backed Securities Program, "D", GNMA, 5.85%, 2024 795,000 796,129 Arkansas Development Finance Authority Rev., Mortgage Backed Securities Program, "E", GNMA, 5.4%, 2034 760,000 785,475 Arkansas Development Finance Authority, Mortgage Backed Securities Program, "C", 5.3%, 2023 370,000 370,733 Arkansas Development Finance Authority, Mortgage Backed Securities Program, "I", GNMA, 5.3%, 2033 355,000 361,276 Arkansas Development Finance Authority, Mortgage Rev., "B", GNMA, 4.85%, 2031 995,000 1,007,069 Arkansas Development Finance Authority, Mortgage Rev., "B", GNMA, 5.25%, 2035 2,510,000 2,596,093 Arkansas Development Finance Authority, Single Family Mortgage Rev., "B", GNMA, 5.125%, 2024 445,000 458,737 Arkansas Housing Development Agency, Single Family Rev., Mortgage Program, ETM, 8.375%, 2011 (c) 1,000,000 1,182,740 ------------------------------------------------------------------------------------------------------------------- $ 12,194,960 ------------------------------------------------------------------------------------------------------------------- State & Local Agencies - 2.4% ------------------------------------------------------------------------------------------------------------------- Arkansas Development Finance Authority Rev., Environmental State Agency Facilities, "A", AMBAC, 5%, 2040 $ 2,500,000 $ 2,625,250 Arkansas Development Finance Authority, Economic Development Rev. (Agritecsorbents LLC), "B", 5%, 2018 175,000 180,462 Arkansas Development Finance Authority, Economic Development Rev. (Madison Industrial), "B", AMBAC, 5.8%, 2020 500,000 510,665 ------------------------------------------------------------------------------------------------------------------- $ 3,316,377 ------------------------------------------------------------------------------------------------------------------- Tax - Other - 3.1% ------------------------------------------------------------------------------------------------------------------- Little Rock, AR, Hotel & Restaurant Gross Receipts Tax Rev., 7.375%, 2015 $ 2,790,000 $ 3,245,467 Virgin Islands Public Finance Authority Rev., "A", 5.5%, 2022 1,000,000 1,029,470 ------------------------------------------------------------------------------------------------------------------- $ 4,274,937 ------------------------------------------------------------------------------------------------------------------- Tobacco - 2.3% ------------------------------------------------------------------------------------------------------------------- Arkansas Development Finance Authority, Tobacco Settlement Rev. (Cancer Research Center Project), AMBAC, 0%, 2026 $ 2,000,000 $ 853,400 Arkansas Development Finance Authority, Tobacco Settlement Rev. (Cancer Research Center Project), AMBAC, 0%, 2027 1,940,000 787,271 Arkansas Development Finance Authority, Tobacco Settlement Rev. (Cancer Research Center Project), AMBAC, 0%, 2036 1,200,000 316,824 Arkansas Development Finance Authority, Tobacco Settlement Rev. (Cancer Research Center Project), "N", AMBAC, 0%, 2030 1,725,000 606,889 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 230,000 239,444 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.5%, 2039 290,000 303,549 ------------------------------------------------------------------------------------------------------------------- $ 3,107,377 ------------------------------------------------------------------------------------------------------------------- Transportation - Special Tax - 2.5% ------------------------------------------------------------------------------------------------------------------- Commonwealth of Puerto Rico Highway & Transportation Authority, "B", MBIA, 5.875%, 2010 (c) $ 2,000,000 $ 2,156,360 Commonwealth of Puerto Rico Highway & Transportation Authority, "G", FGIC, 5%, 2022 500,000 529,895 Commonwealth of Puerto Rico Highway & Transportation Authority, "G", 5%, 2023 750,000 780,090 ------------------------------------------------------------------------------------------------------------------- $ 3,466,345 ------------------------------------------------------------------------------------------------------------------- Universities - Colleges - 18.0% ------------------------------------------------------------------------------------------------------------------- Arkansas State University, Student Fee-ASU (Newport Campus), AMBAC, 5%, 2028 $ 700,000 $ 708,596 Conway, AR, Public Facilities Board, Capital Improvement Rev. (Hendrix College), "B", 5%, 2035 1,000,000 1,023,110 Pulaski, AR, Student Tuition & Fee Rev. (Technical College), FGIC, 5%, 2029 1,820,000 1,895,075 Pulaski, AR, Student Tuition & Fee Rev. (Technical College), AMBAC, 4.5%, 2031 1,190,000 1,172,555 Siloam Springs, AR, Public Education Facilities, Capital Improvement Rev. (John Brown University), AMBAC, 5.35%, 2020 500,000 525,340 University of Arkansas, University Construction Rev. (Monticello), AMBAC, 5%, 2025 1,525,000 1,604,178 University of Arkansas, University Construction Rev. (UAMS Campus), "B", MBIA, 5%, 2026 1,405,000 1,485,647 University of Arkansas, University Construction Rev. (UAMS Campus), "B", MBIA, 5%, 2027 1,000,000 1,056,730 University of Arkansas, University Construction Rev. (UAMS Campus), "B", MBIA, 5%, 2034 3,290,000 3,459,172 University of Arkansas, University Facilities Rev. (Fayetteville Campus), FGIC, 5%, 2027 3,155,000 3,293,694 University of Arkansas, University Facilities Rev. (Fayetteville Campus), FGIC, 5%, 2032 2,500,000 2,602,225 University of Arkansas, University Facilities Rev. (Pine Bluff Campus), "A", AMBAC, 5%, 2030 1,000,000 1,061,240 University of Arkansas, University Facilities Rev. (UAMS Campus), FGIC, 5%, 2028 2,000,000 2,120,860 University of Central Arkansas Rev., "A", AMBAC, 5%, 2023 1,100,000 1,110,780 University of Central Arkansas, Student Housing Rev., "C", FGIC, 5%, 2034 250,000 255,438 University of Puerto Rico Rev., "Q", 5%, 2036 1,145,000 1,189,254 ------------------------------------------------------------------------------------------------------------------- $ 24,563,894 ------------------------------------------------------------------------------------------------------------------- Universities - Dormitories - 2.5% ------------------------------------------------------------------------------------------------------------------- Arkansas State University, Housing Systems Rev., AMBAC, 5.15%, 2021 $ 1,240,000 $ 1,295,180 Arkansas Technical University, Housing Systems Rev., AMBAC, 5.2%, 2026 1,000,000 1,080,850 Pope County, AR, Residential Housing, Facilities Board Rev. (Arkansas Technical University Project), "A", 6%, 2027 500,000 506,305 University of Central Arkansas, Student Housing Rev., "C", FGIC, 5.25%, 2029 500,000 513,775 ------------------------------------------------------------------------------------------------------------------- $ 3,396,110 ------------------------------------------------------------------------------------------------------------------- Utilities - Investor Owned - 0.6% ------------------------------------------------------------------------------------------------------------------- Jefferson County, AR, Pollution Control Rev. (Entergy Arkansas, Inc., Project), 4.6%, 2017 $ 750,000 $ 758,220 ------------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 7.4% ------------------------------------------------------------------------------------------------------------------- Benton, AR, Utilities Rev., AMBAC, 5%, 2030 $ 470,000 $ 489,157 North Little Rock, AR, Electric Rev., "A", MBIA, 6.5%, 2010 1,650,000 1,718,920 North Little Rock, AR, Electric Rev., "A", MBIA, 6.5%, 2015 6,000,000 6,849,660 Puerto Rico Electric Power Authority Rev., "NN", 5.125%, 2024 1,000,000 1,054,190 ------------------------------------------------------------------------------------------------------------------- $ 10,111,927 ------------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 10.0% ------------------------------------------------------------------------------------------------------------------- Arkansas Development Finance Authority, Economic Development Rev., "I", AMBAC, 5.65%, 2014 $ 70,000 $ 70,807 Fort Smith, AR, Water & Sewer Rev., AMBAC, 5.65%, 2009 (c) 1,000,000 1,048,440 Fort Smith, AR, Water & Sewer Rev., "C", FSA, 5.25%, 2020 1,315,000 1,402,000 Fort Smith, AR, Water & Sewer Rev., Refunding & Construction, "A", FSA, 5%, 2019 2,125,000 2,220,455 Fort Smith, AR, Water & Sewer Rev., Refunding & Construction, "A", FSA, 5%, 2021 2,750,000 2,860,880 Little Rock, AR, Sewer Rev., Refunding & Construction, 5%, 2022 1,750,000 1,815,258 Paragould, AR, Water Sewer & Electric Rev., AMBAC, 5.6%, 2010 (c) 765,000 816,423 Rogers, AR, Sewer Rev., Improvement, AMBAC, 5%, 2037 1,000,000 1,053,910 South Sebastian County, AR, Water Refunding Rev., MBIA, 5%, 2038 1,000,000 1,012,400 Virgin Islands Water & Power Authority Rev., ASST GTY, 5.3%, 2018 1,250,000 1,280,400 ------------------------------------------------------------------------------------------------------------------- $ 13,580,973 ------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $132,899,296) $139,618,446 ------------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 1.4% ------------------------------------------------------------------------------------------------------------------- Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), 3.77%, due 4/02/07 $ 100,000 $ 100,000 Jefferson County, AL, Sewer Rev., Capital Improvement Warrants Rev., "A", 3.7%, due 4/05/07 600,000 600,000 Jefferson County, AL, Sewer Rev., Warrants Rev., "B-4", 3.7%, due 4/05/07 400,000 400,000 New York, NY, "A-4", 3.76%, due 4/02/07 300,000 300,000 State of Oregon, "73G", 3.68%, due 4/04/07 400,000 400,000 State of Oregon, "73H", 3.68%, due 4/04/07 100,000 100,000 ------------------------------------------------------------------------------------------------------------------- TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 1,900,000 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $134,799,296) (k) $141,518,446 ------------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (3.7)% (5,049,002) ------------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $136,469,444 ------------------------------------------------------------------------------------------------------------------- SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------- INTEREST RATE SWAPS 12/01/07 USD 3,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $18,205 8/08/17 USD 1,000,000 Goldman Sachs 7-Day BMA 3.736% (fixed rate) (3,693) 5/30/19 USD 2,000,000 Citibank 7-Day BMA 3.695% (fixed rate) 7,899 7/23/22 USD 1,000,000 Merrill Lynch 7-Day BMA 3.889% (fixed rate) (4,796) ------------------------------------------------------------------------------------------------------------------- $17,615 ------------------------------------------------------------------------------------------------------------------- At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) CALIFORNIA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes. Municipal Bonds - 98.4% ------------------------------------------------------------------------------------------------------------------- ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------- Airport & Port Revenue - 1.9% ------------------------------------------------------------------------------------------------------------------- Long Beach, CA, Harbor Rev., "A", FGIC, 5.25%, 2018 $ 3,500,000 $ 3,672,375 Palm Springs, CA, Palm Springs International Airport, 5.55%, 2028 530,000 543,669 Port Oakland, CA, "K", FGIC, 5.75%, 2020 4,000,000 4,209,960 ------------------------------------------------------------------------------------------------------------------- $ 8,426,004 ------------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 11.1% ------------------------------------------------------------------------------------------------------------------- Commonwealth of Puerto Rico, XLCA, 5.5%, 2017 (u) $ 3,000,000 $ 3,399,210 Commonwealth of Puerto Rico, Public Improvement, FGIC, 5.5%, 2016 (u) 6,600,000 7,456,152 Los Angeles, CA, FGIC, 5.25%, 2014 (u) 10,810,000 11,916,187 State of California, 10%, 2007 1,055,000 1,086,344 State of California, 5.125%, 2025 2,000,000 2,107,460 State of California, 4.5%, 2027 5,000,000 4,947,150 State of California, 5.25%, 2029 2,000,000 2,112,680 State of California, AMBAC, 7.2%, 2008 1,600,000 1,658,480 State of California, AMBAC, 6.3%, 2010 3,000,000 3,259,530 State of California, AMBAC, 7%, 2010 2,000,000 2,222,640 State of California, XLCA, 5.75%, 2009 (c)(u) 440,000 468,811 State of California, XLCA, 5.75%, 2009 (c)(u) 200,000 213,096 State of California, XLCA, 5.75%, 2009 (c)(u) 1,860,000 1,981,793 State of California, Various Purposes, 4.75%, 2034 3,130,000 3,191,379 State of California, Various Purposes, "91", 5%, 2028 3,000,000 3,156,210 ------------------------------------------------------------------------------------------------------------------- $ 49,177,122 ------------------------------------------------------------------------------------------------------------------- General Obligations - Improvement - 0.3% ------------------------------------------------------------------------------------------------------------------- Golden Valley, CA, Unified School District, Election of 1999, "D", FSA, 0%, 2031 $ 1,090,000 $ 336,766 Golden Valley, CA, Unified School District, Election of 1999, "D", FSA, 0%, 2032 1,225,000 359,170 Golden Valley, CA, Unified School District, Election of 1999, "D", FSA, 0%, 2033 1,370,000 380,463 Golden Valley, CA, Unified School District, Election of 1999, "D", FSA, 0%, 2034 1,520,000 400,231 ------------------------------------------------------------------------------------------------------------------- $ 1,476,630 ------------------------------------------------------------------------------------------------------------------- General Obligations - Schools - 16.9% ------------------------------------------------------------------------------------------------------------------- Antelope Valley, CA (Union High School), "A", MBIA, 5%, 2027 $ 1,500,000 $ 1,577,025 Butte Glenn Community College District, "A", MBIA, 5%, 2026 1,885,000 1,982,869 Campbell, CA, Union High School District, Election of 2002, "B", FGIC, 5.5%, 2012 (c) 2,270,000 2,520,585 Campbell, CA, Union High School District, FSA, 5%, 2021 1,280,000 1,335,795 Capistrano, CA, Union High School District, "A", FGIC, 5.875%, 2020 1,185,000 1,274,977 Chaffey, CA, Union High School District, "C", FSA, 5%, 2027 1,000,000 1,049,580 Chino Valley, CA, Unified School District, Election of 2002, "D", FGIC, 0%, 2025 3,945,000 1,663,015 Chino Valley, CA, Unified School District, Election of 2002, "D", FGIC, 0%, 2026 4,415,000 1,768,472 Coast Community College District, CA, Capital Appreciation, Election of 2002, "C", FSA, 0%, 2033 5,000,000 1,279,000 Colton, CA, Joint Union School District, "A", FGIC, 5.375%, 2026 1,200,000 1,306,260 Colton, CA, Joint Union School District, Election of 2001, "C", FGIC, 0%, 2032 1,000,000 283,640 Colton, CA, Joint Union School District, Election of 2001, "C", FGIC, 0%, 2033 3,000,000 805,290 Coronado, CA, Union School District, "A", 5.7%, 2020 1,285,000 1,379,769 Escondido, CA, Union School District, "A", FSA, 5%, 2026 1,000,000 1,044,550 Folsom Cordova, CA, Union School District, Facilities Improvement, "A", MBIA, 0%, 2025 1,505,000 665,722 Gilroy Cauni School District, Election of 2002, "N", FGIC, 5%, 2027 1,190,000 1,263,018 Glendale, CA, Union School District, "B", FSA, 5.5%, 2018 4,275,000 4,429,670 Hillsborough, CA, School District, Capital Appreciation, Election of 2002, "B", 0%, 2023 2,285,000 1,115,171 Hillsborough, CA, School District, Capital Appreciation, Election of 2002, "B", 0%, 2024 2,640,000 1,229,131 Inglewood, CA, Union School District, "A", FGIC, 6%, 2009 (c) 1,695,000 1,810,819 Little Lake, CA, City School District, "A", FSA, 6.125%, 2010 (c) 1,035,000 1,126,090 Live Oak, CA, School District, Santa Cruz County, Election of 2004, "A", MBIA, 5%, 2033 1,410,000 1,491,526 Los Angeles, CA, Union School District, FSA, 5.25%, 2013 (c)(u) 10,000,000 10,914,500 Los Angeles, CA, Union School District, Election of 1997, "E", MBIA, 5.125%, 2012 (c) 5,000,000 5,373,350 Moreland, CA, School District, Election of 2002, "B", FGIC, 0%, 2028 1,440,000 558,634 Moreno Valley, CA, Union School District, Election of 2004, "A", FSA, 5%, 2025 1,075,000 1,135,619 Moreno Valley, CA, Union School District, Election of 2004, "A", FSA, 5%, 2026 1,715,000 1,810,611 Morgan Hill, CA, Union School District, FGIC, 5.5%, 2010 (c) 2,545,000 2,724,346 Mount Diablo, CA, Unified School District, Election of 2002, "N", MBIA, 5%, 2028 2,000,000 2,118,240 Natomas Union School District, Election of 2002 "B", FGIC, 5%, 2028 1,430,000 1,508,650 Oceanside, CA, Union School District, Election of 2000, "C", MBIA, 5.25%, 2032 1,940,000 2,050,580 Palos Verdes Peninsula, CA, Capital Appreciation, "N", FSA, 0%, 2029 4,405,000 1,625,049 Perris, CA, Union School District, "A", FGIC, 0%, 2027 3,100,000 1,255,066 San Gabriel, CA, Union School District, "A", FSA, 5%, 2024 2,000,000 2,092,020 San Ysidro, CA, School District, AMBAC, 6.125%, 2021 960,000 1,103,030 Santa Clara, CA, Union School District, FGIC, 5.5%, 2019 2,210,000 2,356,258 Santa Maria, CA, Joint Union High School District, "A", FSA, 5.375%, 2015 (c) 1,120,000 1,272,410 Santa Maria, CA, Joint Union High School District, "A", FSA, 5.375%, 2015 (c) 1,210,000 1,374,657 Sausalito Marin City, CA, School District, Capital Appreciation, Election of 2004, "B", MBIA, 0%, 2039 1,315,000 257,306 Sausalito Marin City, CA, School District, Capital Appreciation, Election of 2004, "B", MBIA, 0%, 2040 1,400,000 259,672 Tehachapi, CA, Union School District, "A", FGIC, 5.625%, 2009 (c) 1,100,000 1,161,842 Walnut Valley, CA, Union School District, Election of 2000, "E", FSA, 0%, 2028 1,535,000 595,488 Washington, CA, Union School District, Election of 1999, "A", FGIC, 5.625%, 2021 1,000,000 1,085,600 ------------------------------------------------------------------------------------------------------------------- $ 75,034,902 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 9.6% ------------------------------------------------------------------------------------------------------------------- Abag Finance Authority Rev. (San Diego Hospital), "C", 5.375%, 2020 $ 2,000,000 $ 2,094,380 California Health Facilities Financing Authority Rev., Catholic Healthcare West, "G", 5.25%, 2023 2,000,000 2,114,480 California Health Facilities Financing Authority Rev., Cedars Sinai Medical Center, 5%, 2027 1,000,000 1,041,130 California Health Facilities Financing Authority Rev., Health Facilities (Adventist Health Systems), "A", 5%, 2033 1,750,000 1,791,230 California Statewide Communities Development Authority Rev. (Henry Mayo Newhall Memorial Hospital), "A", CHFC, 5%, 2018 2,000,000 2,070,520 California Statewide Communities Development Authority Rev. (Kaiser Permanente), "A", 5.5%, 2032 2,000,000 2,114,740 California Statewide Communities Development Authority Rev. (Los Angeles Children's Hospital), 5.125%, 2019 4,000,000 4,113,920 California Statewide Communities Development Authority Rev., ETM, CHFC, 0%, 2007 (c) 3,645,000 3,601,442 California Statewide Communities Development Authority Rev., ETM, CHFC, 0%, 2008 (c) 6,345,000 6,041,011 California Statewide Communities Development Authority Rev., Health Facilities (Memorial Health Services), "A", 6%, 2023 1,500,000 1,650,885 California Statewide Communities Development, "B", 5.625%, 2042 4,000,000 4,255,200 California Valley Health Systems, COP, 6.875%, 2023 470,000 470,757 Central California Joint Powers Health Financing (Community Hospitals of Central California), 5.625%, 2021 1,000,000 1,038,140 Kaweah Delta Health Care District Rev., 6%, 2012 (c) 2,000,000 2,266,800 Rancho Mirage, CA, Joint Powers (Eisenhower Medical Center), 5.625%, 2029 3,000,000 3,260,430 Tahoe Forest California Hospital District, "A", 5.85%, 2009 (c) 795,000 848,352 Tahoe Forest California Hospital District, "A", 5.85%, 2022 205,000 215,072 Turlock, CA, Health Facilities Rev. (Emanuel Medical Center), 5%, 2024 500,000 509,730 Washington Township, CA, Health Care Rev., 5%, 2018 1,000,000 1,024,480 West Contra Costa California Healthcare District, AMBAC, 5.5%, 2029 2,000,000 2,129,920 ------------------------------------------------------------------------------------------------------------------- $ 42,652,619 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Long Term Care - 0.8% ------------------------------------------------------------------------------------------------------------------- California Health Facilities Financing Authority Rev. (Paradise Valley Estates), 5.125%, 2022 $ 1,000,000 $ 1,045,140 California Statewide Communities Development Authority Rev. (Senior Living Presbyterian Homes), 4.875%, 2036 1,000,000 1,014,910 La Verne, CA, COP (Brethren Hillcrest Homes), "B", 6.625%, 2025 1,000,000 1,079,100 Millbrae, CA, Residential Facilities Rev. (Magnolia of Millbrae), "A", 7.375%, 2027 455,000 470,893 ------------------------------------------------------------------------------------------------------------------- $ 3,610,043 ------------------------------------------------------------------------------------------------------------------- Human Services - 0.4% ------------------------------------------------------------------------------------------------------------------- California Statewide Communities Development Authority (Prides Industries), 7.125%, 2009 (c) $ 1,565,000 $ 1,691,702 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Environmental Services - 1.2% ------------------------------------------------------------------------------------------------------------------- California Pollution Control Financing Authority, Solid Waste Disposal Rev. (Browning Ferris, Inc.), "A", 5.8%, 2016 $ 2,000,000 $ 2,005,760 California Pollution Control Financing Authority, Solid Waste Disposal Rev. (Waste Management, Inc.), "A", 5.125%, 2031 2,250,000 2,342,633 California Pollution Control Financing Authority, Solid Waste Disposal Rev. (Waste Management, Inc.), "A-2", 5.4%, 2025 1,000,000 1,056,860 ------------------------------------------------------------------------------------------------------------------- $ 5,405,253 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 0.7% ------------------------------------------------------------------------------------------------------------------- Virgin Islands Public Finance Authority, 4.7%, 2022 $ 2,000,000 $ 2,002,080 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 960,000 1,055,779 ------------------------------------------------------------------------------------------------------------------- $ 3,057,859 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Other - 0.8% ------------------------------------------------------------------------------------------------------------------- San Diego County, CA, COP (Burnham Institute for Medical Research), 5%, 2034 $ 1,000,000 $ 1,016,400 San Diego County, CA, COP (Burnham Institute), 6.25%, 2009 (c) 2,300,000 2,464,841 ------------------------------------------------------------------------------------------------------------------- $ 3,481,241 ------------------------------------------------------------------------------------------------------------------- Multi-Family Housing Revenue - 2.1% ------------------------------------------------------------------------------------------------------------------- California Statewide Communities Development Authority Rev. (Irvine Apartments), 5.25%, 2025 $ 6,000,000 $ 6,166,860 San Bernardino County, CA (Equity Residential/Redlands), "A", 5.2%, 2029 3,000,000 3,054,570 ------------------------------------------------------------------------------------------------------------------- $ 9,221,430 ------------------------------------------------------------------------------------------------------------------- Parking - 0.2% ------------------------------------------------------------------------------------------------------------------- San Francisco, CA, Union Square, MBIA, 6%, 2020 $ 1,000,000 $ 1,096,210 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - Local - 2.2% ------------------------------------------------------------------------------------------------------------------- California Housing Finance Agency Rev., "A", 4.95%, 2036 $ 1,000,000 $ 1,015,760 California Rural Home Mortgage Finance Authority Rev., GNMA, 7.3%, 2031 20,000 20,054 California Rural Home Mortgage Finance Authority Rev., "A", GNMA, 5.75%, 2044 2,000,000 2,149,580 California Rural Home Mortgage Finance Authority Rev., GNMA, 5.4%, 2036 2,500,000 2,686,650 California Rural Home Mortgage Finance Authority Rev., Mortgage Backed Securities Program, "B4", GNMA, 6.35%, 2029 30,000 30,008 Pomona, CA, Single Family Mortgage Rev., ETM, GNMA, 7.375%, 2010 (c) 1,020,000 1,076,916 Pomona, CA, Single Family Mortgage Rev., ETM, GNMA, 7.5%, 2023 (c) 2,000,000 2,617,540 ------------------------------------------------------------------------------------------------------------------- $ 9,596,508 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - Other - 0.5% ------------------------------------------------------------------------------------------------------------------- California Department Veterans Affairs Rev., "A", 4.6%, 2028 $ 2,320,000 $ 2,329,164 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 1.7% ------------------------------------------------------------------------------------------------------------------- California Housing Finance Agency Rev., Home Mortgage, FSA, 0%, 2019 $ 1,820,000 $ 861,042 California Housing Finance Agency Rev., Home Mortgage, MBIA, 0%, 2028 3,865,000 1,298,331 California Housing Finance Agency Rev., Home Mortgage, "I", 4.75%, 2031 3,000,000 3,021,330 California Housing Finance Agency Rev., Home Mortgage, "N", FGIC, 5.05%, 2026 2,480,000 2,567,321 ------------------------------------------------------------------------------------------------------------------- $ 7,748,024 ------------------------------------------------------------------------------------------------------------------- Solid Waste Revenue - 0.7% ------------------------------------------------------------------------------------------------------------------- California Pollution Control Financing Authority, Solid Waste Disposal Rev. (West County Resource Recovery), "A", 5.125%, 2014 $ 1,000,000 $ 1,013,130 South Bayside Waste Management Authority, California Solid Waste System Rev., AMBAC, 5.75%, 2020 2,100,000 2,222,514 ------------------------------------------------------------------------------------------------------------------- $ 3,235,644 ------------------------------------------------------------------------------------------------------------------- State & Agency - Other - 1.1% ------------------------------------------------------------------------------------------------------------------- Pasadena CA, COP, Old Pasadena Parking Facilities Project, 6.25%, 2018 $ 2,820,000 $ 3,127,521 Sacramento County, CA, COP, Capital Projects, AMBAC, 5.75%, 2018 1,500,000 1,596,045 ------------------------------------------------------------------------------------------------------------------- $ 4,723,566 ------------------------------------------------------------------------------------------------------------------- State & Local Agencies - 13.7% ------------------------------------------------------------------------------------------------------------------- Banning, CA, COP, Water Systems Improvement Project, ETM, AMBAC, 8%, 2019 (c) $ 880,000 $ 1,091,024 Calabasas, CA, Certificate Participants (City Hall & Civic Center Project), AMBAC, 4.5%, 2041 3,000,000 2,953,200 California Department of Water Resources Power Supply Rev., "C", 5.25%, 2028 2,500,000 2,637,575 California Public Works Board Lease Rev., Department of Corrections State Prison, "A", 7.4%, 2010 5,000,000 5,581,950 California Public Works Board, Department of Justice, "D", 5.25%, 2020 1,565,000 1,643,626 Fortuna & Susanville, CA, COP, "B", 7.375%, 2017 625,000 634,150 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., "A", FSA, 0% to 2010, 4.55% to 2022 3,000,000 2,617,860 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Enhanced, "A", 5%, 2045 5,500,000 5,671,270 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Enhanced, "B", 5.5%, 2013 (c) 7,000,000 7,687,890 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Enhanced, "B", 5.625%, 2013 (c) $ 5,000,000 $ 5,525,450 Los Angeles, CA, COP, Antelope Valley Courthouse, "A", AMBAC, 5.25%, 2010 (c) 3,000,000 3,170,760 Los Angeles, CA, COP, Real Property Program, AMBAC, 5.3%, 2027 3,000,000 3,193,020 Pomona, CA, Public Financing Authority Rev., "A", AMBAC, 5%, 2042 3,735,000 3,949,949 Pomona, CA, Public Financing Authority Rev., "P", 6.25%, 2010 4,020,000 4,238,326 Sacramento, CA, City Financing Authority Rev., Capital Improvement, 5.5%, 2010 (c) 1,635,000 1,745,526 Sacramento, CA, City Financing Authority Rev., City Hall & Redevelopment Projects, "A", FSA, 5%, 2012 (c) 2,000,000 2,147,380 Salinas, CA, COP, Capital Improvement Projects, "A", 5.7%, 2007 (c) 2,200,000 2,266,968 San Francisco, CA, City & County, COP (San Bruno Jail No. 3), AMBAC, 5.25%, 2033 3,930,000 4,088,497 ------------------------------------------------------------------------------------------------------------------- $ 60,844,421 ------------------------------------------------------------------------------------------------------------------- Tax - Other - 2.0% ------------------------------------------------------------------------------------------------------------------- Irvine, CA, School District Special Tax Rev., Community Facilities District No. 86-1, AMBAC, 5.8%, 2020 $ 3,500,000 $ 3,613,330 Santa Cruz County, CA, Redevelopment Agency Tax Allocation (Oak/Soquel Community), 5.6%, 2017 1,455,000 1,494,009 Virgin Islands Public Finance Authority Rev., "A", 5.5%, 2022 2,000,000 2,058,940 Virgin Islands Public Finance Authority Rev., "E", 5.875%, 2018 1,600,000 1,661,872 ------------------------------------------------------------------------------------------------------------------- $ 8,828,151 ------------------------------------------------------------------------------------------------------------------- Tax Assessment - 7.9% ------------------------------------------------------------------------------------------------------------------- Camarillo, CA, Community Development (Camarillo Corridor Project), AMBAC, 4.5%, 2037 $ 1,755,000 $ 1,746,295 Camarillo, CA, Community Development (Camarillo Corridor Project), AMBAC, 4.5%, 2038 985,000 978,401 Duarte, CA, Redevelopment Agency Tax Allocation, Davis Addition Project Area, 6.7%, 2014 555,000 572,005 Fontana, CA, Redevelopment Agency Tax Allocation, Jurupa Hills Redevelopment Project, "A", 5.5%, 2027 3,350,000 3,436,263 Huntington Park, CA, Public Financing Rev. Wastewater Systems Project, "A", 6.2%, 2025 2,000,000 2,050,440 La Mirada, CA, Redevelopment Agency, Special Tax Rev., Community Facilities District No. 89-1, 5.7%, 2020 1,500,000 1,533,735 Manteca, CA, Redevelopment Agency, Tax Allocation (Sub Amended Merged Project), XLCA, 4.5%, 2042 2,500,000 2,439,375 Modesto, CA, Irrigation District, COP, Refunding & Capital Improvements, "B", 5.3%, 2022 1,655,000 1,655,794 Modesto, CA, Public Financing Authority (John Thurman Field Renovation), 6.125%, 2016 1,170,000 1,195,553 Norco, CA, Special Tax Community Facilities (District No. 2001), "N", AMBAC, 4.75%, 2026 1,700,000 1,758,616 Orange County, CA, Community Facilities District, Special Tax (Rancho Santa Margarita), "A", 5.55%, 2017 1,000,000 1,017,400 Pittsburg, CA, Redevelopment Agency, Tax Allocation (Los Medanos Community), "C", AMBAC, 4.5%, 2034 2,550,000 2,522,154 Poway, CA, Community Facilities District, Special Tax (Parkway Business Center), 6.5%, 2010 715,000 750,335 Poway, CA, Community Facilities District, Special Tax (Parkway Business Center), 6.75%, 2015 775,000 816,176 Riverside County, CA, Public Financing Authority, Jurupa Valley, Tax Allocation, MBIA, 4.75%, 2035 3,000,000 3,085,440 Riverside County, CA, Public Financing Authority, Tax Allocation Rev., XLCA, 5%, 2037 3,000,000 3,127,410 Riverside County, CA, Redevelopment Agency, Tax Allocation, "A", XLCA, 5%, 2037 2,000,000 2,084,940 San Diego, CA, Redevelopment Agency, Tax Allocation (Centre City), "B", AMBAC, 5.3%, 2020 1,250,000 1,322,013 Temecula, CA, Redevelopment Agency, Tax Allocation, "A", MBIA, 4.5%, 2038 2,000,000 1,970,140 Temecula, CA, Redevelopment Agency, Tax Allocation, "A", MBIA, 4.5%, 2036 1,000,000 987,100 ------------------------------------------------------------------------------------------------------------------- $ 35,049,585 ------------------------------------------------------------------------------------------------------------------- Tobacco - 4.6% ------------------------------------------------------------------------------------------------------------------- California County, CA, Tobacco Securitization Agency, Capital Appreciation Asset Backed (Gold Country), 0%, 2033 $ 4,000,000 $ 901,920 California County, CA, Tobacco Securitization Corp., Tobacco Settlement, L.A. County, "A", 0% to 2010, 5.65% to 2041 2,500,000 2,166,650 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, "A", 0%, 2050 2,000,000 136,920 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, "B", 0%, 2055 2,000,000 73,320 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement, "A-1", 6.75%, 2013 (c) 2,645,000 3,085,472 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement, "A-1", 6.25%, 2033 2,935,000 3,240,680 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement, "A-1", 5.125%, 2047 10,000,000 9,911,000 Silicon Valley Tobacco Securitization Authority, CA, Tobacco Settlement Rev. (Turbo-Santa Clara), "A", 0%, 2036 5,000,000 994,400 ------------------------------------------------------------------------------------------------------------------- $ 20,510,362 ------------------------------------------------------------------------------------------------------------------- Toll Roads - 0.6% ------------------------------------------------------------------------------------------------------------------- Foothill/Eastern Corridor Agency, California Toll Road Rev., Capital Appreciation, "A", 7.1%, 2010 (c) $ 2,500,000 $ 2,777,225 ------------------------------------------------------------------------------------------------------------------- Universities - Colleges - 6.1% ------------------------------------------------------------------------------------------------------------------- Cabrillo, CA, Community College District Capital Appreciation, "A", MBIA, 0%, 2028 $ 1,000,000 $ 387,940 California Educational Facilities Authority Rev. (Dominican University), 5%, 2036 1,150,000 1,182,763 California Educational Facilities Authority Rev. (Fresno Pacific University), "A", 6.75%, 2019 2,000,000 2,158,160 California Educational Facilities Authority Rev. (L.A. College of Chiropractic), 5.6%, 2017 2,100,000 2,114,385 California Educational Facilities Authority Rev. (Lutheran University), "C", 5%, 2029 2,500,000 2,580,350 California Educational Facilities Authority Rev. (Pomona College), "B", 5.875%, 2009 (c) 2,000,000 2,119,940 California Educational Facilities Authority Rev. (Santa Clara University), "A", MBIA, 5%, 2027 1,340,000 1,394,015 California Educational Facilities Authority Rev. (University Financing Project), 5%, 2017 685,000 712,414 California Educational Facilities Authority Rev. (University Financing Project), 5%, 2026 1,315,000 1,359,145 California Educational Facilities Authority Rev. (University of La Verne), "A", 5%, 2029 1,500,000 1,546,515 California Educational Facilities Authority Rev., Pooled College & University Projects, "B", 6.625%, 2020 1,000,000 1,091,550 California Statewide Communities, Notre Dame De Namur University, 6.625%, 2033 1,000,000 1,093,010 Chabot Las Positas, CA, Community College, Capital Appreciation, "C", AMBAC, 0%, 2036 5,000,000 1,193,250 Chabot Las Positas, CA, Community College, Election of 2004, "B", AMBAC, 0%, 2024 5,000,000 2,221,550 Foothill-De Anza, CA, Community College District, Election of 1999, "B", FGIC, 0%, 2025 1,500,000 674,430 Long Beach, CA, Industrial Development Rev. (CSU Foundation), "A", 5.25%, 2023 1,450,000 1,472,301 San Mateo County, CA (Community College District, 2005 Election), "A", MBIA, 0%, 2026 3,000,000 1,279,290 Santa Monica, CA (Community College District, 2002 Election), "C", MBIA, 0%, 2027 2,000,000 745,760 University of California, COP, San Diego Campus Projects, "A", 5.25%, 2010 (c) 1,840,000 1,939,121 ------------------------------------------------------------------------------------------------------------------- $ 27,265,889 ------------------------------------------------------------------------------------------------------------------- Universities - Secondary Schools - 0.9% ------------------------------------------------------------------------------------------------------------------- California Statewide Communities Development Authority Rev., Aspire Public Schools (Oakland Project), "A", 7.25%, 2031 $ 960,000 $ 985,565 California Statewide Communities, Development Authority Rev. (Escondido Charter High School), 7.5%, 2011 (c) 1,000,000 1,171,980 Los Angeles, CA, COP, 5.7%, 2018 1,900,000 1,966,405 ------------------------------------------------------------------------------------------------------------------- $ 4,123,950 ------------------------------------------------------------------------------------------------------------------- Utilities - Investor Owned - 1.4% ------------------------------------------------------------------------------------------------------------------- California Pollution Control Financing Authority, Pollution Control Rev. (Pacific Gas & Electric Co.), MBIA, 5.35%, 2016 $ 3,500,000 $ 3,731,140 Chula Vista, CA, Industrial Development Rev. (San Diego Gas), "B", 5%, 2027 2,500,000 2,604,750 ------------------------------------------------------------------------------------------------------------------- $ 6,335,890 ------------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 1.9% ------------------------------------------------------------------------------------------------------------------- Glendale, CA, Electric Works Rev., MBIA, 5.75%, 2010 (c) $ 1,420,000 $ 1,517,227 Glendale, CA, Electric Works Rev., MBIA, 5.75%, 2010 (c) 1,160,000 1,239,425 Hollister, CA, Joint Powers Financing Authority Rev. (Refinancing & Improvement Project), FSA, 4.5%, 2037 2,500,000 2,467,350 Northern California Power Agency Public Power Rev., 5.85%, 2010 880,000 927,608 Virgin Islands Water & Power Authority Rev., 5.5%, 2017 800,000 816,320 Virgin Islands Water & Power Authority Rev., 5.3%, 2018 250,000 251,013 Virgin Islands Water & Power Authority Rev., "A", 5.125%, 2013 1,000,000 1,006,000 ------------------------------------------------------------------------------------------------------------------- $ 8,224,943 ------------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 7.1% ------------------------------------------------------------------------------------------------------------------- California Communities Development Authority, Rev. "D-2", FSA, 4.5%, 2032 $ 2,880,000 $ 2,871,331 California Department of Water Resources, Central Valley Project Rev., "X", FGIC, 5%, 2029 2,000,000 2,085,860 California Department of Water Resources, Water Systems Rev., 7%, 2012 1,090,000 1,271,441 California Department of Water Resources, Water Systems Rev., ETM, 7%, 2012 (c) 405,000 474,445 Castaic Lake Water Agency, California Rev., Water Systems Improvement Project, AMBAC, 5.125%, 2009 (c) 1,725,000 1,802,901 Culver City, CA, Wastewater Facilities Rev., "A", FGIC, 5.6%, 2019 1,000,000 1,064,300 El Monte, CA, Water Authority Rev., Water Systems Project, AMBAC, 6%, 2010 (c) 1,065,000 1,168,007 Livermore Amador Valley Water Management Rev., "A", AMBAC, 5%, 2031 4,875,000 5,054,839 Modesto, CA, Wastewater Rev. "A", FSA, 4.25%, 2031 1,575,000 1,514,504 Southern California Metropolitan Water District Rev., 5.75%, 2018 (u) 10,000,000 11,421,400 West Sacramento, CA, Financing Authority Rev., Water Systems Improvement Project, FGIC, 5%, 2032 2,750,000 2,874,988 ------------------------------------------------------------------------------------------------------------------- $ 31,604,016 ------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $416,163,713) $437,528,353 ------------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 2.8% ------------------------------------------------------------------------------------------------------------------- Bay Area Toll Authority, California Toll Bridge Rev., "A", 3.46%, due 4/05/07 $ 2,800,000 $ 2,800,000 California Department of Water Resources, Power Supply Rev., "C-2", 3.53%, due 4/05/07 2,200,000 2,200,000 California Department of Water Resources, Power Supply Rev., "C-3", 3.53%, due 4/05/07 3,600,000 3,600,000 California Health Facilities Financing Authority Rev. (Adventist Health System), "A", 3.68%, due 4/02/07 2,680,000 2,680,000 California Health Facilities Financing Authority Rev. (Adventist Health System), "B", 3.68%, due 4/02/07 700,000 700,000 California Health Facilities Financing Authority Rev. (Adventist Health System), "C", 3.68%, due 4/02/07 200,000 200,000 Orange County, CA, 3.63%, due 4/02/07 300,000 300,000 ------------------------------------------------------------------------------------------------------------------- TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 12,480,000 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $428,643,713) (k) $450,008,353 ------------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (1.2)% (5,527,973) ------------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $444,480,380 ------------------------------------------------------------------------------------------------------------------- SWAP AGREEMENTS AT 3/31/07
UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 9,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $ 54,615 6/06/17 USD 2,500,000 Merrill Lynch 7-Day BMA 3.579% (fixed rate) 17,534 8/08/17 USD 2,500,000 Goldman Sachs 7-Day BMA 3.736% (fixed rate) (9,233) 5/30/19 USD 4,000,000 Citibank 7-Day BMA 3.695% (fixed rate) 15,798 8/22/19 USD 3,000,000 Goldman Sachs 7-Day BMA 3.726% (fixed rate) 10,181 4/27/22 USD 3,000,000 Citibank 7-Day BMA 3.878% (fixed rate) (15,176) 7/23/22 USD 3,000,000 Merrill Lynch 7-Day BMA 3.889% (fixed rate) (14,387) ------------------------------------------------------------------------------------------------------------------ $ 59,332 ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) FLORIDA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes. Municipal Bonds - 106.1% ------------------------------------------------------------------------------------------------------------------- ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------- Airport & Port Revenue - 4.2% ------------------------------------------------------------------------------------------------------------------- Greater Orlando Aviation Authority Rev., "A", FGIC, 5.25%, 2018 $ 1,000,000 $ 1,037,940 Lee County, FL, Airport Rev., "A", FSA, 5.875%, 2018 1,000,000 1,069,240 Miami-Dade County, FL, Aviation Rev., "C", MBIA, 5.25%, 2018 500,000 513,380 Pensacola, FL, Airport Rev., "B", MBIA, 5.625%, 2014 500,000 513,620 ------------------------------------------------------------------------------------------------------------------- $ 3,134,180 ------------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 13.2% ------------------------------------------------------------------------------------------------------------------- Commonwealth of Puerto Rico, Public Improvement, MBIA, 5.75%, 2010 (c)(u) $ 2,000,000 $ 2,127,820 Miami-Dade County, FL, Educational Facilities Authority Rev. (University of Miami), "A", AMBAC, 5.5%, 2018 1,400,000 1,481,242 State of Florida, Department of Transportation, 5%, 2017 (u) 6,000,000 6,219,960 ------------------------------------------------------------------------------------------------------------------- $ 9,829,022 ------------------------------------------------------------------------------------------------------------------- General Obligations - Schools - 6.3% ------------------------------------------------------------------------------------------------------------------- Florida Board of Education, Capital Outlay, 9.125%, 2014 $ 2,600,000 $ 3,086,356 Florida Board of Education, Capital Outlay, ETM, 9.125%, 2014 (c) 400,000 523,600 Florida Board of Education, Public Education, "J", 5%, 2032 1,000,000 1,048,330 ------------------------------------------------------------------------------------------------------------------- $ 4,658,286 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 18.8% ------------------------------------------------------------------------------------------------------------------- Brevard County, FL, Health Facilities Rev. (Health First, Inc.), 5%, 2034 $ 500,000 $ 516,080 Citrus County, FL, Hospital Development Authority Rev. (Citrus Memorial Hospital), 6.25%, 2023 465,000 502,786 Coral Gables, FL, Health Facilities Authority, Hospital Rev. (Baptist Health South Florida), FSA, 5%, 2029 535,000 560,461 Denver, CO, Health & Hospital Authority Rev., "A", 6%, 2023 250,000 265,800 Hillsborough County, FL, Industrial Development Authority Rev. (University Community Hospital), MBIA, 6.5%, 2019 1,000,000 1,205,430 Indiana Health Facilities Financing Authority, Hospital Rev. (Munster Medical Research Foundation, Inc.), "A", 6.375%, 2031 500,000 533,005 Jacksonville, FL, Health Facilities Rev. (Ascension Health), "A", 5.25%, 2032 1,000,000 1,054,140 Lakeland, FL, Hospital Systems Rev. (Lakeland Regional Health Systems), 5.5%, 2012 (c) 1,000,000 1,100,190 Leesburg, FL, Hospital Rev. (Leesburg Regional Medical Center), 5.5%, 2032 750,000 780,360 Marion County, FL, Hospital District Rev., Refunding & Improvement, Health Systems (Munroe Regional Health System), 5.5%, 2014 500,000 521,300 Marshall County, AL, Health Care Authority Rev., "A", 6.25%, 2022 500,000 548,625 Martin County, FL, Health Facilities Authority Rev. (Martin Memorial Medical Center), "A", 5.75%, 2022 500,000 534,825 Miami Beach, FL, Health Facilities Authority Rev. (Mount Sinai Medical Center), "A", 6.7%, 2019 250,000 274,740 Miami Dade County, FL (Public Facilities Jackson Health Systems), "A", MBIA, 5%, 2029 1,000,000 1,042,090 New Hampshire Health & Educational Facilities Authority Rev. (Exeter Hospital), 6%, 2024 500,000 546,435 Orange County, FL, Health Facilities Authority Hospital Rev. (Orlando Regional Healthcare), 5.75%, 2012 (c) 1,000,000 1,105,350 Rhode Island Health & Education Building Corp. Rev., Hospital Financing (Lifespan Obligated Group), 6.5%, 2012 (c) 500,000 567,520 South Dakota Health & Education Facilities Authority Rev. (Prairie Lakes Health Care System), 5.625%, 2032 500,000 522,050 Tallahassee, FL, Health Facilities Rev. (Tallahassee Memorial Healthcare), 6.25%, 2020 300,000 316,575 Tallahassee, FL, Health Facilities Rev. (Tallahassee Memorial Regional Medical Center), MBIA, 6.625%, 2013 1,000,000 1,001,330 Wisconsin Health & Educational Facilities Authority Rev. (Marshfield Clinic), "A", 5.375%, 2034 500,000 526,800 ------------------------------------------------------------------------------------------------------------------- $ 14,025,892 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Long Term Care - 0.8% ------------------------------------------------------------------------------------------------------------------- New Jersey Economic Development Authority Rev. (First Mortgage Seashore Gardens), 5.375%, 2036 $ 300,000 $ 303,816 Orange County, FL, Health Facilities Authority Rev. (Orlando Lutheran Towers), 5.7%, 2026 250,000 255,960 ------------------------------------------------------------------------------------------------------------------- $ 559,776 ------------------------------------------------------------------------------------------------------------------- Human Services - 0.4% ------------------------------------------------------------------------------------------------------------------- Orange County, FL, Health Facilities Authority Rev. (GF/Orlando Healthcare Facilities), 8.875%, 2021 $ 300,000 $ 331,608 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Chemicals - 1.0% ------------------------------------------------------------------------------------------------------------------- Brazos River, TX, Brazoria County Environmental Rev. (Dow Chemical, Co.), "A-7", 6.625%, 2033 $ 500,000 $ 557,095 Red River Authority, TX, Pollution Control Rev. (Celanese Project), "B", 6.7%, 2030 200,000 217,716 ------------------------------------------------------------------------------------------------------------------- $ 774,811 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Environmental Services - 1.1% ------------------------------------------------------------------------------------------------------------------- California Pollution Control Financing Authority, Solid Waste Disposal Rev. (Waste Management, Inc.), "B", 5%, 2027 $ 500,000 $ 508,105 Nevada Department of Business & Industry Rev. (Republic Services, Inc.), 5.625%, 2026 300,000 326,583 ------------------------------------------------------------------------------------------------------------------- $ 834,688 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 1.1% ------------------------------------------------------------------------------------------------------------------- Madison County, FL, Rev. (Twin Oaks Project), "A", 6%, 2025 $ 140,000 $ 145,410 Park Creek Metropolitan District, CO (Custodial Receipts), "CR-2", 7.875%, 2032 (n) 160,000 177,267 Tooele County, UT, Hazardous Waste Treatment Rev. (Union Pacific Corp.), 5.7%, 2026 500,000 519,000 ------------------------------------------------------------------------------------------------------------------- $ 841,677 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Paper - 0.7% ------------------------------------------------------------------------------------------------------------------- Delta County, MI, Economic Development Corp., Environmental Improvements Rev. (Mead Westvaco Escanaba), "A", 6.25%, 2012 (c) $ 500,000 $ 556,815 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Entertainment & Tourism - 1.4% ------------------------------------------------------------------------------------------------------------------- Palm Beach County, FL, Industrial Development Rev. (South Florida Fair Project), MBIA, 5.5%, 2020 $ 1,000,000 $ 1,051,000 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Other - 1.0% ------------------------------------------------------------------------------------------------------------------- Summit County, OH, Port Authority Building Rev. (Seville Project), "A", 5.1%, 2025 $ 200,000 $ 205,878 Tamarac, FL, Capital Improvement Rev., MBIA, 5%, 2030 500,000 523,230 ------------------------------------------------------------------------------------------------------------------- $ 729,108 ------------------------------------------------------------------------------------------------------------------- Multi-Family Housing Revenue - 3.3% ------------------------------------------------------------------------------------------------------------------- Bay County, FL, Housing Finance Authority, Multi-Family Rev. (Andrews Place II Apartments), FSA, 5%, 2035 $ 500,000 $ 512,445 Florida Housing Finance Corp., Housing Rev. (Augustine Club Apartments), "D-1", MBIA, 5.5%, 2020 500,000 524,830 Florida Housing Finance Corp., Housing Rev. (Crossing at University Apartments), "Q-1", AMBAC, 5.1%, 2018 1,050,000 1,069,908 Palm Beach County, FL, Housing Finance Authority Rev. (Westlake Apartments Project, Phase II), FSA, 4.3%, 2012 120,000 122,250 Tampa, FL, Housing Finance Authority, Multi-Family Rev. (Meridian River Development Corp.), 4.75%, 2026 200,000 204,036 ------------------------------------------------------------------------------------------------------------------- $ 2,433,469 ------------------------------------------------------------------------------------------------------------------- Sales & Excise Tax Revenue - 3.7% ------------------------------------------------------------------------------------------------------------------- Miami-Dade County, FL, Special Obligations, Capital Appreciation, "A", MBIA, 0%, 2032 $ 2,000,000 $ 562,300 Pasco County, FL, Sales Tax Rev. (Half Central), AMBAC, 5%, 2023 1,000,000 1,053,120 Volusia County, FL, Tourist Development Tax Rev., FSA, 5%, 2034 815,000 855,644 Wyandotte County-Kansas City, KS, Unified Government Rev. (Sales Tax Second Lien Area B), 5%, 2020 250,000 259,020 ------------------------------------------------------------------------------------------------------------------- $ 2,730,084 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - Local - 3.4% ------------------------------------------------------------------------------------------------------------------- Brevard County, FL, Housing Finance Authority Rev., "B", GNMA, 6.5%, 2022 $ 29,000 $ 29,685 Lee County, FL, Housing Finance Authority Rev. (Multi-County Program), "A-1", GNMA, 7.2%, 2033 30,000 30,198 Lee County, FL, Housing Finance Authority Rev. (Multi-County Program), "A-4", GNMA, 7%, 2031 25,000 25,000 Manatee County, FL, Housing Finance Mortgage Rev. (Single Family, Subordinated), Series 3, GNMA, 5.3%, 2028 55,000 56,471 Miami-Dade County, FL, Housing Finance Authority Rev. (Home Ownership Mortgage), "A-1", GNMA, 5.2%, 2031 445,000 451,141 Palm Beach County, FL, Housing Finance Authority Rev., "B", GNMA, 5.5%, 2022 120,000 121,639 Pinellas County, FL, Housing Finance Authority Rev. (Multi-County Program), "A-1", GNMA, 5.5%, 2035 555,000 578,127 Pinellas County, FL, Housing Finance Authority Rev. (Multi-County Program), "B-1", GNMA, 6.2%, 2031 200,000 200,262 Pinellas County, FL, Housing Finance Authority Rev., "A-1", GNMA, 4.85%, 2037 1,000,000 1,013,070 ------------------------------------------------------------------------------------------------------------------- $ 2,505,593 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 1.6% ------------------------------------------------------------------------------------------------------------------- Florida Housing Finance Corp. Rev. (Homeowner Mortgage), "1", GNMA, 4.8%, 2031 $ 1,000,000 $ 1,009,420 Florida Housing Finance Corp. Rev. (Homeowner Mortgage), "4", FSA, 5.85%, 2031 160,000 160,565 ------------------------------------------------------------------------------------------------------------------- $ 1,169,985 ------------------------------------------------------------------------------------------------------------------- Solid Waste Revenue - 0.3% ------------------------------------------------------------------------------------------------------------------- Delaware County, PA, Industrial Development Authority, Resource Recovery Facilities Rev. (American Ref-Fuel Co.), "A", 6.2%, 2019 $ 200,000 $ 206,634 ------------------------------------------------------------------------------------------------------------------- State & Local Agencies - 5.7% ------------------------------------------------------------------------------------------------------------------- Florida Municipal Loan Council Rev., "C", MBIA, 5.25%, 2022 $ 1,000,000 $ 1,074,570 Osceola County, FL, School Board Certificate, "A", AMBAC, 5.25%, 2027 1,950,000 2,080,260 St. Augustine, FL, Capital Improvement Rev., AMBAC, 5%, 2029 1,000,000 1,054,910 ------------------------------------------------------------------------------------------------------------------- $ 4,209,740 ------------------------------------------------------------------------------------------------------------------- Tax - Other - 2.3% ------------------------------------------------------------------------------------------------------------------- Orange County, FL, Tourist Development Tax Rev., Subordinated, AMBAC, 5.25%, 2027 $ 1,500,000 $ 1,588,950 Virgin Islands Public Finance Authority Rev., "A", 5.25%, 2024 130,000 137,072 ------------------------------------------------------------------------------------------------------------------- $ 1,726,022 ------------------------------------------------------------------------------------------------------------------- Tax Assessment - 5.8% ------------------------------------------------------------------------------------------------------------------- Amelia Walk Community Development District, FL, Special Assessment, "B", 5.2%, 2014 $ 200,000 $ 201,376 Arborwood Community Development District, FL, Special Assessment (Master Infrastructure Projects), "B", 5.1%, 2014 200,000 199,610 Ave Maria Stewardship Community, FL, "A", 5.125%, 2038 200,000 200,038 Concord Station Community Development District, FL, Special Assessment, 5%, 2015 165,000 163,931 Concorde Estates Community Development District, FL, Special Assessment, "B", 5%, 2011 205,000 204,629 Creekside Community Development District, FL, Special Assessment, 5.2%, 2038 200,000 200,536 Durbin Crossing Community Development District, FL, Special Assessment, "B-1", 4.875%, 2010 250,000 247,530 Fishawk Community Development District II, FL, Tax Allocation, "B", 5%, 2007 10,000 10,006 Greyhawk Landing Community Development, FL, Special Assessment, "B", 6.25%, 2009 100,000 100,959 Heritage Harbour South Community Development District, FL, Special Assessment, "B", 5.4%, 2008 5,000 5,015 Killarney, FL, Community Development District, Special Assessment, "B", 5.125%, 2009 140,000 140,024 Lakes by the Bay South Community Development District, FL, Rev., "B", 5.3%, 2009 155,000 155,144 Middle Village Community Development District, FL, Special Assessment, "A", 5.8%, 2022 95,000 98,395 Middle Village Community Development District, FL, Special Assessment, "B", 5%, 2009 60,000 59,927 New Port Tampa Bay Community Development District, FL, Special Assessment, "B", 5.3%, 2012 200,000 201,710 North Springs Improvement District, FL, Special Assessment (Parkland Golf Country Club), "B-2", 5.125%, 2015 250,000 250,430 Old Palm Community Development District, FL, Special Assessment (Palm Beach Gardens), "B", 5.375%, 2014 130,000 131,478 Palm Glades Community Development District, FL, Special Assessment, "A", 5.3%, 2036 200,000 202,368 Panther Trace II, Community Development District Rev., FL, Special Assessment, "B", 5%, 2010 180,000 179,354 Parkway Center, Community Development District, FL, Special Assessment, "B", 5.625%, 2014 100,000 102,050 Renaissance Community Development District, FL, Special Assessment, "B", 6.25%, 2008 100,000 100,628 Rolling Hills Community Development District, FL, "B", 5.125%, 2013 200,000 200,178 Sterling Hill Community Development District, FL, Special Assessment, 5.5%, 2010 135,000 136,191 Tuscany Reserve Community Development District, FL, Special Assessment, "B", 5.25%, 2016 245,000 247,732 Villa Portofino West Community Development District, FL, Special Assessment, "A", 5.35%, 2036 200,000 202,362 Watergrass Community Development District, FL, Special Assessment, "B", 4.875%, 2010 185,000 183,946 Wentworth Estates Community Development District, FL, Special Assessment, "B", 5.125%, 2012 200,000 199,924 ------------------------------------------------------------------------------------------------------------------- $ 4,325,471 ------------------------------------------------------------------------------------------------------------------- Tobacco - 2.1% ------------------------------------------------------------------------------------------------------------------- Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement, "A-1", 5.125%, 2047 $ 1,000,000 $ 991,100 Louisiana Tobacco Settlement Authority Rev., "2001B", 5.875%, 2039 250,000 268,040 South Carolina Tobacco Settlement Authority Rev., "B", 6.375%, 2030 250,000 290,030 ------------------------------------------------------------------------------------------------------------------- $ 1,549,170 ------------------------------------------------------------------------------------------------------------------- Transportation - Special Tax - 8.4% ------------------------------------------------------------------------------------------------------------------- Commonwealth of Puerto Rico Highway & Transportation Authority, MBIA, 5.5%, 2020 (u) $ 5,000,000 $ 5,759,300 St. Johns County, FL, Transportation Improvement Rev., AMBAC, 5%, 2027 500,000 525,420 ------------------------------------------------------------------------------------------------------------------- $ 6,284,720 ------------------------------------------------------------------------------------------------------------------- Universities - Dormitories - 3.9% ------------------------------------------------------------------------------------------------------------------- Florida Board Regents, Housing Rev., MBIA, 5.3%, 2020 $ 610,000 $ 642,830 Florida Board Regents, Housing Rev. (University of Central Florida), FGIC, 5.25%, 2020 1,185,000 1,250,685 Florida Finance Authority, Capital Loan Projects Rev., "F", MBIA, 5.125%, 2021 1,000,000 1,038,470 ------------------------------------------------------------------------------------------------------------------- $ 2,931,985 ------------------------------------------------------------------------------------------------------------------- Universities - Secondary Schools - 0.3% ------------------------------------------------------------------------------------------------------------------- Deerfield, IL, Educational Facilities Authority Rev. (Chicagoland Jewish High School Project), 6%, 2041 $ 200,000 $ 204,892 ------------------------------------------------------------------------------------------------------------------- Utilities - Investor Owned - 0.3% ------------------------------------------------------------------------------------------------------------------- Port Morrow, OR, Pollution Control Rev. (Portland General Electric), 5.2%, 2033 $ 200,000 $ 204,648 ------------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 1.4% ------------------------------------------------------------------------------------------------------------------- Palm Coast, FL, Utility Systems Rev., MBIA, 5%, 2024 $ 250,000 $ 263,293 St. Lucie West, FL, Utility Rev., MBIA, 5.25%, 2034 720,000 783,605 ------------------------------------------------------------------------------------------------------------------- $ 1,046,898 ------------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 13.6% ------------------------------------------------------------------------------------------------------------------- Florida Community Services Corp., Utility Rev., AMBAC, 5.5%, 2018 $ 1,125,000 $ 1,205,224 Miami Beach, FL, Stormwater Rev., FGIC, 5.25%, 2020 1,000,000 1,054,378 Miami-Dade County, FL, Stormwater Utility Rev., MBIA, 5%, 2028 2,000,000 2,111,840 Pinellas County, FL, Sewer Rev., FSA, 5%, 2032 1,500,000 1,566,690 Polk County, FL, Utility Systems Rev., FGIC, 5%, 2023 1,000,000 1,052,000 Polk County, FL, Utility Systems Rev., "A", FGIC, 5%, 2030 1,000,000 1,051,620 Seminole County, FL, Water & Sewer Rev., Unrefunded Balance, MBIA, 6%, 2019 940,000 1,073,480 Tohopekaliga Water Authority, Florida Utility System Rev., "A", FSA, 5%, 2024 1,000,000 1,053,170 ------------------------------------------------------------------------------------------------------------------- $ 10,168,402 ------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $75,419,568) $ 79,024,576 ------------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 0.8% ------------------------------------------------------------------------------------------------------------------- Pinellas County, FL, Health Facilities Authority Rev. (Pooled Hospital Loan Program), 3.8%, due 4/02/07, at Identified Cost and Value $ 600,000 $ 600,000 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $76,019,568) (k) $ 79,624,576 ------------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (6.9)% (5,128,262) ------------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $ 74,496,314 ------------------------------------------------------------------------------------------------------------------- SWAP AGREEMENTS AT 3/31/07
UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 2,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $12,137 8/08/17 USD 500,000 Goldman Sachs 7-Day BMA 3.736% (fixed rate) (1,847) 5/30/19 USD 1,500,000 Citibank 7-Day BMA 3.695% (fixed rate) 5,924 6/12/19 USD 1,000,000 Merrill Lynch 7-Day BMA 3.660% (fixed rate) 7,536 9/26/22 USD 1,000,000 Goldman Sachs 7-Day BMA 3.807% (fixed rate) 4,948 ------------------------------------------------------------------------------------------------------------------ $28,698 ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) GEORGIA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes. Municipal Bonds - 104.1% ------------------------------------------------------------------------------------------------------------------- ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------- Airport & Port Revenue - 5.1% ------------------------------------------------------------------------------------------------------------------- Atlanta, GA, Airport Passenger Facilities Rev., "J", FSA, 5%, 2029 $ 750,000 $ 787,238 Atlanta, GA, Airport Passenger Facilities Rev., "J", FSA, 5%, 2034 750,000 785,220 Atlanta, GA, Airport Rev., "B", FSA, 5.25%, 2033 1,000,000 1,070,070 Augusta, GA, Airport Rev., "B", 5.35%, 2028 350,000 362,754 ------------------------------------------------------------------------------------------------------------------- $ 3,005,282 ------------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 5.3% ------------------------------------------------------------------------------------------------------------------- Atlanta & Fulton County, GA, Park Improvement, "A", MBIA, 5%, 2030 $ 500,000 $ 528,015 Columbia County, GA (Courthouse Detention Center), 5.625%, 2008 (c) 1,490,000 1,543,536 Macon Bibb County, GA, Urban Development Rev. (Bibb County Public Facilities Project), 5.5%, 2022 1,000,000 1,070,590 ------------------------------------------------------------------------------------------------------------------- $ 3,142,141 ------------------------------------------------------------------------------------------------------------------- General Obligations - Improvement - 3.2% ------------------------------------------------------------------------------------------------------------------- Puerto Rico Municipal Finance Agency, FSA, 6%, 2009 (c)(u) $ 1,000,000 $ 1,062,910 Suwanee, GA, MBIA, 5.25%, 2012 (c) 750,000 801,773 ------------------------------------------------------------------------------------------------------------------- $ 1,864,683 ------------------------------------------------------------------------------------------------------------------- General Obligations - Schools - 6.9% ------------------------------------------------------------------------------------------------------------------- Fayette County, GA, School District Rev., FSA, 0% to 2010, 4.9% to 2024 $ 575,000 $ 502,797 Forsyth County, GA, School District, 6%, 2010 (c) 750,000 810,615 Fulton County, GA, School District, 6.375%, 2010 1,535,000 1,598,257 Wilkes County, GA, School District, 5%, 2024 1,115,000 1,177,317 ------------------------------------------------------------------------------------------------------------------- $ 4,088,986 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 10.4% ------------------------------------------------------------------------------------------------------------------- Athens Clarke County, GA (United Catholic Health East Issue), 5.5%, 2032 $ 500,000 $ 529,110 Chatham County, GA, Hospital Authority Rev. (Memorial Health Medical Center), "A", 6%, 2017 350,000 375,459 Chatham County, GA, Hospital Authority Rev., Hospital Improvement (Memorial Health University), "A", 5.375%, 2026 200,000 209,828 Cobb County, GA, Hospital Authority Revolving, Refunding & Improvement Rev., Anticipation Certificates, AMBAC, 5.25%, 2023 750,000 808,860 Coffee County, GA, Hospital Authority Rev. (Coffee Regional Medical Center, Inc.), 5%, 2026 350,000 355,992 Gainesville & Hall County, GA, Hospital Authority Rev. (Northeast Georgia Health System, Inc.), 5.5%, 2031 500,000 520,085 Georgia Medical Center Hospital Authority Rev. (Spring Harbor Green Island Project), 5.25%, 2037 200,000 202,652 Royston, GA, Hospital Authority Rev. (Ty Cobb Healthcare System, Inc.), 6.125%, 2009 220,000 221,509 Tift County, GA, Hospital Authority Rev., Anticipation Certificates, AMBAC, 5%, 2022 2,000,000 2,103,840 Valdosta & Lowndes County, GA, Hospital Authority Rev. (Southern Georgia Medical Center Project), AMBAC, 5.25%, 2027 500,000 532,020 Valdosta & Lowndes County, GA, Hospital Authority Rev. (Southern Georgia Medical Center Project), 5%, 2033 300,000 312,435 ------------------------------------------------------------------------------------------------------------------- $ 6,171,790 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Long Term Care - 0.5% ------------------------------------------------------------------------------------------------------------------- Fulton County, GA, Residential Care Facilities (Canterbury Court), "A", 6.125%, 2034 $ 150,000 $ 157,784 Fulton County, GA, Residential Care Facilities, First Mortgage (Lenbrook Project), "A", 5%, 2027 150,000 150,210 ------------------------------------------------------------------------------------------------------------------- $ 307,994 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Environmental Services - 0.9% ------------------------------------------------------------------------------------------------------------------- Savannah, GA, Economic Development Authority, Solid Waste Disposal Rev. (Georgia Waste Management Project), "A", 5.5%, 2016 $ 500,000 $ 537,425 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 1.7% ------------------------------------------------------------------------------------------------------------------- Cartersville, GA, Development Authority Waste (Anheuser Busch Project), 5.95%, 2032 $ 750,000 $ 808,433 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 160,000 175,963 ------------------------------------------------------------------------------------------------------------------- $ 984,396 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Paper - 2.2% ------------------------------------------------------------------------------------------------------------------- Effingham County, GA, Development Authority, Solid Waste Disposal Rev. (Fort James), 5.625%, 2018 $ 150,000 $ 151,511 Savannah, GA, Economic Development Pollution (Union Camp Corp.), 6.15%, 2017 1,000,000 1,127,280 ------------------------------------------------------------------------------------------------------------------- $ 1,278,791 ------------------------------------------------------------------------------------------------------------------- Multi-Family Housing Revenue - 2.4% ------------------------------------------------------------------------------------------------------------------- East Point Housing Authority, Multi-Family Rev. (Laurel Ridge at Washington Road Apartments LP), FNMA, 5%, 2032 $ 500,000 $ 513,465 Hinesville, GA, Leased Housing Corp., "A", FHA, 6.7%, 2017 900,000 903,600 ------------------------------------------------------------------------------------------------------------------- $ 1,417,065 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 6.2% ------------------------------------------------------------------------------------------------------------------- Georgia Housing & Finance Authority Rev., 5.5%, 2032 $ 1,000,000 $ 1,008,080 Georgia Housing & Finance Authority Rev., Single Family Mortgage, "A", 5.6%, 2032 635,000 653,269 Georgia Housing & Finance Authority Rev., Single Family Mortgage, "A-2", 4.85%, 2037 500,000 504,585 Georgia Housing & Finance Authority Rev., Single Family Mortgage, "B", 5%, 2026 250,000 255,448 Georgia Housing & Finance Authority Rev., Single Family Mortgage, "C-2", 5.1%, 2022 750,000 766,200 Georgia Housing & Finance Authority Rev., Single Family Mortgage, "C-2", 4.55%, 2031 500,000 492,680 ------------------------------------------------------------------------------------------------------------------- $ 3,680,262 ------------------------------------------------------------------------------------------------------------------- State & Agency - Other - 2.7% ------------------------------------------------------------------------------------------------------------------- County Commissioners of Georgia Assn., Leasing Program, Rockdale County, GA (Public Purpose Project), AMBAC, 5.625%, 2010 (c) $ 335,000 $ 358,333 County Commissioners of Georgia Assn., Leasing Program, Rockdale County, GA (Public Purpose Project), AMBAC, 5.625%, 2020 165,000 175,709 Fulton County, GA, Facilities Corp., Fulton County, GA (Public Purpose Project), AMBAC, 5.9%, 2019 1,000,000 1,079,680 ------------------------------------------------------------------------------------------------------------------- $ 1,613,722 ------------------------------------------------------------------------------------------------------------------- State & Local Agencies - 3.9% ------------------------------------------------------------------------------------------------------------------- Clayton County, GA, Development Authority Rev., "A", 6.25%, 2009 (c) $ 500,000 $ 538,470 De Kalb County, GA, Public Safety & Judicial Facilities Authority Rev., 5%, 2029 400,000 421,284 Fayette County, GA, Public Facilities Authority (Criminal Justice Center Project), 6.25%, 2010 (c) 755,000 820,459 Gilmer County, GA, Building Authority Rev., Courthouse Project, "A", XLCA, 5%, 2029 500,000 528,305 ------------------------------------------------------------------------------------------------------------------- $ 2,308,518 ------------------------------------------------------------------------------------------------------------------- Tax - Other - 1.8% ------------------------------------------------------------------------------------------------------------------- Virgin Islands Public Finance Authority Rev., ASST GTY, 5.5%, 2018 $ 1,000,000 $ 1,035,210 ------------------------------------------------------------------------------------------------------------------- Tax Assessment - 0.5% ------------------------------------------------------------------------------------------------------------------- Atlanta, GA, Tax Allocation (Eastside Project), "B", 5.6%, 2030 $ 150,000 $ 156,042 Atlanta, GA, Tax Allocation (Princeton Lakes Project), 5.5%, 2031 150,000 153,590 ------------------------------------------------------------------------------------------------------------------- $ 309,632 ------------------------------------------------------------------------------------------------------------------- Tobacco - 0.6% ------------------------------------------------------------------------------------------------------------------- Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 360,000 $ 374,782 ------------------------------------------------------------------------------------------------------------------- Transportation - Special Tax - 1.2% ------------------------------------------------------------------------------------------------------------------- Commonwealth of Puerto Rico Highway & Transportation Authority, "Y", 5.5%, 2016 (c) $ 610,000 $ 688,623 ------------------------------------------------------------------------------------------------------------------- Universities - Colleges - 9.3% ------------------------------------------------------------------------------------------------------------------- Fulton County, GA (Morehouse College), AMBAC, 6.25%, 2021 $ 980,000 $ 1,072,581 Fulton County, GA, Development Authority Rev. (Georgia Tech Foundation Funding), "A", 5%, 2031 265,000 275,205 Fulton County, GA, Development Authority Rev. (Georgia Tech Foundation), "A", 5.75%, 2017 1,000,000 1,085,520 Private Colleges & University Authority (Emory University), "A", 5.75%, 2009 (c) 1,000,000 1,061,010 Private Colleges & University Authority (Emory University), "A", 5.75%, 2010 (c) 1,000,000 1,078,890 Private Colleges & University Authority (Mercer University), 5.75%, 2011 (c) 500,000 550,540 Savannah, GA, Economic Development Authority Rev. (College of Art & Design, Inc.), ETM, 6.2%, 2009 (c) 385,000 396,696 ------------------------------------------------------------------------------------------------------------------- $ 5,520,442 ------------------------------------------------------------------------------------------------------------------- Universities - Dormitories - 2.6% ------------------------------------------------------------------------------------------------------------------- Georgia Private College & University Authority Rev. (Mercer Housing Corp.), "A", 6%, 2021 $ 500,000 $ 530,635 Marietta, GA, Development Authority Rev., Student Housing (Southern Polytechnic University), "A", 6.25%, 2007 (c) 1,000,000 1,034,390 ------------------------------------------------------------------------------------------------------------------- $ 1,565,025 ------------------------------------------------------------------------------------------------------------------- Universities - Secondary Schools - 0.3% ------------------------------------------------------------------------------------------------------------------- Gainesville, GA, Redevelopment Authority Educational Facilities Rev. (Riverside Military Academy, Inc.), 5.125%, 2037 $ 200,000 $ 205,684 ------------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 5.1% ------------------------------------------------------------------------------------------------------------------- Georgia Municipal Electric Authority Power Rev., "A", MBIA, 6.5%, 2020 $ 1,250,000 $ 1,503,675 Monroe County, GA, Pollution Control Rev. (Oglethorpe Power Corp.), "A", 6.8%, 2012 1,000,000 1,125,280 Summerville, GA, Public Utility Rev., Refunding & Improvement, 5.75%, 2026 350,000 374,395 ------------------------------------------------------------------------------------------------------------------- $ 3,003,350 ------------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 31.3% ------------------------------------------------------------------------------------------------------------------- Atlanta, GA, Water & Wastewater Rev., FGIC, 5.5%, 2016 (u) $ 8,000,000 $ 8,980,400 Atlanta, GA, Water & Wastewater Rev., "A", MBIA, 5%, 2033 500,000 520,415 Augusta, GA, Water & Sewer Rev., FSA, 5.25%, 2034 1,000,000 1,082,920 Clayton County, GA, Water Authority, Water & Sewer Rev., 6.25%, 2010 (c) 1,000,000 1,084,200 Columbia County, GA, Water & Sewer Rev., FGIC, 6.25%, 2010 (c) 470,000 506,552 Fairburn, GA, Utility Rev., 5.75%, 2020 500,000 528,915 Forsyth County, GA, Water & Sewer Authority, 6.25%, 2010 (c) 1,105,000 1,195,964 Fulton County, GA, Water & Sewer Rev., FGIC, 6.375%, 2014 100,000 110,598 Fulton County, GA, Water & Sewer Rev., ETM, FGIC, 6.375%, 2014 (c) 2,150,000 2,379,873 Gainesville, GA, Water & Sewer Rev., FGIC, 5.625%, 2009 (c) 1,000,000 1,059,150 Jackson County, GA, Water & Sewer Authority, "A", AMBAC, 5.75%, 2017 1,000,000 1,083,030 ------------------------------------------------------------------------------------------------------------------- $ 18,532,017 ------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $58,204,285) $ 61,635,820 ------------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 1.7% ------------------------------------------------------------------------------------------------------------------- Georgia Municipal Electric Authority Rev., 3.61%, due 4/04/07, at Identified Cost and Value $ 970,000 $ 970,000 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $59,174,285) (k) $ 62,605,820 ------------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (5.8)% (3,416,136) ------------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $ 59,189,684 ------------------------------------------------------------------------------------------------------------------- SWAP AGREEMENTS AT 3/31/07
UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------- INTEREST RATE SWAPS 12/01/07 USD 1,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $ 6,068 5/30/19 USD 750,000 Citibank 7-Day BMA 3.695% (fixed rate) 2,962 6/12/19 USD 500,000 Merrill Lynch 7-Day BMA 3.660% (fixed rate) 3,768 9/26/22 USD 1,000,000 Goldman Sachs 7-Day BMA 3.807% (fixed rate) 4,949 ------------------------------------------------------------------------------------------------------------------- $17,747 ------------------------------------------------------------------------------------------------------------------- At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) MARYLAND MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes. Municipal Bonds - 101.6% ------------------------------------------------------------------------------------------------------------------- ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------- Airport and Port Revenue - 0.8% ------------------------------------------------------------------------------------------------------------------- Maryland Transportation Authority Rev. (Baltimore/Washington International Airport), "A", AMBAC, 5%, 2027 $ 1,000,000 $ 1,046,440 ------------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 5.9% ------------------------------------------------------------------------------------------------------------------- Baltimore, MD, "B", 7.15%, 2009 $ 2,120,000 $ 2,290,851 Baltimore, MD, UT, Public Improvement, "A", MBIA, 7%, 2009 1,000,000 1,082,020 Frederick County, MD, Public Facilities, 5.25%, 2009 (c) 2,000,000 2,088,800 Puerto Rico Commonwealth Public Improvement, "A", 5.25%, 2026 2,330,000 2,504,540 ------------------------------------------------------------------------------------------------------------------- $ 7,966,211 ------------------------------------------------------------------------------------------------------------------- General Obligations - Improvement - 15.2% ------------------------------------------------------------------------------------------------------------------- Howard County, MD, "B", 0%, 2008 $ 1,000,000 $ 951,990 Howard County, MD, Consolidated Public Improvement, "A", 5.5%, 2008 (c) 1,000,000 1,025,930 Howard County, MD, Consolidated Public Improvement, "A", 5.5%, 2008 (c) 2,000,000 2,051,860 Prince George's County, MD, 0%, 2007 5,110,000 5,065,083 Prince George's County, MD, Consolidated Public Improvement, "A", 5%, 2023 2,000,000 2,121,560 Prince George's County, MD, Unrefunded Balance, Public Improvement, FSA, 5.375%, 2015 80,000 83,930 Puerto Rico Municipal Finance Agency, FSA, 5.5%, 2009 (c)(u) 2,000,000 2,103,700 Washington Suburban Sanitation District, General Construction Rev., 5%, 2027 930,000 990,813 Washington Suburban Sanitation District, General Construction Rev., 5%, 2028 980,000 1,043,377 Washington Suburban Sanitation District, General Construction Rev., 5%, 2029 1,025,000 1,090,559 Worcester County, MD, Public Improvement, 5.625%, 2010 (c) 1,620,000 1,723,437 Worcester County, MD, Public Improvement, 5.625%, 2010 (c) 2,030,000 2,159,616 ------------------------------------------------------------------------------------------------------------------- $ 20,411,855 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 18.9% ------------------------------------------------------------------------------------------------------------------- Baltimore County, MD, Rev. (Catholic Health Initiatives), "A", 4.5%, 2033 $ 1,250,000 $ 1,248,037 Maryland Health & Higher Education (Peninsula Regional Medical Center), 5%, 2036 1,000,000 1,038,930 Maryland Health & Higher Educational Facilities Authority Rev. (University of Maryland Medical System), "A", 5%, 2041 500,000 515,265 Maryland Health & Higher Educational Facilities Authority Rev. (Adventist Healthcare), "A", 5.75%, 2025 1,000,000 1,065,600 Maryland Health & Higher Educational Facilities Authority Rev. (Anne Arundel Health Systems), "A", FSA, 5%, 2023 1,000,000 1,052,000 Maryland Health & Higher Educational Facilities Authority Rev. (Calvert Health Systems), 5.5%, 2039 1,000,000 1,067,510 Maryland Health & Higher Educational Facilities Authority Rev. (Carroll County General Hospital), 6%, 2037 1,000,000 1,068,310 Maryland Health & Higher Educational Facilities Authority Rev. (Catholic Health), "A", 6%, 2020 245,000 264,277 Maryland Health & Higher Educational Facilities Authority Rev. (Catholic Health), "A", ETM, 6%, 2020 (c) 755,000 813,935 Maryland Health & Higher Educational Facilities Authority Rev. (Doctors Community Hospital), "A", 5%, 2029 750,000 776,093 Maryland Health & Higher Educational Facilities Authority Rev. (Frederick Memorial Hospital), 5.125%, 2035 1,000,000 1,024,130 Maryland Health & Higher Educational Facilities Authority Rev. (Good Samaritan Hospital), ETM, 5.7%, 2009 (c) 1,085,000 1,116,639 Maryland Health & Higher Educational Facilities Authority Rev. (Johns Hopkins Hospital), 5%, 2021 750,000 776,430 Maryland Health & Higher Educational Facilities Authority Rev. (Johns Hopkins Medical Institutions), "A", 5%, 2037 750,000 788,228 Maryland Health & Higher Educational Facilities Authority Rev. (Lifebridge Health), "A", 5.125%, 2034 1,000,000 1,036,320 Maryland Health & Higher Educational Facilities Authority Rev. (Medstar Health), 5.5%, 2033 800,000 846,544 Maryland Health & Higher Educational Facilities Authority Rev. (North Arundel Hospital), 6.5%, 2010 (c) 500,000 547,765 Maryland Health & Higher Educational Facilities Authority Rev. (Suburban Hospital), "A", 5.5%, 2016 1,000,000 1,086,230 Maryland Health & Higher Educational Facilities Authority Rev. (Union Hospital of Cecil County Issue), 5.625%, 2032 1,000,000 1,056,710 Maryland Health & Higher Educational Facilities Authority Rev. (Union Hospital of Cecil County Issue), 5%, 2035 500,000 516,675 Maryland Health & Higher Educational Facilities Authority Rev. (University of Maryland Medical Systems), 6.625%, 2010 (c) 1,000,000 1,083,650 Maryland Health & Higher Educational Facilities Authority Rev. (University of Maryland Medical Systems), "B", AMBAC, 5%, 2024 1,000,000 1,050,750 Maryland Health & Higher Educational Facilities Authority Rev. (Upper Chesapeake Hospital), "A", FSA, 5.5%, 2020 2,000,000 2,046,180 Maryland Health & Higher Educational Facilities Rev. (Helix Health Issue), ETM, AMBAC, 5%, 2027 (c) 1,000,000 1,101,440 Maryland Industrial Development Authority, Economic Development Rev., RIBS, FSA, 8.076%, 2022 (p) 1,400,000 1,798,160 Montgomery County, MD, Economic Development (Trinity Healthcare Group), 5.125%, 2022 500,000 521,720 ------------------------------------------------------------------------------------------------------------------- $ 25,307,528 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Long Term Care - 1.5% ------------------------------------------------------------------------------------------------------------------- Gaithersburg, MD, Economic Development Rev. (Asbury Maryland Obligations Group), "A", 5.125%, 2036 $ 400,000 $ 409,304 Howard County, MD, Retirement (Ref-Vantage House Facilities), "B", 5.25%, 2037 300,000 305,445 Maryland Health & Higher Educational Facilities (King Farm Presbyterian Community), "A", 5.3%, 2037 300,000 306,099 Maryland Health & Higher Educational Facilities Authority Rev. (Mercy Ridge), "A", 6%, 2013 (c) 150,000 169,161 Maryland Health & Higher Educational Facilities Authority Rev. (Edenwald), "A", 5.4%, 2037 350,000 361,452 Westminster, MD, Economic Development Rev. (Carroll Lutheran Village), "A", 6.25%, 2034 400,000 422,028 ------------------------------------------------------------------------------------------------------------------- $ 1,973,489 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Chemicals - 1.2% ------------------------------------------------------------------------------------------------------------------- Baltimore, MD, Port Facilities Rev., Consolidated Coal Sales, "B", 6.5%, 2011 $ 1,500,000 $ 1,563,570 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Environmental Services - 0.5% ------------------------------------------------------------------------------------------------------------------- Northeast Maryland Waste Disposal Authority Resources Recovery Rev. (Baltimore Resco Retrofit Project), 5%, 2012 $ 690,000 $ 702,855 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 0.3% ------------------------------------------------------------------------------------------------------------------- Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 $ 375,000 $ 412,414 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Entertainment & Tourism - 0.8% ------------------------------------------------------------------------------------------------------------------- Maryland Industrial Development Authority Economic Development (Baltimore Aquarium Project), 5.2%, 2026 $ 1,000,000 $ 1,051,240 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Other - 1.7% ------------------------------------------------------------------------------------------------------------------- Baltimore, MD, Convention Center Hotel Rev., "B", 5.875%, 2039 $ 300,000 $ 319,116 Harford County MD, Economic Development Rev. (Battelle Memorial Institute Project), 5.25%, 2034 1,600,000 1,693,920 Maryland Economic Development Corp. (Chesapeake Bay Conference Center), "A", 5%, 2031 300,000 301,977 ------------------------------------------------------------------------------------------------------------------- $2,315,013 ------------------------------------------------------------------------------------------------------------------- Multi-Family Housing Revenue - 5.5% ------------------------------------------------------------------------------------------------------------------- Baltimore, MD, City Housing Corp. Rev., FHA, 7.75%, 2009 $ 320,000 $ 320,000 Howard County, MD, Multi-Family Rev. (Patuxent Square Apartments), FNMA, 4.75%, 2036 1,000,000 1,007,300 Maryland Community Development Administration (Waters Landing II Apartments), "A", GNMA, 5.875%, 2033 1,500,000 1,576,455 Maryland Community Development Administration, "A", 5%, 2034 910,000 927,663 Maryland Community Development Administration, "A", 5.1%, 2044 970,000 988,760 Maryland Community Development Administration, "A", 5.05%, 2047 1,000,000 1,014,750 Maryland Community Development Administration, "B", 5%, 2039 500,000 507,215 Maryland Community Development Administration, "D", 5%, 2032 1,000,000 1,015,450 ------------------------------------------------------------------------------------------------------------------- $ 7,357,593 ------------------------------------------------------------------------------------------------------------------- Parking - 1.2% ------------------------------------------------------------------------------------------------------------------- Maryland Health & Higher Educational Facilities Authority Rev. (Johns Hopkins Medical Institutions), AMBAC, 5%, 2034 $ 1,500,000 $ 1,579,905 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - Local - 0.1% ------------------------------------------------------------------------------------------------------------------- Prince George's County, MD, Housing Single Family Collateral, "A", 7.4%, 2032 $ 30,000 $ 30,215 Prince George's County, MD, Housing Single Family Collateral, "A", GNMA, 5.6%, 2034 50,000 50,832 ------------------------------------------------------------------------------------------------------------------- $ 81,047 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 3.9% ------------------------------------------------------------------------------------------------------------------- Maryland Community Development Administration Housing, "A", 5.875%, 2016 $ 1,155,000 $ 1,180,017 Maryland Community Development Administration Residential, "B", 4.75%, 2019 305,000 310,331 Maryland Community Development Administration, "I", 6%, 2041 990,000 1,065,507 Maryland Community Development Administration, Department of Housing & Community Development, "L", 4.95%, 2038 1,000,000 1,020,770 Montgomery County, MD, Housing Opportunities Commission (Single Family Mortgage Rev.), "B", 4.55%, 2026 1,505,000 1,510,719 Puerto Rico Housing Finance Authority Home Mortgage Rev., Mortgage Backed Securities, "A", 4.75%, 2023 175,000 175,824 ------------------------------------------------------------------------------------------------------------------- $ 5,263,168 ------------------------------------------------------------------------------------------------------------------- State & Agency - Other - 4.0% ------------------------------------------------------------------------------------------------------------------- Howard County, MD, COP, 8%, 2019 $ 805,000 $ 1,121,429 Howard County, MD, COP, 8%, 2019 385,000 536,336 Howard County, MD, COP, 8%, 2019 680,000 947,294 Howard County, MD, COP, "B", 8.15%, 2021 450,000 646,627 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Rev., "B", 5%, 2031 2,000,000 2,087,100 ------------------------------------------------------------------------------------------------------------------- $ 5,338,786 ------------------------------------------------------------------------------------------------------------------- State & Local Agencies - 5.3% ------------------------------------------------------------------------------------------------------------------- Prince George's County, MD, Lease Development Authority Rev., MBIA, 0%, 2009 $ 1,500,000 $ 1,378,755 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2013 (u) 1,000,000 1,093,170 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2016 (u) 3,040,000 3,402,277 Puerto Rico Public Finance Corp., Commonwealth Appropriation, "E", 5.7%, 2010 (c) 1,235,000 1,302,641 ------------------------------------------------------------------------------------------------------------------- $ 7,176,843 ------------------------------------------------------------------------------------------------------------------- Tax - Other - 1.5% ------------------------------------------------------------------------------------------------------------------- Virgin Islands Public Finance Authority Rev., "A", 5.5%, 2022 $ 1,000,000 $ 1,029,470 Virgin Islands Public Finance Authority Rev., "E", 5.875%, 2018 1,000,000 1,038,670 ------------------------------------------------------------------------------------------------------------------- $ 2,068,140 ------------------------------------------------------------------------------------------------------------------- Tax Assessment - 1.8% ------------------------------------------------------------------------------------------------------------------- Anne Arundel County, MD, Special Obligations (Arundel Mills Project), 5.125%, 2029 $ 1,555,000 $ 1,664,954 Brunswick, MD, Special Obligation (Brunswick Crossing Special Taxing), 5.5%, 2036 250,000 255,335 Prince George's County, MD, Special Obligations (National Harbor Project), 5.2%, 2034 500,000 511,850 ------------------------------------------------------------------------------------------------------------------- $ 2,432,139 ------------------------------------------------------------------------------------------------------------------- Tobacco - 0.6% ------------------------------------------------------------------------------------------------------------------- Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 230,000 $ 239,444 Guam Economic Development Authority Tobacco Settlement, "B", 5.5%, 2041 400,000 412,984 Virgin Islands Tobacco Settlement Financing Corp., 5%, 2021 225,000 227,441 ------------------------------------------------------------------------------------------------------------------- $ 879,869 ------------------------------------------------------------------------------------------------------------------- Transportation - Special Tax - 1.4% ------------------------------------------------------------------------------------------------------------------- Maryland Department of Transportation, Port Administration Facilities Project, AMBAC, 5.25%, 2020 $ 1,690,000 $ 1,828,141 ------------------------------------------------------------------------------------------------------------------- Universities - Colleges - 13.0% ------------------------------------------------------------------------------------------------------------------- Annapolis, MD, Economic Development Rev. (St. John's College), 5.5%, 2018 $ 750,000 $ 766,132 Anne Arundel County, MD, Economic Development (Community College Project), 5.25%, 2028 1,600,000 1,711,648 Frederick County, MD, Educational Facilities Rev. (Mount St. Mary's College), 5%, 2030 1,000,000 1,026,080 Frederick County, MD, Educational Facilities Rev. (Mount St. Mary's College), "A", 5.7%, 2020 850,000 882,351 Maryland Health & Higher Education (College Of Art), 5%, 2030 750,000 775,575 Maryland Health & Higher Education (Loyola College), "A", 5%, 2040 1,000,000 1,035,680 Maryland Health & Higher Educational Facilities Authority Rev. (Goucher College), 5.375%, 2025 500,000 535,355 Maryland Health & Higher Educational Facilities Authority Rev. (Johns Hopkins University), 5.625%, 2027 1,400,000 1,432,634 Maryland Health & Higher Educational Facilities Authority Rev. (Johns Hopkins University), "A", 5%, 2032 2,000,000 2,068,740 Montgomery County, MD, Rev. Authority (College Arts Center Project), "A", 5%, 2027 1,950,000 2,059,941 Morgan State University, MD, Academic, MBIA, 6.05%, 2015 1,500,000 1,671,840 Morgan State University, MD, Academic, "A", ETM, MBIA, 0%, 2008 (c) 1,400,000 1,338,190 Westminster, MD, Educational Facilities Rev. (McDaniel College, Inc.), 5.5%, 2012 (c) 1,000,000 1,087,680 Westminster, MD, Educational Facilities Rev. (McDaniel College, Inc.), 5%, 2031 1,000,000 1,037,730 ------------------------------------------------------------------------------------------------------------------- $ 17,429,576 ------------------------------------------------------------------------------------------------------------------- Universities - Dormitories - 5.4% ------------------------------------------------------------------------------------------------------------------- Maryland Economic Development Corp. (Morgan State University Project), "A", 6%, 2034 $ 1,000,000 $ 1,022,260 Maryland Economic Development Corp. (University of Maryland College Park Project), AMBAC, 5%, 2019 1,810,000 1,891,360 Maryland Economic Development Corp., Collegiate Housing (Salisbury), "A", 6%, 2019 1,000,000 1,044,410 Maryland Economic Development Corp., Collegiate Housing Rev. (Towson University), "A", 5.75%, 2029 1,000,000 1,018,500 Maryland Economic Development Corp., Student Housing Rev. (University of Maryland College Park Projects), CIFG, 5%, 2033 2,120,000 2,234,522 ------------------------------------------------------------------------------------------------------------------- $ 7,211,052 ------------------------------------------------------------------------------------------------------------------- Universities - Secondary Schools - 0.7% ------------------------------------------------------------------------------------------------------------------- Maryland Health & Higher Educational Facilities Authority Rev. (Washington Christian Academy), 5.5%, 2038 $ 500,000 $ 511,210 Maryland Industrial Development Financing Authority, Economic Development Authority Rev. (Our Lady of Good Council), "A", 6%, 2035 400,000 427,208 ------------------------------------------------------------------------------------------------------------------- $ 938,418 ------------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 4.9% ------------------------------------------------------------------------------------------------------------------- Guam Power Authority Rev., AMBAC, 5.25%, 2015 (u) $ 3,360,000 $ 3,508,646 Puerto Rico Electric Power Authority Rev., "NN", 5.125%, 2024 1,500,000 1,581,285 Puerto Rico Electric Power Authority Rev., RITES, FSA, 6.014%, 2015 (n)(v) 1,400,000 1,490,076 ------------------------------------------------------------------------------------------------------------------- $ 6,580,007 ------------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 5.5% ------------------------------------------------------------------------------------------------------------------- Baltimore, MD, Project Rev., Refunding Water Projects, "A", FGIC, 5.125%, 2032 $ 1,000,000 $ 1,053,630 Baltimore, MD, Rev., LEVRRS, MBIA, 7.57%, 2020 (p) 3,000,000 3,841,620 Baltimore, MD, Wastewater Rev. Project, "A", MBIA, 5.65%, 2020 2,000,000 2,280,540 Puerto Rico Aqueduct & Sewer Authority Rev., ETM, 10.25%, 2009 (c) 195,000 206,942 ------------------------------------------------------------------------------------------------------------------- $ 7,382,732 ------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $129,245,751) $136,298,031 ------------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 0.8% ------------------------------------------------------------------------------------------------------------------- Allegheny County, PA, Hospital Development Authority Rev. (Presbyterian University Hospital), "A", 3.7%, due 4/05/07 $ 200,000 $ 200,000 Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), 3.77%, due 4/02/07 100,000 100,000 Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), 3.77%, due 4/02/07 100,000 100,000 Jefferson County, AL, Sewer Rev., Warrants Rev., "B-4", 3.7%, due 4/05/07 500,000 500,000 Pinellas County, FL, Health Facilities Authority Rev. (Pooled Hospital Loan Program), 3.8%, due 4/02/07 200,000 $ 200,000 ------------------------------------------------------------------------------------------------------------------- TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 1,100,000 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $130,345,751) (k) $137,398,031 ------------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (2.4)% (3,284,926) ------------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $134,113,105 ------------------------------------------------------------------------------------------------------------------- SWAP AGREEMENTS AT 3/31/07
UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 3,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $ 18,205 6/12/19 USD 2,000,000 Merrill Lynch 7-Day BMA 3.660% (fixed rate) 15,071 4/27/22 USD 2,000,000 Citibank 7-Day BMA 3.878% (fixed rate) (10,117) 7/23/22 USD 1,000,000 Merrill Lynch 7-Day BMA 3.889% (fixed rate) (4,796) 9/26/22 USD 2,000,000 Goldman Sachs 7-Day BMA 3.807% (fixed rate) 9,897 ------------------------------------------------------------------------------------------------------------------ $ 28,260 ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 105.0% ------------------------------------------------------------------------------------------------------------------- ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------- Airport & Port Revenue - 4.5% ------------------------------------------------------------------------------------------------------------------- Massachusetts Port Authority Rev., "A", AMBAC, 5%, 2035 $ 2,000,000 $ 2,101,820 Massachusetts Port Authority Rev., "A", FSA, 5.125%, 2017 1,275,000 1,321,780 Massachusetts Port Authority Rev., "A", MBIA, 5%, 2033 3,000,000 3,135,420 Massachusetts Port Authority Rev., "C", 6%, 2010 (c) 1,000,000 1,070,040 Massachusetts Port Authority Rev., "C", 6.125%, 2010 (c) 1,460,000 1,566,989 Massachusetts Port Authority Rev., ETM, 13%, 2013 (c) 610,000 794,464 ------------------------------------------------------------------------------------------------------------------- $ 9,990,513 ------------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 14.6% ------------------------------------------------------------------------------------------------------------------- Boston, MA, "A", 5.75%, 2010 (c) $ 3,645,000 $ 3,851,489 Brookline, MA, 5.375%, 2019 1,800,000 1,896,066 Commonwealth of Massachusetts, "B", 5.25%, 2028 2,500,000 2,867,250 Commonwealth of Massachusetts, "B", ETM, FGIC, 7%, 2009 (c) 1,150,000 1,193,562 Greater Lawrence, MA, Sanitation District, MBIA, 5.625%, 2010 (c) 1,640,000 1,752,963 Lynn, MA, AMBAC, 5.125%, 2018 3,690,000 3,828,892 Massachusetts Consolidated Loan, "A", 6%, 2010 (c) 3,000,000 3,215,370 Massachusetts Consolidated Loan, "B", 5.75%, 2010 (c) 1,000,000 1,062,980 Massachusetts Consolidated Loan, "C", 5.875%, 2009 (c) 1,000,000 1,060,700 Massachusetts Consolidated Loan, "C", 5.75%, 2010 (c) 1,500,000 1,602,900 Middleborough, MA, FGIC, 5.6%, 2010 (c) 75,000 79,569 Puerto Rico Commonwealth, Public Improvement, "A", 5.25%, 2030 1,000,000 1,070,970 Salisbury, MA, MBIA, 5.25%, 2012 (c) 2,790,000 3,013,646 Sutton, MA, MBIA, 5.5%, 2017 1,000,000 1,058,910 Sutton, MA, MBIA, 5.5%, 2019 1,000,000 1,058,330 Westford, MA, FGIC, 5.25%, 2020 2,250,000 2,356,988 Weymouth, MA, MBIA, 5.375%, 2020 1,250,000 1,324,000 ------------------------------------------------------------------------------------------------------------------- $ 32,294,585 ------------------------------------------------------------------------------------------------------------------- General Obligations - Improvement - 7.9% ------------------------------------------------------------------------------------------------------------------- Massachusetts Bay Transportation Authority, Transit Improvements, 6.2%, 2016 (u) $ 9,670,000 $ 10,984,927 Massachusetts Bay Transportation Authority, Unrefunded Balance, "A", 5.75%, 2018 320,000 340,349 Maynard, MA, MBIA, 5.5%, 2021 1,000,000 1,093,320 Springfield, MA, FSA, 6.25%, 2009 (c) 1,600,000 1,714,816 Worcester, MA, "A", FSA, 6%, 2016 2,955,000 3,179,255 ------------------------------------------------------------------------------------------------------------------- $ 17,312,667 ------------------------------------------------------------------------------------------------------------------- General Obligations - Schools - 7.2% ------------------------------------------------------------------------------------------------------------------- Belmont, MA, 5%, 2015 $ 2,165,000 $ 2,183,402 Dudley-Charlton, MA, Regional School District, FGIC, 5.25%, 2015 (u) 2,730,000 3,010,453 Dudley-Charlton, MA, Regional School District, FGIC, 5.25%, 2016 (u) 2,860,000 3,172,169 Dudley-Charlton, MA, Regional School District, FGIC, 5.25%, 2018 (u) 3,130,000 3,504,192 Narragansett, MA, Regional School District, AMBAC, 6%, 2019 1,720,000 1,849,980 Tantasqua, MA, Regional School District, FSA, 5.375%, 2010 (c) 2,000,000 2,127,860 ------------------------------------------------------------------------------------------------------------------- $ 15,848,056 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 11.9% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency Rev. (Massachusetts Biomedical Research), "C", 6.375%, 2016 $ 50,000 $ 53,952 Massachusetts Health & Educational Facilities Authority Rev. (Baystate Medical Center), "F", 5.75%, 2033 2,000,000 2,123,100 Massachusetts Health & Educational Facilities Authority Rev. (Berkshire Health Systems), "E", 6.25%, 2031 1,350,000 1,466,478 Massachusetts Health & Educational Facilities Authority Rev. (Caritas Christi), "B", 6.5%, 2012 500,000 547,435 Massachusetts Health & Educational Facilities Authority Rev. (Caritas Christi), "B", 6.25%, 2022 20,000 21,873 Massachusetts Health & Educational Facilities Authority Rev. (Catholic Health East Issue), 5.5%, 2032 1,575,000 1,666,697 Massachusetts Health & Educational Facilities Authority Rev. (Covenant Health Systems, Inc.), 6.5%, 2017 75,000 83,024 Massachusetts Health & Educational Facilities Authority Rev. (Covenant Health Systems, Inc.), 6%, 2031 1,000,000 1,086,140 Massachusetts Health & Educational Facilities Authority Rev. (Jordan Hospital), "D", 5.25%, 2018 1,330,000 1,349,445 Massachusetts Health & Educational Facilities Authority Rev. (Milford-Whitinsville Hospital), "D", 6.35%, 2012 (c) 300,000 339,960 Massachusetts Health & Educational Facilities Authority Rev. (Milford-Whitinsville Regional Hospital), "C", 5.25%, 2018 1,500,000 1,513,800 Massachusetts Health & Educational Facilities Authority Rev. (Milton Hospital), "C", 5.5%, 2016 800,000 825,088 Massachusetts Health & Educational Facilities Authority Rev. (New England Medical Center Hospital), "H", FGIC, 5.375%, 2018 1,000,000 1,074,460 Massachusetts Health & Educational Facilities Authority Rev. (New England Medical Center Hospital), "H", FGIC, 5.375%, 2019 815,000 874,894 Massachusetts Health & Educational Facilities Authority Rev. (New England Medical Center Hospital), "H", FGIC, 5%, 2025 1,135,000 1,178,459 Massachusetts Health & Educational Facilities Authority Rev. (Newton Wellesley Hospital), "G", MBIA, 6.125%, 2015 1,000,000 1,025,290 Massachusetts Health & Educational Facilities Authority Rev. (North Adams Regional Hospital), "C", 6.625%, 2018 475,000 481,346 Massachusetts Health & Educational Facilities Authority Rev. (Partners Healthcare Systems), "A", MBIA, 5.375%, 2018 2,000,000 2,026,760 Massachusetts Health & Educational Facilities Authority Rev. (Partners Healthcare Systems), "C", 5.75%, 2021 100,000 108,051 Massachusetts Health & Educational Facilities Authority Rev. (South Shore Hospital), "F", 5.625%, 2019 2,000,000 2,095,100 Massachusetts Health & Educational Facilities Authority Rev. (University of Massachusetts Memorial Hospital), "C", 6.5%, 2021 1,000,000 1,090,050 Massachusetts Health & Educational Facilities Authority Rev. (University of Massachusetts Memorial Hospital), "D", 5%, 2033 500,000 507,385 Massachusetts Industrial Finance Agency Rev., Capital Appreciation (Massachusetts Biomedical Research), "A", 0%, 2010 5,300,000 4,632,465 ------------------------------------------------------------------------------------------------------------------- $ 26,171,252 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Long Term Care - 0.3% ------------------------------------------------------------------------------------------------------------------- Boston, MA, Industrial Development Finance Authority Rev. (Alzheimer's Center Project), FHA, 5.5%, 2012 $ 30,000 $ 30,576 Massachusetts Development Finance Agency Rev., First Mortgage (Loomis Communities Project), "A", 6.9%, 2032 530,000 580,069 ------------------------------------------------------------------------------------------------------------------- $ 610,645 ------------------------------------------------------------------------------------------------------------------- Human Services - 0.5% ------------------------------------------------------------------------------------------------------------------- Massachusetts Health & Educational Facilities Authority Rev. (Learning Center for Deaf Children), "C", 6.1%, 2019 $ 1,000,000 $ 1,021,460 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Airlines - 1.4% ------------------------------------------------------------------------------------------------------------------- Massachusetts Port Authority Rev. (U.S. Airways), MBIA, 5.875%, 2016 $ 1,900,000 $ 1,987,495 Massachusetts Port Authority Rev., Special Facilities (U.S. Airways Project), "A", MBIA, 5.625%, 2011 1,140,000 1,160,440 ------------------------------------------------------------------------------------------------------------------- $ 3,147,935 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Environmental Services - 0.8% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency Rev. (Waste Management, Inc. Project), 5.5%, 2027 $ 750,000 $ 797,790 Massachusetts Development Finance Agency Rev. (Waste Management, Inc.), "B", 6.9%, 2029 1,000,000 1,064,580 ------------------------------------------------------------------------------------------------------------------- $ 1,862,370 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 2.1% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency Rev., Resource Recovery (Flour Corp.), 5.625%, 2019 $ 1,675,000 $ 1,747,193 Massachusetts Industrial Finance Agency Rev. (Welch Foods, Inc.), 5.6%, 2017 2,100,000 2,161,026 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 595,000 654,363 ------------------------------------------------------------------------------------------------------------------- $ 4,562,582 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Other - 2.5% ------------------------------------------------------------------------------------------------------------------- Martha's Vineyard, MA, Land Bank Rev., AMBAC, 5%, 2029 $ 785,000 $ 824,046 Martha's Vineyard, MA, Land Bank Rev., AMBAC, 5%, 2034 1,365,000 1,429,496 Massachusetts Development Finance Agency Rev. (WGBH Educational Foundation), "A", AMBAC, 5.375%, 2012 (c) 3,000,000 3,248,550 ------------------------------------------------------------------------------------------------------------------- $ 5,502,092 ------------------------------------------------------------------------------------------------------------------- Multi-Family Housing Revenue - 6.5% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency Rev. (Credit Housing-Chelsea Homes), "I-A", LOC, 5%, 2024 $ 1,185,000 $ 1,203,071 Massachusetts Development Finance Agency Rev. (Morville House Apartments), "A", LOC, 4.95%, 2023 2,500,000 2,533,375 Massachusetts Housing Finance Agency Rev., "A", 5%, 2028 1,000,000 1,024,500 Massachusetts Housing Finance Agency Rev., "E", 5%, 2028 1,000,000 1,029,740 Massachusetts Housing Finance Agency Rev., "F", 5.125%, 2034 720,000 741,902 Massachusetts Housing Finance Agency Rev., "P", 5%, 2023 1,240,000 1,275,638 Massachusetts Housing Finance Agency Rev., "P", 5.1%, 2033 1,565,000 1,602,654 Massachusetts Housing Finance Agency Rev., "P", 5.2%, 2045 1,445,000 1,478,495 Massachusetts Housing Finance Agency Rev., Rental Mortgage, "A", AMBAC, 5.7%, 2020 1,475,000 1,537,275 Massachusetts Housing Finance Agency, "E", 4.5%, 2038 2,000,000 1,963,700 ------------------------------------------------------------------------------------------------------------------- $ 14,390,350 ------------------------------------------------------------------------------------------------------------------- Parking - 0.6% ------------------------------------------------------------------------------------------------------------------- Rail Connections, Inc., Massachusetts Rev. (Route 128 Parking Garage), "A", 6%, 2009 (c) $ 450,000 $ 481,338 Rail Connections, Inc., Massachusetts Rev. (Route 128 Parking Garage), "A", 6%, 2009 (c) 500,000 534,820 Rail Connections, Inc., Massachusetts Rev. (Route 128 Parking Garage), "A", 6%, 2009 (c) 250,000 267,410 ------------------------------------------------------------------------------------------------------------------- $ 1,283,568 ------------------------------------------------------------------------------------------------------------------- Sales & Excise Tax Revenue - 0.7% ------------------------------------------------------------------------------------------------------------------- Route 3 North Transit Improvement Associates Rev., MBIA, 5.625%, 2010 (c) $ 1,500,000 $ 1,589,940 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 2.3% ------------------------------------------------------------------------------------------------------------------- Massachusetts Housing Finance Agency, Single Family Housing Rev., "102", 5%, 2029 $ 1,500,000 $ 1,526,505 Massachusetts Housing Finance Agency, Single Family Housing Rev., "118", 4.75%, 2030 1,500,000 1,503,735 Massachusetts Housing Finance Agency, Single Family Housing Rev., "122", 4.85%, 2031 2,000,000 2,040,940 ------------------------------------------------------------------------------------------------------------------- $ 5,071,180 ------------------------------------------------------------------------------------------------------------------- Solid Waste Revenue - 1.2% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency, Resource Recovery Rev. (Ogden Haverhill Associates), "A", 6.7%, 2014 $ 600,000 $ 648,852 Massachusetts Industrial Finance Agency, Resource Recovery Rev. (Ogden Haverhill Associates), "A", 5.5%, 2013 25,000 25,981 Massachusetts Industrial Finance Agency, Resource Recovery Rev. (Ogden Haverhill Associates), "A", 5.6%, 2019 1,925,000 1,997,573 ------------------------------------------------------------------------------------------------------------------- $ 2,672,406 ------------------------------------------------------------------------------------------------------------------- State & Agency - Other - 0.6% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency Rev. (Visual & Performing Arts Project), 6%, 2015 $ 1,235,000 $ 1,413,062 ------------------------------------------------------------------------------------------------------------------- State & Local Agencies - 3.2% ------------------------------------------------------------------------------------------------------------------- Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2016 (u) $ 5,000,000 $ 5,595,850 University of Massachusetts, Building Authority Project Rev., "2", AMBAC, 5.5%, 2018 1,400,000 1,487,472 ------------------------------------------------------------------------------------------------------------------- $ 7,083,322 ------------------------------------------------------------------------------------------------------------------- Student Loan Revenue - 0.8% ------------------------------------------------------------------------------------------------------------------- Massachusetts Educational Financing Authority, Education Loan Rev., "E", AMBAC, 5%, 2015 $ 90,000 $ 92,089 Massachusetts Educational Financing Authority, Education Loan Rev., "Issue E", AMBAC, 5.3%, 2016 1,490,000 1,525,924 Massachusetts Educational Financing Authority, Education Loan Rev., "Issue G", "A", MBIA, 6.05%, 2017 50,000 51,462 ------------------------------------------------------------------------------------------------------------------- $ 1,669,475 ------------------------------------------------------------------------------------------------------------------- Tax - Other - 2.0% ------------------------------------------------------------------------------------------------------------------- Virgin Islands Public Finance Authority Rev., "A", 5.5%, 2022 $ 2,950,000 $ 3,036,937 Virgin Islands Public Finance Authority Rev., "E", 5.875%, 2018 1,420,000 1,474,911 ------------------------------------------------------------------------------------------------------------------- $ 4,511,848 ------------------------------------------------------------------------------------------------------------------- Tax Assessment - 0.3% ------------------------------------------------------------------------------------------------------------------- Massachusetts Bay Transportation Authority, Unfunded Balance, "A", 5.25%, 2030 $ 615,000 $ 641,537 ------------------------------------------------------------------------------------------------------------------- Tobacco - 0.6% ------------------------------------------------------------------------------------------------------------------- Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 660,000 $ 687,099 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.5%, 2039 400,000 418,687 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, "A", 0%, 2050 2,000,000 136,920 ------------------------------------------------------------------------------------------------------------------- $ 1,242,706 ------------------------------------------------------------------------------------------------------------------- Universities - Colleges - 21.0% ------------------------------------------------------------------------------------------------------------------- Massachusetts College Building Authority Project Rev., "A", XLCA, 5.25%, 2023 $ 1,000,000 $ 1,064,020 Massachusetts College Building Authority Project Rev., "A", XLCA, 5%, 2043 2,110,000 2,180,179 Massachusetts Development Finance Agency Rev. (Boston University), XLCA, 6%, 2059 1,500,000 1,843,500 Massachusetts Development Finance Agency Rev. (Clark University), XLCA, 5.125%, 2025 1,500,000 1,598,235 Massachusetts Development Finance Agency Rev. (Curry College), "A", ACA, 5%, 2036 1,000,000 1,026,720 Massachusetts Development Finance Agency Rev. (Hampshire College), 5.7%, 2034 1,000,000 1,062,530 Massachusetts Development Finance Agency Rev. (Massachusetts College of Pharmacy), "B", 6.625%, 2010 (c) 50,000 54,338 Massachusetts Development Finance Agency Rev. (Massachusetts College of Pharmacy), "C", 5.75%, 2033 1,000,000 1,068,110 Massachusetts Development Finance Agency Rev. (Mount Holyoke College), 5.125%, 2021 1,000,000 1,048,600 Massachusetts Development Finance Agency Rev. (Olin College), "B", XLCA, 5.25%, 2033 3,000,000 3,189,810 Massachusetts Development Finance Agency Rev. (Suffolk University), 5.75%, 2009 (c) 1,000,000 1,053,520 Massachusetts Development Finance Agency Rev. (Suffolk University), 5.85%, 2009 (c) 1,000,000 1,055,650 Massachusetts Development Finance Agency Rev. (Western New England College), 6.125%, 2012 (c) 1,115,000 1,259,682 Massachusetts Development Finance Agency Rev. Higher Education (Smith College), 5.5%, 2010 (c) 1,210,000 1,289,691 Massachusetts Health & Educational Facilities Authority Rev. (Boston College), "K", 5.25%, 2023 4,350,000 4,352,001 Massachusetts Health & Educational Facilities Authority Rev. (Simmons College), "D", AMBAC, 6.05%, 2010 (c) 1,745,000 1,898,298 Massachusetts Health & Educational Facilities Authority Rev. (Simmons College), "F", FGIC, 5%, 2013 (c) 500,000 537,805 Massachusetts Health & Educational Facilities Authority Rev. (Umass Worcester), "B", FGIC, 5.125%, 2011 (c) 775,000 822,624 Massachusetts Health & Educational Facilities Authority Rev. (Umass Worcester), "B", FGIC, 5.125%, 2019 1,005,000 1,059,089 Massachusetts Health & Educational Facilities Authority Rev. (University of Massachusetts), "A", FGIC, 5.75%, 2010 (c) 2,395,000 2,582,050 Massachusetts Health & Educational Facilities Authority Rev. (University of Massachusetts), "A", FGIC, 5.85%, 2010 (c) 1,200,000 1,297,620 Massachusetts Health & Educational Facilities Authority Rev. (University of Massachusetts), "C", MBIA, 5.25%, 2031 3,000,000 3,236,910 Massachusetts Health & Educational Facilities Authority Rev. (University of Massachusetts), "D", FGIC, 5%, 2029 1,500,000 1,575,465 Massachusetts Health & Educational Facilities Authority Rev. (Wellesley College), 5%, 2033 1,000,000 1,044,020 Massachusetts Health & Educational Facilities Authority Rev. (Wheelock College), "B", MBIA, 5.5%, 2021 3,275,000 3,454,339 Massachusetts Health & Educational Facilities Authority Rev. (Williams College), "H", 5%, 2028 1,000,000 1,047,940 Massachusetts Health & Educational Facilities Authority Rev. (University of Massachusetts), "A", FGIC, 5.625%, 2010 (c) 2,170,000 2,330,645 Massachusetts Industrial Finance Agency Rev. (Brandeis University), "C", MBIA, 0%, 2009 1,000,000 908,250 Massachusetts Industrial Finance Agency Rev. (Brandeis University), "C", MBIA, 0%, 2010 1,000,000 873,830 Massachusetts Industrial Finance Agency Rev. (Brandeis University), "C", MBIA, 0%, 2011 500,000 420,365 ------------------------------------------------------------------------------------------------------------------- $ 46,235,836 ------------------------------------------------------------------------------------------------------------------- Universities - Secondary Schools - 4.3% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency Rev. (Deerfield Academy), "A", 5%, 2028 $ 1,000,000 $ 1,046,300 Massachusetts Development Finance Agency Rev. (Middlesex School), 5.125%, 2023 500,000 531,215 Massachusetts Development Finance Agency Rev. (Williston Northampton School), 6.5%, 2008 (c) 1,300,000 1,378,143 Massachusetts Development Finance Agency Rev. (Xaverian Brothers High School), 5.55%, 2019 1,000,000 1,040,030 Massachusetts Development Finance Agency Rev. (Xaverian Brothers High School), 5.65%, 2029 1,000,000 1,034,320 Massachusetts Industrial Finance Agency Rev. (Concord Academy), 5.5%, 2027 2,000,000 2,052,980 Massachusetts Industrial Finance Agency Rev. (Dana Hall School), 5.9%, 2007 (c) 1,340,000 1,373,714 Massachusetts Industrial Finance Agency Rev. (Tabor Academy), 5.4%, 2018 1,000,000 1,046,860 ------------------------------------------------------------------------------------------------------------------- $ 9,503,562 ------------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 0.3% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency Rev. (Devens Electric Systems), 5.625%, 2016 $ 725,000 $ 768,130 ------------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 6.9% ------------------------------------------------------------------------------------------------------------------- Massachusetts Water Pollution Abatement Trust Rev., Unrefunded Balance, "5", 5.75%, 2017 $ 25,000 $ 26,377 Massachusetts Water Pollution Abatement Trust, "10", 5%, 2014 (c) 855,000 925,136 Massachusetts Water Pollution Abatement Trust, "10", 5%, 2029 160,000 167,886 Massachusetts Water Pollution Abatement Trust, "10", 5%, 2034 145,000 151,683 Massachusetts Water Pollution Abatement Trust, "A", 5%, 2012 (c) 1,435,000 1,527,916 Massachusetts Water Pollution Abatement Trust, "A", 5%, 2032 75,000 78,086 Massachusetts Water Resources Authority, 6.5%, 2019 (u) 8,020,000 9,571,790 Massachusetts Water Resources Authority, General, Rev., "A", FGIC, 6%, 2010 (c) 1,000,000 1,082,090 Massachusetts Water Resources Authority, General, Rev., "J", FSA, 5%, 2023 500,000 522,275 Springfield, MA, Water & Sewer Commission, General, Rev., "A", AMBAC, 5%, 2021 1,000,000 1,054,470 ------------------------------------------------------------------------------------------------------------------- $ 15,107,709 ------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $217,700,196) $231,508,788 ------------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 0.4% ------------------------------------------------------------------------------------------------------------------- Allegheny County, PA, Hospital Development Authority Rev. (Presbyterian University Hospital), "D", 3.7%, due 4/05/07 $ 300,000 $ 300,000 Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), 3.77%, due 4/02/07 103,000 103,000 Jefferson County, AL, Sewer Rev., Capital Improvement Warrants Rev., "A", 3.7%, due 4/05/07 100,000 100,000 Lincoln County, WY, Pollution Control Rev. (Exxon Mobil Corp.), 3.75%, due 4/02/07 300,000 $ 300,000 ------------------------------------------------------------------------------------------------------------------- TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 803,000 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $218,503,196) (k) $232,311,788 ------------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (5.4)% (11,848,077) ------------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $220,463,711 ------------------------------------------------------------------------------------------------------------------- SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------- INTEREST RATE SWAPS 12/01/07 USD 5,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $30,341 8/15/22 USD 2,500,000 Goldman Sachs 5.286% (fixed rate) 3-Month LIBOR (6,877) ------------------------------------------------------------------------------------------------------------------- $23,464 ------------------------------------------------------------------------------------------------------------------- At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. Portfolio Footnotes: (c) Refunded Bond (d) Non-income producing security - in default. (k) As of March 31, 2007, the following funds held securities fair valued in accordance with the policies adopted by the Board of Trustees. All of these security values were provided by an independent pricing service using an evaluated bid. FUND MARKET VALUE % OF MARKET VALUE --------------------------------------------------------------------------------------------------------- Alabama Fund $ 88,345,460 99.47% Arkansas Fund 139,618,446 98.66% California Fund 437,528,353 97.23% Florida Fund 79,024,576 99.25% Georgia Fund 61,635,820 98.45% Maryland Fund 136,298,031 99.20% Massachusetts Fund 231,508,788 99.65% (n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $177,267 and $1,490,076, representing 0.2% and 1.1% of net assets for the Florida Fund and Maryland Fund, respectively. (p) Primary inverse floater. (u) Underlying security deposited into special purpose trust ("the trust") by investment banker upon creation of self-deposited inverse floaters. (v) Externally deposited inverse floater. The following abbreviations are used in this report and are defined: BMA Bond Market Assn. COP Certificate of Participation ETM Escrowed to Maturity LIBOR London Interbank Offered Rate LOC Letter of Credit Insurers Inverse Floaters --------------------------------------------------------------------------------------------------------------- ACA ACA Financial Guaranty Corp. LEVRRS Leveraged Reverse Rate Security AMBAC AMBAC Indemnity Corp. RIBS Residual Interest Bonds ASST GTY Asset Guaranty Insurance Co. RITES Residual Interest Tax-Exempt Security CHFC California Health Facilities Construction Program CIFG CDC IXIS Financial Guaranty FGIC Financial Guaranty Insurance Co. FHA Federal Housing Administration FNMA Federal National Mortgage Assn. FSA Financial Security Assurance, Inc. GNMA Government National Mortgage Assn. MBIA MBIA Insurance Corp. XLCA XL Capital Insurance Co. SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements STATEMENTS OF ASSETS AND LIABILITIES At 3/31/07 These statements represent each fund's balance sheet, which details the assets and liabilities comprising the total value of each fund.
ALABAMA ARKANSAS CALIFORNIA FLORIDA FUND FUND FUND FUND ASSETS ---------------------------------------------------------------------------------------------------------------------------------- Investments - Identified cost $85,131,390 $134,799,296 $428,643,713 $76,019,568 Unrealized appreciation (depreciation) 3,689,070 6,719,150 21,364,640 3,605,008 ---------------------------------------------------------------------------------------------------------------------------------- Total investments, at value $88,820,460 $141,518,446 $450,008,353 $79,624,576 Cash 25,344 22,808 54,734 88,800 Receivable for investments sold 451,800 1,517,017 1,269,438 110,175 Receivable for fund shares sold 210,120 235,135 15,475,350 37,990 Interest receivable 1,328,596 1,921,226 5,278,353 1,401,964 Unrealized appreciation on interest rate swaps 12,137 26,104 98,128 30,545 Other assets 2,452 3,613 8,662 2,548 ---------------------------------------------------------------------------------------------------------------------------------- Total assets $90,850,909 $145,244,349 $472,193,018 $81,296,598 ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES ---------------------------------------------------------------------------------------------------------------------------------- Distributions payable $119,218 $218,811 $623,260 $131,567 Payable for investments purchased -- -- 4,966,450 -- Payable to the holder of the floating rate certificate from trust assets 6,500,000 8,235,000 21,455,000 6,500,000 Payable for fund shares reacquired 47,821 142,840 311,588 22,043 Unrealized depreciation on interest rate swaps 13,157 8,489 38,796 1,847 Payable to affiliates - Management fee 2,069 3,363 10,611 1,835 Shareholder servicing costs 7,665 8,651 22,246 5,976 Distribution and service fees 2,366 4,442 22,027 1,013 Administrative services fee 193 268 691 179 Payable for independent trustees' compensation 10,116 9,811 19,415 9,745 Payable for interest expense and fees 111,108 75,965 150,461 61,132 Accrued expenses and other liabilities 56,046 67,265 92,093 64,947 ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities $6,869,759 $8,774,905 $27,712,638 $6,800,284 ---------------------------------------------------------------------------------------------------------------------------------- Net assets $83,981,150 $136,469,444 $444,480,380 $74,496,314 ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF ---------------------------------------------------------------------------------------------------------------------------------- Paid-in capital $79,852,720 $129,193,288 $423,969,629 $71,006,771 Unrealized appreciation (depreciation) on investments 3,688,050 6,736,765 21,423,972 3,633,706 Accumulated net realized gain (loss) on investments 319,646 315,487 (895,977) (79,913) Accumulated undistributed (distributions in excess of) net investment income 120,734 223,904 (17,244) (64,250) ---------------------------------------------------------------------------------------------------------------------------------- Net assets $83,981,150 $136,469,444 $444,480,380 $74,496,314 ----------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities - continued
ALABAMA ARKANSAS CALIFORNIA FLORIDA FUND FUND FUND FUND Net assets Class A $73,559,914 $127,477,261 $366,860,790 $63,590,266 Class B 10,421,236 8,992,183 47,127,267 10,906,048 Class C -- -- 30,492,323 -- ---------------------------------------------------------------------------------------------------------------------------------- Total net assets $83,981,150 $136,469,444 $444,480,380 $74,496,314 ---------------------------------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding Class A 7,036,260 12,646,778 62,378,258 6,304,076 Class B 996,967 891,151 8,011,672 1,081,105 Class C -- -- 5,166,761 -- ---------------------------------------------------------------------------------------------------------------------------------- Total shares of beneficial interest outstanding 8,033,227 13,537,929 75,556,691 7,385,181 ---------------------------------------------------------------------------------------------------------------------------------- Class A shares Net asset value per share (net assets/shares of beneficial interest outstanding) $10.45 $10.08 $5.88 $10.09 ---------------------------------------------------------------------------------------------------------------------------------- Offering price per share (100/95.25Xnet asset value per share) $10.97 $10.58 $6.17 $10.59 ---------------------------------------------------------------------------------------------------------------------------------- Class B shares Net asset value and offering price per share (net assets/shares of beneficial interest outstanding) $10.45 $10.09 $5.88 $10.09 ---------------------------------------------------------------------------------------------------------------------------------- Class C shares Net asset value and offering price per share (net assets/shares of beneficial interest outstanding) $-- $-- $5.90 $-- ---------------------------------------------------------------------------------------------------------------------------------- On sales of $50,000 or more, the offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. SEE NOTES TO FINANCIAL STATEMENTS
Statements of Assets and Liabilities - continued GEORGIA MARYLAND MASSACHUSETTS AT 3/31/07 FUND FUND FUND ASSETS --------------------------------------------------------------------------------------------------------------------------------- Investments - Identified cost $59,174,285 $130,345,751 $218,503,196 Unrealized appreciation (depreciation) 3,431,535 7,052,280 13,808,592 --------------------------------------------------------------------------------------------------------------------------------- Total investments, at value $62,605,820 $137,398,031 $232,311,788 Cash 5,085 66,672 50,543 Receivable for investments sold 465,000 155,645 1,197,134 Receivable for fund shares sold 1,385 43,440 100,813 Interest receivable 1,084,409 1,832,993 3,500,121 Unrealized appreciation on interest rate swaps 17,747 43,173 30,341 Other assets 1,953 3,668 5,757 --------------------------------------------------------------------------------------------------------------------------------- Total assets $64,181,399 $139,543,622 $237,196,497 --------------------------------------------------------------------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------------------------------------------------------------------- Distributions payable $74,061 $178,633 $357,078 Payable for investments purchased 203,517 306,534 -- Payable to holder of the floating rate certificate from trust assets 4,500,000 4,700,000 15,705,000 Payable for fund shares reacquired 66,588 67,636 407,927 Unrealized depreciation on interest rate swaps -- 14,913 6,877 Payable to affiliates - Management fee 1,459 3,303 5,435 Shareholder servicing costs 4,958 6,396 15,251 Distribution and service fees 1,720 4,736 8,016 Administrative services fee 157 265 389 Payable for independent trustees' compensation 11,468 14,069 14,156 Payable for interest expense and fees 67,346 63,680 129,774 Accrued expenses and other liabilities 60,441 70,352 82,883 --------------------------------------------------------------------------------------------------------------------------------- Total liabilities $4,991,715 $5,430,517 $16,732,786 --------------------------------------------------------------------------------------------------------------------------------- Net assets $59,189,684 $134,113,105 $220,463,711 --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF --------------------------------------------------------------------------------------------------------------------------------- Paid-in capital $55,895,673 $126,627,155 $206,251,961 Unrealized appreciation (depreciation) on investments 3,449,282 7,080,540 13,832,056 Accumulated net realized gain (loss) on investments (37,816) 485,593 548,837 Accumulated distributions in excess of net investment income (117,455) (80,183) (169,143) --------------------------------------------------------------------------------------------------------------------------------- Net assets $59,189,684 $134,113,105 $220,463,711 ---------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities - continued
GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND Net assets Class A $51,015,148 $117,598,430 $189,048,861 Class B 8,174,536 16,514,675 31,414,850 --------------------------------------------------------------------------------------------------------------------------------- Total net assets $59,189,684 $134,113,105 $220,463,711 --------------------------------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding Class A 4,710,490 10,408,731 16,805,151 Class B 752,085 1,462,413 2,788,065 --------------------------------------------------------------------------------------------------------------------------------- Total shares of beneficial interest outstanding 5,462,575 11,871,144 19,593,216 --------------------------------------------------------------------------------------------------------------------------------- Class A shares Net asset value per share (net assets/shares of beneficial interest outstanding) $10.83 $11.30 $11.25 --------------------------------------------------------------------------------------------------------------------------------- Offering price per share (100/95.25Xnet asset value per share) $11.37 $11.86 $11.81 --------------------------------------------------------------------------------------------------------------------------------- Class B shares Net asset value and offering price per share (net assets/shares of beneficial interest outstanding) $10.87 $11.29 $11.27 --------------------------------------------------------------------------------------------------------------------------------- On sales of $50,000 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
Financial Statements STATEMENTS OF OPERATIONS Year ended 3/31/07 These statements describe how much each fund earned in investment income and accrued in expenses. They also describe any gains or losses generated by each fund's operations.
ALABAMA ARKANSAS CALIFORNIA FLORIDA FUND FUND FUND FUND NET INVESTMENT INCOME ---------------------------------------------------------------------------------------------------------------------------------- Interest $4,986,166 $7,829,769 $21,889,251 $4,414,816 ---------------------------------------------------------------------------------------------------------------------------------- Expenses - Management fee $469,793 $733,703 $2,181,898 $444,665 Distribution and service fees 303,935 210,665 1,062,916 96,484 Shareholder servicing costs 102,250 148,600 429,203 92,852 Administrative services fee 23,878 32,507 79,763 23,066 Independent trustees' compensation 3,888 6,343 12,685 4,128 Custodian fee 38,503 47,402 123,002 44,469 Shareholder communications 7,266 16,669 29,848 9,472 Auditing fees 40,805 40,805 41,605 40,805 Legal fees 4,201 3,188 16,553 5,104 Interest expense and fees 248,171 312,869 1,028,247 249,353 Miscellaneous 41,862 49,367 76,424 51,504 ---------------------------------------------------------------------------------------------------------------------------------- Total expenses $1,284,552 $1,602,118 $5,082,144 $1,061,902 ---------------------------------------------------------------------------------------------------------------------------------- Fees paid indirectly (7,416) (9,510) (26,674) (7,525) Reduction of expenses by investment adviser (213,987) (334,194) (993,826) (202,543) ---------------------------------------------------------------------------------------------------------------------------------- Net expenses $1,063,149 $1,258,414 $4,061,644 $851,834 ---------------------------------------------------------------------------------------------------------------------------------- Net investment income $3,923,017 $6,571,355 $17,827,607 $3,562,982 ---------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ---------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) (identified cost basis) - Investment transactions $322,096 $27,552 $1,363,160 $360,428 Swap transactions 142,601 208,747 54,114 (92,508) ---------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments $464,697 $236,299 $1,417,274 $267,920 ---------------------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation) - Investments $(496,594) $(257,541) $658,111 $(10,428) Swap transactions (45,992) (74,791) 60,379 (51,183) ---------------------------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on investments $(542,586) $(332,332) $718,490 $(61,611) ---------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments $(77,889) $(96,033) $2,135,764 $206,309 ---------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $3,845,128 $6,475,322 $19,963,371 $3,769,291 ---------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Statements of Operations - continued
GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND YEAR ENDED 3/31/07 NET INVESTMENT INCOME --------------------------------------------------------------------------------------------------------------------------------- Interest $3,376,702 $7,442,912 $13,035,556 --------------------------------------------------------------------------------------------------------------------------------- Expenses - Management fee $332,832 $742,271 $1,257,514 Distribution and service fees 218,796 598,323 1,024,363 Shareholder servicing costs 72,193 154,248 257,406 Administrative services fee 19,395 32,794 49,670 Independent trustees' compensation 3,817 6,756 11,964 Custodian fee 33,095 47,864 64,315 Shareholder communications 6,298 15,196 23,713 Auditing fees 40,944 40,805 41,605 Legal fees 12,046 6,081 4,126 Interest expense and fees 173,603 179,261 600,707 Miscellaneous 41,959 48,503 60,388 --------------------------------------------------------------------------------------------------------------------------------- Total expenses $954,978 $1,872,102 $3,395,771 --------------------------------------------------------------------------------------------------------------------------------- Fees paid indirectly (5,427) (6,620) (9,858) Reduction of expenses by investment adviser (151,603) (338,098) (572,789) --------------------------------------------------------------------------------------------------------------------------------- Net expenses $797,948 $1,527,384 $2,813,124 --------------------------------------------------------------------------------------------------------------------------------- Net investment income $2,578,754 $5,915,528 $10,222,432 --------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS --------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) (identified cost basis) - Investment transactions $41,612 $579,948 $975,167 Swap transactions (29,265) 112,213 306,775 --------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments $12,347 $692,161 $1,281,942 --------------------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation) - Investments $51,271 $(234,137) $(927,820) Swap transactions (48,734) (84,020) (107,972) --------------------------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on investments $2,537 $(318,157) $(1,035,792) --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments $14,884 $374,004 $246,150 --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $2,593,638 $6,289,532 $10,468,582 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements STATEMENTS OF CHANGES IN NET ASSETS These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
ALABAMA ARKANSAS CALIFORNIA FLORIDA FUND FUND FUND FUND YEAR ENDED 3/31/07 CHANGE IN NET ASSETS FROM OPERATIONS ---------------------------------------------------------------------------------------------------------------------------------- Net investment income $3,923,017 $6,571,355 $17,827,607 $3,562,982 Net realized gain (loss) on investments 464,697 236,299 1,417,274 267,920 Net unrealized gain (loss) on investments (542,586) (332,332) 718,490 (61,611) ---------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $3,845,128 $6,475,322 $19,963,371 $3,769,291 ---------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income Class A $(3,156,475) $(5,558,406) $(14,096,653) $(3,011,198) Class B (428,985) (376,114) (1,967,039) (462,859) Class C -- -- (1,065,059) -- From net realized gain on investments Class A (333,902) -- -- -- Class B (52,906) -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(3,972,268) $(5,934,520) $(17,128,751) $(3,474,057) ---------------------------------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(3,538,592) $3,213,195 $61,771,471 $(11,171,039) ---------------------------------------------------------------------------------------------------------------------------------- Total change in net assets $(3,665,732) $3,753,997 $64,606,091 $(10,875,805) ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS ---------------------------------------------------------------------------------------------------------------------------------- At beginning of period 87,646,882 132,715,447 379,874,289 85,372,119 At end of period $83,981,150 $136,469,444 $444,480,380 $74,496,314 ---------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (distributions in excess of) net investment income included in net assets at end of period $120,734 $223,904 $(17,244) $(64,250) ---------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Statements of Changes in Net Assets - continued GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND YEAR ENDED 3/31/07 CHANGE IN NET ASSETS FROM OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income $2,578,754 $5,915,528 $10,222,432 Net realized gain (loss) on investments 12,347 692,161 1,281,942 Net unrealized gain (loss) on investments 2,537 (318,157) (1,035,792) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $2,593,638 $6,289,532 $10,468,582 --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income Class A $(2,152,288) $(4,893,616) $(8,163,055) Class B (308,790) (695,797) (1,225,506) From net realized gain on investments Class A -- (325,482) (437,284) Class B -- (51,909) (76,182) --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(2,461,078) $(5,966,804) $(9,902,027) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(2,439,289) $(2,526,883) $(14,018,473) --------------------------------------------------------------------------------------------------------------------------------- Total change in net assets $(2,306,729) $(2,204,155) $(13,451,918) --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS --------------------------------------------------------------------------------------------------------------------------------- At beginning of period 61,496,413 136,317,260 233,915,629 At end of period $59,189,684 $134,113,105 $220,463,711 --------------------------------------------------------------------------------------------------------------------------------- Accumulated distributions in excess of net investment income included in net assets at end of period $(117,455) $(80,183) $(169,143) --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Statements of Changes in Net Assets - continued
ALABAMA ARKANSAS CALIFORNIA FLORIDA FUND FUND FUND FUND YEAR ENDED 3/31/06 CHANGE IN NET ASSETS FROM OPERATIONS ---------------------------------------------------------------------------------------------------------------------------------- Net investment income $3,884,000 $6,060,009 $17,491,686 $3,752,067 Net realized gain (loss) on investments 232,548 517,963 (1,179,180) 799,247 Net unrealized gain (loss) on investments (1,578,587) (2,311,453) (1,069,351) (1,123,082) ---------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $2,537,961 $4,266,519 $15,243,155 $3,428,232 ---------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS ---------------------------------------------------------------------------------------------------------------------------------- From net investment income Class A $(3,354,087) $(5,605,194) $(13,643,612) $(3,110,488) Class B (517,644) (401,413) (2,512,572) (644,130) Class C -- -- (1,210,439) -- From net realized gain on investments Class A -- -- (498,302) -- Class B -- -- (106,987) -- Class C -- -- (52,867) -- ---------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(3,871,731) $(6,006,607) $(18,024,779) $(3,754,618) ---------------------------------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(3,636,892) $(3,878,943) $(14,978,975) $(1,765,570) ---------------------------------------------------------------------------------------------------------------------------------- Total change in net assets $(4,970,662) $(5,619,031) $(17,760,599) $(2,091,956) ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS ---------------------------------------------------------------------------------------------------------------------------------- At beginning of period 92,617,544 138,334,478 397,634,888 87,464,075 At end of period $87,646,882 $132,715,447 $379,874,289 $85,372,119 ---------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (distributions in excess of) net investment income included in net assets at end of period $(158,182) $71,943 $(601,740) $(101,465) ---------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Statements of Changes in Net Assets - continued
GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND YEAR ENDED 3/31/06 CHANGE IN NET ASSETS FROM OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income $2,710,686 $6,200,729 $10,103,339 Net realized gain (loss) on investments 104,934 639,411 1,768,389 Net unrealized gain (loss) on investments (1,168,516) (2,628,342) (2,752,976) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $1,647,104 $4,211,798 $9,118,752 --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income Class A $(2,297,243) $(5,277,930) $(8,657,757) Class B (404,404) (856,271) (1,391,165) From net realized gain on investments Class A -- (725,708) (709,997) Class B -- (137,622) (137,074) --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(2,701,647) $(6,997,531) $(10,895,993) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(3,918,543) $(10,873,307) $(15,175,916) --------------------------------------------------------------------------------------------------------------------------------- Total change in net assets $(4,973,086) $(13,659,040) $(16,953,157) --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS --------------------------------------------------------------------------------------------------------------------------------- At beginning of period 66,469,499 149,976,300 250,868,786 At end of period $61,496,413 $136,317,260 $233,915,629 --------------------------------------------------------------------------------------------------------------------------------- Accumulated distributions in excess of net investment income included in net assets at end of period $(174,205) $(270,349) $(477,259) --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements FINANCIAL HIGHLIGHTS MFS(R) ALABAMA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.47 $10.62 $10.88 $10.82 $10.31 --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.49 $0.46 $0.48 $0.48 $0.48 Net realized and unrealized gain (loss) on investments (z) (0.01) (0.15) (0.22) 0.06 0.54 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.48 $0.31 $0.26 $0.54 $1.02 --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.45) $(0.46) $(0.48) $(0.48) $(0.50) From net realized gain on investments (0.05) -- (0.04) -- (0.01) --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.50) $(0.46) $(0.52) $(0.48) $(0.51) --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.45 $10.47 $10.62 $10.88 $10.82 --------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.66 2.97 2.40 5.11 10.06 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.40 1.33 1.21 1.17 1.18 Expenses after expense reductions (f) 1.15 1.08 0.96 0.96 0.98 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.86 0.87 0.84 0.88 0.88 Net investment income (z) 4.70 4.37 4.46 4.38 4.49 Portfolio turnover 9 9 17 10 21 Net assets at end of period (000 Omitted) $73,560 $74,204 $77,499 $80,704 $84,474 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) ALABAMA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.47 $10.62 $10.88 $10.82 $10.31 -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.41 $0.38 $0.40 $0.39 $0.40 Net realized and unrealized gain (loss) on investments (z) (0.01) (0.15) (0.23) 0.07 0.54 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.40 $0.23 $0.17 $0.46 $0.94 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.37) $(0.38) $(0.39) $(0.40) $(0.42) From net realized gain on investments (0.05) -- (0.04) -- (0.01) -------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.42) $(0.38) $(0.43) $(0.40) $(0.43) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.45 $10.47 $10.62 $10.88 $10.82 -------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 3.88 2.20 1.63 4.32 9.14 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 2.15 2.08 1.96 1.91 1.93 Expenses after expense reductions (f) 1.90 1.83 1.71 1.71 1.73 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.61 1.62 1.59 1.63 1.63 Net investment income (z) 3.93 3.61 3.71 3.63 3.74 Portfolio turnover 9 9 17 10 21 Net assets at end of period (000 Omitted) $10,421 $13,443 $15,118 $17,339 $16,163 -------------------------------------------------------------------------------------------------------------------------------- (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.02 per share to net investment income, a decrease of $0.02 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.21% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) ARKANSAS MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.04 $10.17 $10.41 $10.40 $9.97 --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.50 $0.45 $0.45 $0.45 $0.47 Net realized and unrealized gain (loss) on investments (z) (0.01) (0.13) (0.23) 0.01 0.46 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.49 $0.32 $0.22 $0.46 $0.93 --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.45) $(0.45) $(0.46) $(0.45) $(0.50) --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.08 $10.04 $10.17 $10.41 $10.40 --------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 5.02 3.17 2.14 4.53 9.51 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.14 1.10 1.00 0.99 1.02 Expenses after expense reductions (f) 0.89 0.85 0.75 0.79 0.82 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.66 0.67 0.65 0.72 0.73 Net investment income (z) 4.98 4.45 4.47 4.31 4.59 Portfolio turnover 10 10 13 19 15 Net assets at end of period (000 Omitted) $127,477 $122,067 $127,075 $139,333 $134,521 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) ARKANSAS MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.05 $10.18 $10.42 $10.41 $9.98 -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.43 $0.38 $0.38 $0.37 $0.39 Net realized and unrealized gain (loss) on investments (z) (0.01) (0.14) (0.24) 0.01 0.46 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.42 $0.24 $0.14 $0.38 $0.85 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.38) $(0.37) $(0.38) $(0.37) $(0.42) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.09 $10.05 $10.18 $10.42 $10.41 -------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.21 2.39 1.37 3.68 8.62 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.91 1.87 1.76 1.80 1.83 Expenses after expense reductions (f) 1.66 1.62 1.51 1.60 1.63 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.43 1.44 1.41 1.53 1.54 Net investment income (z) 4.21 3.68 3.71 3.50 3.77 Portfolio turnover 10 10 13 19 15 Net assets at end of period (000 Omitted) $8,992 $10,648 $11,259 $12,554 $12,049 -------------------------------------------------------------------------------------------------------------------------------- Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.03 per share to net investment income, a decrease of $0.03 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.30% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) CALIFORNIA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.84 $5.88 $5.98 $5.96 $5.70 --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.27 $0.28 $0.29 $0.28 $0.28 Net realized and unrealized gain (loss) on investments (z) 0.03 (0.03) (0.11) 0.02 0.27 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.30 $0.25 $0.18 $0.30 $0.55 --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.26) $(0.28) $(0.28) $(0.28) $(0.29) From net realized gain on investments -- (0.01) -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.26) $(0.29) $(0.28) $(0.28) $(0.29) --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.88 $5.84 $5.88 $5.98 $5.96 --------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 5.30 4.22 3.14 5.22 9.79 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.11 1.09 0.97 0.96 0.96 Expenses after expense reductions (f) 0.86 0.84 0.72 0.76 0.76 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.60 0.63 0.61 0.67 0.67 Net investment income (z) 4.66 4.69 4.91 4.71 4.73 Portfolio turnover 16 9 12 8 22 Net assets at end of period (000 Omitted) $366,861 $291,656 $295,332 $314,108 $333,350 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) CALIFORNIA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.84 $5.88 $5.98 $5.96 $5.70 -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.23 $0.23 $0.25 $0.23 $0.23 Net realized and unrealized gain (loss) on investments (z) 0.03 (0.03) (0.11) 0.03 0.27 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.26 $0.20 $0.14 $0.26 $0.50 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.22) $(0.23) $(0.24) $(0.24) $(0.24) From net realized gain on investments -- (0.01) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.22) $(0.24) $(0.24) $(0.24) $(0.24) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.88 $5.84 $5.88 $5.98 $5.96 -------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.51 3.44 2.38 4.38 8.93 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.88 1.85 1.70 1.76 1.75 Expenses after expense reductions (f) 1.62 1.60 1.45 1.56 1.55 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.37 1.39 1.34 1.47 1.46 Net investment income (z) 3.91 3.94 4.17 3.91 3.94 Portfolio turnover 16 9 12 8 22 Net assets at end of period (000 Omitted) $47,127 $58,338 $69,142 $85,106 $98,888 -------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) CALIFORNIA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS C 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.86 $5.90 $6.00 $5.98 $5.72 -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.22 $0.23 $0.24 $0.23 $0.23 Net realized and unrealized gain (loss) on investments (z) 0.03 (0.04) (0.11) 0.02 0.27 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.25 $0.19 $0.13 $0.25 $0.50 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.21) $(0.22) $(0.23) $(0.23) $(0.24) From net realized gain on investments -- (0.01) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.21) $(0.23) $(0.23) $(0.23) $(0.24) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.90 $5.86 $5.90 $6.00 $5.98 -------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.36 3.29 2.22 4.27 8.78 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 2.01 1.99 1.87 1.86 1.86 Expenses after expense reductions (f) 1.76 1.74 1.62 1.65 1.66 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.50 1.53 1.51 1.56 1.57 Net investment income (z) 3.77 3.79 4.01 3.81 3.83 Portfolio turnover 16 9 12 8 22 Net assets at end of period (000 Omitted) $30,492 $29,880 $33,162 $36,363 $40,804 -------------------------------------------------------------------------------------------------------------------------------- Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of less than $0.01 per share to net investment income, a decrease of less than $0.01 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.06% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) FLORIDA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.05 $10.09 $10.24 $10.19 $9.78 --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.46 $0.45 $0.47 $0.47 $0.48 Net realized and unrealized gain (loss) on investments (z) 0.02 (0.04) (0.15) 0.05 0.44 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.48 $0.41 $0.32 $0.52 $0.92 --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.44) $(0.45) $(0.47) $(0.47) $(0.51) --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.09 $10.05 $10.09 $10.24 $10.19 --------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.92 4.14 3.25 5.20 9.40 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.19 1.11 0.94 0.98 0.88 Expenses after expense reductions (f) 0.94 0.86 0.69 0.77 0.68 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.64 0.64 0.57 0.64 0.62 Net investment income (z) 4.53 4.46 4.68 4.58 4.78 Portfolio turnover 9 17 18 31 27 Net assets at end of period (000 Omitted) $63,590 $70,402 $69,082 $79,155 $86,045 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) FLORIDA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.05 $10.09 $10.24 $10.19 $9.78 -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.38 $0.38 $0.40 $0.39 $0.40 Net realized and unrealized gain (loss) on investments (z) 0.03 (0.04) (0.16) 0.05 0.43 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.41 $0.34 $0.24 $0.44 $0.83 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.37) $(0.38) $(0.39) $(0.39) $(0.42) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.09 $10.05 $10.09 $10.24 $10.19 -------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.12 3.35 2.45 4.36 8.64 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.96 1.87 1.71 1.77 1.68 Expenses after expense reductions (f) 1.71 1.62 1.46 1.57 1.48 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.40 1.40 1.34 1.44 1.42 Net investment income (z) 3.77 3.70 3.92 3.78 3.97 Portfolio turnover 9 17 18 31 27 Net assets at end of period (000 Omitted) $10,906 $14,970 $18,382 $22,312 $25,175 -------------------------------------------------------------------------------------------------------------------------------- (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.01 per share to net investment income, a decrease of $0.01 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.06% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) GEORGIA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.80 $10.99 $11.22 $11.17 $10.63 --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.47 $0.46 $0.48 $0.49 $0.49 Net realized and unrealized gain (loss) on investments (z) 0.01 (0.18) (0.23) 0.05 0.55 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.48 $0.28 $0.25 $0.54 $1.04 --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.45) $(0.47) $(0.48) $(0.49) $(0.50) --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.83 $10.80 $10.99 $11.22 $11.17 --------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.55 2.53 2.27 4.93 9.97 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.47 1.39 1.24 1.20 1.22 Expenses after expense reductions (f) 1.22 1.14 0.99 0.99 1.02 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.93 0.93 0.88 0.91 0.92 Net investment income (z) 4.37 4.22 4.35 4.35 4.43 Portfolio turnover 6 5 18 12 25 Net assets at end of period (000 Omitted) $51,015 $51,681 $53,190 $55,659 $57,636 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) GEORGIA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.84 $11.00 $11.23 $11.18 $10.64 -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.40 $0.41 $0.40 $0.40 $0.40 Net realized and unrealized gain (loss) on investments (z) 0.00(w) (0.18) (0.24) 0.06 0.56 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.40 $0.23 $0.16 $0.46 $0.96 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.37) $(0.39) $(0.39) $(0.41) $(0.42) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.87 $10.84 $11.00 $11.23 $11.18 -------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 3.77 2.05 1.51 4.15 9.15 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 2.22 2.14 1.99 1.94 1.97 Expenses after expense reductions (f) 1.97 1.89 1.74 1.74 1.77 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.68 1.68 1.63 1.66 1.67 Net investment income (z) 3.63 3.72 3.60 3.60 3.68 Portfolio turnover 6 5 18 12 25 Net assets at end of period (000 Omitted) $8,175 $9,816 $13,280 $16,759 $18,077 -------------------------------------------------------------------------------------------------------------------------------- Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (w) Per share amount was less than $0.01. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.01 per share to net investment income, a decrease of $0.01 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.12% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) MARYLAND MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.27 $11.49 $11.74 $11.69 $11.21 --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.50 $0.50 $0.52 $0.51 $0.52 Net realized and unrealized gain (loss) on investments (z) 0.04 (0.15) (0.25) 0.06 0.50 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.54 $0.35 $0.27 $0.57 $1.02 --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.48) $(0.50) $(0.51) $(0.52) $(0.54) From net realized gain on investments (0.03) (0.07) (0.01) -- -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.51) $(0.57) $(0.52) $(0.52) $(0.54) --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.30 $11.27 $11.49 $11.74 $11.69 --------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.88 3.06 2.36 4.96 9.21 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.29 1.19 1.14 1.17 1.15 Expenses after expense reductions (f) 1.04 0.94 0.89 0.96 0.95 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.91 0.94 0.89 0.96 0.95 Net investment income (z) 4.48 4.38 4.48 4.35 4.51 Portfolio turnover 16 9 12 21 12 Net assets at end of period (000 Omitted) $117,598 $115,307 $124,261 $138,201 $138,666 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) MARYLAND MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.26 $11.49 $11.74 $11.68 $11.20 -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.43 $0.43 $0.44 $0.43 $0.45 Net realized and unrealized gain (loss) on investments (z) 0.03 (0.17) (0.25) 0.07 0.49 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.46 $0.26 $0.19 $0.50 $0.94 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.40) $(0.42) $(0.44) $(0.44) $(0.46) From net realized gain on investments (0.03) (0.07) (0.00)(w) -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.43) $(0.49) $(0.44) $(0.44) $(0.46) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.29 $11.26 $11.49 $11.74 $11.68 -------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.21 2.30 1.69 4.37 8.52 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.95 1.84 1.79 1.81 1.80 Expenses after expense reductions (f) 1.70 1.59 1.54 1.61 1.60 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.56 1.59 1.54 1.61 1.60 Net investment income (z) 3.83 3.72 3.83 3.70 3.86 Portfolio turnover 16 9 12 21 12 Net assets at end of period (000 Omitted) $16,515 $21,011 $25,716 $31,697 $34,033 -------------------------------------------------------------------------------------------------------------------------------- (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (w) Per share amount was less than $0.01. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.01 per share to net investment income, a decrease of $0.01 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.12% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.22 $11.31 $11.52 $11.49 $10.90 --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.51 $0.48 $0.51 $0.51 $0.52 Net realized and unrealized gain (loss) on investments (z) 0.02 (0.05) (0.22) 0.03 0.60 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.53 $0.43 $0.29 $0.54 $1.12 --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.47) $(0.48) $(0.50) $(0.51) $(0.53) From net realized gain on investments (0.03) (0.04) -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.50) $(0.52) $(0.50) $(0.51) $(0.53) --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.25 $11.22 $11.31 $11.52 $11.49 --------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.80 3.83 2.63 4.82 10.42 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 1.39 1.34 1.19 1.23 1.21 Expenses after expense reductions (f) 1.14 1.09 0.94 1.02 1.01 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.87 0.90 0.84 0.95 0.92 Net investment income (z) 4.57 4.23 4.48 4.39 4.56 Portfolio turnover 5 10 11 14 15 Net assets at end of period (000 Omitted) $189,049 $196,992 $210,103 $224,923 $233,500 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 ----------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.24 $11.33 $11.54 $11.51 $10.92 -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- Net investment income (d)(z) $0.44 $0.41 $0.43 $0.43 $0.44 Net realized and unrealized gain (loss) on investments (z) 0.02 (0.05) (0.21) 0.04 0.60 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations $0.46 $0.36 $0.22 $0.47 $1.04 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS -------------------------------------------------------------------------------------------------------------------------------- From net investment income $(0.40) $(0.41) $(0.43) $(0.44) $(0.45) From net realized gain on investments (0.03) (0.04) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(0.43) $(0.45) $(0.43) $(0.44) $(0.45) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.27 $11.24 $11.33 $11.54 $11.51 -------------------------------------------------------------------------------------------------------------------------------- Total return (%) (r)(s)(t) 4.12 3.16 1.97 4.14 9.69 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------------------------------------------- Expenses before expense reductions (f) 2.04 1.99 1.84 1.87 1.86 Expenses after expense reductions (f) 1.79 1.74 1.59 1.67 1.66 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.52 1.55 1.49 1.60 1.57 Net investment income (z) 3.92 3.58 3.83 3.74 3.91 Portfolio turnover 5 10 11 14 15 Net assets at end of period (000 Omitted) $31,415 $36,924 $40,766 $46,253 $47,612 -------------------------------------------------------------------------------------------------------------------------------- Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.02 per share to net investment income, a decrease of $0.02 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.20% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (1) BUSINESS AND ORGANIZATION MFS Alabama Municipal Bond Fund (Alabama Fund), MFS Arkansas Municipal Bond Fund (Arkansas Fund), MFS California Municipal Bond Fund (California Fund), MFS Florida Municipal Bond Fund (Florida Fund), MFS Georgia Municipal Bond Fund (Georgia Fund), MFS Maryland Municipal Bond Fund (Maryland Fund), and MFS Massachusetts Municipal Bond Fund (Massachusetts Fund) are each a series of MFS Municipal Series Trust which 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 U.S. 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. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the taxation supporting the projects or assets or the inability to collect revenues for the project or from the assets. If the Internal Revenue Service determines an issuer of a municipal security has not complied with applicable tax requirements, the security could decline in value, interest from the security could become taxable and the funds may be required to issue Forms 1099-DIV. INVESTMENT VALUATIONS - Debt instruments (other than short-term instruments), including restricted debt instruments, are generally valued at an evaluated or composite bid as reported by an independent pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Swaps are generally valued at an evaluated bid as reported by an independent pricing service. Securities and other assets generally valued on the basis of information from an independent pricing service may also be valued at a broker-dealer bid quotation. Values obtained from pricing services can utilize both dealer-supplied valuations and electronic data processing techniques, which take into account 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. The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund's investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund's valuation policies and procedures, market quotations are not considered to be readily available for many types of debt instruments and certain types of derivatives. These investments are generally valued at fair value based on information from independent pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment's value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund's net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund's net asset value may be deemed to have a material affect on the value of securities traded in foreign markets. Accordingly, the fund's foreign equity securities may often be valued at fair value. The adviser may rely on independent pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund's net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of investments used to determine the fund's net asset value may differ from quoted or published prices for the same investments. In September 2006, FASB Statement No. 157, Fair Value Measurements (the "Statement") was issued, and is effective for fiscal years beginning after November 15, 2007 and for all interim periods within those fiscal years. This Statement provides a single definition of fair value, a hierarchy for measuring fair value and expanded disclosures about fair value measurements. Management is evaluating the application of the Statement to each fund, and believes the impact will be limited to expanded disclosures resulting from the adoption of this Statement in each fund's financial statements. DERIVATIVE RISK - Each fund may invest in derivatives for hedging or non- hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the funds use derivatives as an investment to gain market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative's original cost. Derivative instruments include swap agreements. SWAP AGREEMENTS - Each fund may enter into swap agreements. A swap is an exchange of cash payments between the fund and another party. Net cash payments are exchanged at specified intervals and are recorded as a realized gain or loss in the Statement of Operations. The value of the swap is adjusted daily and the change in value, including accruals of periodic amounts of interest to be paid or received, is recorded as unrealized appreciation or depreciation in the Statement of Operations. A liquidation payment received or made upon early termination is recorded as a realized gain or loss in the Statement of Operations. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in connection with these agreements. Risk of loss may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include the possible lack of a liquid market, failure of the counterparty to perform under the terms of the agreements, and unfavorable market movement of the underlying instrument. All swap agreements entered into by the funds with the same counterparty are generally governed by a single master agreement, which provides for the netting of all amounts owed by the parties under the agreement upon the occurrence of an event of default, thereby reducing the credit risk to which such party is exposed. Each fund holds interest rate swap agreements which involve the periodic exchange of cash flows, such as the exchange of fixed rate interest payments for floating rate interest payments based on a notional principal amount. The interest rates may be based on a specific financial index or the exchange of two distinct floating rate payments. The funds may enter into an interest rate swap in order to manage its exposure to interest rate fluctuations. INVERSE FLOATERS - The funds invest in municipal inverse floating rate securities which are structured by the issuer (known as primary market inverse floating rate securities) or by an investment banker utilizing municipal bonds which have already been issued (known as secondary market inverse floating rate securities) to have variable rates of interest which typically move in the opposite direction of short term interest rates. A secondary market inverse floating rate security is created when an investment banker transfers a fixed rate municipal bond to a special purpose trust, and causes the trust to (a) issue floating rate certificates to third parties, in an amount equal to a fraction of the par amount of the deposited bonds (these certificates usually pay tax-exempt interest at short-term interest rates that typically reset weekly; and the certificate holders typically, on seven days notice, have the option to tender their certificates to the investment banker or another party for redemption at par plus accrued interest), and (b) issue inverse floating rate certificates (sometimes referred to as "inverse floaters"). If the holder of the inverse floater transfers the municipal bonds to an investment banker for the purpose of depositing the municipal bonds into the special purpose trust, the inverse floating rate certificates that are issued by the trust are referred to as "self-deposited inverse floaters." If the bonds held by the trust are purchased by the investment banker for deposit into the trust from someone other than the purchasers of the inverse floaters, the inverse floating rate certificates that are issued by the trust are referred to as "externally deposited inverse floaters." Such self-deposited inverse floaters held by the funds are accounted for as secured borrowings, with the municipal bonds reflected in the investments of the funds and amounts owed to the holder of the floating rate certificate under the provisions of the trust, which amounts are paid solely from the assets of the trust, reflected as liabilities of the funds in the Statements of Assets and Liabilities under the caption, "Payable to the holder of the floating rate certificate from trust assets". Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets in connection with self-deposited inverse floater transactions. Interest expense and fees are recorded as incurred. At March 31, 2007, the value of bonds transferred to the trust, each fund's payable to the holder of the floating rate certificate from trust assets, the weighted average interest rate on the floating rate certificates issued by the trust, and the interest expense and fees in connection with self-deposited inverse floaters were as follows:
WEIGHTED AVERAGE INTEREST EXPENSE AND PAYABLE TO THE HOLDER INTEREST RATE ON FEES IN CONNECTION VALUE OF BONDS OF THE FLOATING RATE FLOATING RATE WITH SELF-DEPOSITED TRANSFERRED TO CERTIFICATE FROM CERTIFICATES ISSUED INVERSE FLOATER THE TRUST TRUST ASSETS BY THE TRUST TRANSACTIONS FUND Alabama Fund $13,633,170 $ 6,500,000 4.23% $248,171 Arkansas Fund 17,445,030 8,235,000 4.21% 312,869 California Fund 47,771,149 21,455,000 4.15% 1,028,247 Florida Fund 14,107,080 6,500,000 4.00% 249,353 Georgia Fund 10,043,310 4,500,000 4.31% 173,603 Maryland Fund 10,107,793 4,700,000 4.23% 179,261 Massachusetts Fund 35,839,381 15,705,000 4.29% 600,707
Primary and externally deposited inverse floaters held by the funds are not accounted for as secured borrowings. INDEMNIFICATIONS - Under each fund's organizational documents, its officers and trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to each fund. Additionally, in the normal course of business, each fund enters into agreements with service providers that may contain indemnification clauses. Each fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against each fund that have not yet occurred. INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. All premium and original issue discount is amortized or accreted for tax reporting purposes as required by federal income tax regulations. Each fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statements of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statements of Operations. 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. As a result of a change in estimate for the amortization of premium and accretion of discount on certain debt securities, interest income has been increased by the following amounts, with a corresponding reduction to net unrealized appreciation (depreciation).
ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND Interest Income $183,123 $395,879 $230,572 $47,896 $75,425 $162,486 $447,164 Net unrealized appreciation (depreciation) (183,123) (395,879) (230,572) (47,896) (75,425) (162,486) (447,164)
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 each fund. This amount, for the year ended March 31, 2007, is shown as a reduction of total expenses on the Statements of Operations. TAX MATTERS AND DISTRIBUTIONS - Each fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable and tax-exempt income, including realized capital gains. Accordingly, no provision for federal income tax is required in the financial statements. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes. Book/tax differences primarily relate to amortization and accretion of debt securities and secured borrowings. The tax character of distributions declared to shareholders is as follows:
ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS YEAR ENDED 3/31/07 FUND FUND FUND FUND FUND FUND FUND Ordinary income (including any short-term capital gains) $57,485 $-- $-- $-- $-- $186,693 $513,466 Tax-exempt income 3,585,460 5,934,520 17,128,751 3,474,057 2,461,078 5,582,159 9,388,561 Long-term capital gain 329,323 -- -- -- -- 197,952 -- ----------------------------------------------------------------------------------------------------------------------------------- Total distributions $3,972,268 $5,934,520 $17,128,751 $3,474,057 $2,461,078 $5,966,804 $9,902,027 ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS YEAR ENDED 3/31/06 FUND FUND FUND FUND FUND FUND FUND Ordinary income (including any short-term capital gains) $-- $-- $-- $49,709 $-- $-- $-- Tax-exempt income 3,871,731 6,006,607 17,366,623 3,704,909 2,701,647 6,134,201 10,048,922 Long-term capital gain -- -- 658,156 -- -- 863,330 847,071 ----------------------------------------------------------------------------------------------------------------------------------- Total distributions $3,871,731 $6,006,607 $18,024,779 $3,754,618 $2,701,647 $6,997,531 $10,895,993 The federal tax cost and the tax basis components of distributable earnings were as follows: ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS AS OF 3/31/07 FUND FUND FUND FUND FUND FUND FUND Cost of investments $78,497,368 $125,957,271 $407,973,746 $69,583,436 $54,645,374 $125,357,611 $203,253,873 ----------------------------------------------------------------------------------------------------------------------------------- Gross appreciation $4,214,563 $7,374,077 $20,868,087 $3,567,739 $3,470,714 $7,364,552 $13,389,249 Gross depreciation (391,471) (47,902) (288,480) (26,599) (10,268) (24,132) (36,334) ----------------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) $3,823,092 $7,326,175 $20,579,607 $3,541,140 $3,460,446 $7,340,420 $13,352,915 Undistributed ordinary income 109,379 -- -- -- -- 8,856 454,630 Undistributed tax-exempt income 572,114 740,341 1,474,026 210,363 92,730 376,829 598,855 Undistributed long-term capital gain 77,664 -- -- -- -- 199,581 553,431 Capital loss carryforwards -- (289,410) (104,559) (14,626) -- -- -- Post-October capital loss deferral -- -- -- -- (66,017) -- -- Other temporary differences (453,819) (500,950) (1,438,323) (247,334) (193,148) (439,736) (748,081) As of March 31, 2007, certain funds had capital loss carryforwards available to offset future realized gains. Such losses expire as follows: ARKANSAS CALIFORNIA FLORIDA EXPIRATION DATE FUND FUND FUND 3/31/11 $-- $-- $(14,626) 3/31/12 (289,410) -- -- 3/31/14 -- (104,559) -- ----------------------------------------------------------------------------------------------------------------- Total $(289,410) $(104,559) $(14,626) In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the "Interpretation") was issued, and is effective for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. On December 22, 2006, the SEC delayed the implementation of the Interpretation for regulated investment companies for an additional six months. This Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return, and requires certain expanded disclosures. Management has evaluated the application of the Interpretation to each fund, and has determined that there is no impact resulting from the adoption of this Interpretation on each fund's financial statements. MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - Each fund offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of each 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 - Each fund has an investment advisory agreement with Massachusetts Financial Services Company (MFS) to provide overall investment management and related administrative services and facilities to each fund. The management fee is computed daily and paid monthly at an annual rate of 0.55% of each fund's average daily net assets. As part of a settlement agreement with the New York Attorney General concerning market timing and related matters, MFS has agreed to reduce the management fee to 0.30% of each fund's average daily net assets for the period March 1, 2004 through February 28, 2009. For the year ended March 31, 2007, this waiver amounted to the following for each fund and is reflected as a reduction of total expenses in the Statements of Operations. ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND $213,542 $333,501 $991,772 $202,120 $151,288 $337,396 $571,597 The management fee incurred for the year ended March 31, 2007 was equivalent to an annual effective rate of 0.30% of each fund's average daily net assets. DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received the following amounts for the year ended March 31, 2007, as its portion of the initial sales charge on sales of Class A shares of the funds. ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND $17,753 $64,852 $85,740 $12,151 $9,074 $27,357 $36,564 The Board of Trustees has adopted a distribution plan for certain class shares pursuant to Rule 12b-1 of the Investment Company Act of 1940. Each fund's distribution plan provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries. Distribution Fee Plan Table: CLASS A ----------------------------------------------------------------------------------------- TOTAL ANNUAL DISTRIBUTION DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE FEE RATE FEE RATE PLAN(d) RATE(e) FEE Alabama Fund 0.10% 0.25% 0.35% 0.25% $183,411 Arkansas Fund 0.10% 0.25% 0.35% 0.10% 123,342 California Fund 0.10% 0.25% 0.35% 0.10% 314,510 Florida Fund 0.10% 0.25% 0.35% -- -- Georgia Fund 0.10% 0.25% 0.35% 0.25% 128,785 Maryland Fund 0.10% 0.25% 0.35% 0.35% 404,526 Massachusetts Fund 0.10% 0.25% 0.35% 0.35% 679,553 CLASS B ----------------------------------------------------------------------------------------- TOTAL ANNUAL DISTRIBUTION DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE FEE RATE FEE RATE PLAN(d) RATE(e) FEE Alabama Fund 0.75% 0.25% 1.00% 1.00% $120,524 Arkansas Fund 0.75% 0.25% 1.00% 0.87% 87,323 California Fund 0.75% 0.25% 1.00% 0.86% 451,834 Florida Fund 0.75% 0.25% 1.00% 0.76% 96,484 Georgia Fund 0.75% 0.25% 1.00% 1.00% 90,011 Maryland Fund 0.75% 0.25% 1.00% 1.00% 193,797 Massachusetts Fund 0.75% 0.25% 1.00% 1.00% 344,810 CLASS C ----------------------------------------------------------------------------------------- TOTAL ANNUAL DISTRIBUTION DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE FEE RATE FEE RATE PLAN(d) RATE(e) FEE California Fund 0.75% 0.25% 1.00% 1.00% $296,572 ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND Total Distribution and Service Fees $303,935 $210,665 $1,062,916 $96,484 $218,796 $598,323 $1,024,363 (d) In accordance with the distribution plan for certain classes, each fund pays distribution and/or service fees up to these annual percentage rates of each class' average daily net assets. (e) The annual effective rates represent actual fees incurred under the distribution plan for the year ended March 31, 2007 based on each class' average daily net assets. Payment of Florida Fund's 0.25% annual Class A service fee is not yet in effect and will be implemented on such date as the fund's Board of Trustees may determine. 0.10% of the Class A service fee is currently being paid by the Arkansas Fund and California Fund. Payment of the remaining 0.15% of the Class A service fee is not yet in effect and will be implemented on such date as the fund's Board of Trustees may determine. For one year from the date of sale of Florida Fund's Class B shares, assets attributable to such Class B shares are subject to the 0.25% annual Class B service fee. On assets attributable to all other Class B shares, the service fee is not currently in effect, but may be implemented on such date as the fund's Board of Trustees may determine. For one year from the date of sale of Arkansas Fund's and California Fund's Class B shares, assets attributable to such Class B shares are subject to the 0.25% annual Class B service fee. On assets attributable to all other Class B shares, 0.10% of the Class B service fee is currently in effect and the remaining portion of the Class B service fee is not in effect but may be implemented on such date as the fund's Board of Trustees may determine. Payment of the Alabama Fund's, Arkansas Fund's, California Fund's, Florida Fund's, and Georgia Fund's 0.10% annual Class A distribution fee is not yet in effect and will be implemented on such date as the fund's Board of Trustees may determine. Certain Class A and Class C shares are subject to a contingent deferred sales charge in the event of a shareholder redemption within 12 months of purchase. Class B shares are subject to a contingent deferred sales charge in the event of a shareholder redemption within six years of purchase. All contingent deferred sales charges are paid to MFD and during the year ended March 31, 2007, were as follows: ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS CDSC IMPOSED FUND FUND FUND FUND FUND FUND FUND Class A $-- $1 $20,000 $-- $-- $-- $1,156 Class B 38,014 21,349 99,477 32,502 11,841 25,324 60,918 Class C N/A N/A 3,913 N/A N/A N/A N/A SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the funds for its services as shareholder servicing agent calculated as a percentage of the average daily net assets of each fund as determined periodically under the supervision of the funds' Board of Trustees. For the year ended March 31, 2007, each fund paid MFSC the following fee, which equated to the following annual percentage of each fund's average daily net assets. ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND Expenses paid $71,308 $111,026 $328,396 $67,833 $50,488 $112,580 $191,101 Percentage of average daily net assets 0.0835% 0.0832% 0.0828% 0.0839% 0.0834% 0.0834% 0.0836% MFSC also receives payment from the funds for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated or unaffiliated service providers. For the year ended March 31, 2007, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to the following: ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND $28,205 $32,334 $85,185 $21,627 $19,281 $33,479 $54,774 The funds may also pay shareholder servicing related costs directly to non- related parties. ADMINISTRATOR - MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the funds. Under an administrative services agreement, the funds partially reimburse MFS the costs incurred to provide these services. Each fund is charged a fixed amount plus a fee based on calendar year average net assets. Each fund's annual fixed amount is $17,500. The administrative services fee incurred for the year ended March 31, 2007 was equivalent to the following annual effective rates of each fund's average daily net assets: ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND 0.0280% 0.0244% 0.0201% 0.0285% 0.0321% 0.0243% 0.0217% TRUSTEES' AND OFFICERS' COMPENSATION - Each fund pays compensation to independent trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The funds do not pay compensation directly to trustees or officers of each fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the funds from MFS. Certain officers and trustees of the funds are officers or directors of MFS, MFD, and MFSC. Each fund has an unfunded, defined benefit plan for certain retired independent trustees which resulted in the following pension expense for the funds. These amounts are included in independent trustees' compensation for the year ended March 31, 2007. ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND $804 $776 $10,864 $772 $792 $1,586 $1,611 The liability for deferred retirement benefits payable to certain retired independent trustees amounted to the following for each fund at March 31, 2007, and is included in payable for independent trustees' compensation. ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND $10,065 $9,703 $19,169 $9,689 $11,394 $13,959 $13,895 OTHER - These funds and certain other MFS funds (the funds) have entered into a services agreement (the Agreement) which provides for payment of fees by the funds to Tarantino LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the Agreement with Tarantino LLC at any time under the terms of the Agreement. For the year ended March 31, 2007, the fee paid to Tarantino LLC amounted to the following: ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND $559 $874 $2,599 $532 $399 $888 $1,491 MFS has agreed to reimburse the funds for a portion of the payments made by each fund to Tarantino LLC in the following amounts, which are shown as a reduction of total expenses in the Statements of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO. ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND $445 $693 $2,054 $423 $315 $702 $1,192 (4) PORTFOLIO SECURITIES Purchases and sales of investments, other than U.S. government securities, purchased option transactions, and short-term obligations, were as follows: ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND Purchases $7,739,778 $15,003,226 $102,164,511 $7,531,782 $4,026,935 $22,125,673 $12,059,073 ---------------------------------------------------------------------------------------------------------------------------------- Sales $11,466,205 $13,896,403 $67,120,714 $18,238,255 $7,366,118 $23,299,374 $26,307,924 ---------------------------------------------------------------------------------------------------------------------------------- (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 each fund's shares were as follows: ALABAMA FUND ARKANSAS FUND -------------------------------------------------------- ------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/07 3/31/06 3/31/07 3/31/06 --------------------------- --------------------------- -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT Shares sold Class A 669,802 $7,025,464 453,164 $4,807,670 1,572,202 $15,852,374 1,098,066 $11,184,396 Class B 29,502 309,032 47,894 508,335 44,510 445,846 127,141 1,292,625 ------------------------------------------------------------------------------------------------------------------------------------ 699,304 $7,334,496 501,058 $5,316,005 1,616,712 $16,298,220 1,225,207 $12,477,021 Shares issued to shareholders in reinvestment of distributions Class A 195,465 $2,049,643 183,725 $1,948,887 309,341 $3,114,374 306,870 $3,122,224 Class B 27,098 284,136 27,249 289,073 22,326 224,998 24,788 252,510 ------------------------------------------------------------------------------------------------------------------------------------ 222,563 $2,333,779 210,974 $2,237,960 331,667 $3,339,372 331,658 $3,374,734 Shares reacquired Class A (917,325) $(9,608,003) (842,942) $(8,923,169) (1,396,838) $(14,049,706) (1,743,455) $(17,710,230) Class B (344,019) (3,598,864) (213,823) (2,267,688) (235,505) (2,374,691) (198,441) (2,020,468) ------------------------------------------------------------------------------------------------------------------------------------ (1,261,344) $(13,206,867) (1,056,765) $(11,190,857) (1,632,343) $(16,424,397) (1,941,896) $(19,730,698) Net change Class A (52,058) $(532,896) (206,053) $(2,166,612) 484,705 $4,917,042 (338,519) $(3,403,610) Class B (287,419) (3,005,696) (138,680) (1,470,280) (168,669) (1,703,847) (46,512) (475,333) ------------------------------------------------------------------------------------------------------------------------------------ (339,477) $(3,538,592) (344,733) $(3,636,892) 316,036 $3,213,195 (385,031) $(3,878,943) CALIFORNIA FUND FLORIDA FUND -------------------------------------------------------- ------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/07 3/31/06 3/31/07 3/31/06 --------------------------- --------------------------- -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT Shares sold Class A 19,060,380 $112,028,736 5,540,422 $32,768,817 628,039 $6,315,187 1,343,743 $13,639,634 Class B 439,370 2,576,697 341,572 2,022,416 51,412 517,499 116,876 1,188,551 Class C 682,033 4,026,468 501,717 2,981,705 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ 20,181,783 $118,631,901 6,383,711 $37,772,938 679,451 $6,832,686 1,460,619 $14,828,185 Shares issued to shareholders in reinvestment of distributions Class A 1,284,059 $7,531,550 1,269,372 $7,511,470 150,268 $1,515,757 142,752 $1,450,063 Class B 204,868 1,201,571 262,673 1,555,229 21,190 213,659 27,817 282,641 Class C 106,824 628,361 129,873 771,330 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ 1,595,751 $9,361,482 1,661,918 $9,838,029 171,458 $1,729,416 170,569 $1,732,704 Shares reacquired Class A (7,938,517) $(46,583,688) (7,053,114) $(41,766,637) (1,476,778) $(14,895,683) (1,327,818) $(13,490,043) Class B (2,623,694) (15,379,345) (2,363,896) (14,014,351) (480,511) (4,837,458) (476,733) (4,836,416) Class C (724,167) (4,258,879) (1,149,084) (6,808,954) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ (11,286,378) $(66,221,912) (10,566,094) $(62,589,942) (1,957,289) $(19,733,141) (1,804,551) $(18,326,459) Net change Class A 12,405,922 $72,976,598 (243,320) $(1,486,350) (698,471) $(7,064,739) 158,677 $1,599,654 Class B (1,979,456) (11,601,077) (1,759,651) (10,436,706) (407,909) (4,106,300) (332,040) (3,365,224) Class C 64,690 395,950 (517,494) (3,055,919) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ 10,491,156 $61,771,471 (2,520,465) $(14,978,975) (1,106,380) $(11,171,039) (173,363) $(1,765,570) GEORGIA FUND MARYLAND FUND -------------------------------------------------------- ------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/07 3/31/06 3/31/07 3/31/06 --------------------------- --------------------------- -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT Shares sold Class A 432,423 $4,704,786 460,892 $5,066,357 999,185 $11,309,806 730,679 $8,394,007 Class B 25,557 278,353 28,232 312,944 89,512 1,009,393 83,527 958,062 ------------------------------------------------------------------------------------------------------------------------------------ 457,980 $4,983,139 489,124 $5,379,301 1,088,697 $12,319,199 814,206 $9,352,069 Shares issued to shareholders in reinvestment of distributions Class A 131,267 $1,424,086 137,577 $1,511,329 280,526 $3,171,970 299,543 $3,427,995 Class B 16,436 178,906 20,316 223,644 37,398 422,520 48,765 557,986 ------------------------------------------------------------------------------------------------------------------------------------ 147,703 $1,602,992 157,893 $1,734,973 317,924 $3,594,490 348,308 $3,985,981 Shares reacquired Class A (636,783) $(6,903,492) (655,008) $(7,177,983) (1,101,793) $(12,451,798) (1,610,274) $(18,401,179) Class B (195,213) (2,121,928) (350,537) (3,854,834) (529,716) (5,988,774) (505,608) (5,810,178) ------------------------------------------------------------------------------------------------------------------------------------ (831,996) $(9,025,420) (1,005,545) $(11,032,817) (1,631,509) $(18,440,572) (2,115,882) $(24,211,357) Net change Class A (73,093) $(774,620) (56,539) $(600,297) 177,918 $2,029,978 (580,052) $(6,579,177) Class B (153,220) (1,664,669) (301,989) (3,318,246) (402,806) (4,556,861) (373,316) (4,294,130) ------------------------------------------------------------------------------------------------------------------------------------ (226,313) $(2,439,289) (358,528) $(3,918,543) (224,888) $(2,526,883) (953,368) $(10,873,307) MASSACHUSETTS FUND -------------------------------------------------------- YEAR ENDED YEAR ENDED 3/31/07 3/31/06 --------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT Shares sold Class A 1,205,445 $13,563,508 1,762,892 $20,057,220 Class B 113,872 1,284,027 181,196 2,072,498 -------------------------------------------------------------------------------- 1,319,317 $14,847,535 1,944,088 $22,129,718 Shares issued to shareholders in reinvestment of distributions Class A 394,127 $4,439,231 405,376 $4,607,951 Class B 69,026 778,775 81,697 930,076 -------------------------------------------------------------------------------- 463,153 $5,218,006 487,073 $5,538,027 Shares reacquired Class A (2,349,203) $(26,419,103) (3,187,918) $(36,274,707) Class B (680,034) (7,664,911) (575,954) (6,568,954) -------------------------------------------------------------------------------- (3,029,237) $(34,084,014) (3,763,872) $(42,843,661) Net change Class A (749,631) $(8,416,364) (1,019,650) $(11,609,536) Class B (497,136) (5,602,109) (313,061) (3,566,380) -------------------------------------------------------------------------------- (1,246,767) $(14,018,473) (1,332,711) $(15,175,916) (6) LINE OF CREDIT Each fund and other funds managed by MFS participate in a $1 billion unsecured committed line of credit provided by a syndication of banks under a credit agreement. In addition, these funds and other funds managed by MFS have established uncommitted borrowing arrangements with certain banks. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the Federal Reserve funds rate plus 0.35%. In addition, a commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. For the year ended March 31, 2007, each fund's commitment fee and interest expense on the line of credit were as follows, and are included in miscellaneous expense on the Statements of Operations. ALABAMA ARKANSAS CALIFORNIA FLORIDA GEORGIA MARYLAND MASSACHUSETTS FUND FUND FUND FUND FUND FUND FUND Commitment Fee $526 $808 $2,324 $509 $373 $826 $1,413 Interest Expense -- -- -- -- -- -- --
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and the Shareholders of MFS Municipal Series Trust: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of MFS Alabama Municipal Bond Fund, MFS Arkansas Municipal Bond Fund, MFS California Municipal Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia Municipal Bond Fund, MFS Maryland Municipal Bond Fund and MFS Massachusetts Municipal Bond Fund, certain of the portfolios constituting MFS Municipal Series Trust (the "Trust") as of March 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the aforementioned portfolios of MFS Municipal Series Trust as of March 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts May 14, 2007 TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND The Trustees and officers of the Trust, as of May 1, 2007, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS DURING POSITION(s) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS & NAME, DATE OF BIRTH WITH FUND SINCE(h) OTHER DIRECTORSHIPS(j) ----------------------- ---------------- --------------- ------------------------------------------ INTERESTED TRUSTEES Robert J. Manning(k) Trustee February 2004 Massachusetts Financial Services Company, (born 10/20/63) Chief Executive Officer, President, Chief Investment Officer and Director Robert C. Pozen(k) Trustee February 2004 Massachusetts Financial Services Company, (born 8/08/46) Chairman (since February 2004); MIT Sloan School (education), Senior Lecturer (since 2006); Secretary of Economic Affairs, The Commonwealth of Massachusetts (January 2002 to December 2002); Fidelity Investments, Vice Chairman (June 2000 to December 2001); Fidelity Management & Research Company (investment adviser), President (March 1997 to July 2001); Bell Canada Enterprises (telecommunication s), Director; Medtronic, Inc. (medical technology), Director; Telesat (satellite communications), Director INDEPENDENT TRUSTEES J. Atwood Ives Trustee and Chair of February 1992 Private investor; Eastern Enterprises (born 5/01/36) Trustees (diversified services company), Chairman, Trustee and Chief Executive Officer (until November 2000) Robert E. Butler(n) Trustee January 2006 Consultant - regulatory and compliance matters (born 11/29/41) (since July 2002); PricewaterhouseCoo pers LLP (professional services firm), Partner (November 2000 until June 2002) Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital, Chief of Cardiac (born 3/11/37) Surgery (2005); Harvard Medical School, Professor of Cardiac Surgery; Physician Director of Medical Device Technology for Partners HealthCare David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining products and (born 5/30/42) service provider), Vice Chairman/Director (since April 2001); Portman Limited (mining), Director (since 2005); Encinitos Ventures (private investment company), Principal (1997 to April 2001); Lincoln Electric Holdings, Inc. (welding equipment manufacturer), Director William R. Gutow Trustee December 1993 Private investor and real estate consultant; (born 9/27/41) Capitol Entertainment Management Company (video franchise), Vice Chairman; Atlantic Coast Tan (tanning salons), Vice Chairman (since 2002) Michael Hegarty Trustee December 2004 Retired; AXA Financial (financial services and (born 12/21/44) insurance), Vice Chairman and Chief Operating Officer (until May 2001); The Equitable Life Assurance Society (insurance), President and Chief Operating Officer (until May 2001) Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys), Partner (born 6/23/35) J. Dale Sherratt Trustee August 1993 Insight Resources, Inc. (acquisition planning (born 9/23/38) specialists), President; Wellfleet Investments (investor in health care companies), Managing General Partner (since 1993); Cambridge Nutraceuticals (professional nutritional products), Chief Executive Officer (until May 2001) Laurie J. Thomsen Trustee March 2005 Private investor; Prism Venture Partners (born 8/05/57) (venture capital), Co- founder and General Partner (until June 2004); St. Paul Travelers Companies (commercial property liability insurance), Director Robert W. Uek Trustee January 2006 Retired (since 1999); PricewaterhouseCoopers (born 5/18/41) LLP (professional services firm), Partner (until 1999); Consultant to investment company industry (since 2000); TT International Funds (mutual fund complex), Trustee (2000 until 2005); Hillview Investment Trust II Funds (mutual fund complex), Trustee (2000 until 2005) OFFICERS Maria F. Dwyer(k) President November 2005 Massachusetts Financial Services Company, (born 12/01/58) Executive Vice President and Chief Regulatory Officer (since March 2004); Fidelity Management & Research Company, Vice President (prior to March 2004); Fidelity Group of Funds, President and Treasurer (prior to March 2004) Tracy Atkinson(k) Treasurer September 2005 Massachusetts Financial Services Company, (born 12/30/64) Senior Vice President (since September 2004); PricewaterhouseCoo pers LLP, Partner (prior to September 2004) Christopher R. Bohane(k) Assistant Secretary and July 2005 Massachusetts Financial Services Company, (born 1/18/74) Assistant Clerk Vice President and Senior Counsel (since April 2003); Kirkpatrick & Lockhart LLP (law firm), Associate (prior to April 2003) Ethan D. Corey(k) Assistant Secretary and July 2005 Massachusetts Financial Services Company, (born 11/21/63) Assistant Clerk Special Counsel (since December 2004); Dechert LLP (law firm), Counsel (prior to December 2004) David L. DiLorenzo(k) Assistant Treasurer July 2005 Massachusetts Financial Services Company, (born 8/10/68) Vice President (since June 2005); JP Morgan Investor Services, Vice President (prior to June 2005) Timothy M. Fagan(k) Assistant Secretary and September 2005 Massachusetts Financial Services Company, (born 7/10/68) Assistant Clerk Vice President and Senior Counsel (since September 2005); John Hancock Advisers, LLC, Vice President and Chief Compliance Officer (September 2004 to August 2005), Senior Attorney (prior to September 2004); John Hancock Group of Funds, Vice President and Chief Compliance Officer (September 2004 to December 2004) Mark D. Fischer(k) Assistant Treasurer July 2005 Massachusetts Financial Services Company, (born 10/27/70) Vice President (since May 2005); JP Morgan Investment Management Company, Vice President (prior to May 2005) Brian E. Langenfeld(k) Assistant Secretary and June 2006 Massachusetts Financial Services Company, (born 3/07/73) Assistant Clerk Assistant Vice President and Counsel (since May 2006); John Hancock Advisers, LLC, Assistant Vice President and Counsel (May 2005 to April 2006); John Hancock Advisers, LLC, Attorney and Assistant Secretary (prior to May 2005) Ellen Moynihan(k) Assistant Treasurer April 1997 Massachusetts Financial Services Company, (born 11/13/57) Senior Vice President Susan S. Newton(k) Assistant Secretary and May 2005 Massachusetts Financial Services Company, (born 3/07/50) Assistant Clerk Senior Vice President and Associate General Counsel (since April 2005); John Hancock Advisers, LLC, Senior Vice President, Secretary and Chief Legal Officer (prior to April 2005); John Hancock Group of Funds, Senior Vice President, Secretary and Chief Legal Officer (prior to April 2005) Susan A. Pereira(k) Assistant Secretary and July 2005 Massachusetts Financial Services Company, (born 11/05/70) Assistant Clerk Vice President and Senior Counsel (since June 2004); Bingham McCutchen LLP (law firm), Associate (prior to June 2004) Mark N. Polebaum(k) Secretary and Clerk January 2006 Massachusetts Financial Services Company, (born 5/01/52) Executive Vice President, General Counsel and Secretary (since January 2006); Wilmer Cutler Pickering Hale and Dorr LLP (law firm), Partner (prior to January 2006) Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of compliance (born 3/07/44) Compliance Officer services), Principal (since June 2004); CRA Business Strategies Group (consulting services), Executive Vice President (April 2003 to June 2004); David L. Babson & Co. (investment adviser), Managing Director, Chief Administrative Officer and Director (prior to March 2003) James O. Yost(k) Assistant Treasurer September 1990 Massachusetts Financial Services Company, (born 6/12/60) Senior Vice President ------------ (h) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously since appointment unless indicated otherwise. (j) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., "public companies"). (k) "Interested person" of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of position with MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116. (n) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance consultant retained by MFS pursuant to its settlement with the SEC concerning market timing and related matters. The terms of that settlement required that compensation and expenses related to the independent compliance consultant be borne exclusively by MFS and, therefore, MFS paid Mr. Butler for the services he rendered to the independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a total of $351,119.29. The Trust held a shareholders" meeting in 2005 to elect Trustees, and will hold a shareholders" meeting at least once every five years thereafter, to elect Trustees. Each Trustee (except Mr. Butler and Mr. Uek) has been elected by shareholders and each Trustee and officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Messrs. Butler, Gutow, Sherratt and Uek and Ms. Thomsen are members of the Trust's Audit Committee. Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or a subsidiary is the investment adviser or distributor, and, in the case of the officers, with certain affiliates of MFS. As of January 1, 2007, the Trustees served as board members of 97 funds within the MFS Family of Funds. The Statement of Additional Information contains further information about the Trustees and is available without charge upon request by calling 1-800-225-2606. ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ADVISER CUSTODIAN Massachusetts Financial Services Company State Street Bank and Trust Company 500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110 DISTRIBUTOR Effective April 1, 2007, the custodian changed to: MFS Fund Distributors, Inc. JPMorgan Chase Bank 500 Boylston Street, Boston, MA 02116-3741 One Chase Manhattan Plaza New York, NY 10081 PORTFOLIO MANAGER Michael Dawson INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche 200 Berkeley Street Boston, MA 02116
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT A discussion regarding the Board's most recent review and renewal of each Fund's investment advisory agreement is available by clicking on the fund's name under "Select a fund" on the MFS Web site (mfs.com). PROXY VOTING POLICIES AND INFORMATION A general description of the MFS funds' proxy voting policies and procedures is available without charge, upon request, by calling 1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC's Web site at http://www.sec.gov. Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC's Web site at http://www.sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed and copied at the: Public Reference Room Securities and Exchange Commission 100 F Street, NE, Room 1580 Washington, D.C. 20549 Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-551-5850. The fund's Form N-Q is available on the EDGAR database on the Commission's Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address. A shareholder can also obtain the quarterly portfolio holdings report at mfs.com. FEDERAL TAX INFORMATION (UNAUDITED) The funds will notify shareholders of amounts for use in preparing 2007 income tax forms in January 2008. The following information is provided pursuant to provisions of the Internal Revenue Code. The funds below designate the following amounts as capital gain dividends paid during the fiscal year. CAPITAL GAINS Alabama Fund $348,167 Georgia Fund 3,003 Maryland Fund 197,952 Massachusetts Fund 76,980 Of the dividends paid from net investment income during the fiscal year, the following percentages were designated as exempt interest dividends for federal income tax purposes. If each fund had earned income on private activity bonds, a portion of the dividends paid may be considered a tax preference item for purposes of computing a shareholder's alternative minimum tax. EXEMPT INTEREST DIVIDENDS Alabama Fund 100.00% Arkansas Fund 100.00% California Fund 100.00% Florida Fund 100.00% Georgia Fund 100.00% Maryland Fund 99.87% Massachusetts Fund 100.00% MFS(R) PRIVACY NOTICE Privacy is a concern for every investor today. At MFS Investment Management(R) and the MFS funds, we take this concern very seriously. We want you to understand our policies about the investment products and services that we offer, and how we protect the nonpublic personal information of investors who have a direct relationship with us and our wholly owned subsidiaries. Throughout our business relationship, you provide us with personal information. We maintain information and records about you, your investments, and the services you use. Examples of the nonpublic personal information we maintain include o data from investment applications and other forms o share balances and transactional history with us, our affiliates, or others o facts from a consumer reporting agency We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We may share nonpublic personal information with third parties or certain of our affiliates in connection with servicing your account or processing your transactions. We may share information with companies or financial institutions that perform marketing services on our behalf or with other financial institutions with which we have joint marketing arrangements, subject to any legal requirements. Authorization to access your nonpublic personal information is limited to appropriate personnel who provide products, services, or information to you. We maintain physical, electronic, and procedural safeguards to help protect the personal information we collect about you. If you have any questions about the MFS privacy policy, please call 1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time. Note: If you own MFS products or receive MFS services in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. CONTACT US WEB SITE mfs.com MFS TALK 1-800-637-8255 24 hours a day ACCOUNT SERVICE AND LITERATURE SHAREHOLDERS 1-800-225-2606 8 a.m. to 8 p.m. ET INVESTMENT PROFESSIONALS 1-800-343-2829 8 a.m. to 8 p.m. ET RETIREMENT PLAN SERVICES 1-800-637-1255 8 a.m. to 8 p.m. ET MAILING ADDRESS MFS Service Center, Inc. P.O. Box 55824 Boston, MA 02205-5824 OVERNIGHT MAIL MFS Service Center, Inc. 500 Boylston Street Boston, MA 02116-3741 ------------------------------------------------------------------------------- Go paperless with eDELIVERY: Arrange to have MFS(R) send prospectuses, reports, and proxies directly to your e-mail inbox. You'll get timely information and less clutter in your mailbox (not to mention help your fund save printing and postage costs). SIGN UP: If your account is registered with us, simply go to mfs.com, log in to your account via MFS(R) Access, and select the eDelivery sign up options. If you own your MFS fund shares through a financial institution or a retirement plan, MFS(R) TALK, MFS Access, and eDelivery may not be available to you. ------------------------------------------------------------------------------- M F S(R) INVESTMENT MANAGEMENT 500 Boylston Street, Boston, MA 02116 M F S(R) INVESTMENT MANAGEMENT [graphic omitted] 3/31/07 ANNUAL REPORT MFS(R) MUNICIPAL SERIES TRUST For the states of: Mississippi, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia MSTB-ANN MFS(R) Municipal Series Trust Mississippi, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia LETTER FROM THE CEO 1 ------------------------------------------------------------------- PORTFOLIO COMPOSITION 2 ------------------------------------------------------------------- MANAGEMENT REVIEW 5 ------------------------------------------------------------------- PERFORMANCE SUMMARY 6 ------------------------------------------------------------------- EXPENSE TABLES 14 ------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS 17 ------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 50 ------------------------------------------------------------------- STATEMENTS OF OPERATIONS 54 ------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 56 ------------------------------------------------------------------- FINANCIAL HIGHLIGHTS 60 ------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 78 ------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 88 ------------------------------------------------------------------- TRUSTEES AND OFFICERS 89 ------------------------------------------------------------------- BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 92 ------------------------------------------------------------------- PROXY VOTING POLICIES AND INFORMATION 92 ------------------------------------------------------------------- QUARTERLY PORTFOLIO DISCLOSURE 92 ------------------------------------------------------------------- FEDERAL TAX INFORMATION 92 ------------------------------------------------------------------- MFS(R) PRIVACY NOTICE 93 ------------------------------------------------------------------- CONTACT INFORMATION BACK COVER ------------------------------------------------------------------- THE 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. -------------------------------------------------------------------------------- NOT FDIC INSURED o MAY LOSE VALUE o NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF -------------------------------------------------------------------------------- LETTER FROM THE CEO [Photo of Robert J. Manning] Dear Shareholders: The past year has been a great example of why investors should keep their eyes on the long term. In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit its all-time high of 12,787. Less than a week later, stocks sold off around the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets and a reason investors should make sure they have an investment plan that can ride out the peaks and troughs. If you are focused on a long-term investment strategy, the short-term ups and downs of the markets should not necessarily dictate portfolio action on your part. Both the bond and stock markets are inherently cyclical. In our view, investors who remain committed to a long-term plan are more likely to achieve their financial goals. We believe you should not let the headlines guide you in your investment decisions and that there is no sense in reacting to short- term volatility. In any market environment, we believe individual investors are best served by following a three-pronged investment strategy of allocating their holdings across the major asset classes, diversifying within each class, and regularly rebalancing their portfolios to maintain their desired allocations. Of course, these strategies cannot guarantee a profit or protect against a loss. Investing and planning for the long term require diligence and patience, two traits that in our experience are essential to capitalizing on the many opportunities the financial markets can offer -- through both up and down economic cycles. Respectfully, /s/ Robert J. Manning Robert J. Manning Chief Executive Officer and Chief Investment Officer MFS Investment Management(R) May 15, 2007 The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed. PORTFOLIO COMPOSITION MFS(R) Mississippi Municipal Bond Fund PORTFOLIO STRUCTURE (i) Bonds 106.5% Cash & Other Net Assets (6.5)% TOP FIVE INDUSTRIES (i) Healthcare Revenue - Hospitals 16.1% -------------------------------------------------- General Obligations - General Purpose 15.9% -------------------------------------------------- State & Local Agencies 15.8% -------------------------------------------------- Water & Sewer Utility Revenue 12.7% -------------------------------------------------- Universities - Colleges 11.4% -------------------------------------------------- CREDIT QUALITY OF BONDS (r) AAA 75.0% -------------------------------------------------- AA 2.1% -------------------------------------------------- A 6.6% -------------------------------------------------- BBB 9.7% -------------------------------------------------- Not Rated 6.6% -------------------------------------------------- PORTFOLIO FACTS Average Duration (d)(i) 5.8 -------------------------------------------------- Average Life (i)(m) 13.2 yrs. -------------------------------------------------- Average Maturity (i)(m) 15.4 yrs. -------------------------------------------------- Average Credit Quality of Rated Securities (long-term) (a) AA+ -------------------------------------------------- Average Credit Quality of Rated Securities (short-term) (a) A-1 -------------------------------------------------- MFS(R) New York Municipal Bond Fund PORTFOLIO STRUCTURE (i) Bonds 105.8% Cash & Other Net Assets (5.8)% TOP FIVE INDUSTRIES (i) Toll Roads 13.6% -------------------------------------------------- State & Local Agencies 12.3% -------------------------------------------------- Water & Sewer Utility Revenue 10.4% -------------------------------------------------- Transportation - Special Tax 8.7% -------------------------------------------------- General Obligations - General Purpose 7.5% -------------------------------------------------- CREDIT QUALITY OF BONDS (r) AAA 41.8% -------------------------------------------------- AA 16.3% -------------------------------------------------- A 15.8% -------------------------------------------------- BBB 6.5% -------------------------------------------------- BB 1.7% -------------------------------------------------- B 0.9% -------------------------------------------------- CCC 0.3% -------------------------------------------------- Not Rated 16.7% -------------------------------------------------- PORTFOLIO FACTS Average Duration (d)(i) 5.8 -------------------------------------------------- Average Life (i)(m) 13.8 yrs. -------------------------------------------------- Average Maturity (i)(m) 15.7 yrs. -------------------------------------------------- Average Credit Quality of Rated Securities (long-term) (a) AA -------------------------------------------------- Average Credit Quality of Rated Securities (short-term) (a) A-1 -------------------------------------------------- MFS(R) North Carolina Municipal Bond Fund PORTFOLIO STRUCTURE (i) Bonds 106.7% Cash & Other Net Assets (6.7)% TOP FIVE INDUSTRIES (i) Healthcare Revenue - Hospitals 23.9% -------------------------------------------------- Utilities - Municipal Owned 15.4% -------------------------------------------------- Universities - Colleges 11.5% -------------------------------------------------- Water & Sewer Utility Revenue 9.5% -------------------------------------------------- State & Agency - Other 8.1% -------------------------------------------------- CREDIT QUALITY OF BONDS (r) AAA 44.3% -------------------------------------------------- AA 30.0% -------------------------------------------------- A 7.0% -------------------------------------------------- BBB 8.3% -------------------------------------------------- Not Rated 10.4% -------------------------------------------------- PORTFOLIO FACTS Average Duration (d)(i) 5.7 -------------------------------------------------- Average Life (i)(m) 13.5 yrs. -------------------------------------------------- Average Maturity (i)(m) 16.2 yrs. -------------------------------------------------- Average Credit Quality of Rated Securities (long-term) (a) AA -------------------------------------------------- Average Credit Quality of Rated Securities (short-term) (a) A-1 -------------------------------------------------- MFS(R) Pennsylvania Municipal Bond Fund PORTFOLIO STRUCTURE (i) Bonds 104.7% Cash & Other Net Assets (4.7)% TOP FIVE INDUSTRIES (i) General Obligations - Schools 18.2% -------------------------------------------------- Healthcare Revenue - Hospitals 13.3% -------------------------------------------------- Universities - Colleges 11.8% -------------------------------------------------- Water & Sewer Utility Revenue 9.8% -------------------------------------------------- General Obligations - General Purpose 8.6% -------------------------------------------------- CREDIT QUALITY OF BONDS (r) AAA 62.1% -------------------------------------------------- AA 15.6% -------------------------------------------------- A 5.0% -------------------------------------------------- BBB 8.7% -------------------------------------------------- BB 0.5% -------------------------------------------------- B 0.6% -------------------------------------------------- Not Rated 7.5% -------------------------------------------------- PORTFOLIO FACTS Average Duration (d)(i) 5.6 -------------------------------------------------- Average Life (i)(m) 14.4 yrs. -------------------------------------------------- Average Maturity (i)(m) 16.9 yrs. -------------------------------------------------- Average Credit Quality of Rated Securities (long-term) (a) AA -------------------------------------------------- Average Credit Quality of Rated Securities (short-term) (a) A-1 -------------------------------------------------- MFS(R) South Carolina Municipal Bond Fund PORTFOLIO STRUCTURE (i) Bonds 105.8% Cash & Other Net Assets (5.8)% TOP FIVE INDUSTRIES (i) Healthcare Revenue - Hospitals 21.2% -------------------------------------------------- Universities - Colleges 12.5% -------------------------------------------------- General Obligations - Schools 12.2% -------------------------------------------------- General Obligations - General Purpose 10.6% -------------------------------------------------- Utilities - Municipal Owned 8.8% -------------------------------------------------- CREDIT QUALITY OF BONDS (r) AAA 65.3% -------------------------------------------------- AA 9.9% -------------------------------------------------- A 5.8% -------------------------------------------------- BBB 4.2% -------------------------------------------------- B 0.6% -------------------------------------------------- Not Rated 14.2% -------------------------------------------------- PORTFOLIO FACTS Average Duration (d)(i) 6.3 -------------------------------------------------- Average Life (i)(m) 17.7 yrs. -------------------------------------------------- Average Maturity (i)(m) 18.7 yrs. -------------------------------------------------- Average Credit Quality of Rated Securities (long-term) (a) AA+ -------------------------------------------------- Average Credit Quality of Rated Securities (short-term) (a) A-1 -------------------------------------------------- MFS(R) Tennessee Municipal Bond Fund PORTFOLIO STRUCTURE (i) Bonds 97.9% Cash & Other Net Assets 2.1% TOP FIVE INDUSTRIES (i) Water & Sewer Utility Revenue 18.5% -------------------------------------------------- Healthcare Revenue - Hospitals 15.2% -------------------------------------------------- Single Family Housing - State 13.3% -------------------------------------------------- General Obligations - Schools 12.0% -------------------------------------------------- Utilities - Municipal Owned 7.8% -------------------------------------------------- CREDIT QUALITY OF BONDS (r) AAA 54.8% -------------------------------------------------- AA 29.9% -------------------------------------------------- A 5.3% -------------------------------------------------- BBB 7.0% -------------------------------------------------- BB 0.3% -------------------------------------------------- B 0.9% -------------------------------------------------- Not Rated 1.8% -------------------------------------------------- PORTFOLIO FACTS Average Duration (d)(i) 5.1 -------------------------------------------------- Average Life (i)(m) 12.6 yrs. -------------------------------------------------- Average Maturity (i)(m) 16.1 yrs. -------------------------------------------------- Average Credit Quality of Rated Securities (long-term) (a) AA -------------------------------------------------- Average Credit Quality of Rated Securities (short-term) (a) A-1 -------------------------------------------------- MFS(R) Virginia Municipal Bond Fund PORTFOLIO STRUCTURE (i) Bonds 105.3% Cash & Other Net Assets (5.3)% TOP FIVE INDUSTRIES (i) State & Local Agencies 23.6% -------------------------------------------------- Healthcare Revenue - Hospitals 14.7% -------------------------------------------------- General Obligations - Improvement 12.4% -------------------------------------------------- Water & Sewer Utility Revenue 9.3% -------------------------------------------------- Airport & Port Revenue 8.9% -------------------------------------------------- CREDIT QUALITY OF BONDS (r) AAA 48.1% -------------------------------------------------- AA 23.6% -------------------------------------------------- A 9.7% -------------------------------------------------- BBB 5.4% -------------------------------------------------- BB 1.1% -------------------------------------------------- B 1.5% -------------------------------------------------- CCC 0.2% -------------------------------------------------- Not Rated 10.4% -------------------------------------------------- PORTFOLIO FACTS Average Duration (d)(i) 5.2 -------------------------------------------------- Average Life (i)(m) 13.0 yrs. -------------------------------------------------- Average Maturity (i)(m) 15.9 yrs. -------------------------------------------------- Average Credit Quality of Rated Securities (long-term) (a) AA -------------------------------------------------- Average Credit Quality of Rated Securities (short-term) (a) A-1 -------------------------------------------------- MFS(R) West Virginia Municipal Bond Fund PORTFOLIO STRUCTURE (i) Bonds 108.5% Cash & Other Net Assets (8.5)% TOP FIVE INDUSTRIES (i) State & Local Agencies 26.9% -------------------------------------------------- Universities - Colleges 22.7% -------------------------------------------------- General Obligations - General Purpose 16.4% -------------------------------------------------- Water & Sewer Utility Revenue 10.5% -------------------------------------------------- Healthcare Revenue - Hospitals 9.0% -------------------------------------------------- CREDIT QUALITY OF BONDS (r) AAA 69.8% -------------------------------------------------- A 9.1% -------------------------------------------------- BBB 4.2% -------------------------------------------------- BB 0.2% -------------------------------------------------- B 0.5% -------------------------------------------------- Not Rated 16.2% -------------------------------------------------- PORTFOLIO FACTS Average Duration (d)(i) 5.7 -------------------------------------------------- Average Life (i)(m) 14.4 yrs. -------------------------------------------------- Average Maturity (i)(m) 16.0 yrs. -------------------------------------------------- Average Credit Quality of Rated Securities (long-term) (a) AA+ -------------------------------------------------- Average Credit Quality of Rated Securities (short-term) (a) A-1 -------------------------------------------------- (a) The average credit quality of rated securities is based upon a market weighted average of portfolio holdings that are rated by public rating agencies. (d) Duration is a measure of how much a bond's price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. (i) For purposes of this presentation, the bond component includes both accrued interest amounts and the equivalent exposure from any derivative holdings, if applicable. (m) The average maturity shown is calculated using the final stated maturity on the portfolio's holdings without taking into accou nt any holdings which have been pre-refunded or pre-paid to an earlier date or which have a mandatory put date prior to the stated ma turity. The average life shown takes into account these earlier dates. (r) Each security is assigned a rating from Moody's Investors Service. If not rated by Moody's, the rating will be that assigned b y Standard & Poor's. Likewise, if not assigned a rating by Standard & Poor's, it will be based on the rating assigned by Fitch, Inc. For th ose portfolios that hold a security which is not rated by any of the three agencies, the security is considered Not Rated. Holding s in U.S. Treasuries and government agency mortgage-backed securities, if any, are included in the "AAA"-rating category. Percentages ar e based on the total market value of investments as of 3/31/07. From time to time "Cash & Other Net Assets" may be negative due to timing of cash receipts and/or equivalent exposure from any derivative holdings. Percentages are based on net assets as of 3/31/07, unless otherwise noted. The portfolio is actively managed and current holdings may be different. MANAGEMENT REVIEW FACTORS THAT AFFECTED PERFORMANCE During the period, duration(d) positioning relative to the benchmark, the Lehman Brothers Municipal Bond Index, had a neutral effect on relative performance for all funds except the Pennsylvania fund, where the effect was positive, and the Tennessee fund, where the effect was negative. Yield curve(y) positioning also had a neutral impact on relative performance for all funds, with the exception of the New York, North Carolina, Tennessee, and Virginia funds, where the effect was negative. In comparison to the benchmark, the negative impact on the funds noted above was due to relative underexposure to the short end of the curve (represented by bonds with durations of 0 - to - 4 years) during a period when interest rates were decreasing. Credit quality had a neutral effect on all funds relative to the benchmark during the reporting period. Notable positive contributions came from the health care and housing sectors. These sectors were generally positive contributors across all of the funds on a relative basis. Results from our positioning in credit enhanced bonds were mixed, being positive for the Mississippi, Pennsylvania, and South Carolina funds and negative for the other funds. Our positioning in pre-refunded bonds was a negative factor in the relative performance of the South Carolina, Tennessee, and West Virginia funds. General obligation bonds were also negative factors to relative performance for these state funds as well as the Pennsylvania fund. Respectfully, Michael Dawson Portfolio Manager (d) Duration is a measure of how much a bond's price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. (y) A yield curve graphically depicts the yields of different maturity bonds of the same credit quality and type; a normal yield curve is upward sloping, with short-term rates lower than long-term rates. The views expressed in this report are those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market and other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio's current or future investments. PERFORMANCE SUMMARY THROUGH 3/31/07 The following information illustrates the historical performance of each fund's original share class in comparison to its benchmark. Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. Each fund's results have been compared to the Lehman Brothers Municipal Bond Index, a market-value-weighted index representative of the tax-exempt bond market. However, while this index is considered the benchmark for the performance of municipal bond funds, it is comprised of municipal bonds issued nationwide, while each of the funds is limited to investing in the bonds of a particular state. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmark comparisons are unmanaged; do not reflect sales charges, commissions or expenses; and cannot be invested in directly. (See Notes to Performance Summary.) It is not possible to invest directly in an index. PERFORMANCE DATA SHOWN REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE SO YOUR SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN QUOTED. FOR MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT MFS.COM. THE PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Mississippi Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,574 11,072 3/99 11,168 11,757 3/00 11,103 11,748 3/01 12,216 13,031 3/02 12,638 13,522 3/03 13,836 14,859 3/04 14,496 15,730 3/05 14,896 16,149 3/06 15,432 16,765 3/07 16,235 17,676 MFS(R) MISSISSIPPI MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ----------------------------------------------------------------- A 8/06/92 5.20% 5.14% 5.48% -------------------------------------------------------------- B 9/07/93 4.41% 4.31% 4.65% ----------------------------------------------------------------- AVERAGE ANNUAL Comparative Benchmark ----------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ----------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ----------------------------------------------------------------- A 0.21% 4.12% 4.96% With Initial Sales Charge (4.75%) -------------------------------------------------------------- B 0.41% 3.97% 4.65% With CDSC (Declining over six years from 4% to 0%) (x) ----------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS New York Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,629 11,072 3/99 11,176 11,757 3/00 11,057 11,748 3/01 12,246 13,031 3/02 12,634 13,522 3/03 13,903 14,859 3/04 14,584 15,730 3/05 14,942 16,149 3/06 15,435 16,765 3/07 16,218 17,676 MFS(R) NEW YORK MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ----------------------------------------------------------------- A 6/06/88 5.07% 5.12% 5.47% -------------------------------------------------------------- B 9/07/93 4.29% 4.28% 4.65% -------------------------------------------------------------- C 12/11/00 4.29% 4.32% 4.66% ----------------------------------------------------------------- AVERAGE ANNUAL Comparative Benchmark ----------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ----------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ----------------------------------------------------------------- A 0.08% 4.10% 4.95% With Initial Sales Charge (4.75%) -------------------------------------------------------------- B 0.29% 3.94% 4.65% With CDSC (Declining over six years from 4% to 0%) (x) -------------------------------------------------------------- C 3.29% 4.32% 4.66% With CDSC (1% for 12 months) (x) ----------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS North Carolina Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,512 11,072 3/99 11,012 11,757 3/00 10,828 11,748 3/01 11,932 13,031 3/02 12,300 13,522 3/03 13,494 14,859 3/04 14,170 15,730 3/05 14,475 16,149 3/06 14,980 16,765 3/07 15,669 17,676 MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ----------------------------------------------------------------- A 10/31/84 4.60% 4.96% 5.10% -------------------------------------------------------------- B 9/07/93 3.93% 4.27% 4.42% -------------------------------------------------------------- C 1/03/94 3.93% 4.28% 4.43% ----------------------------------------------------------------- AVERAGE ANNUAL Comparative Benchmark ----------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ----------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ----------------------------------------------------------------- A -0.36% 3.94% 4.59% With Initial Sales Charge (4.75%) -------------------------------------------------------------- B -0.07% 3.93% 4.42% With CDSC (Declining over six years from 4% to 0%) (x) -------------------------------------------------------------- C 2.93% 4.28% 4.43% With CDSC (1% for 12 months) (x) ----------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Pennsylvania Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,635 11,072 3/99 11,257 11,757 3/00 11,207 11,748 3/01 12,422 13,031 3/02 12,900 13,522 3/03 14,205 14,859 3/04 14,932 15,730 3/05 15,375 16,149 3/06 16,003 16,765 3/07 16,830 17,676 MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ----------------------------------------------------------------- A 2/01/93 5.17% 5.46% 5.86% -------------------------------------------------------------- B 9/07/93 4.37% 4.66% 5.03% ----------------------------------------------------------------- AVERAGE ANNUAL Comparative Benchmark ----------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ----------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ----------------------------------------------------------------- A 0.17% 4.44% 5.34% With Initial Sales Charge (4.75%) -------------------------------------------------------------- B 0.37% 4.33% 5.03% With CDSC (Declining over six years from 4% to 0%) (x) ----------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS South Carolina Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,536 11,072 3/99 10,992 11,757 3/00 10,743 11,748 3/01 11,845 13,031 3/02 12,281 13,522 3/03 13,449 14,859 3/04 14,162 15,730 3/05 14,519 16,149 3/06 15,024 16,765 3/07 15,711 17,676 MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ----------------------------------------------------------------- A 10/31/84 4.57% 5.05% 5.13% -------------------------------------------------------------- B 9/07/93 3.98% 4.39% 4.45% ----------------------------------------------------------------- AVERAGE ANNUAL Comparative Benchmark ----------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ----------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ----------------------------------------------------------------- A -0.40% 4.03% 4.62% With Initial Sales Charge (4.75%) -------------------------------------------------------------- B -0.02% 4.05% 4.45% With CDSC (Declining over six years from 4% to 0%) (x) ----------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Tennesee Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,583 11,072 3/99 11,091 11,757 3/00 10,897 11,748 3/01 11,973 13,031 3/02 12,375 13,522 3/03 13,531 14,859 3/04 14,180 15,730 3/05 14,539 16,149 3/06 14,994 16,765 3/07 15,659 17,676 MFS(R) TENNESSEE MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ----------------------------------------------------------------- A 8/12/88 4.43% 4.82% 5.10% -------------------------------------------------------------- B 9/07/93 3.66% 4.14% 4.42% ----------------------------------------------------------------- AVERAGE ANNUAL Comparative Benchmark ----------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ----------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ----------------------------------------------------------------- A -0.53% 3.80% 4.59% With Initial Sales Charge (4.75%) -------------------------------------------------------------- B -0.34% 3.80% 4.42% With CDSC (Declining over six years from 4% to 0%) (x) ----------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS Virginia Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,508 11,072 3/99 11,003 11,757 3/00 10,883 11,748 3/01 11,923 13,031 3/02 12,265 13,522 3/03 13,381 14,859 3/04 14,143 15,730 3/05 14,543 16,149 3/06 15,044 16,765 3/07 15,732 17,676 MFS(R) VIRGINIA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ----------------------------------------------------------------- A 10/31/84 4.57% 5.11% 5.15% -------------------------------------------------------------- B 9/07/93 3.89% 4.43% 4.46% -------------------------------------------------------------- C 1/03/94 3.89% 4.44% 4.47% ----------------------------------------------------------------- AVERAGE ANNUAL Comparative Benchmark ----------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ----------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ----------------------------------------------------------------- A -0.40% 4.09% 4.64% With Initial Sales Charge (4.75%) ----------------------------------------------------------------- B -0.11% 4.09% 4.46% With CDSC (Declining over six years from 4% to 0%) (x) -------------------------------------------------------------- C 2.89% 4.44% 4.47% With CDSC (1% for 12 months) (x) ----------------------------------------------------------------- GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (FOR THE 10-YEAR PERIOD ENDED 3/31/07) MFS West Virginia Lehman Brothers Municipal Bond Municipal Fund - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,422 11,072 3/99 10,915 11,757 3/00 10,709 11,748 3/01 11,784 13,031 3/02 12,231 13,522 3/03 13,337 14,859 3/04 13,983 15,730 3/05 14,301 16,149 3/06 14,760 16,765 3/07 15,438 17,676 MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ----------------------------------------------------------------- A 10/31/84 4.59% 4.77% 4.95% -------------------------------------------------------------- B 9/07/93 3.92% 4.09% 4.26% ----------------------------------------------------------------- AVERAGE ANNUAL Comparative Benchmark ----------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ----------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ----------------------------------------------------------------- A -0.38% 3.75% 4.44% With Initial Sales Charge (4.75%) ----------------------------------------------------------------- B -0.08% 3.75% 4.26% With CDSC (Declining over six years from 4% to 0%) (x) ----------------------------------------------------------------- CDSC - Contingent Deferred Sales Charge. (f) Source: FactSet Research Systems Inc. (x) Assuming redemption at the end of the applicable period. NOTES TO PERFORMANCE SUMMARY Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial statements for complete details. A 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. From time to time the funds may receive proceeds from litigation settlements, without which performance would be lower. For the MFS New York Municipal Bond Fund only: Performance for Class C shares includes the performance of the fund's Class B shares prior to their offering. This blended class performance has been adjusted to take into account differences in sales loads, if any, applicable to these share classes, but has not been adjusted to take into account differences in class specific operating expenses (such as Rule 12b-1 fees). Compared to performance these share classes would have experienced had they been offered for the entire period, the use of blended performance generally results in higher performance for share classes with higher operating expenses than the share class to which it is blended, and lower performance for share classes with lower operating expenses than the share class to which it is blended. EXPENSE TABLES FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD, OCTOBER 1, 2006 THROUGH MARCH 31, 2007 As a shareholder of the funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments and redemption fees on certain exchanges and redemptions, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the funds and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period October 1, 2006 through March 31, 2007. ACTUAL EXPENSES The first line for each share class in the following tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each share class in the following tables provides information about hypothetical account values and hypothetical expenses based on each fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in each fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees. Therefore, the second line for each share class in the tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. MFS(R) MISSISSIPPI MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Annualized Beginning Ending Paid During Share Expense Account Value Account Value Period (p) Class Ratio 10/01/06 3/31/07 10/01/06-3/31/07 -------------------------------------------------------------------------------- Actual 0.86% $1,000.00 $1,017.60 $4.33 A -------------------------------------------------------------------------- Hypothetical (h) 0.86% $1,000.00 $1,020.64 $4.33 ------------------------------------------------------------------------------- Actual 1.63% $1,000.00 $1,013.70 $8.18 B -------------------------------------------------------------------------- Hypothetical (h) 1.63% $1,000.00 $1,016.80 $8.20 ------------------------------------------------------------------------------- MFS(R) NEW YORK MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Annualized Beginning Ending Paid During Share Expense Account Value Account Value Period (p) Class Ratio 10/01/06 3/31/07 10/01/06-3/31/07 -------------------------------------------------------------------------------- Actual 1.06% $1,000.00 $1,017.20 $5.33 A -------------------------------------------------------------------------- Hypothetical (h) 1.06% $1,000.00 $1,019.65 $5.34 ------------------------------------------------------------------------------- Actual 1.82% $1,000.00 $1,013.40 $9.14 B -------------------------------------------------------------------------- Hypothetical (h) 1.82% $1,000.00 $1,015.86 $9.15 ------------------------------------------------------------------------------- Actual 1.82% $1,000.00 $1,013.40 $9.14 C -------------------------------------------------------------------------- Hypothetical (h) 1.82% $1,000.00 $1,015.86 $9.15 ------------------------------------------------------------------------------- MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Annualized Beginning Ending Paid During Share Expense Account Value Account Value Period (p) Class Ratio 10/01/06 3/31/07 10/01/06-3/31/07 -------------------------------------------------------------------------------- Actual 1.09% $1,000.00 $1,015.50 $5.48 A -------------------------------------------------------------------------- Hypothetical (h) 1.09% $1,000.00 $1,019.50 $5.49 ------------------------------------------------------------------------------- Actual 1.76% $1,000.00 $1,011.40 $8.83 B -------------------------------------------------------------------------- Hypothetical (h) 1.76% $1,000.00 $1,016.16 $8.85 ------------------------------------------------------------------------------- Actual 1.74% $1,000.00 $1,011.40 $8.73 C -------------------------------------------------------------------------- Hypothetical (h) 1.74% $1,000.00 $1,016.26 $8.75 ------------------------------------------------------------------------------- MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Annualized Beginning Ending Paid During Share Expense Account Value Account Value Period (p) Class Ratio 10/01/06 3/31/07 10/01/06-3/31/07 -------------------------------------------------------------------------------- Actual 0.82% $1,000.00 $1,018.80 $4.13 A -------------------------------------------------------------------------- Hypothetical (h) 0.82% $1,000.00 $1,020.84 $4.13 ------------------------------------------------------------------------------- Actual 1.59% $1,000.00 $1,015.00 $7.99 B -------------------------------------------------------------------------- Hypothetical (h) 1.59% $1,000.00 $1,017.00 $8.00 ------------------------------------------------------------------------------- MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Annualized Beginning Ending Paid During Share Expense Account Value Account Value Period (p) Class Ratio 10/01/06 3/31/07 10/01/06-3/31/07 -------------------------------------------------------------------------------- Actual 1.10% $1,000.00 $1,015.90 $5.53 A -------------------------------------------------------------------------- Hypothetical (h) 1.10% $1,000.00 $1,019.45 $5.54 ------------------------------------------------------------------------------- Actual 1.77% $1,000.00 $1,013.40 $8.88 B -------------------------------------------------------------------------- Hypothetical (h) 1.77% $1,000.00 $1,016.11 $8.90 ------------------------------------------------------------------------------- MFS(R) TENNESSEE MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Annualized Beginning Ending Paid During Share Expense Account Value Account Value Period (p) Class Ratio 10/01/06 3/31/07 10/01/06-3/31/07 -------------------------------------------------------------------------------- Actual 0.91% $1,000.00 $1,015.10 $4.57 A -------------------------------------------------------------------------- Hypothetical (h) 0.91% $1,000.00 $1,020.39 $4.58 ------------------------------------------------------------------------------- Actual 1.56% $1,000.00 $1,011.80 $7.82 B -------------------------------------------------------------------------- Hypothetical (h) 1.56% $1,000.00 $1,017.15 $7.85 ------------------------------------------------------------------------------- MFS(R) VIRGINIA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Annualized Beginning Ending Paid During Share Expense Account Value Account Value Period (p) Class Ratio 10/01/06 3/31/07 10/01/06-3/31/07 -------------------------------------------------------------------------------- Actual 1.06% $1,000.00 $1,016.30 $5.33 A -------------------------------------------------------------------------- Hypothetical (h) 1.06% $1,000.00 $1,019.65 $5.34 ------------------------------------------------------------------------------- Actual 1.73% $1,000.00 $1,013.00 $8.68 B -------------------------------------------------------------------------- Hypothetical (h) 1.73% $1,000.00 $1,016.31 $8.70 ------------------------------------------------------------------------------- Actual 1.71% $1,000.00 $1,013.00 $8.58 C -------------------------------------------------------------------------- Hypothetical (h) 1.71% $1,000.00 $1,016.40 $8.60 ------------------------------------------------------------------------------- MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- Expenses Annualized Beginning Ending Paid During Share Expense Account Value Account Value Period (p) Class Ratio 10/01/06 3/31/07 10/01/06-3/31/07 -------------------------------------------------------------------------------- Actual 1.15% $1,000.00 $1,015.80 $5.78 A -------------------------------------------------------------------------- Hypothetical (h) 1.15% $1,000.00 $1,019.20 $5.79 ------------------------------------------------------------------------------- Actual 1.81% $1,000.00 $1,011.60 $9.08 B -------------------------------------------------------------------------- Hypothetical (h) 1.81% $1,000.00 $1,015.91 $9.10 ------------------------------------------------------------------------------- (h) 5% class return per year before expenses. (p) Expenses paid is equal to each class' annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. Expenses paid do not include any applicable sales charges (loads) or redemption fees. If these transaction costs had been included, your costs would have been higher. PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) MISSISSIPPI MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 103.6% ----------------------------------------------------------------------------------------------------------------- ISSUER SHARES/PAR VALUE ($) ----------------------------------------------------------------------------------------------------------------- Airport and Port Revenue - 1.9% ----------------------------------------------------------------------------------------------------------------- Jackson, MS, Municipal Airport Authority, Airport Rev., "A", AMBAC, 5%, 2031 $1,510,000 $ 1,584,531 ----------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 15.7% ----------------------------------------------------------------------------------------------------------------- Commonwealth of Puerto Rico, Public Improvement, FGIC, 5.5%, 2016 (u) $6,220,000 $ 7,026,858 Commonwealth of Puerto Rico, Public Improvement, "A", 5.25%, 2027 800,000 858,664 Hinds County, MS, MBIA, 6.25%, 2010 1,660,000 1,774,225 Hinds County, MS, MBIA, 6.25%, 2011 1,285,000 1,400,727 Mississippi Development Bank Special Obligations (Jackson, Mississippi) FSA, 5.25%, 2020 620,000 692,875 Mississippi Development Bank Special Obligations, Harrison County Mississippi Highway Construction, "N", FGIC, 5%, 2026 1,000,000 1,051,240 Puerto Rico Commonwealth Public Improvement, "A", CIFG, 5%, 2025 500,000 530,815 ----------------------------------------------------------------------------------------------------------------- $13,335,404 ----------------------------------------------------------------------------------------------------------------- General Obligations - Improvement - 3.1% ----------------------------------------------------------------------------------------------------------------- Mississippi Capital Improvement, "I", 6%, 2009 (c) $1,000,000 $ 1,057,980 Puerto Rico Municipal Finance Agency, FSA, 5.5%, 2017 (u) 1,500,000 1,577,775 ----------------------------------------------------------------------------------------------------------------- $ 2,635,755 ----------------------------------------------------------------------------------------------------------------- General Obligations - Schools - 5.9% ----------------------------------------------------------------------------------------------------------------- Biloxi, MS, Public School District, MBIA, 5%, 2021 $1,000,000 $ 1,032,080 Jackson, MS, Public School District, "B", AMBAC, 5.75%, 2010 (c) 1,000,000 1,069,270 Jackson, MS, Public School District, "B", AMBAC, 0%, 2022 2,000,000 906,580 Jackson, MS, Public School District, "B", AMBAC, 0%, 2023 1,000,000 424,860 Madison County, MS, School District, "A", MBIA, 5.875%, 2016 1,500,000 1,578,000 ----------------------------------------------------------------------------------------------------------------- $ 5,010,790 ----------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 15.8% ----------------------------------------------------------------------------------------------------------------- Corinth & Alcorn County, MS, Hospital Rev. (Magnolia Regional Health Center), 5.5%, 2021 $ 400,000 $ 409,616 Gulfport, MS, Hospital Facilities Rev. (Memorial Hospital), MBIA, 6.125%, 2015 2,250,000 2,251,710 Gulfport, MS, Hospital Facilities Rev. (Memorial Hospital), MBIA, 6.2%, 2018 1,000,000 1,000,780 Gulfport, MS, Hospital Facilities Rev. (Memorial Hospital), 5.75%, 2031 500,000 517,025 Hinds County, MS, Rev. (Methodist Hospital & Rehabilitation), AMBAC, 5.6%, 2012 2,055,000 2,124,048 Jones County, MS, Hospital Rev. (South Central Regional Medical Center), 5.5%, 2007 (c) 1,000,000 1,012,070 Mississippi Development Bank Special Obligations (Covington Hospital Nursing Home), "A", AMBAC, 5%, 2031 500,000 524,095 Mississippi Hospital Equipment & Facilities Authority Rev. (Baptist Medical Center), MBIA, 6%, 2007 (c) 750,000 751,320 Mississippi Hospital Equipment & Facilities Authority Rev. (Baptist Medical Center), MBIA, 6.5%, 2007 (c) 1,190,000 1,192,535 Mississippi Hospital Equipment & Facilities Authority Rev. (Baptist Memorial Healthcare), "B-1", 5%, 2024 1,000,000 1,031,160 Mississippi Hospital Equipment & Facilities Authority Rev. (Forrest County General Hospital), FSA, 5.625%, 2020 1,000,000 1,066,660 Mississippi Hospital Equipment & Facilities Authority Rev. (Mississippi Baptist Health Systems, Inc.), "A", 5%, 2026 500,000 517,565 Mississippi Hospital Equipment & Facilities Authority Rev. Refunding & Improvement, Hospital South Central, 5.25%, 2031 500,000 519,155 Mississippi Hospital Equipment & Facilities Authority Rev., Refunding & Improvement, Southwest Regional Medical Center, 5.5%, 2019 250,000 263,170 Mississippi Hospital Equipment & Facilities Authority, Refunding & Improvement, Southwest Regional Medical Center, 5.75%, 2023 250,000 264,725 ----------------------------------------------------------------------------------------------------------------- $13,445,634 ----------------------------------------------------------------------------------------------------------------- Industrial Revenue - Environmental Services - 0.3% ----------------------------------------------------------------------------------------------------------------- Mississippi Business Finance Corp. (Solid Waste Management, Inc.), 4.4%, 2027 $ 250,000 $ 249,990 ----------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 0.9% ----------------------------------------------------------------------------------------------------------------- Mississippi Business Finance Corp. (Northrop Grumman Ship Systems), 4.55%, 2028 $ 500,000 $ 498,810 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 210,000 230,952 ----------------------------------------------------------------------------------------------------------------- $ 729,762 ----------------------------------------------------------------------------------------------------------------- Industrial Revenue - Paper - 3.3% ----------------------------------------------------------------------------------------------------------------- Jones County, MS, Solid Waste Disposal Rev. (International Paper Co.), "A", 5.8%, 2021 $ 500,000 $ 512,200 Lowndes County, MS, Solid Waste Disposal & Pollution Control Rev. (Weyerhaeuser Co.), 6.8%, 2022 1,250,000 1,524,100 Warren County, MS, Environmental Improvement Rev. (International Paper Co.), "A", 4.4%, 2015 750,000 738,660 ----------------------------------------------------------------------------------------------------------------- $ 2,774,960 ----------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Entertainment & Tourism - 1.3% ----------------------------------------------------------------------------------------------------------------- Mississippi Development Bank, Special Obligation (Diamond Lakes Utilities), 6.25%, 2017 $1,050,000 $ 1,074,864 ----------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 5.8% ----------------------------------------------------------------------------------------------------------------- Mississippi Home Corp. Rev., Single Family Rev., "A", GNMA, 6.3%, 2031 $ 185,000 $ 196,135 Mississippi Home Corp. Rev., Single Family Rev., "A-2", GNMA, 6.5%, 2032 270,000 274,641 Mississippi Home Corp. Rev., Single Family Rev., "A-2", GNMA, 5.3%, 2023 645,000 656,791 Mississippi Home Corp. Rev., Single Family Rev., "A-2", GNMA, 6.95%, 2031 255,000 255,479 Mississippi Home Corp. Rev., Single Family Rev., "B", GNMA, 6.625%, 2027 215,000 217,017 Mississippi Home Corp. Rev., Single Family Rev., "B", GNMA, 5.3%, 2035 725,000 738,811 Mississippi Home Corp. Rev., Single Family Rev., "B-2", GNMA, 6.375%, 2032 430,000 442,887 Mississippi Home Corp. Rev., Single Family Rev., "B-2", GNMA, 6.45%, 2033 440,000 453,741 Mississippi Home Corp. Rev., Single Family Rev., "C", GNMA, 4.95%, 2025 805,000 823,274 Mississippi Home Corp. Rev., Single Family Rev., "F", GNMA, 7.55%, 2027 139,000 146,343 Mississippi Home Corp. Rev., Single Family Rev., GNMA, 6.5%, 2024 765,000 766,530 ----------------------------------------------------------------------------------------------------------------- $ 4,971,649 ----------------------------------------------------------------------------------------------------------------- State & Local Agencies - 15.6% ----------------------------------------------------------------------------------------------------------------- Lamar County, MS (Jail Project), MBIA, 5.1%, 2021 $ 430,000 $ 448,245 Mississippi Development Bank Special Obligations (City of Jackson, MS), AMBAC, 4.375%, 2031 500,000 490,170 Mississippi Development Bank Special Obligations (Correctional Facilities),"A", AMBAC, 5.125%, 2025 1,000,000 1,051,700 Mississippi Development Bank Special Obligations (DeSoto County Regional Utility Authority), 5.25%, 2031 905,000 953,689 Mississippi Development Bank Special Obligations (Hinds County Public Improvements), FSA, 5.25%, 2015 (c) 1,110,000 1,228,426 Mississippi Development Bank Special Obligations (Mississippi, Ltd. Tax Hospital Rev.), 5.1%, 2020 1,000,000 1,042,760 Mississippi Development Bank Special Obligations (Natchez Mississippi Convention Center), AMBAC, 6%, 2013 (c) 750,000 852,173 Mississippi Development Bank Special Obligations (Public Improvement Board), 5%, 2023 750,000 753,143 Mississippi Development Bank Special Obligations (Southaven, MS, Recreation Facilities), 6.2%, 2009 (c) 400,000 417,568 Mississippi Development Bank Special Obligations (Southaven, MS, Recreation Facilities), 5.875%, 2014 375,000 390,023 Mississippi Development Bank Special Obligations (Tunica County Building Project), AMBAC, 5%, 2026 1,695,000 1,785,920 Mississippi Development Bank Special Obligations (Tupelo Fairgrounds), "A", AMBAC, 5%, 2017 785,000 815,607 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2013 (u) 1,000,000 1,093,170 Walnut Grove, MS, Correctional Authority, AMBAC, 6%, 2009 (c) 1,750,000 1,883,385 ----------------------------------------------------------------------------------------------------------------- $13,205,979 ----------------------------------------------------------------------------------------------------------------- Tax - Other - 0.8% ----------------------------------------------------------------------------------------------------------------- Puerto Rico Convention Center, District Authority Hotel Occupancy Tax Rev., "A", CIFG, 4.5%, 2036 $ 500,000 $ 500,720 Virgin Islands Public Finance Authority Rev., "A", 5.25%, 2024 135,000 142,344 ----------------------------------------------------------------------------------------------------------------- $ 643,064 ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.7% ----------------------------------------------------------------------------------------------------------------- Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 230,000 $ 239,444 Guam Economic Development Authority Tobacco Settlement, "B", 5.5%, 2041 350,000 361,361 ----------------------------------------------------------------------------------------------------------------- $ 600,805 ----------------------------------------------------------------------------------------------------------------- Transportation - Special Tax - 2.7% ----------------------------------------------------------------------------------------------------------------- Mississippi Development Bank Special Obligations, Madison County (Highway Construction), FGIC, 5%, 2027 $1,000,000 $ 1,055,200 Mississippi Development Bank Special Obligations, Madison County (Road & Bridge), AMBAC, 5.1%, 2019 1,175,000 1,266,133 ----------------------------------------------------------------------------------------------------------------- $ 2,321,333 ----------------------------------------------------------------------------------------------------------------- Universities - Colleges - 11.2% ----------------------------------------------------------------------------------------------------------------- Jackson State University, Educational Building Corp. Rev., (Campus Facilities), "A", FGIC, 5%, 2029 $3,100,000 $ 3,228,464 Jackson State University, Educational Building Corp. Rev., (Student Recreation Center), AMBAC, 5.125%, 2027 750,000 785,228 Medical Center, Educational Building Corp. Rev. (University of Mississippi Medical Center), "B", AMBAC, 5.5%, 2023 1,000,000 1,149,380 Mississippi State University Educational Building Corp. Rev., AMBAC, 5.5%, 2016 1,000,000 1,068,800 Mississippi State University Educational Building Corp. Rev., AMBAC, 5%, 2021 250,000 259,123 Mississippi Valley State University, Educational Building Corp., MBIA, 5.5%, 2021 890,000 946,960 University of Mississippi, Educational Building Corp. (Performing Arts Center), AMBAC, 5.25%, 2009 (c) 1,000,000 1,036,430 University of Southern Mississippi, Educational Building Corp. Rev., "B", FSA, 5%, 2032 1,000,000 1,057,380 ----------------------------------------------------------------------------------------------------------------- $ 9,531,765 ----------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 6.0% ----------------------------------------------------------------------------------------------------------------- Guam Power Authority Rev., AMBAC, 5.25%, 2013 (u) $2,000,000 $ 2,091,400 Mississippi Development Bank Special Obligations (Municipal Energy Agency Power Supply Project), "A", XLCA, 5%, 2026 1,000,000 1,052,070 Mississippi Development Bank Special Obligations (Okolona Electric System), 5.2%, 2011 (c) 1,010,000 1,070,943 Puerto Rico Electric Power Authority Rev., "II", 5.25%, 2031 875,000 925,225 ----------------------------------------------------------------------------------------------------------------- $ 5,139,638 ----------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 12.6% ----------------------------------------------------------------------------------------------------------------- Harrison County, MS, Wastewater & Solid Waste Management, FGIC, 4.75%, 2008 (c) $1,000,000 $ 1,019,170 Jackson, MS, Water & Sewer Systems Rev., FGIC, 5.25%, 2009 (c) 420,000 435,834 Mississippi Development Bank Special Obligations (Combined Water Sewer & Solid Waste Management), FSA, 5.25%, 2021 1,270,000 1,376,896 Mississippi Development Bank Special Obligations (Combined Water Sewer & Solid Waste Management), FSA, 5.05%, 2027 1,610,000 1,712,766 Mississippi Development Bank Special Obligations (Gulfport Water & Sewer Project), FSA, 5.625%, 2012 (c) 500,000 554,965 Mississippi Development Bank Special Obligations (Gulfport Water & Sewer Project), "A", FGIC, 5.25%, 2012 (c) 2,000,000 2,151,300 Mississippi Development Bank Special Obligations (Jackson Water & Sewer System Project), FSA, 5%, 2029 2,000,000 2,102,180 Mississippi Development Bank Special Obligations (Jackson Water & Sewer System Project), FGIC, 5%, 2032 250,000 259,945 Mississippi Development Bank Special Obligations, Grenada, MS, Water & Sewer Systems Project, "N", FSA, 5%, 2030 1,000,000 1,053,970 ----------------------------------------------------------------------------------------------------------------- $10,667,026 ----------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $84,369,506) $87,922,949 ----------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 1.6% ----------------------------------------------------------------------------------------------------------------- Jackson County, MS, Pollution Control Rev. (Chevron USA, Inc.), 3.78%, due 4/02/07 $ 300,000 $ 300,000 Jackson County, MS, Pollution Control Rev. (Chevron USA, Inc.), 3.78%, due 4/02/07 1,100,000 1,100,000 ----------------------------------------------------------------------------------------------------------------- TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 1,400,000 ----------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $85,769,506) (k) $89,322,949 ----------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (5.2)% (4,444,439) ----------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $84,878,510 ----------------------------------------------------------------------------------------------------------------- SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ----------------------------------------------------------------------------------------------------------------- INTEREST RATE SWAPS 12/01/07 USD 2,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $12,137 8/08/17 USD 500,000 Goldman Sachs 7-Day BMA 3.736% (fixed rate) (1,847) 5/30/19 USD 1,000,000 Citibank 7-Day BMA 3.695% (fixed rate) 3,950 8/22/19 USD 1,000,000 Goldman Sachs 7-Day BMA 3.726% (fixed rate) 3,394 7/23/22 USD 500,000 Merrill Lynch 7-Day BMA 3.889% (fixed rate) (2,398) ----------------------------------------------------------------------------------------------------------------- $15,236 ----------------------------------------------------------------------------------------------------------------- At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) NEW YORK MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 103.2% ------------------------------------------------------------------------------------------------------------------ ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------ Airport & Port Revenue - 3.6% ------------------------------------------------------------------------------------------------------------------ New York, NY, City Industrial Development Agency, Special Facilities Rev. (Terminal One Group), 5.5%, 2024 $1,000,000 $ 1,076,030 Port Authority NY & NJ, (120th Series), MBIA, 5.5%, 2018 1,500,000 1,526,445 Port Authority NY & NJ, (132nd Series), 5%, 2033 2,000,000 2,099,720 Port Authority NY & NJ, Special Obligation Rev. (JFK International), MBIA, 6.25%, 2015 1,000,000 1,158,470 ------------------------------------------------------------------------------------------------------------------ $ 5,860,665 ------------------------------------------------------------------------------------------------------------------ General Obligations - General Purpose - 7.3% ------------------------------------------------------------------------------------------------------------------ Commonwealth of Puerto Rico, XLCA, 5.5%, 2017 (u) $2,700,000 $ 3,059,289 Nassau County, NY, Health Systems Rev. (Nassau County), FSA, 6%, 2009 (c) 1,000,000 1,072,120 New York, NY, "D", 5%, 2028 2,000,000 2,092,260 New York, NY, "A", 6%, 2010 (c) 990,000 1,068,517 New York, NY, "C-1", 5.25%, 2025 1,000,000 1,069,130 New York, NY, "G", 5%, 2028 2,000,000 2,093,080 New York, NY, "J", FGIC, 5.5%, 2026 5,000 5,042 New York, NY, "B", 5.375%, 2010 (c) 210,000 223,642 New York, NY, "B", 5.375%, 2017 1,040,000 1,099,166 New York, NY, Unrefunded, "A", 6%, 2019 10,000 10,698 ------------------------------------------------------------------------------------------------------------------ $ 11,792,944 ------------------------------------------------------------------------------------------------------------------ General Obligations - Improvement - 0.1% ------------------------------------------------------------------------------------------------------------------ Erie County, NY, Public Improvement, "A", FGIC, 5%, 2019 $ 140,000 $ 146,818 ------------------------------------------------------------------------------------------------------------------ General Obligations - Schools - 5.6% ------------------------------------------------------------------------------------------------------------------ Genesee Valley, NY, Central School District (Angelica Belmont), FGIC, 5.25%, 2028 $1,720,000 $ 1,843,100 North Babylon, NY, Union Free School District, "A", FGIC, 5.5%, 2018 2,415,000 2,548,984 Port Byron, NY, Central School District, ETM, AMBAC, 7.4%, 2012 (c) 500,000 589,290 Port Byron, NY, Central School District, ETM, AMBAC, 7.4%, 2013 (c) 500,000 603,735 Port Byron, NY, Central School District, ETM, AMBAC, 7.4%, 2014 (c) 500,000 617,345 Port Byron, NY, Central School District, ETM, AMBAC, 7.4%, 2015 (c) 500,000 628,940 Rome, NY, City School District, FSA, 5.5%, 2019 (c) 1,000,000 1,050,070 Washingtonville, NY, Central School Central District, FGIC, 7.35%, 2008 550,000 574,442 Washingtonville, NY, Central School Central District, FGIC, 7.35%, 2009 550,000 594,006 ------------------------------------------------------------------------------------------------------------------ $ 9,049,912 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Hospitals - 6.7% ------------------------------------------------------------------------------------------------------------------ Chautauqua County, NY, Industrial Development Agency, Civic Facilities Rev. (Women's Christian Assn.), "A", 6.35%, 2017 $ 140,000 $ 143,571 Chautauqua County, NY, Industrial Development Agency, Civic Facilities Rev. (Women's Christian Assn.), "A", 6.4%, 2029 480,000 488,722 Fulton County, NY, Industrial Development Agency, Civic Facilities Rev. (Nathan Littauer Hospital), "A", 5.75%, 2009 470,000 475,344 Monroe County, NY, Industrial Development Agency, Civic Facilities Rev. (Highland Hospital of Rochester), 5%, 2025 1,000,000 1,029,440 Nassau County, NY, Industrial Development Agency, Civic Facilities Rev. (North Shore Health Systems), "D", 5.625%, 2010 500,000 524,590 New York Dormitory Authority Rev. (Montefiore Medical Center), AMBAC, 5.25%, 2019 760,000 791,912 New York Dormitory Authority Rev. (North Shore Long Island Jewish Group), 5.5%, 2033 250,000 266,568 New York Dormitory Authority Rev. (White Plains Hospital), FHA, 5.375%, 2043 1,500,000 1,608,015 New York Dormitory Authority Rev., Non State Supported Debt (Kaleida Health), FHA, 4.6%, 2027 1,000,000 1,016,700 New York Dormitory Authority Rev., Non State Supported Debt (Mt. Sinai NYU Health), 5.5%, 2026 250,000 255,823 New York Dormitory Authority Rev., Non State Supported Debt (Mt. Sinai NYU Health), "C", 5.5%, 2026 500,000 509,145 New York Dormitory Authority Rev., Non State Supported Debt (NYU Hospitals Center), "A", 5%, 2026 800,000 829,080 New York, NY, Health & Hospital Corp. Rev., "A", 5.25%, 2017 760,000 785,726 New York, NY, Industrial Development Agency, Civic Facilities Rev. (Staten Island University Hospital), "B", 6.375%, 2031 495,000 515,948 Suffolk County, NY, Industrial Development Agency, Civic Facilities Rev. (Huntington Hospital), "C", 5.875%, 2032 1,000,000 1,058,510 Yonkers, NY, Industrial Development Agency, Civic Facilities Rev. (St. John's Riverside Hospital), "A", 7.125%, 2031 500,000 535,600 ------------------------------------------------------------------------------------------------------------------ $ 10,834,694 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Long Term Care - 1.3% ------------------------------------------------------------------------------------------------------------------ Amherst, NY, Industrial Development Authority Rev. (Beechwood Health Care Center, Inc.), 5.2%, 2040 $ 500,000 $ 503,965 Dutchess County, NY, Industrial Development Agency (Elant Fishkill, Inc.), "A", 5.25%, 2037 400,000 401,576 East Rochester, NY, Housing Authority Rev. (Woodland Village Project), 5.5%, 2033 400,000 407,424 Suffolk County, NY, Industrial Development Agency, Civic Facilities Rev. (Gurwin Jewish Phase II), 6.7%, 2039 385,000 417,459 Westchester County, NY, Industrial Development Agency, Civic Facilities Rev., Continuing Care Retirement (Kendal On Hudson), "A", 6.5%, 2034 300,000 320,667 ------------------------------------------------------------------------------------------------------------------ $ 2,051,091 ------------------------------------------------------------------------------------------------------------------ Human Services - 0.9% ------------------------------------------------------------------------------------------------------------------ Nassau County, NY, Industrial Development Agency, Civic Facility Rev. (Special Needs Facility), "B-1", 6.5%, 2017 $ 205,000 $ 214,280 New York Dormitory Authority Rev. (Jewish Board of Families & Children), AMBAC, 5%, 2023 695,000 730,271 New York, NY, Industrial Development Agency (PSCH, Inc.), 6.375%, 2033 500,000 532,750 ------------------------------------------------------------------------------------------------------------------ $ 1,477,301 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Airlines - 0.6% ------------------------------------------------------------------------------------------------------------------ New York, NY, City Industrial Development Agency (Jetblue Airways Corp.), 5.125%, 2030 $ 500,000 $ 491,725 New York, NY, Industrial Development Agencies Rev. (American Airlines, Inc.), 7.625%, 2025 350,000 422,321 ------------------------------------------------------------------------------------------------------------------ $ 914,046 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Other - 1.3% ------------------------------------------------------------------------------------------------------------------ New York, NY, City Industrial Development Agency Rev., Liberty Bonds (IAC/InterActiveCorp), 5%, 2035 $ 500,000 $ 514,800 Onondaga County, NY, Industrial Development Agency, Sewer Facilities Rev. (Bristol-Meyers Squibb Co.), 5.75%, 2024 1,000,000 1,158,480 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 430,000 472,901 ------------------------------------------------------------------------------------------------------------------ $ 2,146,181 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Paper - 1.3% ------------------------------------------------------------------------------------------------------------------ Essex County, NY, Industrial Development Agency, Pollution Control Rev. (International Paper Corp.), 5.55%, 2014 $ 750,000 $ 806,580 Essex County, NY, Industrial Development Agency, Pollution Control Rev. (International Paper Corp.), 6.15%, 2021 470,000 482,596 Essex County, NY, Industrial Development Agency, Pollution Control Rev. (International Paper Corp.), 6.45%, 2023 700,000 742,875 ------------------------------------------------------------------------------------------------------------------ $ 2,032,051 ------------------------------------------------------------------------------------------------------------------ Miscellaneous Revenue - Entertainment & Tourism - 0.3% ------------------------------------------------------------------------------------------------------------------ New York Liberty Development Corp. Rev. (National Sports Museum), 6.125%, 2019 $ 500,000 $ 522,885 ------------------------------------------------------------------------------------------------------------------ Miscellaneous Revenue - Other - 0.7% ------------------------------------------------------------------------------------------------------------------ New York, NY, Industrial Development Agency, Civic Facilities Rev. (United Jewish Appeal), "A", 5%, 2027 $1,000,000 $ 1,050,720 ------------------------------------------------------------------------------------------------------------------ Multi-Family Housing Revenue - 3.7% ------------------------------------------------------------------------------------------------------------------ New York Housing Finance Agency Rev., Multi-Family Housing, "A", 5.1%, 2041 $ 835,000 $ 858,063 New York, NY, City Housing Development Corp., "C", 5%, 2026 500,000 519,050 New York, NY, City Housing Development Corp., "E", 4.65%, 2025 1,000,000 1,014,810 New York, NY, Housing Development Corp., Multi-Family Housing Rev., 5.5%, 2034 2,000,000 2,066,860 New York, NY, Housing Development Corp., Multi-Family Housing Rev., "C", 5.6%, 2019 400,000 419,112 Rochester, NY, Housing Authority Mortgage Rev., Coll Andrews Terrace Apartments, GNMA, 4.8%, 2048 1,000,000 996,350 ------------------------------------------------------------------------------------------------------------------ $ 5,874,245 ------------------------------------------------------------------------------------------------------------------ Sales & Excise Tax Revenue - 0.3% ------------------------------------------------------------------------------------------------------------------ Schenectady, NY, Metroplex Development Authority Rev., "A", MBIA, 5.375%, 2021 $ 475,000 $ 513,228 ------------------------------------------------------------------------------------------------------------------ Single Family Housing - State - 3.5% ------------------------------------------------------------------------------------------------------------------ New York Mortgage Agency Rev., 4.6%, 2015 $2,000,000 $ 2,030,800 New York Mortgage Agency Rev., 5.1%, 2024 2,000,000 2,058,000 New York Mortgage Agency Rev., "130", 4.75%, 2030 1,500,000 1,513,905 ------------------------------------------------------------------------------------------------------------------ $ 5,602,705 ------------------------------------------------------------------------------------------------------------------ Solid Waste Revenue - 0.6% ------------------------------------------------------------------------------------------------------------------ Niagara County, NY, Industrial Development Agency, Solid Waste Disposal Rev. (American Ref-fuel), "C", 5.625%, 2024 $ 850,000 $ 894,192 ------------------------------------------------------------------------------------------------------------------ State & Agency - Other - 5.8% ------------------------------------------------------------------------------------------------------------------ New York Dormitory Authority (City University), AMBAC, 5.75%, 2018 $ 800,000 $ 911,264 New York Dormitory Authority (Pace University), MBIA, 6%, 2010 (c) 1,700,000 1,840,454 New York Dormitory Authority (School Program), 6.25%, 2020 1,690,000 1,831,622 New York Dormitory Authority (State University), 5.375%, 2010 (c) 1,500,000 1,592,505 New York Dormitory Authority (State University), 5.875%, 2017 1,130,000 1,303,749 New York Dormitory Authority (Upstate Community Colleges), "A", FSA, 6%, 2010 (c) 1,010,000 1,093,446 New York Municipal Bond Bank Agency, Special Program Rev., "A", AMBAC, 5.25%, 2015 715,000 758,022 ------------------------------------------------------------------------------------------------------------------ $ 9,331,062 ------------------------------------------------------------------------------------------------------------------ State & Local Agencies - 12.2% ------------------------------------------------------------------------------------------------------------------ New York Dormitory Authority (City University), "A", 5.625%, 2016 $2,450,000 $ 2,754,903 New York Dormitory Authority (Judicial Institute at Pace), AMBAC, 5.5%, 2020 2,500,000 2,647,300 New York Dormitory Authority Rev., Mental Health Services, "A", MBIA, 5.75%, 2010 (c) 5,000 5,294 New York Dormitory Authority Rev., Mental Health Services, "B", MBIA, 5.25%, 2011 (c) 385,000 410,745 New York Dormitory Authority Rev., Mental Health Services, "D", FSA, 5.25%, 2010 (c) 35,000 36,847 New York Dormitory Authority Rev., Mental Health Services, Unrefunded, "B", MBIA, 5.25%, 2031 830,000 875,550 New York Dormitory Authority Rev., Mental Health Services, Unrefunded, "D", FSA, 5.25%, 2030 70,000 73,151 New York Dormitory Authority, Mental Health Services Facilities Improvement, "B", MBIA, 5.25%, 2011 (c) 785,000 837,493 New York Dormitory Authority, Mental Health Services Facilities Improvement, "D", FSA, 5.25%, 2010 (c) 895,000 942,220 New York Municipal Bond Bank Agency, Special School Purpose Rev., 5.25%, 2022 1,000,000 1,065,890 New York Urban Development Corp. (Correctional Facilities), AMBAC, 0%, 2009 5,000,000 4,688,300 New York Urban Development Corp. (State Facilities), AMBAC, 5.6%, 2015 2,750,000 3,026,155 Tobacco Settlement Financing Corp., NY, "A-1", 5.5%, 2018 2,000,000 2,143,280 ------------------------------------------------------------------------------------------------------------------ $ 19,507,128 ------------------------------------------------------------------------------------------------------------------ Tax - Other - 2.5% ------------------------------------------------------------------------------------------------------------------ New York, NY, Transitional Finance Authority Rev., "A", 5.75%, 2009 (c) $2,730,000 $ 2,888,750 New York, NY, Transitional Finance Authority Rev., "A", 5%, 2026 1,000,000 1,049,640 ------------------------------------------------------------------------------------------------------------------ $ 3,938,390 ------------------------------------------------------------------------------------------------------------------ Tobacco - 2.1% ------------------------------------------------------------------------------------------------------------------ Erie County, NY, Tobacco Asset Securitization Corp., 0%, 2047 $8,000,000 $ 801,760 Guam Economic Development Authority Tobacco Settlement, "B", 5.5%, 2041 400,000 412,984 New York County Tobacco Trust II, 5.625%, 2035 800,000 831,008 Rockland Tobacco Asset Securitization Corp., NY, Tobacco Asset Backed, "C", 0%, 2060 5,000,000 96,650 TSASC, Inc., NY, "1", 5%, 2034 750,000 762,248 Westchester, NY, Tobacco Asset Securitization Corp., 5.125%, 2045 500,000 510,885 ------------------------------------------------------------------------------------------------------------------ $ 3,415,535 ------------------------------------------------------------------------------------------------------------------ Toll Roads - 13.4% ------------------------------------------------------------------------------------------------------------------ New York Thruway Authority, General Rev., "E", 5.25%, 2008 (c) $ 200,000 $ 204,448 New York Thruway Authority, General Rev., "E", 5.25%, 2015 1,300,000 1,327,469 Niagara Falls, NY, Bridge Commission Toll Rev., FGIC, 5.25%, 2015 (u) 7,000,000 7,534,520 Triborough Bridge & Tunnel Authority Rev., NY, ETM, 6%, 2012 (c) 1,000,000 1,068,900 Triborough Bridge & Tunnel Authority Rev., NY, ETM, 5.5%, 2017 (c)(u) 10,000,000 11,099,100 Triborough Bridge & Tunnel Authority Rev., NY, Unrefunded, "A", MBIA, 5%, 2032 310,000 322,707 ------------------------------------------------------------------------------------------------------------------ $ 21,557,144 ------------------------------------------------------------------------------------------------------------------ Transportation - Special Tax - 8.7% ------------------------------------------------------------------------------------------------------------------ Metropolitan Transportation Authority Rev., NY, FGIC, 5.875%, 2010 (c) $2,000,000 $ 2,129,700 Metropolitan Transportation Authority Rev., NY, FGIC, 5%, 2025 2,500,000 2,609,800 Metropolitan Transportation Authority Rev., NY, "A", 5%, 2026 1,500,000 1,586,745 Metropolitan Transportation Authority Rev., NY, Dedicated Tax Fund Rev., 5.5%, 2015 (c) 750,000 843,968 Metropolitan Transportation Authority Rev., NY, ETM, 7.375%, 2008 (c) 755,000 774,124 Metropolitan Transportation Authority Rev., NY, ETM, AMBAC, 5.75%, 2013 (c) 825,000 884,095 Metropolitan Transportation Authority, NY, Commuter Facilities Rev., FGIC, 5.25%, 2011 (c) 1,000,000 1,065,120 New York Thruway Authority, General Rev., Highway & Bridges, "A", FSA, 5.8%, 2010 (c) 20,000 21,435 New York Thruway Authority, General Rev., Highway & Bridges, "B-1", FGIC, 5.4%, 2010 (c) 2,000,000 2,120,960 Puerto Rico Highway & Transportation Authority Rev., "Y", 5%, 2016 (c) 1,700,000 1,853,476 ------------------------------------------------------------------------------------------------------------------ $ 13,889,423 ------------------------------------------------------------------------------------------------------------------ Universities - Colleges - 4.7% ------------------------------------------------------------------------------------------------------------------ Amherst, NY, Industrial Development Agency Rev. (Daemen College), "A", 6%, 2011 (c) $1,000,000 $ 1,113,540 Cattaraugus County, NY, Industrial Development Agency Rev. (Jamestown Community College), "A", 6.4%, 2010 (c) 500,000 550,700 Hempstead Town, NY, Industrial Development Agency, Civic Facilities Rev. (Hofstra University), MBIA, 5.8%, 2015 1,500,000 1,522,590 New York Dormitory Authority Rev. (Fordham University), AMBAC, 7.2%, 2015 20,000 20,021 New York Dormitory Authority Rev. (St. John's University), "A", MBIA, 5%, 2017 300,000 316,401 New York Dormitory Authority Rev. (Yeshiva University), AMBAC, 5.125%, 2034 1,000,000 1,067,470 Onondaga County, NY, Industrial Development Agency Rev. (Le Moyne College), 5.625%, 2021 750,000 803,558 Schenectady, NY, Industrial Development Agency, Civic Facilities Rev. (Union College), "A", AMBAC, 5%, 2032 2,000,000 2,089,160 Utica, NY, Industrial Development Agency, Civic Facilities Rev. (Utica College), "A", 5.3%, 2008 75,000 75,433 ------------------------------------------------------------------------------------------------------------------ $ 7,558,873 ------------------------------------------------------------------------------------------------------------------- Universities - Dormitories - 0.7% ------------------------------------------------------------------------------------------------------------------ New York Dormitory Authority Rev. (New York University), "A", FGIC, 5%, 2029 $1,000,000 $ 1,056,480 ------------------------------------------------------------------------------------------------------------------ Utilities - Investor Owned - 1.4% ------------------------------------------------------------------------------------------------------------------ New York Environmental Facilities, Water Facilities Rev. (NY American Water Co.), 8.85%, 2015 $2,250,000 $ 2,257,268 ------------------------------------------------------------------------------------------------------------------ Utilities - Municipal Owned - 3.7% ------------------------------------------------------------------------------------------------------------------ Guam Power Authority Rev., AMBAC, 5.25%, 2014 (u) $1,000,000 $ 1,045,450 Long Island Power Authority, Electrical Systems Rev., "C", 5.5%, 2013 (c) 400,000 441,932 New York Power Authority Rev., 5.25%, 2040 3,000,000 3,131,040 New York Power Authority Rev., "A", 5%, 2021 1,000,000 1,053,910 Virgin Islands Water & Power Authority Rev., 5.5%, 2017 200,000 204,080 ------------------------------------------------------------------------------------------------------------------ $ 5,876,412 ------------------------------------------------------------------------------------------------------------------ Water & Sewer Utility Revenue - 10.2% ------------------------------------------------------------------------------------------------------------------ New York Environmental Facilities Corp., Clean Water & Drinking Rev., 5%, 2024 $1,005,000 $ 1,052,983 New York Environmental Facilities Corp., Clean Water & Drinking Rev., 5%, 2025 1,500,000 1,580,685 New York Environmental Facilities Corp., Clean Water & Drinking Rev., 5%, 2029 2,000,000 2,117,480 New York Environmental Facilities Corp., Pollution Control Rev., 5.75%, 2010 175,000 186,529 New York Environmental Facilities Corp., Pollution Control Rev., 6.875%, 2010 165,000 165,404 New York Environmental Facilities Corp., Pollution Control Rev., 7.25%, 2010 70,000 70,195 New York Environmental Facilities Corp., Pollution Control Rev., ETM, 5.75%, 2010 (c) 945,000 1,006,671 New York Environmental Facilities Corp., Pollution Control Rev., ETM, 5.75%, 2010 (c) 1,115,000 1,187,765 New York Environmental Facilities Corp., Water Facilities Rev., 6%, 2031 1,005,000 1,080,827 New York Environmental Facilities Corp., Water Facilities Rev. (Spring Valley Water Co.), "B", AMBAC, 6.15%, 2024 1,500,000 1,503,000 New York, NY, Municipal Water & Sewer Finance Authority Rev., FGIC, 5.25%, 2011 (c) 2,000,000 2,128,980 Erie County, NY, Water Authority Water Rev., ETM, AMBAC, 6.75%, 2014 (c) 1,000,000 1,134,950 New York, NY, Municipal Water & Sewer Finance Authority Rev., "A", 5%, 2027 1,500,000 1,566,450 New York, NY, Municipal Water & Sewer Finance Authority Rev., "A", ETM, 6%, 2010 (c) 620,000 665,105 Suffolk County, NY, Water Authority Rev., MBIA, 5.1%, 2012 660,000 704,913 Suffolk County, NY, Water Authority Rev., ETM, MBIA, 5.1%, 2012 (c) 235,000 251,448 ------------------------------------------------------------------------------------------------------------------ $ 16,403,385 ------------------------------------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $155,260,416) $165,554,778 ------------------------------------------------------------------------------------------------------------------ Floating Rate Demand Notes - 1.3% ------------------------------------------------------------------------------------------------------------------ New York, NY, 3.76%, due 4/02/07 $ 400,000 $ 400,000 New York, NY, Municipal Water Finance Authority, Water & Sewer Systems Rev., "C", 3.76%, due 4/02/07 900,000 900,000 New York, NY, Municipal Water Finance Authority, Water & Sewer Systems Rev., "G", 3.74%, due 4/02/07 800,000 800,000 ------------------------------------------------------------------------------------------------------------------ TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 2,100,000 ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (IDENTIFIED COST, $157,360,416) (k) $167,654,778 ------------------------------------------------------------------------------------------------------------------ Other Assets, Less Liabilities - (4.5)% (7,255,801) ------------------------------------------------------------------------------------------------------------------ NET ASSETS - 100.0% $160,398,977 ------------------------------------------------------------------------------------------------------------------ SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 3,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $18,204 8/22/19 USD 2,000,000 Goldman Sachs 7-Day BMA 3.726% (fixed rate) 6,788 ------------------------------------------------------------------------------------------------------------------ $24,992 ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 103.2% ------------------------------------------------------------------------------------------------------------------ ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------ Airport & Port Revenue - 5.4% ------------------------------------------------------------------------------------------------------------------ Charlotte, NC, Airport Rev., "A", MBIA, 5%, 2029 $ 2,000,000 $ 2,106,532 Charlotte, NC, Airport Rev., "A", MBIA, 5%, 2034 4,485,000 4,712,479 Charlotte, NC, Airport Rev., "B", MBIA, 5.875%, 2019 1,000,000 1,050,880 Charlotte, NC, Airport Rev., "B", MBIA, 5.875%, 2020 3,775,000 3,967,072 Raleigh Durham, NC, Airport Authority Rev., "A", FGIC, 5.25%, 2018 2,700,000 2,854,899 Raleigh Durham, NC, Airport Authority Rev., "A", AMBAC, 5%, 2030 3,000,000 3,175,470 ------------------------------------------------------------------------------------------------------------------ $ 17,867,332 ------------------------------------------------------------------------------------------------------------------ General Obligations - General Purpose - 1.7% ------------------------------------------------------------------------------------------------------------------ Charlotte, NC, 5.5%, 2010 (c) $ 3,100,000 $ 3,327,664 Puerto Rico Commonwealth, Public Improvement, "A", 5.25%, 2030 2,000,000 2,141,940 ------------------------------------------------------------------------------------------------------------------ $ 5,469,604 ------------------------------------------------------------------------------------------------------------------ General Obligations - Improvement - 1.4% ------------------------------------------------------------------------------------------------------------------ New Hanover County, NC, Public Improvement, 5.8%, 2010 (c) $ 4,200,000 $ 4,578,210 ------------------------------------------------------------------------------------------------------------------ General Obligations - Schools - 3.9% ------------------------------------------------------------------------------------------------------------------ Brunswick County, NC, FGIC, 5%, 2020 $ 2,800,000 $ 2,966,040 Cumberland County, NC, 5.8%, 2010 (c) 4,400,000 4,739,108 Johnston County, NC, FGIC, 5.6%, 2010 (c) 2,000,000 2,144,340 New Hanover County, NC, Public Improvement, 5%, 2021 1,435,000 1,508,042 New Hanover County, NC, School Improvement, 5%, 2019 1,255,000 1,329,334 ------------------------------------------------------------------------------------------------------------------ $ 12,686,864 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Hospitals - 23.7% ------------------------------------------------------------------------------------------------------------------ Catawba County, NC, Hospital Rev. (Catawba Memorial Hospital), AMBAC, 5%, 2017 $ 1,200,000 $ 1,241,952 Charlotte-Mecklenburg, NC, Healthcare Systems Rev. (Carolinas Healthcare), "A", 5.125%, 2022 1,000,000 1,023,840 Charlotte-Mecklenburg, NC, Healthcare Systems Rev. (Carolinas Healthcare), "A", 5%, 2031 3,500,000 3,618,370 Cumberland County, NC, Hospital Facilities Rev. (Cumberland Hospital), MBIA, ETM, 0%, 2009 (c) 1,800,000 1,642,860 New Hanover County, NC, Hospital Rev. (New Hanover Regional Medical Center), MBIA, 5%, 2019 6,225,000 6,411,190 North Carolina Medical Care Commission (Cleveland County Healthcare), "A", AMBAC, 5%, 2035 1,305,000 1,361,246 North Carolina Medical Care Commission (Morehead Memorial Hospital), FHA, 5%, 2026 2,000,000 2,102,960 North Carolina Medical Care Commission (Northeast Medical Center), 5.25%, 2029 2,000,000 2,115,040 North Carolina Medical Care Commission (Novant Health), "A", MBIA, 5%, 2018 1,975,000 2,028,878 North Carolina Medical Care Commission, Health Care Facilities Rev. (Wakemed), AMBAC, 5%, 2021 3,500,000 3,677,765 North Carolina Medical Care Commission, Health System Rev. (Health Combined Group), 5%, 2036 3,000,000 3,134,550 North Carolina Medical Care Commission, Hospital Rev. (Betsy Johnson Health Care System), FSA, 5.125%, 2032 1,500,000 1,567,710 North Carolina Medical Care Commission, Hospital Rev. (Gaston Memorial Hospital), 5.5%, 2015 5,790,000 5,879,513 North Carolina Medical Care Commission, Hospital Rev. (Gaston Memorial Hospital), 5.5%, 2019 6,500,000 6,599,905 North Carolina Medical Care Commission, Hospital Rev. (Mission-St. Joseph Health Systems), 5.5%, 2011 (c) 2,825,000 3,063,713 North Carolina Medical Care Commission, Hospital Rev. (Pitt County Memorial Hospital), "B", 5%, 2008 (c) 3,000,000 3,095,640 North Carolina Medical Care Commission, Hospital Rev. (Rex Healthcare), AMBAC, 5%, 2017 5,000,000 5,120,700 North Carolina Medical Care Commission, Hospital Rev. (Southeastern Regional Medical Center), 5.375%, 2032 3,330,000 3,490,473 North Carolina Medical Care Commission, Hospital Rev. (St. Joseph's), MBIA, 5.1%, 2008 (c) 975,000 1,005,732 North Carolina Medical Care Commission, Hospital Rev. (Wilson Memorial Hospital), AMBAC, 0%, 2013 1,000,000 766,280 North Carolina Medical Care Commission, Hospital Rev. (Wilson Memorial Hospital), AMBAC, 0%, 2015 1,140,000 794,192 North Carolina Medical Care Commission, Hospital Rev. Unrefunded (St. Joseph's), 5.1%, 2018 525,000 539,999 North Carolina Medical Care Health Novant Health Obligations Group, 4.5%, 2036 3,000,000 2,927,970 Northern Hospital District, Surry County, NC, Health Care Facilities Rev., ASST GTY, 5.5%, 2019 1,190,000 1,245,097 Northern Hospital District, Surry County, NC, Health Care Facilities Rev., ASST GTY, 5.1%, 2021 1,000,000 1,043,230 Onslow County, NC, Hospital Authority (Onslow Memorial Hospital Project), MBIA, 5%, 2026 1,315,000 1,397,714 Pitt County, NC, Rev., Pitt County Memorial Hospital, ETM, 5.25%, 2021 (c) 10,135,000 10,735,803 ------------------------------------------------------------------------------------------------------------------ $ 77,632,322 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Long Term Care - 1.6% ------------------------------------------------------------------------------------------------------------------ North Carolina Medical Care Commision, Health Ref First Mortgage (Salemtowne), 5.1%, 2030 $ 600,000 $ 607,062 North Carolina Medical Care Commission, Health Care Facilities Rev. (Arbor Acres Community), 6.375%, 2012 (c) 1,000,000 1,126,410 North Carolina Medical Care Commission, Health Care Facilities Rev. (Deerfield), "A", 5%, 2023 1,000,000 1,041,530 North Carolina Medical Care Commission, Health Care Facilities Rev. (Givens Estates), 6.5%, 2013 (c) 800,000 927,704 North Carolina Medical Care Commission, Health Care Facilities Rev., "A", 6.125%, 2035 750,000 787,583 North Carolina Medical Care Commission, Health Care Facilities Rev., First Mortgage (Presbyterian Homes), 5.5%, 2031 750,000 779,640 ------------------------------------------------------------------------------------------------------------------ $ 5,269,929 ------------------------------------------------------------------------------------------------------------------ Human Services - 0.7% ------------------------------------------------------------------------------------------------------------------ Cumberland County, NC, Finance Corp., Installment Payment Rev. (Detention Center & Mental Health), AMBAC, 5.625%, 2019 $ 2,125,000 $ 2,230,889 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Other - 0.3% ------------------------------------------------------------------------------------------------------------------ Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 $ 860,000 $ 945,802 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Paper - 0.6% ------------------------------------------------------------------------------------------------------------------ Columbus County, NC, Industrial Facilities & Pollution Control Financing Authority Rev. (International Paper Co.), "A", 5.8%, 2016 $ 2,000,000 $ 2,056,840 ------------------------------------------------------------------------------------------------------------------ Multi-Family Housing Revenue - 2.7% ------------------------------------------------------------------------------------------------------------------ Charlotte, NC, Housing Authority Rev., GNMA, 4.8%, 2048 $ 2,000,000 $ 1,996,320 Charlotte, NC, Housing Authority Rev., Mortgage Rocky Branch II, GNMA, 4.65%, 2035 2,000,000 2,015,160 Mecklenburg County, NC (Little Rock Apartments), FNMA, 5.15%, 2022 1,000,000 1,049,580 North Carolina Housing Finance Agency, "H", FHA, 6.05%, 2028 2,525,000 2,549,417 North Carolina Medical Care Commission, Health Care Facilities Rev., "A", 5.8%, 2034 1,000,000 1,080,450 ------------------------------------------------------------------------------------------------------------------ $ 8,690,927 ------------------------------------------------------------------------------------------------------------------ Single Family Housing - State - 7.1% ------------------------------------------------------------------------------------------------------------------ North Carolina Housing Finance Agency Rev., "15-A", FSA, 4.95%, 2032 $ 430,000 $ 437,310 North Carolina Housing Finance Agency Rev., "19-A", 5.1%, 2030 2,390,000 2,454,243 North Carolina Housing Finance Agency Rev., "22-A", 4.8%, 2026 2,000,000 2,046,540 North Carolina Housing Finance Agency Rev., "23-A", 4.8%, 2037 3,000,000 2,999,790 North Carolina Housing Finance Agency Rev., "24-A", 4.75%, 2026 2,000,000 2,041,920 North Carolina Housing Finance Agency Rev., "25-A", 5.75%, 2037 2,000,000 2,132,880 North Carolina Housing Finance Agency Rev., "26-A", 4.7%, 2038 3,295,000 3,281,919 North Carolina Housing Finance Agency Rev., "5-A", 5.55%, 2019 2,580,000 2,631,445 North Carolina Housing Finance Agency Rev., "7-A", 6.15%, 2020 590,000 606,308 North Carolina Housing Finance Agency Rev., "A", 5.25%, 2020 1,310,000 1,327,397 North Carolina Housing Finance Agency Rev., "A", 5.375%, 2023 245,000 252,237 North Carolina Housing Finance Agency Rev., "PP", FHA, 6.15%, 2017 1,085,000 1,113,959 North Carolina Housing Finance Agency Rev., "RR", 5.85%, 2028 1,940,000 1,977,384 ------------------------------------------------------------------------------------------------------------------ $ 23,303,332 ------------------------------------------------------------------------------------------------------------------ State & Agency - Other - 8.0% ------------------------------------------------------------------------------------------------------------------ Brunswick County, NC, Certificates of Participation, FSA, 5.5%, 2010 (c) $ 1,000,000 $ 1,064,510 Cabarrus County, NC, Installment Financing Contract, 5%, 2021 5,500,000 5,793,425 Carteret County, NC, AMBAC, 5.625%, 2020 1,010,000 1,076,397 Charlotte, NC, Certificates of Participation (Convention Facilities), AMBAC, 0%, 2008 3,000,000 2,819,820 Charlotte, NC, Certificates of Participation (Public Safety Facilities), "D", 5.5%, 2010 (c) 3,000,000 3,191,670 Charlotte, NC, Certificates of Participation (Transit Projects), "E", 5%, 2035 1,990,000 2,072,366 Harnett County, NC, Certificates of Participation, FSA, 5.25%, 2015 1,020,000 1,109,923 Harnett County, NC, Certificates of Participation, FSA, 5.5%, 2016 1,225,000 1,312,624 Pitt County, NC, Certificates of Participation (School Facilities Improvement), "A", FSA, 5.5%, 2010 (c) 1,250,000 1,327,288 Pitt County, NC, Certificates of Participation (School Facilities Improvement), "B", FSA, 5.75%, 2010 (c) 1,390,000 1,485,715 Pitt County, NC, Certificates of Participation (School Facilities Improvement), "B", FSA, 5.75%, 2010 (c) 1,390,000 1,485,715 Randolph County, NC, Certificates of Participation, FSA, 5.6%, 2009 (c) 3,000,000 3,151,140 Rockingham, NC, Certificates of Participation, AMBAC, 5.125%, 2024 350,000 372,327 ------------------------------------------------------------------------------------------------------------------ $ 26,262,920 ------------------------------------------------------------------------------------------------------------------ State & Local Agencies - 4.1% ------------------------------------------------------------------------------------------------------------------ Cabarrus County, NC, Development Corp., AMBAC, 5.3%, 2019 $ 1,250,000 $ 1,302,875 Forsyth County, NC, Certificates of Participation (Public Facilities & Equipment), 5.25%, 2013 (c) 1,230,000 1,339,027 Iredell County, NC, Public Facilities (School Projects), AMBAC, 5.5%, 2010 (c) 1,000,000 1,064,510 New Hanover County, NC, Certificates of Participation (New Hanover County Projects), AMBAC, 5.25%, 2011 (c) 1,635,000 1,761,320 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2016 (u) 3,000,000 3,357,510 Rutherford County, NC, Certificates of Participation (Rutherford County School), AMBAC, 5%, 2023 840,000 884,537 Winston Salem, NC, Certificates of Participation, "A", 4.75%, 2031 1,000,000 1,026,090 Winston Salem, NC, Certificates of Participation, "C", 5%, 2011 (c) 2,575,000 2,709,904 ------------------------------------------------------------------------------------------------------------------ $ 13,445,773 ------------------------------------------------------------------------------------------------------------------ Tax - Other - 0.8% ------------------------------------------------------------------------------------------------------------------ Virgin Islands Public Finance Authority Rev., ASST GTY, 5.5%, 2018 $ 1,000,000 $ 1,035,210 Virgin Islands Public Finance Authority Rev., "A", 5.5%, 2022 1,650,000 1,698,626 ------------------------------------------------------------------------------------------------------------------ $ 2,733,836 ------------------------------------------------------------------------------------------------------------------ Tobacco - 0.6% ------------------------------------------------------------------------------------------------------------------ Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 1,785,000 $ 1,858,292 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, "A", 0%, 2050 2,000,000 136,920 ------------------------------------------------------------------------------------------------------------------ $ 1,995,212 ------------------------------------------------------------------------------------------------------------------ Transportation - Special Tax - 3.9% ------------------------------------------------------------------------------------------------------------------ Commonwealth of Puerto Rico, Highway & Transportation Authority Rev., FSA, 6%, 2018 (u) $10,850,000 $ 12,841,735 ------------------------------------------------------------------------------------------------------------------ Universities - Colleges - 11.4% ------------------------------------------------------------------------------------------------------------------ University of North Carolina, Wilmington, Certificates of Participation (Student Housing Project), FGIC, 5%, 2028 $ 1,825,000 $ 1,930,686 Appalachian State University, NC, "A", FGIC, 5.125%, 2013 (c) 1,260,000 1,358,267 Appalachian State University, NC, Rev., FSA, 5.6%, 2010 (c) 2,285,000 2,443,945 Appalachian State University, NC, Rev., "C", MBIA, 5%, 2030 1,000,000 1,059,710 East Carolina University, NC, Rev., "A", AMBAC, 5.25%, 2011 (c) 1,375,000 1,470,508 North Carolina Capital Facilities, Finance Agency Rev. (Duke University), "A", 5.25%, 2012 (c) 2,000,000 2,157,940 North Carolina Capital Facilities, Finance Agency Rev. (High Point University), 5.125%, 2018 510,000 531,150 North Carolina Capital Facilities, Finance Agency Rev. (High Point University), 5.125%, 2021 300,000 310,605 North Carolina Capital Facilities, Finance Agency Rev. (Johnson & Wales University), "A", XLCA, 5.25%, 2022 1,870,000 2,003,724 North Carolina Capital Facilities, Finance Agency Rev. (Johnson & Wales University), "A", XLCA, 5%, 2033 3,385,000 3,521,686 North Carolina Capital Facilities, Finance Prerefunded (Duke University), "A", 5.125%, 2011 (c) 4,050,000 4,298,873 North Carolina Capital Facilities, Finance Unrefunded (Duke University), "A", 5.125%, 2041 950,000 984,837 Puerto Rico Industrial Tourist Authority (University Plaza), "A", MBIA, 5%, 2020 2,180,000 2,265,020 University of North Carolina, Charlotte Rev., "B", 5%, 2036 1,750,000 1,855,945 University of North Carolina, Greensboro Rev., "A", FSA, 5%, 2020 2,835,000 2,975,673 University of North Carolina, Systems Pool Rev., "C", AMBAC, 5%, 2029 2,000,000 2,103,480 University of North Carolina, University Rev., 5%, 2028 2,000,000 2,101,480 University of North Carolina, Wilmington Rev., "A", AMBAC, 5%, 2019 1,375,000 1,448,219 University of Puerto Rico Rev., "Q", 5%, 2036 2,370,000 2,461,601 ------------------------------------------------------------------------------------------------------------------ $ 37,283,349 ------------------------------------------------------------------------------------------------------------------ Utilities - Investor Owned - 0.8% ------------------------------------------------------------------------------------------------------------------ Wake County, NC, Industrial Facilities & Pollution Control Rev. (Carolina Power & Light Co.), 5.375%, 2017 $ 2,500,000 $ 2,645,150 ------------------------------------------------------------------------------------------------------------------ Utilities - Municipal Owned - 15.2% ------------------------------------------------------------------------------------------------------------------ North Carolina Eastern Municipal Power Agency, AMBAC, 6%, 2018 $ 1,245,000 $ 1,462,987 North Carolina Eastern Municipal Power Agency, AMBAC, 6%, 2018 (u) 13,000,000 15,276,170 North Carolina Eastern Municipal Power Agency, "A", ETM, 7.5%, 2010 (c) 2,595,000 2,819,442 North Carolina Eastern Municipal Power Agency, "A", MBIA, 7.5%, 2010 3,005,000 3,297,417 North Carolina Eastern Municipal Power Agency, "A", ETM, 5%, 2017 (c) 3,120,000 3,379,740 North Carolina Municipal Power Agency, Catawba Electric Rev., MBIA, 6%, 2011 5,000,000 5,398,050 North Carolina Municipal Power Agency, Catawba Electric Rev., 6.375%, 2013 1,000,000 1,074,580 North Carolina Municipal Power Agency, Catawba Electric Rev., MBIA, 5.25%, 2019 (u) 10,000,000 10,682,600 North Carolina Municipal Power Agency, Catawba Electric Rev., MBIA, 5.25%, 2020 (u) 6,000,000 6,403,200 ------------------------------------------------------------------------------------------------------------------ $ 49,794,186 ------------------------------------------------------------------------------------------------------------------ Water & Sewer Utility Revenue - 9.3% ------------------------------------------------------------------------------------------------------------------ Broad River, NC, Water Authority Rev., MBIA, 5.75%, 2010 (c) $ 1,490,000 $ 1,597,146 Cary, NC, Combined Enterprise Systems Rev., 5%, 2026 1,000,000 1,039,910 Charlotte, NC, Storm Water Fee Rev., 6%, 2010 (c) 3,180,000 3,432,174 Charlotte, NC, Storm Water Fee Rev., 5%, 2034 3,675,000 3,859,595 Charlotte, NC, Water & Sewer Systems Rev., 5.75%, 2009 (c) 2,000,000 2,106,940 Charlotte, NC, Water & Sewer Systems Rev., 5.75%, 2010 (c) 3,075,000 3,296,123 Charlotte, NC, Water & Sewer Systems Rev., 5.5%, 2017 1,650,000 1,780,895 Charlotte, NC, Water & Sewer Systems Rev., "A", 4.625%, 2036 2,000,000 2,027,680 Durham County, NC, Enterprise Systems Rev., MBIA, 5%, 2023 1,675,000 1,764,613 Greensboro, NC, Enterprise Systems Rev., "A", 5.125%, 2011 (c) 1,490,000 1,588,012 Greensboro, NC, Enterprise Systems Rev., "A", 5.125%, 2011 (c) 1,750,000 1,865,115 Greenville, NC, Combined Enterprise Systems Rev., FSA, 5%, 2016 1,005,000 1,064,104 Greenville, NC, Combined Enterprise Systems Rev., FSA, 5.25%, 2019 1,170,000 1,248,624 Harnett County, NC, Water & Sewer Systems Rev., AMBAC, 5%, 2028 700,000 737,373 Kannapolis, NC, Water & Sewer Rev., "B", FSA, 5.25%, 2021 1,000,000 1,055,790 Raleigh, NC, Combined Enterprise Systems Rev., 5%, 2014 (c) 385,000 415,011 Winston Salem, NC, Water & Sewer Systems Rev., 5%, 2033 1,600,000 1,690,960 ------------------------------------------------------------------------------------------------------------------ $ 30,570,065 ------------------------------------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $320,597,372) $338,304,277 ------------------------------------------------------------------------------------------------------------------ Floating Rate Demand Notes - 2.2% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Hospital Development Authority Rev. (Presbyterian University Hospital), "D", 3.7%, due 4/05/07 $ 100,000 $ 100,000 Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), 3.77%, due 4/02/07 100,000 100,000 Burke County, GA, Development Authority Pollution Control Rev. (Oglethorpe Power Corp.), "A", 3.7%, due 4/04/07 970,000 970,000 Jefferson County, AL, Sewer Rev., Capital Improvement Warrants Rev., "A", 3.7%, due 4/05/07 400,000 400,000 Jefferson County, AL, Sewer Rev., Warrants Rev., "B-4", 3.7%, due 4/05/07 1,200,000 1,200,000 Lincoln County, WY, Pollution Control Rev. (Exxon Mobil Corp.), "C", 3.82%, due 4/02/07 1,000,000 1,000,000 New York, NY, Municipal Water Finance Authority, Water & Sewer Systems Rev., "C", 3.76%, due 4/02/07 200,000 200,000 Petersburg, IN, Pollution Control Rev. (Indianapolis Power & Light Co.), "B", 3.73%, due 4/04/07 1,200,000 1,200,000 South Blount County, TN, Utility District Rev., 3.85%, due 4/02/07 1,000,000 1,000,000 State of Oregon, "73G", 3.68%, due 4/04/07 400,000 400,000 Sublette County, WY, Pollution Control Rev. (Exxon Mobil Corp.), 3.75%, due 4/02/07 500,000 500,000 ------------------------------------------------------------------------------------------------------------------ TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 7,070,000 ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (IDENTIFIED COST, $327,667,372) (k) $345,374,277 ------------------------------------------------------------------------------------------------------------------ Other Assets, Less Liabilities - (5.4)% (17,594,245) ------------------------------------------------------------------------------------------------------------------ NET ASSETS - 100.0% $327,780,032 ------------------------------------------------------------------------------------------------------------------ SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 7,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $42,478 5/30/19 USD 3,000,000 Citibank 7-Day BMA 3.695% (fixed rate) 11,848 8/22/19 USD 3,000,000 Goldman Sachs 7-Day BMA 3.726% (fixed rate) 10,182 ------------------------------------------------------------------------------------------------------------------ $64,508 ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 101.7% ------------------------------------------------------------------------------------------------------------------ ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------ Airport & Port Revenue - 2.0% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Airport Rev. (Pittsburgh International Airport), MBIA, 5.75%, 2014 $1,000,000 $ 1,097,480 Allegheny County, PA, Airport Rev. (Pittsburgh International Airport), FGIC, 6.125%, 2017 500,000 530,575 Susquehanna Area Regional Airport, AMBAC, 5.375%, 2023 500,000 529,665 ------------------------------------------------------------------------------------------------------------------ $ 2,157,720 ------------------------------------------------------------------------------------------------------------------ General Obligations - General Purpose - 8.5% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Unrefunded Balance, "C53", FGIC, 5.3%, 2018 $ 285,000 $ 301,430 Allegheny County, PA, Unrefunded Balance, "C53", FGIC, 5.4%, 2019 290,000 307,693 Commonwealth of Puerto Rico, FGIC, 5.5%, 2015 (u) 2,000,000 2,244,540 Commonwealth of Puerto Rico, XLCA, 5.5%, 2017 (u) 2,000,000 2,266,140 Erie County, PA, Convention Center, FGIC, 5%, 2025 500,000 527,300 Erie County, PA, Convention Center, FGIC, 5%, 2026 500,000 526,625 Luzerne County, PA, MBIA, 5.25%, 2012 (c) 500,000 539,470 North Huntingdon Township, PA, AMBAC, 5.25%, 2019 500,000 528,705 Pennsylvania Finance Authority Rev. (Penn Hills), "A", FGIC, 5.45%, 2010 (c) 85,000 90,191 Pennsylvania Finance Authority Rev. (Penn Hills), "A", FGIC, 5.45%, 2019 415,000 438,887 State of Pennsylvania, 6%, 2010 (c) 1,000,000 1,070,580 State of Pennsylvania, 6.25%, 2010 300,000 323,433 ------------------------------------------------------------------------------------------------------------------ $ 9,164,994 ------------------------------------------------------------------------------------------------------------------ General Obligations - Improvement - 0.5% ------------------------------------------------------------------------------------------------------------------ Pittsburgh, PA, FGIC, 5.75%, 2009 (c) $ 500,000 $ 524,215 ------------------------------------------------------------------------------------------------------------------ General Obligations - Schools - 18.0% ------------------------------------------------------------------------------------------------------------------ Allegheny Valley, PA, School District, "A", MBIA, 5%, 2028 $1,000,000 $ 1,055,400 Ambridge, PA, Area School District, MBIA, 5%, 2014 (c) 750,000 811,815 Butler, PA, School District, FGIC, 5.375%, 2018 500,000 512,115 Chambersburg, PA, School District, FSA, 5%, 2011 (c) 500,000 525,825 Chester County, PA, School Authority (School Intermediate Unit Project), "N", AMBAC, 5%, 2025 750,000 795,780 Downingtown, PA, School District, AMBAC, 5.65%, 2008 (c) 500,000 513,795 Exeter Township, PA, School District, FGIC, 5%, 2025 1,000,000 1,050,450 Garnet Valley, PA, School District, FGIC, 5.5%, 2015 750,000 812,790 Gateway, PA, Allegheny School District, FGIC, 5.2%, 2023 1,000,000 1,068,950 Gateway, PA, Allegheny School District, FGIC, 5%, 2032 1,890,000 1,978,849 North Allegheny, PA, School District, FGIC, 5.05%, 2022 590,000 613,146 North Schuylkill, PA, School District, FGIC, 5%, 2028 650,000 675,500 Palmyra, PA, School District, FGIC, 5.375%, 2016 820,000 883,001 Pennridge, PA, School District, MBIA, 5%, 2013 (c) 50,000 53,369 Pennridge, PA, School District, Unrefunded, MBIA, 5%, 2013 (c) 450,000 480,321 Pennsylvania Public School Building (Garnet Valley School District), AMBAC, 5.5%, 2011 (c) 1,005,000 1,070,395 Perkiomen Valley, PA, School District, FSA, 5%, 2011 (c) 280,000 293,538 Perkiomen Valley, PA, School District, FSA, 5%, 2019 220,000 229,253 Perkiomen Valley, PA, School District, "A", FSA, 5.25%, 2014 (c) 1,000,000 1,091,150 Philadelphia, PA, School District, MBIA, 6%, 2010 (c) 500,000 531,840 Philadelphia, PA, School District, FSA, 5.75%, 2011 (c) 500,000 536,955 South Park, PA, School District, FGIC, 5%, 2019 750,000 780,383 Southeastern Area, PA, Special Schools Authority Rev., 0%, 2007 360,000 353,484 State Public School Building Authority, PA School (Colonial Intermediate Unit 20), FGIC, 5%, 2030 500,000 527,240 State Public School Building Authority, PA School (Tuscarora School District), FSA, 5%, 2013 (c) 1,000,000 1,068,730 State Public School Building Authority, PA, School Rev. (Haverford Township Project), XLCA, 5%, 2027 1,000,000 1,061,430 ------------------------------------------------------------------------------------------------------------------ $ 19,375,504 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Hospitals - 13.1% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Hospital Development Authority Rev. (Jefferson Regional Medical Center), "A", 4.75%, 2025 $ 500,000 $ 503,170 Allegheny County, PA, Hospital Development Authority Rev. (South Hills Health Systems), "B", 6.75%, 2010 (c) 555,000 603,418 Allegheny County, PA, Hospital Development Authority Rev. (UPMC Health Systems), MBIA, 5%, 2018 500,000 513,940 Allegheny County, PA, Hospital Development Authority Rev. (West Penn Allegheny Health), 9.25%, 2030 150,000 177,195 Allegheny County, PA, Hospital Development Authority Rev. (West Penn Allegheny Health), "B", 9.25%, 2022 50,000 59,065 Blair County, PA, Hospital Authority Rev. (Altoona), AMBAC, 5.5%, 2008 470,000 480,317 Delaware County, PA, Authority Hospital Rev. (Crozer Keystone Obligations Group), "A", 5%, 2031 500,000 512,715 Erie County, PA, Hospital Authority Rev. (Hamot Health Foundation), AMBAC, 5.25%, 2017 675,000 723,040 Lancaster County, PA, Hospital Authority Rev., 5.5%, 2013 (c) 500,000 550,890 Lebanon County, PA, Health Facilities Authority Rev. (Good Samaritan Hospital), 5%, 2018 200,000 204,852 Lebanon County, PA, Health Facilities Authority Rev. (Good Samaritan Hospital), 6%, 2035 350,000 379,404 Lehigh County, PA, General Purpose Authority (Good Shepherd Group), "A", 5.625%, 2034 350,000 375,491 Lehigh County, PA, General Purpose Authority (Lehigh Valley Hospital), MBIA, 7%, 2016 250,000 289,653 Lehigh County, PA, General Purpose Authority (Lehigh Valley Hospital), 5.25%, 2032 600,000 628,422 Lehigh County, PA, General Purpose Authority (St. Luke's Bethlehem Hospital), 5.375%, 2013 (c) 600,000 653,652 Lehigh County, PA, Hospital Rev. (Lehigh Valley Hospital), FSA, 5.25%, 2019 500,000 530,570 Lycoming County, PA, Authority Hospital Rev. (Williamsport Hospital Obligation Group), CONNIE LEE, 5.375%, 2010 750,000 757,793 Monroe County, PA, Hospital Authority Rev. (Pocono Medical Center), 6%, 2043 750,000 802,590 Mount Lebanon, PA, Hospital Authority Rev. (St. Clair Memorial Hospital), 5.625%, 2032 400,000 421,156 Pennsylvania Higher Educational Facilities Authority Rev. (UPMC Health), 6.25%, 2018 100,000 109,635 Pennsylvania Higher Educational Facilities Authority Rev. (UPMC Health), 6%, 2031 650,000 705,510 Philadelphia, PA, Health & Educational Facilities Rev. (Jeane Health), ETM, 6.6%, 2010 115,000 119,962 Philadelphia, PA, Health & Educational Facilities Rev. (Temple University), 6.625%, 2023 250,000 250,833 Philadelphia, PA, Hospitals & Higher Education Facilities Authority (Childrens Hospital), "A", 4.5%, 2033 750,000 731,888 Sayre, PA, Health Care Facilities Authority Rev. (Guthrie Health), 5.875%, 2031 500,000 540,955 Sayre, PA, Health Care Facilities Authority Rev. (Latrobe Hospital), AMBAC, 5.25%, 2012 (c) 585,000 628,389 South Central, PA, General Authority Rev., 5.625%, 2011 (c) 490,000 530,273 South Central, PA, General Authority Rev., Wellspan Health, ETM, 5.625%, 2026 (c) 110,000 117,641 St. Mary's Hospital Authority, PA, Health Systems Rev. (Catholic Health East), "B", 5.375%, 2034 750,000 796,838 West Shore, PA, Hospital Authority (Holy Spirit Hospital), 6.25%, 2032 350,000 374,476 ------------------------------------------------------------------------------------------------------------------ $ 14,073,733 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Long Term Care - 2.0% ------------------------------------------------------------------------------------------------------------------ Bucks County, PA, Industrial Development Authority Rev. (Ann's Choice, Inc.), 6.125%, 2025 $ 250,000 $ 264,993 Chartiers Valley, PA, Industrial & Commercial Development Authority (Asbury Health Center Project), 5.75%, 2022 250,000 258,750 Cumberland County, PA, Municipal Authority Rev. (Diakon Lutheran Ministries), 5%, 2036 200,000 205,552 Cumberland County, PA, Municipal Authority Rev. (Wesley), "A", 7.25%, 2013 (c) 110,000 129,789 Cumberland County, PA, Municipal Authority Rev. (Wesley), "A", 7.25%, 2013 (c) 40,000 47,196 Lancaster County, PA, Hospital Authority Rev. (Willow Valley Retirement Project), 5.875%, 2031 500,000 525,565 Montgomery County, PA, Industrial Development Acts Retirement Communities, "A", 4.5%, 2036 500,000 479,445 Montgomery County, PA, Industrial Development Authority Rev. (Whitemarsh Continuing Care), 6.25%, 2035 250,000 264,733 ------------------------------------------------------------------------------------------------------------------ $ 2,176,023 ------------------------------------------------------------------------------------------------------------------ Human Services - 0.1% ------------------------------------------------------------------------------------------------------------------ Montgomery County, PA, Industrial Development Authority (Wordsworth Academy), 8%, 2024 $ 150,000 $ 150,806 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Environmental Services - 1.0% ------------------------------------------------------------------------------------------------------------------ New Morgan, PA, Industrial Development Authority, Solid Waste Disposal Rev. (New Morgan Landfill Co., Inc./Browning Ferris, Inc.), 6.5%, 2019 $ 530,000 $ 533,503 Westmoreland County, PA, Industrial Development Corp. (Waste Management), LOC, 5.1%, 2018 500,000 507,845 ------------------------------------------------------------------------------------------------------------------ $ 1,041,348 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Other - 1.8% ------------------------------------------------------------------------------------------------------------------ Bucks County, PA, Industrial Development Authority Rev. (USX Corp.), 5.4%, 2017 $ 300,000 $ 320,754 Pennsylvania Economic Development Financing Authority Rev. (Amtrak), 6.125%, 2021 150,000 160,518 Pennsylvania Economic Development Financing Authority, Solid Waste Disposal Rev. (Procter & Gamble), 5.375%, 2031 1,000,000 1,127,300 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 270,000 296,938 ------------------------------------------------------------------------------------------------------------------ $ 1,905,510 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Paper - 0.6% ------------------------------------------------------------------------------------------------------------------ Erie County, PA, Industrial Development Authority, Pollution Control (International Paper Co.), "A", 5.3%, 2012 $ 650,000 $ 683,092 ------------------------------------------------------------------------------------------------------------------ Miscellaneous Revenue - Other - 0.1% ------------------------------------------------------------------------------------------------------------------ Gallery Certificate Trust, PA, Parking Rev., 4.5%, 2013 (n) $ 130,000 $ 129,861 ------------------------------------------------------------------------------------------------------------------ Parking - 2.0% ------------------------------------------------------------------------------------------------------------------ Philadelphia, PA, Public Parking Authority Rev., FSA, 5.625%, 2015 $1,000,000 $ 1,054,270 Pittsburgh, PA, Public Parking Authority Rev., AMBAC, 6%, 2010 (c) 500,000 534,725 Pittsburgh, PA, Public Parking Authority Rev., "A", FGIC, 5%, 2025 500,000 528,015 Pittsburgh & Allegheny County, PA, Sales Tax Rev. (Public Auditorium Hotel Room), AMBAC, 5.25%, 2017 500,000 522,590 ------------------------------------------------------------------------------------------------------------------ $ 2,639,600 ------------------------------------------------------------------------------------------------------------------ Single Family Housing Revenue - Local - 0.4% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Residential Financing Authority, Single Family Mortgage Rev., "RR", 4.75%, 2025 $ 375,000 $ 378,495 ------------------------------------------------------------------------------------------------------------------ Single Family Housing - State - 6.4% ------------------------------------------------------------------------------------------------------------------ Pennsylvania Housing Finance Agency Rev., "96 A", 4.7%, 2037 $ 750,000 $ 743,985 Pennsylvania Housing Finance Agency, Single Family Mortgage Rev., 5.1%, 2020 1,405,000 1,435,390 Pennsylvania Housing Finance Agency, Single Family Mortgage Rev., 5.25%, 2021 750,000 771,818 Pennsylvania Housing Finance Agency, Single Family Mortgage Rev., 5.25%, 2033 455,000 458,827 Pennsylvania Housing Finance Agency, Single Family Mortgage Rev., 5%, 2034 675,000 682,668 Pennsylvania Housing Finance Agency, Single Family Mortgage Rev., "93-A", 5.75%, 2037 730,000 775,121 Pennsylvania Housing Finance Agency, Single Family Mortgage Rev., "94-A", 5.1%, 2031 500,000 514,750 Pennsylvania Housing Finance Agency, Single Family Mortgage Rev., "95-A", 4.875%, 2031 1,000,000 1,012,060 Pennsylvania Housing Finance Agency, Single Family Mortgage Rev., "A", 4.875%, 2026 500,000 512,030 ------------------------------------------------------------------------------------------------------------------ $ 6,906,649 ------------------------------------------------------------------------------------------------------------------ Solid Waste Revenue - 0.3% ------------------------------------------------------------------------------------------------------------------ Delaware County, PA, Industrial Development Authority, Resource Recovery Facilities Rev. (American Ref-Fuel Co.), "A", 6.2%, 2019 $ 300,000 $ 309,951 ------------------------------------------------------------------------------------------------------------------ State & Local Agencies - 4.0% ------------------------------------------------------------------------------------------------------------------ Delaware Valley, PA, Regional Finance Authority, RITES, AMBAC, 7.096%, 2018 (p) $ 500,000 $ 608,530 Northumberland County, PA (Country Careers & Arts Center), 6.65%, 2020 235,000 240,943 Philadelphia, PA, Industrial Development Authority, MBIA, 5.35%, 2012 500,000 510,565 Philadelphia, PA, Industrial Development Authority, FSA, 5.125%, 2026 1,000,000 1,051,250 Philadelphia, PA, Industrial Development Authority, FSA, 5.25%, 2030 750,000 786,765 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2013 (u) 1,000,000 1,093,170 ------------------------------------------------------------------------------------------------------------------ $ 4,291,223 ------------------------------------------------------------------------------------------------------------------ Student Loan Revenue - 1.4% ------------------------------------------------------------------------------------------------------------------ Pennsylvania Higher Education, Capital Acquistion Rev., MBIA, 5%, 2026 $1,500,000 $ 1,553,220 ------------------------------------------------------------------------------------------------------------------ Tax - Other - 0.6% ------------------------------------------------------------------------------------------------------------------ Pittsburgh & Allegheny County, PA, Sales Tax Rev. (Public Auditorium Hotel Room), AMBAC, 5.25%, 2013 $ 500,000 $ 522,360 Virgin Islands Public Finance Authority Rev., "A", 5.25%, 2024 135,000 142,344 ------------------------------------------------------------------------------------------------------------------ $ 664,704 ------------------------------------------------------------------------------------------------------------------ Tax Assessment - 0.6% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Redevelopment Authority Rev. (Pittsburgh Mills), 5.6%, 2023 $ 350,000 $ 365,540 Washington County, PA, Redevelopment Authority (Victory Centre Project), "A", 5.45%, 2035 250,000 254,765 ------------------------------------------------------------------------------------------------------------------ $ 620,305 ------------------------------------------------------------------------------------------------------------------ Tobacco - 0.4% ------------------------------------------------------------------------------------------------------------------ Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 315,000 $ 327,934 Virgin Islands Tobacco Settlement Financing Corp., 5%, 2021 140,000 141,519 ------------------------------------------------------------------------------------------------------------------ $ 469,453 ------------------------------------------------------------------------------------------------------------------ Toll Roads - 0.2% ------------------------------------------------------------------------------------------------------------------ Pennsylvania Turnpike Commission, 5.5%, 2015 $ 250,000 $ 269,230 ------------------------------------------------------------------------------------------------------------------ Transportation - Special Tax - 7.0% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Port Authority Special Rev., MBIA, 6.25%, 2009 (c) $ 500,000 $ 528,590 Commonwealth of Puerto Rico Highway & Transportation Authority, "Y", 5.5%, 2016 (c) 1,020,000 1,151,468 Commonwealth of Puerto Rico Highway & Transportation, Authority, MBIA, 5.5%, 2020 (u) 3,000,000 3,455,580 Pennsylvania Turnpike Commission, MBIA, 5%, 2024 1,775,000 1,865,064 Southeastern Pennsylvania Transportation Authority, Special Rev., FGIC, 5.25%, 2013 500,000 519,360 ------------------------------------------------------------------------------------------------------------------ $ 7,520,062 ------------------------------------------------------------------------------------------------------------------ Universities - Colleges - 11.7% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA (Chatham College), 5.95%, 2032 $ 335,000 $ 356,467 Allegheny County, PA, Higher Education Building Authority Rev. (Duquesne University), "A", XLCA, 5%, 2024 1,000,000 1,061,960 Cumberland County, PA, Municipal Authority (Dickinson College), AMBAC, 5.55%, 2010 (c) 535,000 568,764 Harrisburg, PA, University of Science, "A", 5.4%, 2016 300,000 306,570 Harrisburg, PA, University of Science, "B", 6%, 2036 200,000 205,860 Lycoming County, PA (College of Technology), AMBAC, 5.25%, 2032 750,000 787,028 Pennsylvania Higher Educational Facilities (Allegheny College), 4.75%, 2031 500,000 508,465 Pennsylvania Higher Educational Facilities (Philadelphia University), 5.5%, 2020 500,000 528,315 Pennsylvania Higher Educational Facilities Authority Rev. (Clarion University Foundation), XLCA, 5%, 2023 1,000,000 1,046,260 Pennsylvania Higher Educational Facilities Authority Rev. (Drexel University), 5.2%, 2032 500,000 526,385 Pennsylvania Higher Educational Facilities Authority Rev. (Marywood University), MBIA, 5.5%, 2010 (c) 300,000 316,398 Pennsylvania Higher Educational Facilities Authority Rev. (Mercyhurst College), "B", 5%, 2023 500,000 511,170 Pennsylvania Higher Educational Facilities Authority Rev. (Widener University), 5.375%, 2029 300,000 317,565 Pennsylvania Higher Educational Facilities Authority Rev. (Widener University), 5%, 2031 300,000 308,790 Pennsylvania Public School Building Authority (Delaware County College), MBIA, 5.75%, 2010 (c) 500,000 533,285 Pennsylvania State University, 5%, 2029 1,400,000 1,483,692 Pennsylvania State University, "A", 5%, 2029 1,000,000 1,053,700 State Public School Building Authority, PA, Jefferson County (Dubois Technical School), FGIC, 5%, 2026 1,000,000 1,052,510 Union County, PA, Higher Educational Facilities Financing Authority, University Rev. (Bucknell University), 5.25%, 2021 1,000,000 1,070,960 ------------------------------------------------------------------------------------------------------------------ $ 12,544,144 ------------------------------------------------------------------------------------------------------------------ Universities - Secondary Schools - 0.6% ------------------------------------------------------------------------------------------------------------------ Pennsylvania Economic Development Financing Authority (Germantown Friends School Project), 5.35%, 2031 $ 600,000 $ 631,620 ------------------------------------------------------------------------------------------------------------------ Utilities - Cogeneration - 0.3% ------------------------------------------------------------------------------------------------------------------ Carbon County, PA, Industrial Development Authority Rev. (Panther Creek Partners), 6.65%, 2010 $ 110,000 $ 113,649 Pennsylvania Economic Development Financing Authority Rev., Resources Recovery Rev. (Colver), "G", 5.125%, 2015 100,000 101,330 Pennsylvania Economic Development Financing Authority Rev., Resources Recovery Rev. (Northampton Generating), 6.4%, 2009 150,000 151,809 ------------------------------------------------------------------------------------------------------------------ $ 366,788 ------------------------------------------------------------------------------------------------------------------ Utilities - Investor Owned - 1.2% ------------------------------------------------------------------------------------------------------------------ Lehigh County, PA, Industrial Development Authority Pollution Control Rev. (PPL Electric Utilities Corp.), "A", FGIC, 4.7%, 2029 $ 500,000 $ 513,605 Lehigh County, PA, Industrial Development Authority Rev. (PPL Electric Utilities Corp.), FGIC, 4.75%, 2027 750,000 771,773 ------------------------------------------------------------------------------------------------------------------ $ 1,285,378 ------------------------------------------------------------------------------------------------------------------ Utilities - Municipal Owned - 6.7% ------------------------------------------------------------------------------------------------------------------ Guam Power Authority Rev., AMBAC, 5.25%, 2014 (u) $4,340,000 $ 4,537,253 Philadelphia, PA, Gas Works Rev., FSA, 5.5%, 2009 (c) 1,000,000 1,049,080 Philadelphia, PA, Gas Works Rev., FSA, 5.5%, 2011 (c) 500,000 536,465 Philadelphia, PA, Gas Works Rev. (1998 General Ordinance), FSA, 5.25%, 2020 1,000,000 1,065,160 ------------------------------------------------------------------------------------------------------------------ $ 7,187,958 ------------------------------------------------------------------------------------------------------------------ Water & Sewer Utility Revenue - 9.7% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Sewer Rev., MBIA, 5.75%, 2010 (c) $ 750,000 $ 808,140 Bucks County, PA (Suburban Water Co.), FGIC, 5.55%, 2032 1,000,000 1,059,730 Delaware County, PA Water Quality Control Authority, Sewer Rev., FGIC, 5%, 2018 750,000 786,480 Fairview Township, PA, Sewer Rev., FGIC, 5.05%, 2018 750,000 784,838 Johnstown, PA, Redevelopment Authority, Sewer Rev., "A", FSA, 5%, 2014 (c) 1,500,000 1,620,615 Lancaster County, PA, Water & Sewer Authority Rev., MBIA, 5%, 2028 440,000 462,766 Unity Township, PA, Municipal Authority Sewer Rev., FSA, 5%, 2034 1,660,000 1,747,216 University Area Joint Authority, Sewer Rev., MBIA, 5%, 2023 1,500,000 1,555,755 Virgin Islands Water & Power Authority Rev., ASST GTY, 5.3%, 2018 500,000 512,160 Westmoreland County, PA, Municipal Authority Services Rev., FSA, 5.25%, 2015 (c) 1,000,000 1,103,020 ------------------------------------------------------------------------------------------------------------------ $ 10,440,720 ------------------------------------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $105,051,748) $109,462,306 ------------------------------------------------------------------------------------------------------------------ Floating Rate Demand Notes - 1.7% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Hospital Development Authority Rev. (Presbyterian University Hospital), "B", 3.7%, due 4/05/07 $ 450,000 $ 450,000 Allegheny County, PA, Hospital Development Authority Rev. (Presbyterian University Hospital), "D", 3.7%, due 4/05/07 1,400,000 1,400,000 ------------------------------------------------------------------------------------------------------------------ TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 1,850,000 ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (IDENTIFIED COST, $106,901,748) (k) $111,312,306 ------------------------------------------------------------------------------------------------------------------ Other Assets, Less Liabilities - (3.4)% (3,650,273) ------------------------------------------------------------------------------------------------------------------ NET ASSETS - 100.0% $107,662,033 ------------------------------------------------------------------------------------------------------------------ SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 2,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $12,137 6/06/17 USD 1,500,000 Merrill Lynch 7-Day BMA 3.579% (fixed rate) 10,521 5/30/19 USD 2,000,000 Citibank 7-Day BMA 3.695% (fixed rate) 7,899 6/12/19 USD 1,500,000 Merrill Lynch 7-Day BMA 3.660% (fixed rate) 11,303 8/22/19 USD 1,000,000 Goldman Sachs 7-Day BMA 3.726% (fixed rate) 3,394 4/27/22 USD 1,000,000 Citibank 7-Day BMA 3.878% (fixed rate) (5,059) 7/23/22 USD 500,000 Merrill Lynch 7-Day BMA 3.889% (fixed rate) (2,398) 9/26/22 USD 2,000,000 Goldman Sachs 7-Day BMA 3.807% (fixed rate) 9,897 ------------------------------------------------------------------------------------------------------------------ $47,694 ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 102.2% ------------------------------------------------------------------------------------------------------------------ ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------ Airport & Port Revenue - 3.1% ------------------------------------------------------------------------------------------------------------------ Horry County, SC, "A", FSA, 5.7%, 2027 $2,250,000 $ 2,301,273 Richland Lexington, SC, Airport Rev. (Columbia Airport), FSA, 5.125%, 2025 1,500,000 1,576,620 Richland Lexington, SC, Airport Rev. (Columbia Airport), "A", FSA, 5%, 2026 1,000,000 1,035,750 ------------------------------------------------------------------------------------------------------------------ $ 4,913,643 ------------------------------------------------------------------------------------------------------------------ General Obligations - General Purpose - 10.5% ------------------------------------------------------------------------------------------------------------------ Commonwealth of Puerto Rico, ETM, 5.5%, 2018 (c)(u) $4,000,000 $ 4,285,320 Commonwealth of Puerto Rico, ETM, 5.5%, 2019 (c)(u) 3,500,000 3,749,655 Commonwealth of Puerto Rico, MBIA, 5.75%, 2020 (u) 4,000,000 4,255,640 Hilton Head Island, SC, Rev., MBIA, 5.125%, 2022 1,000,000 1,062,650 Horry County, SC, Hospital Fee Special Obligation, 6%, 2015 915,000 982,015 Puerto Rico Commonwealth, Public Improvement, "A", 5.25%, 2030 1,000,000 1,070,970 Richland Lexington Riverbanks, SC, Parks District, FGIC, 5.8%, 2018 1,000,000 1,047,260 ------------------------------------------------------------------------------------------------------------------ $ 16,453,510 ------------------------------------------------------------------------------------------------------------------ General Obligations - Improvement - 1.8% ------------------------------------------------------------------------------------------------------------------ Beaufort County, SC, FGIC, 5.25%, 2018 $1,000,000 $ 1,035,510 Puerto Rico Municipal Finance Agency, FSA, 6%, 2009 (c)(u) 1,700,000 1,806,947 ------------------------------------------------------------------------------------------------------------------ $ 2,842,457 ------------------------------------------------------------------------------------------------------------------ General Obligations - Schools - 12.1% ------------------------------------------------------------------------------------------------------------------ Anderson County, SC, School District, "B", 5.5%, 2010 (c) $1,465,000 $ 1,553,530 Beaufort County, SC, School District, "A", FSA, 4.25%, 2032 1,000,000 959,850 Berkeley County, SC, School District, 5%, 2008 (c) 2,000,000 2,065,840 Chesterfield County, SC, School District, FSA, 5%, 2023 3,000,000 3,132,390 Darlington County, SC, School District, FSA, 5%, 2027 2,770,000 2,923,430 Lexington County, SC, School District, "A", 4.75%, 2028 1,000,000 1,037,170 Orangeburg County, SC, Consolidated School District, FSA, 5.25%, 2020 1,065,000 1,133,522 Orangeburg County, SC, Consolidated School District, FSA, 5.375%, 2022 2,050,000 2,208,117 Richland County, SC, School District, 5.1%, 2021 1,750,000 1,830,553 York County, SC, School District No. 003, FSA, 5%, 2032 2,000,000 2,133,540 ------------------------------------------------------------------------------------------------------------------ $ 18,977,942 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Hospitals - 20.8% ------------------------------------------------------------------------------------------------------------------ Charleston County, SC, Hospital Facilities Rev. (Medical Society Health), ETM, MBIA, 5%, 2022 (c) $2,450,000 $ 2,467,518 Florence County, SC, Hospital Rev. (McLeod Regional Medical Center), "A", FSA, 5%, 2031 2,000,000 2,101,500 Florence County, SC, Hospital Rev. (McLeod Regional Medical Center), "A", FSA, 5.25%, 2034 2,000,000 2,133,640 Greenville, SC, Hospital Systems, Hospital Facilities Rev., 6%, 2020 3,400,000 3,979,700 Greenwood County, SC, Hospital Facilities Rev. (Self Memorial Hospital), 5.5%, 2021 1,000,000 1,053,550 Lexington County, SC, Health Services District, Inc., 5.5%, 2032 250,000 267,968 Lexington County, SC, Health Services District, Inc., 5.5%, 2037 250,000 267,338 Lexington County, SC, Health Services District, Inc., Hospital Rev., Refunding & Improvement, FSA, 5.125%, 2021 1,500,000 1,555,995 Lexington County, SC, Health Services District, Inc., Hospital Rev., Refunding & Improvement, 5.5%, 2032 1,000,000 1,067,470 South Carolina Jobs & Economic Development Authority Rev. (Bon Secours Health Systems, Inc.), "A", 5.625%, 2030 1,250,000 1,322,188 South Carolina Jobs & Economic Development Authority, Hospital Facilities Rev. (Anderson Area Medical Center, Inc.), MBIA, 5.25%, 2015 1,750,000 1,769,548 South Carolina Jobs & Economic Development Authority, Hospital Facilities Rev. (Georgetown Memorial Hospital), AMBAC, 6%, 2014 1,000,000 1,066,590 South Carolina Jobs & Economic Development Authority, Hospital Facilities Rev. (Georgetown Memorial Hospital), ASST GTY, 5.25%, 2021 1,500,000 1,565,835 South Carolina Jobs & Economic Development Authority, Hospital Facilities Rev. (Georgetown Memorial Hospital), AMBAC, 5%, 2023 1,000,000 1,018,280 South Carolina Jobs & Economic Development Authority, Hospital Facilities Rev. (Palmetto Health Alliance), 6.25%, 2031 750,000 817,193 South Carolina Jobs & Economic Development Authority, Hospital Facilities Rev. (Tuomey Health), CIFG, 5%, 2030 1,000,000 1,052,110 South Carolina Medical University, Hospital Facilities Rev., "A", MBIA, 5%, 2031 3,100,000 3,233,579 Spartanburg County, SC, Health Service Rev., AMBAC, 5.3%, 2020 2,500,000 2,503,425 Spartanburg County, SC, Health Service Rev., AMBAC, 5.3%, 2025 1,000,000 1,001,370 Spartanburg County, SC, Health Service Rev., FSA, 5.25%, 2032 2,250,000 2,361,308 ------------------------------------------------------------------------------------------------------------------ $ 32,606,105 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Long Term Care - 1.4% ------------------------------------------------------------------------------------------------------------------ Greenville County, SC, Hospital Rev. (Chestnut Hill), "A", 8%, 2015 $1,325,000 $ 1,315,725 South Carolina Jobs & Economic Development Authority, First Mortgage (Wesley Commons), 5.125%, 2026 400,000 403,644 South Carolina Jobs & Economic Development Authority, Residential Care Facilities Rev. (Episcopal Home), "A", 6.375%, 2032 400,000 425,644 ------------------------------------------------------------------------------------------------------------------ $ 2,145,013 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Chemicals - 0.6% ------------------------------------------------------------------------------------------------------------------ York County, SC, Industrial Rev. (Exempt Facilities Hoechst Celanese), 5.7%, 2024 $1,000,000 $ 1,003,860 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Other - 1.1% ------------------------------------------------------------------------------------------------------------------ Calhoun County, SC, Solid Waste Disposal Facilities Rev. (Carolina Eastman Co.), ETM, 6.75%, 2017 (c) $1,000,000 $ 1,215,030 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 385,000 423,411 ------------------------------------------------------------------------------------------------------------------ $ 1,638,441 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Paper - 2.0% ------------------------------------------------------------------------------------------------------------------ Darlington County, SC, Industrial Development Rev. (Sonoco Products Co.), 6.125%, 2025 $1,500,000 $ 1,505,790 Georgetown County, SC, Environmental Improvement Rev. (International Paper), "A", 5.3%, 2028 500,000 511,285 Richland County, SC, Environmental Improvement Rev. (International Paper), "A", 6.1%, 2023 1,000,000 1,080,480 ------------------------------------------------------------------------------------------------------------------ $ 3,097,555 ------------------------------------------------------------------------------------------------------------------ Miscellaneous Revenue - Entertainment & Tourism - 1.6% ------------------------------------------------------------------------------------------------------------------ Myrtle Beach, SC, Hospitality Fee Rev., "A", FGIC, 5%, 2036 $ 510,000 $ 534,648 South Carolina Jobs & Economic Development Authority Rev. (Myrtle Beach Convention), "B", MBIA, 5.125%, 2018 570,000 594,293 South Carolina Jobs & Economic Development Authority Rev. (Myrtle Beach Convention), "B", MBIA, 5.125%, 2019 595,000 623,721 South Carolina Jobs & Economic Development Authority Rev. (Myrtle Beach Convention), "B", MBIA, 5.125%, 2020 630,000 659,692 ------------------------------------------------------------------------------------------------------------------ $ 2,412,354 ------------------------------------------------------------------------------------------------------------------ Miscellaneous Revenue - Other - 0.7% ------------------------------------------------------------------------------------------------------------------ South Carolina Jobs & Economic Development Authority Rev. (Coastal Housing Foundation LLC), "A", CIFG, 5%, 2035 $1,000,000 $ 1,036,650 ------------------------------------------------------------------------------------------------------------------ Multi-Family Housing Revenue - 1.4% ------------------------------------------------------------------------------------------------------------------ North Charleston SC, Housing Authority Rev. (Horizon Village), "A", FHA, 5%, 2038 $1,000,000 $ 1,011,380 North Charleston SC, Housing Authority Rev. (Horizon Village), "A", FHA, 5.1%, 2041 1,210,000 1,223,709 ------------------------------------------------------------------------------------------------------------------ $ 2,235,089 ------------------------------------------------------------------------------------------------------------------ Single Family Housing - State - 4.9% ------------------------------------------------------------------------------------------------------------------ South Carolina Housing, Finance & Development Authority Mortgage Rev., "A-2", AMBAC, 5.05%, 2027 $1,000,000 $ 1,030,510 South Carolina Housing, Finance & Development Authority Mortgage Rev., "A-2", FSA, 5.5%, 2034 970,000 998,014 South Carolina Housing, Finance & Development Authority Mortgage Rev., "A-2", FSA, 5.2%, 2035 985,000 1,010,768 South Carolina Housing, Finance & Development Authority Rev., "A-2", FSA, 6%, 2020 370,000 374,403 South Carolina Housing, Finance & Development Authority Rev., "A-2", FSA, 5.35%, 2024 1,645,000 1,698,545 South Carolina Housing, Finance & Development Authority Rev., "A-2", AMBAC, 5.15%, 2037 1,000,000 1,029,620 South Carolina Housing, Finance & Development Authority Rev., "C-2", FSA, 4.6%, 2032 1,500,000 1,480,050 ------------------------------------------------------------------------------------------------------------------ $ 7,621,910 ------------------------------------------------------------------------------------------------------------------ State & Agency - Other - 1.0% ------------------------------------------------------------------------------------------------------------------ Greenville County, SC (University Center), "A", AMBAC, 5.25%, 2009 (c) $1,000,000 $ 1,040,750 South Carolina Water Resources Authority Rev. (Local Government Program), "A", 7.25%, 2020 575,000 575,604 ------------------------------------------------------------------------------------------------------------------ $ 1,616,354 ------------------------------------------------------------------------------------------------------------------ State & Local Agencies - 4.9% ------------------------------------------------------------------------------------------------------------------ North Charleston, SC, Municipal Golf Course Mortgage Rev., 5.5%, 2009 (c) $1,000,000 $ 1,046,920 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2013 (u) 2,750,000 3,006,218 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2019 (u) 2,600,000 2,957,552 Spartanburg, SC, Public Facilities Corp. (Renaissance Park), AMBAC, 5.125%, 2025 685,000 719,243 ------------------------------------------------------------------------------------------------------------------ $ 7,729,933 ------------------------------------------------------------------------------------------------------------------ Tax - Other - 0.1% ------------------------------------------------------------------------------------------------------------------ Virgin Islands Public Finance Authority Rev., "A", 5.25%, 2024 $ 180,000 $ 189,792 ------------------------------------------------------------------------------------------------------------------ Tax Assessment - 0.3% ------------------------------------------------------------------------------------------------------------------ Lancaster County, SC, Assessment Rev. (Sun City Carolina Lakes), 5.45%, 2037 $ 500,000 $ 509,785 ------------------------------------------------------------------------------------------------------------------ Tobacco - 0.7% ------------------------------------------------------------------------------------------------------------------ South Carolina Tobacco Settlement Authority Rev., "B", 6.375%, 2028 $1,000,000 $ 1,070,880 ------------------------------------------------------------------------------------------------------------------ Transportation - Special Tax - 3.5% ------------------------------------------------------------------------------------------------------------------ South Carolina Transportation Infrastructure Rev., "A", MBIA, 5.375%, 2009 (c) $1,000,000 $ 1,051,090 South Carolina Transportation Infrastructure Rev., "A", AMBAC, 5%, 2023 500,000 520,580 South Carolina Transportation Infrastructure Rev., "A", AMBAC, 5%, 2027 2,000,000 2,097,040 South Carolina Transportation Infrastructure Rev., "A", AMBAC, 5%, 2033 1,645,000 1,731,001 ------------------------------------------------------------------------------------------------------------------ $ 5,399,711 ------------------------------------------------------------------------------------------------------------------ Universities - Colleges - 12.4% ------------------------------------------------------------------------------------------------------------------ Clemson University, University Rev., AMBAC, 6.25%, 2009 (c) $1,250,000 $ 1,327,225 College of Charleston, SC, Academic & Administrative Facilities Rev., "B", XLCA, 5%, 2024 800,000 839,912 College of Charleston, SC, Academic & Administrative Facilities Rev., "B", XLCA, 5.125%, 2034 1,510,000 1,599,498 College of Charleston, SC, Higher Education Facility Rev., "A", FGIC, 5.25%, 2028 2,435,000 2,572,626 Educational Facilities Authority Private Non-Profit Institutions of Higher Learning (Wofford College), "A", 5%, 2036 1,000,000 1,046,440 South Carolina Educational Facilities Authority (Furman University), AMBAC, 5.375%, 2020 1,245,000 1,321,144 South Carolina Educational Facilities Authority (Furman University), AMBAC, 5.5%, 2030 2,000,000 2,125,700 South Carolina Educational Facilities Authority (Furman University), 5%, 2038 1,000,000 1,043,770 South Carolina Jobs & Economic Development Authority, Student Housing Rev. (Francis Marion University), "A", MBIA, 5%, 2034 1,945,000 2,035,890 University of South Carolina, University Rev., "A", FGIC, 5.625%, 2010 (c) 1,555,000 1,647,180 University of South Carolina, University Rev., "A", AMBAC, 5%, 2034 3,665,000 3,822,668 ------------------------------------------------------------------------------------------------------------------ $ 19,382,053 ------------------------------------------------------------------------------------------------------------------ Utilities - Municipal Owned - 8.7% ------------------------------------------------------------------------------------------------------------------ Camden, SC, Public Utilities Rev., MBIA, 5.5%, 2017 $ 75,000 $ 77,043 Easley, SC, Utility Rev., FSA, 5%, 2027 1,000,000 1,047,560 Easley, SC, Utility Rev., Refunding & Improvement, FSA, 5%, 2034 2,000,000 2,116,520 Greenwood, SC, Combined Public Utility, Refunding & Improvement Systems, MBIA, 5%, 2021 175,000 184,504 Orangeburg County, SC, Solid Waste Disposal Facilities Rev., Electric & Gas, AMBAC, 5.7%, 2024 2,000,000 2,003,120 Piedmont, SC, Municipal Power Agency, FGIC, 6.25%, 2021 2,600,000 3,167,268 Puerto Rico Electric Power Authority, FSA, RITES, 6.014%, 2015 (n)(v) 1,000,000 1,064,340 South Carolina Public Service Authority, "A", MBIA, 5.5%, 2010 (c) 200,000 211,530 South Carolina Public Service Authority, "A", AMBAC, 5%, 2034 2,000,000 2,088,200 South Carolina Public Service Authority, "B", FSA, 5.125%, 2037 1,500,000 1,562,265 ------------------------------------------------------------------------------------------------------------------ $ 13,522,350 ------------------------------------------------------------------------------------------------------------------ Water & Sewer Utility Revenue - 8.6% ------------------------------------------------------------------------------------------------------------------ Anderson County, SC, Joint Municipal Water, FSA, 5%, 2032 $1,000,000 $ 1,041,320 Anderson County, SC, Water & Sewer Systems Rev., FGIC, 5.125%, 2032 2,000,000 2,114,760 Berkeley County, SC, Water & Sewer Systems Rev., "A", FSA, 4.75%, 2029 1,000,000 1,034,810 Charleston, SC, Waterworks & Sewer Rev., Capital Improvement, "B", 5%, 2028 1,000,000 1,040,890 Columbia, SC, Waterworks & Sewer Systems Rev., 6%, 2010 (c) 2,000,000 2,125,500 Columbia, SC, Waterworks & Sewer Systems Rev., FSA, 5%, 2029 1,020,000 1,076,671 Greenville, SC, Stormwater Systems, FSA, 5%, 2022 595,000 623,625 Rock Hill, SC, Utility Systems Rev., Refunding & Improvement, "A", FSA, 5.375%, 2023 500,000 538,380 Spartanburg, SC, Water & Sewer Authority Rev., "B", MBIA, 5.25%, 2030 1,250,000 1,341,113 Spartanburg, SC, Waterworks Rev., "A", FSA, 4.375%, 2028 1,000,000 985,690 York County, SC, Water & Sewer Rev., Refunding & Capital Improvement, MBIA, 5%, 2027 1,490,000 1,561,833 ------------------------------------------------------------------------------------------------------------------ $ 13,484,592 ------------------------------------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $151,660,295) $159,889,979 ------------------------------------------------------------------------------------------------------------------ Floating Rate Demand Notes - 2.3% ------------------------------------------------------------------------------------------------------------------ Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), 3.77%, due 4/02/07 $ 300,000 $ 300,000 Jefferson County, AL, Sewer Rev., Capital Improvement Warrants Rev., "A", 3.7%, due 4/05/07 900,000 900,000 State of Oregon, "73G", 3.68%, due 4/04/07 200,000 200,000 Sublette County, WY, Pollution Control Rev. (Exxon Mobil Corp.), 3.75%, due 4/02/07 2,200,000 2,200,000 ------------------------------------------------------------------------------------------------------------------ TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 3,600,000 ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (IDENTIFIED COST, $155,260,295) (k) $163,489,979 ------------------------------------------------------------------------------------------------------------------ Other Assets, Less Liabilities - (4.5)% (7,044,823) ------------------------------------------------------------------------------------------------------------------ NET ASSETS - 100.0% $156,445,156 ------------------------------------------------------------------------------------------------------------------ SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 3,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $18,205 8/08/17 USD 1,500,000 Goldman Sachs 7-Day BMA 3.736% (fixed rate) (5,540) 5/30/19 USD 2,500,000 Citibank 7-Day BMA 3.695% (fixed rate) 9,874 ------------------------------------------------------------------------------------------------------------------ $22,539 ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) TENNESSEE MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 96.9% ------------------------------------------------------------------------------------------------------------------ ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------ Airport and Port Revenue - 1.4% ------------------------------------------------------------------------------------------------------------------ Memphis-Shelby County, TN, Airport Authority Facilities Rev., FSA, 5.125%, 2021 $1,500,000 $ 1,546,200 ------------------------------------------------------------------------------------------------------------------ General Obligations - General Purpose - 4.1% ------------------------------------------------------------------------------------------------------------------ Chattanooga, TN, Public Improvement, 5%, 2009 (c) $2,570,000 $ 2,647,691 Commonwealth of Puerto Rico, Unrefunded, Public Improvement, FSA, 5%, 2024 770,000 802,771 Puerto Rico Public Building Authority, 5.5%, 2021 1,000,000 1,117,200 ------------------------------------------------------------------------------------------------------------------ $ 4,567,662 ------------------------------------------------------------------------------------------------------------------ General Obligations - Improvement - 0.6% ------------------------------------------------------------------------------------------------------------------ Knoxville, TN, Recreational Facilities Improvement, 5.5%, 2008 (c) $ 645,000 $ 664,202 ------------------------------------------------------------------------------------------------------------------ General Obligations - Schools - 12.0% ------------------------------------------------------------------------------------------------------------------ Fayette County, TN, School District, AMBAC, 5.6%, 2008 (c) $1,215,000 $ 1,234,805 Gibson County, TN, School District, MBIA, 5.75%, 2009 (c) 455,000 473,637 Gibson County, TN, School District, MBIA, 5.75%, 2016 190,000 197,598 Giles County, TN, School Improvement, FGIC, 5.75%, 2010 (c) 1,980,000 2,092,167 Roane County, TN, Rural School, FGIC, 5.6%, 2008 (c) 915,000 931,863 Roane County, TN, Rural School, FGIC, 5.6%, 2008 (c) 975,000 992,969 Rutherford County, TN, School & Public Improvement, 5%, 2022 1,510,000 1,577,980 Rutherford County, TN, School District, 5.875%, 2010 (c) 1,100,000 1,169,729 Rutherford County, TN, School Improvement, 0%, 2007 (c) 1,500,000 949,050 Rutherford County, TN, School Improvement, 5.875%, 2010 (c) 2,000,000 2,126,780 Williamson County, TN, Rural School, 6.125%, 2010 (c) 1,575,000 1,682,021 ------------------------------------------------------------------------------------------------------------------ $ 13,428,599 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Hospitals - 15.0% ------------------------------------------------------------------------------------------------------------------ Johnson City, TN, Health & Education Financing Authority Rev. (Johnson City Medical Center Hospital), MBIA, 5.25%, 2016 $1,375,000 $ 1,376,925 Johnson City, TN, Health & Education Financing Authority Rev. (Johnson City Medical Center Hospital), ETM, MBIA, 5%, 2018 (c) 1,500,000 1,540,950 Johnson City, TN, Health & Educational Facilities, Hospital Rev. (Mountain States Health), "A", 5.5%, 2036 600,000 642,570 Knox County, TN, Health, Educational, Hospital & Housing Facilities Board Rev. (Baptist Health Systems), 6.5%, 2031 300,000 313,680 Knox County, TN, Health, Educational, Hospital & Housing Facilities Board Rev. (Catholic Healthcare Partners), 5.25%, 2030 1,000,000 1,047,020 Knox County, TN, Health, Educational, Hospital & Housing Facilities Board Rev. (Covenant Health), "A", 0%, 2036 4,000,000 948,640 Knox County, TN, Health, Educational, Hospital & Housing Facilities Board Rev. (East Tennessee Children's Hospital), 5.75%, 2033 450,000 481,540 Knox County, TN, Health, Educational, Hospital & Housing Facilities Board Rev. (Fort Sanders), MBIA, 5.75%, 2014 3,250,000 3,615,430 Knox County, TN, Health, Educational, Hospital & Housing Facilities Board Rev., "A", FSA, 5%, 2013 (c) 545,000 581,896 Knox County, TN, Health, Educational, Hospital & Housing Facilities Board Rev., "A", FSA, 5%, 2022 455,000 476,208 Metropolitan Government Nashville, TN, Davidson Town Unrefunded Hospital, 5.25%, 2008 (c) 460,000 470,943 Metropolitan Government Nashville, TN, Davidson Town, 5.25%, 2008 (c) 540,000 559,013 Shelby County, TN, Health, Educational & Housing Facilities Board Rev. (Methodist Healthcare), 6.5%, 2012 (c) 625,000 711,025 Shelby County, TN, Health, Educational & Housing Facilities Board Rev. (Methodist Healthcare), 6.5%, 2012 (c) 375,000 426,615 Shelby County, TN, Health, Educational & Housing Facilities Board Rev. (St. Judes Children's Research), 5.5%, 2009 (c) 1,750,000 1,850,468 Springfield, TN, Health & Higher Educational Facilities Hospital Rev. (Northcrest Medical Center), 5.25%, 2013 1,000,000 1,006,890 Sullivan County, TN, Health, Educational & Housing Facilities Board, Hospital Rev. (Wellmont Health Systems Project), "C", 5.25%, 2036 750,000 785,108 ------------------------------------------------------------------------------------------------------------------ $ 16,834,921 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Long Term Care - 0.2% ------------------------------------------------------------------------------------------------------------------ Shelby County, TN, Health, Educational & Housing Facilities Board Rev. (Germantown Village), 7.25%, 2034 $ 250,000 $ 255,825 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Other - 1.2% ------------------------------------------------------------------------------------------------------------------ Hardeman County, TN, Correctional Facilities Rev., 7.75%, 2017 $ 945,000 $ 967,945 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 320,000 351,926 ------------------------------------------------------------------------------------------------------------------ $ 1,319,871 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Paper - 0.9% ------------------------------------------------------------------------------------------------------------------ McMinn County, TN, Industrial Development Board, Pollution Control Rev. (Bowater, Inc.), 7.625%, 2016 $1,000,000 $ 1,006,510 ------------------------------------------------------------------------------------------------------------------ Miscellaneous Revenue - Entertainment & Tourism - 3.5% ------------------------------------------------------------------------------------------------------------------ Memphis-Shelby County, TN (Memphis Sports Arena), AMBAC, 5.125%, 2012 (c) $2,000,000 $ 2,104,240 Memphis-Shelby County, TN (Memphis Sports Arena), AMBAC, 5.35%, 2012 (c) 1,665,000 1,785,729 ------------------------------------------------------------------------------------------------------------------ $ 3,889,969 ------------------------------------------------------------------------------------------------------------------ Multi-Family Housing Revenue - 4.1% ------------------------------------------------------------------------------------------------------------------ Chattanooga, TN, Health, Educational & Housing Facilities (Rainbow Creek), GNMA, 6.125%, 2019 $ 410,000 $ 431,099 Knoxville, TN, Community Development Corp., 5%, 2024 1,000,000 1,053,910 Memphis, TN, Health & Educational Facilities Board Rev. (Hickory Point Apartments), MBIA, 5.85%, 2020 1,000,000 1,043,690 Memphis, TN, Health, Educational & Housing Facilities Board Rev. (Prescott Place Apartments Project), FNMA, 5.125%, 2038 1,000,000 1,025,140 Metropolitan Government of Nashville & Davidson County, TN, Health, Educational & Housing Facilities Board Rev. (Berkshire Place), GNMA, 6%, 2023 500,000 524,775 Metropolitan Government of Nashville & Davidson County, TN, Health, Educational & Housing Facilities Board Rev. (Herman Street), FHA, 7.25%, 2032 485,000 486,014 ------------------------------------------------------------------------------------------------------------------ $ 4,564,628 ------------------------------------------------------------------------------------------------------------------ Single Family Housing - State - 13.1% ------------------------------------------------------------------------------------------------------------------ Tennessee Housing Development Agency Mortgage Finance, 5.2%, 2023 $1,500,000 $ 1,571,865 Tennessee Housing Development Agency Mortgage Finance, 5.35%, 2034 175,000 181,174 Tennessee Housing Development Agency Rev., Homeownership Program, 5.45%, 2014 2,535,000 2,623,395 Tennessee Housing Development Agency Rev., Homeownership Program, 4.45%, 2017 645,000 649,509 Tennessee Housing Development Agency Rev., Homeownership Program, 4.45%, 2017 660,000 664,613 Tennessee Housing Development Agency Rev., Homeownership Program, 4.55%, 2018 575,000 579,002 Tennessee Housing Development Agency Rev., Homeownership Program, 4.55%, 2018 690,000 694,802 Tennessee Housing Development Agency Rev., Homeownership Program, 6%, 2020 925,000 947,108 Tennessee Housing Development Agency Rev., Homeownership Program, 5%, 2026 2,000,000 2,049,680 Tennessee Housing Development Agency Rev., Homeownership Program, 5.05%, 2027 760,000 773,946 Tennessee Housing Development Agency Rev., Homeownership Program, 4.85%, 2032 1,000,000 1,011,520 Tennessee Housing Development Agency Rev., Homeownership Program, FSA, 5.4%, 2032 695,000 716,420 Tennessee Housing Development Agency Rev., Homeownership Program, 5.125%, 2034 990,000 1,022,809 Tennessee Housing Development Agency Rev., Homeownership Program, 5.25%, 2034 1,255,000 1,285,898 ------------------------------------------------------------------------------------------------------------------ $ 14,771,741 ------------------------------------------------------------------------------------------------------------------ State & Local Agencies - 6.0% ------------------------------------------------------------------------------------------------------------------ Blount County, TN, Town Public Building Authority, Local Government Public Improvement, "B ", AMBAC, 4.375%, 2038 $1,500,000 $ 1,456,425 Blount County, TN, Town Public Building Authority, Local Government Public Improvement, "B", XLCA, 4.375%, 2035 1,000,000 972,320 Chattanooga, TN, Industrial Development Board, AMBAC, 5.75%, 2018 1,000,000 1,065,560 Tennessee School Bond Authority (Higher Education Facilities), FSA, 5.25%, 2012 (c) 3,000,000 3,220,440 ------------------------------------------------------------------------------------------------------------------ $ 6,714,745 ------------------------------------------------------------------------------------------------------------------ Tax - Other - 0.7% ------------------------------------------------------------------------------------------------------------------ Virgin Islands Public Finance Authority Rev., "E", 5.875%, 2018 $ 730,000 $ 758,229 ------------------------------------------------------------------------------------------------------------------ Tobacco - 1.0% ------------------------------------------------------------------------------------------------------------------ Guam Economic Development Authority Tobacco Settlement, "B", 5.5%, 2041 $ 350,000 $ 361,361 Tobacco Settlement Financing Corp., 5%, 2031 750,000 758,190 ------------------------------------------------------------------------------------------------------------------ $ 1,119,551 ------------------------------------------------------------------------------------------------------------------ Universities - Colleges - 6.1% ------------------------------------------------------------------------------------------------------------------ Metropolitan Government of Nashville & Davidson County, TN, Health, Educational & Housing Facilities Board Rev. (McKendree Village, Inc.), 5.125%, 2020 $1,000,000 $ 1,010,480 Metropolitan Government of Nashville & Davidson County, TN, Health, Educational & Housing Facilities Board Rev. (Meharry Medical College), AMBAC, 5%, 2024 3,750,000 3,841,425 University of Puerto Rico Rev., "Q", 5%, 2036 1,985,000 2,061,720 ------------------------------------------------------------------------------------------------------------------ $ 6,913,625 ------------------------------------------------------------------------------------------------------------------ Utilities - Municipal Owned - 7.7% ------------------------------------------------------------------------------------------------------------------ Clarksville, TN, Electrical Systems Rev., XLCA, 5%, 2032 $ 500,000 $ 530,395 Jackson, TN, Electrical Systems Rev., MBIA, 5%, 2018 1,000,000 1,004,140 Lawrenceberg, TN, Electrical Rev., MBIA, 5.5%, 2009 (c) 1,255,000 1,305,840 Metropolitan Government of Nashville & Davidson County, TN, Electrical Rev., 5.125%, 2021 1,500,000 1,572,060 Metropolitan Government of Nashville & Davidson County, TN, Electrical Rev., "A", AMBAC, 5%, 2029 1,500,000 1,577,775 Metropolitan Government of Nashville & Davidson County, TN, Electrical Rev., MBIA, 0%, 2012 3,305,000 2,703,126 ------------------------------------------------------------------------------------------------------------------ $ 8,693,336 ------------------------------------------------------------------------------------------------------------------ Utilities - Other - 1.0% ------------------------------------------------------------------------------------------------------------------ Tennessee Energy Acquisition, "A", 5.25%, 2026 $1,000,000 $ 1,107,360 ------------------------------------------------------------------------------------------------------------------ Water & Sewer Utility Revenue - 18.3% ------------------------------------------------------------------------------------------------------------------ Hallsdale-Powell Utility District, TN, Water & Sewer Rev., FGIC, 5%, 2027 $3,000,000 $ 3,140,520 Hallsdale-Powell Utility District, TN, Water & Sewer Rev., "A", FGIC, 5%, 2024 1,500,000 1,570,260 Hallsdale-Powell Utility District, TN, Water & Sewer Rev., "N", FGIC, 5%, 2036 1,000,000 1,064,730 Madison, TN, Utility Waterworks Rev., MBIA, 5%, 2019 2,750,000 2,775,520 Memphis, TN, Sewage Systems Rev., 5.75%, 2008 (c) 625,000 645,106 Memphis, TN, Sewage Systems Rev., 5.75%, 2008 (c) 1,145,000 1,181,835 Memphis, TN, Sewage Systems Rev., 5.75%, 2008 (c) 750,000 774,128 Rutherford County, TN, Water Rev., MBIA, 5%, 2027 770,000 820,250 West Knox Utility District, TN, Water & Sewer Rev., ETM, MBIA, 0%, 2007 (c) 1,920,000 1,874,822 West Wilson Utility District, TN, Waterworks Rev., MBIA, 5.25%, 2014 (c) 2,000,000 2,191,980 West Wilson Utility District, TN, Waterworks Rev., MBIA, 4.25%, 2036 1,045,000 1,002,751 White House Utility District, TN, Unrefunded, FSA, 5%, 2021 420,000 436,065 White House Utility District, TN, "Y", FSA, 5%, 2011 (c) 380,000 398,039 White House Utility District, TN, Water & Sewer Rev. (Robertson & Sumner Counties Waterworks), FSA, 6%, 2010 (c) 1,000,000 1,061,520 White House Utility District, TN, Water & Sewer Rev. (Robertson & Sumner Counties Waterworks), FSA, 5%, 2012 (c) 1,500,000 1,587,360 ------------------------------------------------------------------------------------------------------------------ $ 20,524,886 ------------------------------------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $103,765,278) $108,681,860 ------------------------------------------------------------------------------------------------------------------ Floating Rate Demand Notes - 0.7% ------------------------------------------------------------------------------------------------------------------ Sevier County, TN, Public Building Authority, 3.69%, due 4/05/07 $ 200,000 $ 200,000 Sevier County, TN, Public Building Authority (Local Government Public Improvement), 3.69%, due 4/05/07 200,000 200,000 Sevier County, TN, Public Building Authority (Local Government Public Improvement), 3.85%, due 4/02/07 120,000 120,000 South Blount County, TN, Utility District Rev., 3.85%, due 4/02/07 300,000 300,000 ------------------------------------------------------------------------------------------------------------------ TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 820,000 ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (IDENTIFIED COST, $104,585,278) (k) $109,501,860 ------------------------------------------------------------------------------------------------------------------ Other Assets, Less Liabilities - 2.4% 2,723,893 ------------------------------------------------------------------------------------------------------------------ NET ASSETS - 100.0% $112,225,753 ------------------------------------------------------------------------------------------------------------------ SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) VIRGINIA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 102.3% ------------------------------------------------------------------------------------------------------------------ ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------ Airport & Port Revenue - 8.8% ------------------------------------------------------------------------------------------------------------------ Metropolitan Washington, DC, Airport Authority Rev., "A", FGIC, 5.125%, 2024 $ 1,000,000 $ 1,049,760 Metropolitan Washington, DC, Airport Authority Rev., "A", FGIC, 5%, 2025 705,000 733,912 Metropolitan Washington, DC, Airport Authority Rev., "A", FSA, 5%, 2032 1,455,000 1,529,060 Metropolitan Washington, DC, Airport Authority Rev., "A", MBIA, 5%, 2035 3,000,000 3,137,190 Metropolitan Washington, DC, Airport Authority Rev., "B", 5.5%, 2007 (c) 2,465,000 2,510,257 Metropolitan Washington, DC, Airport Authority Rev., "B", 5.75%, 2007 (c) 11,000,000 11,215,160 Norfolk, VA, Airport Authority Rev., "A", FGIC, 5.375%, 2017 1,755,000 1,872,866 Norfolk, VA, Airport Authority Rev., "A", FGIC, 5%, 2022 3,000,000 3,113,430 Virginia Resources Authority, Airport Rev., "B", 5.125%, 2027 720,000 744,430 ------------------------------------------------------------------------------------------------------------------ $ 25,906,065 ------------------------------------------------------------------------------------------------------------------ General Obligations - General Purpose - 2.4% ------------------------------------------------------------------------------------------------------------------ Newport News, VA, Economic Development, "A", 5%, 2031 $ 1,595,000 $ 1,693,810 Puerto Rico Commonwealth, Public Improvement, "A", 5.25%, 2030 2,000,000 2,141,940 Stafford County, VA, Industrial Development Authority Rev., "B", MBIA, 5%, 2034 3,060,000 3,222,670 ------------------------------------------------------------------------------------------------------------------ $ 7,058,420 ------------------------------------------------------------------------------------------------------------------ General Obligations - Improvement - 12.3% ------------------------------------------------------------------------------------------------------------------ Chesterfield County, VA, 6%, 2010 (c) $ 1,900,000 $ 2,018,465 Chesterfield County, VA, 5%, 2011 (c) 2,015,000 2,107,247 Hampton, VA, Public Improvement, 6%, 2010 (c) 3,280,000 3,545,090 Hampton, VA, Public Improvement, 6%, 2010 (c) 3,480,000 3,761,254 Lynchburg, VA, Public Improvement, 5.6%, 2010 (c) 1,765,000 1,884,085 Puerto Rico Municipal Finance Agency, FSA, 5.5%, 2009 (c)(u) 1,230,000 1,293,776 Puerto Rico Municipal Finance Agency, FSA, 6%, 2009 (c)(u) 2,210,000 2,349,031 Richmond, VA, 0%, 2008 2,000,000 1,943,720 Richmond, VA, "A", FSA, 5.125%, 2010 (c) 5,000,000 5,242,350 Richmond, VA, "B", 0%, 2008 5,270,000 5,121,702 Richmond, VA, "B", 0%, 2009 5,175,000 4,840,333 Suffolk, VA, Public Improvement, 5.5%, 2010 (c) 1,880,000 1,996,240 ------------------------------------------------------------------------------------------------------------------ $ 36,103,293 ------------------------------------------------------------------------------------------------------------------ General Obligations - Schools - 0.4% ------------------------------------------------------------------------------------------------------------------ Harrisonburg, VA, Public Recreation Facilities, FSA, 5.75%, 2029 $ 1,000,000 $ 1,084,460 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Hospitals - 14.5% ------------------------------------------------------------------------------------------------------------------ Albemarle County, VA, Industrial Development Authority, Hospital Rev. (Martha Jefferson Hospital), 5.25%, 2023 $ 3,000,000 $ 3,127,650 Arlington County, VA, Industrial Development Authority Rev. (Virginia Hospital Center Arlington Health Systems), 5.25%, 2011 (c) 2,600,000 2,784,262 Fredericksburg, VA, Industrial Development Rev. (Medicorp Health Systems), AMBAC, 5.25%, 2023 11,000,000 11,245,410 Fredericksburg, VA, Industrial Development Rev. (Medicorp Health Systems), "B", 5.125%, 2033 750,000 771,105 Harrisonburg, VA, Industrial Development Authority, Hospital Rev. (Rockingham Memorial Hospital), AMBAC, 4.5%, 2041 3,000,000 2,923,020 Henrico County, VA, Economic Development Authority Rev. (Bon Secours Health Systems, Inc.), "A", 5.6%, 2030 2,000,000 2,118,140 Henrico County, VA, Industrial Development Authority Rev. (Bon Secours Health Systems, Inc.), MBIA, 6.25%, 2020 1,500,000 1,786,095 Loudoun County, VA, Industrial Development Authority, Hospital Rev. (Loudoun Hospital Center), "A", 6.1%, 2012 (c) 1,000,000 1,118,980 Lynchburg, VA, Industrial Development Authority, Healthcare Facilities Rev. (Central Health), 5.2%, 2008 (c) 855,000 873,263 Lynchburg, VA, Industrial Development Authority, Healthcare Facilities Rev., Unrefunded Balance (Central Health), 5.2%, 2018 145,000 148,012 Medical College of Virginia, Hospital Authority Rev., MBIA, 5.125%, 2018 3,000,000 3,100,020 Peninsula Ports Authority, VA, Health System Rev. (Riverside Health System), 5%, 2018 3,580,000 3,670,395 Peninsula Ports Authority, VA, Hospital Facility Rev. (Whittaker Memorial), FHA, 8.7%, 2023 2,005,000 2,286,562 Prince William County, VA, Industrial Development Authority, Hospital Rev. (Potomac Hospital Corp.), 5.2%, 2026 1,000,000 1,055,450 Roanoke, VA, Industrial Development Authority, Hospital Rev. (Roanoke Memorial Hospital), "B", ETM, MBIA, 6.125%, 2017 (c) 3,000,000 3,494,760 Winchester VA, Industrial Development Hospital Valley Health Systems Obligated, 5.25%, 2037 2,000,000 2,144,840 ------------------------------------------------------------------------------------------------------------------ $ 42,647,964 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Long Term Care - 1.5% ------------------------------------------------------------------------------------------------------------------ Albemarlecnty VA, Industrial Development Ref Westminster Canterbury, 5%, 2031 $ 500,000 $ 501,625 Henrico County, VA, Economic Development Authority, Residential Care Facilities (United Methodist Homes), "A", 6.7%, 2027 750,000 798,037 Lynchburg, VA, Industrial Development Authority, Residential Care Facilities Rev. (Westminster-Canterbury of Lynchburg, Inc.), 5%, 2031 750,000 754,050 Norfolk, VA, Redevelopment & Housing Authority Rev. (Fort Norfolk Retirement Community), "A", 6.125%, 2035 750,000 784,912 Prince William County, VA, Industrial Development Authority, Residential Care Facilities (Westminster Presbyterian Retirement Community, Inc.), 5.125%, 2026 750,000 766,275 Suffolk, VA, Industrial Development Authority, Retirement Facilities Rev. (Lake Prince Center, Inc.), 5.3%, 2031 750,000 764,077 ------------------------------------------------------------------------------------------------------------------ $ 4,368,976 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Environmental Services - 1.1% ------------------------------------------------------------------------------------------------------------------ Charles City County, VA, Industrial Development Authority, Solid Waste Disposal Facility Rev. (Waste Management, Inc.), 6.25%, 2027 $ 1,500,000 $ 1,621,755 Henrico County, VA, Industrial Development Authority Rev. (Browning Ferris, Inc.), 5.45%, 2014 1,750,000 1,738,642 ------------------------------------------------------------------------------------------------------------------ $ 3,360,397 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Other - 1.3% ------------------------------------------------------------------------------------------------------------------ Loudoun County, VA, Industrial Development Authority Rev. (Dulles Airport Marriott Hotel), 7.125%, 2015 $ 2,000,000 $ 2,026,680 Peninsula Ports Authority, VA, Coal Terminal Rev. (Dominion Terminal Associates), 6%, 2033 1,000,000 1,095,040 Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 750,000 824,827 ------------------------------------------------------------------------------------------------------------------ $ 3,946,547 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Paper - 2.2% ------------------------------------------------------------------------------------------------------------------ Bedford County, VA, Industrial Development Authority Rev. (Nekooska Packaging Corp.), 5.6%, 2025 $ 1,000,000 $ 1,009,000 Hopewell, VA, Industrial Development Authority, Environmental Impact Rev. (Smurfit-Stone Container), 5.25%, 2015 740,000 744,936 Isle Wight County, VA, Industrial Development Authority, Solid Waste Disposal Facilities Rev. (Union Camp Corp.), 6.1%, 2027 2,750,000 2,807,200 West Point, VA, Industrial Development Authority, Solid Waste Disposal Rev. (Chesapeake Corp.), "A", 6.375%, 2019 1,750,000 1,757,315 ------------------------------------------------------------------------------------------------------------------ $ 6,318,451 ------------------------------------------------------------------------------------------------------------------ Multi-Family Housing Revenue - 4.5% ------------------------------------------------------------------------------------------------------------------ Alexandria, VA, Redevelopment & Housing Finance Authority Rev. (Jefferson Village Apartments), "B", 9%, 2018 $ 3,545,000 $ 3,558,826 Arlington County, VA, Industrial Development Authority Rev. (Colonial Village), FNMA, 5.15%, 2031 3,000,000 3,114,990 Virginia Housing Development Authority Rev., "B", 5.95%, 2016 1,345,000 1,353,756 Virginia Housing Development Authority Rev., "G", 5.625%, 2020 2,000,000 2,066,080 Virginia Housing Development Authority Rev., "I", 5.15%, 2017 3,000,000 3,065,430 ------------------------------------------------------------------------------------------------------------------ $ 13,159,082 ------------------------------------------------------------------------------------------------------------------ Parking - 0.6% ------------------------------------------------------------------------------------------------------------------ Norfolk, VA, Parking Systems Rev., MBIA, 5%, 2020 $ 1,630,000 $ 1,680,465 ------------------------------------------------------------------------------------------------------------------ Single Family Housing - State - 2.2% ------------------------------------------------------------------------------------------------------------------ Virginia Housing Development Authority Commonwealth, "C", 4.4%, 2022 $ 1,270,000 $ 1,259,154 Virginia Housing Development Authority Commonwealth, "C", 4.75%, 2032 1,795,000 1,814,583 Virginia Housing Development Authority, "A", 5%, 2031 2,000,000 2,048,120 Virginia Housing Development Authority, "C", 4.66%, 2027 1,285,000 1,260,521 ------------------------------------------------------------------------------------------------------------------ $ 6,382,378 ------------------------------------------------------------------------------------------------------------------ State & Agency - Other - 1.7% ------------------------------------------------------------------------------------------------------------------ Fairfax County, VA, COP, 6.1%, 2017 $ 3,090,000 $ 3,478,907 Virginia Biotechnology Research Park Lease Rev. (Consolidated Laboratories), 5%, 2021 1,500,000 1,566,795 ------------------------------------------------------------------------------------------------------------------ $ 5,045,702 ------------------------------------------------------------------------------------------------------------------ State & Local Agencies - 23.3% ------------------------------------------------------------------------------------------------------------------ Blue Ridge, VA, Regional Jail Authority, MBIA, 5.2%, 2021 $ 1,830,000 $ 1,883,802 Caroline County, VA, Industrial Development Authority Lease Rev., AMBAC, 5.125%, 2034 1,000,000 1,060,070 Chesapeake, VA, Industrial Development Authority (Chesapeake Court House), MBIA, 6.25%, 2011 3,985,000 4,080,640 Chesapeake, VA, Industrial Development Authority (Chesapeake Court House), MBIA, 5.25%, 2017 2,000,000 2,044,540 Chesterfield County, VA, Industrial Development Authority, Public Facilities Lease Rev., 7.5%, 2008 830,000 830,374 Dinwiddie County, VA, Industrial Development Authority Lease Rev., "B", MBIA, 5%, 2030 2,500,000 2,624,150 Fairfax County, VA, Economic Development Authority, 4.5%, 2026 2,325,000 2,342,205 Fairfax County, VA, Economic Development Authority Rev. (U.S. Route 28), MBIA, 5%, 2029 1,000,000 1,054,850 Fairfax County, VA, Economic Development Authority, Fairfax Public Improvement Project, 5%, 2030 1,000,000 1,049,860 Fairfax County, VA, Economic Development Authority, Parking Rev. (Vienna II Metrorail), 6%, 2009 (c) 1,650,000 1,770,796 Fairfax County, VA, Economic Development Authority, Parking Rev. (Vienna II Metrorail), 6%, 2009 (c) 1,750,000 1,878,117 Fairfax County, VA, Redevelopment & Housing Authority Rev. (Mott & Gum Springs Community Centers), 5.5%, 2017 2,225,000 2,258,753 Front Royal & Warren County, VA, Industrial Development Authority Lease Rev., School & Capital Improvement, "B", FSA, 5%, 2035 2,875,000 3,020,188 King George County, VA, Industrial Development Authority Lease Rev., FSA, 5%, 2036 2,000,000 2,093,780 Middlesex County, VA, Industrial Development Authority Rev., AMBAC, 5.125%, 2012 (c) 1,000,000 1,078,990 Middlesex County, VA, Industrial Development Authority Rev., AMBAC, 5.25%, 2012 (c) 2,000,000 2,169,980 Montgomery County, VA, Industrial Development, "B", AMBAC, 6%, 2011 (c) 1,000,000 1,091,680 Montgomery County, VA, Industrial Development, "C", AMBAC, 6%, 2011 (c) 1,120,000 1,222,682 New River Valley, VA, Regional Jail Authority, MBIA, 5.125%, 2019 3,405,000 3,496,629 Orange County, VA, Industrial Development Authority (Orange County Project), AMBAC, 5%, 2034 1,000,000 1,045,410 Powhatan County, VA, Economic Development Authority Lease Rev. (Virginia Capital Projects), AMBAC, 5.25%, 2033 1,000,000 1,063,580 Prince William County, VA, Lease Partnerships, 5%, 2021 1,500,000 1,573,485 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2013 (u) 4,000,000 4,372,680 Puerto Rico Public Finance Corp., AMBAC, 5.375%, 2016 (u) 1,000,000 1,119,170 Richmond, VA, Public Facilities, COP (Megahertz Project), "A", AMBAC, 5%, 2022 1,600,000 1,662,240 Southwest Virginia Regional Jail Authority Rev., MBIA, 5%, 2035 1,720,000 1,801,459 Virginia College Building Authority (21st Century College Program), 6%, 2009 (c) 2,000,000 2,101,940 Virginia Public Building Authority Rev., "B", MBIA, 0%, 2007 3,750,000 3,705,675 Virginia Resources Authority Rev., 5%, 2021 (u) 2,780,000 2,949,135 Virginia Resources Authority Rev., 5%, 2023 (u) 3,040,000 3,214,131 Virginia Resources Authority Rev., 5%, 2033 (u) 5,020,000 5,272,004 Virginia Resources Authority, Infrastructure Rev., "A", 5%, 2017 1,360,000 1,416,998 ------------------------------------------------------------------------------------------------------------------ $ 68,349,993 ------------------------------------------------------------------------------------------------------------------ Tax - Other - 1.6% ------------------------------------------------------------------------------------------------------------------ Greater Richmond Convention Center Authority, Hotel Tax Rev. (Convention Center Expansion), 6.125%, 2010 (c) $ 3,500,000 $ 3,793,440 Virgin Islands, Public Finance Authority Rev., "A", 5.625%, 2025 1,000,000 1,031,110 ------------------------------------------------------------------------------------------------------------------ $ 4,824,550 ------------------------------------------------------------------------------------------------------------------ Tobacco - 1.1% ------------------------------------------------------------------------------------------------------------------ Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 445,000 $ 463,272 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.5%, 2039 965,000 1,010,085 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, "B", 0%, 2055 2,000,000 73,320 Virgin Islands Tobacco Settlement Financing Corp., 5%, 2021 540,000 545,859 Virginia Tobacco Settlement Financing Corp., 5.625%, 2037 1,000,000 1,062,850 ------------------------------------------------------------------------------------------------------------------ $ 3,155,386 ------------------------------------------------------------------------------------------------------------------ Toll Roads - 0.4% ------------------------------------------------------------------------------------------------------------------ Pocahontas Parkway Assn., VA, Toll Road Rev., "B", 0%, 2008 (c) $ 1,500,000 $ 1,107,015 ------------------------------------------------------------------------------------------------------------------ Transportation - Special Tax - 1.0% ------------------------------------------------------------------------------------------------------------------ Commonwealth of Puerto Rico, Highway & Transportation Authority Rev., "J", MBIA, 5%, 2029 $ 1,210,000 $ 1,278,341 Virginia Commonwealth Board Program (Oak Grove Connector), "A", 5.25%, 2007 (c) 1,500,000 1,517,715 ------------------------------------------------------------------------------------------------------------------ $ 2,796,056 ------------------------------------------------------------------------------------------------------------------ Universities - Colleges - 3.0% ------------------------------------------------------------------------------------------------------------------ Amherst, VA, Industrial Development Authority Rev. (Educational Facilities Sweet Briar), 5%, 2026 $ 1,770,000 $ 1,823,507 Danville, VA, Industrial Development Authority, Educational Facilities Rev. (Averett University), 6%, 2022 500,000 520,270 Loudoun County, VA, Industrial Development Authority, University Facilities Rev. (George Washington University), 6.25%, 2012 2,710,000 2,712,575 University of Virginia (University Revenue), "B", 5%, 2027 2,690,000 2,826,410 Virginia College Building Authority, Educational Facilities Rev. (Hampton University), 6%, 2010 (c) 1,000,000 1,075,300 ------------------------------------------------------------------------------------------------------------------ $ 8,958,062 ------------------------------------------------------------------------------------------------------------------ Utilities - Investor Owned - 1.6% ------------------------------------------------------------------------------------------------------------------ Chesapeake, VA, Industrial Development Authority Rev. (Virginia Electric & Power Co.), 5.25%, 2008 $ 750,000 $ 753,772 Halifax County, VA, Industrial Development Authority (Old Dominion Electric Cooperative), AMBAC, 5.625%, 2028 3,000,000 3,235,950 Mecklenburg County, VA, Industrial Development Authority Rev. (UAE Mecklenburg LP), 6.5%, 2017 700,000 767,144 ------------------------------------------------------------------------------------------------------------------ $ 4,756,866 ------------------------------------------------------------------------------------------------------------------ Utilities - Municipal Owned - 7.6% ------------------------------------------------------------------------------------------------------------------ Bristol, VA, Utility Systems Rev., ETM, FSA, 5.75%, 2016 (c) $ 240,000 $ 276,096 Guam Power Authority Rev., AMBAC, 5.25%, 2015 (u) 2,020,000 2,109,365 Puerto Rico Electric Power Authority Rev., FSA, 5.625%, 2010 (c)(u) 2,540,000 2,719,324 Puerto Rico Electric Power Authority Rev., FSA, 5.75%, 2010 (c)(u) 5,000,000 5,371,950 Puerto Rico Electric Power Authority Rev., FSA, 5.3%, 2020 (u) 2,500,000 2,636,125 Richmond, VA, Public Utilities Rev., FSA, 5%, 2027 1,000,000 1,058,010 Richmond, VA, Public Utilities Rev., FSA, 5%, 2033 6,950,000 7,209,444 Richmond, VA, Public Utilities Rev., FSA, 5%, 2035 1,000,000 1,055,280 ------------------------------------------------------------------------------------------------------------------ $ 22,435,594 ------------------------------------------------------------------------------------------------------------------ Water & Sewer Utility Revenue - 9.2% ------------------------------------------------------------------------------------------------------------------ Fairfax County, VA, Water Authority Rev., 5%, 2014 (c) $ 1,000,000 $ 1,078,800 Fairfax County, VA, Water Authority Rev., 5%, 2014 (c) 3,155,000 3,403,614 Fairfax County, VA, Water Authority Rev., 5%, 2032 2,000,000 2,075,020 Fairfax County, VA, Water Authority Rev., Unrefunded, 5%, 2027 3,210,000 3,352,460 Prince William County, VA, Water & Sewer Rev., FGIC, 5.5%, 2009 (c) 2,000,000 2,099,480 Puerto Rico Aqueduct & Sewer Authority Rev., ETM, 10.25%, 2009 (c) 145,000 153,880 Spotsylvania County, VA, Water & Sewer Rev., FSA, 5%, 2022 1,450,000 1,506,086 Virginia Beach, VA, Storm Water Utilities Rev., 6%, 2020 1,000,000 1,079,470 Virginia Resources Authority Sewer Systems Rev. (Hopewell Regional Wastewater), 5.75%, 2021 1,335,000 1,433,803 Virginia Resources Authority, Clean Water Rev., 5.4%, 2010 (c) 1,135,000 1,200,705 Virginia Resources Authority, Clean Water Rev., 6%, 2010 (c) 2,750,000 2,962,850 Virginia Resources Authority, Infrastructure Rev., FSA, 5.5%, 2010 (c) 350,000 372,109 Virginia Resources Authority, Infrastructure Rev., FSA, 5.5%, 2010 (c) 630,000 669,797 Virginia Resources Authority, Infrastructure Rev., MBIA, 5.5%, 2011 (c) 660,000 712,041 Virginia Resources Authority, Infrastructure Rev., MBIA, 5.5%, 2011 (c) 700,000 755,195 Virginia Resources Authority, Infrastructure Rev., MBIA, 5.5%, 2011 (c) 710,000 765,983 Virginia Resources Authority, Infrastructure Rev., MBIA, 5.5%, 2011 (c) 750,000 809,137 Virginia Resources Authority, Infrastructure Rev., MBIA, 5.5%, 2019 230,000 247,411 Virginia Resources Authority, Infrastructure Rev., FSA, 5.5%, 2019 90,000 95,496 Virginia Resources Authority, Infrastructure Rev., MBIA, 5.5%, 2020 240,000 258,072 Virginia Resources Authority, Water & Sewer Systems Rev. (Tuckahoe Creek Project), 5%, 2035 2,015,000 2,111,317 ------------------------------------------------------------------------------------------------------------------ $ 27,142,726 ------------------------------------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $287,768,815) $300,588,448 ------------------------------------------------------------------------------------------------------------------ Floating Rate Demand Notes - 1.8% ------------------------------------------------------------------------------------------------------------------ Allegheny County, PA, Hospital Development Authority Rev. (Presbyterian University Hospital), "C", 3.7%, due 4/05/07 $ 100,000 $ 100,000 Allegheny County, PA, Hospital Development Authority Rev. (Presbyterian University Hospital), "D", 3.7%, due 4/05/07 900,000 900,000 Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), 3.77%, due 4/02/07 100,000 100,000 Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), "B-2", 3.77%, due 4/02/07 100,000 100,000 Burke County, GA, Development Authority Pollution Control Rev. (Oglethorpe Power Corp.), "A", 3.7%, due 4/04/07 200,000 200,000 California Health Facilities Financing Authority Rev. (Adventist Health System), "B", 3.68%, due 4/02/07 500,000 500,000 Chicago, IL, Midway Airport Rev., Second Lien, "B", 3.81%, due 4/02/07 100,000 100,000 Lincoln County, WY, Pollution Control Rev. (Exxon Mobil Corp.), "C", 3.82%, due 4/02/07 100,000 100,000 Massachusetts Water Resources Authority, 3.65%, due 4/04/07 100,000 100,000 Petersburg, IN, Pollution Control Rev. (Indianapolis Power & Light Co.), "B", 3.73%, due 4/04/07 900,000 900,000 Sevier County, TN, Public Building Authority, 3.69%, due 4/05/07 400,000 400,000 Sevier County, TN, Public Building Authority Rev., Government Public Improvement, "B-4", 3.85%, due 4/02/07 50,000 50,000 State of Oregon, "73G", 3.68%, due 4/04/07 1,600,000 1,600,000 Triborough Bridge & Tunnel Authority, NY, Rev., "F", 3.65%, due 4/05/07 200,000 200,000 ------------------------------------------------------------------------------------------------------------------ TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 5,350,000 ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (IDENTIFIED COST, $293,118,815) (k) $305,938,448 ------------------------------------------------------------------------------------------------------------------ Other Assets, Less Liabilities - (4.1)% (11,948,276) ------------------------------------------------------------------------------------------------------------------ NET ASSETS - 100.0% $293,990,172 ------------------------------------------------------------------------------------------------------------------ SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 6,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $ 36,410 9/12/19 USD 4,000,000 Goldman Sachs 5.145% (fixed rate) 3-Month LIBOR (33,371) 8/15/22 USD 3,750,000 Goldman Sachs 5.286% (fixed rate) 3-Month LIBOR (10,315) ------------------------------------------------------------------------------------------------------------------ $ (7,276) ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.
PORTFOLIO OF INVESTMENTS 3/31/07 MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Municipal Bonds - 103.9% ------------------------------------------------------------------------------------------------------------------ ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------ General Obligations - General Purpose - 16.2% ------------------------------------------------------------------------------------------------------------------ Charleston, WV, Public Improvements, 7.2%, 2009 $1,140,000 $ 1,225,135 Commonwealth of Puerto Rico, Public Improvement, ETM, MBIA, 5.75%, 2019 (c)(u) 6,000,000 6,383,460 Commonwealth of Puerto Rico, Public Improvement, 5.25%, 2023 1,500,000 1,588,965 Commonwealth of Puerto Rico, Public Improvement, "A", CIFG, 5%, 2034 2,000,000 2,102,720 Puerto Rico Commonwealth Public Improvement, "A", CIFG, 5%, 2025 1,000,000 1,061,630 Puerto Rico Public Buildings Authority Rev. (State Office Building), "F", XLCA, 5.25%, 2025 2,000,000 2,287,720 Puerto Rico Public Buildings Authority Rev., "B", 5.25%, 2007 (c) 3,115,000 3,173,873 West Virginia Highway Improvements, FGIC, 5.625%, 2010 (c) 2,000,000 2,134,560 West Virginia Sewer Improvements, FGIC, 5.5%, 2017 2,565,000 2,681,733 ------------------------------------------------------------------------------------------------------------------ $ 22,639,796 ------------------------------------------------------------------------------------------------------------------ General Obligations - Improvement - 2.4% ------------------------------------------------------------------------------------------------------------------ Brooke County, WV, Board of Education, FGIC, 5%, 2016 $1,390,000 $ 1,449,186 Puerto Rico Municipal Finance Agency, FSA, 5.5%, 2009 (c)(u) 1,800,000 1,893,330 ------------------------------------------------------------------------------------------------------------------ $ 3,342,516 ------------------------------------------------------------------------------------------------------------------ General Obligations - Schools - 5.3% ------------------------------------------------------------------------------------------------------------------ Jefferson County, WV, Board of Education, ETM, FGIC, 6.85%, 2009 (c) $1,680,000 $ 1,795,332 Monongalia County, WV, Board of Education, MBIA, 5%, 2027 2,350,000 2,484,138 Monongalia County, WV, Board of Education, MBIA, 5%, 2033 3,000,000 3,156,540 ------------------------------------------------------------------------------------------------------------------ $ 7,436,010 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Hospitals - 8.9% ------------------------------------------------------------------------------------------------------------------ Kanawha County, WV, Building Commission Rev. (St. Francis Hospital), ETM, 7.5%, 2007 (c) $ 30,000 $ 30,756 Monongalia County, WV, Building Community Hospital Rev. (Monongalia General Hospital), "A", 5.25%, 2035 2,000,000 2,081,240 Ohio County, WV, County Commission Health System Rev. (Ohio Valley Medical Center), 5.75%, 2013 750,000 741,555 Randolph County, WV, Community Health Systems Rev. (Davis Health Systems, Inc.), FSA, 5.2%, 2021 1,000,000 1,065,770 Weirton, WV, Municipal Hospital Building, Commission Rev. (Weirton Hospital Medical Center), 6.375%, 2031 600,000 631,338 West Virginia Hospital Finance Authority, Hospital Rev., ETM, 6.5%, 2023 (c) 2,000,000 2,439,000 West Virginia Hospital Finance Authority, Hospital Rev. (Fairmont General Hospital), 6.625%, 2019 300,000 300,669 West Virginia Hospital Finance Authority, Hospital Rev. (General Division Medical Office Building), 7.25%, 2014 1,510,000 1,514,515 West Virginia Hospital Finance Authority, Hospital Rev. (West Virginia University Hospital), AMBAC, 5%, 2018 1,000,000 1,016,800 West Virginia Hospital Finance Authority, Rev., "A", AMBAC, 5%, 2022 2,500,000 2,644,775 ------------------------------------------------------------------------------------------------------------------ $ 12,466,418 ------------------------------------------------------------------------------------------------------------------ Healthcare Revenue - Long Term Care - 2.2% ------------------------------------------------------------------------------------------------------------------ Harrison County, WV, Building Commission Rev. (Maplewood Retirement), AMBAC, 5.25%, 2008 (c) $2,625,000 $ 2,717,479 West Virginia Economic Development (Edgewood Summit), 5.5%, 2029 300,000 308,928 ------------------------------------------------------------------------------------------------------------------ $ 3,026,407 ------------------------------------------------------------------------------------------------------------------ Industrial Revenue - Other - 0.3% ------------------------------------------------------------------------------------------------------------------ Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Refinery), 5.875%, 2022 $ 350,000 $ 384,919 ------------------------------------------------------------------------------------------------------------------ Parking - 0.9% ------------------------------------------------------------------------------------------------------------------ West Virginia Economic Development Authority, Auto Lease Rev. (Capitol Parking Garage), AMBAC, 5.8%, 2020 $1,260,000 $ 1,335,991 ------------------------------------------------------------------------------------------------------------------ Single Family Housing - Local - 1.0% ------------------------------------------------------------------------------------------------------------------ Charlestown, WV, Residential Mortgage Rev., 6.2%, 2011 $ 50,000 $ 50,225 Kanawha County, WV, 0%, 2014 (c) 1,920,000 1,315,565 ------------------------------------------------------------------------------------------------------------------ $ 1,365,790 ------------------------------------------------------------------------------------------------------------------ Single Family Housing - State - 2.5% ------------------------------------------------------------------------------------------------------------------ Puerto Rico Housing Finance Authority Home Mortgage Rev., Mortgage Backed Securities, "A", 4.75%, 2023 $ 670,000 $ 673,156 West Virginia Housing Development Fund Rev., 5.25%, 2018 950,000 973,883 West Virginia Housing Development Fund Rev., 5.3%, 2023 850,000 868,071 West Virginia Housing Development Fund Rev., "A", 4.625%, 2032 1,000,000 981,720 ------------------------------------------------------------------------------------------------------------------ $ 3,496,830 ------------------------------------------------------------------------------------------------------------------ State & Local Agencies - 26.5% ------------------------------------------------------------------------------------------------------------------ Huntington, WV, Municipal Development Authority, Rev., MBIA, 5.1%, 2018 $1,740,000 $ 1,792,235 West Virginia Building Commission, "A", AMBAC, 5.375%, 2018 (u) 9,040,000 10,129,862 West Virginia Building Commission, "B", AMBAC, 5.375%, 2018 (u) 2,500,000 2,801,400 West Virginia Building Commission, Lease Rev., ETM, MBIA, 0%, 2007 (c) 3,150,000 3,122,248 West Virginia Building Commission, Lease Rev., ETM, MBIA, 0%, 2008 (c) 3,050,000 2,914,275 West Virginia Building Commission, Lease Rev., ETM, MBIA, 0%, 2009 (c) 1,000,000 920,490 West Virginia Economic Development Authority (Correctional Juvenile & Public), MBIA, 5.5%, 2013 1,000,000 1,089,590 West Virginia Economic Development Authority (Correctional Juvenile & Public), 5%, 2020 1,000,000 1,044,350 West Virginia Economic Development Authority (Correctional Juvenile & Public), MBIA, 5%, 2026 2,100,000 2,191,371 West Virginia Economic Development Authority (State Office Building), "B", MBIA, 5.25%, 2030 1,355,000 1,442,601 West Virginia Economic Development Authority, Auto Lease Rev., 5.2%, 2033 1,000,000 1,052,620 West Virginia Economic Development Authority, Department of Environmental Protection, 5.5%, 2022 2,000,000 2,164,900 West Virginia Economic Development Authority, Lease Rev. (State Office Building), "B", MBIA, 5.25%, 2025 645,000 687,873 West Virginia Hospital Finance Authority, Hospital Rev. (Veterans Nursing Home), 5.5%, 2034 1,000,000 1,034,630 West Virginia School Building Authority, Miscellaneous Tax Rev., FSA, 5.25%, 2007(c) 2,550,000 2,610,461 West Virginia School Building Authority, Rev., "A", FGIC, 5%, 2020 2,000,000 2,154,380 ------------------------------------------------------------------------------------------------------------------ $ 37,153,286 ------------------------------------------------------------------------------------------------------------------ Tax - Other - 0.4% ------------------------------------------------------------------------------------------------------------------ Virgin Islands, Public Finance Authority Rev., "A", 5.625%, 2025 $ 500,000 $ 515,555 ------------------------------------------------------------------------------------------------------------------ Tax Assessment - 0.3% ------------------------------------------------------------------------------------------------------------------ Morgantown, West Virginia, Tax Increment Revenue, Parking Garage Project, "A", 5%, 2033 $ 500,000 $ 494,390 ------------------------------------------------------------------------------------------------------------------ Tobacco - 0.5% ------------------------------------------------------------------------------------------------------------------ Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, 5.375%, 2033 $ 660,000 $ 687,100 ------------------------------------------------------------------------------------------------------------------ Toll Roads - 1.8% ------------------------------------------------------------------------------------------------------------------ West Virginia Parkways, Economic Development & Tourism Authority, Rev., ETM, FGIC, 0%, 2007 (c) $2,000,000 $ 1,982,380 West Virginia Parkways, Economic Development & Tourism Authority, Rev., ETM, FGIC, 0%, 2008 (c) 610,000 582,855 ------------------------------------------------------------------------------------------------------------------ $ 2,565,235 ------------------------------------------------------------------------------------------------------------------ Transportation - Special Tax - 1.4% ------------------------------------------------------------------------------------------------------------------ Commonwealth of Puerto Rico, Highway & Transportation Authority Rev., "J", MBIA, 5%, 2029 $1,820,000 $ 1,922,794 ------------------------------------------------------------------------------------------------------------------ Universities - Colleges - 22.4% ------------------------------------------------------------------------------------------------------------------ Commonwealth of Puerto Rico, Industrial Tourist Education (University Plaza), MBIA, 5%, 2021 $1,270,000 $ 1,318,349 Fairmont State College, West Virginia, College Rev., "A", FGIC, 5%, 2032 3,210,000 3,353,230 Fairmont State College, West Virginia, College Rev., "A", FGIC, 5.375%, 2027 1,500,000 1,611,780 Fairmont State College, West Virginia, College Rev., "A", FGIC, 5%, 2032 2,250,000 2,344,185 Fairmont State College, West Virginia, College Rev., "B", FGIC, 5.25%, 2022 5,130,000 5,465,143 Shepherd University Board of Governors, West Virginia Rev. (Residence Facilities Projects), MBIA, 5%, 2035 1,675,000 1,760,760 West Liberty State College, Capital Improvement, 6%, 2028 500,000 532,995 West Virginia Department of Higher Education (Marshall University), FGIC, 5.25%, 2019 1,680,000 1,766,570 West Virginia Department of Higher Education (Student Union James C. Wilson College), 5.125%, 2022 1,500,000 1,586,505 West Virginia Department of Higher Education, "B", FGIC, 5%, 2029 3,000,000 3,136,710 West Virginia Department of Higher Education, "A", MBIA, 5%, 2010 595,000 617,057 West Virginia University, Dormitory Rev., AMBAC, 5%, 2007 (c) 2,000,000 2,035,560 West Virginia University, University Systems Rev. (Marshall University), FGIC, 6%, 2020 2,705,000 2,895,946 West Virginia University, University Systems Rev. (West Virginia University), MBIA, 5.5%, 2020 1,700,000 1,943,406 West Virginia, West Virginia University Improvement Rev., "C", FGIC, 5%, 2028 1,000,000 1,052,930 ------------------------------------------------------------------------------------------------------------------ $ 31,421,126 ------------------------------------------------------------------------------------------------------------------ Utilities - Investor Owned - 0.5% ------------------------------------------------------------------------------------------------------------------ Mason County, WV, Pollution Control Rev. (Appalachian Power Co.), 5.5%, 2022 $ 750,000 $ 775,875 ------------------------------------------------------------------------------------------------------------------ Water & Sewer Utility Revenue - 10.4% ------------------------------------------------------------------------------------------------------------------ Berkeley County, WV, Public Service Sewer District, "A", 5%, 2047 $1,000,000 $ 1,009,290 Berkeley County, WV, Public Service Sewer District, Sewer Capacity Impact Fee, 5%, 2022 300,000 299,679 Fairmont, WV, Waterworks Rev., AMBAC, 5.25%, 2022 200,000 225,378 West Virginia Water Development Authority Loan Program, "B", AMBAC, 4.75%, 2035 500,000 511,295 West Virginia Water Development Authority Loan Program, "B", AMBAC, 5.125%, 2024 2,140,000 2,287,596 West Virginia Water Development Authority Rev., ETM, 7.1%, 2009 (c) 80,000 83,776 West Virginia Water Development Authority Rev., AMBAC, 6.25%, 2020 1,000,000 1,077,760 West Virginia Water Development Authority Rev., AMBAC, 5.25%, 2023 1,000,000 1,071,680 West Virginia Water Development Authority Rev., AMBAC, 5%, 2026 2,850,000 2,992,757 West Virginia Water Development Authority, "A", FGIC, 5%, 2033 1,500,000 1,573,500 West Virginia Water Development Authority, Infrastructure Rev., FSA, 5.5%, 2010 (c) 390,000 413,451 West Virginia Water Development Authority, Infrastructure Rev., FSA, 5.5%, 2010 (c) 895,000 948,816 West Virginia Water Development Authority, Infrastructure Rev., "A", AMBAC, 5%, 2033 1,950,000 2,045,550 ------------------------------------------------------------------------------------------------------------------ $ 14,540,528 ------------------------------------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $139,801,651) $145,570,566 ------------------------------------------------------------------------------------------------------------------ Floating Rate Demand Notes - 3.1% ------------------------------------------------------------------------------------------------------------------ Jefferson County, AL, Sewer Rev., Capital Improvement Warrants Rev., "A", 3.7%, due 4/05/07 $1,700,000 $ 1,700,000 Lincoln County, WY, Pollution Control Rev. (Exxon Mobil Corp.), "C", 3.82%, due 4/02/07 900,000 900,000 New York, NY, Municipal Water Finance Authority, Water & Sewer Systems Rev., "A", 3.67%, due 4/02/07 100,000 100,000 Pinellas County, FL, Health Facilities Authority Rev. (Pooled Hospital Loan Program), 3.8%, due 4/02/07 1,200,000 1,200,000 Sevier County, TN, Public Building Authority, Government Public Improvement II, "F-4", 3.69%, due 4/05/07 315,000 315,000 Sevier County, TN, Public Building Authority, Government Public Improvement III, "F", 3.69%, due 4/05/07 100,000 $ 100,000 ------------------------------------------------------------------------------------------------------------------ TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST AND VALUE $ 4,315,000 ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (IDENTIFIED COST, $144,116,651) (k) $149,885,566 ------------------------------------------------------------------------------------------------------------------ Other Assets, Less Liabilities - (7.0)% (9,824,459) ------------------------------------------------------------------------------------------------------------------ NET ASSETS - 100.0% $140,061,107 ------------------------------------------------------------------------------------------------------------------ SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ INTEREST RATE SWAPS 12/01/07 USD 3,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $18,205 8/08/17 USD 2,000,000 Goldman Sachs 7-Day BMA 3.736% (fixed rate) (7,386) 5/30/19 USD 2,250,000 Citibank 7-Day BMA 3.695% (fixed rate) 8,886 8/22/19 USD 1,000,000 Goldman Sachs 7-Day BMA 3.726% (fixed rate) 3,394 7/23/22 USD 1,000,000 Merrill Lynch 7-Day BMA 3.889% (fixed rate) (4,796) 9/26/22 USD 1,500,000 Goldman Sachs 7-Day BMA 3.807% (fixed rate) 7,423 ------------------------------------------------------------------------------------------------------------------ $25,726 ------------------------------------------------------------------------------------------------------------------ At March 31, 2007, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE PORTFOLIO FOOTNOTES AND NOTES TO FINANCIAL STATEMENTS Portfolio Footnotes: (c) Refunded bond. (k) Each fund held securities fair valued in accordance with the policies adopted by the Board of Trustees. All of these security values were provided by an independent pricing service using an evaluated bid. As of March 31, 2007, the following funds held securities that were fair valued. FUND MARKET VALUE % OF MARKET VALUE --------------------------------------------------------------------------------------------------------- Mississippi Fund $ 87,922,949 98.43% New York Fund 165,554,778 98.75% North Carolina Fund 338,304,277 97.95% Pennsylvania Fund 109,462,306 98.34% South Carolina Fund 159,889,979 97.80% Tennessee Fund 108,681,860 99.25% Virginia Fund 300,588,448 98.25% West Virginia Fund 145,570,566 97.12% (n) Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be sold in the ordinary cours e of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate valu e of this security was $129,861, representing 0.1% of net assets for the Pennsylvania Fund. (p) Primary inverse floater. (u) Underlying security deposited into special purpose trust ("the trust") by investment banker upon creation of self-deposited inve rse floaters. (v) Externally deposited inverse floater. The following abbreviations are used in this report and are defined: BMA Bond Market Assn. COP Certificate of Participation ETM Escrowed to Maturity LOC Letter of Credit LIBOR London Interbank Offered Rate Insurers Inverse Floaters --------------------------------------------------------------------------------------------------------------- AMBAC AMBAC Indemnity Corp. RITES Residual Interest Tax-Exempt Security ASST GTY Asset Guaranty Insurance Co. CIFG CDC IXIS Financial Guaranty CONNIE LEE Connie Lee Insurance Co. FGIC Financial Guaranty Insurance Co. FHA Federal Housing Administration FNMA Federal National Mortgage Assn. FSA Financial Security Assurance Inc. GNMA Government National Mortgage Assn. MBIA MBIA Insurance Corp. XLCA XL Capital Insurance Co. SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements STATEMENTS OF ASSETS AND LIABILITIES At 3/31/07 These statements represent each fund's balance sheet, which details the assets and liabilities comprising the total value of each fund.
MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA FUND FUND FUND FUND ASSETS --------------------------------------------------------------------------------------------------------------------------------- Investments - Identified cost $85,769,506 $157,360,416 $327,667,372 $106,901,748 Unrealized appreciation (depreciation) 3,553,443 10,294,362 17,706,905 4,410,558 --------------------------------------------------------------------------------------------------------------------------------- Total investments, at value $89,322,949 $167,654,778 $345,374,277 $111,312,306 Cash -- 51,554 50,760 34,939 Receivable for investments sold 20,390 1,233,316 -- 590,000 Receivable for fund shares sold 14,421 57,179 1,396,068 569,144 Interest receivable 1,200,660 2,555,420 5,240,371 1,666,536 Receivable from investment adviser -- -- -- 16,461 Unrealized appreciation on interest rate swaps 19,481 24,992 64,508 55,151 Other assets 2,425 4,187 8,665 2,623 --------------------------------------------------------------------------------------------------------------------------------- Total assets $90,580,326 $171,581,426 $352,134,649 $114,247,160 --------------------------------------------------------------------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------------------------------------------------------------------- Payable to custodian $37 $-- $-- $-- Distributions payable 120,846 223,408 369,452 125,687 Payable for investments purchased -- -- 1,861,615 -- Payable to the holder of the floating rate certificate from trust assets 5,360,000 10,350,000 21,425,000 6,170,000 Payable for fund shares reacquired 76,442 359,532 351,620 102,308 Unrealized depreciation on interest rate swaps 4,245 -- -- 7,457 Payable to affiliates - Management fee 2,092 3,959 8,081 2,653 Shareholder servicing costs 6,460 12,897 11,685 8,612 Distribution and service fees 908 5,854 12,622 12,466 Administrative services fee 194 303 543 227 Payable for independent trustees' compensation 9,068 11,472 14,209 8,966 Payable for interest expense and fees 58,470 137,424 206,863 80,192 Accrued expenses and other liabilities 63,054 77,600 92,927 66,559 --------------------------------------------------------------------------------------------------------------------------------- Total liabilities $5,701,816 $11,182,449 $24,354,617 $6,585,127 --------------------------------------------------------------------------------------------------------------------------------- Net assets $84,878,510 $160,398,977 $327,780,032 $107,662,033 --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF --------------------------------------------------------------------------------------------------------------------------------- Paid-in capital $81,488,782 $150,130,633 $309,476,778 $103,105,951 Unrealized appreciation (depreciation) on investments 3,568,679 10,319,354 17,771,413 4,458,252 Accumulated net realized gain (loss) on investments (198,611) 171,743 964,482 170,749 Accumulated undistributed (distributions in excess of) net investment income 19,660 (222,753) (432,641) (72,919) --------------------------------------------------------------------------------------------------------------------------------- Net assets $84,878,510 $160,398,977 $327,780,032 $107,662,033 ---------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities - continued
MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA FUND FUND FUND FUND Net Assets Class A $75,470,126 $118,923,734 $268,107,653 $73,812,781 Class B 9,408,384 25,653,596 26,519,900 33,849,252 Class C -- 15,821,647 33,152,479 -- --------------------------------------------------------------------------------------------------------------------------------- Total net assets $84,878,510 $160,398,977 $327,780,032 $107,662,033 --------------------------------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding Class A 7,704,881 10,667,392 22,609,197 7,207,390 Class B 959,260 2,308,490 2,239,489 3,296,547 Class C -- 1,421,261 2,797,561 -- --------------------------------------------------------------------------------------------------------------------------------- Total shares of beneficial interest outstanding 8,664,141 14,397,143 27,646,247 10,503,937 --------------------------------------------------------------------------------------------------------------------------------- Class A shares Net asset value per share (net assets/shares of beneficial interest outstanding) $9.80 $11.15 $11.86 $10.24 --------------------------------------------------------------------------------------------------------------------------------- Offering price per share (100/95.25Xnet asset value per share) $10.29 $11.71 $12.45 $10.75 --------------------------------------------------------------------------------------------------------------------------------- Class B shares Net asset value and offering price per share (net assets/shares of beneficial interest outstanding) $9.81 $11.11 $11.84 $10.27 --------------------------------------------------------------------------------------------------------------------------------- Class C shares Net asset value and offering price per share (net assets/shares of beneficial interest outstanding) $-- $11.13 $11.85 $-- --------------------------------------------------------------------------------------------------------------------------------- On sales of $50,000 or more, the offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. SEE NOTES TO FINANCIAL STATEMENTS
Statements of Assets and Liabilities - continued
SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA AT 3/31/07 FUND FUND FUND FUND ASSETS --------------------------------------------------------------------------------------------------------------------------------- Investments - Identified cost $155,260,295 $104,585,278 $293,118,815 $144,116,651 Unrealized appreciation (depreciation) 8,229,684 4,916,582 12,819,633 5,768,915 --------------------------------------------------------------------------------------------------------------------------------- Total investments, at value $163,489,979 $109,501,860 $305,938,448 $149,885,566 Cash 58,737 70,785 81,561 11,749 Receivable for investments sold -- 1,010,000 -- -- Receivable for fund shares sold 282,005 493,446 67,622 98,568 Interest receivable 2,598,196 1,575,583 4,724,130 2,274,240 Unrealized appreciation on interest rate swaps 28,079 -- 36,410 37,908 Other assets 4,341 3,249 8,084 3,775 --------------------------------------------------------------------------------------------------------------------------------- Total assets $166,461,337 $112,654,923 $310,856,255 $152,311,806 --------------------------------------------------------------------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------------------------------------------------------------------- Distributions payable $176,847 $177,365 $418,336 $150,330 Payable for investments purchased -- -- -- 2,163,120 Payable to the holder of the floating rate certificate from trust assets 9,275,000 -- 15,670,000 9,670,000 Payable for fund shares reacquired 329,396 159,043 400,017 66,410 Unrealized depreciation on interest rate swaps 5,540 -- 43,686 12,182 Payable to affiliates - Management fee 3,855 2,762 7,246 3,451 Shareholder servicing costs 10,008 6,667 16,709 7,947 Distribution and service fees 5,602 3,913 9,783 4,565 Administrative services fee 297 233 495 273 Payable for independent trustees' compensation 14,071 11,528 14,381 14,070 Payable for interest expense and fees 128,646 -- 193,774 89,357 Accrued expenses and other liabilities 66,919 67,659 91,656 68,994 --------------------------------------------------------------------------------------------------------------------------------- Total liabilities $10,016,181 $429,170 $16,866,083 $12,250,699 --------------------------------------------------------------------------------------------------------------------------------- Net assets $156,445,156 $112,225,753 $293,990,172 $140,061,107 --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF --------------------------------------------------------------------------------------------------------------------------------- Paid-in capital $147,969,007 $106,733,526 $280,518,592 $133,787,617 Unrealized appreciation (depreciation) on investments 8,252,223 4,916,582 12,812,357 5,794,641 Accumulated net realized gain (loss) on investments 102,810 568,928 1,265,396 451,330 Accumulated undistributed (distributions in excess of) net investment income 121,116 6,717 (606,173) 27,519 --------------------------------------------------------------------------------------------------------------------------------- Net assets $156,445,156 $112,225,753 $293,990,172 $140,061,107 ---------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities - continued
SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND Net Assets Class A $135,766,359 $99,302,077 $269,067,789 $129,973,788 Class B 20,678,797 12,923,676 12,545,474 10,087,319 Class C -- -- 12,376,909 -- --------------------------------------------------------------------------------------------------------------------------------- Total net assets $156,445,156 $112,225,753 $293,990,172 $140,061,107 --------------------------------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding Class A 11,043,312 9,383,777 23,539,553 11,352,163 Class B 1,683,028 1,222,158 1,098,347 881,469 Class C -- -- 1,083,035 -- --------------------------------------------------------------------------------------------------------------------------------- Total shares of beneficial interest outstanding 12,726,340 10,605,935 25,720,935 12,233,632 --------------------------------------------------------------------------------------------------------------------------------- Class A shares Net asset value per share (net assets/shares of beneficial interest outstanding) $12.29 $10.58 $11.43 $11.45 --------------------------------------------------------------------------------------------------------------------------------- Offering price per share (100/95.25Xnet asset value per share) $12.90 $11.11 $12.00 $12.02 --------------------------------------------------------------------------------------------------------------------------------- Class B shares Net asset value and offering price per share (net assets/shares of beneficial interest outstanding) $12.29 $10.57 $11.42 $11.44 --------------------------------------------------------------------------------------------------------------------------------- Class C shares Net asset value and offering price per share (net assets/shares of beneficial interest outstanding) $-- $-- $11.43 $-- --------------------------------------------------------------------------------------------------------------------------------- On sales of $50,000 or more, the offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements STATEMENTS OF OPERATIONS Year ended 3/31/07 These statements describe how much each fund earned in investment income and accrued in expenses. They also describe any gains or losses generated by each fund's operations.
MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA FUND FUND FUND FUND NET INVESTMENT INCOME --------------------------------------------------------------------------------------------------------------------------------- Interest $4,618,825 $9,300,755 $17,958,092 $5,698,565 --------------------------------------------------------------------------------------------------------------------------------- Expenses - Management fee $466,964 $893,996 $1,813,867 $595,890 Distribution and service fees 76,335 734,018 1,559,507 385,686 Shareholder servicing costs 99,088 192,498 348,037 130,789 Administrative services fee 23,785 37,765 67,864 28,009 Independent trustees' compensation 3,884 6,062 12,283 6,190 Custodian fee 39,625 67,328 104,609 54,089 Shareholder communications 8,707 18,820 31,078 15,480 Auditing fees 40,805 40,805 40,805 41,605 Legal fees 6,691 9,518 7,219 7,052 Interest expense and fees 204,304 399,460 821,947 236,409 Miscellaneous 47,455 65,559 77,342 52,604 --------------------------------------------------------------------------------------------------------------------------------- Total expenses $1,017,643 $2,465,829 $4,884,558 $1,553,803 --------------------------------------------------------------------------------------------------------------------------------- Fees paid indirectly (6,372) (10,982) (20,101) (9,911) Reduction of expenses by investment adviser (212,699) (407,208) (826,203) (391,307) --------------------------------------------------------------------------------------------------------------------------------- Net expenses $798,572 $2,047,639 $4,038,254 $1,152,585 --------------------------------------------------------------------------------------------------------------------------------- Net investment income $3,820,253 $7,253,116 $13,919,838 $4,545,980 --------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS --------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) (identified cost basis) - Investment transactions $97,831 $311,386 $949,526 $405,122 Swap transactions 30,387 152,895 316,622 (144,406) --------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments $128,218 $464,281 $1,266,148 $260,716 --------------------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation) - Investments $294,296 $115,995 $(594,771) $432,169 Swap transactions (22,733) (91,693) (144,496) (63,863) --------------------------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on investments $271,563 $24,302 $(739,267) $368,306 --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments $399,781 $488,583 $526,881 $629,022 --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $4,220,034 $7,741,699 $14,446,719 $5,175,002 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Statements of Operations - continued
SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA YEAR ENDED 3/31/07 FUND FUND FUND FUND NET INVESTMENT INCOME --------------------------------------------------------------------------------------------------------------------------------- Interest $8,675,008 $6,075,800 $16,696,040 $7,987,590 --------------------------------------------------------------------------------------------------------------------------------- Expenses - Management fee $857,474 $624,813 $1,646,844 $790,021 Distribution and service fees 698,217 495,638 1,226,792 576,714 Shareholder servicing costs 173,188 124,345 329,647 156,631 Administrative services fee 36,562 28,958 62,413 34,370 Independent trustees' compensation 6,815 6,187 12,249 7,119 Custodian fee 52,185 43,019 110,818 43,307 Shareholder communications 14,026 12,753 26,540 14,450 Auditing fees 40,805 40,805 40,805 40,805 Legal fees 6,603 2,612 6,827 6,809 Interest expense and fees 352,183 -- 598,180 371,506 Miscellaneous 49,473 46,989 73,102 47,726 --------------------------------------------------------------------------------------------------------------------------------- Total expenses $2,287,531 $1,426,119 $4,134,217 $2,089,458 --------------------------------------------------------------------------------------------------------------------------------- Fees paid indirectly (11,941) (10,537) (21,450) (6,444) Reduction of expenses by investment adviser (390,572) (284,598) (750,126) (359,848) --------------------------------------------------------------------------------------------------------------------------------- Net expenses $1,885,018 $1,130,984 $3,362,641 $1,723,166 --------------------------------------------------------------------------------------------------------------------------------- Net investment income $6,789,990 $4,944,816 $13,333,399 $6,264,424 --------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS --------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) (identified cost basis) - Investment transactions $160,211 $355,358 $453,910 $956,555 Swap transactions 93,201 70,630 292,322 268,185 --------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments $253,412 $425,988 $746,232 $1,224,740 --------------------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation) - Investments $(65,483) $(705,649) $(906,842) $(1,019,492) Swap transactions (126,520) 151,684 5,695 (72,841) --------------------------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on investments $(192,003) $(553,965) $(901,147) $(1,092,333) --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments $61,409 $(127,977) $(154,915) $132,407 --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $6,851,399 $4,816,839 $13,178,484 $6,396,831 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements STATEMENTS OF CHANGES IN NET ASSETS These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA FUND FUND FUND FUND YEAR ENDED 3/31/07 CHANGE IN NET ASSETS FROM OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income $3,820,253 $7,253,116 $13,919,838 $4,545,980 Net realized gain (loss) on investments 128,218 464,281 1,266,148 260,716 Net unrealized gain (loss) on investments 271,563 24,302 (739,267) 368,306 --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $4,220,034 $7,741,699 $14,446,719 $5,175,002 --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income Class A $(3,270,278) $(5,127,904) $(11,182,764) $(2,996,195) Class B (361,313) (990,363) (1,057,404) (1,242,788) Class C -- (567,073) (1,144,699) -- From net realized gain on investments Class A -- (556,342) (660,858) -- Class B -- (125,175) (73,300) -- Class C -- (72,128) (80,834) -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(3,631,591) $(7,438,985) $(14,199,859) $(4,238,983) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(1,771,453) $(5,489,028) $(7,423,527) $(4,345,538) --------------------------------------------------------------------------------------------------------------------------------- Total change in net assets $(1,183,010) $(5,186,314) $(7,176,667) $(3,409,519) --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS --------------------------------------------------------------------------------------------------------------------------------- At beginning of period 86,061,520 165,585,291 334,956,699 111,071,552 At end of period $84,878,510 $160,398,977 $327,780,032 $107,662,033 --------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (distributions in excess of) net investment income included in net assets at end of period $19,660 $(222,753) $(432,641) $(72,919) --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Statements of Changes in Net Assets - continued
SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND YEAR ENDED 3/31/07 CHANGE IN NET ASSETS FROM OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income $6,789,990 $4,944,816 $13,333,399 $6,264,424 Net realized gain (loss) on investments 253,412 425,988 746,232 1,224,740 Net unrealized gain (loss) on investments (192,003) (553,965) (901,147) (1,092,333) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $6,851,399 $4,816,839 $13,178,484 $6,396,831 --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income Class A $(5,495,872) $(4,052,871) $(11,631,198) $(5,366,646) Class B (821,365) (523,277) (529,064) (388,328) Class C -- -- (468,928) -- From net realized gain on investments Class A -- (44,099) (69,200) (817,240) Class B -- (6,370) (3,504) (68,586) Class C -- -- (3,300) -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(6,317,237) $(4,626,617) $(12,705,194) $(6,640,800) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(1,470,342) $(4,007,457) $(13,995,838) $(6,498,685) --------------------------------------------------------------------------------------------------------------------------------- Total change in net assets $(936,180) $(3,817,235) $(13,522,548) $(6,742,654) --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS --------------------------------------------------------------------------------------------------------------------------------- At beginning of period 157,381,336 116,042,988 307,512,720 146,803,761 At end of period $156,445,156 $112,225,753 $293,990,172 $140,061,107 --------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (distributions in excess of) net investment income included in net assets at end of period $121,116 $6,717 $(606,173) $27,519 --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Statements of Changes in Net Assets - continued
MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA FUND FUND FUND FUND YEAR ENDED 3/31/06 CHANGE IN NET ASSETS FROM OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income $3,838,529 $7,198,028 $14,258,999 $4,423,018 Net realized gain (loss) on investments 286,632 809,461 1,019,442 343,891 Net unrealized gain (loss) on investments (1,103,224) (2,621,239) (3,747,594) (599,785) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $3,021,937 $5,386,250 $11,530,847 $4,167,124 --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income Class A $(3,413,002) $(5,263,309) $(11,694,658) $(2,989,205) Class B (412,712) (1,168,804) (1,306,917) (1,394,784) Class C -- (642,938) (1,170,926) -- From net realized gain on investments Class A -- (564,709) (1,065,305) -- Class B -- (152,917) (135,859) -- Class C -- (82,521) (127,766) -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(3,825,714) $(7,875,198) $(15,501,431) $(4,383,989) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(4,252,560) $(12,844,892) $(14,095,028) $1,890,721 --------------------------------------------------------------------------------------------------------------------------------- Total change in net assets $(5,056,337) $(15,333,840) $(18,065,612) $1,673,856 --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS --------------------------------------------------------------------------------------------------------------------------------- At beginning of period 91,117,857 180,919,131 353,022,311 109,397,696 At end of period $86,061,520 $165,585,291 $334,956,699 $111,071,552 --------------------------------------------------------------------------------------------------------------------------------- Accumulated distributions in excess of net investment income included in net assets at end of period $(122,532) $(506,387) $(585,389) $(210,389) --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Statements of Changes in Net Assets - continued
SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND YEAR ENDED 3/31/06 CHANGE IN NET ASSETS FROM OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- Net investment income $6,758,875 $4,974,219 $13,515,722 $6,088,091 Net realized gain (loss) on investments 690,541 481,186 1,195,139 401,417 Net unrealized gain (loss) on investments (2,164,942) (1,720,907) (4,166,118) (1,928,663) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from operations $5,284,474 $3,734,498 $10,544,743 $4,560,845 --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS --------------------------------------------------------------------------------------------------------------------------------- From net investment income Class A $(5,659,836) $(4,261,947) $(12,295,006) $(5,562,081) Class B (1,056,777) (664,458) (688,908) (467,115) Class C -- -- (466,544) -- From net realized gain on investments Class A -- (373,368) -- -- Class B -- (67,191) -- -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(6,716,613) $(5,366,964) $(13,450,458) $(6,029,196) --------------------------------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(2,560,303) $(7,850,463) $(6,612,020) $(521,038) --------------------------------------------------------------------------------------------------------------------------------- Total change in net assets $(3,992,442) $(9,482,929) $(9,517,735) $(1,989,389) --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS --------------------------------------------------------------------------------------------------------------------------------- At beginning of period 161,373,778 125,525,917 317,030,455 148,793,150 At end of period $157,381,336 $116,042,988 $307,512,720 $146,803,761 --------------------------------------------------------------------------------------------------------------------------------- Accumulated distributions in excess of net investment income included in net assets at end of period $(93,191) $(255,988) $(824,572) $(284,008) --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements FINANCIAL HIGHLIGHTS MFS(R) MISSISSIPPI MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $9.73 $9.82 $10.02 $10.02 $9.61 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.45(z) $0.44 $0.46 $0.46 $0.46 Net realized and unrealized gain (loss) on investments 0.05(z) (0.09) (0.19) 0.01 0.44 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.50 $0.35 $0.27 $0.47 $0.90 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.43) $(0.44) $(0.47) $(0.47) $(0.49) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.80 $9.73 $9.82 $10.02 $10.02 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 5.20 3.59 2.76 4.77 9.48 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.11 1.07 0.93 0.82 0.84 Expenses after expense reductions (f) 0.86 0.82 0.68 0.62 0.64 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.62 0.64 0.58 0.62 0.64 Net investment income 4.59(z) 4.48 4.70 4.61 4.70 Portfolio turnover 12 9 19 12 22 Net assets at end of period (000 Omitted) $75,470 $75,597 $79,574 $82,507 $87,724 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) MISSISSIPPI MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 -------------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $9.74 $9.84 $10.03 $10.04 $9.62 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.38(z) $0.37 $0.39 $0.38 $0.38 Net realized and unrealized gain (loss) on investments 0.04(z) (0.10) (0.19) (0.01)(g) 0.44 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.42 $0.27 $0.20 $0.37 $0.82 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.35) $(0.37) $(0.39) $(0.38) $(0.40) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.81 $9.74 $9.84 $10.03 $10.04 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.41 2.71 2.08 3.80 8.67 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.87 1.83 1.70 1.64 1.67 Expenses after expense reductions (f) 1.62 1.58 1.45 1.44 1.47 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.38 1.40 1.35 1.44 1.47 Net investment income 3.83(z) 3.72 3.93 3.79 3.86 Portfolio turnover 12 9 19 12 22 Net assets at end of period (000 Omitted) $9,408 $10,465 $11,544 $13,177 $12,900 ------------------------------------------------------------------------------------------------------------------------------ Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (g) The per share amount is not in accordance with the net realized and unrealized gain/loss for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.01 per share to net investment income, a decrease of $0.01 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.07% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) NEW YORK MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.13 $11.30 $11.53 $11.49 $10.94 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.52(z) $0.49 $0.51 $0.51 $0.52 Net realized and unrealized gain (loss) on investments 0.03(z) (0.12) (0.24) 0.04 0.56 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.55 $0.37 $0.27 $0.55 $1.08 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.48) $(0.49) $(0.50) $(0.51) $(0.53) From net realized gain on investments (0.05) (0.05) -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.53) $(0.54) $(0.50) $(0.51) $(0.53) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.15 $11.13 $11.30 $11.53 $11.49 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 5.07 3.30 2.45 4.90 10.05 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.32 1.28 1.14 1.13 1.17 Expenses after expense reductions (f) 1.06 1.03 0.89 0.93 0.97 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.82 0.85 0.79 0.86 0.87 Net investment income 4.66(z) 4.36 4.47 4.39 4.56 Portfolio turnover 8 12 20 13 17 Net assets at end of period (000 Omitted) $118,924 $118,476 $125,861 $131,642 $132,843 ------------------------------------------------------------------------------------------------------------------------------ YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.09 $11.27 $11.49 $11.45 $10.93 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.43(z) $0.41 $0.42 $0.42 $0.43 Net realized and unrealized gain (loss) on investments 0.04(z) (0.14) (0.22) 0.04 0.54 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.47 $0.27 $0.20 $0.46 $0.97 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.40) $(0.40) $(0.42) $(0.42) $(0.45) From net realized gain on investments (0.05) (0.05) -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.45) $(0.45) $(0.42) $(0.42) $(0.45) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.11 $11.09 $11.27 $11.49 $11.45 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.29 2.43 1.77 4.12 8.96 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 2.07 2.03 1.89 1.87 1.92 Expenses after expense reductions (f) 1.82 1.78 1.64 1.67 1.72 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.57 1.60 1.54 1.60 1.62 Net investment income 3.91(z) 3.61 3.70 3.62 3.80 Portfolio turnover 8 12 20 13 17 Net assets at end of period (000 Omitted) $25,654 $30,046 $35,328 $41,509 $40,867 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) NEW YORK MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS C 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.11 $11.29 $11.51 $11.47 $10.93 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.43(z) $0.41 $0.42 $0.42 $0.43 Net realized and unrealized gain (loss) on investments 0.04(z) (0.14) (0.22) 0.04 0.56 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.47 $0.27 $0.20 $0.46 $0.99 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.40) $(0.40) $(0.42) $(0.42) $(0.45) From net realized gain on investments (0.05) (0.05) -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.45) $(0.45) $(0.42) $(0.42) $(0.45) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.13 $11.11 $11.29 $11.51 $11.47 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.29 2.43 1.78 4.12 9.14 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 2.07 2.03 1.89 1.87 1.92 Expenses after expense reductions (f) 1.82 1.78 1.64 1.67 1.72 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.57 1.60 1.54 1.60 1.62 Net investment income 3.92(z) 3.61 3.72 3.63 3.81 Portfolio turnover 8 12 20 13 17 Net assets at end of period (000 Omitted) $15,822 $17,064 $19,730 $21,907 $14,005 ------------------------------------------------------------------------------------------------------------------------------ Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.02 per share to net investment income, a decrease of $0.02 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.22% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.85 $11.99 $12.30 $12.24 $11.68 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.51(z) $0.51 $0.53 $0.53 $0.54 Net realized and unrealized gain (loss) on investments 0.03(z) (0.09) (0.27) 0.07 0.58 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.54 $0.42 $0.26 $0.60 $1.12 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.50) $(0.51) $(0.53) $(0.53) $(0.56) From net realized gain on investments (0.03) (0.05) (0.04) (0.01) -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.53) $(0.56) $(0.57) $(0.54) $(0.56) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.86 $11.85 $11.99 $12.30 $12.24 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.60 3.49 2.15 5.01 9.71 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.36 1.32 1.10 1.12 1.11 Expenses after expense reductions (f) 1.11 1.08 0.85 0.92 0.91 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.86 0.89 0.85 0.92 0.91 Net investment income 4.34(z) 4.24 4.38 4.30 4.50 Portfolio turnover 12 8 9 9 20 Net assets at end of period (000 Omitted) $268,108 $270,124 $279,875 $305,185 $316,687 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.83 $11.98 $12.29 $12.23 $11.67 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.44(z) $0.43 $0.45 $0.45 $0.47 Net realized and unrealized gain (loss) on investments 0.02(z) (0.10) (0.27) 0.07 0.57 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.46 $0.33 $0.18 $0.52 $1.04 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.42) $(0.43) $(0.45) $(0.45) $(0.48) From net realized gain on investments (0.03) (0.05) (0.04) (0.01) -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.45) $(0.48) $(0.49) $(0.46) $(0.48) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.84 $11.83 $11.98 $12.29 $12.23 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 3.93 2.73 1.49 4.33 9.01 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 2.01 1.98 1.75 1.76 1.76 Expenses after expense reductions (f) 1.76 1.73 1.50 1.56 1.56 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.51 1.54 1.50 1.56 1.56 Net investment income 3.70(z) 3.59 3.72 3.64 3.85 Portfolio turnover 12 8 9 9 20 Net assets at end of period (000 Omitted) $26,520 $32,610 $40,251 $50,363 $59,116 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS C 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.84 $11.98 $12.29 $12.23 $11.67 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.44(z) $0.43 $0.45 $0.45 $0.46 Net realized and unrealized gain (loss) on investments 0.02(z) (0.09) (0.27) 0.07 0.58 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.46 $0.34 $0.18 $0.52 $1.04 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.42) $(0.43) $(0.45) $(0.45) $(0.48) From net realized gain on investments (0.03) (0.05) (0.04) (0.01) -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.45) $(0.48) $(0.49) $(0.46) $(0.48) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.85 $11.84 $11.98 $12.29 $12.23 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 3.93 2.82 1.49 4.33 9.01 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 2.01 1.98 1.76 1.77 1.76 Expenses after expense reductions (f) 1.76 1.73 1.51 1.57 1.56 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.51 1.54 1.51 1.57 1.56 Net investment income 3.69(z) 3.61 3.76 3.67 3.84 Portfolio turnover 12 8 9 9 20 Net assets at end of period (000 Omitted) $33,152 $32,223 $32,897 $35,256 $31,836 ------------------------------------------------------------------------------------------------------------------------------ Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.02 per share to net investment income, a decrease of $0.02 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.16% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.15 $10.17 $10.31 $10.21 $9.73 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.45(z) $0.43 $0.44 $0.42 $0.45 Net realized and unrealized gain (loss) on investments 0.06(z) (0.02) (0.14) 0.10 0.51 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.51 $0.41 $0.30 $0.52 $0.96 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.42) $(0.43) $(0.44) $(0.42) $(0.48) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $10.24 $10.15 $10.17 $10.31 $10.21 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 5.17 4.08 2.97 5.12 10.12 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.18 1.13 1.03 1.05 1.03 Expenses after expense reductions (f) 0.82 0.77 0.69 0.75 0.55 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.60 0.60 0.60 0.64 0.48 Net investment income 4.45(z) 4.24 4.33 4.12 4.47 Portfolio turnover 9 9 20 24 19 Net assets at end of period (000 Omitted) $73,813 $72,429 $67,942 $75,083 $68,705 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.18 $10.20 $10.34 $10.24 $9.75 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.38(z) $0.36 $0.36 $0.34 $0.36 Net realized and unrealized gain (loss) on investments 0.06(z) (0.03) (0.14) 0.10 0.53 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.44 $0.33 $0.22 $0.44 $0.89 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.35) $(0.35) $(0.36) $(0.34) $(0.40) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $10.27 $10.18 $10.20 $10.34 $10.24 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.37 3.30 2.19 4.38 9.21 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.94 1.89 1.80 1.85 1.85 Expenses after expense reductions (f) 1.58 1.53 1.46 1.55 1.37 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.36 1.36 1.37 1.44 1.30 Net investment income 3.69(z) 3.49 3.56 3.32 3.62 Portfolio turnover 9 9 20 24 19 Net assets at end of period (000 Omitted) $33,849 $38,642 $41,455 $48,480 $46,941 ------------------------------------------------------------------------------------------------------------------------------ Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.02 per share to net investment income, a decrease of $0.02 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.15% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $12.25 $12.36 $12.61 $12.53 $12.00 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.55(z) $0.54 $0.56 $0.55 $0.58 Net realized and unrealized gain (loss) on investments 0.00(w)(z) (0.11) (0.25) 0.10 0.54 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.55 $0.43 $0.31 $0.65 $1.12 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.51) $(0.54) $(0.56) $(0.57) $(0.59) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $12.29 $12.25 $12.36 $12.61 $12.53 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.57 3.48 2.52 5.30 9.51 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.37 1.34 1.23 1.21 1.23 Expenses after expense reductions (f) 1.12 1.09 0.98 1.01 1.03 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.89 0.92 0.89 0.94 0.95 Net investment income 4.45(z) 4.35 4.50 4.39 4.68 Portfolio turnover 10 13 15 16 21 Net assets at end of period (000 Omitted) $135,766 $131,167 $130,342 $137,911 $129,844 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $12.24 $12.36 $12.60 $12.52 $11.99 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.47(z) $0.46 $0.48 $0.47 $0.50 Net realized and unrealized gain (loss) on investments 0.01(z) (0.12) (0.24) 0.10 0.54 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.48 $0.34 $0.24 $0.57 $1.04 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.43) $(0.46) $(0.48) $(0.49) $(0.51) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $12.29 $12.24 $12.36 $12.60 $12.52 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 3.98 2.73 1.94 4.62 8.81 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 2.02 1.99 1.88 1.86 1.88 Expenses after expense reductions (f) 1.77 1.74 1.63 1.66 1.68 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.54 1.57 1.54 1.59 1.60 Net investment income 3.80(z) 3.70 3.85 3.74 4.03 Portfolio turnover 10 13 15 16 21 Net assets at end of period (000 Omitted) $20,679 $26,214 $31,032 $36,817 $37,603 ------------------------------------------------------------------------------------------------------------------------------ Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (w) Per share amount was less than $0.01. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.04 per share to net investment income, a decrease of $0.04 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.29% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) TENNESSEE MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.56 $10.71 $10.96 $10.90 $10.43 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.47(z) $0.45 $0.45 $0.45 $0.47 Net realized and unrealized gain (loss) on investments (0.01)(z) (0.12) (0.18) 0.06 0.49 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.46 $0.33 $0.27 $0.51 $0.96 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.44) $(0.44) $(0.44) $(0.45) $(0.49) From net realized gain on investments (0.00)(w) (0.04) (0.08) -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.44) $(0.48) $(0.52) $(0.45) $(0.49) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $10.58 $10.56 $10.71 $10.96 $10.90 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.43 3.13 2.53 4.80 9.34 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.17 1.19 1.16 1.14 1.17 Expenses after expense reductions (f) 0.92 0.94 0.91 0.94 0.97 Net investment income 4.44(z) 4.17 4.16 4.08 4.35 Portfolio turnover 15 5 11 19 16 Net assets at end of period (000 Omitted) $99,302 $98,825 $104,837 $118,990 $115,819 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) TENNESSEE MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $10.56 $10.70 $10.95 $10.89 $10.42 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.40(z) $0.38 $0.38 $0.38 $0.40 Net realized and unrealized gain (loss) on investments (0.02)(z) (0.11) (0.18) 0.06 0.49 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.38 $0.27 $0.20 $0.44 $0.89 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.37) $(0.37) $(0.37) $(0.38) $(0.42) From net realized gain on investments (0.00)(w) (0.04) (0.08) -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.37) $(0.41) $(0.45) $(0.38) $(0.42) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $10.57 $10.56 $10.70 $10.95 $10.89 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 3.66 2.56 1.87 4.12 8.64 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.82 1.84 1.81 1.79 1.82 Expenses after expense reductions (f) 1.57 1.59 1.56 1.59 1.62 Net investment income 3.78(z) 3.52 3.51 3.43 3.70 Portfolio turnover 15 5 11 19 16 Net assets at end of period (000 Omitted) $12,924 $17,217 $20,689 $24,306 $27,546 ------------------------------------------------------------------------------------------------------------------------------ (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (w) Per share amount was less than $0.01. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.03 per share to net investment income, a decrease of $0.03 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.27% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) VIRGINIA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.41 $11.52 $11.73 $11.61 $11.14 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.51(z) $0.51 $0.53 $0.53 $0.53 Net realized and unrealized gain (loss) on investments (0.00)(w)(z) (0.12) (0.21) 0.12 0.47 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.51 $0.39 $0.32 $0.65 $1.00 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.49) $(0.50) $(0.53) $(0.53) $(0.53) From net realized gain on investments (0.00)(w) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.49) $(0.50) $(0.53) $(0.53) $(0.53) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.43 $11.41 $11.52 $11.73 $11.61 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.57 3.45 2.83 5.70 9.10 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.32 1.30 1.10 1.13 1.13 Expenses after expense reductions (f) 1.07 1.05 0.85 0.93 0.93 Expenses after expense reduction and excluding interest expense and fees (f)(l) 0.87 0.90 0.85 0.93 0.93 Net investment income 4.51(z) 4.38 4.63 4.53 4.62 Portfolio turnover 8 13 11 11 13 Net assets at end of period (000 Omitted) $269,068 $277,633 $285,185 $301,218 $308,164 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) VIRGINIA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.40 $11.51 $11.72 $11.60 $11.13 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.44(z) $0.43 $0.46 $0.45 $0.46 Net realized and unrealized gain (loss) on investments (0.00)(w)(z) (0.11) (0.21) 0.12 0.46 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.44 $0.32 $0.25 $0.57 $0.92 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.42) $(0.43) $(0.46) $(0.45) $(0.45) From net realized gain on investments (0.00)(w) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.42) $(0.43) $(0.46) $(0.45) $(0.45) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.42 $11.40 $11.51 $11.72 $11.60 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 3.89 2.78 2.16 5.02 8.40 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.97 1.95 1.75 1.77 1.78 Expenses after expense reductions (f) 1.72 1.70 1.50 1.57 1.58 Expenses after expense reduction and excluding interest expense and fees (f)(l) 1.52 1.55 1.50 1.57 1.58 Net investment income 3.87(z) 3.73 3.98 3.88 3.97 Portfolio turnover 8 13 11 11 13 Net assets at end of period (000 Omitted) $12,545 $16,885 $19,637 $23,564 $25,470 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) VIRGINIA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS C 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.41 $11.52 $11.72 $11.61 $11.13 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.44(z) $0.43 $0.46 $0.45 $0.45 Net realized and unrealized gain (loss) on investments (0.00)(w)(z) (0.11) (0.20) 0.11 0.48 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.44 $0.32 $0.26 $0.56 $0.93 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.42) $(0.43) $(0.46) $(0.45) $(0.45) From net realized gain on investments (0.00)(w) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.42) $(0.43) $(0.46) $(0.45) $(0.45) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.43 $11.41 $11.52 $11.72 $11.61 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 3.89 2.78 2.25 4.93 8.49 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.97 1.95 1.75 1.77 1.78 Expenses after expense reductions (f) 1.72 1.70 1.50 1.57 1.58 Expenses after expense reduction and excluding interest expense and fees (f)(l) 1.52 1.55 1.50 1.57 1.58 Net investment income 3.86(z) 3.72 3.98 3.88 3.97 Portfolio turnover 8 13 11 11 13 Net assets at end of period (000 Omitted) $12,377 $12,995 $12,208 $13,338 $12,758 ------------------------------------------------------------------------------------------------------------------------------ Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (w) Per share amount was less than $0.01. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.02 per share to net investment income, a decrease of $0.02 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.17% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
YEARS ENDED 3/31 ---------------------------------------------------------------- CLASS A 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.47 $11.58 $11.82 $11.77 $11.32 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.51(z) $0.48 $0.51 $0.51 $0.55 Net realized and unrealized gain (loss) on investments 0.01(z) (0.11) (0.25) 0.05 0.46 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.52 $0.37 $0.26 $0.56 $1.01 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.47) $(0.48) $(0.50) $(0.51) $(0.56) From net realized gain on investments (0.07) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.54) $(0.48) $(0.50) $(0.51) $(0.56) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.45 $11.47 $11.58 $11.82 $11.77 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.59 3.21 2.28 4.84 9.04 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.40 1.34 1.25 1.21 1.26 Expenses after expense reductions (f) 1.15 1.09 1.00 1.01 1.06 Expenses after expense reduction and excluding interest expense and fees (f)(l) 0.89 0.92 0.89 0.93 0.96 Net investment income 4.41(z) 4.16 4.35 4.33 4.71 Portfolio turnover 13 7 14 17 13 Net assets at end of period (000 Omitted) $129,974 $134,416 $134,459 $140,599 $139,564 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND - CONTINUED
YEARS ENDED 3/31 --------------------------------------------------------------- CLASS B 2007 2006 2005 2004 2003 Net asset value, beginning of period $11.46 $11.58 $11.82 $11.76 $11.31 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.43(z) $0.41 $0.43 $0.43 $0.47 Net realized and unrealized gain (loss) on investments 0.01(z) (0.13) (0.24) 0.06 0.46 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.44 $0.28 $0.19 $0.49 $0.93 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.39) $(0.40) $(0.43) $(0.43) $(0.48) From net realized gain on investments (0.07) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions declared to shareholders $(0.46) $(0.40) $(0.43) $(0.43) $(0.48) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.44 $11.46 $11.58 $11.82 $11.76 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 3.92 2.45 1.62 4.25 8.34 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 2.06 1.99 1.90 1.86 1.91 Expenses after expense reductions (f) 1.80 1.74 1.65 1.66 1.71 Expenses after expense reduction and excluding interest expense and fees (f)(l) 1.55 1.57 1.54 1.58 1.61 Net investment income 3.76(z) 3.51 3.71 3.68 4.06 Portfolio turnover 13 7 14 17 13 Net assets at end of period (000 Omitted) $10,087 $12,388 $14,334 $17,744 $19,443 ------------------------------------------------------------------------------------------------------------------------------ Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.03 per share to net investment income, a decrease of $0.03 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.25% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (1) BUSINESS AND ORGANIZATION MFS Mississippi Municipal Bond Fund (Mississippi Fund), MFS New York Municipal Bond Fund (New York Fund), MFS North Carolina Municipal Bond Fund (North Carolina Fund), MFS Pennsylvania Municipal Bond Fund (Pennsylvania Fund), MFS South Carolina Municipal Bond Fund (South Carolina Fund), MFS Tennessee Municipal Bond Fund (Tennessee Fund), MFS Virginia Municipal Bond Fund (Virginia Fund), and MFS West Virginia Municipal Bond Fund (West Virginia Fund) are each a series of MFS Municipal Series Trust which 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 U.S. 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. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the taxation supporting the projects or assets or the inability to collect revenues for the project or from the assets. If the Internal Revenue Service determines an issuer of a municipal security has not complied with applicable tax requirements, the security could decline in value, interest from the security could become taxable and each fund may be required to issue Forms 1099-DIV. INVESTMENT VALUATIONS - Debt instruments (other than short-term instruments), including restricted debt instruments, are generally valued at an evaluated or composite bid as reported by an independent pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Swaps are generally valued at an evaluated bid as reported by an independent pricing service. Securities and other assets generally valued on the basis of information from an independent pricing service may also be valued at a broker-dealer bid quotation. Values obtained from pricing services can utilize both dealer-supplied valuations and electronic data processing techniques, which take into account 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. The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of each fund's investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under each fund's valuation policies and procedures, market quotations are not considered to be readily available for many types of debt instruments and certain types of derivatives. These investments are generally valued at fair value based on information from independent pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment's value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of each fund's net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of each fund's net asset value may be deemed to have a material affect on the value of securities traded in foreign markets. Accordingly, each fund's foreign equity securities may often be valued at fair value. The adviser may rely on independent pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating each fund's net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of investments used to determine each fund's net asset value may differ from quoted or published prices for the same investments. In September 2006, FASB Statement No. 157, Fair Value Measurements (the "Statement") was issued, and is effective for fiscal years beginning after November 15, 2007 and for all interim periods within those fiscal years. This Statement provides a single definition of fair value, a hierarchy for measuring fair value and expanded disclosures about fair value measurements. Management is evaluating the application of the Statement to each fund, and believes the impact will be limited to expanded disclosures resulting from the adoption of this Statement in each fund's financial statements. DERIVATIVE RISK - Each fund may invest in derivatives for hedging or non- hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the funds use derivatives as an investment to gain market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative's original cost. Derivative instruments include swap agreements. SWAP AGREEMENTS - Each fund may enter into swap agreements. A swap is an exchange of cash payments between each fund and another party. Net cash payments are exchanged at specified intervals and are recorded as a realized gain or loss in the Statement of Operations. The value of the swap is adjusted daily and the change in value, including accruals of periodic amounts of interest to be paid or received, is recorded as unrealized appreciation or depreciation in the Statement of Operations. A liquidation payment received or made upon early termination is recorded as a realized gain or loss in the Statement of Operations. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with each fund's custodian in connection with these agreements. Risk of loss may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include the possible lack of a liquid market, failure of the counterparty to perform under the terms of the agreements, and unfavorable market movement of the underlying instrument. All swap agreements entered into by each fund with the same counterparty are generally governed by a single master agreement, which provides for the netting of all amounts owed by the parties under the agreement upon the occurrence of an event of default, thereby reducing the credit risk to which such party is exposed. Each fund holds interest rate swap agreements which involve the periodic exchange of cash flows, such as the exchange of fixed rate interest payments for floating rate interest payments based on a notional principal amount. The interest rates may be based on a specific financial index or the exchange of two distinct floating rate payments. Each fund may enter into an interest rate swap in order to manage its exposure to interest rate fluctuations. INVERSE FLOATERS - The funds invest in municipal inverse floating rate securities which are structured by the issuer (known as primary market inverse floating rate securities) or by an investment banker utilizing municipal bonds which have already been issued (known as secondary market inverse floating rate securities) to have variable rates of interest which typically move in the opposite direction of short term interest rates. A secondary market inverse floating rate security is created when an investment banker transfers a fixed rate municipal bond to a special purpose trust, and causes the trust to (a) issue floating rate certificates to third parties, in an amount equal to a fraction of the par amount of the deposited bonds (these certificates usually pay tax-exempt interest at short-term interest rates that typically reset weekly; and the certificate holders typically, on seven days notice, have the option to tender their certificates to the investment banker or another party for redemption at par plus accrued interest), and (b) issue inverse floating rate certificates (sometimes referred to as "inverse floaters"). If the holder of the inverse floater transfers the municipal bonds to an investment banker for the purpose of depositing the municipal bonds into the special purpose trust, the inverse floating rate certificates that are issued by the trust are referred to as "self-deposited inverse floaters." If the bonds held by the trust are purchased by the investment banker for deposit into the trust from someone other than the purchasers of the inverse floaters, the inverse floating rate certificates that are issued by the trust are referred to as "externally deposited inverse floaters." Such self-deposited inverse floaters held by the funds are accounted for as secured borrowings, with the municipal bonds reflected in the investments of the funds and amounts owed to the holder of the floating rate certificate under the provisions of the trust, which amounts are paid solely from the assets of the trust, reflected as liabilities of the funds in the Statements of Assets and Liabilities under the caption, "Payable to the holder of the floating rate certificate from trust assets". Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets in connection with self-deposited inverse floater transactions. Interest expense and fees are recorded as incurred. At March 31, 2007, the value of bonds transferred to the trust, each fund's payable to the holder of the floating rate certificate from trust assets, the weighted average interest rate on the floating rate certificates issued by the trust, and the interest expense and fees in connection with self-deposited inverse floaters were as follows:
WEIGHTED AVERAGE PAYABLE TO THE HOLDER INTEREST RATE ON INTEREST EXPENSE AND VALUE OF BONDS OF THE FLOATING RATE FLOATING RATE FEES IN CONNECTION TRANSFERRED TO CERTIFICATE FROM CERTIFICATES ISSUED WITH SELF-DEPOSITED FUND THE TRUST TRUST ASSETS BY THE TRUST INVERSE FLOATERS Mississippi Fund $11,789,203 $5,360,000 3.83% $204,304 New York Fund $22,738,359 $10,350,000 4.18% $399,460 North Carolina Fund $48,561,215 $21,425,000 4.01% $821,947 Pennsylvania Fund $13,596,683 $6,170,000 3.85% $236,409 South Carolina Fund $20,061,332 $9,275,000 4.22% $352,183 Tennessee Fund $-- $-- -- $-- Virginia Fund $33,406,691 $15,670,000 4.00% $598,180 West Virginia Fund $21,208,052 $9,670,000 4.19% $371,506
Primary and externally deposited inverse floaters held by each fund are not accounted for as secured borrowings. INDEMNIFICATIONS - Under each fund's organizational documents, its officers and trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to each fund. Additionally, in the normal course of business, each fund enters into agreements with service providers that may contain indemnification clauses. Each fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against each fund that have not yet occurred. INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. All premium and original issue discount is amortized or accreted for tax reporting purposes as required by federal income tax regulations. Each fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations. 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. As a result of a change in the estimate for the amortization of premium and accretion of discount on certain debt securities, interest has been increased, with a corresponding reduction to net unrealized appreciation (depreciation) as follows:
NORTH SOUTH WEST MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA CAROLINA TENNESSEE VIRGINIA VIRGINIA YEAR ENDED 3/31/07 FUND FUND FUND FUND FUND FUND FUND FUND Interest income 57,503 359,703 541,901 163,194 450,953 308,306 497,713 351,885 Net unrealized appreciation (depreciation) (57,503) (359,703) (541,901) (163,194) (450,953) (308,306) (497,713) (351,885)
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 each fund. This amount, for the year ended March 31, 2007, is shown as a reduction of total expenses on the Statements of Operations. TAX MATTERS AND DISTRIBUTIONS - Each fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable and tax-exempt income, including realized capital gains. Accordingly, no provision for federal income tax is required in the financial statements. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes. Book/tax differences primarily relate to amortization and accretion of debt securities and secured borrowings. The tax character of distributions declared to shareholders is as follows:
NORTH SOUTH WEST MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA CAROLINA TENNESSEE VIRGINIA VIRGINIA YEAR ENDED 3/31/07 FUND FUND FUND FUND FUND FUND FUND FUND Ordinary income (including any short-term capital gains) $-- $104,521 $346,482 $-- $-- $-- $-- $-- Tax-exempt income 3,631,591 6,685,340 13,384,867 4,238,983 6,317,237 4,576,148 12,629,190 5,754,974 Long-term capital gain -- 649,124 468,510 -- -- 50,469 76,004 885,826 ---------------------------------------------------------------------------------------------------------------------------------- Total distributions $3,631,591 $7,438,985 $14,199,859 $4,238,983 $6,317,237 $4,626,617 $12,705,194 $6,640,800 YEAR ENDED 3/31/06 Ordinary income (including any short-term capital gains) $-- $-- $398,095 $-- $-- $178,774 $-- $-- Tax-exempt income 3,825,714 7,075,051 14,172,501 4,383,989 6,716,613 4,915,444 13,450,458 6,029,196 Long-term capital gain -- 800,147 930,835 -- -- 272,746 -- -- ---------------------------------------------------------------------------------------------------------------------------------- Total distributions $3,825,714 $7,875,198 $15,501,431 $4,383,989 $6,716,613 $5,366,964 $13,450,458 $6,029,196 The federal tax cost and the tax basis components of distributable earnings were as follows: NORTH MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA AS OF 3/31/07 FUND FUND FUND FUND Cost of investments $80,380,249 $147,064,459 $305,653,096 $100,587,067 --------------------------------------------------------------------------------------------------------------- Gross appreciation 3,650,988 10,245,221 18,476,883 4,615,856 Gross depreciation (68,288) (4,902) (180,702) (60,617) --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) $3,582,700 $10,240,319 $18,296,181 $4,555,239 Undistributed ordinary income $-- $187,567 $-- $-- Undistributed tax-exempt income 327,310 335,398 661,555 282,638 Undistributed long-term capital gain -- 40,347 380,172 27,487 Capital loss carryforwards (226,449) -- -- -- Post-October capital loss deferral -- -- -- -- Other temporary differences (293,833) (535,287) (1,034,654) (309,282) SOUTH WEST CAROLINA TENNESSEE VIRGINIA VIRGINIA AS OF 3/31/07 FUND FUND FUND FUND Cost of investments $145,484,884 $104,345,745 $276,721,154 $134,095,112 --------------------------------------------------------------------------------------------------------------- Gross appreciation 8,816,561 5,274,076 13,623,858 6,193,497 Gross depreciation (86,466) (117,961) (76,564) (73,043) --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) $8,730,095 $5,156,115 $13,547,294 $6,120,454 Undistributed ordinary income $-- $244,063 $299,075 $39,337 Undistributed tax-exempt income 663,073 389,769 436,285 499,730 Undistributed long-term capital gain -- 85,332 242,917 65,284 Capital loss carryforwards (395,472) -- -- -- Post-October capital loss deferral -- -- -- (2,702) Other temporary differences (521,547) (383,052) (1,053,991) (448,613) As of March 31, 2007, certain funds had capital loss carryforwards available to offset future realized gains. Such losses expire as follows: MISSISSIPPI SOUTH CAROLINA EXPIRATION DATE FUND FUND 3/31/09 $-- $(395,472) 3/31/13 (196,772) -- 3/31/14 (29,677) -- ----------------------------------------------------------------- Total $(226,449) $(395,472) In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the "Interpretation") was issued, and is effective for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. On December 22, 2006, the SEC delayed the implementation of the Interpretation for regulated investment companies for an additional six months. This Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return, and requires certain expanded disclosures. Management has evaluated the application of the Interpretation to each fund, and has determined that there is no impact resulting from the adoption of this Interpretation on each fund's financial statements. MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - Each fund offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of each 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 - Each fund has an investment advisory agreement with Massachusetts Financial Services Company (MFS) to provide overall investment management and related administrative services and facilities to each fund. The management fee is computed daily and paid monthly at an annual rate of 0.55% of each of the fund's average daily net assets. As part of a settlement agreement with the New York Attorney General concerning market timing and related matters, MFS has agreed to reduce the management fee to 0.30% of each fund's average daily net assets for the period March 1, 2004 through February 28, 2009. For the year ended March 31, 2007, this waiver amounted to the following for each fund and is reflected as a reduction of total expenses in the Statement of Operations. MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND $212,257 $406,362 $824,485 $270,859 $389,761 $284,006 $748,566 $359,100 For the Pennsylvania Fund, the investment adviser has agreed in writing to pay a portion of the funds operating expenses exclusive of management, distribution and service, and certain other fees and expenses, such that operating expenses do not exceed 0.20% annually of the fund's average daily net assets. This written agreement will continue through July 31, 2007, unless changed or rescinded by the Board of Trustees. For the year ended March 31, 2007 this reduction amounted to $119,883 and is reflected as a reduction of total expenses in the Statement of Operations. DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of MFS, as distributor, received the following amounts for the year ended March 31, 2007, as its portion of the initial sales charge on sales of Class A shares of each fund. MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND $32,832 $16,940 $53,525 $32,091 $29,874 $13,099 $39,624 $37,374 The Board of Trustees has adopted a distribution plan for certain class shares pursuant to Rule 12b-1 of the Investment Company Act of 1940. Each fund's distribution plan provides that each fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries. Distribution Fee Plan Table: CLASS A ------------------------------------------------------------------------------------ TOTAL ANNUAL DISTRIBUTION DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE FEE RATE FEE RATE PLAN(d) RATE(e) FEE Mississippi Fund 0.10% 0.25% 0.35% -- $-- New York Fund 0.10% 0.25% 0.35% 0.25% 297,143 North Carolina Fund 0.10% 0.25% 0.35% 0.35% 936,079 Pennsylvania Fund 0.10% 0.25% 0.35% 0.10% 71,884 South Carolina Fund 0.10% 0.25% 0.35% 0.35% 463,522 Tennessee Fund 0.10% 0.25% 0.35% 0.35% 344,823 Virginia Fund 0.10% 0.25% 0.35% 0.35% 951,716 West Virginia Fund 0.10% 0.25% 0.35% 0.35% 462,909 CLASS B ------------------------------------------------------------------------------------ TOTAL ANNUAL DISTRIBUTION DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE FEE RATE FEE RATE PLAN(d) RATE(e) FEE Mississippi Fund 0.75% 0.25% 1.00% 0.76% $76,335 New York Fund 0.75% 0.25% 1.00% 1.00% 277,832 North Carolina Fund 0.75% 0.25% 1.00% 1.00% 299,029 Pennsylvania Fund 0.75% 0.25% 1.00% 0.86% 313,802 South Carolina Fund 0.75% 0.25% 1.00% 1.00% 234,695 Tennessee Fund 0.75% 0.25% 1.00% 1.00% 150,815 Virginia Fund 0.75% 0.25% 1.00% 1.00% 145,797 West Virginia Fund 0.75% 0.25% 1.00% 1.00% 113,805 CLASS C ------------------------------------------------------------------------------------ TOTAL ANNUAL DISTRIBUTION DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE FEE RATE FEE RATE PLAN(d) RATE(e) FEE New York Fund 0.75% 0.25% 1.00% 1.00% $159,043 North Carolina Fund 0.75% 0.25% 1.00% 1.00% 324,399 Virginia Fund 0.75% 0.25% 1.00% 1.00% 129,279 NORTH SOUTH WEST MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA CAROLINA TENNESSEE VIRGINIA VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND Total Distribution and Service Fees $76,335 $734,018 $1,559,507 $385,686 $698,217 $495,638 $1,226,792 $576,714 (d) In accordance with the distribution plan for certain classes, each fund pays distribution and/or service fees up to these annual percentage rates of each class' average daily net assets. (e) The annual effective rates represent actual fees incurred under the distribution plan for the year ended March 31, 2007 based on each class' average daily net assets. Payment of the Mississippi Fund's 0.25% annual Class A service fee and 0.10% annual Class A distribution fee is not yet in effect and will be implemented on such date as the fund's Board of Trustees may determine. For one year from the date of sale of Class B shares of the Mississippi Fund, assets attributable to such Class B shares are subject to the 0.25% annual Class B service fee. On assets attributable to all other Class B shares of the Mississippi Fund, the service fee is not currently in effect, but may be implemented on such date as the fund's Board of Trustees may determine. Payment of the New York Fund's 0.10% annual Class A distribution fee is not yet in effect and will be implemented on such date as the fund's Board of Trustees may determine. Payment of the Pennsylvania Fund's 0.10% annual Class A distribution fee is not yet in effect and will be implemented on such date as the fund's Board of Trustees may determine. 0.10% of the Class A service fee is currently being paid by the Pennsylvania Fund. Payment of the remaining 0.15% of the Pennsylvania Fund's Class A service fee is not yet in effect and will be implemented on such date as the fund's Board of Trustees may determine. For one year from the date of sale of Class B shares of the Pennsylvania Fund, assets attributable to such Class B shares are subject to the 0.25% annual Class B service fee. On assets attributable to all other Class B shares of the Pennsylvania Fund, 0.10% of the Class B service fee is currently in effect and the remaining portion of the Class B service fee is not in effect but may be implemented on such date as the fund's Board of Trustees may determine. Certain Class A and Class C shares are subject to a contingent deferred sales charge in the event of a shareholder redemption within 12 months of purchase. Class B shares are subject to a contingent deferred sales charge in the event of a shareholder redemption within six years of purchase. All contingent deferred sales charges are paid to MFD and during the year ended March 31, 2007, were as follows: NORTH SOUTH WEST MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA CAROLINA TENNESSEE VIRGINIA VIRGINIA CDSC IMPOSED FUND FUND FUND FUND FUND FUND FUND FUND Class A $-- $975 $-- $-- $961 $-- $-- $-- Class B 14,850 48,374 35,676 77,802 33,719 16,725 39,247 20,258 Class C N/A 124 1,564 N/A N/A N/A 628 N/A SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from each fund for its services as shareholder servicing agent calculated as a percentage of the average daily net assets of each fund as determined periodically under the supervision of each fund's Board of Trustees. For the year ended March 31, 2007, each fund paid MFSC the following fee, which equated to the following annual percentage of each fund's average daily net assets for shareholder services. NORTH SOUTH WEST MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA CAROLINA TENNESSEE VIRGINIA VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND Expenses paid $70,801 $135,726 $275,172 $90,486 $129,923 $94,905 $250,086 $120,114 Percentage of average daily net assets 0.0834% 0.0835% 0.0834% 0.0835% 0.0833% 0.0836% 0.0835% 0.0836% MFSC also receives payment from each fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. For the year ended March 31, 2007, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to the following. Each fund may also pay shareholder servicing related costs directly to non-related parties. MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND $24,646 $47,358 $35,742 $32,436 $36,771 $25,038 $65,011 $30,934 ADMINISTRATOR - MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to each fund. Under an administrative services agreement, each fund partially reimburses MFS the costs incurred to provide these services. Each fund is charged a fixed amount plus a fee based on calendar year average net assets. Each fund's annual fixed amount is $17,500. The administrative services fee incurred for the year ended March 31, 2007 was equivalent to the following annual effective rates of each fund's average daily net assets: NORTH SOUTH WEST MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA CAROLINA TENNESSEE VIRGINIA VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND Percentage of average daily net assets 0.0280% 0.0232% 0.0206% 0.0259% 0.0235% 0.0255% 0.0208% 0.0239% TRUSTEES' AND OFFICERS' COMPENSATION - Each fund pays compensation to independent trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The funds do not pay compensation directly to trustees or officers of each fund who are also officers of the investment adviser, all of whom receive remuneration for their services to each fund from MFS. Certain officers and trustees of the fund are officers or directors of MFS, MFD, and MFSC. Each fund has an unfunded, defined benefit plan for certain retired independent trustees which resulted in the following pension expense for the funds. These amounts are included in independent trustees' compensation for the year ended March 31, 2007. MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND $689 $802 $1,618 $700 $1,590 $745 $1,611 $1,586 The liability for deferred retirement benefits payable to certain retired independent trustees amounted to the following for each fund at March 31, 2007, and is included in the payable for independent trustees' compensation. MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND $8,962 $11,422 $14,003 $8,858 $13,963 $11,418 $14,026 $13,958 OTHER - These funds and certain other MFS funds (the funds) have entered into a services agreement (the Agreement) which provides for payment of fees by the funds to Tarantino LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the Agreement with Tarantino LLC at any time under the terms of the Agreement. For the year ended March 31, 2007, the fee paid to Tarantino LLC amounted to the following: MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND $558 $1,062 $2,167 $705 $1,021 $746 $1,945 $938 MFS has agreed to reimburse each fund for a portion of the payments made by the funds to Tarantino LLC in the following amounts, which are shown as a reduction of total expenses in the Statements of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO. MISSISSIPPI NEW YORK NORTH CAROLINA PENNSYLVANIA SOUTH CAROLINA TENNESSEE VIRGINIA WEST VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND $442 $846 $1,718 $565 $811 $592 $1,560 $748 (4) PORTFOLIO SECURITIES Purchases and sales of investments, other than U.S. government securities, purchased option transactions, and short-term obligations were as follows: NORTH SOUTH WEST MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA CAROLINA TENNESSEE VIRGINIA VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND Purchases $10,678,074 $13,000,645 $41,729,973 $9,606,837 $16,758,151 $17,097,360 $24,364,377 $19,021,606 ---------------------------------------------------------------------------------------------------------------------------------- Sales $12,574,349 $20,324,505 $54,144,584 $15,364,206 $20,476,120 $22,503,761 $39,916,709 $27,358,487 ---------------------------------------------------------------------------------------------------------------------------------- (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 each fund's shares were as follows: MISSISSIPPI FUND NEW YORK FUND ---------------------------------------------------- ----------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/07 3/31/06 3/31/07 3/31/06 ------------------------- ------------------------- ------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT Shares sold Class A 663,986 $6,491,928 866,381 $8,546,452 1,133,622 $12,597,179 653,127 $7,390,698 Class B 46,864 458,803 24,252 239,436 86,951 964,688 138,910 1,569,384 Class C -- -- -- -- 126,256 1,407,588 134,687 1,526,215 ----------------------------------------------------------------------------------------------------------------------------------- 710,850 $6,950,731 890,633 $8,785,888 1,346,829 $14,969,455 926,724 $10,486,297 Shares issued to shareholders in reinvestment of distributions Class A 193,423 $1,891,276 185,126 $1,824,861 307,695 $3,437,943 324,484 $3,670,111 Class B 19,122 187,141 21,153 208,716 64,570 718,927 74,060 834,700 Class C -- -- -- -- 35,669 397,818 39,815 449,550 ----------------------------------------------------------------------------------------------------------------------------------- 212,545 $2,078,417 206,279 $2,033,577 407,934 $4,554,688 438,359 $4,954,361 Shares reacquired Class A (925,165) $(9,025,658) (1,380,138) $(13,645,231) (1,418,323) $(15,814,182) (1,469,796) $(16,663,402) Class B (181,260) (1,774,943) (144,591) (1,426,794) (551,167) (6,130,622) (640,793) (7,238,245) Class C -- -- -- -- (275,976) (3,068,367) (387,465) (4,383,903) ----------------------------------------------------------------------------------------------------------------------------------- (1,106,425) $(10,800,601) (1,524,729) $(15,072,025) (2,245,466) $(25,013,171) (2,498,054) $(28,285,550) Net change Class A (67,756) $(642,454) (328,631) $(3,273,918) 22,994 $220,940 (492,185) $(5,602,593) Class B (115,274) (1,128,999) (99,186) (978,642) (399,646) (4,447,007) (427,823) (4,834,161) Class C -- -- -- -- (114,051) (1,262,961) (212,963) (2,408,138) ----------------------------------------------------------------------------------------------------------------------------------- (183,030) $(1,771,453) (427,817) $(4,252,560) (490,703) $(5,489,028) (1,132,971) $(12,844,892) NORTH CAROLINA FUND PENNSYLVANIA FUND ------------------------------------------------------ ----------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/07 3/31/06 3/31/07 3/31/06 ------------------------- ------------------------- ------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT Shares sold Class A 1,898,273 $22,539,331 1,314,537 $15,818,825 1,220,775 $12,466,087 1,258,762 $12,897,989 Class B 73,925 876,814 132,671 1,590,635 123,402 1,261,103 275,025 2,820,655 Class C 388,647 4,606,363 271,600 3,270,481 -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- 2,360,845 $28,022,508 1,718,808 $20,679,941 1,344,177 $13,727,190 1,533,787 $15,718,644 Shares issued to shareholders in reinvestment of distributions Class A 656,787 $7,802,661 698,501 $8,393,304 181,751 $1,854,890 185,707 $1,901,237 Class B 53,048 629,177 69,832 838,029 76,588 783,496 87,173 894,888 Class C 76,393 906,938 79,561 954,980 -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- 786,228 $9,338,776 847,894 $10,186,313 258,339 $2,638,386 272,880 $2,796,125 Shares reacquired Class A (2,742,695) $(32,545,431) (2,554,557) $(30,727,514) (1,329,719) $(13,551,451) (990,703) $(10,143,698) Class B (643,462) (7,631,237) (807,609) (9,719,958) (700,221) (7,159,663) (631,297) (6,480,350) Class C (388,669) (4,608,143) (375,266) (4,513,810) -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- (3,774,826) $(44,784,811) (3,737,432) $(44,961,282) (2,029,940) $(20,711,114) (1,622,000) $(16,624,048) Net change Class A (187,635) $(2,203,439) (541,519) $(6,515,385) 72,807 $769,526 453,766 $4,655,528 Class B (516,489) (6,125,246) (605,106) (7,291,294) (500,231) (5,115,064) (269,099) (2,764,807) Class C 76,371 905,158 (24,105) (288,349) -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- (627,753) $(7,423,527) (1,170,730) $(14,095,028) (427,424) $(4,345,538) 184,667 $1,890,721 SOUTH CAROLINA FUND TENNESSEE FUND ------------------------------------------------------ ----------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/07 3/31/06 3/31/07 3/31/06 ------------------------- ------------------------- ------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT Shares sold Class A 1,237,791 $15,208,672 1,132,204 $14,046,582 1,107,252 $11,714,106 493,536 $5,305,262 Class B 61,731 755,885 85,307 1,056,145 21,584 228,692 79,543 857,100 ----------------------------------------------------------------------------------------------------------------------------------- 1,299,522 $15,964,557 1,217,511 $15,102,727 1,128,836 $11,942,798 573,079 $6,162,362 Shares issued to shareholders in reinvestment of distributions Class A 307,423 $3,777,261 307,593 $3,815,307 204,944 $2,169,008 210,399 $2,255,583 Class B 44,911 551,237 54,579 676,705 29,765 314,601 40,963 439,012 ----------------------------------------------------------------------------------------------------------------------------------- 352,334 $4,328,498 362,172 $4,492,012 234,709 $2,483,609 251,362 $2,694,595 Shares reacquired Class A (1,208,409) $(14,841,104) (1,274,850) $(15,823,297) (1,284,714) $(13,567,118) (1,135,271) (12,170,537) Class B (564,676) (6,922,293) (510,226) (6,331,745) (460,389) (4,866,746) (422,094) (4,536,883) ----------------------------------------------------------------------------------------------------------------------------------- (1,773,085) $(21,763,397) (1,785,076) $(22,155,042) (1,745,103) $(18,433,864) (1,557,365) (16,707,420) Net change Class A 366,805 $4,144,829 164,947 $2,038,592 27,482 $315,996 (431,336) $(4,609,692) Class B (458,034) (5,615,171) (370,340) (4,598,895) (409,040) (4,323,453) (301,588) (3,240,771) ----------------------------------------------------------------------------------------------------------------------------------- (121,229) $(1,470,342) (205,393) $(2,560,303) (381,558) $(4,007,457) (732,924) $(7,850,463) VIRGINIA FUND WEST VIRGINIA FUND ------------------------------------------------------ ----------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/07 3/31/06 3/31/07 3/31/06 ------------------------- ------------------------- ------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT Shares sold Class A 1,287,431 $14,716,384 1,481,053 $17,100,137 652,133 $7,488,745 767,854 $8,913,846 Class B 49,323 563,135 138,191 1,599,934 35,587 409,605 78,236 910,206 Class C 132,391 1,510,841 152,773 1,767,443 -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- 1,469,145 $16,790,360 1,772,017 $20,467,514 687,720 $7,898,350 846,090 $9,824,052 Shares issued to shareholders in reinvestment of distributions Class A 603,956 $6,905,165 610,984 $7,063,585 372,205 $4,278,867 325,732 $3,779,345 Class B 27,108 309,555 33,680 389,119 24,063 276,549 23,338 270,745 Class C 27,058 309,239 26,043 300,916 -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- 658,122 $7,523,959 670,707 $7,753,620 396,268 $4,555,416 349,070 $4,050,090 Shares reacquired Class A (2,681,174) $(30,616,172) (2,517,056) $(29,092,777) (1,390,871) $(15,981,170) (981,278) $(11,390,785) Class B (458,840) (5,235,603) (396,940) (4,587,647) (258,739) (2,971,281) (258,946) (3,004,395) Class C (215,473) (2,458,382) (99,697) (1,152,730) -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- (3,355,487) $(38,310,157) (3,013,693) $(34,833,154) (1,649,610) $(18,952,451) (1,240,224) (14,395,180) Net change Class A (789,787) $(8,994,623) (425,019) $(4,929,055) (366,533) $(4,213,558) 112,308 $1,302,406 Class B (382,409) (4,362,913) (225,069) (2,598,594) (199,089) (2,285,127) (157,372) (1,823,444) Class C (56,024) (638,302) 79,119 915,629 -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- (1,228,220) $(13,995,838) (570,969) $(6,612,020) (565,622) $(6,498,685) (45,064) $(521,038) (6) LINE OF CREDIT Each fund and other funds managed by MFS participate in a $1 billion unsecured committed line of credit provided by a syndication of banks under a credit agreement. In addition, these funds and other funds managed by MFS have established uncommitted borrowing arrangements with certain banks. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the Federal Reserve funds rate plus 0.35%. In addition, a commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. For the year ended March 31, 2007, each fund's commitment fee and interest expense on the line of credit were as follows, and are included in miscellaneous expense on the Statements of Operations. NORTH SOUTH WEST MISSISSIPPI NEW YORK CAROLINA PENNSYLVANIA CAROLINA TENNESSEE VIRGINIA VIRGINIA FUND FUND FUND FUND FUND FUND FUND FUND Commitment Fee $517 $1,013 $2,013 $669 $951 $704 $1,849 $894 Interest Expense -- -- -- -- -- -- -- --
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and the Shareholders of MFS Municipal Series Trust: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of MFS Mississippi Municipal Bond Fund, MFS New York Municipal Bond Fund, MFS North Carolina Municipal Bond Fund, MFS Pennsylvania Municipal Bond Fund, MFS South Carolina Municipal Bond Fund, MFS Tennessee Municipal Bond Fund, MFS Virginia Municipal Bond Fund and MFS West Virginia Municipal Bond Fund, certain of the portfolios constituting MFS Municipal Series Trust (the "Trust") as of March 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the aforementioned portfolios of MFS Municipal Series Trust as of March 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts May 14, 2007 TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND The Trustees and officers of the Trust, as of May 1, 2007, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS DURING POSITION(s) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS & NAME, DATE OF BIRTH WITH FUND SINCE(h) OTHER DIRECTORSHIPS(j) ----------------------- ---------------- --------------- ----------------------------------------------- INTERESTED TRUSTEES Robert J. Manning(k) Trustee February 2004 Massachusetts Financial Services Company, Chief (born 10/20/63) Executive Officer, President, Chief Investment Officer and Director Robert C. Pozen(k) Trustee February 2004 Massachusetts Financial Services Company, (born 8/08/46) Chairman (since February 2004); MIT Sloan School (education), Senior Lecturer (since 2006); Secretary of Economic Affairs, The Commonwealth of Massachusetts (January 2002 to December 2002); Fidelity Investments, Vice Chairman (June 2000 to December 2001); Fidelity Management & Research Company (investment adviser), President (March 1997 to July 2001); Bell Canada Enterprises (telecommunications), Director; Medtronic, Inc. (medical technology), Director; Telesat (satellite communications), Director INDEPENDENT TRUSTEES J. Atwood Ives Trustee and Chair of February 1992 Private investor; Eastern Enterprises (born 5/01/36) Trustees (diversified services company), Chairman, Trustee and Chief Executive Officer (until November 2000) Robert E. Butler(n) Trustee January 2006 Consultant - regulatory and compliance matters (born 11/29/41) (since July 2002); PricewaterhouseCoopers LLP (professional services firm), Partner (November 2000 until June 2002) Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital, Chief of Cardiac (born 3/11/37) Surgery (2005); Harvard Medical School, Professor of Cardiac Surgery; Physician Director of Medical Device Technology for Partners HealthCare David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining products and (born 5/30/42) service provider), Vice Chairman/Director (since April 2001); Portman Limited (mining), Director (since 2005); Encinitos Ventures (private investment company), Principal (1997 to April 2001); Lincoln Electric Holdings, Inc. (welding equipment manufacturer), Director William R. Gutow Trustee December 1993 Private investor and real estate consultant; (born 9/27/41) Capitol Entertainment Management Company (video franchise), Vice Chairman; Atlantic Coast Tan (tanning salons), Vice Chairman (since 2002) Michael Hegarty Trustee December 2004 Retired; AXA Financial (financial services and (born 12/21/44) insurance), Vice Chairman and Chief Operating Officer (until May 2001); The Equitable Life Assurance Society (insurance), President and Chief Operating Officer (until May 2001) Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys), Partner (born 6/23/35) J. Dale Sherratt Trustee August 1993 Insight Resources, Inc. (acquisition planning (born 9/23/38) specialists), President; Wellfleet Investments (investor in health care companies), Managing General Partner (since 1993); Cambridge Nutraceuticals (professional nutritional products), Chief Executive Officer (until May 2001) Laurie J. Thomsen Trustee March 2005 Private investor; Prism Venture Partners (born 8/05/57) (venture capital), Co-founder and General Partner (until June 2004); St. Paul Travelers Companies (commercial property liability insurance), Director Robert W. Uek Trustee January 2006 Retired (since 1999); PricewaterhouseCoopers (born 5/18/41) LLP (professional services firm), Partner (until 1999); Consultant to investment company industry (since 2000); TT International Funds (mutual fund complex), Trustee (2000 until 2005); Hillview Investment Trust II Funds (mutual fund complex), Trustee (2000 until 2005) OFFICERS Maria F. Dwyer(k) President November 2005 Massachusetts Financial Services Company, (born 12/01/58) Executive Vice President and Chief Regulatory Officer (since March 2004); Fidelity Management & Research Company, Vice President (prior to March 2004); Fidelity Group of Funds, President and Treasurer (prior to March 2004) Tracy Atkinson(k) Treasurer September 2005 Massachusetts Financial Services Company, (born 12/30/64) Senior Vice President (since September 2004); PricewaterhouseCoopers LLP, Partner (prior to September 2004) Christopher R. Bohane(k) Assistant Secretary July 2005 Massachusetts Financial Services Company, Vice (born 1/18/74) and Assistant Clerk President and Senior Counsel (since April 2003); Kirkpatrick & Lockhart LLP (law firm), Associate (prior to April 2003) Ethan D. Corey(k) Assistant Secretary July 2005 Massachusetts Financial Services Company, (born 11/21/63) and Assistant Clerk Special Counsel (since December 2004); Dechert LLP (law firm), Counsel (prior to December 2004) David L. DiLorenzo(k) Assistant Treasurer July 2005 Massachusetts Financial Services Company, Vice (born 8/10/68) President (since June 2005); JP Morgan Investor Services, Vice President (prior to June 2005) Timothy M. Fagan(k) Assistant Secretary September 2005 Massachusetts Financial Services Company, Vice (born 7/10/68) and Assistant Clerk President and Senior Counsel (since September 2005); John Hancock Advisers, LLC, Vice President and Chief Compliance Officer (September 2004 to August 2005), Senior Attorney (prior to September 2004); John Hancock Group of Funds, Vice President and Chief Compliance Officer (September 2004 to December 2004) Mark D. Fischer(k) Assistant Treasurer July 2005 Massachusetts Financial Services Company, Vice (born 10/27/70) President (since May 2005); JP Morgan Investment Management Company, Vice President (prior to May 2005) Brian E. Langenfeld(k) Assistant Secretary June 2006 Massachusetts Financial Services Company, (born 3/07/73) and Assistant Clerk Assistant Vice President and Counsel (since May 2006); John Hancock Advisers, LLC, Assistant Vice President and Counsel (May 2005 to April 2006); John Hancock Advisers, LLC, Attorney and Assistant Secretary (prior to May 2005) Ellen Moynihan(k) Assistant Treasurer April 1997 Massachusetts Financial Services Company, (born 11/13/57) Senior Vice President Susan S. Newton(k) Assistant Secretary May 2005 Massachusetts Financial Services Company, (born 3/07/50) and Assistant Clerk Senior Vice President and Associate General Counsel (since April 2005); John Hancock Advisers, LLC, Senior Vice President, Secretary and Chief Legal Officer (prior to April 2005); John Hancock Group of Funds, Senior Vice President, Secretary and Chief Legal Officer (prior to April 2005) Susan A. Pereira(k) Assistant Secretary July 2005 Massachusetts Financial Services Company, Vice (born 11/05/70) and Assistant Clerk President and Senior Counsel (since June 2004); Bingham McCutchen LLP (law firm), Associate (prior to June 2004) Mark N. Polebaum(k) Secretary and Clerk January 2006 Massachusetts Financial Services Company, (born 5/01/52) Executive Vice President, General Counsel and Secretary (since January 2006); Wilmer Cutler Pickering Hale and Dorr LLP (law firm), Partner (prior to January 2006) Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of compliance services), (born 3/07/44) Compliance Officer Principal (since June 2004); CRA Business Strategies Group (consulting services), Executive Vice President (April 2003 to June 2004); David L. Babson & Co. (investment adviser), Managing Director, Chief Administrative Officer and Director (prior to March 2003) James O. Yost(k) Assistant Treasurer September 1990 Massachusetts Financial Services Company, (born 6/12/60) Senior Vice President ------------ (h) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously since appointment unless indicated otherwise. (j) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., "public companies"). (k) "Interested person" of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of position with MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116. (n) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance consultant retained by MFS pursuant to its settlement with the SEC concerning market timing and related matters. The terms of that settlement required that compensation an d expenses related to the independent compliance consultant be borne exclusively by MFS and, therefore, MFS paid Mr. Butler for the service s he rendered to the independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a total of $351,119.29. The Trust held a shareholders' meeting in 2005 to elect Trustees, and will hold a shareholders' meeting at least once every five years thereafter, to elect Trustees. Each Trustee (except Mr. Butler and Mr. Uek) has been elected by shareholders and each Trustee and officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Messrs. Butler, Gutow, Sherratt and Uek and Ms. Thomsen are members of the Trust's Audit Committee. Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or a subsidiary is the investment adviser or distributor, and, in the case of the officers, with certain affiliates of MFS. As of January 1, 2007, the Trustees served as board members of 97 funds within the MFS Family of Funds. The Statement of Additional Information contains further information about the Trustees and is available without charge upon request by calling 1-800-225-2606. ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ADVISER CUSTODIAN Massachusetts Financial Services Company State Street Bank and Trust Company 500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110 DISTRIBUTOR Effective April 1, 2007, the custodian changed to: MFS Fund Distributors, Inc. JPMorgan Chase Bank 500 Boylston Street, Boston, MA 02116-3741 One Chase Manhattan Plaza New York, NY 10081 PORTFOLIO MANAGER Michael Dawson INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 200 Berkeley Street, Boston, MA 02116
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT A discussion regarding the Board's most recent review and renewal of each Fund's investment advisory agreement is available by clicking on the fund's name under "Select a fund" on the MFS Web site (mfs.com). PROXY VOTING POLICIES AND INFORMATION A general description of the MFS funds' proxy voting policies and procedures is available without charge, upon request, by calling 1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC's Web site at http://www.sec.gov. Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC's Web site at http://www.sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed and copied at the: Public Reference Room Securities and Exchange Commission 100 F Street, NE, Room 1580 Washington, D.C. 20549 Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-551-5850. The fund's Form N-Q is available on the EDGAR database on the Commission's Internet Web site at http:// www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address. A shareholder can also obtain the quarterly portfolio holdings report at mfs.com. FEDERAL TAX INFORMATION (UNAUDITED) The funds will notify shareholders of amounts for use in preparing 2007 income tax forms in January 2008. The following information is provided pursuant to provisions of the Internal Revenue Code. The funds below designated the following amounts as capital gain dividends paid during the fiscal year. CAPITAL GAINS New York Fund $681,156 North Carolina Fund 512,309 Pennsylvania Fund 28,874 Tennessee Fund 96,932 Virginia Fund 114,566 West Virginia Fund 907,139 Of the dividends paid from net investment income during the fiscal year, the following percentages were designated as exempt interest dividends for federal income tax purposes. If each fund had earned income on private activity bonds, a portion of the dividends paid may be considered a tax preference item for purposes of computing a shareholder's alternative minimum tax. EXEMPT INTEREST DIVIDENDS Mississippi Fund 100.00% New York Fund 100.00% North Carolina Fund 100.00% Pennsylvania Fund 100.00% South Carolina Fund 100.00% Tennessee Fund 100.00% Virginia Fund 100.00% West Virginia Fund 100.00% MFS(R) PRIVACY NOTICE Privacy is a concern for every investor today. At MFS Investment Management(R) and the MFS funds, we take this concern very seriously. We want you to understand our policies about the investment products and services that we offer, and how we protect the nonpublic personal information of investors who have a direct relationship with us and our wholly owned subsidiaries. Throughout our business relationship, you provide us with personal information. We maintain information and records about you, your investments, and the services you use. Examples of the nonpublic personal information we maintain include o data from investment applications and other forms o share balances and transactional history with us, our affiliates, or others o facts from a consumer reporting agency We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We may share nonpublic personal information with third parties or certain of our affiliates in connection with servicing your account or processing your transactions. We may share information with companies or financial institutions that perform marketing services on our behalf or with other financial institutions with which we have joint marketing arrangements, subject to any legal requirements. Authorization to access your nonpublic personal information is limited to appropriate personnel who provide products, services, or information to you. We maintain physical, electronic, and procedural safeguards to help protect the personal information we collect about you. If you have any questions about the MFS privacy policy, please call 1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time. Note: If you own MFS products or receive MFS services in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. CONTACT US WEB SITE mfs.com MFS TALK 1-800-637-8255 24 hours a day ACCOUNT SERVICE AND LITERATURE SHAREHOLDERS 1-800-225-2606 8 a.m. to 8 p.m. ET INVESTMENT PROFESSIONALS 1-800-343-2829 8 a.m. to 8 p.m. ET RETIREMENT PLAN SERVICES 1-800-637-1255 8 a.m. to 8 p.m. ET MAILING ADDRESS MFS Service Center, Inc. P.O. Box 55824 Boston, MA 02205-5824 OVERNIGHT MAIL MFS Service Center, Inc. 500 Boylston Street Boston, MA 02116-3741 ------------------------------------------------------------------------------- Go paperless with eDELIVERY: Arrange to have MFS(R) send prospectuses, reports, and proxies directly to your e-mail inbox. You'll get timely information and less clutter in your mailbox (not to mention help your fund save printing and postage costs). SIGN UP: If your account is registered with us, simply go to mfs.com, log in to your account via MFS(R) Access, and select the eDelivery sign up options. If you own your MFS fund shares through a financial institution or a retirement plan, MFS(R) TALK, MFS Access, and eDelivery may not be available to you. ------------------------------------------------------------------------------- M F S(R) INVESTMENT MANAGEMENT 500 Boylston Street, Boston, MA 02116 M F S(R) INVESTMENT MANAGEMENT [graphic omitted] Annual report MFS(R) MUNICIPAL INCOME FUND LETTER FROM THE CEO 1 ------------------------------------------------------------ PORTFOLIO COMPOSITION 2 ------------------------------------------------------------ MANAGEMENT REVIEW 3 ------------------------------------------------------------ PERFORMANCE SUMMARY 4 ------------------------------------------------------------ EXPENSE TABLE 6 ------------------------------------------------------------ PORTFOLIO OF INVESTMENTS 8 ------------------------------------------------------------ STATEMENT OF ASSETS AND LIABILITIES 30 ------------------------------------------------------------ STATEMENT OF OPERATIONS 32 ------------------------------------------------------------ STATEMENTS OF CHANGES IN NET ASSETS 33 ------------------------------------------------------------ FINANCIAL HIGHLIGHTS 34 ------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS 37 ------------------------------------------------------------ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 47 ------------------------------------------------------------ TRUSTEES AND OFFICERS 48 ------------------------------------------------------------ BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 54 ------------------------------------------------------------ PROXY VOTING POLICIES AND INFORMATION 54 ------------------------------------------------------------ QUARTERLY PORTFOLIO DISCLOSURE 54 ------------------------------------------------------------ FEDERAL TAX INFORMATIO 54 ------------------------------------------------------------ MFS(R) PRIVACY NOTICE 55 ------------------------------------------------------------ CONTACT INFORMATION BACK COVER ------------------------------------------------------------ THE 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. ------------------------------------------------------------------------------ NOT FDIC INSURED o MAY LOSE VALUE o NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF ------------------------------------------------------------------------------ 3/31/07 LMB-ANN LETTER FROM THE CEO [Photo of Robert J. Manning] Dear Shareholders: The past year has been a great example of why investors should keep their eyes on the long term. In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit its all-time high of 12,787. Less than a week later, stocks sold off around the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets and a reason investors should make sure they have an investment plan that can ride out the peaks and troughs. If you are focused on a long-term investment strategy, the short-term ups and downs of the markets should not necessarily dictate portfolio action on your part. Both the bond and stock markets are inherently cyclical. In our view, investors who remain committed to a long-term plan are more likely to achieve their financial goals. We believe you should not let the headlines guide you in your investment decisions and that there is no sense in reacting to short-term volatility. In any market environment, we believe individual investors are best served by following a three-pronged investment strategy of allocating their holdings across the major asset classes, diversifying within each class, and regularly rebalancing their portfolios to maintain their desired allocations. Of course, these strategies cannot guarantee a profit or protect against a loss. Investing and planning for the long term require diligence and patience, two traits that in our experience are essential to capitalizing on the many opportunities the financial markets can offer -- through both up and down economic cycles. Respectfully, /s/ Robert J. Manning Robert J. Manning Chief Executive Officer and Chief Investment Officer MFS Investment Management(R) May 15, 2007 The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed. PORTFOLIO COMPOSITION PORTFOLIO STRUCTURE (i) Bonds 103.6% Cash & Other Net Assets (3.6)% TOP FIVE INDUSTRIES (i) Healthcare Revenue - Hospitals 20.5% ------------------------------------------------ General Obligations - Schools 9.0% ------------------------------------------------ General Obligations - General Purpose 8.2% ------------------------------------------------ Utilities - Municipal Owned 5.9% ------------------------------------------------ State & Local Agencies 5.8% ------------------------------------------------ CREDIT QUALITY OF BONDS (r) AAA 41.1% ------------------------------------------------ AA 9.9% ------------------------------------------------ A 14.6% ------------------------------------------------ BBB 17.9% ------------------------------------------------ BB 3.1% ------------------------------------------------ B 1.7% ------------------------------------------------ CCC 0.4% ------------------------------------------------ CC (o) 0.0% ------------------------------------------------ Not Rated 11.3% ------------------------------------------------ PORTFOLIO FACTS Average Duration (d)(i) 5.7 ------------------------------------------------ Average Life (i)(m) 13.5 yrs. ------------------------------------------------ Average Maturity (i)(m) 16.6 yrs. ------------------------------------------------ Average Credit Quality of Rated Securities (long-term) (a) AA- ------------------------------------------------ Average Credit Quality of Rated Securities (short-term) (a) A2 ------------------------------------------------ (a) The average credit quality of rated securities is based upon a market weighted average of portfolio holdings that are rated by public rating agencies. (d) Duration is a measure of how much a bond's price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. (i) For purposes of this presentation, the bond component includes both accrued interest amounts and the equivalent exposure from any derivative holdings, if applicable. (m) The average maturity shown is calculated using the final stated maturity on the portfolio's holdings without taking into account any holdings which have been pre- refunded or pre-paid to an earlier date or which have a mandatory put date prior to the stated maturity. The average life shown takes into account these earlier dates. (o) Less than 0.1%. (r) Each security is assigned a rating from Moody's Investors Service. If not rated by Moody's, the rating will be that assigned by Standard & Poor's. Likewise, if not assigned a rating by Standard & Poor's, it will be based on the rating assigned by Fitch, Inc. For those portfolios that hold a security which is not rated by any of the three agencies, the security is considered Not Rated. Holdings in U.S. Treasuries and government agency mortgage-backed securities, if any, are included in the "AAA"-rating category. Percentages are based on the total market value of investments as of 3/31/07. From time to time "Cash & Other Net Assets" may be negative due to timing of cash receipts and/or equivalent exposure from any derivative holdings. Percentages are based on net assets as of 3/31/07, unless otherwise noted. The portfolio is actively managed and current holdings may be different. MANAGEMENT REVIEW SUMMARY OF RESULTS For the twelve months ended March 31, 2007, Class A shares of the MFS Municipal Income Fund provided a total return of 5.00%, at net asset value. This compares with a return of 5.44% for the fund's benchmark, the Lehman Brothers Municipal Bond Index (the Lehman Index). DETRACTORS FROM PERFORMANCE Yield curve(y) positioning had a negative effect on the fund's relative performance. Overweighting the short portion of the curve (represented by bonds with durations(d) of 0- to 4- years) detracted as this area underperformed the benchmark. Additionally, underweighting the intermediate to longer end of the curve (represented by bond with durations between 8- and 14- years) hindered relative results. CONTRIBUTORS TO PERFORMANCE The fund benefited from holding lower-quality "BBB"-rated(s) securities and below-investment-grade debt. During the period, spreads in these credit sectors narrowed due to stronger demand for higher yielding securities, causing prices to appreciate. (The Lehman Index is composed primarily of higher-grade securities with no bonds rated lower than "BBB"). The fund's overall positioning in the healthcare sector bolstered relative returns. Respectfully, Geoffrey Schechter Portfolio Manager (d) Duration is a measure of how much a bond's price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5 year duration is likely to lose about 5.00% of its value. (s) Bonds rated "BBB", "Baa", or higher are considered investment grade; bonds rated "BB", "Ba", or below are considered non-investment grade. The primary source for bond quality ratings is Moody's Investors Service. If not available, ratings by Standard & Poor's are used, else ratings by Fitch, Inc. For securities which are not rated by any of the three agencies, the security is considered Not Rated. (y) A yield curve graphically depicts the yields of different maturity bonds of the same credit quality and type. A normal yield curve is upward sloping, with short term-rates lower than long term rates. The views expressed in this report are those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views are subject to change at any time based on market and other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio's current or future investments. PERFORMANCE SUMMARY THROUGH 3/31/07 The following chart illustrates the historical performance of the fund's original share class in comparison to its benchmark. Performance results include any applicable contingent deferred sales charge and reflect the percentage change in net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmark comparisons are unmanaged; do not reflect sales charges, commissions or expenses; and cannot be invested in directly. (See Notes to Performance Summary.) PERFORMANCE DATA SHOWN REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE SO YOUR SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN QUOTED. FOR MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT MFS.COM. THE PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT MFS Municipal Lehman Brothers Income Fund Municipal - Class A Bond Index 3/97 $ 9,525 $10,000 3/98 10,631 11,072 3/99 11,179 11,757 3/00 11,051 11,748 3/01 12,052 13,031 3/02 12,387 13,522 3/03 13,378 14,859 3/04 14,307 15,730 3/05 14,805 16,149 3/06 15,425 16,765 3/07 16,196 17,676 TOTAL RETURNS THROUGH 3/31/07 AVERAGE ANNUAL WITHOUT SALES CHARGE Share class Class inception date 1-yr 5-yr 10-yr ---------------------------------------------------------------------------- A 9/07/93 5.00% 5.51% 5.45% ---------------------------------------------------------------------------- B 12/29/86 4.34% 4.75% 4.67% ---------------------------------------------------------------------------- C 1/03/94 4.34% 4.77% 4.68% ---------------------------------------------------------------------------- AVERAGE ANNUAL Comparative benchmark ---------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (f) 5.44% 5.50% 5.86% ---------------------------------------------------------------------------- AVERAGE ANNUAL WITH SALES CHARGE Share class ---------------------------------------------------------------------------- A 0.01% 4.49% 4.94% With Initial Sales Charge (4.75%) ---------------------------------------------------------------------------- B 0.34% 4.41% 4.67% With CDSC (Declining over six years from 4% to 0%) (x) ---------------------------------------------------------------------------- C 3.34% 4.77% 4.68% With CDSC (1% for 12 months) (x) ---------------------------------------------------------------------------- CDSC - Contingent Deferred Sales Charge. (f) Source: FactSet Research Systems Inc. (x) Assuming redemption at the end of the applicable period. INDEX DEFINITION Lehman Brothers Municipal Bond Index - a market-value-weighted index representative of the tax-exempt bond market. It is not possible to invest directly in an index. NOTES TO PERFORMANCE SUMMARY Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial statements for complete details. A 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. From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. EXPENSE TABLE Fund expenses borne by the shareholders during the period, October 1, 2006 through March 31, 2007 As a shareholder of the fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments and redemption fees on certain exchanges and redemptions, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period October 1, 2006 through March 31, 2007. ACTUAL EXPENSES The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees. Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- Expenses Paid During Annualized Beginning Ending Period(p) Share Expense Account Value Account Value 10/01/06- Class Ratio 10/01/06 3/31/07 3/31/07 -------------------------------------------------------------------------------- Actual 0.93% $1,000.00 $1,017.30 $4.68 A ----------------------------------------------------------------------- Hypothetical (h) 0.93% $1,000.00 $1,020.29 $4.68 -------------------------------------------------------------------------------- Actual 1.70% $1,000.00 $1,014.70 $8.54 B ----------------------------------------------------------------------- Hypothetical (h) 1.70% $1,000.00 $1,016.45 $8.55 -------------------------------------------------------------------------------- Actual 1.68% $1,000.00 $1,013.60 $8.43 C ----------------------------------------------------------------------- Hypothetical (h) 1.68% $1,000.00 $1,016.55 $8.45 -------------------------------------------------------------------------------- (h) 5% class return per year before expenses. (p) Expenses paid is equal to each class' annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. Expenses paid do not include any applicable sales charges (loads) or redemption fees. If these transaction costs had been included, your costs would have been higher. PORTFOLIO OF INVESTMENTS 3/31/07 The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes. Municipal Bonds - 100.6% -------------------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($) ------------------------------------------------------------------------------------------------------------------- Airport & Port Revenue - 3.2% ------------------------------------------------------------------------------------------------------------------- Chicago, IL, O'Hare International Airport Rev. (Second Lien Passenger Facility D), AMBAC, 5.5%, 2019 $ 350,000 $ 372,950 Chicago, IL, O'Hare International Airport Rev. (Third Lien Passenger Facility B), FSA, 5.75%, 2022 (u) 3,000,000 3,277,701 Chicago, IL, O'Hare International Airport Rev., Third Lien, "A", MBIA, 5%, 2029 950,000 1,005,784 Indianapolis, IN, Local Public Improvement (Airport Authority Project), "I", MBIA, 5%, 2034 200,000 206,992 Louisville & Jefferson County, KY, Regional Airport Authority, "A", MBIA, 6.5%, 2017 3,000,000 3,076,590 Miami-Dade County, FL, Aviation Rev., "A", CIFG, 5%, 2038 500,000 517,480 New York, NY, City Industrial Development Agency, Special Facilities Rev. (Terminal One Group), 5.5%, 2024 195,000 209,826 Oklahoma City, OK, Airport Trust, "B", FSA, 5.75%, 2017 1,080,000 1,138,201 ------------ $ 9,805,524 ------------------------------------------------------------------------------------------------------------------- General Obligations - General Purpose - 8.1% ------------------------------------------------------------------------------------------------------------------- Chicago, IL (Lakefront Millennium Parking Facilities), MBIA, 5%, 2009 (c) $ 4,000,000 $ 4,166,600 Chicago, IL (Lakefront Millennium Parking Facilities), MBIA, 5.7%, 2012 (c) 645,000 712,028 Commonwealth of Puerto Rico, FGIC, 5.5%, 2015 (u) 6,000,000 6,733,620 Commonwealth of Puerto Rico, Public Improvement, "A", 5.25%, 2027 235,000 252,233 Country Club Hills, IL, "N", MBIA, 5%, 2031 710,000 751,116 Cranston, RI, FGIC, 6.375%, 2009 (c) 200,000 215,384 Houston County, AL, AMBAC, 6.25%, 2009 (c) 850,000 918,893 Interlocken Metropolitan District, CO, Improvement, "C", XLCA, 0%, 2027 510,000 161,099 Kane Kendall County, IL, Capital Appreciation, "E", FGIC, 0%, 2023 1,360,000 610,055 Kane Kendall County, IL, Capital Appreciation, "E", FGIC, 0%, 2025 1,335,000 536,203 Massachusetts Consolidated Loan, "C", 5.875%, 2009 (c) 3,205,000 3,399,544 Mobile County, AL, 6%, 2009 (c) 800,000 841,496 New York, NY, "J", MBIA, 5%, 2017 2,000,000 2,069,580 Southlake, TX, AMBAC, 0%, 2009 (c) 3,185,000 1,268,554 Southlake, TX, AMBAC, 0%, 2009 (c) 3,150,000 1,173,470 State of Illinois, MBIA, 5.5%, 2025 110,000 114,987 State of Wisconsin, "C", 6%, 2010 (c) 1,200,000 1,280,568 ------------ $ 25,205,430 ------------------------------------------------------------------------------------------------------------------- General Obligations - Improvement - 1.5% ------------------------------------------------------------------------------------------------------------------- Birmingham, AL, "A", 5.75%, 2017 $ 1,000,000 $ 1,071,080 Worcester, MA, FSA, 6%, 2010 (c) 3,475,000 3,738,718 ------------ $ 4,809,798 ------------------------------------------------------------------------------------------------------------------- General Obligations - Schools - 8.9% ------------------------------------------------------------------------------------------------------------------- Adams 12 Five Star Schools, CO, "B", FGIC, 0%, 2025 $ 490,000 $ 201,106 De Soto, TX, Independent School District, School Building, PSF, 0%, 2031 380,000 112,567 De Soto, TX, Independent School District, School Building, PSF, 0%, 2034 285,000 71,575 De Soto, TX, Independent School District, School Building, PSF, 0%, 2036 380,000 85,580 Dudley-Charlton, MA, Regional School District, FGIC, 5.25%, 2017 (u) 2,990,000 3,334,777 Ennis, TX, Independent School District, Capital Appreciation, "N", PSF, 0%, 2031 380,000 114,502 Ferris, TX, Independent School District, PSF, 5.5%, 2034 640,000 689,101 Florida Board of Education Capital Outlay, Public Education, "A", 5%, 2008 (c) 1,000,000 1,025,640 Fresno, CA, Unified School District, MBIA, 6.55%, 2020 1,225,000 1,426,868 Goose Creek, TX, Consolidated School District, PSF, 5%, 2009 (c) 2,500,000 2,576,800 Keller, TX, Independent School District, PSF, 6%, 2017 225,000 240,775 Knox County, KY, Independent School District, XLCA, 5.5%, 2014 (c) 640,000 715,731 Lancaster, TX, Independent School District, "N", FSA, 4.5%, 2028 1,105,000 1,099,022 Lancaster, TX, Independent School District, "N", FSA, 4.5%, 2030 300,000 297,447 Lancaster, TX, Independent School District, Capital Appreciation, FSA, 0%, 2014 (c) 485,000 180,003 Lancaster, TX, Independent School District, Capital Appreciation, FSA, 0%, 2014 (c) 430,000 150,061 Lancaster, TX, Independent School District, Capital Appreciation, FSA, 0%, 2025 275,000 115,899 Lancaster, TX, Independent School District, Capital Appreciation, FSA, 0%, 2026 275,000 109,802 Leander, TX, Independent School District, PSF, 0%, 2018 2,500,000 1,301,525 Leander, TX, Independent School District, Capital Appreciation, Refunding, School Building, FGIC, 0%, 2026 900,000 342,819 Leander, TX, Independent School District, Capital Appreciation, Refunding, School Building, FGIC, 0%, 2031 910,000 258,413 Manchester, NH, School Facilities Rev., MBIA, 5.5%, 2027 215,000 252,098 Manchester, NH, School Facilities Rev., MBIA, 5.5%, 2028 215,000 252,913 Manistee, MI, Area Public Schools, FGIC, 5.75%, 2009 (c) 700,000 729,386 Palos Verdes Peninsula, CA, Capital Appreciation, "N", FSA, 0%, 2029 1,115,000 411,335 Phenix City, AL, AMBAC, 5.65%, 2010 (c) 1,500,000 1,618,665 Philadelphia, PA, School District, MBIA, 6%, 2010 (c) 750,000 797,760 Prosper, TX, Independent School District, Capital Appreciation School Building, "N", PSF, 0%, 2031 515,000 149,211 Roma, TX, Independent School District, PSF, 5.875%, 2010 (c) 1,705,000 1,823,975 San Jose Evergreen, CA, Community College District, Election 2004, "A", MBIA, 0%, 2028 740,000 252,910 Schertz-Cibolo-Universal City, TX, Independent School District, Capital Appreciation, School Building, "A", PSF, 0%, 2029 230,000 79,373 Schertz-Cibolo-Universal City, TX, Independent School District, Capital Appreciation, School Building, "A", PSF, 0%, 2030 4,035,000 1,318,436 Wattsburg, PA, Public School Building Authority Rev., Capital Appreciation, MBIA, 0%, 2029 2,150,000 800,144 Williamson County, TN, Rural School, 6.125%, 2010 (c) 1,665,000 1,778,137 Williamson County, TN, Rural School, 6.125%, 2010 (c) 1,765,000 1,884,932 Wylie, TX, Independent School District, PSF, 5.25%, 2029 1,080,000 1,141,873 ------------ $ 27,741,161 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Hospitals - 20.2% ------------------------------------------------------------------------------------------------------------------- Allegheny County, PA, Hospital Development Authority Rev. (West Penn Allegheny Health), 9.25%, 2030 $ 650,000 $ 767,845 Allegheny County, PA, Hospital Development Authority Rev. (West Penn Allegheny Health), "B", 9.25%, 2022 350,000 413,455 Baldwin County, AL, Eastern Shore Health Care Authority Rev. (Thomas Hospital), 5.75%, 2008 (c) 600,000 623,616 Baxter County, AR, Hospital Rev., 5.375%, 2014 1,000,000 1,028,920 Chemung County, NY, Civic Facilities Rev. (St. Joseph's Hospital-Elmira), "A", 6%, 2013 515,000 518,481 Colorado Health Facilities Authority Rev. (Portercare Adventist Health Systems), 6.625%, 2011 (c) 500,000 566,845 Cuyahoga County, OH, Hospital Facilities Rev. (Canton, Inc.), 7.5%, 2030 900,000 996,921 Denver, CO, Health & Hospital Authority Rev., "A", 5.375%, 2018 300,000 305,586 Denver, CO, Health & Hospital Authority Rev., "A", 6%, 2023 500,000 531,600 Fulton County, NY, Industrial Development Agency, Civic Facilities Rev. (Nathan Littauer Hospital), "A", 5.75%, 2009 160,000 161,819 Gainesville & Hall County, GA, Hospital Authority Rev. (Northeast Georgia Health System, Inc.), 5.5%, 2031 445,000 462,876 Gulfport, MS, Hospital Facilities Rev. (Memorial Hospital), 5.75%, 2031 525,000 542,876 Henrico County, VA, Industrial Development Authority Rev. (Bon Secours), RIBS, FSA, 7.924%, 2027 (p) 5,000,000 6,679,200 Highlands County, FL, Health Facilities Authority Rev. (Adventist Health Systems), "C", 5.25%, 2036 465,000 491,579 Highlands County, FL, Health Facilities Authority Rev. (Adventist/Sunbelt Hospital), 6%, 2011 (c) 350,000 387,583 Illinois Health Facilities Authority Rev. (Condell Medical Center), 6.35%, 2015 1,000,000 1,060,640 Illinois Health Facilities Authority Rev. (Decatur Memorial Hospital), 5.75%, 2024 350,000 370,675 Illinois Health Facilities Authority Rev. (Passavant Memorial Area Hospital Associates), 6%, 2010 (c) 335,000 363,311 Illinois Health Facilities Authority Rev. (Riverside Health Systems), 5.75%, 2012 (c) 650,000 716,963 Illinois Health Facilities Authority Rev. (Sinai Health), FHA, 5.15%, 2037 640,000 667,437 Indiana Health Facilities Financing Authority, Hospital Rev. (Clarian Health), "A", 5%, 2039 260,000 266,534 Indiana Health Facilities Financing Authority, Hospital Rev. (Deaconess Hospital), "A", AMBAC, 5.375%, 2034 565,000 606,533 Indiana Health Facilities Financing Authority, Hospital Rev. (Munster Medical Research Foundation, Inc.), "A", 6.375%, 2021 1,700,000 1,807,423 Indiana Health Facilities Financing Authority, Hospital Rev. (Munster Medical Research Foundation, Inc.), "A", 6.375%, 2031 500,000 533,005 Indiana Health Facilities Financing Authority, Hospital Rev. (Riverview Hospital), 5.25%, 2014 400,000 409,956 Indiana Health Facilities Financing Authority, Hospital Rev. (Riverview Hospital), 6.125%, 2031 250,000 269,278 Kentucky Economic Development Finance Authority (Norton Healthcare), "A", 6.5%, 2010 (c) 490,000 540,220 Kentucky Economic Development Finance Authority, Prerefunded (Norton Healthcare), "A", 6.625%, 2010 (c) 195,000 215,777 Kentucky Economic Development Finance Authority, Unrefunded (Norton Healthcare), "A", 6.5%, 2020 760,000 820,222 Kentucky Economic Development Finance Authority, Unrefunded (Norton Healthcare), "A", 6.625%, 2028 55,000 59,561 Knox County, TN, Health Educational Hospital & Housing Facilities Board Rev. (Covenant Health), "A", 0%, 2035 730,000 182,507 Knox County, TN, Health Educational Hospital & Housing Facilities Board Rev. (Covenant Health), "A", 0%, 2037 315,000 70,850 Knox County, TN, Health Educational Hospital & Housing Facilities Board Rev. (Covenant Health), "A", 0%, 2036 460,000 109,094 Knox County, TN, Health Educational Hospital Facility (Baptist Health Systems, East Tennessee), 6.375%, 2022 1,000,000 1,038,230 Lauderdale County & Florence, AL (Coffee Health Group), "A", MBIA, 5.25%, 2019 1,100,000 1,138,478 Macomb County, MI, Hospital Finance Authority Rev. (Mount Clemens General Hospital), 5.75%, 2025 1,000,000 1,045,540 Marion County, FL, Hospital District Rev. (Monroe Hospital), 5.625%, 2019 750,000 779,625 Marshall County, AL, Health Care Authority Rev., "A", 6.25%, 2022 500,000 548,625 Martin County, FL, Health Facilities Authority Rev. (Martin Memorial Medical Center), "A", 5.75%, 2022 850,000 909,203 Maryland Health & Higher Educational Facilities Authority Rev. (Medstar Health), 5.5%, 2033 305,000 322,745 Maryland Health & Higher Educational Facilities Authority Rev. (University of Maryland Medical System), 6.75%, 2010 (c) 1,000,000 1,103,110 Massachusetts Health & Educational Facilities Authority Rev. (Caritas Christi), "A", 5.7%, 2015 1,000,000 1,036,730 Massachusetts Health & Educational Facilities Authority Rev. (Caritas Christi), "B", 6.5%, 2012 400,000 437,948 Massachusetts Health & Educational Facilities Authority Rev. (Partners Healthcare Systems), "C", 5.75%, 2021 400,000 432,204 Mecosta County, MI, General Hospital Rev., 6%, 2018 300,000 308,205 Miami Beach, FL, Health Facilities Authority Rev. (Mount Sinai Medical Center), "A", 6.7%, 2019 750,000 824,220 Miami Dade County, FL (Public Facilities Jackson Health Systems), "A", MBIA, 5%, 2029 4,040,000 4,210,044 Michigan Hospital Finance Authority Rev. (Memorial Healthcare Center), 5.75%, 2015 800,000 834,296 Monroe County, MI, Hospital Finance Authority, Hospital Rev. (Mercy Memorial Hospital Corp.), 5.5%, 2035 670,000 703,212 Montgomery, AL, Medical Clinic Board Health Care Facility Rev. (Jackson Hospital & Clinic), 5.25%, 2031 145,000 150,743 Mount Lebanon, PA, Hospital Authority Rev. (St. Clair Memorial Hospital), 5.625%, 2032 375,000 394,834 Nassau County, NY, Industrial Development Agency, Civic Facilities Rev. (North Shore Health System), 5.875%, 2011 280,000 290,814 New Hampshire Health & Educational Facilities Authority Rev. (Covenant Health), 6.5%, 2017 820,000 910,725 New Hampshire Health & Educational Facilities Authority Rev. (Exeter Hospital), 6%, 2024 500,000 546,435 New Jersey Health Care Facilities (Palisades Medical Center), 6.5%, 2021 500,000 545,470 New Jersey Health Care Facilities, Financing Authority Rev. (Saint Barnabas Health), Capital Appreciation, "B", 0%, 2036 3,135,000 710,767 New Jersey Health Care Facilities, Financing Authority Rev. (Saint Barnabas Health), Capital Appreciation, "B", 0%, 2037 2,090,000 449,078 North Texas Health Facilities Development Corp. Rev. (United Regional Health Care System, Inc.), 6%, 2023 1,000,000 1,081,500 Ohio County, WV, County Commission Health System Rev. (Ohio Valley Medical Center), 5.75%, 2013 900,000 889,866 Oklahoma Development Finance Authority Rev. (Comanche County Hospital), "B", 6%, 2014 600,000 660,540 Oklahoma Development Finance Authority Rev. (Comanche County Hospital), "B", 6.6%, 2031 255,000 279,353 Rhode Island Health & Education Building Corp. Rev., Hospital Financing (Lifespan Obligated Group), 6.5%, 2012 (c) 1,500,000 1,702,560 Royston, GA, Hospital Authority Rev. (Ty Cobb Healthcare Systems, Inc.), 6.5%, 2027 290,000 298,369 Shelby County, TN, Educational & Housing Facilities Board Hospital Rev. (Methodist Healthcare), 6%, 2012 (c) 300,000 333,996 Shelby County, TN, Educational & Housing Facilities Board Hospital Rev. (Methodist Healthcare), 6%, 2012 (c) 500,000 556,660 South Carolina Jobs & Economic Development Authority, Hospital Facilities Rev. (Palmetto Health Alliance), 6.25%, 2031 500,000 544,795 Steubenville, OH, Hospital Rev. (Trinity Hospital), 6.375%, 2020 300,000 325,140 Stillwater, OK, Medical Center Authority (Stillwater Medical Center), 6.5%, 2007 (c) 1,000,000 1,023,080 Suffolk County, NY, Industrial Development Agency, Civic Facilities Rev. (Huntington Hospital), "C", 5.875%, 2032 1,000,000 1,058,510 Tallahassee, FL, Health Facilities Rev. (Tallahassee Memorial Healthcare), 6.25%, 2020 1,000,000 1,055,250 Tom Green County, TX, Health Facilities Rev. (Shannon Health System), 6.75%, 2021 400,000 433,880 Upper Illinois River Valley Development, Health Facilities Rev. (Morris Hospital), 6.625%, 2031 500,000 544,710 Valley, AL, Special Care Facilities Financing (Lanier Memorial Hospital), 5.5%, 2007 500,000 502,645 Wapello County, IA, Hospital Authority Rev. (Ottumwa Regional Health Center), 6.375%, 2012 (c) 750,000 848,085 Weirton, WV, Municipal Hospital Building, Commission Rev. (Weirton Hospital Medical Center), 6.375%, 2031 500,000 526,115 West Plains, MO, Industrial Development Authority Rev. (Ozarks Medical Center), 6.75%, 2024 195,000 201,575 West Shore, PA, Hospital Authority (Holy Spirit Hospital), 6.25%, 2032 1,000,000 1,069,930 Wichita, KS, Hospital Authority Rev. (Via Christi Health System), 6.25%, 2019 1,500,000 1,653,330 Wisconsin Health & Educational Facilities Authority Rev. (Agnesian Healthcare, Inc.), 6%, 2017 325,000 345,023 Wisconsin Health & Educational Facilities Authority Rev. (Aurora Health Care, Inc.), 6.875%, 2030 750,000 857,610 Wisconsin Health & Educational Facilities Authority Rev. (Wheaton Franciscan Healthcare), 5.25%, 2031 1,025,000 1,072,786 Wisconsin Health & Educational Facilities Authority Rev. (Wheaton Franciscan Services), 6.25%, 2012 (c) 1,000,000 1,120,870 Yonkers, NY, Industrial Development Agency, Civic Facilities Rev. (St. John's Riverside Hospital), 6.8%, 2016 385,000 410,271 ------------ $ 62,616,918 ------------------------------------------------------------------------------------------------------------------- Healthcare Revenue - Long Term Care - 1.9% ------------------------------------------------------------------------------------------------------------------- Bell County, TX, Health Facilities Development Rev. (Advanced Living Technology), 8.125%, 2016 $ 505,000 $ 492,168 Bell County, TX, Health Facilities Development Rev. (Advanced Living Technology), 8.5%, 2026 1,130,000 1,085,681 Colorado Health Facilities Authority Rev. (Evangelical), 6.9%, 2010 (c) 305,000 344,095 Colorado Health Facilities Authority Rev. (Evangelical), 6.9%, 2025 195,000 217,004 Cumberland County, PA, Municipal Authority Rev. (Wesley), "A", 7.25%, 2013 (c) 270,000 318,573 Cumberland County, PA, Municipal Authority Rev. (Wesley), "A", 7.25%, 2013 (c) 105,000 123,890 Eden Prairie, MN, Multi-Family Housing Rev. (Coll-Rolling Hills), "A", GNMA, 6%, 2021 200,000 216,410 Indiana Health Facilities Financing Authority Rev. (Hoosier Care), 7.125%, 2034 795,000 818,930 Iowa Finance Authority, Health Care Facilities Rev. (Care Initiatives Project), 9.25%, 2011 (c) 480,000 586,670 Iowa Finance Authority, Health Care Facilities Rev. (Care Initiatives Project), "A", 5.5%, 2025 275,000 288,525 Millbrae, CA, Residential Facilities Rev. (Magnolia of Millbrae), "A", 7.375%, 2027 920,000 952,136 Montana Facility Finance Authority Rev. (Senior Living St. Johns Lutheran), "A", 6.125%, 2036 170,000 177,509 Shelby County, TN, Health, Educational & Housing Facilities Board Rev. (Germantown Village), 7.25%, 2034 385,000 393,971 ------------ $ 6,015,562 ------------------------------------------------------------------------------------------------------------------- Human Services - 0.6% ------------------------------------------------------------------------------------------------------------------- Louisiana Local Government Environmental Facilities & Community Development (Westside Rehab Center Project), "B", 6.5%, 2013 $ 450,000 $ 454,257 Nassau County, NY, Industrial Development Civic (Special Needs Facilities), 6.1%, 2012 225,000 231,212 Orange County, FL, Health Facilities Authority Rev. (GF/ Orlando Healthcare Facilities), 9%, 2031 1,000,000 1,097,510 ------------ $ 1,782,979 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Airlines - 0.8% ------------------------------------------------------------------------------------------------------------------- Los Angeles, CA, Regional Airport Lease Rev. (AMR Corp.), "C", 7%, 2012 $ 300,000 $ 323,898 New York, NY, Industrial Development Agencies Rev. (American Airlines, Inc.), 7.625%, 2025 970,000 1,170,431 Tulsa, OK, Municipal Airport Trust Rev. (American Airlines, Inc.), "B", 5.65%, 2035 1,000,000 1,017,620 ------------ $ 2,511,949 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Chemicals - 0.7% ------------------------------------------------------------------------------------------------------------------- Brazos River, TX, Harbor Navigation District (Dow Chemical Co.), 5.7%, 2033 $ 1,000,000 $ 1,064,550 Red River Authority, TX, Pollution Control Rev. (Celanese Project), "B", 6.7%, 2030 1,000,000 1,088,580 ------------ $ 2,153,130 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Environmental Services - 1.5% ------------------------------------------------------------------------------------------------------------------- California Pollution Control Financing Authority, Solid Waste Disposal Rev. (Waste Management, Inc.), "A-2", 5.4%, 2025 $ 215,000 $ 227,225 Carbon County, UT, Solid Waste Disposal Rev. (Laidlaw Environmental), 7.45%, 2017 2,500,000 2,567,200 Charles City County, VA, Industrial Development Authority, Solid Waste Disposal Facility Rev. (Waste Management, Inc.), 6.25%, 2027 500,000 540,585 Colorado Housing & Finance Authority, Solid Waste Rev. (Waste Management, Inc.), 5.7%, 2018 230,000 253,058 Gloucester County, NJ, Solid Waste Resource Recovery Rev. (Waste Management, Inc.), 6.85%, 2029 150,000 159,890 Massachusetts Development Finance Agency Rev. (Waste Management, Inc.), "B", 6.9%, 2029 300,000 319,374 Nevada Department of Business & Industry Rev. (Republic Services, Inc.), 5.625%, 2026 450,000 489,875 ------------ $ 4,557,207 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Metals - 0.0% ------------------------------------------------------------------------------------------------------------------- Burns Harbor, IN, Solid Waste Disposal Facilities Rev. (Bethlehem Steel), 8%, 2024 (d) $ 3,000,000 $ 30 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Other - 2.7% ------------------------------------------------------------------------------------------------------------------- Bucks County, PA, Industrial Development Authority Rev. (USX Corp.), 5.4%, 2017 $ 500,000 $ 534,590 Gulf Coast, TX, Industrial Development Authority (Valero Energy Corp.), 5.6%, 2031 500,000 516,065 Gulf Coast, TX, Industrial Development Authority Rev. (Microgy Holdings LLC Project), 7%, 2036 320,000 343,411 Hardeman County, TN, Correctional Facilities Corp. (Corrections Corp. of America), 7.375%, 2017 500,000 511,545 Massachusetts Development Finance Agency Rev., Resource Recovery (Flour Corp.), 5.625%, 2019 2,895,000 3,019,775 Massachusetts Industrial Finance Agency Rev. (Welch Foods, Inc.), 5.6%, 2017 1,300,000 1,337,778 Park Creek Metropolitan District, CO, Rev. (Custodial Receipts), "CR-2", 7.875%, 2032 (n) 400,000 443,168 Pennsylvania Economic Development Financing Authority Rev. (Amtrak), 6.125%, 2021 550,000 588,566 Tooele County, UT, Hazardous Waste Treatment Rev. (Union Pacific Corp.), 5.7%, 2026 980,000 1,017,240 ------------ $ 8,312,138 ------------------------------------------------------------------------------------------------------------------- Industrial Revenue - Paper - 2.2% ------------------------------------------------------------------------------------------------------------------- Butler, AL, Industrial Development Board, Solid Waste Disposal Rev. (Georgia Pacific Corp.), 5.75%, 2028 $ 260,000 $ 266,427 Delta County, MI, Economic Development Corp., Environmental Improvements Rev. (Mead Westvaco Escanaba), "A", 6.25%, 2012 (c) 900,000 1,002,267 Mobile, AL, Industrial Development Board Improvement Rev., "B" (International Paper Co.), 6.45%, 2019 2,000,000 2,109,300 Navajo County, AZ, Industrial Development Authority Rev. (Stone Container Corp.), 7.4%, 2026 1,500,000 1,515,870 Navajo County, AZ, Industrial Development Authority Rev. (Stone Container Corp.), 7.2%, 2027 500,000 511,375 Onondaga County, NY, Industrial Development Authority Rev., Solid Waste Disposal Rev. (Solvay Paperboard LLC), 6.8%, 2014 900,000 938,061 West Point, VA, Industrial Development Authority, Solid Waste Disposal Rev. (Chesapeake Corp.), "A", 6.375%, 2019 550,000 552,299 ------------ $ 6,895,599 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Entertainment & Tourism - 0.1% ------------------------------------------------------------------------------------------------------------------- New York Liberty Development Corp. Rev. (National Sports Museum), 6.125%, 2019 $ 265,000 $ 277,129 ------------------------------------------------------------------------------------------------------------------- Miscellaneous Revenue - Other - 1.0% ------------------------------------------------------------------------------------------------------------------- Austin, TX, Convention Center (Convention Enterprises, Inc.), "A", 6.6%, 2011 (c) $ 300,000 $ 329,787 Austin, TX, Convention Center (Convention Enterprises, Inc.), "A", 6.7%, 2011 (c) 400,000 441,100 Austin, TX, Convention Enterprises, Inc., Rev., "B", 5.75%, 2034 520,000 555,693 Baltimore, MD, Convention Center Hotel Rev., "A", XLCA, 5.25%, 2039 555,000 597,202 Gallery Certificate Trust, PA, Parking Rev., 4.5%, 2013 (n) 565,000 564,395 San Antonio, TX, Convention Center, Hotel Financial Corp., Contract Rev. (Empowerment Zone), "A", AMBAC, 5%, 2034 490,000 507,091 Toledo Lucas County, OH, Port Authority Development Rev. (Northwest Ohio Bond Fund), "C", 5.125%, 2025 65,000 65,741 ------------ $ 3,061,009 ------------------------------------------------------------------------------------------------------------------- Multi-Family Housing Revenue - 3.2% ------------------------------------------------------------------------------------------------------------------- Bay County, FL, Housing Finance Authority, Multi-Family Rev. (Andrews Place II Apartments), FSA, 5%, 2035 $ 150,000 $ 153,734 Bay County, FL, Housing Finance Authority, Multi-Family Rev. (Andrews Place II Apartments), FSA, 5.1%, 2046 275,000 281,636 California Statewide Communities Development Authority Rev. (Irvine Apartments), 5.25%, 2025 1,000,000 1,027,810 Charter Mac Equity Issuer Trust, FRN, 6.625%, 2009 (n) 2,000,000 2,096,760 Eaglebend, CO, Affordable Housing Corp., 6.2%, 2007 (c) 1,000,000 1,025,620 GMAC Municipal Mortgage Trust, "B-1", 5.6%, 2039 (n) 1,000,000 1,056,430 GMAC Municipal Mortgage Trust, "C-1", 5.7%, 2040 (n) 500,000 509,030 Indianapolis, IN, Multi-Family Rev. (Cambridge Station Apartments II), FNMA, 5.25%, 2039 320,000 330,621 Munimae TE Bond Subsidiary LLC, "A-2", 4.9%, 2049 (n) 2,000,000 2,030,040 Newark, NJ, Housing Authority (Port Authority - Newark Marine Terminal), MBIA, 5.5%, 2009 (c) 215,000 237,756 North Charleston, SC, Housing Authority Rev. (Horizon Village), "A", FHA, 5.15%, 2048 305,000 308,447 Seattle, WA, Housing Authority Rev., Capped Fund Program (High Rise Rehab), "I", FSA, 5%, 2025 455,000 464,846 Tampa, FL, Housing Finance Authority, Multi-Family Rev. (Meridian River Development Corp.), 4.75%, 2026 335,000 341,760 ------------ $ 9,864,490 ------------------------------------------------------------------------------------------------------------------- Parking - 0.1% ------------------------------------------------------------------------------------------------------------------- Rail Connections, Inc., MA Rev., "B", 0%, 2009 (c) $ 100,000 $ 60,327 Rail Connections, Inc., MA Rev., "B", 0%, 2009 (c) 210,000 118,457 Rail Connections, Inc., MA Rev., "B", 0%, 2009 (c) 300,000 158,493 ------------ $ 337,277 ------------------------------------------------------------------------------------------------------------------- Sales & Excise Tax Revenue - 0.8% ------------------------------------------------------------------------------------------------------------------- Austin, TX, Town Community Events Center Venue, FGIC, 6%, 2009 (c) $ 1,015,000 $ 1,074,428 Metropolitan Pier & Expo, IL, McCormick Place Expansion, MBIA, 5.25%, 2042 220,000 232,654 Miami Dade County, FL, Transportation Systems, "N", XLCA, 5%, 2022 1,130,000 1,204,817 ------------ $ 2,511,899 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - Local - 4.4% ------------------------------------------------------------------------------------------------------------------- Adams County, CO, Single Family Mortgage Rev., ETM, 8.875%, 2011 (c) $ 2,510,000 $ 3,026,759 Brevard County, FL, Housing Finance Authority Rev., "B", GNMA, 6.5%, 2022 126,000 128,975 Calcasieu Parish, LA, Public Trust Authority, Single Family Mortgage Rev., "A", GNMA, 6.05%, 2032 430,000 458,027 California Rural Home Mortgage Finance Authority Rev., GNMA, 6.55%, 2030 80,000 82,174 Chicago, IL, Single Family Mortgage Rev., "C", GNMA, 7.05%, 2030 10,000 10,183 Chicago, IL, Single Family Mortgage Rev., "C", GNMA, 5.5%, 2038 1,500,000 1,623,000 Cook County, IL, Single Family Mortgage Rev., "A", 0%, 2015 345,000 84,422 Jefferson Parish, LA, Single Family Mortgage Rev., "B-1", GNMA, 6.625%, 2023 265,000 280,373 Jefferson Parish, LA, Single Family Mortgage Rev., "B-1", GNMA, 6.75%, 2030 365,000 368,818 Lee County, FL, Housing Finance Authority Rev. (Multi-County Program), "A-4", GNMA, 7%, 2031 5,000 5,000 Maricopa County, AZ, Single Family Mortgage Rev., "B", GNMA, 6.2%, 2034 35,000 35,217 Nortex Housing Finance Corp., TX, Single Family Mortgage Backed Securities Rev., "A", GNMA, 5.5%, 2038 785,000 836,551 Oklahoma County Home Finance Mortgage Backed, "N", GNMA, 5.4%, 2038 565,000 599,086 Pima County, AZ, Industrial Development Authority Rev., "B-1", GNMA, 7.05%, 2030 120,000 121,970 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A", GNMA, 6.45%, 2029 450,000 451,521 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A", GNMA, 5.9%, 2035 230,000 248,361 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A", GNMA, 6.25%, 2035 105,000 112,119 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A", GNMA, 5.8%, 2036 575,000 633,805 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-1", GNMA, 6.875%, 2026 40,000 40,159 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-1", GNMA, 5.75%, 2037 190,000 207,875 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-3", GNMA, 6%, 2035 310,000 339,245 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-3", GNMA, 5.5%, 2037 330,000 352,074 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-4", GNMA, 5.85%, 2037 350,000 383,478 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-5", GNMA, 5.8%, 2027 270,000 283,665 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-5", GNMA, 5.7%, 2036 580,000 634,439 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-5", GNMA, 5.9%, 2037 140,000 153,766 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "A-6", GNMA, 5.65%, 2036 440,000 460,112 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "B", GNMA, 5.45%, 2027 300,000 312,303 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "B-2", GNMA, 6.45%, 2033 255,000 272,796 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "B-3", GNMA, 5.25%, 2038 455,000 477,568 Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., "B-4", GNMA, 5.55%, 2038 460,000 500,020 ------------ $ 13,523,861 ------------------------------------------------------------------------------------------------------------------- Single Family Housing - State - 2.1% ------------------------------------------------------------------------------------------------------------------- California Housing Finance Agency Rev., Home Mortgage, MBIA, 0%, 2028 $ 1,285,000 $ 431,657 Colorado Housing & Finance Authority Rev., 7.45%, 2016 25,000 25,105 Colorado Housing & Finance Authority Rev., 6.875%, 2028 50,000 50,097 Colorado Housing & Finance Authority Rev., 6.8%, 2030 60,000 60,000 Colorado Housing & Finance Authority Rev., "A-1", 7.4%, 2027 10,000 10,155 Colorado Housing & Finance Authority Rev., "A-2", 7.15%, 2014 7,000 7,134 Colorado Housing & Finance Authority Rev., "A-2", AMBAC, 6.6%, 2028 225,000 236,133 Colorado Housing & Finance Authority Rev., "B-2", 6.1%, 2023 95,000 98,237 Colorado Housing & Finance Authority Rev., "B-3", 6.55%, 2033 85,000 86,640 Colorado Housing & Finance Authority Rev., "C", 6.75%, 2021 35,000 36,953 Colorado Housing & Finance Authority Rev., "C-2", 5.9%, 2023 145,000 149,666 Colorado Housing & Finance Authority Rev., "C-2", FHA, 6.6%, 2032 135,000 144,214 Colorado Housing & Finance Authority Rev., "C-3", FHA, 6.375%, 2033 75,000 77,607 Louisiana Housing Finance Agency, Single Family Mortgage Rev., GNMA, 6.4%, 2032 90,000 90,000 Louisiana Housing Finance Agency, Single Family Mortgage Rev., "B-2", GNMA, 7.55%, 2031 45,000 45,668 Minnesota Housing Finance Agency Rev., Residential Housing Finance, "B", 4.8%, 2023 135,000 136,173 Missouri Housing Development Commission, Single Family Mortgage Rev. (Home Loan Program), GNMA, 6.35%, 2032 165,000 166,696 Missouri Housing Development Commission, Single Family Mortgage Rev. (Home Loan Program), GNMA, 6.85%, 2032 140,000 142,660 Missouri Housing Development Commission, Single Family Mortgage Rev. (Home Loan Program), GNMA, 6.75%, 2034 85,000 88,902 Missouri Housing Development Commission, Single Family Mortgage Rev. (Home Loan Program), "B", GNMA, 6.7%, 2030 145,000 147,310 New Hampshire Housing Finance Authority Rev., "B", 5.875%, 2030 80,000 80,008 New Hampshire Housing Finance Authority Rev., "B", 6.3%, 2031 65,000 66,966 New Hampshire Housing Finance Authority Rev., "B", 6.5%, 2035 700,000 748,706 New Mexico Mortgage Finance Authority Rev., GNMA, 7.1%, 2030 60,000 60,322 New Mexico Mortgage Finance Authority Rev., GNMA, 6.25%, 2032 290,000 298,259 New Mexico Mortgage Finance Authority Rev., "B-2", GNMA, 6.35%, 2033 150,000 153,215 New Mexico Mortgage Finance Authority Rev., "N", GNMA, 5.95%, 2037 435,000 466,690 North Dakota Housing Finance Agency Rev., Housing Finance, "A", 5%, 2033 295,000 295,000 Ohio Housing Finance Agency Mortgage Rev., Residential Mortgage Backed, "C", GNMA, 5.9%, 2035 405,000 421,334 Oklahoma Housing Finance Agency Rev., 6.65%, 2029 340,000 344,158 Texas Affordable Housing Corp., Single Family Mortgage Rev., "B", GNMA, 5.25%, 2039 520,000 551,855 Texas Housing & Community Affairs, Residential Mortgage Rev., GNMA, 7.1%, 2021 620,000 637,961 Vermont Housing Finance Agency Rev., FSA, 4.95%, 2032 165,000 165,282 ------------ $ 6,520,763 ------------------------------------------------------------------------------------------------------------------- Solid Waste Revenue - 1.0% ------------------------------------------------------------------------------------------------------------------- Delaware County, PA, Industrial Development Authority, Resource Recovery Facilities Rev. (American Ref-Fuel Co.), "A", 6.2%, 2019 $ 500,000 $ 516,585 Hudson County, NJ, Solid Waste System Rev., 5.9%, 2015 805,000 807,938 Massachusetts Development Finance Agency, Resource Recovery Rev. (Ogden Haverhill Associates), "A", 6.7%, 2014 700,000 756,994 Massachusetts Industrial Finance Agency, Resource Recovery Rev. (Ogden Haverhill Associates), "A", 5.6%, 2019 1,000,000 1,037,700 ------------ $ 3,119,217 ------------------------------------------------------------------------------------------------------------------- State & Agency - Other - 0.8% ------------------------------------------------------------------------------------------------------------------- Massachusetts Development Finance Agency (Visual & Performing Arts), 6%, 2021 $ 1,000,000 $ 1,180,930 State of Michigan, COP, AMBAC, 5.5%, 2010 (c) 1,250,000 1,318,325 ------------ $ 2,499,255 ------------------------------------------------------------------------------------------------------------------- State & Local Agencies - 5.7% ------------------------------------------------------------------------------------------------------------------- Alabama Building Renovation Authority, AMBAC, 6%, 2018 $ 760,000 $ 812,349 Alabama Public School & College, Capital Improvement, "D", 6%, 2015 2,850,000 3,041,748 Chicago, IL, Public Building Commission Rev., FGIC, 5.25%, 2016 (u) 3,000,000 3,325,740 Chicago, IL, Public Building Commission Rev., FGIC, 5.25%, 2017 (u) 2,500,000 2,782,650 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Enhanced, "A", 5%, 2045 325,000 335,121 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Enhanced, "B", 5.375%, 2010 (c) 1,500,000 1,579,200 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Enhanced, "B", 5.5%, 2013 (c) 1,075,000 1,180,640 Indianapolis, IN, Public Improvement Bond Bank, "C", AMBAC, 6%, 2017 500,000 532,455 New York Urban Development Corp., Correctional Facilities Service Contract C, AMBAC, 5.875%, 2009 (c) 1,000,000 1,048,270 Stafford, TX, Economic Development Corp., FGIC, 6%, 2015 525,000 603,776 Virginia College Building Authority, VA, Public Higher Education Financing, "A", 5.75%, 2009 (c) 2,295,000 2,406,698 ------------ $ 17,648,647 ------------------------------------------------------------------------------------------------------------------- Student Loan Revenue - 0.8% ------------------------------------------------------------------------------------------------------------------- Access to Loans for Learning, California Student Loan Rev., 7.95%, 2030 $ 650,000 $ 686,056 Arizona Student Loan Acquisition Authority Rev., 5.8%, 2016 675,000 713,718 Arizona Student Loan Acquisition Authority Rev., 5.85%, 2017 700,000 740,817 Massachusetts Educational Financing Authority, Refunding Issue G, "A", MBIA, 6.1%, 2018 485,000 498,682 ------------ $ 2,639,273 ------------------------------------------------------------------------------------------------------------------- Tax - Other - 1.1% ------------------------------------------------------------------------------------------------------------------- Black Hawk, CO, Device Tax Rev., 5%, 2010 $ 20,000 $ 20,455 Black Hawk, CO, Device Tax Rev., 5%, 2013 15,000 15,485 Black Hawk, CO, Device Tax Rev., 5%, 2015 45,000 46,484 Black Hawk, CO, Device Tax Rev., 5%, 2021 40,000 40,629 New Jersey Economic Development Authority Rev. Cigarette Tax, 5.5%, 2024 250,000 261,495 New Jersey Economic Development Authority Rev. Cigarette Tax, 5.75%, 2029 450,000 489,137 New Jersey Economic Development Authority Rev. Cigarette Tax, 5.5%, 2031 200,000 213,692 New Jersey Economic Development Authority Rev. Cigarette Tax, 5.75%, 2034 300,000 324,165 New York, NY, Transitional Finance Authority Rev., Future Tax Secured, "A", 6%, 2009 (c) 2,000,000 2,127,520 ------------ $ 3,539,062 ------------------------------------------------------------------------------------------------------------------- Tax Assessment - 2.1% ------------------------------------------------------------------------------------------------------------------- Allegheny County, PA, Redevelopment Authority Rev. (Pittsburgh Mills), 5.1%, 2014 $ 75,000 $ 75,853 Allegheny County, PA, Redevelopment Authority Rev. (Pittsburgh Mills), 5.6%, 2023 50,000 52,220 Broadview, IL, Tax Increment Rev., 5.25%, 2012 1,000,000 1,023,030 Fishhawk Community Development District, FL, 5.125%, 2009 165,000 165,104 Greyhawk Landing Community Development, FL, Special Assessment, "B", 6.25%, 2009 100,000 100,959 Katy, TX, Development Authority Rev., "B", 5.8%, 2011 780,000 799,773 Katy, TX, Development Authority Rev., "B", 6%, 2018 1,200,000 1,235,544 Killarney, FL, Community Development District, Special Assessment, "B", 5.125%, 2009 170,000 170,029 Lakes by the Bay South Community Development District, FL, Rev., "B", 5.3%, 2009 220,000 220,205 Lancaster County, SC, Assessment Rev. (Sun City Carolina Lakes), 5.45%, 2037 50,000 50,979 Noblesville, IN, Redevelopment Authority Lease Rental, 5.25%, 2025 455,000 483,219 Panther Trace II, Community Development District Rev., FL, Special Assessment, "B", 5%, 2010 585,000 582,900 Parkway Center, Community Development District, FL, Special Assessment, "B", 5.625%, 2014 935,000 954,168 Preserve at Wilderness Lake, FL, Community Development District, Capital Improvement, "B", 5%, 2009 45,000 44,964 Renaissance Community Development District, FL, Special Assessment, "B", 6.25%, 2008 120,000 120,754 Tuscany Reserve Community Development District, FL, Special Assessment, "B", 5.25%, 2016 180,000 182,007 Washington County, PA, Redevelopment Authority (Victory Centre Project), "A", 5.45%, 2035 120,000 122,287 ------------ $ 6,383,995 ------------------------------------------------------------------------------------------------------------------- Tobacco - 2.1% ------------------------------------------------------------------------------------------------------------------- Badger, WI, Tobacco Asset Securitization Corp., 6.125%, 2027 $ 1,005,000 $ 1,074,295 California County, CA, Tobacco Securitization Agency, Capital Appreciation Asset Backed (Gold Country), 0%, 2033 1,655,000 373,169 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, "A", 0%, 2050 4,000,000 273,840 Children's Trust Fund, Tobacco Settlement Rev., Puerto Rico, "B", 0%, 2055 2,000,000 73,320 District of Columbia, Tobacco Settlement, 6.25%, 2024 385,000 409,763 District of Columbia, Tobacco Settlement, Capital Appreciation, "A", 0%, 2046 2,215,000 210,336 Golden State Tobacco Securitization Corp., California Tobacco Settlement Rev., Asset Backed, "A-1", 5%, 2033 245,000 242,207 Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement, "A-1", 5.125%, 2047 250,000 247,775 Guam Economic Development Authority, 5%, 2022 85,000 85,450 Iowa Tobacco Settlement Authority, Tobacco Settlement Rev., Asset Backed, "B", 0% to 2007, 5.6% to 2034 615,000 626,580 Louisiana Tobacco Settlement Authority Rev., 5.5%, 2030 415,000 437,182 New Jersey Tobacco Settlement Authority, 5.75%, 2012 (c) 660,000 706,490 New Jersey Tobacco Settlement Financing Corp., "1-A", 5%, 2041 500,000 487,340 Northern Tobacco Securitization Corp., AK, Asset Backed, "A", 5%, 2046 455,000 441,464 Silicon Valley Tobacco Securitization Authority, CA, Tobacco Settlement Rev. (Turbo-Santa Clara), "A", 0%, 2036 1,035,000 205,841 Silicon Valley Tobacco Securitization Authority, CA, Tobacco Settlement Rev. (Turbo-Santa Clara), "A", 0%, 2041 825,000 122,141 South Carolina Tobacco Settlement Authority Rev., "B", 6.375%, 2028 500,000 535,440 Washington Tobacco Settlement Authority, 6.5%, 2026 70,000 76,695 ------------ $ 6,629,328 ------------------------------------------------------------------------------------------------------------------- Toll Roads - 0.6% ------------------------------------------------------------------------------------------------------------------- New Jersey Turnpike Authority Rev., Unrefunded, "C", MBIA, 6.5%, 2016 $ 235,000 $ 270,765 New Jersey Turnpike Authority Rev., "C", ETM, MBIA, 6.5%, 2016 (c) 80,000 92,925 Northwest Parkway Public Highway Authority Co. Rev., Capital Appreciation, "B", AMBAC, 0%, 2018 750,000 431,865 San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Rev., ETM, 0%, 2009 (c) 1,000,000 939,750 ------------ $ 1,735,305 ------------------------------------------------------------------------------------------------------------------- Transportation - Special Tax - 1.1% ------------------------------------------------------------------------------------------------------------------- Allegheny County, PA, Port Authority Special Rev., MBIA, 6.25%, 2009 (c) $ 1,000,000 $ 1,057,180 New Jersey Economic Development Authority Rev., Transportation Project Sublease, "A", FSA, 6%, 2009 (c) 325,000 340,451 Pennsylvania Turnpike Commission Oil, "A", AMBAC, 5.25%, 2008 (c) 670,000 693,926 Pennsylvania Turnpike Commission Oil, "A", AMBAC, 5.25%, 2018 180,000 186,133 Pennsylvania Turnpike Commission Oil, "A", ETM, AMBAC, 5.25%, 2018 (c) 1,150,000 1,185,236 ------------ $ 3,462,926 ------------------------------------------------------------------------------------------------------------------- Universities - Colleges - 4.4% ------------------------------------------------------------------------------------------------------------------- Alabama Private Colleges & Universities, Facilities Authority Rev. (Tuskegee University), ASSD GTY, 4.75%, 2026 $ 1,000,000 $ 1,025,530 Amherst, NY, Industrial Development Agency Rev. (Daemen College), "A", 6%, 2011 (c) 1,000,000 1,113,540 Arkansas Technical University Rev., Housing Systems, "N", AMBAC, 5%, 2036 165,000 173,828 California Educational Facilities Authority Rev. (L.A. College of Chiropractic), 5.6%, 2017 250,000 251,713 Harrisburg, PA, University of Science, "A", 5.4%, 2016 150,000 153,285 Harrisburg, PA, University of Science, "B", 6%, 2036 350,000 360,255 Houston, TX, Community College Systems, MBIA, 7.875%, 2025 1,650,000 1,957,428 Illinois Finance Authority Rev. (University of Chicago), "A", 5%, 2034 215,000 224,675 Massachusetts Development Finance Agency Rev. (Boston University), XLCA, 6%, 2059 1,250,000 1,536,250 Massachusetts Development Finance Agency Rev. (Massachusetts College of Pharmacy), "B", 6.625%, 2010 (c) 100,000 108,675 Massachusetts Development Finance Agency Rev. (Olin College), "B", XLCA, 5.25%, 2033 2,000,000 2,126,540 New York Dormitory Authority Rev. (Vassar College), 4.25%, 2039 240,000 227,484 Northern Illinois University Rev., Auxiliary Facilities Systems, AMBAC, 5.875%, 2018 1,370,000 1,424,293 Oregon Facilities Authority Rev. (Linfield College), "A", 5%, 2030 165,000 170,064 Savannah, GA, Economic Development Authority Rev. (College of Art & Design, Inc.), 6.5%, 2009 (c) 500,000 540,660 St. Joseph County, IN, Educational Facilities Rev. (University of Notre Dame), 6.5%, 2026 1,000,000 1,307,330 Upland, IN, Economic Development Rev. (Taylor University), 6%, 2018 435,000 479,905 Upland, IN, Economic Development Rev. (Taylor University), 6.25%, 2023 520,000 572,988 ------------ $ 13,754,443 ------------------------------------------------------------------------------------------------------------------- Universities - Secondary Schools - 1.3% ------------------------------------------------------------------------------------------------------------------- California Statewide Communities, Development Authority Rev. (Escondido Charter High School), 7.5%, 2011 (c) $ 500,000 $ 585,990 Maine Finance Authority, Educational Rev. (Waynflete School), 6.4%, 2019 1,000,000 1,054,750 Maine Finance Authority, Educational Rev. (Waynflete School), 6.5%, 2029 1,000,000 1,059,220 Maryland Health & Higher Educational Facilities Authority Rev. (Washington Christian Academy), 5.5%, 2038 100,000 102,242 Michigan Municipal Bond Authority Rev. (YMCA Service Learning Academy), 7.625%, 2021 400,000 431,876 New Hampshire Health & Education (Derryfield School), 6.5%, 2010 205,000 210,176 Pima County, AZ, Industrial Development Authority Education Rev. (Arizona Charter Schools), "C", 6.75%, 2031 495,000 524,705 ------------ $ 3,968,959 ------------------------------------------------------------------------------------------------------------------- Utilities - Cogeneration - 0.2% ------------------------------------------------------------------------------------------------------------------- Carbon County, PA, Industrial Development Authority Rev. (Panther Creek Partners), 6.65%, 2010 $ 550,000 $ 568,244 ------------------------------------------------------------------------------------------------------------------- Utilities - Investor Owned - 4.8% ------------------------------------------------------------------------------------------------------------------- Apache County, AZ, Industrial Development Authority, Pollution Control Rev. (Tucson Electric Power Co.), 5.875%, 2033 $ 1,000,000 $ 1,005,860 Brazos River Authority, TX, Pollution Control Rev. (TXU Electric Company), "C", 5.75%, 2036 120,000 123,236 California Pollution Control Financing Authority, Pollution Control Rev. (Pacific Gas & Electric Co.), MBIA, 5.35%, 2016 1,600,000 1,705,664 Clark County, NV, Industrial Development Rev. (Southwest Gas Corp.), "A", AMBAC, 4.85%, 2035 730,000 735,052 Connecticut Development Authority, Pollution Control Rev. (Connecticut Light & Power Co.), 5.85%, 2028 1,000,000 1,045,530 Farmington, NM, Pollution Control Rev. (New Mexico Public Service), 6.375%, 2022 1,000,000 1,023,660 Farmington, NM, Pollution Control Rev. (New Mexico Public Service), "A", 6.3%, 2016 565,000 576,232 Farmington, NM, Pollution Control Rev. (New Mexico Public Service), "A", 5.8%, 2022 500,000 505,935 Lehigh County, PA, Industrial Development Authority Pollution Control Rev. (PPL Electric Utilities Corp.), "A", FGIC, 4.7%, 2029 320,000 328,707 Matagorda County, TX, District Pollution Control Rev. (AEP Texas Central), "N", AMBAC, 4.4%, 2030 1,160,000 1,127,184 Matagorda County, TX, Pollution Control Rev. (Reliant Energy), 5.95%, 2030 750,000 773,903 Mecklenburg County, VA, Industrial Development Authority Rev. (UAE Mecklenburg LP), 6.5%, 2017 700,000 767,144 New Hampshire Industrial Development Authority, Pollution Control Rev. (Connecticut Light & Power), 5.9%, 2016 500,000 508,225 Pima County, AZ, Industrial Development Authority Rev. (Tucson Electric Power Co.), "A", 6.1%, 2025 2,000,000 2,013,200 Port Morrow, OR, Pollution Control Rev. (Portland General Electric), 5.2%, 2033 350,000 358,134 Sabine River Authority, TX, Pollution Control Rev. (TXU Electric Co.), "A", 5.5%, 2022 500,000 509,250 West Feliciana Parish, LA, Pollution Control Rev. (Entergy Gulf States), 6.6%, 2028 1,665,000 1,672,126 ------------ $ 14,779,042 ------------------------------------------------------------------------------------------------------------------- Utilities - Municipal Owned - 5.8% ------------------------------------------------------------------------------------------------------------------- Austin, TX, Utility Systems Rev., AMBAC, 6.75%, 2011 $ 1,500,000 $ 1,685,580 California Department of Water Resources Power Supply Rev., "A", 5.125%, 2012 (c) 750,000 809,948 Easley, SC, Utility Rev., Refunding & Improvement, FSA, 5%, 2034 320,000 338,643 Georgia Municipal Electric Power Authority Rev., MBIA, 6.375%, 2016 2,000,000 2,366,800 Georgia Municipal Electric Power Authority Rev., MBIA, 6.5%, 2020 7,350,000 8,841,977 North Carolina Municipal Power Agency, Catawba Electric Rev., 6.375%, 2013 750,000 805,935 North Carolina Municipal Power Agency, Catawba Electric Rev., MBIA, 5.25%, 2019 (u) 3,000,000 3,204,780 ------------ $ 18,053,663 ------------------------------------------------------------------------------------------------------------------- Water & Sewer Utility Revenue - 4.8% ------------------------------------------------------------------------------------------------------------------- Atlanta, GA, Water & Wastewater Rev., RITES, FGIC, 6.432%, 2016 (n)(v) $ 1,000,000 $ 1,245,100 Forsyth County, GA, Water & Sewage Authority, 6.25%, 2010 (c) 1,170,000 1,266,314 Magnolia, TX, Water & Sewer System Rev., 5.15%, 2031 140,000 143,612 Massachusetts Water Resources Authority, ETM, 6.5%, 2019 (c) 5,965,000 7,093,817 Mississippi Development Bank Special Obligations, Grenada, MS, Water & Sewer Systems Project, "N", FSA, 5%, 2030 490,000 516,445 New York Environmental Facilities, 5%, 2016 430,000 440,987 New York Environmental Facilities, ETM, 5%, 2016 (c) 570,000 583,617 Pittsburgh, PA, Water & Sewer Authority Rev., "C", FSA, 5.25%, 2022 2,000,000 2,025,940 Spartanburg, SC, Water & Sewer Authority Rev., "B", MBIA, 5.25%, 2030 255,000 273,587 West Virginia Water Development Authority Loan Program, "B", AMBAC, 4.75%, 2035 110,000 112,485 West Wilson Utility District, TN, Waterworks Rev., MBIA, 5.25%, 2014 (c) 480,000 526,075 Westmoreland County, PA, Municipal Authority Services Rev., FSA, 5.25%, 2015 (c) 520,000 573,570 ------------ $ 14,801,549 ------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST, $294,671,406) $312,086,761 ------------------------------------------------------------------------------------------------------------------- Floating Rate Demand Notes - 1.2% ------------------------------------------------------------------------------------------------------------------- Allegheny County, PA, Hospital Development Authority Rev. (Presbyterian University Hospital), "B", 3.7%, due 4/05/07 $ 100,000 $ 100,000 Bell County, TX, Health Facilities Development Corp. Rev. (Scott & White Memorial Hospital), 3.77%, due 4/02/07 197,000 197,000 East Baton Rouge, LA, Pollution Control Rev. (Exxon Mobil Corp.), 3.75%, due 4/02/07 200,000 200,000 Illinois Health Facilities Authority Rev. (University of Chicago Hospital), 3.77%, due 4/02/07 100,000 100,000 Jefferson County, AL, Sewer Rev., Capital Improvement Warrants Rev., "A", 3.7%, due 4/05/07 100,000 100,000 Jefferson County, AL, Sewer Rev., Warrants Rev., "B-4", 3.7%, due 4/05/07 300,000 300,000 Petersburg, IN, Pollution Control Rev. (Indianapolis Power & Light Co.), "B", 3.73%, due 4/04/07 2,550,000 2,550,000 State of Oregon, "73G", 3.68%, due 4/04/07 300,000 300,000 ------------------------------------------------------------------------------------------------------------------- TOTAL FLOATING RATE DEMAND NOTES, AT IDENTIFIED COST $ 3,847,000 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (IDENTIFIED COST, $298,518,406) (k) $315,933,761 ------------------------------------------------------------------------------------------------------------------- Other Assets, Less Liabilities - (1.8)% (5,719,252) ------------------------------------------------------------------------------------------------------------------- NET ASSETS - 100.0% $310,214,509 ------------------------------------------------------------------------------------------------------------------- (c) Refunded bond. (d) Non-income producing security - in default. (k) As of March 31, 2007, the fund held securities fair valued in accordance with the policies adopted by the Board of Trustees, aggregating $312,086,761 and 98.78% of market value. All of these security values were provided by an independent pricing service using an evaluated bid. (n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $7,944,923, representing 2.6% of net assets. (p) Primary inverse floater. (u) Underlying security deposited into special purpose trust ("the trust") by investment banker upon creation of self-deposited inverse floaters. (v) Externally deposited inverse floater. The following abbreviations are used in this report and are defined: BMA Bond Market Assn. COP Certificate of Participation ETM Escrowed to Maturity FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end. Insurers ------------------------------------------------------------------------------------------------------------------- AMBAC AMBAC Indemnity Corp. ASSD GTY Assured Guaranty Insurance Co. CIFG CDC IXIS Financial Guaranty FGIC Financial Guaranty Insurance Co. FHA Federal Housing Administration FNMA Federal National Mortgage Assn. FSA Financial Security Assurance Inc. GNMA Government National Mortgage Assn. MBIA MBIA Insurance Corp. PSF Permanent School Fund XLCA XL Capital Insurance Co. Inverse Floaters ------------------------------------------------------------------------------------------------------------------- RIBS Residual Interest Bonds RITES Residual Interest Tax-Exempt Security SWAP AGREEMENTS AT 3/31/07 UNREALIZED NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION) -------------------------------------------------------------------------------------------------------------------- INTEREST RATE SWAPS 12/01/07 USD 6,000,000 Merrill Lynch 7-Day BMA 2.795% (fixed rate) $36,410 At March 31, 2007, the fund has sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts. SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements STATEMENT OF ASSETS AND LIABILITIES At 3/31/07 This statement represents your fund's balance sheet, which details the assets and liabilities comprising the total value of the fund. ASSETS ------------------------------------------------------------------------------------------------------- Investments, at value (identified cost, $298,518,406) $315,933,761 Cash 214,711 Receivable for investments sold 75,690 Receivable for fund shares sold 1,006,006 Interest receivable 4,435,048 Unrealized appreciation on interest rate swap agreements 36,410 Other assets 8,111 ------------------------------------------------------------------------------------------------------- Total assets $321,709,737 ------------------------------------------------------------------------------------------------------- LIABILITIES ------------------------------------------------------------------------------------------------------- Distributions payable $499,767 Payable for investments purchased 230,227 Payable to the holder of the floating rate certificate from trust assets 10,245,000 Payable for fund shares reacquired 245,586 Payable to affiliates Management fee 7,636 Shareholder servicing costs 20,900 Distribution and service fees 10,182 Administrative services fee 517 Payable for independent trustees' compensation 28,449 Payable for interest expense and fees 97,172 Accrued expenses and other liabilities 109,792 ------------------------------------------------------------------------------------------------------- Total liabilities $11,495,228 ------------------------------------------------------------------------------------------------------- Net assets $310,214,509 ------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF ------------------------------------------------------------------------------------------------------- Paid-in capital $295,034,743 Unrealized appreciation (depreciation) on investments 17,451,765 Accumulated net realized gain (loss) on investments (2,557,307) Accumulated undistributed (distributions in excess of) net investment income 285,308 ------------------------------------------------------------------------------------------------------- Net assets $310,214,509 ------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding 36,241,232 -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued Class A shares ------------------------------------------------------------------------------------------------------- Net assets $248,226,360 Shares outstanding 29,016,533 ------------------------------------------------------------------------------------------------------- Net asset value per share $8.55 ------------------------------------------------------------------------------------------------------- Offering price per share (100/95.25Xnet asset value per share) $8.98 ------------------------------------------------------------------------------------------------------- Class B shares ------------------------------------------------------------------------------------------------------- Net assets $26,918,510 Shares outstanding 3,141,918 ------------------------------------------------------------------------------------------------------- Net asset value and offering price per share $8.57 ------------------------------------------------------------------------------------------------------- Class C shares ------------------------------------------------------------------------------------------------------- Net assets $35,069,639 Shares outstanding 4,082,781 ------------------------------------------------------------------------------------------------------- Net asset value and offering price per share $8.59 ------------------------------------------------------------------------------------------------------- On sales of $50,000 or more, the offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements STATEMENT OF OPERATIONS Year ended 3/31/07 This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations. NET INVESTMENT INCOME ------------------------------------------------------------------------------------------------------ Interest income $18,096,163 Other income 1,901 ------------------------------------------------------------------------------------------------------ Total investment income $18,098,064 ------------------------------------------------------------------------------------------------------ Expenses Management fee $1,701,583 Distribution and service fees 1,269,809 Shareholder servicing costs 354,089 Administrative services fee 64,186 Independent trustees' compensation 13,511 Custodian fee 130,819 Shareholder communications 36,263 Auditing fees 44,254 Legal fees 10,602 Interest expense and fees 462,670 Miscellaneous 101,539 ------------------------------------------------------------------------------------------------------ Total expenses $4,189,325 ------------------------------------------------------------------------------------------------------ Fees paid indirectly (13,920) Reduction of expenses by investment adviser (775,058) ------------------------------------------------------------------------------------------------------ Net expenses $3,400,347 ------------------------------------------------------------------------------------------------------ Net investment income $14,697,717 ------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ------------------------------------------------------------------------------------------------------ Realized gain (loss) (identified cost basis) Investment transactions $682,382 Swap transactions 110,887 ------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments $793,269 ------------------------------------------------------------------------------------------------------ Change in unrealized appreciation (depreciation) Investments $(339,494) Swap transactions (193,145) ------------------------------------------------------------------------------------------------------ Net unrealized gain (loss) on investments $(532,639) ------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments $260,630 ------------------------------------------------------------------------------------------------------ Change in net assets from operations $14,958,347 ------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements STATEMENTS OF CHANGES IN NET ASSETS These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
YEARS ENDED 3/31 ---------------------------------------- 2007 2006 CHANGE IN NET ASSETS FROM OPERATIONS ------------------------------------------------------------------------------------------------------- Net investment income $14,697,717 $14,460,172 Net realized gain (loss) on investments 793,269 629,325 Net unrealized gain (loss) on investments (532,639) (2,743,791) ------------------------------------------------------------------------------------------------------- Change in net assets from operations $14,958,347 $12,345,706 ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------- From net investment income Class A $(11,328,364) $(11,422,176) Class B (1,227,213) (1,578,544) Class C (1,360,395) (1,359,481) ------------------------------------------------------------------------------------------------------- Total distributions declared to shareholders $(13,915,972) $(14,360,201) ------------------------------------------------------------------------------------------------------- Change in net assets from fund share transactions $(2,410,081) $(6,094,125) ------------------------------------------------------------------------------------------------------- Total change in net assets $(1,367,706) $(8,108,620) ------------------------------------------------------------------------------------------------------- NET ASSETS ------------------------------------------------------------------------------------------------------- At beginning of period 311,582,215 319,690,835 At end of period (including undistributed net investment income of $285,308 and accumulated distributions in excess of net investment income of $126,026) $310,214,509 $311,582,215 ------------------------------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS Financial Statements FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period. CLASS A YEARS ENDED 3/31 --------------------------------------------------------------------------------- 2007 2006 2005 2004 2003 Net asset value, beginning of period $8.53 $8.58 $8.70 $8.54 $8.32 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.42(z) $0.41 $0.42 $0.41 $0.41 Net realized and unrealized gain (loss) on investments 0.00(w)(z) (0.06) (0.13) 0.17 0.25 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.42 $0.35 $0.29 $0.58 $0.66 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.40) $(0.40) $(0.41) $(0.42) $(0.44) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.55 $8.53 $8.58 $8.70 $8.54 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 5.00 4.18 3.49 6.94 8.00 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.19 1.17 1.04 1.04 1.05 Expenses after expense reductions (f) 0.94 0.92 0.79 0.88 0.90 Expenses after expense reductions and excluding interest expense and fees (f)(l) 0.79 0.81 0.79 0.88 0.90 Net investment income 4.91(z) 4.71 4.90 4.80 4.85 Portfolio turnover 10 9 8 9 13 Net assets at end of period (000 Omitted) $248,226 $240,212 $241,850 $264,797 $274,442 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS B YEARS ENDED 3/31 --------------------------------------------------------------------------------- 2007 2006 2005 2004 2003 Net asset value, beginning of period $8.54 $8.59 $8.72 $8.55 $8.33 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.36(z) $0.34 $0.36 $0.35 $0.35 Net realized and unrealized gain (loss) on investments 0.00(w)(z) (0.05) (0.14) 0.18 0.24 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.36 $0.29 $0.22 $0.53 $0.59 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.33) $(0.34) $(0.35) $(0.36) $(0.37) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.57 $8.54 $8.59 $8.72 $8.55 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.34 3.40 2.60 6.27 7.19 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.95 1.92 1.79 1.79 1.80 Expenses after expense reductions (f) 1.70 1.67 1.54 1.63 1.65 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.55 1.56 1.54 1.63 1.65 Net investment income 4.16(z) 3.96 4.15 4.05 4.10 Portfolio turnover 10 9 8 9 13 Net assets at end of period (000 Omitted) $26,919 $36,752 $43,930 $52,594 $59,591 ------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS C YEARS ENDED 3/31 -------------------------------------------------------------------------- 2007 2006 2005 2004 2003 Net asset value, beginning of period $8.56 $8.61 $8.73 $8.56 $8.34 ------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS ------------------------------------------------------------------------------------------------------------------------------ Net investment income (d) $0.36(z) $0.35 $0.36 $0.35 $0.35 Net realized and unrealized gain (loss) on investments 0.01(z) (0.06) (0.13) 0.18 0.24 ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations $0.37 $0.29 $0.23 $0.53 $0.59 ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------------ From net investment income $(0.34) $(0.34) $(0.35) $(0.36) $(0.37) ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.59 $8.56 $8.61 $8.73 $8.56 ------------------------------------------------------------------------------------------------------------------------------ Total return (%) (r)(s)(t) 4.34 3.41 2.72 6.27 7.18 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------------------------------ Expenses before expense reductions (f) 1.94 1.92 1.79 1.79 1.80 Expenses after expense reductions (f) 1.69 1.67 1.54 1.63 1.65 Expenses after expense reductions and excluding interest expense and fees (f)(l) 1.54 1.56 1.54 1.63 1.65 Net investment income 4.16(z) 4.09 4.15 4.05 4.10 Portfolio turnover 10 9 8 9 13 Net assets at end of period (000 Omitted) $35,070 $34,618 $33,911 $37,508 $39,420 ------------------------------------------------------------------------------------------------------------------------------ Any redemption fees charged by the fund during the 2005 fiscal year resulted in a per share impact of less than $0.01. (d) Per share data are based on average shares outstanding. (f) Ratios do not reflect reductions from fees paid indirectly. (l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets. (r) Certain expenses have been reduced without which performance would have been lower. (s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. (t) Total returns do not include any applicable sales charges. (w) Per share amount was less than $0.01. (z) The fund applied a change in estimate for amortization of premium on certain debt securities in the current year that resulted in an increase of $0.03 per share to net investment income, a decrease of $0.03 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.30% to the net investment income ratio for each class for the year ended March 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return of each class. SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (1) BUSINESS AND ORGANIZATION MFS Municipal Income Fund (the fund) is a 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 U.S. 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. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the taxation supporting the projects or assets or the inability to collect revenues for the project or from the assets. If the Internal Revenue Service determines an issuer of a municipal security has not complied with applicable tax requirements, the security could decline in value, interest from the security could become taxable and the fund may be required to issue Forms 1099-DIV. INVESTMENT VALUATIONS - Debt instruments (other than short-term instruments), including restricted debt instruments, are generally valued at an evaluated or composite bid as reported by an independent pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Swaps are generally valued at an evaluated bid as reported by an independent pricing service. Securities and other assets generally valued on the basis of information from an independent pricing service may also be valued at a broker-dealer bid quotation. Values obtained from pricing services can utilize both dealer-supplied valuations and electronic data processing techniques, which take into account 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. The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund's investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund's valuation policies and procedures, market quotations are not considered to be readily available for many types of debt instruments and certain types of derivatives. These investments are generally valued at fair value based on information from independent pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment's value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund's net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund's net asset value may be deemed to have a material affect on the value of securities traded in foreign markets. Accordingly, the fund's foreign equity securities may often be valued at fair value. The adviser may rely on independent pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund's net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of investments used to determine the fund's net asset value may differ from quoted or published prices for the same investments. In September 2006, FASB Statement No. 157, Fair Value Measurements (the "Statement") was issued, and is effective for fiscal years beginning after November 15, 2007 and for all interim periods within those fiscal years. This Statement provides a single definition of fair value, a hierarchy for measuring fair value and expanded disclosures about fair value measurements. Management is evaluating the application of the Statement to the fund, and believes the impact will be limited to expanded disclosures resulting from the adoption of this Statement in the fund's financial statements. DERIVATIVE RISK - The fund may invest in derivatives for hedging or non- hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to gain market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative's original cost. Derivative instruments include swap agreements. SWAP AGREEMENTS - The fund may enter into swap agreements. A swap is an exchange of cash payments between the fund and another party. Net cash payments are exchanged at specified intervals and are recorded as a realized gain or loss in the Statement of Operations. The value of the swap is adjusted daily and the change in value, including accruals of periodic amounts of interest to be paid or received, is recorded as unrealized appreciation or depreciation in the Statement of Operations. A liquidation payment received or made upon early termination is recorded as a realized gain or loss in the Statement of Operations. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in connection with these agreements. Risk of loss may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include the possible lack of a liquid market, failure of the counterparty to perform under the terms of the agreements, and unfavorable market movement of the underlying instrument. All swap agreements entered into by the fund with the same counterparty are generally governed by a single master agreement, which provides for the netting of all amounts owed by the parties under the agreement upon the occurrence of an event of default, thereby reducing the credit risk to which such party is exposed. The fund holds interest rate swap agreements which involve the periodic exchange of cash flows, such as the exchange of fixed rate interest payments for floating rate interest payments based on a notional principal amount. The interest rates may be based on a specific financial index or the exchange of two distinct floating rate payments. The fund may enter into an interest rate swap in order to manage its exposure to interest rate fluctuations. INVERSE FLOATERS - The fund invests in municipal inverse floating rate securities which are structured by the issuer (known as primary market inverse floating rate securities) or by an investment banker utilizing municipal bonds which have already been issued (known as secondary market inverse floating rate securities) to have variable rates of interest which typically move in the opposite direction of short term interest rates. A secondary market inverse floating rate security is created when an investment banker transfers a fixed rate municipal bond to a special purpose trust, and causes the trust to (a) issue floating rate certificates to third parties, in an amount equal to a fraction of the par amount of the deposited bonds (these certificates usually pay tax-exempt interest at short-term interest rates that typically reset weekly; and the certificate holders typically, on seven days notice, have the option to tender their certificates to the investment banker or another party for redemption at par plus accrued interest), and (b) issue inverse floating rate certificates (sometimes referred to as "inverse floaters"). If the holder of the inverse floater transfers the municipal bonds to an investment banker for the purpose of depositing the municipal bonds into the special purpose trust, the inverse floating rate certificates that are issued by the trust are referred to as "self-deposited inverse floaters." If the bonds held by the trust are purchased by the investment banker for deposit into the trust from someone other than the purchasers of the inverse floaters, the inverse floating rate certificates that are issued by the trust are referred to as "externally deposited inverse floaters." Certain self-deposited inverse floaters held by the fund are accounted for as secured borrowings, with the municipal bonds reflected in the investments of the fund and amounts owed to the holder of the floating rate certificate under the provisions of the trust, which amounts are paid solely from the assets of the trust, reflected as liabilities of the fund in the Statement of Assets and Liabilities under the caption, "Payable to the holder of the floating rate certificate from trust assets". Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets in connection with self-deposited inverse floater transactions. Interest expense and fees are recorded as incurred. At March 31, 2007, the value of bonds transferred to the trust was $22,659,257. The fund's payable to the holder of the floating rate certificate from trust assets was $10,245,000. The weighted average interest rate on the floating rate certificates issued by the trust was 3.98%. For the year ended March 31, 2007, interest expense and fees in connection with self-deposited inverse floaters was $462,670. Primary and externally deposited inverse floaters held by the fund are not accounted for as secured borrowings. INDEMNIFICATIONS - Under the fund's organizational documents, its officers and trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred. INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. All premium and original issue discount is amortized or accreted for tax reporting purposes as required by federal income tax regulations. The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations. 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. As a result of the change in estimate for the amortization of premium and accretion of discount on certain debt securities, interest income has been increased by $933,492, with a corresponding reduction to net unrealized appreciation (depreciation). FEES PAID INDIRECTLY - The fund's custody fee is reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the year ended March 31, 2007, is shown as a reduction of total expenses on the Statement of Operations. TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable and tax-exempt income, including realized capital gains. Accordingly, no provision for federal income tax is required in the financial statements. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes. Book/tax differences primarily relate to amortization and accretion of debt securities and secured borrowings. The tax character of distributions declared to shareholders is as follows: 3/31/07 3/31/06 Ordinary income (including any short- term capital gains) $24,400 $-- Tax-exempt income 13,891,572 14,360,201 -------------------------------------------------------------------------- Total distributions $13,915,972 $14,360,201 The federal tax cost and the tax basis components of distributable earnings were as follows: AS OF 3/31/07 Cost of investments $287,503,025 ---------------------------------------------------------- Gross appreciation $21,533,454 Gross depreciation (3,347,718) ---------------------------------------------------------- Net unrealized appreciation (depreciation) $18,185,736 Undistributed tax-exempt income $1,462,420 Capital loss carryforwards (3,323,431) Other temporary differences (1,144,959) As of March 31, 2007, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows: 3/31/12 $(3,323,431) In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the "Interpretation") was issued, and is effective for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. On December 22, 2006, the SEC delayed the implementation of the Interpretation for regulated investment companies for an additional six months. This Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return, and requires certain expanded disclosures. Management has evaluated the application of the Interpretation to the fund, and has determined that there is no impact resulting from the adoption of this Interpretation on the fund's financial statements. 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 management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at an annual rate of 0.55% of the fund's average daily net assets. As part of a settlement agreement with the New York Attorney General concerning market timing and related matters, MFS has agreed to reduce the management fee to 0.30% of the fund's average daily net assets for the period March 1, 2004 through February 28, 2009. For the year ended March 31, 2007, this waiver amounted to $773,447 and is reflected as a reduction of total expenses in the Statement of Operations. DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $38,270 for the year ended March 31, 2007, as its portion of the initial sales charge on sales of Class A shares of the fund. The Board of Trustees has adopted a distribution plan for certain class shares pursuant to Rule 12b-1 of the Investment Company Act of 1940. The fund's distribution plan provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries. Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE FEE RATE FEE RATE PLAN(d) RATE(e) FEE Class A 0.10% 0.25% 0.35% 0.25% $607,993 Class B 0.75% 0.25% 1.00% 1.00% 313,683 Class C 0.75% 0.25% 1.00% 1.00% 348,133 --------------------------------------------------------------------------------------------------------------------- Total Distribution and Service Fees $1,269,809 (d) In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees up to these annual percentage rates of each class' average daily net assets. (e) The annual effective rates represent actual fees incurred under the distribution plan for the year ended March 31, 2007 based on each class' average daily net assets. Payment of the 0.10% annual Class A distribution fee is not yet implemented and will commence on such date as the fund's Board of Trustees may determine.
Certain Class A and Class C shares are subject to a contingent deferred sales charge in the event of a shareholder redemption within 12 months of purchase. Class B shares are subject to a contingent deferred sales charge in the event of a shareholder redemption within six years of purchase. All contingent deferred sales charges are paid to MFD and during the year ended March 31, 2007, were as follows: AMOUNT Class A $45,914 Class B $58,195 Class C $3,885 SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the average daily net assets of the fund as determined periodically under the supervision of the fund's Board of Trustees. For the year ended March 31, 2007, the fee was $257,937, which equated to 0.0834% annually of the fund's average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated service providers. For the year ended March 31, 2007, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to $74,985. The fund may also pay shareholder servicing related costs directly to non-related parties. ADMINISTRATOR - MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged a fixed amount plus a fee based on calendar year average net assets. The fund's annual fixed amount is $17,500. The administrative services fee incurred for the year ended March 31, 2007 was equivalent to an annual effective rate of 0.0207% of the fund's average daily net assets. TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to independent trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to trustees or officers of the fund who are also officers of the investment adviser, 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, MFD, and MFSC. The fund has an unfunded, defined benefit plan for certain retired independent trustees which resulted in a pension expense of $2,929. This amount is included in independent trustees' compensation for the year ended March 31, 2007. The liability for deferred retirement benefits payable to certain retired independent trustees amounted to $28,254 at March 31, 2007, and is included in payable for independent trustees' compensation. OTHER - This fund and certain other MFS funds (the funds) have entered into a services agreement (the Agreement) which provides for payment of fees by the funds to Tarantino LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the Agreement with Tarantino LLC at any time under the terms of the Agreement. For the year ended March 31, 2007, the fee paid to Tarantino LLC was $2,036. MFS has agreed to reimburse the fund for a portion of the payments made by the funds to Tarantino LLC in the amount of $1,611, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO. (4) PORTFOLIO SECURITIES Purchases and sales of investments, other than U.S. government securities, purchased option transactions, and short-term obligations, aggregated $32,952,431 and $39,653,722, respectively. (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:
YEAR ENDED YEAR ENDED 3/31/07 3/31/06 SHARES AMOUNT SHARES AMOUNT Shares sold Class A 4,077,868 $34,806,575 3,325,237 $28,649,761 Class B 277,826 2,379,647 537,071 4,625,461 Class C 673,589 5,779,551 633,255 5,472,817 ---------------------------------------------------------------------------------------------------------- 5,029,283 $42,965,773 4,495,563 $38,748,039 Shares issued to shareholders in reinvestment of distributions Class A 732,144 $6,262,765 734,629 $6,332,181 Class B 74,877 641,277 90,476 781,204 Class C 103,647 890,072 104,388 902,609 ---------------------------------------------------------------------------------------------------------- 910,668 $7,794,114 929,493 $8,015,994 Shares reacquired Class A (3,968,355) $(33,877,957) (4,066,222) $(34,988,521) Class B (1,515,106) (12,956,565) (1,435,040) (12,389,239) Class C (738,293) (6,335,446) (634,387) (5,480,398) ---------------------------------------------------------------------------------------------------------- (6,221,754) $(53,169,968) (6,135,649) $(52,858,158) Net change Class A 841,657 $7,191,383 (6,356) $(6,579) Class B (1,162,403) (9,935,641) (807,493) (6,982,574) Class C 38,943 334,177 103,256 895,028 ---------------------------------------------------------------------------------------------------------- (281,803) $(2,410,081) (710,593) $(6,094,125)
(6) LINE OF CREDIT The fund and other funds managed by MFS participate in a $1 billion unsecured committed line of credit provided by a syndication of banks under a credit agreement. In addition, the fund and other funds managed by MFS have established uncommitted borrowing arrangements with certain banks. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the Federal Reserve funds rate plus 0.35%. In addition, a commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. For the year ended March 31, 2007, the fund's commitment fee and interest expense on the line of credit were $1,885 and $0, respectively, and are included in miscellaneous expense and interest expense and fees, respectively, on the Statement of Operations. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of MFS Municipal Series Trust and the Shareholders of MFS Municipal Income Fund: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of MFS Municipal Income Fund (one of the portfolios constituting MFS Municipal Series Trust) (the "Trust") as of March 31, 2007, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of MFS Municipal Income Fund as of March 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts May 14, 2007 TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND The Trustees and officers of the Trust, as of May 1, 2007, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS DURING POSITION(s) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS & NAME, DATE OF BIRTH WITH FUND SINCE(h) OTHER DIRECTORSHIPS(j) ------------------- --------------- --------------- ---------------------------- INTERESTED TRUSTEES Robert J. Manning(k) Trustee February 2004 Massachusetts Financial Services (born 10/20/63) Company, Chief Executive Officer, President, Chief Investment Officer and Director Robert C. Pozen(k) Trustee February 2004 Massachusetts Financial Services (born 8/08/46) Company, Chairman (since February 2004); MIT Sloan School (education), Senior Lecturer (since 2006); Secretary of Economic Affairs, The Commonwealth of Massachusetts (January 2002 to December 2002); Fidelity Investments, Vice Chairman (June 2000 to December 2001); Fidelity Management & Research Company (investment adviser), President (March 1997 to July 2001); Bell Canada Enterprises (telecommunications), Director; Medtronic, Inc. (medical technology), Director; Telesat (satellite communications), Director INDEPENDENT TRUSTEES J. Atwood Ives Trustee and Chair February 1992 Private investor; Eastern (born 5/01/36) of Trustees Enterprises (diversified services company), Chairman, Trustee and Chief Executive Officer (until November 2000) Robert E. Butler(n) Trustee January 2006 Consultant - regulatory and (born 11/29/41) compliance matters (since July 2002); PricewaterhouseCoopers LLP (professional services firm), Partner (November 2000 until June 2002) Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital, (born 3/11/37) Chief of Cardiac Surgery (2005); Harvard Medical School, Professor of Cardiac Surgery; Physician Director of Medical Device Technology for Partners HealthCare David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining (born 5/30/42) products and service provider), Vice Chairman/Director (since April 2001); Portman Limited (mining), Director (since 2005); Encinitos Ventures (private investment company), Principal (1997 to April 2001); Lincoln Electric Holdings, Inc. (welding equipment manufacturer), Director William R. Gutow Trustee December 1993 Private investor and real estate (born 9/27/41) consultant; Capitol Entertainment Management Company (video franchise), Vice Chairman; Atlantic Coast Tan (tanning salons), Vice Chairman (since 2002) Michael Hegarty Trustee December 2004 Retired; AXA Financial (financial (born 12/21/44) services and insurance), Vice Chairman and Chief Operating Officer (until May 2001); The Equitable Life Assurance Society (insurance), President and Chief Operating Officer (until May 2001) Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys), (born 6/23/35) Partner J. Dale Sherratt Trustee August 1993 Insight Resources, Inc. (born 9/23/38) (acquisition planning specialists), President; Wellfleet Investments (investor in health care companies), Managing General Partner (since 1993); Cambridge Nutraceuticals (professional nutritional products), Chief Executive Officer (until May 2001) Laurie J. Thomsen Trustee March 2005 Private investor; Prism Venture (born 8/05/57) Partners (venture capital), Co- founder and General Partner (until June 2004); St. Paul Travelers Companies (commercial property liability insurance), Director Robert W. Uek Trustee January 2006 Retired (since 1999); (born 5/18/41) PricewaterhouseCoopers LLP (professional services firm), Partner (until 1999); Consultant to investment company industry (since 2000); TT International Funds (mutual fund complex), Trustee (2000 until 2005); Hillview Investment Trust II Funds (mutual fund complex), Trustee (2000 until 2005) OFFICERS Maria F. Dwyer(k) President November 2005 Massachusetts Financial Services (born 12/01/58) Company, Executive Vice President and Chief Regulatory Officer (since March 2004); Fidelity Management & Research Company, Vice President (prior to March 2004); Fidelity Group of Funds, President and Treasurer (prior to March 2004) Tracy Atkinson(k) Treasurer September 2005 Massachusetts Financial Services (born 12/30/64) Company, Senior Vice President (since September 2004); PricewaterhouseCoopers LLP, Partner (prior to September 2004) Christopher R. Bohane(k) Assistant Secretary July 2005 Massachusetts Financial Services (born 1/18/74) and Assistant Clerk Company, Vice President and Senior Counsel (since April 2003); Kirkpatrick & Lockhart LLP (law firm), Associate (prior to April 2003) Ethan D. Corey(k) Assistant Secretary July 2005 Massachusetts Financial Services (born 11/21/63) and Assistant Clerk Company, Special Counsel (since December 2004); Dechert LLP (law firm), Counsel (prior to December 2004) David L. DiLorenzo(k) Assistant Treasurer July 2005 Massachusetts Financial Services (born 8/10/68) Company, Vice President (since June 2005); JP Morgan Investor Services, Vice President (prior to June 2005) Timothy M. Fagan(k) Assistant Secretary September 2005 Massachusetts Financial Services (born 7/10/68) and Assistant Clerk Company, Vice President and Senior Counsel (since September 2005); John Hancock Advisers, LLC, Vice President and Chief Compliance Officer (September 2004 to August 2005), Senior Attorney (prior to September 2004); John Hancock Group of Funds, Vice President and Chief Compliance Officer (September 2004 to December 2004) Mark D. Fischer(k) Assistant Treasurer July 2005 Massachusetts Financial Services (born 10/27/70) Company, Vice President (since May 2005); JP Morgan Investment Management Company, Vice President (prior to May 2005) Brian E. Langenfeld(k) Assistant Secretary June 2006 Massachusetts Financial Services (born 3/07/73) and Assistant Clerk Company, Assistant Vice President and Counsel (since May 2006); John Hancock Advisers, LLC, Assistant Vice President and Counsel (May 2005 to April 2006); John Hancock Advisers, LLC, Attorney and Assistant Secretary (prior to May 2005) Ellen Moynihan(k) Assistant Treasurer April 1997 Massachusetts Financial Services (born 11/13/57) Company, Senior Vice President Susan S. Newton(k) Assistant Secretary May 2005 Massachusetts Financial Services (born 3/07/50) and Assistant Clerk Company, Senior Vice President and Associate General Counsel (since April 2005); John Hancock Advisers, LLC, Senior Vice President, Secretary and Chief Legal Officer (prior to April 2005); John Hancock Group of Funds, Senior Vice President, Secretary and Chief Legal Officer (prior to April 2005) Susan A. Pereira(k) Assistant Secretary July 2005 Massachusetts Financial Services (born 11/05/70) and Assistant Clerk Company, Vice President and Senior Counsel (since June 2004); Bingham McCutchen LLP (law firm), Associate (prior to June 2004) Mark N. Polebaum(k) Secretary and Clerk January 2006 Massachusetts Financial Services (born 5/01/52) Company, Executive Vice President, General Counsel and Secretary (since January 2006); Wilmer Cutler Pickering Hale and Dorr LLP (law firm), Partner (prior to January 2006) Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of (born 3/07/44) Compliance Officer compliance services), Principal (since June 2004); CRA Business Strategies Group (consulting services), Executive Vice President (April 2003 to June 2004); David L. Babson & Co. (investment adviser), Managing Director, Chief Administrative Officer and Director (prior to March 2003) James O. Yost(k) Assistant Treasurer September 1990 Massachusetts Financial Services (born 6/12/60) Company, Senior Vice President ------------ (h) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously since appointment unless indicated otherwise. (j) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., "public companies"). (k) "Interested person" of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of position with MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116. (n) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance consultant retained by MFS pursuant to its settlement with the SEC concerning market timing and related matters. The terms of that settlement required that compensation and expenses related to the independent compliance consultant be borne exclusively by MFS and, therefore, MFS paid Mr. Butler for the services he rendered to the independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a total of $351,119.29. The Trust held a shareholders' meeting in 2005 to elect Trustees, and will hold a shareholders' meeting at least once every five years thereafter, to elect Trustees. Each Trustee (except Mr. Butler and Mr. Uek) has been elected by share- holders and each Trustee and officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Messrs. Butler, Gutow, Sherratt and Uek and Ms. Thomsen are members of the Trust's Audit Committee. Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or a subsidiary is the investment adviser or distributor, and, in the case of the officers, with certain affiliates of MFS. As of January 1, 2007, the Trustees served as board members of 97 funds within the MFS Family of Funds. The Statement of Additional Information contains further information about the Trustees and is available without charge upon request by calling 1-800-225-2606. ------------------------------------------------------------------------------------------------------- INVESTMENT ADVISER CUSTODIAN Massachusetts Financial Services Company State Street Bank and Trust Company 500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110 DISTRIBUTOR Effective April 1, 2007, the custodian changed to: MFS Fund Distributors, Inc. JPMorgan Chase Bank 500 Boylston Street, Boston, MA 02116-3741 One Chase Manhattan Plaza New York, NY 10081 PORTFOLIO MANAGER INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Geoffrey Schechter Deloitte & Touche 200 Berkeley Street, Boston, MA 02116
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT A discussion regarding the Board's most recent review and renewal of the Fund's investment advisory agreement is available by clicking on the fund's name under "Select a fund" on the MFS Web site (mfs.com). PROXY VOTING POLICIES AND INFORMATION A general description of the MFS funds' proxy voting policies and procedures is available without charge, upon request, by calling 1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC's Web site at http://www.sec.gov. Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC's Web site at http://www.sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed and copied at the: Public Reference Room Securities and Exchange Commission 100 F Street, NE, Room 1580 Washington, D.C. 20549 Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-551-5850. The fund's Form N-Q is available on the EDGAR database on the Commission's Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address. A shareholder can also obtain the quarterly portfolio holdings report at mfs.com. FEDERAL TAX INFORMATION (unaudited) The fund will notify shareholders of amounts for use in preparing 2007 income tax forms in January 2008. The following information is provided pursuant to provisions of the Internal Revenue Code. Of the dividends paid from net investment income during the fiscal year, 99.82% is designated as exempt interest dividends for federal income tax purposes. If the fund has earned income on private activity bonds, a portion of the dividends paid may be considered a tax preference item for purposes of computing a shareholder's alternative minimum tax. MFS(R) PRIVACY NOTICE Privacy is a concern for every investor today. At MFS Investment Management(R) and the MFS funds, we take this concern very seriously. We want you to understand our policies about the investment products and services that we offer, and how we protect the nonpublic personal information of investors who have a direct relationship with us and our wholly owned subsidiaries. Throughout our business relationship, you provide us with personal information. We maintain information and records about you, your investments, and the services you use. Examples of the nonpublic personal information we maintain include o data from investment applications and other forms o share balances and transactional history with us, our affiliates, or others o facts from a consumer reporting agency We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We may share nonpublic personal information with third parties or certain of our affiliates in connection with servicing your account or processing your transactions. We may share information with companies or financial institutions that perform marketing services on our behalf or with other financial institutions with which we have joint marketing arrangements, subject to any legal requirements. Authorization to access your nonpublic personal information is limited to appropriate personnel who provide products, services, or information to you. We maintain physical, electronic, and procedural safeguards to help protect the personal information we collect about you. If you have any questions about the MFS privacy policy, please call 1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time. Note: If you own MFS products or receive MFS services in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. CONTACT US WEB SITE MAILING ADDRESS mfs.com MFS Service Center, Inc. P.O. Box 55824 MFS TALK Boston, MA 1-800-637-8255 02205-5824 24 hours a day OVERNIGHT MAIL ACCOUNT SERVICE AND MFS Service Center, Inc. LITERATURE 500 Boylston Street Boston, MA 02116-3741 SHAREHOLDERS 1-800-225-2606 8 a.m. to 8 p.m. ET INVESTMENT PROFESSIONALS 1-800-343-2829 8 a.m. to 8 p.m. ET RETIREMENT PLAN SERVICES 1-800-637-1255 8 a.m. to 8 p.m. ET ------------------------------------------------------------------------------- Go paperless with eDELIVERY: Arrange to have MFS(R) send prospectuses, reports, and proxies directly to your e-mail inbox. You'll get timely information and less clutter in your mailbox (not to mention help your fund save printing and postage costs). SIGN UP: If your account is registered with us, simply go to mfs.com, log in to your account via MFS(R) Access, and select the eDelivery sign up options. If you own your MFS fund shares through a financial institution or a retirement plan, MFS(R) TALK, MFS Access, and eDelivery may not be available to you. ------------------------------------------------------------------------------- M F S(R) INVESTMENT MANAGEMENT ITEM 2. CODE OF ETHICS. The Registrant has adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act and as defined in Form N-CSR that applies to the Registrant's principal executive officer and principal financial and accounting officer. The Registrant has not amended any provision in its Code of Ethics (the "Code") that relates to an element of the Code's definitions enumerated in paragraph (b) of Item 2 of this Form N-CSR. A copy of the Code of Ethics is filed as an exhibit to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Messrs. Robert E. Butler and Robert W. Uek and Ms. Laurie J. Thomsen, members of the Audit Committee, have been determined by the Board of Trustees in their reasonable business judgment to meet the definition of "audit committee financial expert" as such term is defined in Form N-CSR. In addition, Messrs. Butler and Uek and Ms. Thomsen are "independent" members of the Audit Committee (as such term has been defined by the Securities and Exchange Commission in regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002). The Securities and Exchange Commission has stated that the designation of a person as an audit committee financial expert pursuant to this Item 3 on the Form N-CSR does not impose on such a person any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. ITEMS 4(A) THROUGH 4(D) AND 4(G): The Board of Trustees has appointed Deloitte & Touche LLP ("Deloitte") to serve as independent accountants to each series of the Registrant (collectively, the "Funds"). The tables below set forth the audit fees billed to the Funds as well as fees for non-audit services provided to the Funds and/or to the Funds' investment adviser, Massachusetts Financial Services Company ("MFS") and to various entities either controlling, controlled by, or under common control with MFS that provide ongoing services to the Funds ("MFS Related Entities"). For the fiscal years ended March 31, 2007 and 2006, audit fees billed to the Funds by Deloitte were as follows: Audit Fees FEES BILLED BY DELOITTE: 2007 2006 ---- ---- MFS Alabama Municipal Bond Fund 36,794 32,954 MFS Arkansas Municipal Bond Fund 36,794 32,954 MFS California Municipal Bond Fund 36,794 32,954 MFS Florida Municipal Bond Fund 36,794 32,954 MFS Georgia Municipal Bond Fund 36,794 32,954 MFS Maryland Municipal Bond Fund 36,794 32,954 MFS Massachusetts Municipal Bond Fund 36,794 32,954 MFS Mississippi Municipal Bond Fund 36,794 32,954 MFS Municipal Income Fund 40,191 36,117 MFS New York Municipal Bond Fund 36,794 32,954 MFS North Carolina Municipal Bond Fund 36,794 32,954 MFS Pennsylvania Municipal Bond Fund 36,794 32,954 MFS South Carolina Municipal Bond Fund 36,794 32,954 MFS Tennessee Municipal Bond Fund 36,794 32,954 MFS Virginia Municipal Bond Fund 36,794 32,954 MFS West Virginia Municipal Bond Fund 36,794 32,954 -------- -------- TOTAL $592,101 $530,427 For the fiscal years ended March 31, 2007 and 2006, fees billed by Deloitte for audit-related, tax and other services provided to the Funds and for audit-related, tax and other services provided to MFS and MFS Related Entities were as follows:
Audit-Related Fees(1) Tax Fees(2) All Other Fees(3) FEES BILLED BY DELOITTE: 2007 2006 2007 2006 2007 2006 ---- ---- ---- ---- ---- ---- To MFS Alabama Municipal Bond Fund 0 0 5,427 9,550 379 514 To MFS Arkansas Municipal Bond Fund 0 0 5,427 9,550 379 519 To MFS California Municipal Bond Fund 0 0 5,427 9,550 379 548 To MFS Florida Municipal Bond Fund 0 0 5,427 9,550 379 514 To MFS Georgia Municipal Bond Fund 0 0 5,427 9,550 379 511 To MFS Maryland Municipal Bond Fund 0 0 5,427 9,550 379 520 To MFS Massachusetts Municipal Bond Fund 0 0 5,427 9,550 379 532 To MFS Mississippi Municipal Bond Fund 0 0 5,427 9,550 379 514 To MFS Municipal Income Fund 0 0 5,479 9,550 379 539 To MFS New York Municipal Bond Fund 0 0 5,427 9,550 379 524 To MFS North Carolina Municipal Bond Fund 0 0 5,427 9,550 379 543 To MFS Pennsylvania Municipal Bond Fund 0 0 5,427 9,550 379 516 To MFS South Carolina Municipal Bond Fund 0 0 5,427 9,550 379 522 To MFS Tennessee Municipal Bond Fund 0 0 5,427 9,550 379 518 To MFS Virginia Municipal Bond Fund 0 0 5,427 9,550 379 539 To MFS West Virginia Municipal Bond Fund 0 0 5,427 9,550 379 520 TOTAL FEES BILLED BY DELOITTE TO ABOVE FUNDS: $0 $0 $86,884 $152,800 $6,064 $8,393 To MFS and MFS Related Entities of MFS Alabama Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Arkansas Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS California Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Florida Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Georgia Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Maryland Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Massachusetts Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Mississippi Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Municipal Income Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS New York Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS North Carolina Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Pennsylvania Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS South Carolina Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Tennessee Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS Virginia Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531 To MFS and MFS Related Entities of MFS West Virginia Municipal Bond Fund* 695,825 931,475 0 0 443,805 469,531
AGGREGATE FEES FOR NON-AUDIT SERVICES: 2007 2006 ---- ---- To MFS Alabama Municipal Bond Fund, MFS and MFS 1,293,014 1,518,665 Related Entities# To MFS Arkansas Municipal Bond Fund, 1,293,014 1,518,670 MFS and MFS Related Entities# To MFS California Municipal Bond Fund, 1,293,014 1,518,699 MFS and MFS Related Entities# To MFS Florida Municipal Bond Fund, 1,293,014 1,518,665 MFS and MFS Related Entities# To MFS Georgia Municipal Bond Fund, 1,293,014 1,518,662 MFS and MFS Related Entities# To MFS Maryland Municipal Bond Fund, 1,293,014 1,518,671 MFS and MFS Related Entities# To MFS Massachusetts Municipal Bond Fund, 1,293,014 1,518,683 MFS and MFS Related Entities# To MFS Mississippi Municipal Bond Fund, 1,293,014 1,518,665 MFS and MFS Related Entities# To MFS Municipal Income Fund, MFS 1,293,066 1,518,690 and MFS Related Entities# To MFS New York Municipal Bond Fund, 1,293,014 1,518,675 MFS and MFS Related Entities# To MFS North Carolina Municipal Bond Fund, 1,293,014 1,518,694 MFS and MFS Related Entities# To MFS Pennsylvania Municipal Bond Fund, 1,293,014 1,518,667 MFS and MFS Related Entities# To MFS South Carolina Municipal Bond Fund, 1,293,014 1,518,673 MFS and MFS Related Entities# To MFS Tennessee Municipal Bond Fund, 1,293,014 1,518,669 MFS and MFS Related Entities# To MFS Virginia Municipal Bond Fund, 1,293,014 1,518,690 MFS and MFS Related Entities# To MFS West Virginia Municipal Bond Fund, 1,293,014 1,518,671 MFS and MFS Related Entities# * This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to the operations and financial reporting of the Funds (portions of which services also related to the operations and financial reporting of other funds within the MFS Funds complex). # This amount reflects the aggregate fees billed by Deloitte, for non-audit services rendered to the Funds and for non-audit services rendered to MFS and the MFS Related Entities. (1) The fees included under "Audit-Related Fees" are fees related to assurance and related services that are reasonably related to the performance of the audit or review of financial statements, but not reported under "Audit Fees," including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters and internal control reviews. (2) The fees included under "Tax Fees" are fees associated with tax compliance, tax advice and tax planning, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews and tax distribution and analysis. (3) The fees included under "All Other Fees" are fees for products and services provided by Deloitte other than those reported under "Audit Fees," "Audit-Related Fees" and "Tax Fees," including fees for services related to sales tax refunds, consultation on internal cost allocations, review of internal controls and review of Rule 38a-1 compliance program. ITEM 4(e)(1): Set forth below are the policies and procedures established by the Audit Committee of the Board of Trustees relating to the pre-approval of audit and non-audit related services: To the extent required by applicable law, pre-approval by the Audit Committee of the Board is needed for all audit and permissible non-audit services rendered to the Funds and all permissible non-audit services rendered to MFS or MFS Related Entities if the services relate directly to the operations and financial reporting of the Registrant. Pre-approval is currently on an engagement-by-engagement basis. In the event pre-approval of such services is necessary between regular meetings of the Audit Committee and it is not practical to wait to seek pre-approval at the next regular meeting of the Audit Committee, pre-approval of such services may be referred to the Chair of the Audit Committee for approval; provided that the Chair may not pre-approve any individual engagement for such services exceeding $50,000 or multiple engagements for such services in the aggregate exceeding $100,000 in each period between regular meetings of the Audit Committee. Any engagement pre-approved by the Chair between regular meetings of the Audit Committee shall be presented for ratification by the entire Audit Committee at its next regularly scheduled meeting ITEM 4(e)(2): None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and All Other Fees paid by the Fund and MFS and MFS Related Entities relating directly to the operations and financial reporting of the Registrant disclosed above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit, review or attest services, if certain conditions are satisfied). ITEM 4(f): Not applicable. ITEM 4(h): The Registrant's Audit Committee has considered whether the provision by a Registrant's independent registered public accounting firm of non-audit services to MFS and MFS Related Entities that were not pre-approved by the Committee (because such services did not relate directly to the operations and financial reporting of the Registrant) was compatible with maintaining the independence of the independent registered public accounting firm as the Registrant's principal auditors. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the Registrant. ITEM 6. SCHEDULE OF INVESTMENTS A schedule of investments of the Registrant is included as part of the report to shareholders of such series under Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the Registrant. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the Registrant. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to the Registrant. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant's Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (as required by Item 22(b)(15) of Schedule 14A), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) Based upon their evaluation of the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) as conducted within 90 days of the filing date of this report on Form N-CSR, the registrant's principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Code of Ethics attached hereto. (2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2): Attached hereto. (b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed "filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference: Attached hereto. NOTICE A copy of the Amended and Restated Declaration of Trust of the Registrant is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) MFS MUNICIPAL SERIES TRUST ------------------------------------------------------------------ By (Signature and Title)* MARIA F. DWYER ----------------------------------------------------- Maria F. Dwyer, President Date: May 14, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* MARIA F. DWYER ----------------------------------------------------- Maria F. Dwyer, President (Principal Executive Officer) Date: May 14, 2007 By (Signature and Title)* TRACY ATKINSON ----------------------------------------------------- Tracy Atkinson, Treasurer (Principal Financial Officer and Accounting Officer) Date: May 14, 2007 * Print name and title of each signing officer under his or her signature.